The most common forum for malpractice claims is civil litigation. However, a professional may find himself in a potentially worse situation if the appropriate professional regulatory board also gets involved. Take for example a recent case of accounting malpractice that demonstrates the serious side effects that can occur when an accountant falls short of the standards of the profession.
The attorney-client privilege is one of the most basic tenants of professional liability. While the general rule itself is uncomplicated, complex circumstances between attorneys and their clients can often trip up even the most experienced lawyer. Take for example the following New Jersey malpractice case involving a law firm’s general counsel which raises the question: who is really the client?
If you are in the world of finance, accounting or tax chances are you have probably heard of Sam Wyly and his late brother Charles Wyly. In recent years, the business mogul brothers have been the hot topic of litigation as they battled with the IRS and SEC over alleged tax and securities fraud that may have spanned decades. In the most recent decision to come out of the Wyly saga, Sam Wyly was ordered by a Dallas bankruptcy court to pay $1.1 billion in back taxes, interest and penalties. While the litigation is noteworthy because of the massive amount of dollars involved, it can also provide some reminders for tax professionals, particularly those with sophisticated clients.
As a general matter, the Rules of Professional Conduct prohibit lawyers from sharing fees with non-attorneys. However, there are certain exceptions to that rule. Rule 5.4 states that “a lawyer or law firm may include non-lawyer employees in a compensation or retirement plan, even though the plan is based in whole or in part on a profit-sharing arrangement.” A recent case out of Pennsylvania describes how a non-lawyer attempted to put this exception into action, albeit unsuccessfully.
The particular nuances of each state’s affidavit of merit rule can be difficult to navigate. Since affidavits of merit (AOM) are so critical to malpractice actions, we do our best here at Professional Liability Matters to keep you informed of the particular differences among states and various defenses that can be raised in a malpractice suit requiring an AOM. Last week we blogged about a particular exception to the AOM rule in New Jersey, which you can check out here. This week we turn our attention to another New Jersey case, in which the court again finds an exception, but under different circumstances, when it comes to the AOM requirement.
Your friends at Professional Liability Matters often focus on interpretation of Affidavit of Merit (“AOM”) requirements. As our handy table shows, each state has its own rules as to AOM requirements and other details regarding substance and form. These rules are of critical importance to many malpractice claims. Most states require an AOM from a professional within the same field certifying that the malpractice case has merit. This is a necessary gateway function so that litigants cannot sue professionals without any justification. Implicit in this requirement is that the typical fact-finder may not understand the appropriate standard of care, and therefore must rely upon professionals within the field. However, in some cases, an expert opinion may not be necessary to understand how the standard of care was breached. In some states this qualifies as an exception to the AOM requirement. Take for example the following case out of New Jersey which applied the common knowledge exception to the AOM requirement.
Employee wellness programs are all the rage. While the concept is still relatively new, the potential implications of such programs are still being ironed out. Consider for example our recent post about how such plans can comply with other existing federal regulations. As employers struggle to make sure that their programs comply with existing regulations, another aspect of the employer wellness programs cannot be forgotten: taxes. The potential tax implications for both the employer and employee are an important aspect of any wellness program. In a recent Chief Counsel Advice (CCA) the IRS addressed what constitutes taxable income when benefits are provided to employees through a wellness program. Employers and tax-preparers should take note.
Model Rule of Professional Conduct 1.6(c) provides that “A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure” of client information. Generally that isn’t too difficult but things get complicated when it comes to electronic communication. Over 220 billion e-mails are delivered each day. According to reports, e-mail remains the most “pervasive form of communication in the business world.” Given the rampant use of e-mail, eventually there will be mistakes: your e-mail will land in the wrong hands or you will receive an e-mail meant for someone else. In some cases, the disclosure can be harmless, but what happens when the information lands in the hands of counsel for your adversary?
Employee wellness plans are a hot item these days. Increasingly, wellness plans are seen as a benefit to both employees and employers alike. As many employers jump on the bandwagon of this growing health trend, they should be aware of the other legal implications of creating and implementing these programs within their company. For example, a popular topic ever since the EEOC issued its proposed regulations last year has been how employee wellness programs can comply with existing regulations such as the ADA and Title II of the Genetic Information Nondiscrimination Act (GINA). Well now it’s time for employers to take note because the EEOC has just finalized its rules in this regard.
