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Archive for the ‘Professional Liability and MPL’ Category

New Clarity for California CCP 998 Offers

Posted on: April 18th, 2018

By: Gretchen S. Carner

California Code of Civil Procedure section 998 settlement offers (“998 offer”) are valuable settlement tools, often under-utilized in prevailing party attorneys’ fees cases.  The California Court of Appeal has bolstered defendants’ ability to confidently make valid 998 offers, exclusive of attorneys’ fees, so that a motion for attorneys’ fees can be brought after acceptance of the offer.

The California Court of Appeal recently held that a defendant’s 998 offer to pay the plaintiff $12,500 “exclusive of reasonable costs and attorney[ ] fees, if any” was clear and unambiguous.  (Timed out LLC v. 13359 Corp. (Feb. 27, 2018, No. B280301) ___Cal.App.5th___ [2018 Cal. App. LEXIS 262].)  In Timed Out LLC v. 13359 Corp., plaintiff sued defendant for misappropriation of a model’s right of publicity under Civil Code section 3344 (section 3344).  Section 3344(a) provides for “prevailing party” attorneys’ fees and costs.  After trial, the court awarded plaintiff $4,483.30 “exclusive of any costs [or] attorneys’ fees that may be set by noticed [m]otion.”

Defendant submitted a cost bill that included post-offer attorneys’ fees and costs.  Plaintiff moved to strike the cost bill on the grounds, among others, that the 998 offer was invalid because the terms “exclusive of attorneys’ fees, if any” was ambiguous.  The Court of Appeal concluded that the usual and ordinary meaning of the term “exclusive of” in this context is that the settlement amount did not include fees and costs, and that one could not fairly interpret the phrase “if any” to require a concession that plaintiff may not be entitled to any attorney fees if it accepted the 998 offer.  The 998 offer did not deny Plaintiff’s right to recover attorneys’ fees and costs, nor could it have reasonably been interpreted to do so.  The offer provided that Defendant would pay $12,500, which was ‘exclusive of,’ meaning not including, reasonable costs and attorneys’ fees.  Where a 998 offer does not expressly preclude the recovery of fees and costs, a prevailing party may seek them.  Defendant was awarded its post-offer attorneys’ fees and costs.

The take away here is that defendants in any case where statutory attorneys’ fees and costs are at stake, should think about serving early 998 offers to cut off and limit their potential liability for significant attorneys’ fees that quickly add up during protracted litigation.  In addition, if the plaintiff does not obtain an award greater than defendant’s 998 offer (plus plaintiff’s actual award of attorneys’ fees and costs), the defendant is entitled to recover its post-offer attorneys’ fees and costs.  This should give great pause to plaintiff’s counsel who have weak or meritless cases.

If you have any questions or would like more information, please contact Gretchen Carner at [email protected].

Tax Day Troubles?

Posted on: April 12th, 2018

By: Jessica C. Samford

As the well-known saying goes, “Nothing can be said to be certain, except death and taxes,” and with the federal individual income tax deadline quickly approaching on Tuesday, April 17, 2018, now is a good time for tax professionals to take a quick break from their busy season and take account of the possible liabilities that could arise when filing tax returns.

Similar to legal malpractice claims against a lawyer, an accountant may be held liable for professional malpractice, which often involves allegations of a negligent act or omission in performing accounting services below the standard of care for certified public accountants, for example. A simple illustration of this would be if a tax professional misses the deadline by failing to file either the tax return or the extension, postmarked on or before Tax Day (perhaps with a payment to accompany the extension to decrease the potential for interest and penalties).

While the advent of e-filing alleviates some of the pressure of the Tax Day deadline, there could still be mistakes within the returns themselves. Whether it be inadvertent typos, reliance on figures miscalculated by prior tax professionals, or reliance on misrepresentations by clients, the decision to amend the return or not after a mistake is discovered also affects potential liability of the tax professional. Unhappy clients can get creative in asserting numerous claims under a variety of theories in addition to professional malpractice, such as breach of fiduciary duty, fraud, constructive fraud, negligent misrepresentation, breach of contract, breach of good faith and fair dealing, violation of applicable state laws, etc.

Although having to file taxes may be as certain as death, accounting service liability has many uncertainties to account for, such that professional liability insurance and assistance of legal counsel should be considered in any risk management strategy.

If you have any questions or would like more information, please contact Jessica Samford at [email protected].

What About the Attorney-Client Privilege? The FBI’s Raid of President Trump’s Personal Lawyer’s Office

Posted on: April 10th, 2018

By: Gregory T. Fayard

On April 9, 2018, federal agents raided the law office of Michael Cohen, President Trump’s personal attorney. The purpose of the raid purportedly concerned a payment made to porn actress Stormy Daniels related to an alleged 2006 affair she had with Donald Trump in exchange for her silence. The FBI’s aggressive move certainly raised eyebrows among legal ethicists. Wouldn’t the FBI be prevented from reviewing a lawyer’s files based on the sacrosanct attorney-client privilege? After all, the attorney-client privilege is intended to allow lawyers to give honest legal advice without worrying about incriminating a client.

Not necessarily. To obtain a federal search warrant of an attorney’s office, high-level approval within the Justice Department must be obtained and special DOJ guidelines must be followed when the search target is an attorney. The warrant was also reviewed and approved by a federal judge.  Further, attorney client communications may be discovered under the rarely used and hard to meet “crime-fraud” exception to the privilege. That is, a client cannot hide evidence of a crime by relying on the attorney-client shield.  The concern for the Justice Department is whether any evidence from the raid will be admissible if “tainted” by the “fruit of the poisonous tree.” To deal with spoliation through “tainted” evidence, the Justice Department has used  “taint teams”—government attorneys who are segregated from FBI agents and prosecutors involved in the investigation. (“Taint Teams and the Attorney-Client Privilege,” Loren E. Weiss, Gregory S. Osborne, December 2015) Taint teams are charged with sifting through seized files and determining what prosecutors can and can’t use. (Id.)

