An Introduction to Legal Malpractice Claims and Related Ethical Issues
The two greatest sources of professional risk to attorneys come from overlapping sources – ethical obligations and legal duties to clients. Using real world examples, this course explores a national survey of claims against lawyers based on attorney malpractice and professional misconduct. Common ethical considerations and the relationship between professional responsibility and malpractice exposure will be explored along with growing cyber risks to attorneys. Related causes of action, common defenses and jurisdictional considerations will be reviewed as well as risk management techniques and best practices to mitigate such claims.
Jeffrey Cunningham: Hello, my name is Jeffrey Cunningham. I'm an associate at Goldberg Segalla LLP. Today we'll be discussing an introduction to legal malpractice claims and related ethical issues. Overall, today we're going to be talking about these two major sources of risk to attorneys and how they overlap. And at that overlap, is the most dangerous period an attorney's practice, that's where most of the claims come from. Today I'd like you to keep in mind what I think of as the dart board with the attorney at the bullseye. If you think about a dart board, there's multiple colors.
The standard dart board has black and white spaces for the larger target and then there's the smaller double triple scores even if you're not that familiar with dartboards. Just trust me on this, there's double and triple scores, which are typically red and green, and those are smaller areas and that's where the overlap is. And what I really like about the bullseye board analogy is that the attorney is at the target, the attorney is the bullseye, and that's important to keep in mind. We'll discuss a little later on what makes attorneys particularly vulnerable, but also particularly valuable targets to legal malpractice claims and dissatisfied clients.
Just a brief course overview. We're going to talk about obviously ethics and practice, an introduction to just the standard nuts and bolts of a legal malpractice claim. We're going to look at a 50 state survey essentially, and I'm not going to hit on every state. But we'll talk about nuances from each state and examples from each state. And throughout the presentation, we'll use actual cases to dive into the various aspects of legal malpractice claim and the related ethical issues. And today, we're going to be using the ABA model rules typically to discuss the various ethical obligations and how they interact with legal malpractice claims. Obviously each state's rules are going to be a little different, but most states have adopted at least the major model rules we'll be discussing today anyway.
And just generally speaking, ethics versus legal malpractice. Ethics involves professional ideas, an academic approach, while malpractice claims really tend to cut towards the common practice, what an attorney in your jurisdiction, in your city, in your practice area does. Ethics generally involve intent and malpractice generally involves negligence, almost always involves negligence. So there's a split there in the motivation behind the attorney. Now, you could certainly have a negligent ethical violation as well. But typically, there's some aspect of intent or more than negligence involved. Ethics violations generally are conduct based, so a course of conduct over time. An attorney fails to do this or that for an extensive period. That's not to say one instance couldn't prove to be a terrible ethics violation, but typically, it's a course of conduct whereas malpractice is the other way, malpractice generally involves one mistake, one instance where the attorney fails to adhere to the standard of care and causes damage. Ethics complaints are handled by the state bar associations typically, whereas malpractice claims are dealt with in state court, federal court, but primarily in state court.
Jumping right in, I'd like to start with the duty to disclose malpractice and what obligations the attorney owes the client when malpractice occurs or when malpractice may occur. According to the model rules, which is contrary to most jurisdictions, the attorney does owe a duty to disclose potential malpractice to a client. ABA model rule 1.4 provides for client communication, 1.7 the personal interest of the lawyer and how it cannot impact the representation of the client. And ABA opinion 41 dives into rule 1.4 and requires the attorney to inform the client if the lawyer believes an error is "material." Now, whether the error is material, there's plenty of room for discussion there. But the thrust of the ABAs opinion is that if the mistake or the issue, the act omission could arise to malpractice, that would be material, that could cause damage to the client. That's something that ethically the attorney is required to disclose. The restatement of third governing lawyers, section 20, again puts the obligation on the attorney. And a minority of jurisdictions find there is a common law duty to disclose malpractice such as in Texas.
There's also a risk for not disclosing malpractice, where you may not be committing an ethical violation per se, you may not be committing malpractice, but you could expose yourself, the attorney could expose himself to a breach of fiduciary duty type claim. And this is seen in Pennsylvania and a series of other jurisdictions, where usually where it's an issue of first impression, where there isn't an obligation on the attorney to disclose malpractice, but it rises to some other claim, some sort of breach. There's also in the duty to disclose cutting the other way, serious, significant malpractice insurance consideration. So before any disclosure is made, you should certainly contact a competent attorney who can help you, guide you through the ethical issues, the legal malpractice issues. But you also want to be in touch with your malpractice carrier because you don't want to jeopardize the potential insurance because you jump the gun on disclosure.
Diving in, as I said, we'll be discussing case studies throughout the day and illustrating points with actual cases. So the case study for disclosure, there's a large trust and estates firm with significant client wealth of billions of dollars, really incredible amount of money this firm is dealing with. And it's a midsize firm. The managing partner tragically develops significant mental health issues. And being the managing partner of the firm, there's an absolute lack of oversight over this partner's work. So after eight years of suffering from these mental health issues, the firm discovers that there was a series of impropriety impacting dozens of clients, and over about $150 million at issue when you take into account all of the clients. Now, the money wasn't being stolen or anything, the money was being moved around to cover up a lack of activity and a lack of progress on various cases. There were allegations made by the various plaintiffs of the former clients of falsifying court documents and misappropriating the client's money to hold off other clients and dupe other clients into thinking everything was proceeding normally.
