Tracy Kepler - Welcome to the program, The Ethics of Errors. My name is Tracy Kepler and I'll be with you for the next hour speaking to this topic. It's not easy being a lawyer. Attorneys face rigid deadlines, packed calendars, and long hours. Clients are often stubborn and unforgiving, demanding 110% of your attention and expecting five-star work at two-star prices. As attorneys are only human, even the most skilled and seasoned will inevitably, to some degree, make a mistake. The mistake may be sufficiently serious, such that it may result in a malpractice claim. However, the attorney's management of the mistake is often more important than the mistake itself. The failure to appropriately address an error can exacerbate the simple malpractice situation and give rise to a disciplinary grievance or other claims and increased damages. The political axiom, it is not the act, but the coverup that causes trouble, applies to attorneys as well. A desire to conceal mistakes is understandable. Lawyers may be embarrassed to admit to their client and colleagues that they have made a mistake. Not withstanding this inclination, attorneys have ethical and professional duties to disclose mistakes to their clients. A mistake may damage your case, and it might also threaten your relationship with a client or even your position at a firm, but failing to respond appropriately to a mistake will jeopardize your license and your career. At the end of this program, I hope you'll understand your duties related to error disclosure, what exactly those duties require, and why it's important to take these duties seriously.
So, starting off, let's talk about why lawyers make errors or mistakes in the first place. We talked about the primary reason, I think, we're human beings. We are bound to make mistakes. Another reason is really ignorance of the ethics rules. We took legal ethics or professional responsibility in law school, but for whatever reason, our retention of those rules, policies, procedures, hasn't carried with us, and we're not quite sure about what it means to be diligent or competent or communicate with our clients. In addition, attorneys are busy, sometimes unorganized, we procrastinate, we may not get things to as fast as we would like, and some things that we may not like may end up in the bottom of the inbox, only to be forgotten about and to have missed a statute of limitations. Other reasons that we make mistakes, personal financial pressure, the pressure to get and then retain clients, also the act itself, the pressure to win at all costs, having this zero sum game.
In addition, there are often wellbeing issues at play, certain substance use disorders or mental health issues from which we may be suffering, or maybe even a cognitive impairment, for the more seasoned practitioner, dementia, Alzheimer's, something around being impaired as a result of mental function. And then, lastly, I think there's a continuum of good and evil. There are attorneys where there are just isolated instances of neglect, that simple mistake, to the middle of the road, where attorneys may see, wow, there's this whole pile of money sitting in my client trust fund account, and I just need to borrow some for a short period of time, and I'm gonna pay it back as soon as that next settlement comes in. No client will be harmed. No mistake will happen. It's all gonna be okay. To the other end of the spectrum, where there are attorneys who set out to steal from widows and orphans, and on those, rather not a mistake or an error, but intentional. The foundation of the duty to disclose: An attorney who commits a material error must inform the client of that error. This duty is as old as the profession itself and traces its origins to an attorney's role as a fiduciary.
The Eighth Circuit Court of Appeals has characterized the common law duty to disclose errors as a corollary of the fiduciary obligations of undivided loyalty and confidentiality an attorney owes their client, reasoning that the client must be aware of acts or events under their control and any circumstances that may limit the attorney's ability to ethically continue the representation. These common law duties have been codified in the ABA model rules. Rule 1.4 requires attorneys to keep the client reasonably informed about the status of a matter and to provide information necessary to permit the client to make informed decisions regarding the representation. This naturally includes any serious enough error by the attorney, the same as any other adverse development in the case. Rule 1.7, which concerns conflicts of interest with current clients, provided an additional basis for the duty.
Rule 1.7a2 precludes any representation without the client's informed consent, where there is a significant risk that the attorney's services will be limited by the attorney's own personal interests. An attorney, of course, has a personal interest in avoiding the cost and stress of a legal malpractice suit, but how will this interest interfere with the representation? Won't the attorney's motivation to minimize the consequences of the error and to achieve the best possible result for the client only benefit the client? At first glance, it appears that the interests of the attorney and the clients are aligned, but in practice, this is seldom the case. The attorney, now fixated on avoiding liability, may be tempted to highlight legal or factual theories that remain unaffected by the error, recommend settlement to prevent its exposure, or steer the client towards litigation to surpass a previously bungled settlement. Where the error is serious enough, the attorney will likely need to withdraw or seek a conflict of interest waiver, both of which require disclosure of the circumstances to the client. Triggering the duty: Courts, academics, and disciplinary authorities agree that attorneys have a duty to disclose errors to their clients, and most attorneys, I think, are aware of this duty as well. The more difficult task, however, is determining exactly which errors give rise to the duty.
