legal ethics: top mistakes that lead to malpractice
TRANSCRIPT
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© 2016 Downey Law Group LLC. For educa!onal purposes only.
Legal Ethics: Top Mistakes That Lead to Malpractice
Michael DowneyRaphael Nemes
Downey Law Group LLCJune 2016
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11.3
8.9
8.8
8.6
6.7
6.6
5.9
5.4
5.3
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0 2 4 6 8 10 12
Failure to Know/Apply Law
Planning Error
Inadequate Disc/Investigation
Failure to File Documents/No Deadline
Failure to Calendar
Failure to Know Deadline
Procrastination
Failure to Obtain Client Consent
Conflict of Interest
Fraud
10 Most Common Legal Malpractice Error Allegations
Percentage
Source: ABA Standing Committee on Lawyers’ Professional Liability
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Administrative Errors
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Calendaring
• Failure to calendar properly• Failure to react to calendar entries
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Calendaring
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Document Completion Errors
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Lost Files & Documents
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Lost Files & Documents
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Consequences
• Disciplinary liability (lawyers)– Normally not from single mistake
– “Reasonable measures”?
• Civil liability (lawyers and firm)– Special protections for special information
– Notice requirements in many states
– (Insurance coverage?)
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Rule 1.1-‐ Duty of Competence
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation necessary for the representation.
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Rule 1.1 – Technology Competence
• [8] To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject
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Watch the Video Before Posting It• Attorney posts video on YouTube, thinking it shows police planting drugs on his client
• In reality, the video showed his client selling drugs and revealed the identity of a confidential source
• Attorney: the video caused a “media storm” and “people who have known me my whole life don’t speak to me now”
• Result: attorney suspended for five months, sues the ARDC for violation of his 1st Amendment free speech rights
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(http://www.abajournal.com/news/article/lawyer_suspended_for_posting_video_of_undercover_drug_buy_in_mistaken_belie/)
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Rule 1.3-‐ Duty of Diligence
A lawyer shall act with reasonable diligence and promptness in representing a client.
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Rule 5.1 – Responsibilities of Partners [and] Supervisory Lawyers
(a) A partner in a law firm, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm, shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that all lawyers in the firm conform to the Rules of Professional Conduct.
(b) A lawyer having direct supervisory authority over another lawyer shall make reasonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct.
(c) A lawyer shall be responsible for another lawyer’s violation of the Rules of Professional Conduct if:
(1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or
(2) the lawyer is a partner or has comparable managerial authority in the law firm in which the other lawyer practices, or has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.
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Rule 1.1 – Co-‐Counsel Arrangements• Retaining Or Contracting With Other Lawyers
• [6] Before a lawyer retains or contracts with other lawyers outside the lawyer’s own firm to provide or assist in the provision of legal services to a client, the lawyer should ordinarily obtain informed consent from the client and must reasonably believe that the other lawyers’ services will contribute to the competent and ethical representation of the client. See also Rules 1.2(e) and Comment [15], 1.4, 1.5(e), 1.6, and 5.5(a). The reasonableness of the decision to retain or contract with other lawyers outside the lawyer’s own firm will depend upon the circumstances, including the education, experience and reputation of the nonfirm lawyers; the nature of the services assigned to the nonfirm lawyers; and the legal protections, professional conduct rules, and ethical environments of the jurisdictions in which the services will be performed, particularly relating to confidential information.
• [7] When lawyers from more than one law firm are providing legal services to the client on a particular matter, the lawyers ordinarily should consult with each other and the client about the scope of their respective representations and the allocation of responsibility among them. See Rule 1.2. When making allocations of responsibility in a matter pending before a tribunal, lawyers and parties may have additional obligations that are a matter of law beyond the scope of these Rules.
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Rule 5.3 – Supervising Non-‐LawyersWith respect to a nonlawyer employed or retained by or associated with a lawyer:
(a) a partner, and a lawyer who individually or together with other lawyers possesses comparable managerial authority in a law firm shall make reasonable efforts to ensure that the firm has in effect measures giving reasonable assurance that the person’s conduct is compatible with the professional obligations of the lawyer;
(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person’s conduct is compatible with the professional obligations of the lawyer; and
(c) a lawyer shall be responsible for conduct of such a person that would be a violation of the Rules of Professional Conduct if engaged in by a lawyer if:
(1) the lawyer orders or, with the knowledge of the specific conduct, ratifies the conduct involved; or
2) the lawyer is a partner or has comparable managerial authority in the law firm in which the person is employed, or has direct supervisory authority over the person, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action.