The firm contacted private counsel, their insurance company, they obtained insurance counsel, and insurance defense counsel, that's where I stepped in, and conducted a forensic accounting to figure out exactly happened over this eight year period. We were able to settle six claims and defeated two claims that could not settle via pre-answered motions. And again, it was over $150 million at issue and the firm was able to get ahead of all of that, settled for a fraction of that $150 million, and was able to meet their ethical obligations to their various clients.
And some of the clients even once they were informed, once the firm disclosed the issues and attempted to make them whole, some of the clients didn't proceed to litigation, we didn't even need to settle, they were okay. And even some kept their work there and appreciate the disclosure, some didn't. But again, the duty to disclose in ethical standpoint, the attorney does have a duty to disclose malpractice or potential malpractice if the error is material. Now, most states, there are minority of jurisdictions that mirror this. But most states do not require that and real recognize that the attorney has dual interest to the client, but also in preserving the attorney's self-interest as well. And that really does conflict with the model rules and most state's rules.
So a malpractice overview, not to scare you, but 80% of attorneys are sued for malpractice during their career. That's from the ABAs around the ABA December 2016 issue. The article is Ways to Avoid Legal Malpractice as Claims Rise Industry-wide. I can tell you in the five years since that article has come out, claims have gone up significantly and continue to increase exponentially. So 80% of lawyers face some sort of malpractice claim during their career. 70% of all claims are against firms with one to five attorneys. Now, that doesn't mean if you're at a big firm you don't need to worry, obviously there's still the 30% of the claims. But claims against attorneys at larger firms continue to increase as well and tend to be on the significantly higher dollar amounts. Legal malpractice claims have continually climbed about 20% since 2012.
And here's the biggest shocker of this statistics, and the ABA compiles these statistics and does reports, but a third of the errors reported, and this is for the past three or four cycles, about a third of the errors reported involve preparation, filing, and transmittal of documents. So this is not substantive legal work, but this is work that is generally delegated to support staff, paralegal assists, even younger associates. But work that the attorney is not handling directly, is a third of the sources of claims.
So legal malpractice, the nuts and bolts overview. Most of you have probably heard of the case within a case. And inevitably, you've heard someone say, "No, if we did that, if we did X, Y, and Z, that would be malpractice." People tend to conflate malpractice with the negligence element, understandably so. But there's more to malpractice than just making a mistake thankfully. The elements are, and this is across the jurisdictions, you need to have an attorney-client relationship, privity is key. And we'll talk about that a little bit more, there is a privity spectrum. But generally, the only person, the only entity that could sue an attorney for legal malpractice is the client.
The second element is negligence, a breach of the standard of care. The third element is proximate causation, and that varies jurisdiction to jurisdiction. But typically, it's a but for a causation. And then actual ascertainable damages. Now, some jurisdictions allow for broader damages than others, but there has to be actual damages. A breach of the duty is not enough. And typically dismissal of a legal malpractice claim can occur pre answer if any of the elements are missing. And throughout the day, we'll talk about related claims, breach of fiduciary duty claims, other duplicative claims that are often brought against attorneys, breach of contract, fraud, regular negligence, all sorts of other claims that that are typically brought in an attempt to usually evade the statute of limitations, but otherwise expose the attorney to what really is a garden variety illegal malpractice claim. So that's our legal malpractice overview.
The ethics overview, again, we're using the model rules. The model rules preamble and scope specifically holds that a violation of the model rules does not give rise to a cause of action against a lawyer. The rules are not meant to impose civil liability. Most jurisdictions have a similar disclaimer in their ethical rules. The ethics rules are not meant to be a legal malpractice claim. There are professional standards independent of the legal ramifications of a mistake. You have to know the rules of each jurisdiction, of course. It's important to remember that the rules for your jurisdiction are likely admissible to establish the standard of care. So the jury does get to hear the rules whether or not, and we'll talk about this a little more in a bit, but whether or not it's admissible, it's positive, that's jurisdictional. But typically, the jury will hear the actual rules at issue.
All right. So jumping right into the elements. The first element, the attorney-client relationship, the privity, that's where the duties created. Most states have a strict privity requirement, they require something in the nature of an explicit undertaking to perform a specific task. So if you're a real estate attorney and you're representing a client in a house closing and the client gets arrested and doesn't contact an attorney or something goes wrong on the criminal end, the attorney typically can't turn around... I'm sorry. The client can't typically turn around and sue the real estate closing attorney for malpractice to the criminal action if the attorney was not representing the client in that criminal action. Most jurisdictions allow a unilateral reasonable belief of the client. So it's unilateral, it's the client's belief, but it does have to be reasonable. So it adds a subjective nature to the privity calculus. And this is related to but distinct from issues of standing. So issues of standing still need to be dealt with as well.