Several ethics opinions have attempted to provide clarity on this point, explaining that errors must be significant, serious, or material, but unfortunately, leaving a sizable gray area. Recognizing the confusion on this and other issues related to error disclosure, the American Bar Association issued Formal Opinion 481 in 2018. In its opinion, the ABA explained that an attorney must disclose all material errors to the client, defining a material error as one that a disinterested lawyer would consider reasonably likely to harm or a client or cause a client to consider terminating the representation, even in the absence of harm or prejudice. This still leaves room for ambiguity, and determining which errors require disclosure will always be a judgment call, to a certain extent. But when you begin connecting the dots with the ABA's definition, a roadmap appears that can guide attorneys in the right direction. First, consider whether you've erred at all. Not every adverse development in a case constitutes attorney error. This is true where the adverse development was based on a decision made by the attorney. Hindsight is 20/20. An attorney whose actions are reasonable, zealous, yet untimely and unsuccessful has not necessarily erred, even where a more effective strategy becomes apparent after the fact.
As the Colorado Bar Association explained, in its Ethics Opinion Number 113, missing a non-jurisdictional deadline, a potential fruitful area of discovery, or a theory of liability or defense may, upon discovery, prompt regretful frustration, but not an ethical duty to disclose to the client. Clients impose budgetary constraints, areas of law are unsettled, and a variety of other factors might contribute to unsuccessful, but entirely defensible actions or omissions by an attorney. Where such a development is itself significant, the attorney has a duty to inform the client that it has occurred, but not that the attorney has made an error. Next, is the error reasonably likely to harm or prejudice your client? Let's assume that the attorney has committed an error. She has acted or failed to act optimally, not because of forces outside of her control, but because she misinterpreted the law, maybe failed to adequately prepare, or lost her concentration in a way that a reasonable attorney should not. Even in this case, the attorney may not be ethically required to explain to the client that she made an error. Is there a reasonable chance that this error will harm or prejudice the client? Perhaps a lost defendant or claim was duplicative and won't carry any meaningful consequences for the client, or maybe the error can be quickly and easily corrected in the present proceeding.
Federal Rule of Civil Procedure 6B, for example, permits blown deadlines to be extended upon a showing of excusable neglect. Under such circumstances, where an avenue is immediately available to correct the error without substantial delay or at an expense for the client, the attorney may attempt to do so before disclosing to the client that they've made an error. Determining whether the corrective measures are quick and easy enough to avoid disclosure is a judgment call. How much extra time and work is required, and what are the odds that these measures will fail? Additionally, some errors, like most typographical or citation errors, are so insignificant that they are unlikely to cause harm, even without any corrective measures, and can safely be ignored. It's worth pointing out that the analysis of whether an error will harm the client may differ from the analysis of whether the client would have a viable legal malpractice claim.
Consider a scenario where a client retained an attorney to pursue litigation with only the slightest chance to prevail. If the attorney failed to timely file the complaint and the case was dismissed, the attorney could not cite the weaknesses, no matter how glaring, in the underlying case as a reason to avoid informing the client of his error. Flaws in the underlying case will inform the viability of the client's legal malpractice claim should the client choose to bring one, but the client's goals were hindered by the attorney's error, so the attorney's ethical obligations remain the same. In short, the attorney's decision and duty to inform the client of an error does not hinge on the attorney's back of the envelope analysis of whether the client has satisfied every element of a legal malpractice cause of action. Finally, even if the error is unlikely to cause harm, might it motivate your client to fire you? The second component of what the ABA considers a material error in Opinion 481 includes any error that would cause a client to consider terminating the representation, irrespective of harm or prejudice to the client.
