The Risk Manager, Spring 2019
One advantage that large law firms have over sole practitioners and small firms is the flexibility within the existing firm to take on new business without adding lawyers or staff. Solo practitioners and smaller law firms often have the problem of a surge in business that requires more lawyers than the firm has. The question then is how to leverage firm productivity without permanently increasing the size of the firm. The answer often is part-time lawyers and office sharing agreements. While these arrangements can work well, they carry an increased risk of the firm finding itself with a malpractice claim by a client it did not know it had – a lawyer’s worst nightmare. This article reports on a recent case illustrating the risks and provides a recapitulation of our risk management advice for part-time lawyers, office sharing, contract lawyers, and Of Counsel.
Part-Time Lawyer Exposes Firm to a Malpractice Claim
Indy Auto Man, LLC v. Keown & Kratz, LLC, 2018 BL 40220, Ind. Ct. App.,
No. 18A-PL-1154, 11/1/18
An Indiana two-partner firm, after finding it necessary to refer too many prospective clients to other lawyers, decided to engage Stohler, a sole practitioner, part-time. Stohler was to work on cases for the firm, but would also represent his own clients in his separate solo practice.
Indy Auto Man (IAM), a used car dealer, retained Stohler to represent it in two cases. In both cases Stohler filed his appearance using firm letterhead. He used the firm’s address and his firm email address as contact information. Stohler’s relationship with firm did not work out. He disappeared. It was later learned that he had accepted an in-house position.
Stohler’s abandonment of IMA resulted in missing the time limitations for responding to discovery. This led to a default judgment in one of the cases of $60,000. IAM filed a malpractice claim against Stohler and the firm. The firm moved for summary judgment arguing that as a matter of law it did not owe IAM a duty of care. The trial court granted the motion.
On appeal the Indiana Court of Appeals reviewed the facts to determine whether the firm assumed a duty of care by giving Stohler the apparent authority to engage the firm to represent IAM. The Court noted these undisputed facts:
- The Firm provided Stohler with rent-free office space and allowed him to use the Firm’s mailing address.
- The Firm provided Stohler with business cards and letterhead.
- The Firm provided Stohler with an email address, though he never activated it.
- Stohler used the Firm’s contact information when filing appearances in the two IAM cases.
- The Firm added Stohler to its legal malpractice insurance policy. The Firm believes that was only intended to cover Stohler’s work for the Firm’s clients, but there is no written evidence supporting that belief.
- IAM sought to retain an attorney with the backing of a firm and selected Stohler, in part, because it believed that he was in such a situation.
The Court concluded that:
At the very least, there is a question of fact as to whether IAM had a reasonable belief that Stohler was “Acting as the firm’s agent based on the Firm’s manifestations. It is clear that this evidence must be weighed and evaluated by a trier of fact. ….The judgment of the trial court is reversed and remanded for further proceedings.
This case is an object lesson on how not to employ a part-time lawyer. We recommend it for your risk management professional reading
The De Facto Law Partnership
There are numerous KBA ethics opinions governing shared offices. The significant risk management consideration is expressed in E-418:
If the lawyer relationships and client information systems found in an office-sharing arrangement resemble those found in firms, the lawyers will be deemed members of a firm for the purpose of applying the Rules of Professional Conduct.
KBA ethics opinions uniformly require accurate and clear communication of firm names and that there be no misleading of the public that a shared office is a single firm. [See generally, KBA E-219, 259, 299, 302, 311, 338, 396,406, 417, and 418.] Once misleading of the public is found, malpractice liability attaches to all lawyers in the shared office.
Managing the Risk
Lawyers Mutual’s risk management article, Sharing Offices: The Ethical, Risk Management, and Practical Considerations, is a comprehensive review of:
- With whom may lawyers share offices?
- With whom should lawyers share offices?
- What professional responsibility rules are paramount in shared office arrangements?
- What are the shared office vicarious malpractice liability risks?