Payment for services does not matter typically. West Virginia is a great example where anyone can pay for the attorney, that doesn't impact the attorney-client relationship at all. And most states follow that idea across the board. There are exceptions, and it really does deal with in the criminal context and in some other specific context. But typically payment for services doesn't impact the attorney-client relationship or alter who the client is or expose the attorney to a broader risk of legal malpractice claims.
There's a privity spectrum, I like to think of it as California being on the end, where privity is the loosest and New York state is on the end where privity is the strictest, and states fall in between. But in California, they've opened the door somewhat to intended beneficiaries, known beneficiaries, potential non-clients who the attorney is aware of and that are relying on the attorney's work, could potentially bring a claim against the attorney. That's pretty rare. And most states tend to go towards the New York side of the spectrum, where there's an absolute privity requirement and only the attorney's client can Sue from malpractice. This is where the scope of the services is so important. And again, using the example of the real estate attorney and the criminal situation, in order to have a written retainer and make it a living document that's updated and reflects the understanding between the attorney and the client is so important.
And there's a major problem of jury perception here. Many clients will say the attorney was taking care of it, no matter what it was, even if it was something that attorneys don't take care of or this particular attorney was not supposed to take care of. Juries tend to agree with clients, that when you have a lawyer, the lawyer is supposed to handle everything, and it's a major issue. People always say juries don't like attorneys, I really haven't found that to be the case any more than anyone else, and who knows exactly what a jury will do. But there's a real problem of jury perception that they will broaden the scope of the attorney client relationship as the client will and think the attorney is there to handle everything. So the scope of services, a written retainer agreement that's updated, constant communication in writing. Email is wonderful for keeping the scope of services in writing. And that's really key because when problems arise, inevitably the scope of the service is going to be a major issue.
Ethical considerations in privity, you have to know the jurisdiction you're in, you have to know the professional rules. The retainer agreement is key, client communication is key, particularly vulnerable clients. Incapacitated and competent clients require special care. And it's important to know the rules in your jurisdiction when dealing with clients such as those. Also unrepresented parties and witnesses, there are ethical issues that are way, way broader than legal malpractice, where only your client can sue you for legal malpractice. There are ethical obstacles that attorneys face when dealing with unrepresented parties and non-party witnesses. Arbitration clauses and informed consent, especially the retainer agreement, but arbitration clauses with clients can be used. Often many states require another attorney to be involved, to represent the client's interests. And in Michigan, for example, an arbitration clause can preclude a malpractice claim. So again, know your jurisdiction.
Conflicts of interest waivers are a major source of legal malpractice claims. And whether or not the waiver of the conflict of interest could bar a legal malpractice claim is again, state by state. But it's something to really consider and to be aware of. And anytime there's a conflict of interest, even when that's wavable, that's a huge source of risk to attorneys. Finally, the attorney-client privilege, the ethical considerations around that. Many states have an at issue doctrine where if a client sues the attorney, they waive the attorney client privilege. For any material that's at issue to the representation, such as New York State, it does not allow the attorney to simply disclose all privileged communications. What it does is allow the attorney to disclose privileged communications to the extent it's required to defend the claim. So it prevents the sword and shield problem. It doesn't let the client hide behind the privilege while prosecuting a malpractice claim against the attorney.
A case study in privity. The attorney's client was a custodian injured while working at a commercial building. The attorney failed to name the proper entities and the case was dismissed. It was a very, very serious injury. And there was a web of entities that rented this particular space. And it was an admitted failure on the attorney's part at the end of the day. The client and the client's wife sued the attorney from malpractice, and we were able to get the wife's claims dismissed due to a lack of privity. She was never represented by the attorney. Even though she was involved in the discussions, she worked as a translator for the plaintiff, they were both non-native English speakers. She had solo phone calls with the attorney and marital funds were used to pay the attorney. But the retainer agreement was only signed with the client not the wife. And the case was dismissed as against the wife, it was settled with the client.
The next element, breach of the standard of care. Attorneys must exercise the care skill and diligence commonly exercised by attorneys in similar conditions and circumstances. Each state has a slightly different standard, but typically it's not across the board a standard of care for all attorneys, it has with the attorney's practice area, the attorney's experience level, the attorney's area of practice, the geographic area of practice. So in a major urban area, a real estate attorney will be held to a slightly different standard than in a rural area where a real estate attorney would be held to the common practice of an attorney in their area.
The professional attorney judgment rule and qualified immunity, states tend to call it different things. But the basic idea, Virginia is a good example, an attorney will not be held liable, exposed to legal malpractice for the exercise of professional judgment. So if it's a reasonable professional decision that the attorney makes, then there's some immunity provided, where it would bar a malpractice claim. Now it has to be a reasonable professional decision, it doesn't have to be a perfect decision. But it does have to be reasonably based on the law and within the standard of care. Attorney experts. Some states like New Jersey require an affidavit of merit for a legal malpractice claim to proceed. Some like New York rely heavily on expert testimony. However, the judge can also be an expert of the law in many instances. And it tends to cut both ways, it depends on the legal issues at issue.