Such errors, the opinion explains, may cause a reasonable client to lose confidence in the lawyer's ability to perform the representation competently, diligently, or loyally, despite the absence of clear harm. This is something of a catchall. It's really hard to imagine an error that would undermine a reasonable client's confidence in their attorney, but also pose no risk of harm or prejudice. It is possible, though, that a client stressed the importance of timing to their attorney and the attorney's error, while causing only a minimal delay, would call into question the attorney's ability to act promptly at later points on in the representation. Or maybe the attorney's error resulted in added expenses or fees. Even if the amount is minor or the attorney agrees to cover the added expense, an especially cost-conscious client might worry about the attorney's ability to achieve the desired result while representing the client's limited financial means. Most errors, however, will fall squarely into both categories or neither. Disclose to whom: Most of the time, an attorney's error will become apparent during the representation or not long after it took place. Situations may arise, however, in which the attorney discovers the error after the representation has already ended. The attorney might discover a drafting mistake while digging through a closed file, looking to use a previously drafted document as a template for a new client, or perhaps a former client contacts the attorney directly, inquiring about unanticipated tax obligations or an unsatisfied lien on their property.
Is an attorney who uncovers a mistake after the fact obligated to inform their former clients that they've made an error? According to the American Bar Association, the answer is no. Prior to ABA Opinion 481, whether the duty to disclose an error extended to former clients wasn't entirely clear. Attorneys, of course, owe duties to former clients in other contexts. The fiduciary obligations of loyalty and confidentiality continue beyond the end of the representation. These duties are codified in Rule 1.9, which prohibits an attorney from taking on new matters which would conflict with the interests of a former client, revealing confidential information about a former client, or using such information to the disadvantage of that client. Rule 1.16D also requires attorneys to protect a client's interests upon and immediately after the representation by providing reasonable notice of termination, transferring the file, and returning any unearned fees.
However, the basis of an attorney's duty to disclose, Rules 1.4 and 1.7, concern communication and conflicts of interest only with respect to current clients. ABA Model Rule 1.4 is completely silent on former clients, both in the comments and the rule itself, and nothing in the legislative history of Model Rule 1.4 suggests that the drafters intended the rule to apply to prior representations. From a practical standpoint, requiring attorneys to update clients on developments affecting their legal interests after the representation has ended and after the client has stopped paying fees would not be realistic or particularly fair. Rule 1.7 as well discusses former clients only to the extent that the representation of a former client might conflict with the interests of a current client. Additionally, the component of Rule 1.7 that provides a basis for error disclosure, that a personal interest of the lawyer would interfere with the interest of the client, does not have a corollary in Rule 1.9 that would extend these same principles to a former client.
Again, from a practical standpoint, prohibiting an attorney from acting in their own interest when it conflicted with the interest of any former client would be unrealistic. The distinction between a current and former client, therefore, is going to be critical. Exactly when this transition occurs will usually be obvious, but not always. When an attorney formally withdraws, completes the objective defined in the engagement letter, or is fired by the client, the representation's end will have been, or should have been, reasonably apparent to both attorney and client. If the relationship is ongoing, say if the attorney agreed to handle all legal matters for a client or all legal matters in a specific practice area, the attorney must consider the client current as far as error disclosure, despite the absence of any pending matter or project. A scenario where the client completed their initial objective, but subsequently sought and received legal advice and never received any correspondence confirming the representation ended could really go either way.
This is why written engagement letters and closure letters are vital to ensure that your former clients know that they're actually former clients. So what can you say when a former client calls you to inquire about a problem with your previous engagement? Attorneys should look to Rule 4.3, which concerns an attorney's interactions with an unrepresented person. If it's clear that the client misunderstands your role, in fact, they may believe that you still represent them, you should make reasonable efforts to correct that misunderstanding. In light of the potential conflict, you may not provide your former client with any legal advice other than the advice to secure counsel. Let's talk about intra-firm discussions on the error. Navigating error disclosure and addressing conflicts of interest can get complicated fast, and an attorney staring down a lawsuit is prone to the same brand of fear and uncertainty as any other potential defendant. Recognizing the need for prompt, dispassionate advice when responding to potential malpractice, many firms designate in-house ethics counsel to provide this guidance in times of need. While this is an effective way to avoid missteps, attorneys need to address the risk before an error occurs, that communications with firm general counsel might be discoverable in a legal malpractice action.
