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How small firm lawyers can avoid ethics traps

Recognizing potential ethics traps as a small firm lawyer requires more than just following the ABA Model Rules of Professional Conduct. A good lawyer will internalize the concepts stated in the rules more effectively with real-life examples, and one way to do this is by studying attorney discipline matters and malpractice claims.

In the On Demand ABA webinar, “A Day in the Life of a Small Firm Lawyer: Potential Ethics Traps for the Unwary,” John P. Ratnaswamy, an energy regulation lawyer and partner at Rooney Rippie & Ratnaswamy LLP in Chicago, looked at recent lawyer discipline matters in Illinois and other states to glean potential ethics traps.

Ratnaswamy taught legal ethics for 20 years, was a member of the ABA Standing Committee on Ethics and Professional Responsibility and served on the hearing and oversight committees of the Illinois Attorney Registration & Disciplinary Commission (ARDC), which investigates and prosecutes lawyer misconduct complaints.

Ratnaswamy started with four tips to stay out of disciplinary trouble:

  • Don’t neglect client matters, nor withdraw in an inappropriate manner.
  • Tell clients what’s going on (accurately) and do so in a timely manner, including disclosure of all fees.
  • Don’t be dishonest (don’t commit fraud or give false statements about material facts or governing law).
  • Don’t convert or mishandle client or third-party funds, and account for them properly.

“A fifth principle is … don’t be someone whom someone wants to report,” Ratnaswamy said, adding that people get complaints because they’ve developed an adversarial relationship with a client or opposing counsel. “I’ve seen complaints where the person did absolutely nothing wrong, but what drew the complaint was that they were disliked, he said.”

Ratnaswamy looked at disciplinary cases in Illinois, South Carolina, Texas and Colorado, which represent a cross-section of the country and offer robust data. He found that the top five practice areas that draw grievances – which come to a disciplinary authority from the outside (usually a client) – were related to cases involving criminal law, domestic relations, real estate, tort and probate – the “meat and potatoes” of most solo and small firm practices.

The top five categories of complaints – which are the result of a disciplinary authority investigation – involve cases related to real estate, criminal conduct/conviction of lawyer, tort matters, contract law and domestic relations. Many of the complaints in Illinois involved unauthorized practice of law, related to legal work done by nonlawyers, he said.

Here’s how the grievances break down:

  • 73 percent arise out of breakdowns in the attorney-client relationship, such as
    • Neglect, 38 percent
    • Dispute over fees, 10 percent
    • Fraudulent or deceptive activity, 12 percent
    • Failure to communicate, 13 percent.

Though there are thousands of complaints filed each year, the ARDC in Illinois only pursues about 100 cases each year, Ratnaswamy said. In 2017 there were 79 new cases filed, mostly involving fraudulent or dishonest conduct, which are a top priority for the ARDC in its role as protector of the profession.

If a grievance is filed against you, you’ll get a letter from the disciplinary authority asking for a response. In Illinois in 2017, 118 lawyers were sanctioned by the Illinois Supreme Court, either by suspension, probation, censure or disbarment.

Among practice settings: solo practitioners represented about 26 percent of disciplinary action in Illinois, followed closely by small firms of 2-10 lawyers and large firms with 26 or more lawyers. Lawyers who are 10-20 years out of law school represent 24.5 percent of investigations, those who’ve practiced 20-30 years represented 23.7 percent and lawyers who’ve practiced for 30 years or more represented 33.5 percent of investigations.

“Why? Because they should know better,” Ratnaswamy said.

A look at legal malpractice claim data finds that practice areas align somewhat with complaints:

  • personal injury, 18 percent
  • real estate, 14.9 percent
  • family law, 13.5 percent
  • estate, trust and probate, 12 percent
  • collection and bankruptcy, 10 percent
  • criminal, 5 percent.  

In estate trust and probate cases, the problem often involves disputes over who is the client. “Engagement letters are really important to identifying who is – and who is not – the client,” Ratnaswamy said.

Most legal malpractice claims are filed against solo and small firms, and Ratnaswamy said he does not have a good explanation for that. Nearly a third of malpractice claims involve routine activities involving documents or giving bad advice. A surprising number involve simple clerical errors surrounding scheduling problems.

In 2011:

  • 52 percent resulted in no payment or claim abandoned
  • 18 percent in dismissal or judgment for defendant
  • 16 percent settlement paid, but no suit filed
  • 8.4 percent settlement paid and suit filed
  • 4.8 percent payment/judgment for plaintiff.

Review formal opinions on competence issued by the ABA Standing Committee on Ethics and Professional Responsibility to make certain you’re in full compliance of the Model Rules, especially relating to confidentiality and data security, to reduce the risk of facing disciplinary action or malpractice suits.  

Other resources include:

The program was sponsored by the ABA Solo, Small Firm and General Practice Division, Center for Professional Responsibility, Young Lawyers Division, Law Practice Division and ABACLE.

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