Warning of Risks
Early on, a client may ask the lawyer for an assessment of the case. How the lawyer answers that question can set the tone for the entire litigation. Most lawyers know that, Chick Hearn aside, words like “slam dunk” are not particularly helpful or, frankly, descriptive of any litigation in which most of us ever have been involved. Even the most frivolous lawsuits have some risk, given the prospects of a bored jury deciding complex issues of contract consideration, patent invalidity, or market share. Nor can or should a lawyer ever guarantee that a particular motion is going to be successful, no matter how optimistic the lawyer may be. By the same token, telling a client that it will take a miracle to prevail—in other words, setting yourself up to be a hero—is not particularly helpful to a client either. Instead, giving as accurate an assessment as possible, with all appropriate caveats, is vital.
Failure to warn a client of the risks and likely downside of a litigation matter is a recipe for dispute down the line. With adequate warning, the client can make the proper decisions and preparations. For instance, many clients—including public company clients—must set a litigation reserve for their potential future liabilities. Even if the client does not expressly ask the lawyer to advise on the setting of that reserve, the client likely will base its reserve at least in part on its lawyer’s advice about the potential risks and exposure. If the litigation reserve is not accurate and reasonable, it will make it more difficult for the client to settle when the time is right to do so.
Similarly, some cases warrant early consideration of settlement, and clients often rely on their lawyer to assess the case so they can decide if and when settlement is appropriate. If a case should settle early for a payment close to $500,000, but the lawyer does not properly advise the client, the client will be none too pleased when it ends up paying $500,000 to settle a year later, after spending $1 million in legal fees. Of course, this very scenario may be unavoidable because many relevant facts often are not fully developed early in the case. For cases that scream “trouble” from the inception, however, a lawyer should tell the client just that, rather than waiting and surprising the client with the bad news months or even years later.
As litigators, we know that most cases settle, which is why it is important to give the client the information it needs to make an intelligent decision about settlement. But we also know that some cases do not settle, and for cases that are resolved at trial or on a dispositive motion, there generally is a winner and a loser. And even the best of us may end up on the losing side on occasion. Clients, particularly sophisticated ones, understand that and will not necessarily blame their lawyer when a case is lost—provided the client had realistic expectations about that result. If a client knows the risks of going to trial, it is far less likely to blame its lawyer for an adverse verdict than a client who is not aware of those risks.
It also is becoming increasingly common for clients to demand a litigation budget at the outset of a matter. This is precisely because the client—often an in-house counsel answering to general counsel or management—does not want to be surprised and does not want to surprise his or her superiors. And few surprises in litigation are more frustrating for in-house counsel than a litigation bill that far exceeds a budgeted amount.
Many legal malpractice claims are filed as cross-complaints in an action by the law firm to recover fees or as a preemptive strike in the midst of a fee dispute. It follows, then, that a lawyer who can avoid fee disputes with his or her clients is less likely to be sued for legal malpractice. Of course, not all fee disputes can be avoided. But some can. Sticking to a budget—whether client-mandated or otherwise—is one way to avoid fee disputes because it avoids billing surprises. If a client expects to get through a case spending less than $250,000 in fees, it is more likely to gripe and resist paying when the bill substantially exceeds that amount.
If it becomes apparent that you won’t be able to stay within your budget—a relatively common occurrence given the unpredictability of litigation—tell the client as soon as possible and, as appropriate, submit a revised budget. Most clients understand that litigation budgets involve a significant amount of guesswork and will be understanding if you update the budgets, keep them informed about increased expenses, and limit surprises.