New Jersey is known for its beaches and its tomatoes. In the malpractice community, New Jersey is also known for its unique rules on fee shifting. New Jersey allows successful litigants in attorney malpractice suits to recover as consequential damages the legal expenses and attorneys’ fees they incur in prosecuting the claim. We previously reported on the case of Innes v. Marzano-Lesnevich, pending before the New Jersey Supreme Court that could potentially expand the rules on fee shifting in malpractice cases. Well, the New Jersey Supreme Court has spoken and any attorney practicing in New Jersey should be aware of the outcome.
Fee sharing is not unfamiliar to most attorneys. Model Rule of Professional Conduct 1.5(e) permits lawyers who are not in the same firm to share or divide a fee. A typical example is when an attorney refers a case out to “trial counsel”. But, fee sharing has its restrictions. For example, the Model Rules permit fee sharing only when the fee is reasonable, the client agrees to the arrangement and the division of the fee is proportionate to the share of each lawyer’s services or the lawyers assume joint responsibility for the representation. These requirements create ethical implications for lawyers engaged in fee sharing. Fortunately, the ABA recently provided some guidance.
The Department of Labor recently announced its new Fiduciary Rule – aka the “conflicts of interest rule.” This new rule expands the definition of fiduciary and alters how investment advice is delivered in retirement accounts. It won’t go into effect for at least another year, but it’s not too early to start thinking about how the changes will affect the professionals who render this advice.
It’s not uncommon for small or solo attorneys to join together with others to share in operating and overhead costs of running a law firm. Attorneys can sometimes share office space, personnel and equipment yet run completely different practices independent of each other. However, what happens when one attorney is sued? Can any of the other attorneys also be held liable? Of course not, right? Well, according to a decision out of Tennessee it’s not entirely out of the question.
Professionals must play the hand they’re dealt. Good, bad or ugly, a professional assesses the situation and provides a recommendation as to how to overcome certain obstacles and achieve the client’s objectives. However, professionals do not have unfettered authority. Rather, all classes of professionals are bound by certain guidelines which delineate how a professional must behave on behalf of the client. Professionals that stay the course will not be held accountable for the client’s indiscretions, mistakes or even intentional wrongdoing. But, in the rare scenario when a professional is complicit with the client, both may be held liable.
In many states a litigant cannot proceed with a professional liability lawsuit without an appropriate affidavit of merit. As our handy table shows, each state has its own rules as to AOM requirements and other details regarding substance and form. Simply filing an AOM though is not always enough. Ensuring that the AOM has been prepared by the appropriate professional and addresses the issues of the particular case is critical to surviving a potential motion to dismiss. Take for example two recent cases out of New Jersey.
The doctrine of concurrent causation can apply in many different insurance coverage scenarios. The doctrine provides that if two causes - one covered by an insurance policy and the other excluded by the policy - both contribute to a loss, then coverage should be afforded under the policy. The doctrine would seem to expand coverage in scenarios where a potential exclusion might otherwise preclude it. Seems simple, right? Not always. Take for example the following APL case where the court found the concurrent causation doctrine did not apply and coverage was denied.
Contract law is that body of rules that govern agreements between contracting parties. In contrast, tort laws govern situations where one person has harmed or injured another. Usually, professional liability claims grounded in one body of law or the other. There are various defenses available to the professional to ensure the claim against them falls in one of those categories (if any), but not both. A recent A&E decision would suggest otherwise, however.
Subpoenas provide a means to obtain testimony or documents from a non-party. Many lawyers routinely issue subpoenas during the discovery or trial phases of litigation. But lawyers are sometimes on the receiving end of a subpoena. This is when things get a bit tricky.
Even the most experienced of professionals cannot predict the future. So, as a risk prevention measure, many of us turn to the next best thing by agreeing to clear contractual terms with our clients so as to eliminate confusion down the road. We spell out the terms and scope of our engagement and we identify the client’s responsibilities in an effort to avoid problems before they arise. We attempt to reach agreements today that may impact us tomorrow. According to the ABA, conflicts of interest are one of the most common legal malpractice claims so some attorneys may be tempted to seek a waiver of future conflicts in their engagement letters. This practice does not work. Consider for example the following case out of California.
An attorney can’t be held accountable for her client’s breach of the Rules of Professional Conduct, right? Wrong. Model Rule of Professional Conduct 1.15 provides that a lawyer cannot commingle a client’s property (i.e. money) with the lawyer’s. Seems simple enough: don’t mix personal with business. However, what happens when the lawyer complies with this standard but her employee doesn’t? According to a Texas state court, the lawyer is still responsible.