Ethical considerations in the breach of standard of care. The ABA model rules and most state rules recognize the distinction between ethics and malpractice. A majority of jurisdictions allow, as we discussed before, allow the ethics violations to be used as evidence of a breach. Arizona is a good example, where the ethical rules can be brought in as evidence. A minority, like Arkansas, provide for the ethical rules to be a presumption of malpractice, rebuttable presumption. Some states will hold attorneys to a higher standard of care in the instance if they're allowed to specialize. So in certain states, attorneys can say that they're a specialist in an area of the law. And states like California will hold the standard of care higher to an attorney who specializes. Again, if you're holding yourself out as a real estate specialist, you're held to a different standard of care than a general practitioner. Be wary of practice in other jurisdictions and the exposure that could bring. Pro hac vice admissions, or even just conducting transactions with property in other jurisdictions than ones you are admitted in, that can increase exposure to the attorney.
Now, case study for breach, the client led a rent strike against a landlord. This was a very, very high end luxury building. It resulted in seven different litigations over about 11 years. The attorney attempted to resolve all of the litigations with a statutory technique, but tweak the language that in order to try to cover the client and resolve all of the litigations. The court determined that the statutory tender was invalid and the client sued the attorney. We used the professional judgment rule to show that not only was the statutory tender approach appropriate and reasonable, but the client was also a sophisticated client, was aware of the strategy and approved of the strategy, and provided informed consent in writing, was really involved in the decision. The case settled after opening for our pretrial offer. But it was in impressive how strong the professional judgment rule argument was, that our attorney had a reasonable plan, it didn't work, but that alone didn't provide for a strong malpractice claim against the attorney.
The next element, proximate causation, negligence is not enough. Again, people always say that would be malpractice. A mistake does not equal malpractice, it must proximately cause damage. And in the criminal context, most states have an innocence requirement, which goes to the proximate cause element. If the client criminal defendant is guilty, provides an allocution or a confession, then that will generally bar a malpractice claim because the client plaintiff needs to be innocent of the crime in order to argue that but for the attorney's act or omission, they wouldn't have gone to jail. It's typically but for causation. And it's important to think about prior subsequent co-counsel when analyzing proximate cause in the legal malpractice context.
The sophisticated client doctrine is available in many states. And it essentially holds that each client is unique and that a client who is a sophisticated business person, real estate person, or in fact a lawyer will be held to a different standard than a non-sophisticated client. Client satisfaction, speculation about how an outcome should have played out is not enough to establish proximate causation. And the ethical issues and proximate causes, it's always important to consider the agency principles, that attorneys have both actual and apparent authority to bind their clients. And especially in the settlement context, this can be a major source of risk, both for legal malpractice claims, but also for potential ethical issues. Most mistakes do not cause recoverable damage or amount to an ethical violation, but still a professional failure. And we owe duties to our clients not to commit even minor failures, whether or not they cause damage. But it's important to keep that in mind, that proximate cause is a key element of legal malpractice, but a mistake alone, even one that doesn't cause actual dollar damages, is still a failure of our ethical obligations to our clients.
Case study in approximate cause. Client purchased $110 million commercial building, the major tenant did not renew the lease two months after the purchase, the client thought the tenant was going to renew for 20 years. The client sues the lawyer alleging the lawyer told him he would get the tenant to sign an extension. The contract of sale for the building included the rent rolls, the leases. The client admitted he reviewed all of that before signing and he knew he didn't have a lease extension. But he maintained that the attorney was going to get it for him somehow. Our motion for summary judgment was affirmed on appeal, the client was bound by the contract and nothing the lawyer did or said could have forced the non-party tenant to extend the lease after the contract was signed.
And here, this sophisticated client doctrine popped into the case because this client was purchasing $110 million commercial building, he owned dozens of multimillion dollar, $100 million dollar buildings, and he was a very sophisticated real estate investor. And that definitely helped get the case dismissed. Again, the client was held to a different standard of care, in that he wasn't a baby in the woods, this wasn't his first time home purchase. This was a substantial commercial investment and he had significant experience.
The last element, damages. Generally, only pecuniary loss is available. Must be actual ascertainable and not speculative. Emotional distress, loss of Liberty, things like that are not generally recoverable, some states allow it. Washington State for example, if the emotional distress can be tied to the malpractice closely enough, then it could potentially be recoverable. There's a push to expand damages beyond pecuniary loss, but most jurisdictions still require actual dollar damages. Issues of collectability, such as in Arkansas. If the client lost $100 million lawsuit but the underlying defendant was insolvent and had no money, then that lawsuit is actually worth nothing. If the client lost $100 million lawsuit but the underlying defendant only had $1 million, then that lawsuit is only worth $1 million dollars. So whether or not the underlying judgment would be collectible goes to damages in many states.
Other considerations are interest and attorney's fees, pre-judgment interest, and attorneys fees to cure malpractice. Most jurisdictions allow some of those. Some like Massachusetts provide fees to cure malpractice, some do not. And It's really important to get a handle on whether interest is prejudgment, whether it's statutory, and what the accrual date is because that can be substantial. The ethical considerations and damages are really pretty deep here because non-pecuniary damages are still damages. So emotional distress, loss of liberty, things like that, reputational harm, they may not be recoverable in a legal malpractice claim, but they are certainly ethical obligations we have to our client, to protect our clients from such damages. Those are real damages, they're just not damages that are afforded a dollar amount. In the matrimonial family law, criminal law context, these are especially acute concerns.
