Volume 20, Number 3
Top Trends in Malpractice
By Mary Kathleen HartleyMary Kathleen Hartley is a member of Hartley & Hartley in Santa Monica, California, where she represents lawyers and clients in legal malpractice claims.
An old ditty advised new brides on their wedding day to wear “something old, something new,
something borrowed, something blue.” This bit of doggerel actually has proven useful over the years to describe the trends we see in legal malpractice cases. Some things never change, others are new or borrowed from other areas of law, and some are so depressing that you feel blue thinking about them.
One thing before starting: These trends are cyclical with the economy. When times are bad, lawyers get blamed and sued for transactions that sour. Right now, business lawyers have greater exposure because of the recent recession. By contrast, claims against attorneys involving real estate are down because real estate has been booming. When the real estate market enters a down cycle in a few months or years, another review of malpractice trends will show real estate claims climbing. Consequently, this article should be considered as nothing more than a snapshot in time of claims that are currently popular.Something Old
The golden oldies never change. Ever since I began practicing law, the two most common areas for claims have been personal injury and family law (divorce).
Personal injury claims. Malpractice claims involving personal injury claims continue to top the list of most common claims. The most common error lawyers make with such claims continues to be the failure to file within the statute of limitations. With all the modern technology available to remind an attorney to get something on file, attorneys still miscalculate dates or forget to calendar them.
Family law/divorce. Family law is and remains a fertile area for malpractice claims. We have often wondered whether it would be better to go back to a fault system of divorce so that the spouses could fight about something meaningful instead of fighting over property issues. Divorces are messy and emotional, and after the divorce is over the rage of one spouse against another is frequently rechanneled against the client’s own lawyer. Extra special client handling is required to avoid claims in family law.Something New
For better or worse, there are a number of new areas of legal malpractice we have not seen in quite this way before.
Multiparty cases with large damages. Attorneys are handling bigger and more complex tort cases. In cases with large damages from catastrophic injuries, it is imperative that all possible defendants be named to ensure that there is an adequate pot of money for the plaintiff. We are seeing more and more claims where a party in the chain of distribution of a defective product is omitted, or the manufacturer of a component is not named. Attorneys who are handling large, catastrophic loss cases simply cannot afford to ignore any possible defendant, particularly if there are probable limits to the amount that can be recovered for the client from the existing pool of defendants.
In law, as in comedy, timing is everything. In the past five years, we have seen more claims where the client no longer blames the attorney for mishandling a matter, but instead claims that the lawyer did not handle it fast enough or aggressively enough, and therefore lost a valuable right or claim. Some examples:
l Failure to file a security interest quickly. In one case, a lawyer did a superb job of documenting a secured transaction for his client, a lender. He prepared a bulletproof security agreement, but it took him several months to tweak the agreement and get it finished to his satisfaction. As soon as he finished it, the borrower signed the agreement immediately, and the lawyer duly recorded it. But in the intervening months while the lawyer was crafting his masterpiece, the borrower experienced serious financial troubles, and declared bankruptcy shortly after the security interest was recorded. The security interest was then set aside by the bankruptcy court, and the secured assets which would have provided collateral for the transaction were lost by the delay.
l Postponing filing a lawsuit. In another variation, where statutes of limitations exceed a year, we have seen lawyers waiting until the last minute to file lawsuits. With insurance becoming unavailable for many businesses and individuals, we have seen cases where lawyers who delayed filing claims discovered that the defendant who had previously been insured for millions of dollars had either a dramatically lower policy limit or, in some cases, no insurance at all. If the defendant is now judgment-proof and the case otherwise had been a clear winner for the client, the delay effectively cost the client a substantial judgment. Guess who gets blamed (and sued) when the client discovers that he or she could have recovered had the lawyer filed the claim while the defendant still had insurance?
l Statutes of limitations. Besides the outright miscalendaring of statute of limitations dates, we are seeing more cases where the attorney actually plans to file on time and has the time blocked out to prepare the complaint, only to have an emergency occur which prevents him from filing in time. Although modern word processors and document assembly programs make the preparation of a complaint much easier and faster than it was 20 or 30 years ago, the speed at which documents can be prepared has had the perverse effect of persuading some attorneys that they can wait until the last moment to file. But as anyone with children knows, stuff happens. And often does.
Failing to follow through or advise clients of consequences. A third new trend is lawyers who fail to realize that their work may not be finished with a single transaction. A lawyer filing a security agreement forgets to advise the client that it needs to be renewed and closes his file, even though the transaction may take years to complete. If the client doesn’t know to calendar the date, the attorney may get sued in the future for malpractice. Note that the attorney does not have to keep the file open but must be sure that the client is fully advised of what needs to be done and how to do it. It is often simpler for the attorney to keep the file open—the attorney’s calendaring system is probably superior to anything the client has available (see sidebar “You Gotta Do It: Case and Time Management,” page 24).
