Lawyers make mistakes. Some are harmless, some can be costly and others fall in between. Dealing with them raises issues of how and when to report them to the client, insurance carriers and maybe disciplinary counsel. What exactly must or should a lawyer report? And may a lawyer who’s made a mistake continue to represent the client? Should she? What if the lawyer can fix the problem? Or hire someone else to fix it?
An ABA-sponsored webinar “Mistakes: Coping Ethically and Wisely with the Inevitable” brought together a panel of loss-prevention lawyers, carrier representatives and professional responsibility counsel to discuss rules of professional conduct that come into play when a mistake has been made, and how to ethically respond to the situation. The presentation included several real-life hypotheticals that highlighted numerous Rules of Professional Conduct. The panel included moderator Peter R. Jarvis, a partner and co-chair of the legal professional team at Holland & Knight in Portland, Ore.; Jeanne Marie Clavere, professional responsibility counsel to the Washington State Bar; and Matthew Corbin, a vice president in the Kansas City, Mo., office of Aon Risk Solutions malpractice insurers.
Hypothetical — How much to charge
You have to travel coast-to-coast for a client, and you become aware that if you book your airline ticket today, it will be fully refundable and only cost $400 round-trip. Although you had the time to book the ticket or to instruct your assistant to do so, you forgot. You therefore wind up paying $2,000 for the round-trip ticket. Questions - May you charge more than $400? Must you also explain the situation to the client? And, as a general proposition, is it OK not to tell a client about an error whenever you make the client economically whole?
Clavere and Corbin agreed that if the lawyer absorbs the extra cost then there is nothing to report. But Clavere said if the lawyer attempts to pass on the cost on to the client she sees a “a huge problem in nondisclosure to the client in addition to the fiduciary duty you owe to the client to maximize the client interest and not mine.”
Corbin cites Model Rule 1.5 and the reasonableness of cost and the fees and says because of that “the lawyer is going to have problems passing those costs on to the client.”
As for the question of if it’s OK not to tell a client about an error whenever you make the client economically whole, Corbin said “if it’s a one-time mistake as opposed to you being a serial offender where you have issues of competence or poor case management issues – that changes the equation. In that case, making the client economically whole doesn’t end the discussion.”
Model Rules that apply are:
- Rule 1.1 (competent representation)
- Rule 1.3 (diligence)
- Rule 1.4 (communication)
- Rule 1.6 (confidentiality)
- Rule 1.7 (concurrent client conflicts)
Hypothetical — When to report?
In a state other than Illinois, you discover that another lawyer in your firm used client funds held in an IOLTA trust account as a virtual ATM. You also learn that this lawyer took credit on bills submitted to the client for work done by other firm lawyers by replacing their names on time entries with his but did not thereby increase the bills. When you tell the client that you feel you must report the other lawyer to the disciplinary authorities, the client instructs you not to do so, both because the client does not want to be dragged into the fray and because the client does not want to lose the services of the other lawyer for any period of time. Questions - Must or may you tell the disciplinary authorities? If so, must you include or conceal the client’s identity? Under what circumstances, if any, must this ostensibly corrected error (at least corrected insofar as the client is concerned) be reported to your insurer?
“Nobody likes reporting their former colleagues but I would do whatever I could to report,’’ moderator Jarvis said. “You also need to look at whether you have the right policies in place to prevent this kind of thing from happening.” Corbin said he would also try and persuade the client to give permission to report.
As for reporting to insurers, Corbin said there should be some vetting to determine that the potential for a claim exists. “But when in doubt, report,’’ he said. “What that tells the insurer is that the firm is on top of a situation and that is considered a plus.’’
Model rules that apply are:
- Rule 1.6 (confidentiality)
- Rule 1.15 (safekeeping property)
- Rule 5.1 (responsibilities of a supervisory lawyer)
- Rule 5.2 (responsibilities of a subordinate lawyer)
- Rule 5.3 (responsibilities regarding nonlawyer assistants)
- Rule 8.3 (reporting professional misconduct)
- Rule 8.4 (misconduct, including criminal and dishonest acts)
Hypothetical — When to point out errors
You represent a target company in a mid-market acquisition. Amazonia, the acquiring company, repeatedly requests certain indemnification language that your client is unwilling to give. At the 11th hour, with the requested indemnification as the only outstanding point, your client caves and you so advise Amazonia’s counsel. The final acquisition agreement, both marked and unmarked (for execution), arrives by messenger from Amazonia’s counsel the following morning. To your surprise, the proposed definitive documents do not reflect your client’s concession. You know that Amazonia’s counsel did not deliberately delete the term; this is a scrivener’s error. Questions - Must or may you advise Amazonia’s counsel? Must you advise your client before you do so?
Corbin said you should consult with the client, but in this case it is a scrivener’s error and believes the ABA has put out an opinion (A6-1518) that provides guidance on errors. Generally, you have a duty to disclose that error to opposing counsel. You can’t capitalize on the other side’s mistake. Rule 1.2d says you can’t counsel the client to engage in conduct the lawyer knows is fraudulent. Rule 4.1b says you can’t fail do disclose a material fact when a disclosure is necessary to avoid a client fraud. All those rules come into play in this equation.
Model rules that apply are:
- Rule 1.2 (scope of representation)
- Rule 4.1 (truthfulness in statements to others)
- Rule 8.4 (misconduct, including conduct involving dishonesty, fraud, deceit or misrepresentation)
The panelists also discussed hypotheticals about failing to remove a case from federal court within 30 days, discussing errors in risk management cases and how to tell the client about an error.
The webinar was co-sponsored by the ABA Center for Professional Responsibility; Center for Professional Development; Tort, Trial and Insurance Practice Section; Section of Family Law; Law Practice Division; Senior Lawyers Division; and the Division for Public Services.