Beginning with In Re: Sunrise Securities litigation, a 1989 federal decision out of the Eastern District of Pennsylvania, courts had previously reached a consensus that an attorney's communication to in-house ethics counsel concerning a current client were not privileged or not protected by the attorney-client privilege vis a vis that client. The theories underpinning these holdings are twofold. First, where an attorney seeks advice concerning her representation of a client, she is doing so for the client's benefit, so the client should be entitled to share in that advice. This so-called fiduciary exception has its origins in estate planning, where a trustee seeking advice on administration cannot assert the privilege against the trust beneficiaries. Second, where two attorneys within a law firm consult with one another, the firm, by way of imputation, is representing adverse parties in the malpractice action, the defendant attorney and the plaintiff client. The result is a conflict of interest, which nullifies the privilege in the interest of protecting the client.
Following the Southern District of Ohio's 2011 opinion in Tattletale Alarm Systems versus Calfee, Halter, and Griswold, LLP, several courts have actually declined to follow the Sunrise Securities line of cases and the theories they espoused. In fact, currently, the prevailing trend is to protect communications related to the attorney's malpractice liability with intra-firm counsel from discovery by the client, subject to several conditions. First, the court will want to see evidence of a formal in-house ethics or general counsel position. The firm should consistently and routinely direct issues involving firm liability to the same attorney or group of attorneys for guidance. Formality and consistency will underpin the notion of a genuine attorney-client relationship between the in-house attorney and the consulting attorney. Having unwritten or rotating designations or having too many attorneys involved may dissuade a court from upholding the privilege.
Second to alleviate conflict of interest concerns, the attorney serving as ethics counsel should not have performed work for the client in question in the underlying matter. Where the firm has designated multiple attorneys as in-house counsel, attorneys associated with the client's matter should not participate in relevant discussions, and where the firm has a single ethics attorney, the firm should have a pre-designated alternate. It may go without saying, but the ethics attorney should also not bill the client for their services as intra-firm counsel. Third, the firm should remain cognizant of its obligation to promptly inform the client of the error. Too long of a delay between the in-house consultation and the disclosure may cause unnecessary harm to the client or risk creating an adverse inference about the purpose of the consultation. And finally, communications between the in-house attorney and the consulting attorney must have been made in confidence and kept confidential. Sharing the discussions with other attorneys at the firm or blurring the line between when this meeting ended and another one began will call into question whether the parties intended to maintain the confidentiality of the advice rendered, as is required to establish the attorney-client privilege. Further, any documents or notes created as a result of the consultation should be kept in a file separate from the client file. Let's talk about some cases from around the country that highlight this trend.
First Edwards, Wildman, Palmer, LLP, versus Superior Courts from 2014 out of California. In this case, the California Court of Appeals examined the applicability of the privilege in the context of intra-firm communications between attorneys regarding a dispute with a client in a subsequent action for malpractice by that same client. The court held that, where a genuine attorney-client relationship exists between the attorneys who engage in the intra-firm communications, the attorney-client privilege remains applicable. In that case, the plaintiff brought a legal malpractice action arising from an underlying invasion of privacy action commenced on his behalf by his former counsel, an international law firm. The plaintiff's relationship with his former counsel quickly degenerated after the filing of the underlying action, with the plaintiff contemplating or complaining that the firm had presented him with vastly inaccurate budget, had over-billed, and had failed to properly advise him regarding the consequences of his lawsuit.
In response to the plaintiff's complaint, the primary attorneys handling the underlying action consulted with two other firm attorneys, the firm's general counsel and the firm's claims counsel, with respect to framing responses to the plaintiff's claims and to further representation of the plaintiff. In addition, the firm's general counsel and claims counsel deputized another attorney to supervise the handling of the underlying action. The plaintiff ultimately retained success or counsel to handle the underlying action and sued the law firm for legal malpractice. In the legal malpractice case, the firm asserted the attorney-client privilege with respect to communications among the initial handling attorney, the firm's general counsel and claims counsel, and the attorney deputized to assist with the handling of the underlying action. The plaintiff successfully moved to compel further responses, convincing the trial court to adopt the so-called fiduciary or current client exception to the privilege. The law firm responded with a petition for a writ of mandate. The court of appeals partially granted the firm's writ of mandate, reiterating that, in California, the attorney-client privilege is a legislative creation, which courts have no power to limit by recognizing implied exceptions.