Other disputes or claims may arise not because of a surprise, but because the lawyer simply made a mistake—missed a deadline, failed to assert a defense or privilege objection, or the like. Yet, even in those cases, lawyers can compound their problems by turning the mistake into a mistake plus a surprise by failing to promptly notify the client of the mistake. After all, it’s usually the cover-up that gets people into trouble—often more so than the initial mistake. Think Richard Nixon and Watergate. Bill Clinton and Monica Lewinsky. Barry Bonds. Lance Armstrong. Each just needed to come clean to avoid, or at least minimize, his or her trouble. So if a lawyer misses a deadline, he or she should immediately tell the client and strategize about what, if anything, can be done. Any potential liability will not get better with age, so hiding it serves no purpose (in addition to being unethical).
A man surprised is half beaten.
Surprises, of course, not only cause client disputes and claims but also can make those disputes and claims much worse. Just as in-house counsel want to avoid surprises in their own litigation matters, so too law firm management wants to avoid surprises when defending a claim brought against the firm by one of its clients or former clients. But surprises often do occur, and some can’t be avoided. It is the avoidable surprises that are most frustrating and the ones that all lawyers can and should work hard to avoid.
As noted above, legal malpractice claims or other client disputes sometimes are started by a simple mistake that has negative consequences for the client. In defending such a claim, a law firm must convince the trier of fact either that it did not act negligently or that the negligence, if any, did not harm the client. A simple mistake—especially if the lawyer disclosed it to the client as soon as it occurred—is unlikely to invoke the passions of the jurors and thus is unlikely to lead to an award out of proportion to any harm actually caused.
Sometimes, however, an otherwise garden-variety professional negligence action can escalate into something more dangerous if the client’s legal malpractice counsel discovers a potential ethical violation by the lawyers involved. And for these purposes, the king of ethical violations is a conflict of interest. These can inflame a jury and lead to an award of punitive damages for breach of fiduciary duty. In many cases, the existence of the conflict is unknown to either the client or the law firm at the time of the representation. The surprise, then, comes when it is uncovered during the subsequent dispute.
Consider a law firm that was named as a defendant in a securities fraud lawsuit when it turned out, unbeknownst to the firm, that the prospectus it drafted for its issuer client contained fraudulent misrepresentations. One year into the litigation, it is discovered that one of the defrauded investors was a hedge fund that sought advice from a different lawyer in the same law firm regarding potential investments. It may be that the law firm took all appropriate precautions—including running a conflict check—and that this conflict was one that simply was not foreseeable or reasonably detectable. Nonetheless, if and when discovered by plaintiffs’ counsel, it becomes a very troubling fact in the defense of the securities fraud suit.
Conflicts that are similarly difficult to detect sometimes arise in the patent context, where running names through a conflict database often proves unhelpful. Consider a lawyer who is hired to prosecute a biotech patent for Company A. On the other side of the country, another lawyer in the same law firm is hired to prosecute a different biotech patent for Company B. Both lawyers dutifully run their clients’ names, along with known competitors, through the firm’s conflicts database. Because both companies are small and have never done business in that particular technology space, neither company identified the other as a competitor, and, thus, neither lawyer’s conflict check raised a red flag. Fast-forward three years when Company A is suing the law firm for drafting the patent claims too narrowly. Surprise—the law firm and its outside counsel learn of the conflict during the pendency of the legal malpractice action when Company A’s malpractice lawyer stumbles on it during written discovery. Company A’s counsel quickly constructs a theory that the narrowly drafted patent was more than just carelessness by the lawyer; rather, it was an intentional act to benefit the firm’s more favored client, Company B. The settlement value of Company A’s malpractice claim has now increased dramatically, as has the headache of law firm management.
These are the types of surprises that all lawyers should try to avoid. Of course, it may be that in cases like these two hypotheticals, the surprise could not have been reasonably avoided. But vigilant efforts to discover potential surprises like these—even if not otherwise required by the applicable ethical rules—are sound policy. For example, in the patent context, in addition to running the names of clients and competitors through their conflict database, law firms often try to determine whether a contemplated patent covers technology that is separately being addressed by another lawyer in the firm. This may not be an easy task, but finding solutions to discover these types of conflicts before they become an issue is worth the effort.
