In 2009 the Kentucky Supreme Court substantially revised the Kentucky Rules of Professional Conduct.
Articles in this index written before 2009 citing Kentucky Rules of Professional Conduct must be checked for any changes to the rule cited.

Malpractice Avoidance – Client Screening

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Client screening is a concept of risk management well known to most lawyers. Screening out high-risk prospective clients is a failsafe method of avoiding any risk of a malpractice claim. What is not so well appreciated is that current client screening should be part of your risk management program as well. In tough economic times, however, it can be hard to apply screening when it means declining or disengaging clients, worthy or unworthy. Nonetheless the price paid for representing a client that should be avoided can be high both in terms of cost, time, and reputation. These circumstances suggest that now is a good time to review the factors that a prudent lawyer will consider when performing prospective and current client screening.

Prospective Client Screening Checklist:

  1. Beware of the prospective client who is changing attorneys.
  2. Be leery of a case that has been rejected by one or more other firms.
  3. Does the prospective client have a history of questionable prior litigation?
  4. Does the prospective client have unrealistic expectations for the matter that cannot be altered?
  5. Does the prospective client have an unreasonable sense of urgency over the matter? Beware of a case that has an element of avoidable urgency.
  6. Beware of the client who has already contacted multiple government representatives to plead his case.
  7. Beware of the client who wants to proceed with his case because of principle and regardless of cost.
  8. Beware of a client who has done considerable personal legal research on his case.
  9. If your first impression of the prospective client or his matter is unfavorable, think twice before accepting the case. It is best to avoid a prospective client who demonstrates a difficult personality along with other indications that he will be uncooperative. If your intuition tells you to avoid a prospective client, listen to it.
  10. Is the prospective client difficult about reaching agreement on fees? Does he appear to be price shopping? Can he afford your services? Does he refuse to give an adequate retainer?
  11. Avoid prospective clients with matters outside your firm’s regular practice areas unless you are prepared to spend the time and resources necessary to develop the required competence to practice the matter. Can the prospective client afford the cost associated with this effort?
  12. Avoid prospective clients when the statute of limitations is about to run or other deadline is impending on their matter unless you are absolutely sure you can meet the limitation or deadline. A good rule of thumb is that a new case should not be accepted if it is within three months of the statute of limitations. This is just too short a time to identify and name all the parties. Accepting unrealistic time pressure to represent a client is an invitation to commit malpractice (think medical malpractice suits).
  13. Be leery of accepting prospective clients who are family or friends. Fee misunderstandings along with the loss of objectivity when representing family or friends can lead to bitter results.
  14. Learn everything you can about the quality of a prospective client before you take the matter – not just verification of the facts of the case. Do a Google search – look for Websites, blogs, and participation on sites such as FaceBook, and MySpace. Determine whether the prospective client has:
    1. Good credit and is financially solvent.
    2. A criminal record.
    3. Frequently filed claims for injuries.
    4. Retained numerous lawyers in the past.
    5. Ever sued a lawyer for malpractice or filed a bar complaint.
  15. Verify the identity of non-face-to-face prospective clients – those that contact you by phone, mail, or over the Internet. Scams targeting lawyers are everyday occurrences.

Current Client Screening Checklist: (From "The Impact of the Credit Crunch on Lawyer Risk Management," by Del O’Roark, Kentucky Bench & Bar, July 2009)

Screening of prospective clients is a well-known risk management procedure. What many lawyers fail to do, however, is screen current clients for problems that can develop during a representation. Current client screening should include:

  • Conducting Interim Conflict of Interest Checks: During the course of a representation a conflict check should be made anytime a new party is named, a new entity becomes involved, new witnesses are identified, or any other development that triggers conflict issues. This is especially important in business and commercial transactions. When the deal goes bad or the business fails, lawyers involved with any whiff of a conflict are sued either for malpractice or breach of fiduciary duty. These are difficult claims to defend and juries have little sympathy for lawyers perceived as disloyal or devious.
  • Monitoring for Good Clients Gone Bad: Enron’s fall from grace is a good example of a good client gone bad resulting in its lawyers being accused of breaching fiduciary duties owed to third parties and aiding and abetting the client in fraud. Business and commercial transaction lawyers are at greatest risk for such a claim. To risk manage this exposure, establish policies that screen for red flags signaling that something is amiss with a client or that a client is engaged in questionable transactions.

    The following is a list of some of the factors to consider in evaluating whether a current client poses unexpected risks:
    • Change in control – Has there been a sudden change of management or has management gone into weaker hands? Are the client’s employees leaving the client or being laid off?
    • Change in ownership – Has the client been acquired by a conglomerate or gone into bankruptcy? Successors, receivers, regulators, and trustees are not your friends, even if the client was.
    • Unusual transactions – Does the client want to do a transaction with no apparent business purpose?
    • Nature of client’s business – Does the client owe fiduciary duties to customers and is the client dealing with other people’s money?
    • Change in relationship with the client – Has the client’s behavior changed as reflected in sudden urgent requests for legal advice giving little time for response? Is the client tense, erratic? Does the client want to micromanage the matter? Does the client want a reduction in fees? In bad economic times clients can become desperate.
    • Character change – Does the client expect you to bend rules, endorse a questionable scheme, cover up, or stretch the truth? Is the client uncertain of the source of funds for a deal? Is the client now willing to commit fraud?
    • Change in fee payments – A change in payment habits is a frequent sign of trouble in a client. Accounts receivable building up could be a signal that the client is in financial difficulties. Do a solvency check before the amount of arrearages becomes significant. If you are about to enter a period of intense work for the client that will involve substantial billing, get a retainer supplement and make sure the client knows what is coming. If you cannot readily work out fee payments, consider withdrawing.

Do not rely on a client’s continued good will. Clients change. There are changes in ownership, control, and circumstances. Educate firm lawyers and staff to be alert to these developments. If you become concerned that a good client is going or has gone bad, withdrawal is often the best risk management. If you continue the representation, be sure that the letter of engagement accurately defines the scope of representation and any changes in scope. Carefully document the file to record significant developments and the advice given. In delicate situations it is especially important that the advice given be reflected in a letter to the client. Do not expose yourself to a claim of fiduciary breach by third parties or of aiding and abetting your client in fraud.

 


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Disclaimer: The contents of this Web site are intended for general information purposes only and should not be construed as legal advice or legal opinion on any specific facts or circumstances. It is not the intent of this Web site to establish an attorney’s standard of due care for a particular situation. Rather, it is our intent to advise our policyholders to act in a manner which may be well above the standard of due care in order to avoid claims having merit, as well as those without merit. In the event any statement on the Web site differs from a statement in an issued policy the policy will control.

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