In rare cases, a judge could appoint an independent special master to review the files or examine seized documents him or herself.  (United States v. Taylor (D. Me. 2011) 764 F.Supp.2d 230.)  Further, prosecutors can seize evidence of criminal activity that lies beyond the scope of a warrant if it is in plain view, like drugs, guns or other contraband—not likely at issue here.

In any event, Mr. Cohen will certainly contest the FBI raid as an overreach, including why the Justice Department did not issue a subpoena instead of a search warrant. A subpoena would give Mr. Cohen time to protect client confidences and seek court guidance on the attorney-client issues. While the FBI seems to be pushing the envelope as to the bounds of the attorney-client privilege, others have critiqued the raid as going beyond the scope of Robert Mueller’s Special Counsel investigation into collusion between Russia and the Trump Campaign.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].

When the Midas Touch Does Not Protect You From Your CLE Obligations

Posted on: March 15th, 2018

By: Jonathan M. Romvary

As part of every attorney’s ongoing duty of competence, each jurisdiction requires attorneys to attend Continuing Learning Education classes each year. The failure to attain the minimum required credit hours for substantive and ethical topics may result in fines, suspension or worse. Multi-jurisdictional attorneys have a further obligation to remain in compliance with each of their jurisdiction’s varying CLE obligations.

Recently, the general counsel for TBC Corp., the parent company of car parts companies Midas and National Tire & Battery, got a two-year stayed suspension from the Board of Professional Conduct of the Supreme Court of Ohio for practicing out-of-state despite prior suspensions from the state for failing to comply with his CLE obligations. The decision arises out of charges that the general counsel engaged in unauthorized practice in Florida while under suspension in Ohio.

In 2009, Marciak was hired as general counsel for Florida-based TBC Retail Group and later promoted to senior vice president, general counsel and secretary of TBC Corp. As General counsel, Marciak oversaw a team of in-house attorneys managing litigation and was otherwise in a legal position requiring him to have a current license to practice. Despite his legal work in Florida, Marciak did not obtain a certification as an “authorized house counsel” until December of 2015.

Marciak’s problems began when a former employee of TBC filed a bar complaint with the State of Florida in 2015 alleging Marciak was being engaged in the unauthorized practice of law, resulting in disciplinary  action. The same employee thereafter filed a bar complaint with the State of Ohio alleging violation of their local rules, including the practice of law in another jurisdiction while suspended.

According to the court’s records, Marciak was suspended from the practice of law in Ohio in 2007 and sanctioned in 2009 and 2011 for failing to comply with his Ohio CLE credits. According to the Court Marciak failed to certify his compliance with Ohio’s biennial CLE compliance reporting for seven years. Further, Marciak only obtained the Florida certificate as authorized house counsel after the initial bar complaint was filed against him. Ultimately, the Ohio Supreme Court entered the two-year stayed suspension, saying that Marciak did not represent a future risk to the public and was attending and presenting at CLE classes. However the court warned that if Marciak failed to remain in full compliance, the stay would be immediately lifted and he would be required to serve the entire two-year suspension.

Despite receiving a stayed suspension, the lessons from Marciak’s natter is clear: every lawyer must familiarize themselves with the rules of the court and professional rules of conduct for the jurisdiction in which you practice and any other states in which you might practice law.

If you have any questions or would like more information, please contact Jonathan Romvary at [email protected].

Avoiding the #%&^%!& Swearing Contest

Posted on: March 9th, 2018

By: Seth F. Kirby

In the course of defending professionals in all manner of disputes, a common theme is often repeated.  It usually involves some variation of the former client (now plaintiff) claiming that they “were told” or that it was “their understanding” that the professional would do something different than what actually occurred.  While these claims are obviously self-serving, if the client is willing to swear under oath that oral communications with the professional occurred, we can end up in a swearing contest in which a jury may have to determine the credibility of the competing testimony.

Thankfully, the law does not always allow alleged oral communications to alter contractual relationships or create legal duties.  Indeed, depending upon the circumstances and applicable law, claims of oral representations may not be allowed to impact the duty owed to the client at all.  Nevertheless, the ability to attack the credibility of claims based upon oral representations in as many way as possible is an invaluable asset in the defense of the professional.

As defense counsel, I am always pleased to review a file in which the professional has taken careful steps to outline the scope of their representation and to confirm, in writing, what was discussed or agreed upon in the transaction.  For attorneys this usually takes the form of engagement letters issued at the outset of the representation that are followed up with reports to the client in which the various options are presented and the decision on how to proceed is confirmed.  For insurance agents, it can be policy summaries (assuming that they are accurate) that discuss the policies that were considered, obtained and/or rejected.  That summary is then followed up by a letter which forwards the actual policy issued and a warning to the client to read the policy and ensure that it conforms to the client’s expectations.  The existence of these types of confirming documents often stop a threatened claim in their tracks (i.e. pre-suit).  When claims of oral representations are made which contradict the written confirmations, they are met with great skepticism, if not outright rejection, by judges and juries.

As they say, an ounce of prevention is worth a pound of cure.  Professionals of all stripes should create and implement procedures in which their scope of responsibility is defined from the outset and the client’s buy-in to decisions is confirmed contemporaneously.  Let us know if we can help you with implementing such procedures.

If you have any questions or would like more information, please contact Seth Kirby at [email protected].