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Intentional Wrongs
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Defamation
• Lawyer makes claims adversary considers false and defamatory.
• Defamation – Elements
– False statement concerning plaintiff by defendant
– Unprivileged publication of statement to third party
– Damages to plaintiff
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Fraud
Claim against Lawyer for Lawyer’s own conduct
Claim against Lawyer for client’s conduct
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Elements of Fraud
(1) a false statement of material fact; (2) the defendant's knowledge that the statement was
false; (3) the defendant's intent that the statement induce
the plaintiff to act; (4) the plaintiff's reliance on the statement; and(5) the plaintiff's damages resulting from reliance on
the statement
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Rule 1.6(b)-‐(c) – Disclosing Client Fraud
(b) A lawyer may reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary: (1) to prevent the client from committing a crime in circumstances other than those
specified in paragraph (c); (2) to prevent the client from committing fraud that is reasonably certain to result in
substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services;
(3) to prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime or fraud in furtherance of which the client has used the lawyer’s services; . . .
(c) A lawyer shall reveal information relating to the representation of a client to the extent the lawyer reasonably believes necessary to prevent reasonably certain death or substantial bodily harm.
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Malicious Prosecution
(1) the commencement or continuance of an original criminal or civil judicial proceeding by the defendant;
(2) the termination of the proceeding in favor of the plaintiff;
(3) the absence of probable cause for such proceeding;
(4) malice; and
(5) damages.
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Abuse of Process
(1) the existence of an ulterior purpose or motive and (2) some act in the use of legal process not proper in the regular prosecution of the proceedings.
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“Litigation Privilege”
• Affirmative defense protecting lawyers from being sued for defamation due to litigation-‐related conduct
• Applies to statements related to a judicial proceeding that refer to the matters being litigated
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Waffle House Litigation
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Problems from Past Clients
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Duty of Confidentiality
• Often arise when an attorney violates the duty to protect client confidences even after the representation ends
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Rule 1.9(c)A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
(1) use information relating to the representation to the disadvantage of the former client except as these Rules would permit or require with respect to a client, or when the information has become generally known; or
(2) reveal information relating to the representation except as these Rules would permit or require with respect to a client.
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Conflicts from Past Representations –Rule 1.9(a) and (b)
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent.
(b) A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client (1) whose interests are materially adverse to that person; and(2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter; unless the former client gives informed consent.
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Changing Law Firms
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Ethical and Other Obligations
• "The departing lawyer must also consider legal obligations other than ethics rules that apply to [his/her] conduct when changing firms, as well as . . . fiduciary duties owed the former firm. The law of agency, partnership, property, contracts, and unfair competition impose obligations that are not addressed directly by the Model Rule . . . " ABA Formal Opinion 99-‐414
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Basic Principles for Laterals
• Partners owe fiduciary duties to other partners
• Lawyer employees may owe fiduciary duties to firm
• Courts will (almost) always look out for clients
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Translation of Principles to Action
• Notify partners first• Then notify clients– Clients chose who represents them – now and in the future
– Lawyers do not "own" clients• Withdraw from matters remaining behind
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The Former Firm Should NOT . . .
• Withhold client files• Misrepresent the lawyer's current association• Hide the lawyer's new association• Prevent clients from learning of the departure
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Departing Lawyers Should NOT . . .
• Seek work for the new firm before notifying the old firm
• Remove client files from the old firm• Advise clients not to pay former firm's bills• Compete by comparing confidential information from the former firm (rates, etc.)
• Malign the former firm
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Insured for Prior Work?
• Generally policy covers legal services provided by "insured"–Work done at firm– By people at firm or associated with firm
• Services at prior firm typically not covered– Right to indemnification under corporate law– "Tail" policies
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Beware Conflicts
• Krutzfeldt Ranch v. Pinnacle Bank (Mt. 2012) – Lawyer advised plaintiff on tax consequences of proposed settlement
– Lawyer billed plaintiff $2375– Lawyer joined firm representing defendant– Firm was disqualified for conflict
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Lateral Moves and Conflicts
Law Firm #2Law Firm #2
What conflicts do laterals bring to Firm #2? And remove from Firm #1?
