“Avoiding a Frivolous Malpractice Claim ”
Del O’Roark, Loss Prevention Consultant, Lawyers Mutual Insurance Company of Kentucky
Malpractice claims that have no merit are one of the most frustrating aspects of practicing law. You meet all professional standards and get the best result the circumstances permit, yet some yahoo still alleges malpractice. Fortunately, such claims in Kentucky are almost always closed with no indemnity payment to the claimant. Even so, claims without merit are expensive to defend, often cost lawyers their insurance deductible, and add considerable stress for lawyers unlucky enough to find themselves the victim of a cheap shot. In the practice of law it can be just about as important to dodge a blank as it is to dodge a bullet.
The Summer 2004 issue of Lawyers’ Mutual Insurance Company of California Bulletin has an excellent article by Stephen M. Blumberg on how to dodge a blank. In his article, “Avoiding Claims Without Merit,” Blumberg points out five situations that often lead to unfounded claims that are avoidable following proven risk management practices. They are:
The one thing all these situations have in common is that the claim always results in a swearing contest between the lawyer and claimant. If the claim gets to court, a lawyer will not get the benefit of doubt from a jury, and could be found liable for a substantial amount. A second thing these situations have in common is that they are avoidable and defensible if the circumstances are properly documented. What follows are some suggestions on risk managing each situation.
One of the weakest defenses to a malpractice claim is when a lawyer asserts that there was no attorney-client relationship. The claimant counters that they sure thought they had a lawyer when they left the office that day. This disagreement is decided by determining whether an implied-in-fact attorney-client relationship arose based on all the circumstances from the prospective client’s viewpoint. The malpractice claim is usually made well after the statute of limitations has passed for the matter and, if an attorney-client relationship is found, leaves the lawyer in an untenable position.
A recent California ethics opinion provides a useful list of the factors that bear on when an implied-in-fact attorney-client relationship is formed and serves as a guide on how to avoid inadvertently leaving a prospective client with the reasonable impression that you are their lawyer:
The best defense, and often the only defense, to a prospective client claiming to be a client when you do not think so is documentation – a letter of nonengagement showing that a matter was clearly declined and that no attorney-client relationship was formed. The nonengagement letter should:
All documents and any other property left with the lawyer by prospective clients should be returned with the nonengagement letter. In some cases it may be prudent to send the letter by certified mail, return receipt requested – especially if a time limit is close to expiring.
A closely related risk to prospective clients claiming an attorney-client relationship is when a casual contact involves a legal question. This can occur on social occasions, on the street, by e-mail, and cold phone calls. Occasionally, these casual contacts lead to an assertion that an attorney-client relationship was formed and malpractice committed. “The best practice is to document every casual contact made that involves any discussion of legal questions. It can be short, but should include the date, name of casual contact, gist of what was discussed, and any disclaimers communicated at the time. Many lawyers use a numbered consultation form for this purpose. In many cases it may be necessary to send a letter of nonengagement to make it clear that no attorney-client relationship was formed. This may seem laborious, but it is the proverbial ounce of prevention.”3 Lawyers Mutual has developed a Cold Call/E-Mail/Casual Contact Log consisting of a pad of pre-printed forms for quick and convenient recording of casual contacts. They are available to all Kentucky lawyers by calling Lawyers Mutual at 1-800-800-6101.
A lawyer’s worst malpractice nightmare is to have a client and not know it. This can happen when a client, after a lawyer thinks he has withdrawn from representation, claims still to be a client. Of course, terrible things have happened to the matter since the lawyer believed the representation to be over. Again proper documentation is the answer. Withdrawal should be a clean break – a clear-cut decision with the client’s agreement in a written letter of disengagement. Use a disengagement letter that:
After sending the disengagement letter, carefully follow through on the duty to take necessary actions to protect the client’s interest as required by Kentucky Rule of Professional Conduct 1.16 (d) and comply with the representations in the disengagement letter. This avoids a malpractice claim over the manner of withdrawal. Finally, a complete copy of the file should be retained. A client that has been terminated is a risk to make a malpractice claim. The first line of defense is a complete file with a comprehensive disengagement letter.
Nonclient liability is a growing risk for lawyers. Nowhere is the risk more evident than when a lawyer represents one party in a business transaction such as a partnership formation and other parties are not represented. If the partnership fails, the risk that one of those other parties will claim reliance on the represented party’s lawyer is significant. Blumberg advises that lawyers document their status by having all parties sign a document showing who the lawyer represented and who was not represented; or by sending a letter with proof of receipt carefully delineating who was represented and who was not; or by including language in the partnership agreement that identifies represented parties and unrepresented parties to the partnership formation. This documentation approach is equally useful in other transaction matters that have a risk of misunderstanding by unrepresented parties. For more on nonclient liability read the KBA Bench & Bar article “Negligence Liability To Nonclients” available in the Risk Management section on Lawyers Mutual’s website at www.lmick.com.
