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Who is your Client?

5/5/2014

Pretty basic legal stuff you might say. If so, why do so many legal malpractice claims involve lawyers who lost sight of their clients. The wandering off of true client north leads to conflict of interest claims. Those can cause you some distress since juries just do not see your point when you say there was no conflict. They think bible verses about having only one master. You will make it a little rough on your defense counsel if you get mission creep from your initial engagement by the loss of the identity of your real client.

Believe me, this happens to good lawyers. They have represented Fred and his company for years, but in a business deal or in litigation they forget they represent only the company — and not good old Fred’s interests. What about a partnership or a 50/50 stock ownership and you focus only upon one of them for guidance? Take a joint representation and fail to disclose the same information to both and see where you end.

A solid way to deal with the issue is to take the pain at the file opening stage. Define your client and your terms of engagement without fail. Do it in writing. To do that, prevent any files from being opened until that engagement letter is prepared. Sure the clients can then change and the engagement mission changes. It is real easy to just send an e-mail to document that you have also asked us to also represent the treasurer of the company and we have explained to you any risk of conflict and both of you consent, etc. You can do the same simple approach for your new tasks: In addition to our engagement letter of January 1, 2014, you have asked to also do X and represent Y in the same litigation. Believe me, when a claim is made, you need to be able to hand over a writing that says who you were to represent and what you were to do. It also forces the lawyer to remember who his client is at all stages.

Of course, when you get one of these course corrections after the engagement letter, you better also think of it like opening a new file and do a conflicts check on any new client or new adverse party. What was clear of conflicts yesterday may not be so today.

These are simple things. They should be a matter of routine. Yet lawyers lose their way on who their real client is at times. Make it a simple process of a full stop until an engagement letter is done specifically stating (1) who the client is; and (2) what is to be done. Then require, insist and harass until another writing to the client(s) is done when there are changes. Exhibits “A” and “B” of these will be your friends later when the client’s memory fades, or it is more convenient to remember it differently. Some lawyers do not make very good defendants or witnesses because of non-lawyer’s perceptions on conflicts. Clear writings and identity of client and engagement sure help them look good.

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SITUATIONAL AWARENESS

4/9/2014

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                   In a recent car commercial, the driver accelerates some new style engine in the car in order to bring the three passengers’ heads up from their devices to make them discuss where to go to lunch. Everywhere you go, you see people preoccupied with something and not paying attention. We all go about our pattern behavior without really looking around and seeing our situation. Lots of trips and slips of all types can be avoided by effectively looking, a concept long recognized in negligence case law.

                    For fun, I took a handgun safety class once. During all nine hours of the class, the former Marine captain made us do every maneuver only after first looking around us to develop “situational awareness”. I had never made myself regularly do that as a habit. I now look around parking areas and walkways, as a habit, because his comments made real sense. Be aware of where you are and what is around you. You will see things quite literally and avoid many issues by having your head up and looking around.

                    This same concept really applies in law offices where you want to avoid personnel or client problems. When there is a big issue of these types, you usually find after the fact that someone had knowledge, or was generally aware that something was not right. They just did nothing about it. They did not pay enough attention. So, I am now preaching situational awareness to you in the loss prevention business for lawyers. (See November 2013 Post for examples to look for and consider.)

                    A lawyer from Ames & Gough, an insurance broker specializing in law firm coverage, recently shared with me their article on Enterprise Risk Management (ERM), a recognized method of evaluating and eliminating risk in an organization. They argue that its use in the law firm setting starts with the education of senior leadership and management acceptance and then moves out in the firm. A group within the firm organizes the effort to list their known risks and keeps track of them and how they deal with them. They suggest a formal approach to accomplish this and to evaluate the risks, manage, and measure them.

                    In many modern larger law firms this is done through the General Counsel function. If you are not to that point in your firm, you may want to consider forming a small group to do this on a formal basis. I submit it is worth your time and will then allow you to use basic situational awareness to avoid problems. Paying attention to developing problems will save you later grief, as well as money.

