For the Legal Community: Red Flags for Malpractice


*This article first appeared in Advocate magazine, a publication of Consumer Attorneys of Los Angeles.”

Don’t be a target:

Learn to identify the red flags for malpractice When your fee is larger than your client’s recovery, there’s a red flag flying.

Some lawyers are sued for malpractice quite a bit, and others not at all. This phenomenon surely has something to do with competence and the lack thereof, but it also has a lot to do with how well the lawyer has communicated with the client. Lawyers who tend to have strong relationships with their clients are the ones who are never sued, much the way that doctors with poor bedside manners are the ones who tend to suffer medical negligence claims.

So here are some circumstances where you’ll want to have really good communication with your client. These are the Red Flags for Legal Malpractice Claims:

• Your contingency fee is larger than your client’s recovery. Nothing makes a client more angry and resentful than an unhappy result, except for an unhappy result where the lawyer – the guy who agreed to take his money as a percentage of what the client got – gets more than the client. Example: A non-physical-injury tort action where the recovery will be considered ordinary taxable income under the Internal Revenue Code. (See Murphy v. Internal Revenue Serv. (D.C. Cir. 2007) 493 F. 3d 170.) If the recovery in the case exceeds the threshold for application of the Alternative Minimum Tax (AMT), generally above $300,000, application of the AMT may require that the client pay as much as 40 percent of her gross recovery in taxes, which when you add a 40 percent attorney’s fee and reimbursement of the attorney’s costs advanced and pay-off of any liens, can easily leave the client with less money than the attorney, even though the attorney’s fee is based upon a percentage of the client’s “recovery.” Any non-physical-injury case should begin with an important “sit down” with the client to explain the vagaries of the “Small Business Job Protection Act of 1996,” a legacy of the Gingrich Congress signed into law by Bill Clinton.

Example: You have the right to petition the court for an attorney fee award. E.g., private attorney general statute, “fee shifting” statute (loser pays). (See, e.g., Civ. Code, § 3344(a).)

• You have a file in your office, delivered to you by another attorney, and you have promised to let that attorney know if you’re willing to take the case. You may never have spoken with the client, and you may be relying on the referral attorney’s representation that there’s no statute of limitations’ problem, but if that attorney is wrong, you’re on the hook. Under California law, the fiduciary relationship between an attorney and a client “extends to preliminary consultations by a prospective client with a view to retention of the lawyer, although actual employment does not result.” (People ex rel Department of Corporations v. Speedee Oil Change Systems, Inc. (1999) 20
Cal.4th 1135.)

• You’ve made telephone contact with a potential client and asked him or her for more information in order to evaluate the case, but you don’t know when the statute runs. Example: You rely on your staff to screen potential new cases, but your staff members aren’t lawyers and don’t always know what questions to ask. This scenario isn’t so problematic in typical, personal injury situations. There, the staff knows what questions to ask to get an idea of the limitation period, and it’s a two-year statute. It’s the one-year statute or less cases that are dangerous: Government claims (six months from the accident), medical malpractice (one year from discovery, but in no event more than three years), defamation (one year), but only 20 days to demand a retraction of defamatory material published by a newspaper or radio broadcast in order to preserve the right to recover general damages. (Civ. Code, § 48a.) Potential case calls about unusual cases are the ones to return quickly because limitation periods can be very short!