Lawyers wear many hats; the key is not to wear them all simultaneously. Many lawyers are well versed in areas outside of the law and can be a source of non-legal knowledge for clients. However, lawyers need to be mindful when their services extend beyond the traditional landscape of legal advice. Mixing business interests and legal advice can easily get you in hot water if the transaction goes awry. Take for example the case of Burk & Reedy, LLP v. Am. Guarantee & Liab. Ins. Co., in which a professional liability insurer denied coverage for an attorney that was involved in both the legal and business aspects of a transaction.
The Constitution guarantees the right to an impartial jury. This right is critical to ensuring a fair trial. While not specifically outlined in the Rules of Professional Conduct, it should go without saying that an attorney may not interfere with a party’s right to a fair trial. Nonetheless, PL Matters would have considerably less to discuss if professionals always followed the rules. Take for example the following case out of Texas where an attorney learned the hard way not to tamper with the jury process.
As you are undoubtedly aware, Professional Liability Matters previously circulated this handy table addressing the various affidavit of merit requirements throughout the country. Generally, in jurisdictions that require it, an affidavit of merit is necessary in order to maintain a malpractice claim against specified professionals, often including attorneys. But what is a “malpractice claim”? Suing a professional does not always equal malpractice. For example, a claim for malicious use of process is based upon a different standard than negligence. So this raises the question, is an affidavit of merit still required? In a case of first impression, a New Jersey Appeals Court recently ruled that it is not.
The Model Rules of Professional Conduct prevent lawyers from representing conflicting clients. A conflict of interest may arise when the representation of one client will be directly adverse to another client. Just how far the requirement of “directly adverse” may extend was recently addressed by the Massachusetts Supreme Court in an interesting case involving IP litigation. While one inventor retained Firm to represent him on screwless eyeglass hinges another inventor had already retained Firm to secure a related patent in the screwless eyeglass market. Read on to see who got screwed.
Insurers are entitled to make decisions as to the professionals they will insure and the terms of the relationship. To that end, insurers expend considerable energy evaluating risks and assessing the likelihood of a potential claim. The scope of underwriting and the key metrics may vary from carrier to carrier but without exception each insurer relies upon some form of insurance application. Insurers are entitled to rely upon the representations of their applicants and, when faced with a misrepresentation in an insurance application, have the right to deny coverage. Accordingly, we’ve cited previous examples of applicants caught in a lie in their insurance applications. Don’t do it. Consider another recent example.
Pursuant to ABA Model Rule 1.10, a single attorney’s conflict of interest may be imputed to the entire law firm. The Rule provides that while lawyers are associated in a firm, none of them shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so under the Rules. It is not uncommon for lawyers to have different associations with a particular firm—for example the term “of counsel” is often used to designate a role different from the traditional partner or associate positions. This may beg the question what level of involvement must an attorney have in order to be “associated with” a particular firm for conflicts purposes. A recent case out of the U.S. District Court of New Jersey involving a “seconded” attorney addressed just this issue.
Pro bono activities are not unfamiliar to most attorneys. Many attorneys will volunteer their time with organizations that provide pro bono legal services to those who could not otherwise afford legal representation. Most jurisdictions permit volunteer attorneys to be on a list of counsel that the court may appoint when a party is in need of representation. Some states may even assign attorneys in good standing to a court appointed representation. What happens though when that court appointed attorney allegedly commits malpractice in the course of the pro bono representation? A recent case out of Illinois addressed this scenario in the context of a court appointed child representative.
Here at PL Liability Matters we have written on numerous occasions about the importance of an engagement letter. The engagement letter is a critical tool for setting expectations and managing risks. As we have said before a well drafted engagement letter can deter malpractice claims and in meritless suits it can be “Exhibit A” to a dispositive motion. A case out of New York involving an accountant-client relationship demonstrates just that scenario. Unfortunately in this case, however, the court found that the engagement letter did not sufficiently limit the risk to the professional in order to avoid the malpractice claim.
In September the Department of Justice released its new directive on individual accountability for corporate wrongdoing in a revived effort to fight corporate fraud. The “Yates Memo” by Deputy U.S. Attorney General Sally Quillian Yates, outlines the DOJ’s policy on targeting and pursuing corporate executives in cases of corporate wrongdoing. With the DOJ’s new guidelines companies should be taking a fresh look at their D&O insurance.
The concept of fee shifting in the field of legal malpractice may not be well known or understood if you don’t practice in New Jersey. That is because New Jersey is one of the only states to employ this unique fee structure. The so-called “Saffer rule” was created by the NJ Supreme Court decision in Saffer v. Willoughby, in which the Court held that clients may recover as consequential damages the legal expenses and attorneys’ fees they incur in prosecuting a malpractice claim against their former attorney. Recently, the NJ Supreme Court heard oral argument in the case of Innes v. Marzano-Lesnevich, to determine whether attorney-defendants can be liable for attorneys' fees as consequential damages to a non-client under Saffer.