Law Firm #1Law Firm #1
Moving Lawyers
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Ordinary Imputation Within Firm – Rule 1.10 (Imputing 1.7 and 1.9)
ConflictedLawyerColleague ColleagueColleague Colleague
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Imputation of Concurrent Conflicts Within Firm
• Rule 1.10 –While associated in a firm, no lawyer shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Rules 1.7 or 1.9– Unless prohibition is based on a personal interest of the prohibited lawyer and does not present a significant risk of materially limiting the representation
• This disqualification may be waived under conditions set in Rule 1.7
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Two (Separate Firms)
Law Firm #1 Law Firm #2Law Firm #2
No imputation.
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Lateral Moves – Part I(Receiving Firm)
Law Firm #2Law Firm #2
What conflicts do laterals bring to Firm #2? And remove from Firm #1?
Law Firm #1Law Firm #1
Moving Lawyers
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Scenario
• Lawyer is at Law Firm #1 while Law Firm #1 represented Client
• Lawyer moves to Law Firm #2
• If there was a conflict for Firm #1, would Lawyer's movement bring the conflict to Firm #2
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What Is/Was Lateral's RelationshipWith Client's Work?
Lawyer's Relationship with Client Work at
Firm #1
Applicable Rule Impact on Firm #2
Client work comes with Lawyer
Rule 1.7 Conflict transfers to Firm #2
Lawyer did work, but work stays
Rule 1.9(a) Conflict if "substantially related"
Lawyer did no work, but had access to information
Rule 1.9(b) Conflict if information is material
Lawyer did no work, had no access to information
Rule 1.9 general No transfer of conflict
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Conflicts from Past Representations –Rule 1.9(a) and (b)
(a) A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent.
(b) A lawyer shall not knowingly represent a person in the same or a substantially related matter in which a firm with which the lawyer formerly was associated had previously represented a client (1) whose interests are materially adverse to that person; and(2) about whom the lawyer had acquired information protected by Rules 1.6 and 1.9(c) that is material to the matter; unless the former client gives informed consent.
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Screening for Lateral Hires• Rule 1.10 (e) When a lawyer becomes associated with a firm, no
lawyer associated in the firm shall knowingly represent a person in a matter in which that lawyer is disqualified under Rule 1.9 unless the personally disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.
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Imputation Without Screen
ConflictedLawyerColleague ColleagueColleague Colleague
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No Imputation With Screen
ConflictedLawyerColleague Colleague
Ethical Screen Ethical Screen
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Lateral Move With Screen
Law Firm #2
Screen to prevent imputationin new firm.
Law Firm #1Law Firm #1
Moving Lawyers
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Screening for Lateral Hires• Rule 1.10 (e) When a lawyer becomes associated with a firm, no
lawyer associated in the firm shall knowingly represent a person in a matter in which that lawyer is disqualified under Rule 1.9 unless the personally disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.
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Components of Rule 1.10(e)
• Screen only for Rule 1.9(a) or (b) conflicts arising from prior firm
• Screen must prevent– Participation in matter– Receipt of fees from matter
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Lateral Moves – Part II(Departed Firm)
Law Firm #2Law Firm #2
What conflicts do laterals leave at/remove from Firm #1?
Law Firm #1Law Firm #1 Law Firm #2
Moving Lawyers
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What Is Old Firm's On-‐Going Relationship With Client's Work?
Firm #1's Relationship to Client Work
Applicable Rule Impact on Firm #2
Work for Client remains at firm
Rule 1.7 Conflict remains at Firm #1
All work for Client leaves firm – but information remains
1.10(b) Firm can handle adverse matter unless matter is substantially related and information is material
All work for and information about Client leaves firm
1.10(b) Firm can handle adverse matter
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Non-‐Competes ProhibitedRule 5.6. A lawyer shall not participate in offering or making:
(a) a partnership, shareholders, operating, employment, or other similar type of agreement that restricts the right of a lawyer to practice after termination of the relationship, except an agreement concerning benefits upon retirement; or
(b) an agreement in which a restriction on the lawyer's right to practice is part of the settlement of a client controversy.