• You’ve reviewed a case and found potential legal malpractice by a previous lawyer. Example: You have decided not to take the case because it’s been screwed up by the previous lawyer. Many lawyers are reluctant to opine about a previous lawyer’s work, but this can be a serious mistake. While considering whether to accept a client for representation, you have an attorney-client relationship. That relationship carries with it all the common duties: The duty of competence, the duty of confidentiality, the duty of loyalty. How can the client know that malpractice occurred if her own lawyer doesn’t tell her? If she isn’t told and therefore doesn’t actually know of the malpractice, she will be charged with constructive knowledge because she was represented by another lawyer (after the negligent one), and that lawyer is required to know. (Smith v. Lewis (1975) 13 Cal.3d 349, 359.) (An attorney assumes an obligation to his client to undertake reasonable research in an effort to ascertain relevant legal principles and to make an informed decision as to a course of conduct based upon an intelligent assessment of the problem.) If you see malpractice or potential malpractice of a previous lawyer, you have a professional obligation to bring it to the client’s attention. If you’re not comfortable opining that there was conduct below the standard of care, you must at least advise the client, in writing, that he/she needs to get another opinion on the issue, and you must provide statute of limitation advice, and it’s generally a one-year statute. (Code Civ. Proc., § 340.6.)

Example: You have agreed to represent the client in an appeal from an adverse judgment caused by the previous lawyer’s negligence. Many lawyers mistakenly assume that as long as the adverse judgment is on appeal, the essential element of the cause of action for legal malpractice, damages, has yet to be established, and that, therefore, the cause of action has not yet accrued. This is wrong. As soon as there is “any appreciable and actual harm flowing from the attorney’s negligent conduct,” the legal malpractice claim accrues. (Budd v. Nixen (1971) 6 Cal.3d 195, 201.) In this example the client has already suffered an adverse judgment. If that judgment was for money, there has been “appreciable and actual harm,” and the statute is running. If it was an adverse judgment for a plaintiff, (i.e., a judgment for no money), as soon as the client pays money, or makes a monetary obligation to a new lawyer, (e.g., a contingency fee agreement), there has been “appreciable harm” and the statute is running.

• You represent multiple plaintiffs in one action. Example: The omitted heir in a wrongful death case. Wrongful death circumstances can be tricky. When a decedent leaves one or more children as survivors and they ask you to represent them, you’ve got to be sure there isn’t a black sheep sibling they’re not telling you about. At the outset of the representation you’ve got to get the family to be candid about all of the decedent’s children. If you can’t locate one, you’ve got to name him or her as a “nominal defendant” in the action to be sure that he or she is included in the case. (See Watkins v. Nutting (1941) 17 Cal.2d 490, 498).) In wrongful death cases there is a “one action rule”: There can only be one action for damages for wrongful death, and once that judgment is entered, no other omitted heir can bring his or her own case. (Gonzales v. Southern Cal. Edison Co. (1999) 77 Cal.App.4th 485, 489.) She can only look to the recovery made by her siblings and make a claim for her share of it. If that situation arises, expect to be sued! These sorts of circumstances are especially common where the decedent has had children in different marriages. Sometimes one side of the family isn’t even aware of who is on the other side. Sometimes the two sides “just don’t talk to each other.” As much as your clients may not want you to, you’ve got to alert all potential heirs to their right to participate in the action. If your clients don’t want you to, explain to them that they will be sued for excluding their halfsiblings.

