ALFA International Product Liability Newsletter


Managing The Risks Of Legal Malpractice Claims In California And Beyond By: Jennifer Saunders Has the economic climate brought new challenges to the practice of law? Not really. The challenges present in the practice of law haven’t changed over the past several years, only the need to be more vigilant in your practice. Legal filings against lawyers for the past few years overall has remained fairly steady in Los Angeles and Orange Counties, although the number of filings for the two months of this year are slightly down, as compared to this same time last year. The key to protecting your practice from claims is an increased awareness and remaining proactive. Attorneys can do so in three ways. First, they should carefully interview prospective clients. Second, they should carefully prepare written retainer agreements and execute them. And, third, they should keep an eye on runaway receivables. For starters, when a prospective client walks through your door, listen carefully to what he or she has to say. Has this potential client been represented by multiple attorneys in the past? If so, explore the reasons multiple attorneys have been involved. Then ask yourself whether this is a client you wish to have. Does this client have the ability to pay your fees or the costs for the matter? If not, are there special billing arrangements you should consider including in your retainer agreement, such as cost retainers, payment within defined period, interest on unpaid principal and ability to withdraw in the event of non-payment. Remember, you are in the business of providing legal services, not financing the client’s matter. How does this client communicate and how actively involved will the client be during the representation? If this is an intelligent individual who doesn’t want to be bothered with communications with his/her attorney, ask yourself whether this is a client you wish to establish a relationship with. The answers to these questions should guide you from the outset. It should also be a guide to what terms you may wish to include in your retainer agreement with the client. A retainer agreement establishes the relationship of the attorney and the client and it defines the terms under which the relationship proceeds. Negotiation of a retainer agreement is generally considered to be an arms-length transaction and attorneys are entitled to negotiate the terms on which they will accept employment. The California Business & Professions Code requires that in any case where it is anticipated that legal expenses will exceed $1,000 the retention agreement must be in writing. It is for this reason that you should take care in the drafting of the agreement and utilize it as an opportunity to clearly set forth the operative terms under which the attorney-client relationship was formed and was to be guided. The written agreement must contain certain provisions and the failure to comply with these statutory requirements will render the agreement voidable, at the option of the client, and limit the attorney to a “reasonable attorney fee.” One requirement is that the hourly rates and any other charges that you anticipate will be applicable to the case. Set forth the financial terms clearly, including the rate(s) for specific attorneys who will be working on the file, responsibility for the fees and costs, and the timing of statements and when payment is due. Clearly state when payment of the fees and costs is due, such as within 30 days of the statement. Including the due date on all statements consistent with the terms of the written agreement will remind the client of his/her obligation as you proceed in your representation. There should also be a clear, concise description of the scope of your retention, avoiding too general a description. But beware! There are occasions during the course of a representation where issues may arise that are not covered by the terms of the retainer agreement and yet the attorney may still provide those services. This voluntary undertaking of representation in areas not covered by the retainer agreement nevertheless creates a duty of due care and will not shield the attorney from liability. In the event this situation arises during the course of the representation and the attorney decides to proceed, document this expanded scope of representation in the form of a brief letter mailed to the client, to be executed by him or her and returned. Since the attorney-client relationship is established at this point, the new agreement will not be considered an arms-length transaction. Therefore, advising the client to the right to independent counsel and providing the client with the opportunity to seek such counsel before signing the agreement is prudent. Also consider a statement in the agreement which excludes certain services. Whether you have a new client or an existing one, keeping receivables to a minimum will help reduce conflicts. The higher the receivable and the longer the receivable remains open, the higher the risk that a conflict with the client will result. At the conclusion of your services when there is a high receivable the decision for the attorney may be whether to pursue collection. One of the questions to ask yourself is whether there is any potential claim that could be brought by the client in order to defeat or offset the fees and whether it is worth that risk. Frequently attorneys make the business decision not to pursue collection when the representation has been completed. This is not necessarily because there may be a viable claim against the attorney, but rather the practical reality that the client may make a claim just to offset or obtain a forgiveness of the debt. Claims can take many different forms, including a general negligence allegation directed at the quality of the services provided, a claim that the fees charged were unconscionable, there was misrepresentation, coercion to settle or abandonment. Collection actions by the attorney can, and frequently do, invite a cross-complaint by the client. Even if the cross-complaint is not filed, an affirmative defense to the collection action may be asserted setting forth these or similar claims. A factor to consider is that while affirmative claims by the former client may be covered under your errors and omissions policy, claims based solely on fees, claims seeking disgorgement of fees and/or mere defenses to a claim for fees may not be covered or may be covered under a reservation of rights. Presenting repeated and regular accountings to your clients is always a good practice. So be sure to keep open lines of communication with your clients regarding your billings and work with them to resolve any issues. The changing economic times requires extra attention to those seemingly small things which will help keep you practice free from claims and therefore more productive.

