The ABA/BNA Lawyers’ Manual on Professional Conduct™ is a trusted resource that helps attorneys understand cases and decisions that directly impacts their work, practice ethically, and...
By Timothy J. Halloran and Karen K. Stromeyer
Timothy J. Halloran, a senior shareholder of Murphy, Pearson, Bradley & Feeney in San Francisco, is a trial lawyer and civil litigator who for 30 years has tried cases to jury verdicts in diverse matters. He is a Certified Legal Malpractice Specialist and a member of the California State Bar Legal Malpractice Law Advisory Committee.
Karen K. Stromeyer, an associate of Murphy, Pearson, Bradley & Feeney, represents businesses and individuals in all phases of litigation in state and federal courts. Her practice focuses primarily on professional liability, corporate business, and appellate matters.
Never again. We legal malpractice specialists hear that phrase uttered often, usually when a “difficult” client has just served a Civil Complaint against their former attorney. But there's an old saying that vows are made during the storm, but forgotten in calm waters.
Vow (noun): A solemn promise, pledge, or personal commitment.
Having been practitioners in the art of defending lawyers in malpractice cases for over a quarter of a century, we have heard many vows uttered by our clients after they've had the unpleasant experience of being sued. Each of the vows listed below, in no particular order, have actually come from the mouths of our clients as the result of having to deal with the fallout of a disagreement with their former client.
It usually starts this way: “I, [fill in the lawyer's name], vow:
“I will never represent a friend, or a relative, even in a minor matter, or give an opinion for a favor, because I never end up charging, or they never end up paying, or it doesn't work out, and in the end I have an unhappy friend, family member, and most often law partner, and I can still get sued.”
You are still subject to the same potential claims for malpractice whether there is an executed fee agreement, or whether you actually get paid. So long as there is an agreement between you, whether in writing or not, whether express or implied, once you agree to help someone out, you're in it.
For example, in Miller v. Metzinger (1979) 91 Cal.App.3d 31, a widow contacted a law firm for an evaluation of a wrongful death claim regarding her husband. Attorney Metzinger met with her and reviewed the medical records, then advised her that he was unable to handle the case because he did not have sufficient expertise in medical malpractice. Metzinger then referred her to another law firm, who the widow retained to prosecute the claim, and a retainer agreement was executed. However, by that time the statute of limitations had already run on the wrongful death claim.
In the subsequent legal malpractice action, Metzinger testified that his function was purely investigatory and that he did not agree to represent the widow, charge any fee for his services, or secure a retainer agreement. However, the Court held that absence of the above does not suffice to eliminate the existence of an attorney-client relationship. “When a party seeking legal advice consults an attorney at law and secures that advice, the relation of attorney and client is established prima facie.” (Miller v. Metzinger, supra, 91 Cal.App.3d at 39.)
Of course the primary reason why it's difficult to represent your own family or friend is because they rarely end up remaining in your good stead unless you get the optimum results. Try sitting down at Thanksgiving with your friend after a Motion for Summary Judgment has been lost through no fault of your own. Heaven forbid, you should ask to be paid for your services.
“I will make my billing entries clear when I bill clients on an hourly basis; I will send my bills on a regular basis and keep copies of those bills; and importantly, I will include language in the bill every month that says, 'if you have any issue or objections concerning the fees or the entries in this billing, please let me know in writing within the next 30 days.'”
Believe it or not, clear billing entries not only give the client an explanation of what's going on in the case, but it is required under California Business and Professions Code section 6148(b), which states that “all bills rendered by an attorney to a client shall clearly state the basis thereof.” This includes the amount, rate, basis for calculations, and costs and expenses, which must be clearly identified.
It's particularly difficult to defend an action for attorney malpractice or prevail in an action to recover attorney's fees if the billing is unprofessionally presented, or if the client doesn't get the bills in a proper and orderly fashion.
Look at it this way, do you trust the doctor to provide you excellent advice when he hands you a bill for his services on a napkin? It may not have a direct correlation, but you do have to wonder.
