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Archive for the ‘Professional Liability and MPL’ Category

When Laws Conflict: What Ethics Rule Applies to a California Lawyer Advising On Cannabis?

Posted on: June 30th, 2020

By: Greg Fayard

It goes without saying that a lawyer—from California or elsewhere—shall not counsel a client to do something illegal.

But what about a state law that conflicts with a federal law? For example, federal laws that criminalize the use of marijuana and state laws that don’t criminalize marijuana–how should the lawyer advise a client when laws conflict regarding a subject matter?

Under California’s Rules of Professional Conduct applicable to lawyers, a lawyer can assist a client in complying with California law, but must inform the client when California law conflicts with federal (or Tribal law). The lawyer then needs to discuss the consequences of complying with a California law that runs afoul with another law.

For those lawyers that work in the area of Cannabis law, Rule 1.2.1 is the Rule to follow in California.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Teamwork Makes The Dream Work: Lawyer in Same Firm Allowed To Submit Expert Affidavit On Behalf of Firm’s Client

Posted on: June 30th, 2020

By: Gregory Blueford

In a case of first impression, the Georgia Court of Appeals reversed a trial court’s order granting a motion to dismiss after determining the trial judge improperly dismissed the case because the expert affidavit in support of the complaint was written by a law partner of the filing attorney.

Plaintiff David Mitchell (“Plaintiff”) retained defendant law firm Parian Injury Law (“Parian”) to defend him in a personal injury case. Plaintiff alleges that Parian referred the case out to another law firm without his knowledge, who then failed to notify him of depositions that were trying to be set which ultimately led the court to dismiss the case and impose $1,8000 in sanctions for missing three depositions. Plaintiff further alleges that the first time he saw the complaint was after the dismissal and it did not resemble his actual claims made and appeared that the law firm used a complaint from a different case and simply substituted his name into the complaint.

In 2019, Plaintiff sued Parian and others (collectively “Defendants”) for legal malpractice and submitted an expert affidavit from his attorneys’ legal partner supporting the claims. Defendants moved to dismiss the case on the grounds that Plaintiff had not complied with the Georgia expert affidavit statute. The trial court granted the motion, finding an “inherent conflict between [the partner attorneys] in making the affidavit as a witness and being a member of the law firm” representing Plaintiff.

O.C.G.A. § 9-11-9.1 provides, in relevant part, that in any action asserting a claim for legal malpractice, the plaintiff is “required to file with the complaint and affidavit of an expert competent to testify, which affidavit shall set forth specifically at least one negligent act or omission claimed to exist and the factual basis for each such claim.”

The appellate court reversed the trial court decision, stating that the statute is clear that it “requires only that an affiant in a professional malpractice action be ‘competent to testify’ as to the opinion set forth in his or her affidavit” and that neither the statute nor the Georgia Rules of Professional Conduct regarding attorney-client conflicts serves to bar a member of a firm from testifying for a colleague’s client “provided the testimony will not be adverse to or otherwise conflict with the client’s interests.”

As this is a case of first impression, it remains to be seen how this ruling will play out practically going forward. One could surmise that firms will initially rely on members of their own law firms to submit the necessary affidavit under O.C.G.A. § 9-11-9.1 rather than rely on a hired expert to save costs up front, although it may not be a practical plan of action if the matter is going to actually require a professional malpractice attorney to give testimony later on in the litigation.

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

How Should a California Mediator Deal With An Unrepresented Party?

Posted on: June 17th, 2020

By: Greg Fayard

Most California mediators are lawyers. When mediator-lawyers handle a mediation where one party does not have a lawyer, the lawyer-mediator has to treat that pro per party differently than a party who has a lawyer.

Specifically, if the mediator suspects the unrepresented party does not understand the role of a mediator as compared to a lawyer, the mediator needs to explain the difference to the lawyer-less party. That is, the mediator needs to advise the pro per that he or she, as the mediator trying to resolve a dispute, is neutral and not representing anyone.

Under Rule 2.4 of California’s Rules of Professional Conduct, it is the job of the mediator to help the pro per party understand what mediators are and what they do, and how they are not advocates, and are different from lawyers.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Law Firm Falls Victim To E-Mail Scam – Loses Appeal Following Allowance Of Summary Judgment

Posted on: May 28th, 2020

By: Marc Finkel

In 2019, the United States Treasury Department released statistics detailing the number of reported business email compromise incidents over a three- year period.  The number of monthly incidents increased exponentially over those three years from approximately 500 reported incidents per month in 2016 to over 1,100 reported incidents per month in 2018.  Additionally, the total value of such scams increased from approximately $110 million per month in 2016 to $310 million per month in 2018.  Despite the efforts of law enforcement to curtail such scams, the Treasury Department statistics suggest that the problems associated with business email compromise incidents are worsening over time. 

Businesses that routinely conduct large wire transfers in the ordinary course of business, such as law firms, are particularly vulnerable to such scams.  Unfortunately, when a law firm falls victim to such a scam, the consequences can be financially devastating with little-to-no available recourse.  Such a situation recently befell a Boston area law firm that was denied relief from the Massachusetts Appeals Court in a matter arising out of an email scam that cost the firm over $300,000.00. 

In Sarrouf Law LLP v. First Republic Bank & another, a lawyer from the Plaintiff law firm was contacted through the firm’s email system from someone pretending to be the president of a large foreign construction manufacturing company.  The scammer sought to hire the law firm to represent the manufacturing company in the sale of construction equipment to a purported Massachusetts based purchaser.  The scammer went so far as to have a telephone conference with a lawyer from the Plaintiff law firm in order to discuss details concerning what was ultimately a phony business transaction and to execute a fee agreement as required by the Plaintiff. 