Friends of PL Matters know that maintaining malpractice insurance is a must, regardless of your profession. Clients count on professionals to get things done right. When things don’t go exactly as planned, clients get unhappy, lawsuits are filed, and malpractice insurance kicks in to protect the professional. But what if the professional lacks insurance? May the client maintain a cause of action for lack of insurance?
Expert witnesses are critical in many professional malpractice cases. This is particularly true in the med-mal context where expert testimony may be necessary to help understand causation. More specifically, experts in medical malpractice cases are essential in helping the fact finder determine whether the medical professional’s actions (or inactions) were the cause of the alleged injury. Whether an expert succeeds in this task can be the difference between a win and a loss at trial and in some cases on a motion for summary judgment. Take for example the following scenario.
Professional athletes are worth a lot of money. When they are on top of their game they are capable of raking in the dough for themselves and their organizations. However, if they become injured or otherwise unable to perform a lot of money is at stake. Therefore, it’s not unusual for athletes to obtain disability insurance policies, covering them in the event of a career ending injury. In fact with respect to collegiate athletes, the NCAA even sponsors a disability insurance program, which provides protection for qualified athletes against future loss of earnings as a professional athlete, due to a disabling injury or sickness. Of course in order to make the transition from collegiate athlete to professional you must first be drafted, and that’s where loss of value insurance comes into play.
Like all professionals, pharmacists owe a duty of care to their clients. The level of care and the specific duty owed, however, can vary depending on the jurisdiction. Historically, most states assign the duty to warn about the potential dangers, side effects or general usage of a drug to the physician or drug manufacture. Since pharmacists are not prescribing the medication, their potential liability is generally limited to scenarios involving the negligent filling of a prescription. However, a recent trend in the field has been expanding the potential liability of the pharmacists by holding them liable for failing to warn about a drug in certain situations or failing to consult the prescribing physician. A decision out of the state of Florida highlights this growing trend and creates a cause for concern in the profession.
The accountant-client privilege doesn’t seem to get as much attention as the other more commonly used privilege defenses such as attorney-client or doctor-patient. However, a case out of the Illinois Supreme Court earlier this year is giving the other “a/c privilege” a lot of press. While not all states recognize this privilege, the ones that do generally find that the client is the holder of the privilege and requires the client’s consent to disclose any information exchanged between the accountant and client. Illinois, however, has decided to take a slightly different approach.
Knowing the applicable statute of limitations for your case is critical for every attorney. In the world of legal malpractice, there are many variables in play: the jurisdiction, the facts, tolling and the extent of the underlying representation. Therefore, it’s important for attorneys to know the various nuances of the statute of limitations doctrine in their jurisdiction. For this reason, attorneys will want to take note of a recent decision out of the South Carolina Supreme Court that overruled precedent on when a legal malpractice claim begins to run.
We recently addressed the ethical implications of the initial, would-be client interview. As we discussed, the lawyer owes certain duties to a potential client and those duties vary from those owed to former and current clients. Whether an attorney-client relationship is actually formed can dictate whether a lawyer has a conflict of interest down the road when representing a new client. A recent decision out of the North Dakota Supreme court illustrates this concept.
Most attorneys don’t end their careers in the same place they started. Rather, many attorneys make a move or two which may require the transfer of files and clients. When an attorney transfers a file to a new firm, the prior firm must maintain certain ethical obligations. Model RPC 1.16 provides that a lawyer must provide notice when terminating a representation and take steps to the extent reasonably practicable to protect a client's interests. Therefore, professional obligations are not always terminated as soon as the client ends the relationship. The following example demonstrates how failure to timely withdraw from a case after the attorney-client relationship ended resulted in a claim of malpractice.
Ever hear the joke about the in-house attorney who was fired for complying with the Rules of Professional Conduct? It’s no joke. Model Rule 1.13(b) provides that if in-house counsel knows that an employee is violating a law that may be imputed to the employer, the lawyer must proceed in the best interest of the employer. But, complying with that rule may result in backlash for the attorney. Take for example the following case, in which the Utah Supreme Court considered whether the rule creates a public policy exception to at-will employment to prevent companies from terminating in-house counsel for reporting illegal activity to management.
We’ve previously touched on the risks of delegation. Although most of the LPL cases we discuss involve an attorney’s own, direct negligence, an attorney may be responsible for delegating tasks to others. Can the delegating attorney avoid liability because the alleged negligence was committed by someone else? According to a recent South Carolina opinion, the answer is no.