Consequently, the court concluded that the fiduciary or current client exceptions, common law exceptions, which essentially provide that a law firm cannot assert the attorney-client privilege against a current client, when self-representation creates a conflict of interest with that client or otherwise breaches the firm's duty to the client, could not apply, because no statute authorized this type of an exception to the attorney-client privilege. As to the issue of a potential conflict of interest arising in instances where a firm represents both itself and the client on the same matter, the court held the existence of a conflict was immaterial, at least as to the privilege applicability, because nothing in the evidence code permitted a waiver of the attorney-client privilege in the event of a violation of the rules of professional conduct.
Further, although the court did express some concern about thorny ethical issues, where a firm acts as counsel for both itself and a client simultaneously, it did note that it is not a foregone conclusion that an attorney's consultation with in-house counsel in regard to a client dispute will always be adverse to the client. The court went on to reject the plaintiff's concern that holding the attorney-client privilege applicable in these circumstances would allow firms to conceal information through the creation of artificial attorney-client relationships after the fact by noting that the privilege would, of course, only protect communications and not facts relating to the representation. The court also noted that the privilege would only apply when a party resisting discovery could demonstrate the existence of a genuine attorney-client relationship between an attorney and an in-house counsel at a firm. The court then listed the four factors we have covered in this program for a court in determining whether a genuine attorney-client relationship exists between an attorney and a firm's in-house counsel. Applying these factors to the facts before it, the court of appeals concluded that the firm had shown sufficient evidence to establish an attorney-client relationship between the initial handling attorney and the firm's general counsel and claims counsel. However, the court of appeals found insufficient evidence to establish an attorney-client relationship between the initial handling attorney and the attorney deputized to assist the general counsel and claims counsel, as the deputized attorney was not acting in his, quote, unquote, normal role as counsel for the firm and had actually performed work on the underlying action. There are several other cases from around the country that really stand for the purpose of highlighting the four ways a firm can establish that these contacts or these communications need to be held pursuant to the attorney-client privilege.
Some of them are Crimson Trace Corporation versus Davis, Wright, Tremaine, LLP. That's a case out of Oregon from 2014, again, a case where the law firm was challenging a trial court order compelling production of certain materials that, in the firm's view, were protected under the attorney-client privilege. Another case is RFF Family Partnership LP versus Burns and Levinson, a 2013 case out of Massachusetts, again, related to confidential communications between law firm attorneys and a law firm's in-house counsel concerning a malpractice claim and going through those four factors. One of the last cases is St. Simons Waterfront, LLC, versus Hunter, Maclean, Exely, and Dunn, PC, a 2013 case out of Georgia with a similar analysis. And then, lastly, a case out of Illinois, Garvy versus Seyfarth Shaw, LLP, again, a case out of 2012, going through the same analysis around communications with in-house counsel. Consulting your carrier: Attorneys should also consider contacting their professional liability insurance carrier soon after committing or discovering a serious error. For solo attorneys or law firms without designated in-house ethics counsel, the firm's insurer may offer risk management services to help attorneys navigate error disclosure. Many insurance carriers provide a risk control hotline staffed by licensed attorneys that allow attorneys facing a potential claim or any risk control issue to talk through best practices and ethical duties before making a decision. Every professional liability policy will require a law firm to report a claim to the insurance carrier. The definition of claim will include the service of illegal malpractice complaints, but also any demand for money or services arising out of the error or omission. Most policies will require timely notice of disciplinary complaints as well.
Notice should be given to the carrier as soon as possible. A reasonable amount of time to ascertain the facts and decide whether to report a claim is understandable, but any attempt to resolve the claim before notifying the carrier may void coverage. Potential claims, generally defined as any act or omission which could reasonably be expected to form the basis of a claim are a little less straightforward. Circumstances that constitute only a potential claim might include a client blaming an attorney for an unsatisfactory result, a client threatening to file a malpractice suit unless the attorney fixes a perceived error, an attorney becoming aware that they violated an ethics rule in their representation of a client, or an attorney committing a serious error, even without any indication that the client is considering a lawsuit. Upon filling out a renewal application, attorneys are usually asked whether they're aware of any circumstances that could reasonably give rise to a claim, at which point the firm has a duty to disclose potential claims they're aware of or risk waiving coverage. Outside of the renewal application, a typical lawyer's professional liability policy will not require attorneys to report potential claims on an ongoing basis. Regardless, notifying the insurance carrier of potential claims as they occur does provide certain advantages. Early notice will preempt the policy's notice requirement should a potential claim develop into an actual claim, and the carrier may provide risk control or pre-claim assistance to help mitigate a claim or prevent one from occurring. Further, a potential claim that doesn't turn into an actual claim and doesn't result in any legal expenses or indemnity for the insurer will not cause the firm's insurance premiums to rise.