Third-party discovery is another area where surprise often rears its ugly head. Many lawyers are not diligent enough about running the names of potential third-party witnesses through their conflict databases at the outset of a matter. Suppose, a year into a litigation, a lawyer prepares to serve a deposition and document subpoena on a third-party witness who has been in his sights since the commencement of the action. The lawyer then runs a conflict check and learns that the third party is a client of his law firm. Now what? There are ethical opinions concluding that the mere service of a subpoena is an adverse event that cannot be done to a current client. At a minimum, then, the lawyer may be required to obtain consent from both clients, which may prove to be a difficult task, particularly if the third-party discovery is likely to be contentious. If the lawyer cannot obtain the necessary consent, he risks having to withdraw from the matter, thereby subjecting himself to a potential claim by the now-abandoned client. This dire consequence likely could have been avoided if the lawyer had run the conflict check at the outset of the matter and then discussed the issue with one or both of his clients. The lawyer and client were surprised, however, because the lawyer waited a year to run the conflict check and now finds himself in a much more difficult situation than had he discovered the conflict earlier. This particular type of surprise is far more common than it should be, and it often—although, admittedly, not always—can be avoided by running conflict checks on likely third-party witnesses at the outset of the case.
Conflicts of interest are not the only surprises that may seriously compromise a law firm’s position in a subsequent dispute with the client. Another surprise may arise when a client, and then law firm management, learns that a lawyer has oversold himself on his law firm résumé or webpage. Lawyers may be tempted to take credit for successes to which they barely contributed—a verdict in a trial where they had no stand-up role or the granting of a summary judgment motion that another member of the team wrote. Whether or not these exaggerations actually contributed to a client’s decision to hire the law firm, to the extent the client and the law firm end up in a dispute, you can be sure the exaggerations will be front and center. And because plaintiffs’ counsel who specialize in legal malpractice love to grill a defendant lawyer about the details of his or her past experiences, rest assured any exaggerations will be discovered. Surprise!
These types of surprises generally can be avoided by law firms if they provide sufficient oversight of lawyer résumés and webpages. Whether through a marketing director or another lawyer, law firms should review individual résumés and, to some extent, even cross-examine lawyers about those résumés to minimize the risk that a lawyer—even without malicious intent—oversells himself or herself. Such caution is not only prudent but arguably required by the applicable ethics rules.
More and more commonly, surprises arise in connection with social networking. Several ethics opinions recently have addressed issues arising from social networking, including the “friending” of opposing parties or third-party witnesses, research of potential jurors, and the applicability of lawyer advertising restrictions. Most firms have no idea what their individual lawyers are doing on Facebook, Twitter, or another social networking site unless it becomes an issue in connection with a client dispute. It may be only after an issue arises that a law firm discovers that an attorney has been posting about interesting facts in his cases, including the case now subject to a dispute. He may even have inadvertently disclosed attorney-client privileged information to his small group of “friends.” None of this is acceptable, of course, and law firms would be well served by educating their lawyers about their responsibilities when using social networking sites or otherwise communicating with the outside world, lest they be surprised later when a timely and well-crafted subpoena uncovers some embarrassing information about the lawyer involved in an underlying case.
Social networking faux pas are not limited to the disclosure of confidential or other client information, and they may not relate to a client matter at all. Clients do not want to read about their lawyers doing or saying stupid, obnoxious, or offensive things; nor does law firm management. Posting pictures of yourself drunk or in some other compromising position, for example, may not be unethical or actionable, but it isn’t smart. When those pictures find their way to your client’s or managing partner’s computer, they most certainly will be surprised and not in a good way (and if they aren’t surprised by such photos, you may have an even bigger problem). That surprise may turn from disappointment to outrage if the pictures are discovered during the course of a legal malpractice case, and plaintiff’s counsel is able to argue that the photos are relevant because they were taken the night before a significant hearing in the underlying case and thereby demonstrate why the lawyer was not as prepared as he or she should have been. Don’t be that lawyer.
