Understanding Legal Malpractice
Legal malpractice occurs when an attorney fails to perform competently and that failure causes damage to a client. In order for the client to have grounds for a case, there are some key elements: a duty must be owed, the duty must be breached, damages must be incurred as a result of the breach, and the damages are something the client can recover. At the same time , the mere possibility of legal malpractice is not actionable; there must be a clear breach of the above elements in order for a client to have grounds to file a case. This can be a very murky area of law because liability issues can include negligence, vicarious liability, fraud, conspiracy, defamation, modern practice under RICO, and others.
Common Legal Malpractice Types
Legal malpractice can occur in a variety of forms, with distinction often being drawn between negligence, breach of fiduciary duty, and errors in judgment. These terms are not formally defined and there is a great deal of overlap among them; however, in order to properly assess your case it may be useful to understand how these types differ.
Negligence is the most common legal malpractice claim. Generally speaking, attorneys have a duty to act with a minimum standard of care when conducting litigation or performing other tasks on behalf of a client. When an attorney fails to act with reasonable care it may be determined that his failure caused damage to the client, and the client may be able to sue the attorney for malpractice. An example of negligence would be if an attorney misses a statute of limitations deadline, resulting in a barred lawsuit against a third party. In that scenario, while the attorney’s conduct is the proximate cause of the damages, he is shielded from liability by the fact that the damages are entirely speculative. By the time the malpractice action is commenced, the suit against the third-party has been barred, and no damage has actually occurred. Absent proof of a future economic loss, such as lost equity in a house, the damages are essentially non-existent. In this situation, the attorney’s negligence results in only speculation as to damages, and no malpractice recovery is possible.
A breach of fiduciary duty, on the other hand, should be based upon more than a mere allegation of negligence. A fiduciary relationship is one of special trust and confidence, where one party places its confidence in the third party who is bound to act in the principal’s best interest. Common examples of fiduciaries are trustees, executors, and guardians. Attorneys are also fiduciaries, and any breach of their duty to represent clients – such as failing to file a timely appeal – could be considered a breach of fiduciary duty, but only if the damages are actually quantifiable. Sustaining an injury by an attorney operating under a fiduciary duty is not a sufficient basis for a breach of fiduciary duty claim if the damages are too speculative. A breach of fiduciary duty is also actionable in equity, due to the nature of the relationship, and does not require the same degree of proximate causation as a legal malpractice claim.
Errors in judgment arise less frequently, and are generally not actionable unless the result is a breach of fiduciary duty or some sort of tort. Again, since attorneys are also fiduciaries, this can overlap in some circumstances but, as a general rule, errors in judgment are not actionable alone. While the plaintiff has some burden of proof with regard to establishing breach of fiduciary duty and negligence regarding an attorney’s error in judgment, the courts are generally less strict, although this can depend on jurisdiction. The balancing act here is careful consideration of the facts and circumstances of the case.
Prominent Legal Malpractice Cases
Legal malpractice cases come in many forms and can occur in a variety of circumstances. Here are some noteworthy examples:
In 1992, the case of Reece v. Dytch, Brott & Associates involved a claim against a law firm for failure to file a wrongful termination lawsuit within the statute of limitations (the time period in which a lawsuit must be filed). The plaintiff had worked for the same company for nearly 30 years, and in August 1986, she asked to be transferred to a different department. Four months later, she was fired. She claimed that she was not given a reason for her termination, but told that the job she applied for had "dried up." When she applied for unemployment benefits, the company claimed that it terminated her for cause. It then took more than 16 months after her termination to finally deny her claim for benefits. The terminated employee then visited an attorney who told her that her best course of action would be to wait until the company gave her a final denial of benefits because she might be entitled to reinstatement. After learning that she couldn’t be reinstated, the plaintiff hired another attorney. This attorney told her that he could sue for wrongful discontinuance of benefits, but that such a lawsuit would be unlikely to succeed. The plaintiff filed her employment application with the state Department of Labor for unemployment benefits on August 17, 1988. The Department of Labor awarded her benefits retroactive to October 1, 1986 and granted her an informal conference. In a decision issued by the New York State Industrial Board of Appeals, her benefits were retroactively awarded back to the month of her termination. Her attorney then failed to file a Notice of Appeal from this decision to a higher court within the required 30-day time period. The plaintiff then contacted what became the post-dissolution litigation attorney. This attorney wrote a demand letter and a Notice of Claim to the City of New York on November 22, 1989. The next day, the claimant sustained immediate injuries in a car accident. In July 1990, the Corporation Counsel and the claimant’s attorney entered into a stipulation to dismiss her claim against the New York City Housing Authority. The court based its decision on the claimant’s failure to submit a verification, as mandated by section 50-e(3)(a) of the General Municipal Law. Her attorney apparently failed to serve this very simple verification because it in fact was not a requirement for discovering the name of the proper party. On June 7, 1991, the lower court denied the motion to vacate the dismissal. The court stated that both the insurance carrier and the attorney for the claimant had made every effort to locate the driver of the vehicle who struck her; however, to no avail. The court found that the claimant’s inability to identify the driver was fatal to her claim.