Once “engaged” the Plaintiff was sent two checks that were purportedly from the equipment buyer’s insurance broker.  The first check was in the amount of $3,000.00 which was meant to cover the Plaintiff’s fee.  The second check was in the amount of $337,044.00 and was purportedly an initial deposit for the purchase of the construction equipment.  Both checks were subsequently deposited in the Plaintiff’s lawyer trust account.  The scammer thereafter provided the Plaintiff with specific wiring instructions as to the second check which the Plaintiff followed—even though the first check for $3,000.00 had been returned as non-payable.

The Plaintiff’s bank, Defendant First Republic Bank, conducted a multi-tiered procedure in order to verify the requested wire transfers.  The Defendant ultimately approved the wire transfers and the recipients received the funds as directed.  It was discovered after the wire transfers were completed that the second check for $337,044.00 was counterfeit and, as a result, the Plaintiff was charged back the amount of the second check.  Accordingly, the Plaintiff’s lawyer trust account became overdrawn and required them to deposit over $300,000.00 of their own money in order to restore the account to its prior balance.  Ultimately, the Plaintiff filed a two- count complaint in the Massachusetts Superior Court against the Defendant alleging, under California law (due to choice of law considerations), negligence and a violation of the California Uniform Commercial Code.  The Superior Court granted summary judgment on behalf of the Defendant and dismissed both counts of the Plaintiff’s complaint.

On appeal, the Massachusetts Appeals Court affirmed the allowance of summary judgment.  Specifically, the Appeals Court found that the Plaintiff could not bring a viable claim for negligence against the Defendant due to (1) the absence of a legal duty based upon the relationship between the parties; (2) the economic loss doctrine’s bar against the recovery of pure economic losses in claims sounding in tort; and (3) that the Plaintiff’s common law negligence claim is preempted by sections of the Uniform Commercial Code that apply to banks and transactions similarly at issue.  Furthermore, the Appeals Court affirmed summary judgment as to the second count of Plaintiff’s complaint alleging a violation of the California Uniform Commercial Code because there was no evidence that the Defendant failed to exercise good faith or ordinary care in the performance of its obligations to follow the wire instructions as directed by the Plaintiff.  Here, the Defendant had no legal obligation to inspect the check to determine whether it was potentially counterfeit.

The Sarrouf Law LLP matter serves as a truly sad and cautionary tale of which practicing lawyers should be aware.  As the Appeals Court stated, “[a] party is in the best position to guard against the risk of a counterfeit check by knowing it’s ‘client,’ it’s client’s purported debtor and the recipient of [a] wire transfer.”  When it comes to business email compromise incidents none of us are immune to such scams and vigilance on our part alone is the only form of true protection.

If you have questions or would like more information, please contact Marc Finkel at [email protected].

A Slow Moving Storm is Brewing: Attorneys Should Expect an Uptick in Malpractice Claims, Just Not Right Away

Posted on: May 22nd, 2020

By: Anastasia Osbrink

Many attorneys are wondering whether to expect an increase in legal malpractice claims when courts – and society at large – begin to reopen. Such an increase would follow the pattern seen with previous economic declines. For instance, after the 2008 Great Recession, there was a significant increase in legal malpractice claims. However, it took a year for those claims to reach their peak in 2009. That is because the claims against attorneys followed an initial increase in other insurance claims. The number of claims in the five most likely areas for legal malpractice suits – personal injury, real estate, family, bankruptcy and estate law – nearly doubled between 2005 and 2009. Of course, such an increase can be expected during an economic downturn.

In the case of attorneys, following the initial wave of legal filings, the number of legal malpractice claims jumped as well in 2009. A similar increase in malpractice claims occurred in 2012 following the downturn caused by the European debt crisis and the downgrading of America’s credit rating in 2011. Again, the increase in malpractice claims occurred approximately one year after the peak of other types of filings had taken place.

This time, the increase in lawsuits in general likely will take even longer. Courts are reopening slowly, deadlines have been and likely will continue to be extended, statutes of limitations are being tolled, and there will be a significant backlog for the courts. Additionally, the disease itself likely has discouraged many people from going out and finding an attorney. Eventually, though, as people feel the devastating economic effects of the largest unemployment rate since the Great Depression, they will turn to litigation and the hope of a settlement or a large verdict to ease their financial pain. When this happens, legal malpractice suits may follow, as they did in 2009 and 2012.

Yet another factor likely will lead to an increase in malpractice suits that is unique to the pandemic. Even though courts are closed and many jurisdictions have been extending filing deadlines and tolling statutes of limitations, attorneys cannot simply assume that all cases are on hold. Indeed, as is typical, how and when a case is litigated must be evaluated on a jurisdiction by jurisdiction and case by case basis. An attorney’s failure to do his or her due diligence easily could lead to one or more claims of legal malpractice (though it remains to be seen how lenient courts will be to parties that missed deadlines during the pandemic).

Given this potential paradigm, it is essential that attorneys keep track of the rules and approaches by all courts in all jurisdictions in which they practice. Nevertheless, history suggests that we can expect an increase in the number of legal malpractice claims filed, even if it takes a year or two to get there.

If you have questions or would like more information, please contact Anastasia Osbrink at [email protected].