Lawyers often are surprised when their emails are produced and reviewed in the course of a client dispute. More often than not, among those emails are some that the lawyer and the firm wished had never been written. These may include nasty disagreements among lawyers on the team regarding strategy, harsh criticism of a client, inappropriate sexual comments, a racist joke, bickering among lawyers about billing credit, or profanity. Jurors may be shocked by such emails, which appear highly unprofessional and often offensive. They can turn a jury against a lawyer or law firm even if they have little to do with the actual dispute. Lawyers can avoid these surprises by thinking before hitting the “Send” button. At a minimum, limit all emails relating to a case about the case. If you feel compelled to tell a racy joke or send an unflattering email, do it in a separate email that has no reference to a client matter and thus is unlikely to be discoverable in a subsequent dispute with the client. Better yet, don’t do it at all.
Yet another surprise that can frustrate management or outside litigation counsel is when the partner or other lawyer in charge of a matter is unavailable during a critical moment of a case. Perhaps the law firm is being sued because the associate was unable to file an opposition to summary judgment before the deadline, or a transactional document used an incorrect term that had the effect of changing the entire face of the deal. If it turns out that, on the day the opposition was due or the deal closed, the lead partner was on the golf course or lying on a beach, that will not look good to a jury. That is not to say lawyers may not play golf or take vacations, but it does mean lawyers should give serious thought to where they are, and how available they are, at critical moments in a representation. It also means that, if something goes wrong while you are on the 17th green, tell your management and your outside defense counsel, rather than letting them discover it when they are reviewing emails before or even during your deposition.
Another unpleasant surprise that may come up in a legal malpractice action is when the law firm general counsel or outside counsel learns that one of the lawyers involved in the underlying dispute has been terminated. That surprise is all the more unpleasant when it turns out that the reason given for the termination was poor performance. Of course, committing legal malpractice should not provide job security to a lawyer, but at the same time, law firms must realize that firing a lawyer accused of malpractice has ramifications in the subsequent dispute. At a minimum, law firm hiring and firing partners should communicate with the firm’s general counsel so that all parties understand the role the lawyer at issue played in a given dispute and can make an informed decision about whether to terminate the lawyer and, if so, how to handle the departure.
Finally, yet another all-too-common unpleasant surprise is when an accused act of misconduct turns out to be in contravention of the law firm’s own policies. Going back to the third-party discovery example discussed above, suppose a lawyer fails to run a conflict check on a potential third-party witness at the outset of a case. If it turns out the third party is a client of the law firm, and the firm can’t obtain that client’s consent for the discovery, the law firm could have a problem. That problem will be compounded if it also turns out the firm has an express policy mandating that lawyers run conflict checks on likely third-party witnesses before taking on a new matter. Outside counsel can manage that bad fact far better if he or she is told about this policy early in the case, rather than being surprised about it shortly before or even during a deposition.
The moral of the story, then, is that lawyers should avoid surprising their own counsel (whether law firm management or outside counsel), just as they should avoid surprising their clients. In litigation, surprises are rarely good, unless you are the one unleashing them on the other side. Following these best practices will help you avoid unwelcome surprises, keep your clients happy, and minimize your exposure in the event a dispute does arise:
- Analyze and inform the client of potential risks and exposure of the case early and often.
- Establish a reasonable litigation budget early in the case, and periodically reassess that budget as the litigation progresses.
- Promptly communicate all developments—good or bad—to the client.
- Run thorough conflict checks at the outset of a case, including on potential third-party witnesses.
- Ensure that lawyer résumés and other promotional material are accurate.
- Educate yourself and your colleagues about the risks and benefits of social networking.
- Be engaged and available during all significant representation events.
- Understand and follow firm policies and procedures, particularly as they relate to ethical obligations.