Fans of the popular series “Breaking Bad” will be familiar with the trials and tribulations of Saul Goodman, an attorney who frequently receives and accepts referrals to handle all types of legal issues. Saul provides the perfect example of the real world risks facing referring attorneys when the subsequent professional commits malpractice.
When referring a matter, an attorney has a duty to ensure that the successor attorney is competent and trustworthy. In such a referral arrangement, agency principles apply: the referring attorney assumes a duty to select other competent “agents” to handle matters that were originally entrusted to the “principal” attorney. Generally, a referring attorney who receives no fee and does no work on the case does not guarantee the performance of the working attorney, and therefore cannot be held liable for the latter’s malpractice. However, a referring attorney must exercise “due care” when making a referral if there is an attorney-client relationship with the person who is being referred.
In the malpractice context, it is significant whether the referring attorney at the time of the referral should have had knowledge about the successor attorney that would have prevented a reasonable lawyer from referring the matter to successor counsel. This basis for liability does not necessarily depend upon the referring attorney retaining any control or financial interest in the case. Rather, the referral itself is the negligent act that ultimately injures the client, when successor counsel commits malpractice. Further, once the case has been referred, there is usually no duty to monitor successor counsel.
In the absence of referral fees (which are the subject of a risk management headache that we’ll discuss in a future post), some jurisdictions like New Jersey assess the totality of the circumstances in determining if a referring attorney is liable for the ultimate malpractice, and require only that the referring attorney verify that successor counsel was licensed to practice law in the appropriate jurisdiction.
By contrast, in the absence of fees, New York and Pennsylvania have refused to recognize a cause of action against an attorney who is alleged to have negligently referred a client to another attorney, who subsequently mishandles the case, and have also declined to impose a duty on referring counsel to monitor or supervise the work of successor counsel.
Some risk management tools to consider when referring a matter to another professional:
- Complete some level of due diligence. At a minimum, ensure the attorney to whom you are referring is licensed to practice and in good standing. When possible, ascertain the attorney’s practice areas or focus.
- Be clear with the client. Take affirmative steps to clearly communicate to the client the scope of your representation and supervisory authority, if any, over successor counsel.
- Always provide at least three names and make no promises. Suggesting the individual contact a state or local bar referral service is always a safe practice.
- Educate staff. Make certain that all staff understand the firm’s referral procedure and also the reasons the policy is in place. Consider developing a referral list and make it available to everyone in the office.
- Exercise caution with regard to referral fees. It is acceptable to decline a fee, and if you do so, do not supervise the successor attorney, and expressly advise the client that your role has ended. If you accept a fee, be aware of the risk involved and be up front with the client about the arrangement. If you are still involved with the case, allocate, with successor counsel, your respective responsibilities and other details of the case’s management in writing.
- Check malpractice insurance. Prior to accepting a fee, consider ensuring that your successor has adequate malpractice insurance in place.