Example: The plaintiffs are passengers and a driver in one car. Your driver/ client may not believe that he was a contributory factor in the happening of the accident, but if you’re also representing passengers in the car, you may have a conflict of interest. If that conflict manifests, say, after the defense comes up with a comparative negligence theory, you’re going to be conflicted out of the case altogether. Your duty of loyalty will prevent you from continuing to represent any plaintiff who was in the car. Don’t make the mistake of referring all but one of the passengers to another lawyer, but keeping the most seriously injured as your client. If the others have a viable claim against the driver, you still have a conflict, and if one of them or the driver ends up unhappy with the result, any of them, or all of them, can sue you. Another don’t: Don’t make the mistake of confusing the family exclusion of an automobile insurance policy with a rule of law that would preclude a family member from suing another member as a negligent driver. There is no such rule of law, so technically, if there’s any chance of a finding of driver negligence, there’s a conflict of interest in representing that driver and any other passenger. These circumstances call for you to accept representation of only one plaintiff, and then send the others on to someone else for their representation. Potential conflicts among plaintiffs in a single action can be remedied by informed, written consent. Each client must agree in writing to the representation following your full written disclosure of the “relevant circumstances” and the “actual and reasonable foreseeable adverse consequences to them.” (RPC 3- 310(A)(1); Gilbert v. National Corp. for Housing Partnerships (1999) 71 Cal.App.4th 1240, 1255 (“Clearly, as a threshold matter one must know of, understand and acknowledge the presence of a conflict of interest before one can give informed consent to its existence”).) Example: Say a husband, purporting to represent the best interest of his wife, brings a potential negligence case to you. It’s dangerous not to have any contact with a client, and even more dangerous not to have contact with a potential client. A husband may claim that he has the best interests of his family members at heart, but if you tell him that you’re not willing to represent his injured wife in the case, and you don’t tell her that, you’re asking for trouble. You have no idea what’s going on behind the scenes. The husband may have his own agenda and may never tell the wife that there’s a potential claim. You may send your “off the hook” letter to the wife, but it may never reach her if the husband is controlling the mail. A telephone call can make
all the difference.

• You’re outside of your comfort zone of practice, but you want the case anyway. Example: You’re a criminal defense lawyer, but you’d like to get into personal injury. Don’t learn at your client’s expense. If you have a case in a new field you’d like to learn, associate with experienced counsel, and learn by doing it (or by watching it done) the right way.

• You really don’t care for the client, or for the lawyer on the other side of the case. Clients we don’t like too much are the ones we tend not to talk to. They are also the ones most likely to sue us! This is a red flag situation, sure, but what can you do about it? If you’ve got staff, or other lawyers working for you, this is when to use them. Troublesome clients should be the squeaky wheel that gets the grease. If that’s not working for you, you should look for a way to refer the case to someone else. Of course, the client has to agree to this, and if there’s a chance the client won’t agree to leave you, you may cause more damage to the relationship by trying to refer him or her. Petitioning the court to be relieved as counsel isn’t always easy either, especially if you’re close to trial. See the rules pertaining to permissive withdrawal. (RPC 3-700(C).) Two factors that can enable you to obtain an order permitting withdrawal from representation are: That the client “insists, in a matter not pending before a tribunal, that the member engage in conduct that is contrary to the judgment and advice of the member but not prohibited under these rules or the State Bar Act . . . .” (RPC 3-700(C)(1)(e)), and that, “The member believes in good faith, in a proceeding pending before a tribunal, that the tribunal will find the existence of other good cause of withdrawal.” (RPC 3- 700(C)(6).) In such circumstances, rather than set forth your reasons specifically in a declaration that, when read by the adverse party could cause prejudice to the client, set forth a generalization, and tell the court that in order to avoid causing any prejudice to the client, you would be happy to relate the specifics of the problem, if necessary, in an off-therecord chambers proceeding. This procedure will likely require the agreement of opposing counsel, but they have every reason to facilitate the withdrawal of representation. As for a case where you can’t stand the lawyer on the other side, this is when the potential for poor judgment increases. When things get very adversarial with opposing counsel, we tend to do things we might not otherwise do. Getting into a quarrel in a way that requires resolution by the court could end up prejudicing your client. Advising your client to reject a settlement offer because you don’t want to see the defense lawyer be a hero for the defendant can be disastrous. Here is where professionalism really counts! Antony Stuart is an accomplished trial attorney and the principal of Stuart Law Firm in Los Angeles, focusing on individual and class-action consumer protection in the field of health insurance, invasion of privacy, misappropriation of likeness, product liability, and professional malpractice. In 1998, California Lawyer magazine named him one of California’s top 20 lawyers, and in 2000, Editor and Publisher magazine named him one of the nation’s “Three Kings of Privacy.” He is a long-time Board member of Consumer Attorneys of California and a past-president of Consumer Attorneys of Los Angeles.