“I will withdraw from a case when the client has not paid me, or when they owe me more money than they will ever be able to pay me; and when I do withdraw from the case I will do so without foreseeably prejudicing their interests.”
Don't pay your phone bill for 60 or 90 days and see how long the telephone company allows you to “string it along.” It doesn't happen. But attorneys have to deal with this all the time--clients routinely put them at the bottom of the payment schedule.
While you will still face the battle of recovering your fees, if you withdraw in a fashion that leaves your client the opportunity to respond to discovery, take depositions, and get the case ready for trial with new counsel, at least you avoid the possibility of a cross-complaint for failing to protect your client's interests.
Rule 3-700(A)(2) of the California Rules of Professional Conduct provides that an attorney “shall not withdraw from employment until the member has taken reasonable steps to avoid reasonably foreseeable prejudice to the rights of the client, including giving due notice to the client, allowing time for employment of other counsel, complying with rule 3-700(D) [release to the client all client papers and property], and complying with applicable laws and rules.”
By withdrawing in a timely fashion so as to allow your client to obtain new counsel or to keep them from incurring more debt to you, an attorney is actually doing a service to himself and his client. The more a client owes you and is not going to pay you, the more your judgment is at risk of being impaired--whether you know it or acknowledge it--because you're thinking about your bill as part of the overall resolution of the case.
“I will never file a lawsuit for my fees until after the statute of limitations for legal malpractice under Code of Civil Procedure section 340.6 has run, or is reasonably likely to have run.”
This particular vow is probably the one we hear most. The unhappy attorney, knowing that his client has tricked him into continuing to represent him for a period of time, and then not paying him, or holding up payments in some fashion … lashes out by having fee arbitration commence immediately or filing a lawsuit for fees which draws a malpractice action.
If you are insured, the first thing to know is that you have now reduced the potential for recovery of your attorney's fees by your malpractice insurance deductible. So before you decide to file a lawsuit for your fees, take what you know to be your deductible, and subtract it from what the client owes you if you're not going to wait a period of time for the statute to run.
Code of Civil Procedure section 340.6 provides that, subject to certain circumstances which toll the statute, an action against an attorney for a wrongful act or omission arising in the performance of professional services must be commenced within one year after the plaintiff discovers or should have discovered the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.1
The statutes of limitations for claims for open book account2 and breach of contract3 are beneficial for you, and allow a claim for your fees after the one-year statute for malpractice has passed. This does not mean, however, that you still may not have to defend a claim for attorney malpractice as an affirmative defense in a fee dispute. An expert witness on the other side, if believed by the jury, can zero out your fee claim because your malpractice vitiated the consideration for the fees that you claim you are owed. However, what you will not do is put yourself into a situation where that jury, if they believe that expert, will be awarding damages against you and in favor of your former client.
“No matter how unhappy I may be with the local bar association's ruling on my fee dispute with my client, I will never file for a trial de novo unless I can guarantee that I'm going to get a better result at trial. Otherwise I expose myself to having to pay the client's new attorney their attorney's fees.”
The party seeking a trial after arbitration shall be the prevailing party if that party obtains a judgment more favorable than that provided by the arbitration award, and in all other cases the other party shall be the prevailing party. The prevailing party may, in the discretion of the court, be entitled to an allowance for reasonable attorney's fees and costs incurred in the trial after arbitration, which allowance shall be fixed by the court. In fixing the attorney's fees, the court shall consider the award and determinations of the arbitrators, in addition to any other relevant evidence.
Yes, that's right, imagine your surprise when the local bar association panel only gives you 50 percent of the fee that you were asking, and you, astounded by the result, decide to seek a trial de novo after the arbitration, but you forget Business & Professions Code section 6204(d). So maybe it's better to possibly try and work out something with the client before that 30-day period to file a trial de novo comes up.
“I will never enter into a business venture or transaction with a client unless they have separately consulted independent counsel and waived the conflict.”
