Legal Malpractice – You Have Rights!

Legal Malpractice Cases for Real Estate now Surpasses Personal Injury

According to an American Bar Association study, real estate has surpassed personal injury as the largest source of legal malpractice claims.  This may be a result of the fallout from the 2008 real estate market crisis and the vast number of “failed real estate transactions” following the crash.  This 2008-2011 study of over 53,000 legal malpractice claims showed a changed trend since the studies began in 1985.  It is worth noting that the damages paid to plaintiffs were higher, on average, then in previous years.  A good example of real estate legal malpractice litigation is the Burns & Levinson case, below.<

Legal Malpractice and Smart File Management

When a real estate deal went bad, the victim real estate partnership sent their Boston firm a 93A demand letter.  The attorneys involved spoke to their internal ethics counsel before responding to the demand.  When the subsequent legal malpractice lawsuit was filed, the plaintiffs, real estate partnership members, sought discovery of the conversation and the documents referred to in that meeting.  The Suffolk Superior Court judge handed down a decision late in 2012, stating that an internal law firm meeting, between counsel and the law firm’s designated “ethics counsel” would be privileged, however, the documents referred to at the meeting were not privileged. There are various judicial decisions regarding this scenario.  This one was written by a Superior Court judge, and, as such, is not required “law”.  Another decision, written by a US District Court judge found that law firm internal consultations were a “fiduciary exception.”  The distinction may be that in the Suffolk case, the law firm still represented the partnership when the internal consultation occurred.

Lawyers should consider the following when entering into client fee agreements:  ask clients to sign a non-waiver document that specifically addresses this issue; inform clients in a fee agreement that ethical issues may be discussed internally.  Law firms should consider having their ethics partner be an individual that has not undertaken any work on the clients’ files.  A red flag will go up if the client is billed for the work; they clearly have the right to all work billed for.  Finally, consider the documents carefully; how are they identified, who “keeps” them and where.  If they are “kept” with the client’s file, they may be considered the clients’.  Clients—you have rights!

Finally, in a stern warning from the judge in the Superior Court case, attorneys are warned to be scrupulous in their civil procedure when undertaking responses to legal malpractice claim.  It appears, from the written decision, that the judge was angry with the malpractice defense counsel’s arrogance in failing to produce a privileged log, failing to engage in a proper Rule 9C conference, and that he “wasted very considerable time and resources” of the plaintiff’s counsel.

Legal Malpractice and Conflicts of Interest: Who Does The Lawyer for the Corporation Represent?

Conflict of interest cases are often difficult to decipher. We know. We have litigated them of behalf of clients, and the defense rarely admits a conflict. Our other news in the legal malpractice realm adds a new wrinkle to the classic conflict of interest case. This was a case that was handed down last year against the large national law firm Holland & Knight. At issue was the fact that the firm represented a corporation, however, also advised two of the individuals who invested in the business. Those two individuals were advised to sign personal loan guarantees for the corporation. The jury returned a verdict of over $34 million against the law firm. Then the parties entered into an out of court agreement, prior to the 93A legal malpractice damages case could be heard.

The takeaway here is that lawyers should inform all clients whom they represent, and inform all others, who could perceive to be a client, to seek their own counsel. Corporate counsel now often use a written Miranda type of warning, called an “Upjohn warning” after the case Upjohn v. US, 449 U.S. 383 (1981), in which the non client corporate employee signs a written waiver. Lawyers who are reluctant to have non-clients sign a written warning may get more information at the outset, but they are opening themselves up to claims going forward.

For information on your rights in a legal malpractice matter, call Attorney Neil Burns at 617-227-7423.

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