As far as confidentiality, there is no independent insured-insurer privilege in most jurisdictions. However, the general rule is that communications pertaining to the insured's potential liability covered under a policy are protected by the attorney-client privilege because they are considered a part of the joint legal defense to the claim. Your insurance carrier has an interest in encouraging your firm to report potential claims. The sooner it knows about the smoke, the easier it is to put out the fire, so you should feel confident contacting your carrier at least as a way to understand your options. So what to tell the client? After deciding that an error must be disclosed to the client, questions may remain as to what exactly an attorney needs to say. First, the attorney must inform the client of the factual circumstances surrounding the error and the consequences to the client's legal position in the current matter. What happened and why does it matter? The client may not fully appreciate the significance of even a seemingly straightforward error, so the attorney does need to take care to explain the situation thoroughly and in a way that the client can understand.
Next, if the attorney has identified remedial measures, the attorney should discuss these actions with the client. Can the error be fixed? And is the attorney able and willing to fix it? It's possible that nothing can be done. Even where a remedy exists, the attorney really does have to be realistic about the client's chances for success and inform the client of the alternative option, terminating the relationship and attempting to salvage the case with a different attorney. Last but not least, the attorney has to address the elephant in the room, their own legal malpractice liability. In light of the glaring conflict of interest, an attorney cannot opine on the viability of the client's potential legal malpractice claim. Whether the underlying case was weak, extenuating circumstances existed, or illegal malpractice litigation would be prohibitively expensive or difficult for the client, the attorney is in no position to offer advice on the malpractice implications of their own error.
However, disciplinary authorities agree that the attorney can't sidestep the issue all together. The New York City Bar Association Informal Opinion 1995-2 stressed the importance of advising the client about all available options, but clarified in quotes, "We do not believe the word malpractice must necessarily be used," end quote. The best approach, and one championed by ethics opinions from several other jurisdictions, was originally proposed by the ethics committee of the Colorado Bar, Informal Ethics Opinion 113. In it, they say the lawyer should inform the client that it may be advisable to consult with an independent lawyer, with respect to the potential impact of the error on the client's rights or claims. This language satisfies the attorney's duty to inform the client of their potential legal malpractice claim and their possible need for independent counsel, but at the same time, withholding any substantive legal advice about that potential claim. So how to tell the client? Even for a seasoned attorney, this is not an easy discussion. Unless it's impractical or inconvenient for the client, the initial disclosure should take place during a face-to-face meeting, or at the very least during a phone or Zoom call. The client will likely have questions, and making the disclosure a conversation as opposed to a one-way blast of information in a letter, email, or voicemail, will give the attorney a chance to explain possible corrective strategies before the client can start Googling legal malpractice lawyers.
Even if a fix isn't possible, it's an opportunity to convey a sense of accountability and candor. Adopting a conciliatory tone, owning up to your mistake, and even apologizing may go further than you think in avoiding a malpractice claim, especially in situations involving a longtime client. An apology on its own will not work against you in a legal malpractice claim and might actually be viewed favorably should you find yourself in a disciplinary hearing. Attorneys must not admit liability, however. There is a critical line between admitting you made an error, which ethical duty requires, and admitting liability, which exceeds any ethical duty and jeopardizes legal malpractice insurance coverage. As we previously talked about, a wide variety of extenuating circumstances may exist that prevent an error from becoming legal malpractice. I made an error and here's what I did is sufficient. I made an error and I believe I was negligent, or I believe you have a claim is a problem, as is any assurance that the client will be provided a settle or otherwise made whole, whether through insurance or any other means. Every lawyer's professional liability policy will contain a clause waiving coverage in the event that the insured admits liability or settles any claim without the insurer's prior written consent. Attorneys must take care not to run afoul of this provision, and in the event that you're concerned, reach out to your insurance company for guidance. Settling a claim might also run afoul of ethical rules if the proper precautions aren't taken. For example, Model Rule of Professional Conduct 1.HH states that a lawyer shall not make an agreement prospectively limiting the lawyer's liability to a client for malpractice unless the client is independently represented in making the agreement, or settle a claim or potential claim for such liability with an unrepresented client or former client unless that person is advised in writing of the desirability of seeking and is given reasonable opportunity to seek with the advice of independent legal counsel in connection therewith.