A case study and damages involves an underlying criminal case. The underlying client was involved in a kidnapping and received a 15 year sentence. There was a series of appeals over about 20 years and ultimately the conviction was quashed. Our attorney client was sued from our practice, he missed a new issue with speedy trial time calculation. And arguably, but for that calculation, the criminal defendant client would not have been convicted. The client was unable to show actual pecuniary loss. The jurisdiction we were in did not allow for non-pecuniary recovery such as loss of liberty. And the client beforehand had been off the books restaurant manager with ties to organized crime. We had an expert that showed his time in jail was actually financially better than when he was free.
Now, that would've been a tough sell to the jury, but there was a split in the appellate decisions. And during the pendency of this positive motion practice, the highest court in the jurisdiction decided to stick with the idea that non-pecuniary loss was not recoverable. And we were able to settle the case following the high courts decision. Again, this goes to show that this man spent 15 years in jail, one he shouldn't have. So while it wasn't necessarily a recoverable damage and his legal malpractice claim was really hamstrung by the fact that he didn't have dollar damages, he was damaged. And we again owe that obligation to our clients.
So that's the four elements. Ethics and malpractice wrap up here. The elements of a malpractice claim and the ethics rules overlap all the way. Each aspect of the representation presents risks and challenges to the attorney. You have to know the rules of your jurisdiction and the best risk avoidance tool an attorney has is contemporaneous communications in writing, email is so important and to save those emails, so important. I don't think of it as a CYA type approach, but just the best practice, keep your client updated. And the best way to keep your client updated is to provide that in writing.
Other key points of risk I want to talk about to attorneys, threats of ethical violations as malpractice. Duplicative claims, we touched on early on, I want to go into that in a little detail. Fraud claims, conflicts of interest, statute of limitations considerations, releases, and statutes in your jurisdiction. So threats of ethical violate by other lawyers. You have to know your jurisdictional rules. But in most jurisdictions, threatening or mentioning an ethics violation by an attorney is in itself a violation. You're not supposed to threaten an attorney with an ethics violation, you're supposed to report an ethics violation if you see one. Once you start hinting that if the attorney does this or does that you won't report, that's a huge problem by the client. If a client starts talking about ethics violations, that could be used to terminate the representation and it's something you really should consider.
And it goes along with the next idea, if you have a client who starts talking about ethics violations about another lawyer, often the other side's lawyer, that's a good time to sit down and think about continuing the representation of this client. Because that's probably leading down a road of trouble. There's also criminal implications to consider. Again, threatening ethics violations can oftentimes lead to criminal complications such as extortion. It's something that attorneys sometimes open the door to without really thinking things through.
Duplicative claims that often tag along with legal malpractice claims, negligence, breach of contract, fraud, breach of fiduciary duty, negligent misrepresentation, discouragement of fees, or other claims aimed at attorneys' fees that were paid such as unjust enrichment, things like that. Generally speaking, if it's the same set of facts seeking the same damages as the legal malpractice claim, most jurisdictions will dismiss the claims as duplicative. A lot of the times, these duplicative claims are used to seek otherwise unrecoverable damages such as emotional distress and things like that. And or, I guess, are used as an end run around the statutes of limitation. Because in many jurisdictions, fraud based claims will have a longer statute of limitation or contract claims will have a longer statute of limitations than a illegal malpractice claim.
Jumping into conflict of interest. The ABA model rules 1.7 to 1.11 discuss conflict of interest in detail. And again, you have to know your jurisdiction. But a conflict of interest alone is not generally a basis for a cause of action for legal malpractice, unless the divided loyalty establishes the four elements of malpractice that we discussed before. Regardless, unlike most legal malpractice claims, it's very difficult to defeat these claims early with a pre-answered motion to dismiss or even at the close of discovery. They're usually very fact intensive and tend to survive.
Statute limitations consideration. The timing, you have to know your jurisdiction. Certain jurisdictions have the illegal malpractice claim is based in contract, some in tort, some have a specific statute of limitations for claims against attorneys, some have discovery rules that are involved. And it really varies depending on your state. And just a bit of a warning, fee claims in my practice, fee claims amount for about a third of the legal malpractice claims. So the attorney sues the client for outstanding fees, the client then goes to another lawyer to defend the fee claim, and that other lawyer comes back with a legal malpractice claim, which is typically 10 to 20 times the amount being sought by the attorney. So anytime you... Sometimes you need to bring a fee claim obviously, but anytime you do, it's an important time to stop up and consider the cost benefit analysis of bringing a claim against that client and to review the file and make sure that there's no problem areas in the representation.
Many states, not all, but many states employ a continuous representation idea, where if an attorney is representing a client in the same or similar matter, the statute of limitations won't run until that representation is done. And that's borrowed from usually from a medical malpractice approach as well. The idea being that while the client has faith in the attorney and relies on the attorney, they shouldn't be a stop from bringing a claim until the representation's over. Not all states have a continuous representation idea, New Mexico is one of them. Where the attorney can continue to represent the client and the statute runs from the act or emission.