Inadequate investigation and over-reliance on clients. One disturbing new trend is the failure of lawyers to adequately investigate a case or transaction. Typically, a client will relate what the client believes is important, and the attorney will inquire no further. We are seeing more lawsuits where the attorney failed to discover a critical weakness in the case that a thorough investigation would have revealed. Damages in such cases are variable, but they often result in a claim of excessive attorney fees, something that increasingly is not covered by malpractice insurance.Something Borrowed
Plaintiffs will always try new theories against lawyers. For a while, securities and RICO claims were popular until the plaintiff’s bar realized that the litigation did not terrify the lawyers into settling and often enriched only the insurance defense lawyers who defended the accused attorney. The following are the more common of the somewhat exotic new legal theories seen recently.
Elder abuse in probate practice. Many states have enacted statutes to protect the elderly from economic exploitation. When these statutes were first enacted, they were often used in conjunction with malpractice suits against doctors and nursing homes. Because the statutes often provide for attorney fees and the survival of emotional distress claims of deceased elderly persons, it was only a matter of time before elder abuse started migrating into legal malpractice cases. Although this is only a trend, we expect it will continue and increase. Probate practitioners are well advised to acquaint themselves with the elder abuse statutes in their jurisdiction and review their procedures and practices to ensure that none of them will run afoul of the elder abuse statutes. Like RICO, the elder abuse statutes cast a wide net and can go well beyond the archetype of a neglected nursing home patient with gangrenous bedsores.
Conflicts of interest in the
nonadversarial divorce. Many family law attorneys are excited about a less adversarial approach to divorces where the attorneys supposedly will not be advocates but facilitators in helping the divorcing couple to resolve their differences. Given how acrimonious and expensive divorces can be, the borrowing of concepts from social work and mediation makes superficial sense. Yet a client is unlikely to be able to understand the difference between an advocate and a mediator and really wants an attorney who is in his or her corner, as his or her champion. Further, the ethics rules of the attorney’s jurisdiction may well preclude such representation, especially under arrangements where the lawyer may owe duties to the opposing spouse.
Malicious prosecution down in urban areas, up in rural areas. During the 1970s and 1980s, an urban litigator could expect to be sued for malicious prosecution or abuse of process after losing a case, whereas rural or suburban lawyers appeared relatively immune to such claims. Many theorized that there were too many urban lawyers and no social restrictions there for suing another member of the bar, as there were in rural areas. In the past ten years, the trends have reversed themselves. Urban lawyers discovered how difficult it is to prove liability and damages in a malicious prosecution claim. Rural and suburban lawyers have discovered the joy of suing their brethren but have not yet discovered how difficult and expensive the cases are to plead and prove.Something Blue
Some common claims are just plain depressing.
Sexual relations with clients. Perhaps male lawyers have been having sexual relations with their clients forever, but it is still a highly dangerous undertaking, and we’re seeing more and more of it in malpractice claims. Even if the attorney’s jurisdiction state has as minimal an ethics rule as California does, which prohibits sexual relations only if it is done coercively or if the relationship affects the lawyer’s judgment, lawyers still get into serious trouble, especially if the relationship ends before the legal representation does. We expect that most states will eventually make an outright ban on sexual relationships between attorneys and their clients regardless of the circumstances. Until then, if the relationship sours, an attorney who is foolish enough to be sleeping with a client should not be surprised by a malpractice suit. One bright spot: We have yet to see such a malpractice claim brought by a male client against a female lawyer.
“I was only doing a friend a favor!” With clients ever more fickle, many lawyers do whatever they can to attract and keep clients, often handling complex matters for little or no cost to the client. There’s nothing wrong with this procedure if the attorney treats the matter as seriously as a matter where the attorney is being promptly and fully paid. But we’re human, and the file that doesn’t get charged is often a neglected orphan, which leads to things being left undone or overlooked. Favors are fine, but they don’t change the attorney’s obligation to perform fully and competently.
Business relationships with clients. Perhaps it’s a sagging economy or the difficulty of getting paid a high hourly rate, but we’re seeing more and more attorneys who go into business with their clients. It can be done, provided the attorney makes full and complete disclosure to the client. Most attorneys don’t, and so become insurers of the investment. It’s a great deal for the client, who can point the finger at the attorney in a transaction gone bad and effectively turn the attorney into an insurer.How to Avoid These Claims
How can you avoid becoming ensnared in any of these trends? There is no magic solution except for diligence and hard work.
l Use your systems. You must develop and use procedures to ensure that matters are calendared and handled in a timely fashion. There are many systems that can help you (see sidebar “You Gotta Do It: Case and Time Management,” page 24), but they are uselessif you don’t understand and use them.
l Don’t delay. The very power of the modern computer makes many lawyers think they can defer taking action until the last minute. Don’t fall into this trap. Statistically it’s a loser, and sooner or later you will regret the delay. Some delay can’t be helped, but if you are doing everything at the last minute, your procedures and work flow need rethinking.
l Be thorough. Many of the new trends occur because the lawyer does not fully prepare the matter or relies excessively on the client. Your clients turn to you for independent advice. You cannot give it unless you understand the client’s problems fully.
l Be sure the client understands. Your client does not need to know how to try a case or draft a business deal, but the client must understand the risks of any legal action you advise. Inform the client in writing so that there’s no question later about the nature of your advice (see sidebar “Who’s an Unsophisticated Client,” page 25).
l Avoid temptation. An offer to go into business with a client is flattering, but be strong and don’t succumb to the honor. As for sexual relationships with the client . . . don’t.