In view of the danger that a lawyer will take unfair advantage of an unrepresented client or former client, the lawyer must first advise such a person in writing of the appropriateness of independent representation in connection with such a settlement. In addition, the lawyer has to give the client or former client a reasonable opportunity to find and consult with independent counsel. In accordance with Rule 1.4, disclosure to the client must be prompt, and whether a delay in notification was reasonable is really going to depend on the facts at hand. Why did the attorney wait? Was the client harmed by the delay? Should the attorney have known that a delay would cause harm? Once you discover an error involving a current client, you should act quickly, but it's generally appropriate to consult with another lawyer, your firm's general counsel, or your professional liability insurance carrier before speaking with your client. While the initial disclosure should be verbal, the attorney should memorialize the discussion in a written, dated letter. This is for the client's convenience, but also to protect the attorney should the issue of how, when, or what the attorney disclosed arise in a subsequent malpractice litigation. The cautions against admissions of liability or substantive legal advice apply doubly to this letter, as it may later become an exhibit. The attorney will also need to consider whether the client is entitled to a fee reduction. Like any other profession, an attorney who messes up should not charge the client additional fees for work that has only become necessary due to the attorney's error. if only from sound business practice, consumer relations standpoints. Unlike other professions, attorneys are actually duty-bound to refrain from charging any unreasonable fee.
Rule 1.5A explains that whether a fee is unreasonable will depend on a number of factors, including difficulty of the issues and the time required, but also the skill involved and the results obtained. So in addition to foregoing payment for your work to fix your own mistake, consider whether you can reasonably charge the client the full amount or any amount for the work that gave rise to the error. Like an apology, a reduction or waiver of legal fees will not be viewed as an admission of liability in a malpractice suit and may actually serve to avoid a claim altogether. A fee waiver in exchange for a release of liability from the client should only be pursued in consultation with your insurance carrier, or you may inadvertently waive coverage. I'd like to talk about some of the consequences of nondisclosure. Failing to disclose a mistake to tell the client will likely constitute fraudulent concealment. Established in every jurisdiction, either by statute or common law, fraudulent concealment is any act designed to conceal information necessary to a cause of action in order to prevent the plaintiff from bringing that action in a timely fashion. For example, an attorney who failed to file a claim within the statute of limitations period might inform his client that the claim was dismissed, but fraudulently state that it was dismissed on the merits in order to avoid liability. With respect to most torts, the plaintiff must show that the defendant took active steps towards concealing the cause of action.
However, due to the fiduciary relationship between the attorney and client, silence alone, accompanied by the client's reasonable failure to discover the malpractice claim is really enough to support a fraudulent concealment claim. To use the previous example, failing to inform the client that the dismissal was the result of attorney error or failing to notify the client of the dismissal at all would both constitute fraudulent concealment. Where there's no active concealment, no shredded documents, misdirection, or outright lie, the attorney's failure to fully satisfy his ethical duty to his client is itself the fraud. The effect of fraudulent concealment finding will vary. Some jurisdictions toll the statute of limitations until the client discovers the cause of action, while others simply prevent the attorney from asserting a statute of limitations defense. Either way, an attorney who fails to inform the client of a potential malpractice claim is merely delaying the inevitable. Failing to adequately disclose an error to the client may also subject the attorney to professional discipline. While making a mistake is rarely grounds for discipline by itself, attorneys have been publicly reprimanded, suspended, or even disbarred for biting their tongues or telling half truths with respect to their own errors. In jurisdictions that permit punitive damages in legal malpractices case, an attorney's failure to disclose an error or the true cause of an error may be considered an aggravating factor, sufficient to justify a punitive damage award. Given that a typical professional liability policy will not cover punitive damages, this can be especially devastating for a firm. May the representation continue?