Because of the statute of limitations considerations, engagement letters, retainers, and closing letters or turn down letters are really key. So when a file's over, when a case is over, when the file's closed, sending out a letter is really important to establish the end date of the representation. Turn down letters for prospective clients who don't end up being accepted by the attorney or don't engage the attorney are also key to establish that one, there was no representation but two, even if there was, the end date was at the date of the turn down letter.
Releases between attorneys and clients prior to or contemporaneous with the engagement. So having a pre-retainer release will almost certainly be held invalid. Without an express recommendation to consult outside counsel again, probably invalid. In exchange for a reduction or waiver of fee, that's usually the strongest. And I often recommend before bringing fee a claim again, sit down, review the file. But a really strong idea is to cut the fee claim down and accept a reduced fee or completely waive the fee in exchange for a release so that you can put any legal malpractice claims to bed in exchange for fees that you may not recover anyway. And again, in the criminal context, an allocution, an admission, confession of the crime often bars a claim against the attorney. An interesting thing, I have a client who builds releases into the real estate transactions that they perform. And it's been very helpful in related claims. It can be a little challenging. And again, you want outside counsel or at least the recommendation to seek outside counsel for the client to review it. But it's an effective risk mitigation technique that I recommend, especially in the real estate context.
As I said, fee claims often result in counterclaims for malpractice. The important issues there are to weigh the pros and cons of bringing a fee claims, sometimes it has to be done. And using the closing letters, using the scope of services and the living document of a retainer is really going to be key in bringing fee claims without having a legal malpractice claim result. Third party claims are a consideration, attorneys have to make contribution indemnification claims. And attorneys are often targeted by contribution indemnification claims. Some states like Maryland specifically provide for such claims against attorneys. Subpoenas are also a major source of risk for attorneys as non-clients seek privileged communications or the attorney's non-privileged documents. Privilege considerations are key. We talked about the ad issue doctrine, how the attorney can waive the privilege in order to defend against legal malpractice claims. Other professionals, co-counsel, common interest council, coverage council, accountants, insurers, other professionals that also represent the client could also be a major source of risk and those considerations should really be paramount while representing a client who has other professionals involved in the representation.
I want to briefly touch on out of office risks, like advertising, social media, personal or shared email accounts, even casual conversations. All of those can be a source of legal malpractice risks and ethical concerns. That attorneys really need to one, know the jurisdiction and the rules for your jurisdiction but two, be aware. Be aware of casual legal conversations or providing legal advice to friends or family via text message. Be careful about what is sent to or from a shared or personal email account. That email account may be the source of litigation in the future. And there are privilege issues with a shared email account. Obviously, that's a huge problem.
Pro bono risks are a major source of both ethical and malpractice risks to attorneys. And the key is to remember that a pro bono client enjoys the same standard of care for legal malpractice and the same ethical obligations as a paying client. So pro bono organizations, non-legal charitable work, condo, co-op, religious boards, they all present risk to attorneys. And the standard of care, the ethical standards are the same. There's also malpractice insurance considerations. So if you are going to be on a condo board or a religious board or doing charitable work that's even borderline legal, you probably want to notify your malpractice carrier in advance. Pro bono work, as I said, is a major source of risk for attorneys, and it's about 20% or so of the cases I see. They stem from pro bono work that that turns sour.
A major developing source of risk, especially these days is cyber risk to attorneys. The ABA put out the 2016 legal technology survey, which essentially comes to the conclusion that more lawyers using more tech makes more risk. Firms with over 500 attorneys amount for about a quarter of the cyber claims against lawyers. The danger zone, which is another quarter of the claims, is firms between 10 to 49 attorneys. And I call it the danger zone because I think that's when a firm is growing. It's no longer a small firm and they're starting to bring on more practice areas, more attorneys, and more technology. That use of more technology when maybe not all of the lawyers are familiar with the technology, maybe there's not staff to support the attorneys using that technology creates huge areas of risk.
The ABA Cyber Security Handbook, which advises attorneys, a bit of a dry read, but advises attorneys on the use of technology, states that if a lawyer is not competent to decide whether to use a particular technology, such as cloud storage, public wifi, et cetera, reasonable measures need to be used to protect client confidentiality. And the lawyer must get help, even if that means hiring an expert, information technology consultant to advise the lawyer. So not knowing how to use technology is not a defense for ethical obligations. And it generally is not going to be a defense to a legal malpractice claim. There's no clear standard and it's developing, but each state bar is trying to work out the ethical considerations with cyber risk. Firms face challenges complying with varying and evolving state laws and bar ethics opinions. Look to the model rules, look to the jurisdictional rules. The ABA puts out The Cybersecurity Handbook, as I mentioned, and is continually attempting to address these risks.
At the end of the day, model rule 1.6 part C has a reasonableness standard. And that seems to be the overwhelming approach, that attorneys need to use a reasonable approach to employ technology in a way that will protect their clients. And by utilizing an expert, an IT expert of some sort, that's a great step in the right direction. By hiring someone who is actually an expert and not saying, "we handle this ourselves," that really helps satisfy both the ethical obligations and the legal malpractice concerns. And again, the courts and each state bar is grappling with the ever increasing use of technology. But it really is a major source of risk that attorneys must stay ahead of.