See Ames & Gough Winter 2014 Information Alert,

citing Fraser and Simpkins Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives

Wiley & Sons, Inc. 2010

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Check

2/4/2014

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     You take comfort when you walk on to a plane that the flight crew always runs a printed checklist on every aspect of the flight and that most systems on the aircraft are duplicated. If you were awake, you might have heard the scrub or circulating nurse doing a sponge and instrument count before and after your surgery. These are routine and fundamental procedures in these professions.

      With the number of claims and their severity on the rise against legal professionals, you might just wonder why we do so little check-listing. I often remind younger lawyers that spell-checking is not proofreading. Double-checking legal documents by proofreading seems to be a dying art.

      A successful major insurer of law firms (Attorneys Liability Assurance Society, or ALAS) recently put on a training program featuring an engineer who was a pilot, and later became a medical doctor who then became an astronaut. Having retired from NASA, he does quality control for a large metropolitan hospital. His point was that we lawyers can control mistakes to a greater degree than other professional errors, and should utilize basic safety type checklists
with the fundamental communication read back. Every new pilot learns quickly to read back the controller’s direction to take heading 240° at 10,000 feet to avoid that simple little avoidable mistake of running into another aircraft at the wrong altitude and heading. The same basics apply to an itemized list of procedures, which as the surgeon Atul Gawande wrote, can “hold the odds of doing harm low enough for the odds of doing good to prevail.”

      In a recent WSJ column, Jason Zweig argued that intelligent investors should consider doing the same standardization for basic investment decisions, and thereby reduce the risk of costly errors you have learned by past mistakes. He argues the biggest investment flaw comes from inconsistency which can be smoothed out to avoid making the same mistake again.

      So, think with me here as to our profession. Would not real estate title research and opinions, business closings, legal research and litigation filings, estate planning and many other aspects of the practice make logical checklist items? My argument is that we can take control of the mill run mistake and narrow its occurrence by a simple read back of all essential and required steps on a checklist to get repeat legal tasks done.
Roger that.

See, Joseph T. Halliman, Why We Make Mistakes; and The Checklist Manifesto by Atul Gawande.

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MOMMA SAID THERE WOULD BE DAYS LIKE THIS

12/5/2013

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     You know the legal rules and you follow them. You use common sense and have good social skills with clients. You still get named in a legal malpractice action. It can and does happen to good lawyers. The ABA recently put the average number of claims at three per career and at a risk of 4% to 17% of a claim in any year. ABA Profile of Legal Malpractice Claims: 2008-2011.

     Like other professions, you cannot guarantee a result (and remember that half of each case loses as a rule) and sometimes an adverse result ends up as a claim despite no errors or issues – just a loss. I again encourage you to use all the methods available to you to control and reduce those possibilities. Bring your own stats down by all means available.

     Various groups look at trailing years and report the highest risk area of practice. It just makes you want to stay in bed some mornings. The latest areas to stub toes are real estate (20%); personal injury (15%); family law (12%); estate, trust and probate (10%); and collection and bankruptcy (9%). Oddly, solos have the highest percent of the claims and the percents drop sharply as the firm size goes up. The level of experience fools you also because the new and the old are not the leaders of the pack in claims. Instead the biggest tranche of claims (35%) falls with those having 11 to 20 years of experience.

     The number of claims and the severity (read cost) are on the rise. While loss prevention is not a positive cash flow in a firm, it certainly prevents already made and taxed income from going out the door. It is truly worth the time of a firm to devote resources to a solid loss prevention program.

     Ames & Gough, a risk and insurance advisor to the law firms, does its own analysis and studies trends. They polled seven of the leading professional liability insurers (80% of the market for Am Law 250 firms). They confirm that the number of claims is increasing along with their frequency. The bad news is that their study confirms the big claims and costs are growing, no doubt due to added complexity and the cost of defense of these claims. Out of the seven carriers, six reported payouts on claims of more than $50 million. That makes a law firm stop to look at their purchased limits, compared with the type of work they do.