After the attorney discloses the error, both the attorney and the client have some important decisions to make. Can the attorney continue representing the client? If so, is this what both parties want? The representation may end as a direct consequence of the error if it was fatal to the claim. If the client is merely placed at a disadvantage, the error can be fixed, or the attorney represents the client in other matters, the attorney has to address the conflict of interest before pressing on. As we previously discussed, an error that is serious enough to require disclosure creates a conflict between the client's interests and the attorney's interest in avoiding malpractice liability. This conflict of interest threatens not only the matter in which the attorney erred, but all matters the attorney represents in this particular client.
Not withstanding the conflict, Rule 1.7B allows an attorney to continue the representation as long as, one, the attorney reasonably believes that they can provide competent and diligent representation to the client, two, the representation is not prohibited by law, three, the representation doesn't involve the assertion of one client against another client in the same matter, and four, the client gives informed consent in writing. Only the first and last conditions are hurdles here.
First, the attorney must ask, can I represent this client as effectively as I could have before the error? Perhaps the relationship with the client has become acrimonious, to the point where the attorney's work will suffer. Maybe instead, the error was a result of the attorney's lack of experience in a subject matter, and that same lack of experience would prevent the attorney from properly remedying the error. The attorney must also consider whether there's been a breakdown in trust or communication that will interfere with the attorney's other work for this client. In light of these considerations, the attorney may be forced to withdraw after disclosing the error. If the attorney concludes that they can continue working with the client, an attorney must now obtain the client's informed consent to waive the conflict in writing. So addressing the conflict: A reliable conflict waiver, especially one concerning a personal interest of the attorney, must be tailored to the facts at hand. Using a pre-printed form without adding any specific details or explanations will not get the job done. There are, however, several components an attorney should consider and should include as part of an effective waiver.
The first is to specifically identify the conflict of interest. At this point, the client is aware that the error occurred, but refer to your earlier disclosure and explain that your personal interest in avoiding professional liability may threaten your ability to represent the client moving forward. If you represent the client in multiple matters, note that the conflict and the conflict waiver applies to all of your work for the client, and not only the matter that gave rise to the error. Next, you want to clarify that, while ethical rules require you to obtain the client's permission before continuing the representation, you believe you can serve the client diligently and competently. There are many benefits to the client in waving the conflict. They will avoid the aggravation and delay associated with finding and transitioning to a new attorney, along with the likely additional cost in doing so, and you should highlight those benefits.
By the same term, you must also explain the potential downsides. It is possible that, despite your best efforts, your personal interest in avoiding liability or protecting your reputation may influence your actions in a way that could actually harm the client. Furthermore, explain to the client that, while you're asking them to sign the waiver, they are not required to do so. And finally, inform the client that, although they are not required to do so, they have a right to consult with an attorney outside of your practice to discuss whether or not they should waive the conflict. The client should be given a reasonable opportunity to consider whether to sign the waiver. The attorney should be available to answer any questions the client might have about the purpose of the waiver or the additional work the attorney is willing to take on, but any pressure exerted on the client by the attorney to sign will likely render the waiver unenforceable.
As a final takeaway on this Ethics of Errors, I think there's a great statement from a case called RFF Family Partnership, LP, versus Burns and Levinson, LLP. It's a 2012 case out of Massachusetts, and that statement is that, "The confession of error runs contrary to self-interest and human nature, yet may be required, is simply a fact of fiduciary life. Unflinching loyalty to their interests is the duty of every attorney to his clients." Additionally, legendary college football coach Bear Bryant once said, "When you make a mistake, there are only three things you should ever do about it. Admit it, learn from it, and don't repeat it." I think it's hard to do them in any other order. Taking ownership of your mistakes will allow you to move on with your career and salvage your reputation in the client's eyes, even if you can't salvage their case. I hope you enjoyed this presentation of The Ethics of Errors and learned some practical takeaways about how to talk to the clients, conflicts of interest waivers, talking to intra-firm ethics counsels about how to handle it, as well as some of the rules of professional conduct that surround having this disclosure, communication, conflicts of interests, as well as what can happen if you fraudulently conceal the error or try to remain silent.
Thank you very much.