Jennifer Saunders Managing The Risks Of Legal Malpractice Claims In California And Beyond
By: Jennifer Saunders

Has the economic climate brought new challenges to the practice of law? Not really. The challenges present in the practice of law haven’t changed over the past several years, only the need to be more vigilant in your practice. Legal filings against lawyers for the past few years overall has remained fairly steady in Los Angeles and Orange Counties, although the number of filings for the two months of this year are slightly down, as compared to this same time last year. The key to protecting your practice from claims is an increased awareness and remaining proactive.

Attorneys can do so in three ways. First, they should carefully interview prospective clients. Second, they should carefully prepare written retainer agreements and execute them. And, third, they should keep an eye on runaway receivables.

For starters, when a prospective client walks through your door, listen carefully to what he or she has to say. Has this potential client been represented by multiple attorneys in the past? If so, explore the reasons multiple attorneys have been involved. Then ask yourself whether this is a client you wish to have. Does this client have the ability to pay your fees or the costs for the matter? If not, are there special billing arrangements you should consider including in your retainer agreement, such as cost retainers, payment within defined period, interest on unpaid principal and ability to withdraw in the event of non-payment. Remember, you are in the business of providing legal services, not financing the client’s matter. How does this client communicate and how actively involved will the client be during the representation? If this is an intelligent individual who doesn’t want to be bothered with communications with his/her attorney, ask yourself whether this is a client you wish to establish a relationship with. The answers to these questions should guide you from the outset. It should also be a guide to what terms you may wish to include in your retainer agreement with the client.

A retainer agreement establishes the relationship of the attorney and the client and it defines the terms under which the relationship proceeds. Negotiation of a retainer agreement is generally considered to be an arms-length transaction and attorneys are entitled to negotiate the terms on which they will accept employment. The California Business & Professions Code requires that in any case where it is anticipated that legal expenses will exceed $1,000 the retention agreement must be in writing. It is for this reason that you should take care in the drafting of the agreement and utilize it as an opportunity to clearly set forth the operative terms under which the attorney-client relationship was formed and was to be guided.

The written agreement must contain certain provisions and the failure to comply with these statutory requirements will render the agreement voidable, at the option of the client, and limit the attorney to a “reasonable attorney fee.”

One requirement is that the hourly rates and any other charges that you anticipate will be applicable to the case. Set forth the financial terms clearly, including the rate(s) for specific attorneys who will be working on the file, responsibility for the fees and costs, and the timing of statements and when payment is due. Clearly state when payment of the fees and costs is due, such as within 30 days of the statement. Including the due date on all statements consistent with the terms of the written agreement will remind the client of his/her obligation as you proceed in your representation.

There should also be a clear, concise description of the scope of your retention, avoiding too general a description. But beware! There are occasions during the course of a representation where issues may arise that are not covered by the terms of the retainer agreement and yet the attorney may still provide those services. This voluntary undertaking of representation in areas not covered by the retainer agreement nevertheless creates a duty of due care and will not shield the attorney from liability. In the event this situation arises during the course of the representation and the attorney decides to proceed, document this expanded scope of representation in the form of a brief letter mailed to the client, to be executed by him or her and returned. Since the attorney-client relationship is established at this point, the new agreement will not be considered an arms-length transaction. Therefore, advising the client to the right to independent counsel and providing the client with the opportunity to seek such counsel before signing the agreement is prudent. Also consider a statement in the agreement which excludes certain services.

Whether you have a new client or an existing one, keeping receivables to a minimum will help reduce conflicts. The higher the receivable and the longer the receivable remains open, the higher the risk that a conflict with the client will result. At the conclusion of your services when there is a high receivable the decision for the attorney may be whether to pursue collection. One of the questions to ask yourself is whether there is any potential claim that could be brought by the client in order to defeat or offset the fees and whether it is worth that risk. Frequently attorneys make the business decision not to pursue collection when the representation has been completed. This is not necessarily because there may be a viable claim against the attorney, but rather the practical reality that the client may make a claim just to offset or obtain a forgiveness of the debt. Claims can take many different forms, including a general negligence allegation directed at the quality of the services provided, a claim that the fees charged were unconscionable, there was misrepresentation, coercion to settle or abandonment. Collection actions by the attorney can, and frequently do, invite a cross-complaint by the client. Even if the cross-complaint is not filed, an affirmative defense to the collection action may be asserted setting forth these or similar claims. A factor to consider is that while affirmative claims by the former client may be covered under your errors and omissions policy, claims based solely on fees, claims seeking disgorgement of fees and/or mere defenses to a claim for fees may not be covered or may be covered under a reservation of rights. Presenting repeated and regular accountings to your clients is always a good practice. So be sure to keep open lines of communication with your clients regarding your billings and work with them to resolve any issues.

The changing economic times requires extra attention to those seemingly small things which will help keep you practice free from claims and therefore more productive.