     The Butcher’s Bill lists new risks that never even existed in the past (attorney/client relationships from e-mails; inadvertent disclosures via e-mail; cyber risks and confidential information breaches). Lateral hires are driving up the claims, but the old standby of conflict of interest still ranks as the first or second on all lists of the most frequent cause of malpractice claims – by a large margin.

     I would like to offer end-of-the-year cheerful thoughts. But the old Dragnet TV show detectives said: “Just the facts, ma’am.” It is what it is, so you better do all you can to keep down the claims against you.

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THINGS THAT BITE LAWYERS IN THE SOUTHERN HEMISPHERE

9/1/2013

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     The lawyers that don’t get honesty and professional responsibility usually have issues early and often and many times find themselves selling fudge at the beach instead of practicing law. However, it is not uncommon for honest and reputable attorneys to go years without issues, and then to suddenly find themselves with complaints or claims. There is simply no way to predict when such situations might arise and, accordingly, you have to always practice like you just finished your ethics exam from law school.

     I wrote here in March of 2013 about “The Appearance of a Secondary Interest”. I emphasized that conflicts remain a constant problem for lawyers. As time goes on, lawyers will tend to say, “Well, that’s not a conflict.” However, in the eyes of clients or laymen and jurors, there is no higher duty that a lawyer owes than the duty of loyalty and trust. Juries go “biblical” (i.e., as you cannot serve two masters) when a lawyer is perceived to have a conflict which affected his or her duty to the client that is now making the claim. A totally defensible case can be significantly compromised by the mere appearance of a conflict. It just colors everything. I suggest the use of a third party, whether counsel in your firm, or someone else to consult on conflicts. If there is enough of an issue to merit discussion, it probably merits study and consents from all involved. Plowing ahead with the idea of a “that’s not a conflict” is just asking for trouble.

    Another area that causes a lack of client loyalty, if not complaints and actions, relates to the lack of diligence. Any lawyer worth their salt has more to do than she can get done. You must force yourself, and I mean really force yourself, to stay up with your matters and if nothing else, to communicate with the clients to tell them that you have been delayed, etc.   When you look at a survey of state disciplinary claims, the lack of diligence complaints jump off the page. Many of those who get deeply behind in client matters then start concocting stories, or slipping out the back door. That makes everything worse. The legal items on your desk do not age gracefully like good wine and good cheese. You must act with reasonable diligence and promptness in representing a client or you’re in big trouble. It simply leads to a blown deadline and your professional liability deductible going out the door. I suggest you use your staff, your office calendaring systems, and all technology available to help you address the items on your “To Do” list. You all know that courts and administrative bodies solve that problem for you when you miss deadlines, but the same effect ought to be applied with every client matter. If you cannot do the basics, hire an assistant to remedy the issue. Otherwise, you might need to go sell fudge at the beach.

     Finally, you ought to know what you’re doing. I routinely look at more than 30 new file openings every business day. I particularly make sure that the work to be done is in the right practice area, and more importantly, by a lawyer who has expertise in that area. As a brand new lawyer, I was interviewed by the firm’s most senior named partner my first week and he asked me what I wanted to do. I naively told him I would like to be a generalist and learn about the law. He was well up into his 80’s then, with only one sheet of paper on his desk in front of him, and looked at me and said, “Son, those days are gone.” The law had changed so much since he started in 1921 that he was encouraging each new lawyer at that time to develop a specialty. Honestly, that was well before the time that the rest of the Bar recognized that, but he was certainly right. A litigator can mess up a deed for Aunt Bertha quicker than Sherman went down Peachtree Creek. Lawyers cannot be all things to all areas of the law and simply must have the right expertise. A little lack of knowledge is truly dangerous in the law. A simple will done by the business lawyer may miss a critical simple thing.

     There used to be a TV show in which the police sergeant as he dispatched the patrol officers out of the squad room would say to them every day: “Be careful out there.” In today’s modern environment for a lawyer, we need to heed that.

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Who is your Client?

SITUATIONAL AWARENESS

Check

MOMMA SAID THERE WOULD BE DAYS LIKE THIS

THINGS THAT BITE LAWYERS IN THE SOUTHERN HEMISPHERE

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