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Beware the “Failing Firm"
• Lawyer departures may trigger a default on a firm's line of credit
• Firms that inherit lawyers from failing firms may face Jewel v. Boxer (Cal. App. 1984) claims
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Managing Risk from Failing Firms
• Partnership agreement– Clear dissolution provision– Jewel v. Boxer waiver– Handling of work in progress
• Personal guarantees• Tail insurance
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Hess v. Bresney (7th Cir. May 4, 2015)
• Hess was terminated from K&A• Hess sued for fees for cases where he “did all the work” before his termination– Employment agreement included bonuses based upon fees generated
• Potential ambiguity – “generated” versus “received”
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Business with Clients
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Business with Clients – Rule 1.8(a)A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client
(2) the client is informed in writing that the client may seek the advice of independent legal counsel on the transaction, and is given a reasonable opportunity to do so; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.
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Requirements of Rule 1.8(a)• The terms of the transaction must be fair and reasonable to the client;
• The terms must be fully disclosed in a writing transmitted to and reasonably understood by the client;
• The client must be advised in writing of the desirability of seeking independent legal advice, and must be given reasonable opportunity to obtain such advice; and
• The client must give informed consent by signing a document that sets forth the essential terms of the transaction; and
• The document memorializing the transaction must indicate whether the lawyer is representing the client in the transaction, or not.
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Key Email Mistakes
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Key Email Mistakes
Common ethics issues related to use of email include:
• Using an unsecured server or email system
• Inadvertently sending email containing confidential information to the wrong recipient
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Rule 1.6(e) – Protecting Client Information
• A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.
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Rule 1.6(e) – Protecting Client Information
• A lawyer shall make reasonable efforts to prevent the inadvertent or unauthorized disclosure of, or unauthorized access to, information relating to the representation of a client.
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What Are "Reasonable" Precautions
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Evaluation of Safeguards• Factors to be considered in determining the reasonableness
of the lawyer’s efforts include, but are not limited to, – the sensitivity of the information– the likelihood of disclosure if additional safeguards are not employed
– the cost of employing additional safeguards– the difficulty of implementing the safeguards (and) – the extent to which the safeguards adversely affect the lawyer’s ability to represent clients (e.g., by making a device or important piece of software excessively difficult to use)
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Two Additional Caveats• A client may require the lawyer to implement special security
measures not required by this Rule or may give informed consent to forgo security measures that would otherwise be required by this Rule.
• Whether a lawyer may be required to take additional steps to safeguard a client’s information in order to comply with other law, such as state and federal laws that govern data privacy or that impose notification requirements upon the loss of, or unauthorized access to, electronic information, is beyond the scope of these Rules.
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In re Eisenstein (Mo. 4/5/2016)• Eisenstein represented Husband in divorce• Husband accessed Wife’s email without permission, and gave
Eisenstein documents including questions Wife’s attorney had prepared for direct examination
• Eisenstein did not produce the documents received from Wife’s email, until giving them to opposing counsel as exhibits during trial
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Consequences in Eisenstein
• Eisenstein was found to have used improperly obtained information (violating Rule 4-‐4.4) and concealing documents with evidentiary value (violating Rule 4-‐3.4)
• Eisenstein received an indefinite (minimum 6 month) suspension
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Commingling or Mismanaging Funds
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Trust Accounting Violations
• Improper or inadequate paperwork
• Commingling lawyer’s funds with client funds or funds belonging to a third party
• Misappropriation
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Rule 1.15A lawyer shall hold property of clients or third persons that is in a lawyer’s possession in connection with a representation separate from the lawyer’s own property.
Funds shall be deposited in one or more separate and identifiable interest-‐ or dividend-‐bearing client trust accounts maintained at an eligible financial institution in the state where the lawyer’s office is situated, or elsewhere with the informed consent of the client or third person.
For the purposes of this Rule, a client trust account means an IOLTA account as defined in paragraph (i)(2) (j)(2), or a separate, interest-‐bearing non-‐IOLTA client trust account established to hold the funds of a client or third person as provided in paragraph (f).
Funds of clients or third persons shall not be deposited in a non-‐interest-‐bearing or non-‐dividend-‐bearing account.
Other, tangible property shall be identified as such and appropriately safeguarded. Complete records of client trust account funds and other property shall be kept by the lawyer and shall be preserved for a period of seven years after termination of the representation.
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Retainers
• Retainers– Type -‐-‐ “true” or “security” or “advance payment”?
– How much?–Where do you deposit them?