We do not know if it is true that all lawyers talk about good client relations, but few do anything about it – but it sure seems that way with the number of avoidable malpractice claims involving bad client relations. This type of claim centers on lawyer competence, client communications, and diligence. Irate clients often file bar complaints as well as malpractice claims – a double whammy. Blumberg cites the usual culprits in bad client relations: not returning calls, subjecting clients to long waits at the office, not keeping clients informed, having an arrogant demeanor with clients, and having poor billing practices.
Of course, the best risk management to prevent irate client claims is to consistently treat clients with the utmost courtesy and personal attention. Even with such treatment disappointed clients may spitefully allege lack of competence, diligence and poor client communications. Unfortunately, lawyers facing a frivolous claim of this nature too often find themselves in the awkward position of having a client file with little or no documentation even though they have been thoroughly professional in their practice of the matter. This is especially embarrassing in cases when clients claim malpractice when the real issue is fee avoidance.
From a spite claim risk management perspective it is just as important to document the file in a way that demonstrates clients were well served as it is to show competent legal advice. The file should reflect work effort (good billing practices accomplish this) and time spent with the client in person or on the phone. Always include in the file copies of all documents sent to the client. Many lawyers routinely copy clients with all correspondence and other documents relating to their matter. With modern office technology this is both easy and inexpensive to do and it helps Bar Counsel make short work of a complaint alleging poor communications and lack of diligence.
A client rejecting legal advice can come up in any representation, but this most often leads to a claim of malpractice in settlement negotiations. It is not unusual for a client to refuse a settlement offer against a lawyer’s advice and then after receiving less than the offer at the end of the matter to blame the lawyer for the results. This same client syndrome appears in settlement remorse situations when the client regrets accepting a settlement offer and attempts to increase the proceeds by accusing their lawyer of malpractice.
The risk management rule in these situations is to always document the client’s decisions that are contrary to the legal advice given. Blumberg suggests a tactful, uncritical letter to the client that carefully describes the advice given and the client’s decision not to heed it. Remember that the rule in Kentucky is that a lawyer must have actual authority to settle a client’s matter (Ky. Clark v. Burden, 917 S.W.2d 574 (1996)). Accordingly, both settlement authority and rejection of advice to settle should be documented and signed by the client. Often settlement offers come up suddenly just prior to trial, during trial, or at other times when quick action is required and administrative support is limited. Regardless of the circumstances use whatever paper is available, hand-write the client’s decision, and have the client sign and date the paper. Following this practice should avoid claims lacking merit and those that are filed are easily and less expensively defended.
An Alaska lawyer found herself entangled with three of Blumberg’s issues – questionable engagement, questionable disengagement, and bad client relations. The lawyer interviewed a prospective client by telephone who, while a ship passenger, was injured by a fall from a dock gangway in Juneau. At the time of the interview one year remained before the statute of limitations expired. The lawyer advised the passenger that she would investigate the circumstances and then decide whether to take the case. After investigation, during which the lawyer had no contact with the passenger, she concluded that the case had problems, but there was a colorable claim. Shortly before the statute of limitations was to expire the lawyer sent the passenger a letter with questions about the problems with the case and a contingent fee contract for signature. She received no response to the letter and was unsuccessful in reaching the passenger by phone. In desperation she asked the Alaska Bar Association Ethics Committee whether she ethically may file suit before the statute of limitations expires without the passenger’s authorization and a signed engagement letter.
First, the Ethics Committee pointed out the lawyer’s problems:
The Ethics Committee reasoned that there was nothing in the ethics rules precluding the lawyer from filing suit if she reasonably believed that the passenger authorized her to file and is relying on her to do so. Conversely, she may decide that disengagement will not have a material adverse effect on the passenger and terminate the relationship. As a third alternative, if she determines that disengagement is proper, but that the passenger will suffer material adverse effects, she may file suit and then seek withdrawal as counsel of record from the court. In the final analysis the Ethics Committee concluded that the lawyer must decide for herself which alternative to take.5
Did the Alaska Bar Association Ethics Committee leave the lawyer twisting in the wind? If so, maybe that was a good call by the Committee – it is hard to feel too sorry for the lawyer. What would you do if you found yourself in such a dilemma? Don’t forget the malpractice consequences of your decision. While acting within the guidance of the Ethics Committee should be a good defense to a bar complaint by the passenger, this will not protect the lawyer from a malpractice claim. Of course, the best answer is never to allow yourself to be in the Alaska lawyer’s predicament. Applying the risk management practices suggested in this article should go a long way in doing just that – helping you dodge both bullets and blanks.