The article concludes with risk management guidelines for evaluating office sharing arrangements along with a sample office-share agreement that offers ideas on how to structure a workable relationship. The article includes the following risk management advice for avoiding the appearance of a de facto law firm:
- Office Signs:
Exterior – Building marquees, building directories, and office entrance door signs must clearly indicate the relationship among the lawyers practicing in the office. Insert a line between the names of separate practices. Include descriptive language as appropriate; e.g., add “
Sole Practitioner” after the name of those lawyers practicing alone.
Interior – Place on individual lawyer office doors signs that indicate that the lawyer’s practice is separate from others in the office.
- Documents and Advertising: Business cards, letterhead, and pleadings should indicate only the lawyers practicing together in the shared office. Telephone listings, yellow page ads, brochures, and other advertising should be done in the name of the separate practices – never jointly.
- Office Layout: Organize office space to separate practices to the maximum extent feasible. Lawyers should have private offices and workspace for their staff and individually owned equipment. Use interior walls, screens, and cubicles to indicate separate office practices.
- Common Receptionists: Common receptionists must be trained on how to answer the telephone in a way that avoids giving the impression of a partnership and how to answer questions about who employs them. The best procedure is for each practice to have a separate telephone number. If a common telephone number is used, the receptionist should answer with a recitation of the number only or the generic phrase “law offices.”
- Letters of engagement: Require that all lawyers use a letter of engagement that includes a paragraph explaining the shared office arrangement and exactly whose services are being retained. If there is common staff, describe their duties in the letter of engagement making it clear that client confidentiality is protected. If appropriate, use the letter of engagement to get client consent for use of common staff on their matter.
- Referrals: Make referrals to other lawyers in the shared office carefully. Be sure the client understands any further involvement the referring lawyer has in the matter. Some lawyers give referred clients several names of lawyers, both inside and outside the shared office, or a lawyer referral service telephone number to avoid any confusion on relationships.
- Lawyer Office Demeanor: Do not be too casual in the office with other lawyers in the presence of clients and visitors thereby giving the impression that there is a close professional association. Knock before entering another lawyer’s office and do not discuss business with another lawyer in front of clients or visitors.
- Staff: All office-share lawyers are ultimately responsible for training their staff and common staff on client confidentiality and other professional responsibility requirements. Sharing legal secretaries and paralegals with access to client confidential information should be avoided. Temporary employees must be thoroughly instructed on office-share procedures before working even a short time in the office.
- Files and Office Procedures: Filing systems must be separate – complete non-access. General bank accounts and client trust accounts cannot be combined. Office procedures should be established for mail handling, telephone messages, answering machine playback, and fax receipt that protect confidentiality.
- Office Machines: Shared telephone systems, fax machines, answering machines, scanners, and copiers should be located and operated on a basis that protects client information from inadvertent disclosure. Computer systems should not be networked in the office. Each practice should use a stand-alone computer system with password security and controlled access. If an office system is networked to be eligible for volume licensing on software and upgrades, firewalls and password security measures must be used to make absolutely certain files cannot be accessed by unauthorized persons.
- Conflict of Interest Check System: Each practice should maintain its own conflict of interest check system. Checkfor conflicts with other lawyers at the time the office-share is started and thereafter for all new clients and matters. The surest way to avoid disqualification motions for office-share lawyers is to agree not to represent adverse interests. Exceptions to this agreement should be made only with the consent of both clients.
We recommend lawyers in or considering an office sharing arrangement read Sharing Offices: The Ethical, Risk Management, and Practical Considerations by going to lmick.com, click on Resources, click on Risk Manager by Subject, click on Sharing Offices, and select the article. Two other ways firms leverage practice by are using contract lawyers and Of Counsel. For our analysis and risk management advice on these arrangements go to lmick.com, click on Resources, click on Risk Manager by Subject, click on Contract Lawyers, and select the article Barrister in a Box, Contract Lawyers in Kentucky; and in the Subject index click on Of Counsel, select the article Of Counsel.