• Where should a lawyer put an advanced payment of a fixed fee?
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Basic Rule on Handling Funds Paid for Legal Services
WorkPayment Payment
Trust Account
Operating Account
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Three Exceptions in Illinois
• Funds received as a fixed fee, a general retainer, or an advance payment retainer shall be deposited in the lawyer's general account or other account belonging to the lawyer.
• Fixed fee – set payment for work – Note: Missouri requires opposite treatment
• "General retainer" – for availability of the lawyer• "Advance payment retainer"
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Advance Payment Retainer• An advance payment retainer may be used only when necessary to accomplish some
purpose for the client that cannot be accomplished by using a security retainer. • An agreement for an advance payment retainer shall be in a writing signed by the client
that uses the term "advance payment retainer" to describe the retainer, and states the following:(1) the special purpose for the advance payment retainer and an explanation why it is
advantageous to the client;(2) that the retainer will not be held in a client trust account, that it will become the property of
the lawyer upon payment, and that it will be deposited in the lawyer's general account;(3) the manner in which the retainer will be applied for services rendered and expenses incurred;(4) that any portion of the retainer that is not earned or required for expenses will be refunded to
the client;(5) that the client has the option to employ a security retainer, provided, however, that if the
lawyer is unwilling to represent the client without receiving an advance payment retainer, the agreement must so state and provide the lawyer's reasons for that condition.
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Dealing with MistakesIf you’ve made a real mistake:
(1) confirm that you really did make the mistake
(2) Enlist the help of another lawyer, such as a mentor or trusted senior lawyer.
Ethics/risk management counsel and/or the supervising attorney may need to be notified
(3) Attempt to formulate a solution
(4) Notify client of the problem if client is materially affected
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Dealing with Potential Malpractice
• Ordinarily a lawyer must notify his/her insurer in writing of a potential malpractice claim
• An insurer may provide additional resources to mitigate or avoid a claim
• Admitting liability or settling may waive coverage of a claim
• A potential malpractice claim may impact the underlying representation in a number of ways
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Responding to Sanctions Motion
• Before submitting a response, ask an uninvolved lawyer to review it
• Avoid attacking the accuser as a means of defense
• Consider notifying your professional liability insurer
• Do NOT ignore a motion for sanctions or a disciplinary complaint
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11 Tips for Responding to an Ethics Complaint
• Take a breath
• Consider notifying your insurer
• Consider retaining counsel
• Review the file
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11 Tips for Responding to an Ethics Complaint
• Review the law
• Prepare a careful response
• Provide details
• Be succinct
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11 Tips for Responding to an Ethics Complaint
• Provide proof
• Be professional
• Be honest
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Risk Management and Mistakes
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Dealing with Mistakes
• Confirm you made the mistake (quickly)• Enlist help from another lawyer– Re-‐confirm presence of mistake – Who
• Mentor• Ethics/risk management counsel• Supervising attorney• Client-‐relationship attorney• Practice group leader• Insurer
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More on Addressing Mistakes
• Formulate possible solution• Discuss issue with client (as appropriate)– Fiduciary obligation/Rule 1.4– Avoid admitting liability
• Attempt to resolve problem
• Rule 5.2 issues
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Professional Liability Insurance
• "Claims made" policies – when claim is made, not when malpractice occurs– "Claim" is very broad• Demand letter• Lawsuit
– "Pre-‐claim" coverage varies greatly by policy• MO Bar Plan -‐-‐ $5000 for disciplinary work• Many policies $0• Some policies $25,000 or more
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"Claims"-‐Made Policies
• If you leave your firm (coverage source), you may lose coverage for subsequent claims
• A "tail" policy may be available
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Work Done
Policy A Policy B Policy C
Demand letter received
Settlement/ Judgment Paid
X X X
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How Much Coverage?
• "Self-‐insured retention" (deductible)• "Burning” or “wasting” policy – coverage limit is for defense and resolution
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Cost of Insurance
• Cost – solos sometimes spend $60-‐100 per month, while large firms may spend $500 per month
• Variables – coverage, practice, claims history
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Ethics Rules and Insurance
• Oregon requires LPL insurance
• Many states require disclosure of whether a lawyer has insurance– Sometimes to clients– Sometimes to bar regulator
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Michael DowneyDowney Law Group LLC
(314) 961-‐6644(844) 961-‐6644 toll free
Thank You