In another example, the case of Emas v. Pomerantz, 853 F.2d 421 involved a complex series of transactions in which the client borrowed money from a lending company that eventually ended up owning their shares. The client then hired a new lawyer to draft a settlement agreement. In a curious move, the client’s lawyer breached the original settlement agreement that he had just drafted. This breach gave the lending company a right to acquire additional shares for a nominal amount. Even though the client knew that the other company was about to acquire 50% of its stock, the client could do nothing about it because the franchise was structured so that each side had to approve a transfer of shares from the other side. As the court explained, the client was the victim of his own ill-advised business strategy. But the trial jury did exonerate the new lawyer and assigned the fault to its predecessor.
Legal Malpractice Consequences
Upon a finding of legal malpractice, a defendant lawyer is at risk for various sanctions. First may be the forfeiture of the attorney’s fees in the underlying case, including the additional fees charged for the legal malpractice action. Next may be a disciplinary proceeding in front of a State Grievance Committee. Internal grievance committees may impose mere reprimands for slight infractions but may more seriously suspend or disbar attorneys guilty of serious infractions. Internal grievance committee findings are not necessarily the same as State Bar Committee findings. The State Bar’s case can be based on either of the two. The next level of sanctions is in the State Courts before a panel of colleagues, similar to the arbitration panels. As above , the internals and State Courts can find differently, so lawyers are wise to always plead to the State Court. The panel may be composed of three people chosen from the list of attorneys that the State Bar has compiled through a variety of source, including Attorney Advertising. A third sanction may be the loss of the right to plead in forma pauperis. Poor people may sue without paying fees because of an in forma pauperis provision in the CPLR, at least until the adverse party moves to dismiss the suit on the basis that the plaintiff actually has money. If successful, the motion will remove the in forma pauperis status, and compel the plaintiff to pay. There are cases where plaintiffs have not been permitted to proceed in forma pauperis because of legal malpractice.
Legal Malpractice Prevention
In the battle to prevent legal malpractice, no single action can guarantee your law firm will be covered from exposure. However, a diverse strategy that includes strategic hiring of employees, risk management policies, and ongoing education can go a long way toward identifying, minimizing, and avoiding any instances of legal malpractice.
- Understand that there are more ways to create exposure to legal malpractice than an error or omission in the handling of a particular matter. The law is vast and its application in context is complicated. Some other common traps an attorney may open themselves up to include:
- Incompetence Being ill-informed about the law and cutting corners by providing insufficient information to a client and depending on other professionals to fill in the knowledge gaps is also a basis for exposing your law firm to legal malpractice.
- Engaging in fraud or unethical conduct At times, unscrupulous attorneys knowingly make misrepresentations to benefit themselves or their clients at the expense of others. When lawyers step over the line by committing fraud or other illegal acts, they make it easy for someone to bring a legal malpractice claim against them when things go awry. One of the best ways to avoid exposing yourself to legal malpractice is to recognize what you are doing or failing to do that can create risks.
Hiring the right staff to work with you Many law firms fall prey to their friendly, competent secretary, paralegal, or law clerk who oversteps the bounds of what that person is authorized to do. This leaves the door wide open for the unwitting lawyer. Most often, there’s a "big picture" approach to hiring. Attorneys zealously protect their clients’ interests in their particular area of practice. They simply don’t follow the nuances of the law firm’s practice as a whole.
Training staff members Even with all the security and hiring checks in place, an attorney cannot be everywhere at once, taking on every task necessary to handle the firm’s cases. The need to "wear many hats" in a small law firm presents the risk of these employees going beyond the lines of their authority.
Continuing education All lawyers are aware of the ethical duty to keep informed and stay current about the law, competent representation, and learning the law and its applications in practical contexts. Staying out of complex issues helps to avoid creating a potentially bad situation.
Legal Malpractice: What to Do
When legal malpractice rears its ugly head, litigation is not the only available remedy; there are many things to consider before pursuing a case, which should not be taken lightly:
1. Start looking for a new lawyer. You need to gather the evidence that will show the prior lawyer did not do what he/she was supposed to do. This can involve repair costs, and if you are lucky, more than one report that will evidence the malpractice.
2. In New York you may demand a copy of the entire file. This will involve making copies yourself, but getting the whole file is essential to showing a course of legal malpractice.
3. Check if your malpractice carrier is still in business and/or if it has any money to pay for the damages. It is our belief that once a client learns of legal malpractice , it becomes harder to show reliance.
4. Order other transcripts, reports, and information you may be able to gather to show that the case would have gone well but for the legal malpractice.
- Weigh the costs of a case. If you are successful, will the legal malpractice victory completely replace the money you lost? Will a verdict be collectible? Will the defendant have insurance?
- Get a second opinion from an expert who is not connected to your case.
- Check to confirm that the Statute of Limitations will not run (six months in New York) and that you will not be stopped by judicial estoppel (new theory).
- Be sure you have no choice but to move forward with the case.
- Take solace in that you do not have to wait until you draft the complaint to start gathering the evidence, the reports, and the like. Stay diligent.