A member shall not enter into a business transaction with a client; or knowingly acquire an ownership, possessory, security, or other pecuniary interest adverse to a client, unless each of the following requirements has been satisfied:
(A) The transaction or acquisition and its terms are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner which should reasonably have been understood by the client; and
(B) The client is advised in writing that the client may seek the advice of an independent lawyer of the client's choice and is given a reasonable opportunity to seek that advice; and
(C) The client thereafter consents in writing to the terms of the transaction or the terms of the acquisition.
Rule 3-300 is triggered when the attorney represents the client at the time of the transaction, and can also be triggered in a deal between an attorney and former client, where the former client trusted the attorney because of the prior relationship. (Hunniecutt v. State Bar (1988) 44 Cal.3d 362, 371-372.) A violation of Rule 3-300 renders the transaction voidable at the client's option and, if the client suffers loss on account of counsel's adverse interest, may provide evidence of counsel's breach of fiduciary duty to the client.
In Fair v. Bakhtiari (2011) 195 Cal.App.4th 1135, 27 Law. Man. Prof. Conduct 359, attorney Fair and his client engaged in business dealings for a decade in which Fair rendered legal services in exchange for profit distributions. The trial court held that because the material terms and conditions of the transactions were not fully explained in writing and understood by client Bakhtiari as required under Rule 3-300, all business agreements between Fair and Bakhtiari were void and unenforceable.
When Fair requested quantum meruit recovery of his fees, the appellate court held that even though his client did not suffer any damage and most of the business transactions were very profitable to Bakhtiari, where a rule violation prohibits the exact conduct the attorney is seeking compensation for, such as engaging in conflicting representation or accepting professional employment adverse to the interests of a client, no recovery is allowed.
“I will not fail to tell my client, in writing, when their case has gone bad, or when they fail to follow my advice, and that if they aren't going to follow my advice, that I will confirm, in writing, that they have decided not to do so.”
The second most common lament we hear in the initial client meeting for a legal malpractice case when doing the postmortem on where the underlying case went wrong is: “I would never bill my client to send a letter to confirm that the client is going south on my advice, but I did tell them verbally and warn them about the risks of not accepting a settlement that I recommended.”
Here's the advice: don't bill for the letter. Write it anyway. Every client that seeks compensation from their attorney for not understanding something, i.e., failing to give informed consent, claims that they didn't hear what you said or it wasn't said clear enough.
Rule 3-500 of the Rules of Professional Conduct requires that attorneys provide information to the client on material aspects of the case: “A member shall keep a client reasonably informed about significant developments relating to the employment or representation, including promptly complying with reasonable requests for information and copies of significant documents when necessary to keep the client so informed.”
In other words, you are required to keep your client reasonably informed about significant developments relating to the representation--including when negative developments have impacted the outcome or recovery in the case, or that in your evaluation the current settlement is the best probable outcome for the client.
That informed communication is no different than any other communication required under the Rules of Professional Conduct--it must be written in a fashion that the client can reasonably understand. Therefore, if the client is unsophisticated, the written disclosure must be in simple terms that the client can understand. Some people learn by hearing, some people learn by doing, some people never learn. But at least a letter signed by you, sent to your client, explaining where the case is going to go if they don't accept your advice is not going to be convincingly denied by the client in front of a jury about why they chose not to do what you had suggested.
Not surprisingly, having sworn a vow, our former clients have rarely come back with the same issue. But that doesn't mean they don't come back. Most importantly, they have learned a great lesson that the fine writer Mark Twain once was quoted as saying: It's a heck of a lot easier to stay out of something than it is to get out of something. So true Mr. Twain. Thanks for the advice.
1 Tolling occurs when the plaintiff has not sustained actual injury; the attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred; the attorney willfully conceals the facts constituting the wrongful act or omission when such facts are known to the attorney; or the plaintiff is under a legal or physical disability which restricts the plaintiff's ability to commence legal action.
2 Four years, see Code Civ. Proc. §337(2).
3 Two years for oral, see Code Civ. Proc. §339(1); Four years for written, see Code Civ. Proc. §337(1).
Copyright 2012, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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