Legal malpractice and cyber risks. So it's a very limited still, but a very developing area of case law. The truth is it's extremely under reported. The ABA is constantly conducting studies, but it seems that most law firms are one, unfortunately not notifying clients when there are cyber breaches, when there are areas of concern and two, if the clients do become aware, these cases are often settled very early on. Now, there's other insurance components to this. Most firms have cyber risk insurance. And if your firm doesn't, you should definitely explore it. But these are very expensive cases to defend and the reputational damage that can result to a firm is really exponential.
The good news, right, is that the elements of legal malpractice remain the same. There's still the privity element, only the client can sue for legal malpractice based on these cyber risks. The duty is still the same, it's based off the prevailing practice and customs of an attorney practicing in that area, that jurisdiction. And there has to be proximate cause leading to damage. So often times a simple cyber breach and the loss of sensitive data doesn't necessarily result in actual damage. And that can be a real burden to prove, that the client was damaged by the breach.
Something that I'm surprised, attorneys who are typically not as tech savvy as our counter parts in finance and other areas, I'm surprised attorneys don't use telephone communications in meetings more to confirm electronic communications. It's something I highly recommend. And a quick case study in the cyber breach area is the attorney settles a few hundred thousand dollars claim on behalf of his client and sends the payment information to the other side. A hacker gets into the system, either on his side or the other side, the forensic in IT people we're still determining it when we settled the case. But a hacker gets in and they spoof the email and send an email from my client lawyer's email address, it looks like his anyway, providing new wire information. And the other side wires the settlement proceeds to this bad actor who we believe is in Pakistan, or at least that's where the IP address is, who knows where the actual bad actor is? And the money's gone. Law enforcement is not particularly helpful. And there's really not much else to do except the resulting lawsuit.
Now, the issue here, again, only the client's able to sue the attorney from practice. So if the settlement falls apart, then the attorney is exposed to a malpractice claim there. But the other side had attorneys and had insurance and we were able to work it all out, but it was a very complicated negotiation about who owed who what duties. And did our lawyer owe the other side any duties in having a secure email server? Did the other side owe us any duties in having secure email? Should the other attorney have picked up the phone and confirmed the wire instructions had changed? These are all issues that don't generally get played out in court yet and are typically settled early, but they're a source of risk to attorneys.
All of that being said, there are so many resources available to attorneys. Most firms have a general counsel's office or someone that is up to speed on these issues. Also, your malpractice insurance carrier can be a great resource, not when an actual claim arises, although they're great then too. But they can be a source of advice and will have resources to help attorneys mitigate risk. That really should be explored and I think are often overlooked by attorneys and firms. The ABA provides a hotline, the lawyer's professional liability hotline. I'll give you the number 1-800-285-2221 extension 5754. It's a really great resource. It's free, it's easy, and it can provide peace of mind.
Most state and local bar associations have similar hotlines or similar resources where you can get quick advice. Other attorneys, judges, law professors, mentors are a great resource. And it's better, as you would say to your client, it's better to get ahead of these issues before they become a problem. And, of course, I'm always available, please reach out, again, Jeff Cunningham at Goldberg Segalla, I like to talk about this stuff but it's also what I do. So I certainly see myself as another resource for you.
To recap, the great risk to attorneys is in the areas of overlap between ethics legal malpractice. So going back to that dartboard idea, the attorney is at the bullseye, but the source of risk are really those overlapping double and triple point areas where the danger zone to attorneys really exist. It's not just the bullseye, the lawyer is the target. But our ethical obligations and the legal malpractice claims are really the areas of concern where those two risks overlap. And again, ethics involve our professional ideals, a bit academic, the intent side of things is there, it's generally a course of conduct. And the state bar associations are the ones that enforce and regulate ethical violations.
Malpractice on the other hand, as we talked about, it's the common practice, what attorneys in your area, in your practice area, your geographic area do. It's negligence based, typically involves an instance. So one mistake, one instance of malpractice, and it's handled by state courts, federal courts to some extent. And keeping in mind that we owe these ethical obligations and these legal obligations to our clients, they're also meant to protect attorneys and give us guidance in representing our clients in a way that also protects our practice and our firms and ourselves. So use the ethical obligations and the legal malpractice standards really as a resource as well to protect you against claims and running a foul of our obligations.
A growing area of cyber risk is in our new normal. With COVID-19, every aspect of our lives has been impacted, but the practice of law in particular has been impacted in every jurisdiction. Executive orders, administrative orders have been in place that impact all aspects of the practice of law. Remote practice and virtual courts are new and challenging uses of technology. The actual risk from these new ways to practice are yet to be seen. And I think in a few years, they'll be coming to the forefront. But there's new risks that are developing in our new normal. It's a perfect storm for bad actors. And from the cyber example before, pick up the phone, confirm communications through technology, with meetings if possible or a phone call.
