No Duty to Report Errors to Ex-Clients, ABA Panel Says

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By Samson Habte

Lawyers who discover malpractice-worthy errors on matters they handled for former clients have no ethical obligation to disclose those mistakes, the ABA’s ethics committee said in an April 17 opinion.

Few bar panels and courts have addressed whether lawyers have a duty to disclose their errors to former clients, and the question divides legal malpractice insurers—who may be the most important constituency for law firms responding to a potential crisis.

“I suspect [ the opinion] will receive a bit of attention,” said Matthew K. Corbin, a senior vice president of Aon Risk Solutions.

Corbin, whose company insures 56 of the 100 largest U.S. law firms, said the committee’s conclusion lines up with research he conducted last year.

Case law is sparse, but Corbin said the authority that does exist suggests that “once the representation ends, lawyers are generally not required to keep former clients informed about material developments.”

But Corbin, and the ABA panel, noted an important caveat: that such a duty will exist if the lawyer takes on another matter for the client.

The ABA opinion also said that "[g]ood business and risk management reasons may exist” for reporting a material error to a former client, even if lawyers aren’t ethically bound to do so.

Corbin echoed that conclusion as well. “Realistically, it may be the best decision for a lawyer to notify a former client of a material mistake on a completed matter—particularly if that notification might prevent, or at least mitigate, future harm to the client’s interests,” he told Bloomberg Law.

Thorny Questions

How to respond to errors is one of the thorniest subjects in the law of professional responsibility—and a topic that often drives wedges between law firms and their clients.

Many of the most high-profile malpractice lawsuits of the last decade have been bogged down by satellite litigation over how lawyers and firms responded to errors.

Large firms joined forces by pushing a number of courts around the country to recognize a privilege for internal firm deliberations about errors, the records of which disgruntled former clients invariably seek to discover in malpractice cases.

And an imminent trial in one of the most high-profile malpractice cases of the decade—pitting Redskins owner Daniel Snyder against Cadwalader, Wickersham & Taft LLP—highlights the dangers of staying involved and trying to help a client win a lawsuit that arose out of a firm’s alleged errors.

In that lawsuit—which could go to a jury as early as September, and involves an allegedly botched contract Cadwalader drafted for Snyder—the law firm extended the clock for a malpractice suit by helping another firm that Snyder hired to litigate a dispute that arose over the contract. See 30 Law. Man. Prof. Conduct 433 ; 32 Law. Man. Prof. Conduct 391 .

Silent Rules

It is well-settled that lawyers must disclose material errors to current clients. That duty stems from ABA Model Rule 1.4, which requires lawyers to keep clients reasonably informed about the status of a matter.

But the duty to communicate does not extend to former clients, the committee said.

The rule refers to “clients,” and if the drafters meant it to apply to former clients “they presumably would have referred to former clients in the language of the rule or in the comments,” the committee said.

“They did neither despite knowing how to distinguish duties owed to current clients from duties owed to former clients when appropriate, as reflected in the Model Rules regulating conflicts of interest,” the committee said.

Insurer Split

Corbin said the few courts that have addressed the issue have concluded that there is no duty to alert former clients to errors made in completed matters.

Corbin pointed to a 2014 Connecticut Supreme Court decision that said courts “generally reject the notion that the attorney has a continuing duty to the client to correct or report an earlier wrong,” because efforts to correct will “in the usual situation” be “futile.” 30 Law. Man. Prof. Conduct 434

At least one malpractice carrier has said that the duty to report errors to clients is not limited to current clients.

CNA Insurance offered that contrary take in a 2016 alert for its clients, titled “To Err is Human: A Guide for Attorneys on How to Manage Errors.”

The CNA bulletin said that Rule 1.16, which requires lawyers to protect a client’s interests upon termination of a relationship, could be read to suggest that “an attorney’s obligation to disclose an error, arising from the fiduciary duty of loyalty, may continue even after the attorney-client relationship has ended.”

The carrier noted that although professional negligence claims against lawyers “must be based on the existence of an attorney-client relationship at the time of the alleged malpractice,” lawyers who fail to report material errors to former clients could be exposed to breach of fiduciary duty claims, which are not so limited.

The opinion is ABA Standing Comm. on Ethics & Prof’l Responsibility, Formal Op. 481, 4/17/18.

To contact the reporter on this story: Samson Habte in Washington at shabte@bloomberglaw.com

To contact the editor responsible for this story: S. Ethan Bowers at sbowers@bloomberglaw.com

The ABA/BNA Lawyers’ Manual on Professional Conduct is a joint publication of the American Bar Association Center for Professional Responsibility and Bloomberg BNA.

 

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