Vol. 4, No. 6, Pg. 22. The High Stakes of Legal Malpractice.

• Author: By Wilburn Brewer Jr.

South Carolina Lawyer

1993.

Vol. 4, No. 6, Pg. 22.

The High Stakes of Legal Malpractice

22The High Stakes of Legal MalpracticeBy Wilburn Brewer Jr.23"In studies by the American Bar Association, the major source of client dissatisfaction was a feeling that the lawyer did not care about the client and his or her problem. In other words, too many lawyers have poor bedside manners."

The past decade has seen a virtual explosion in the prevalence of legal malpractice claims. Although it is impossible to give more than a cursory examination of the problem here, this article will discuss the subject briefly.

Preventing the Claim

Most lawyers are more interested in avoiding the subject of legal malpractice than learning about the substance of the subject. In studies by the American Bar Association, the major source of client dissatisfaction was a feeling that the lawyer did not care about the client and his or her problem. In other words, too many lawyers have poor bedside manners.

If the client likes the lawyer and believes that the lawyer has honestly tried on the client's behalf, the client is less likely to bring a legal malpractice claim. Even if the claim cannot be avoided, the risks in a trial can be lessened and settlement discussions facilitated if the client believes the lawyer erred in good faith.

Here are a few suggestions:

1. Personally spend time and empathize with clients.

2. Return telephone calls promptly. Have your secretary explain if you are not available to return calls.

3. Have in place a proper docket system and a proper accounting system.

4. Always get written fee agreements.

5. Disclose in writing any potential conflict of interests and get written waivers.

6. Involve the client in difficult decisions in the case and document that fact.

7. Keep clients informed. Send them copies of everything.

   Discovery and Reporting of the Claim

   Quite often, the client may not be aware that he or she has a potential legal malpractice claim. Unless something draws their attention to the fact, clients may not recognize that the lawyer may have made an error. The lawyer, however, most likely is aware of the problem.

   The lawyer who becomes aware of the potential claim is in an immediate conflict of interest situation. What is the duty of the lawyer who believes he or she has made an error that has harmed or might harm the client?

   A lawyer has a duty to avoid conflicts of interest and a duty to keep the client informed. Rule 407, SCACR (adopted Rules 1.7 and 1.4 of the Model Rules of Professional Conduct). Honesty and fair dealing require the lawyer to report an error on his or her part to the client. Sometimes it may not be clear whether there was an error. The question may be one of judgment or strategy.

   Involving the client in the decision making process may circumvent the problem. However, the question of whether the problem should be reported to the client, to the extent there is serious doubt, should be resolved in favor of the client. Conduct viewed as a cover-up can seriously impair the ability to defend the legalmalpractice action and may aggravate the damages.

   A lawyer reporting a potential error to a client should be cautious. The lawyer is not objective and, in attempting to be fair to the client, should not unnecessarily give away potential defenses. Additionally, the lawyer's duties to hie or her malpractice carrier require that the lawyer do nothing to impair the carrier's right to defend the claim.

   The lawyer who discovers a potential error needs to be aware of the implications of a claims made liability insurance policy. Failure to report circumstances that could give rise to a claim, even though the client may not have made such a claim, could result in a denial of coverage if the conduct and knowledge of the lawyer were in one policy period and the claim is made in a later policy period. The policies and the applications require reporting of conduct that might give rise to a claim. The best rule is: if in doubt, report it to the carrier--unless you are willing to assume the entire burden.

   Remedial Action to Avoid the Claim or to Conduct Damage Control

   In pending matters, quite often an error will occur and an opportunity to take corrective action will be presented. For instance, the case may be in default, request for admissions may not have be answered, or there may have been a failure to engage in discovery--with the consequence that the client's claim or defense

   24is imperiled. Sometimes these problems can be cured and the client restored to his or her former position.

   In any serious matter, the lawyer in this situation should not proceed with self help without (1) disclosure to the client and permission of the client in writing, and (2) disclosure to the carrier and permission of the carrier in writing. In instances of potential serious consequences, because of the conflict of interest, the lack of objectivity and the risks associated with insurance coverage, it probably is best for the lawyer (and the client) to have independent outside counsel work on the problem.

   Elements of Legal Malpractice Claims

   A legal malpractice claim includes the following elements, each of which must be present to support a claim:

   * employment of the lawyer,

   * breach of a duty,

   * proximate cause and

   * damages.

   Shealy v. Walters, 273 S.C. 330, 256 S.E.2d 739, 742 (1979); First v. Leatherwood, Walker, Todd & Mann, 433 F.2d 11 (4th Cir. 1970); Maryland Ins. Co. v. Price, 231 F. 397, 401 (4th Cir. 1916).

   Employment of the Lawyer

   Sometimes the lawyer is surprised to be sued by a person the lawyer thought was not his or her client.

   A lawyer-client relationship can be implied. 1 S.C. Jur., Attorney and Client § 21 (1991). A lawyer gratuitously doing a favor for another may assume the obligations of the lawyer-client relationship. See In Re Padgett, 290 S.C. 209, 349 8.E.2d 338, 339 (1986) (lawyer who voluntarily assumed obligation of handling funds had a duty to account). The relationship may arise out of the interview for a possible retention of the lawyer. Togstad v. Vesely, Otto, Miller & Keefe, 291 N.W.2d 686 (Minn. 1980). The relationship does not depend on the payment of a fee. Crest Investment Trust Co. v. Comstock, 327 A.2d 891 (Md. App. 1974).

   In the Togstad case, a law firm declined a medical malpractice case and received no fee. The client" later contended the law firm was liable for not giving proper advice on the statute of limitations. The lawyers were held liable for $685,000 for the loss of the medical malpractice claim. The lesson of this case is that the lawyer should consider using nonengagement letters in serious cases that are declined.

   The employment question most often arises in multiple party transactions where there is a dispute as to whom the lawyer represented and the question of whether a person who is not a client has a right to rely on the lawyer's services. It is extremely important in such situations to document whom the lawyer does and does not represent.

   In Bank v. Ward, 100 U.S. 195 (1879), the defendant lawyer was employed by the owner of property to check the title. He certified title to the owner, who used the certificate to obtain a loan. The borrower defaulted, and it was then discovered that the title was defective. The bank sued the lawyer. The court held that the lawyer was not liable to a person with whom he had no lawyer-client relationship. The rule of Bank v. Ward has been somewhat eroded in modern times, and many states have adopted exceptions to the direct employment requirement. Nevertheless, the holding of that case as carried forward remains an important element in a legal malpractice action.

   Breach of a Duty: Standard of Care

   Malpractice actions may be grounded on negligence, breach of contract, breach of fiduciary duty...