The new normal is forcing attorneys, courts, and clients to use technology that they're not necessarily comfortable with. And firms and courts are dealing with reduced staffing. So as we discussed before, the danger zone for mid-size firms tends to be where they're embracing technology without having the support staff to help attorneys use that technology, and it could be a real source of risk. The uncertainty of deadlines, the impact on of statute limitations, it's really jurisdictional and needs to be closely tracked by firms. It's really going to be a problem I think, especially coupled with the economic instability that the COVID-19 pandemic has had on our economy. As the economy drops, lawyers tend to be a nice target because we're insured and because claims against attorneys by clients are usually valuable.
Remote practice issues are a major problem from the ethical standpoint as well. Attorney-client communications through platforms such as Zoom, that have already had issues with security can be a real issue. And I can't stress enough, as I've probably stressed today, pick up the phone, use older methods of communication. New technology isn't always the best and it really does present risks. And not to pick on Zoom, but the various video chat providers we have, the new technologies that are being used are wonderful. But when you're talking about attorney-client communications, using something that's tried and true is probably much safer.
There's issues with remote depositions. I recently had a deposition, it was a slip and fall case and the plaintiff's counsel was on Zoom. And I don't know exactly what he was doing, but the Zoom video showed his computer and he was working on something during his client's deposition. Now, that raises issues one, of whether he was competently defending his client but two, presumably he was working on some privileged issue, some client's case and he was doing something that he shouldn't have been showing to a bunch of other attorneys, the court reporter, and maybe even his client. I interrupted and let him know we could see his computer, he turned his camera, it was no problem. But it's something that really needs to be thought in the new normal. There's all sorts of ethical risks with client coaching, recording of depositions. And remote practice in general really presents problems for attorneys that we don't have clear answers on.
Just like with cyber risks in general, the thought is these are going to be held to a reasonable standard, and that's going back to the ABA rules. That's really what we have to keep in mind. If you're not competent to use these remote platforms or to handle a paperless practice or anything like that, there really is an obligation to hire an expert to help you. Someone that can help you with the new normal's heavy, heavy use of technology. And not necessarily rising into ethical violations and certainly not an issue of malpractice, but there are, and I'm sure we've all experienced, there are issues of professionalism that come up, which we are ethically obligated to maintain. People appearing in court from their bedroom lack the professionalism that they would otherwise have if they were standing in court. I highly recommend putting a suit and tie on, the equivalent for ladies and getting yourself in the mindset of appearing in court even if you are in your basement or your bedroom. It's a different day but our obligations remain the same. And I think it's really important to maintain that level of normalcy.
Just a virtual courts example. There's a virtual ADR, the client agrees to settlement in principle in a breakout room, the zoom rooms, we've all done that now. And the client agrees to on board with the settlement. The case is settled, discontinued, everybody goes their separate way. But the client changes his mind. It turns into a he said she said or he said he said in this case because both the client and attorney were male. And the attorney is saying that his client agreed, the client said, "I never agreed to settle."
The mediator, they're almost always immune anyway, but our mediator here was a retired judge who in no uncertain terms told us that he would be extremely upset if he was subpoenaed. He did speak to us and told us generally his impression, but we weren't able to use any of that. The big takeaway here is consider recording if a settlement is reached. Obviously, you're not going to record the mediation. But if a settlement is reached, put it on the record of sorts. And that's something you can do easily in a remote setting that you couldn't do before, just at a mediator's office. Follow up in writing, that contemporaneous writing really is the key, but consider making a record to protect yourself in remote settings when you can.
The risk management techniques here parallel the traditional approach. You want to continue to use that reasonableness standard and attempt to develop risk management techniques for a remote, paperless practice. It's likely going to be the way we practice going forward, regardless of when we get to return to offices and things like that. But It's still going to be a major source of risk. The big takeaways I think are that while it's the new normal, it's still the old risks. And you still have to go through and be sure you're meeting your ethical obligations to your clients and consider the legal malpractice risks. Those four elements are going to be key to protecting your firm. And utilizing best practices, keeping things in writing, keeping the retainer agreement as a living document that's updated to reflect the actual scope of services is going to be a gigantic step in mitigating all of the risks you face, but especially these new developing cyber risks from the pandemic.
The ABA is providing coronavirus resources, there's a COVID-19 taskforce. And many firms have, I'd be remiss if I didn't mention Goldberg Segalla's coronavirus resources and rapid response task force. Many firms are putting out resources related to COVID-19. I particularly like Winston Strong's COVID-19 Client Resource Center. State bar associations and courts are also continually putting out resources. And it's a bit overwhelming, which is why I think it's helpful to pick a firm and use their resource center as a great guideline. But it's a very useful resource for risk mitigation for attorneys that I think many lawyers are overlooking at this point, simply because they're overwhelmed with the dramatic shift in practice.
But use the COVID-19 resources that are available and consider those risks in the context of the larger ethical obligations that are owed and the traditional legal malpractice concerns that arise in representation of clients. So in conclusion, the overlap between ethics and legal malpractice continues to be the main source of risk to attorneys. And it should be addressed together for risk mitigation purposes. Thank you for joining me. Again, Jeff Cunningham from Goldberg Segalla. Please feel free to reach out. I look forward to speaking with some of you. Thank you.