Claims professionals, a/k/a "adjusters" play an important role in evaluating and defending an insured claim as part of the tripartite relationship. When something goes wrong, it is not uncommon for the insured to turn on her attorney but the adjuster is never a target, right? Maybe not. At least two jurisdictions, New Hampshire and Alaska, permit claims of negligence against individual insurance adjusters on the theory that they owe a duty of ordinary care to conduct adequate investigations into an insured’s claim. Pennsylvania recently considered the issue and concluded that the Pennsylvania Supreme Court may permit such a claim against an insurance adjuster.
Under Model Rules of Professional Conduct 1.15 and 1.16, a lawyer must safeguard a client’s property and deliver it promptly to the client upon the client’s request and upon termination of representation a lawyer shall take whatever steps are reasonably practical to protect a client’s interest. The ABA recently issued a formal opinion clarifying and updating a lawyer’s ethical obligations under these Rules and addressing practical considerations regarding the application of these Rules to practice.
Social Media has transformed the legal profession. Today’s lawyers routinely communicate, advertise, investigate and obtain information via the numerous social media platforms available at the click of a button. The rapid change in the way lawyers do business has created a new set of ethical challenges. In order to navigate this growing field of ethical issues, many states have issued guidelines for the use of social media in the legal profession. Last year, the New York State Bar Association’s Commercial and Federal Litigation Section issued its first set of Social Medial Ethics Guidelines. Just recently, those Guidelines were updated to address areas that require additional guidance including new sections on the retention of social media by lawyers, tracking of client social media, communications by lawyers with judges, and lawyers’ use of LinkedIn.
e·gre·gious: adjective; outstandingly bad/shocking. In the malpractice context, egregious is used to describe conduct that is so extraordinary that it may violate the rules of Professional Conduct. What is considered egregious can vary depending on the circumstances of the case and often is defined by the end result. Take for example the following case, where counsel’s egregious conduct resulted in a mistrial. According to the court: “That word – egregious—is difficult to write, but nothing else seems adequate.”
Attorneys often utilize local counsel to assist in a venue they are not licensed. The role of the local counsel will vary from case to case. Generally speaking, local counsel have a more limited role in the litigation. However, according to a recent NY ethics opinion, a limited role does not necessarily mean limited responsibilities or risks.
We were pleased to see your interest in our recent post regarding emotional distress damages in the LPL space. In continuing with that topic, we turn to emotional distress claims in the context of medical malpractice. Medical malpractice victims are generally entitled to recover for emotional harm they endure, but what about the victim’s family? Many states permit some form of recovery for bystander emotional distress. However, translating that type of claim into the field of medical malpractice can be trickier as there is often no specific “accident” to observe when a medical mistake is made. The Supreme Court of Connecticut recently addressed this issue, reconciling a split in the state courts as to whether a claim of bystander emotional distress was available as a result of medical malpractice.
Emotional distress is not uncommon in malpractice cases. We have blogged before about jurisdictions that have expressly permitted the recovery of such damages, while other jurisdictions don’t have any law addressing this potential area of recovery. In the past year a few states have addressed this issue and the decisions are worth noting.
The law in Pennsylvania, like most other jurisdictions, is clear that the attorney-client privilege survives the death of an individual. However, until recently the law was not so clear as to whether that same privilege applies to a corporation after it dissolved or “died.” Earlier this year the Pennsylvania Superior Court answered this question in Red Visions Systems v. National Real Estate Information Services, and just recently, the state Supreme Court denied allocator, leaving the Superior Court’s decision as the law of the state.
Attorneys are held to a reasonably well defined standard when it comes to professional conduct. Clearly, however, not all attorneys abide by this code. What an attorney may consider zealous advocacy can easily turn into unprofessional conduct if taken too far. Take for example the following case out of New Jersey where comments from the plaintiff's counsel were found to exceed the bounds of permissible advocacy and resulted in a mistrial, vacating a nearly $2.5 million judgment.
Expert reports are a staple in many litigated matters. A good report should clearly convey the opinion and provide sound reasoning for the basis of the opinion. It is to be expected that an attorney and the expert will work together to formulate the expert opinions and ultimately to author a report. But how much input may an attorney provide? Federal Rule 26 clearly states that the expert report is to be prepared and signed by the witness. Nothing in the rule prohibits counsel from helping the witness. But, it's not completely clear from the rule exactly what level of involvement is permissible. A recent federal case sheds some additional light on this issue.