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Archive for the ‘Professional Liability and MPL’ Category

Avoiding Legal Malpractice Tip: Document, Document, Document

Posted on: May 24th, 2019

By: Greg Fayard

“Boy, I wish that was in writing!”

Having defended scores of attorneys over the years, more often than not, I wish my lawyer-client had either better documented his or her file, or memorialized a key conversation. It certainly helps defending legal malpractice claims when a pivotal issue is in writing as opposed to merely being oral.

While it is not possible to document every detail in a legal matter, having the mindset of documenting interactions with clients can reduce legal consequences should a client sue. A simple e-mail confirming a conversation, or a time entry stating the substance of a conversation can help in defending a legal malpractice claim. Letters work too, of course, but are more time-consuming. For a key strategy decision in a case, a quick “memo to file” in e-mail form works as well as something more formal. A lawyer’ mindset should be: something in writing is better than nothing in writing.

But writings are not only helpful in “defending” a claim. A contemporaneous writing on a key point or issue in a matter may be enough to dissuade the client from suing in the first place.

In sum: the lawyer who chooses to document a file, over not documenting, no matter how informal, will be in a better position in the event the client is later dissatisfied with the lawyer’s services.

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

It is Time to Clean House – The Client Break-Up

Posted on: May 8th, 2019

By: Nancy Reimer

The end of tax season is an opportune time for certified public accounting firms to review their client roster to ensure existing clients are a good fit with the firm’s mission and culture. CPA’s are taught to exercise due diligence when accepting new clients. For example, a firm will  assess whether it has the required knowledge and skill to perform the work, whether the client’s expectations are reasonable, does its management team exhibit integrity and trustworthiness, had the client changed CPA’s often, is it negotiating down the fee, hesitant to pay a retainer, is the client delinquent in filing or does the client keep its records in poor condition? If satisfied with the answers, a firm will accept the client.

Once clients are in the door, however, should they stay? Is it difficult to get information timely from the client, does the client haggle over fees, fail to pay, act abusive towards staff, fake or inflate numbers to avoid tax payments or penalties, lack proper internal control or consistently fail to follow advice?

What about changes in the firm that may make servicing the client difficult? New technologies may make it difficult for certain clients to keep up, some clients may not be comfortable with online organizers and electronic engagement letters. Perhaps there is a staff-turnover losing technical expertise to perform certain services; or the cost of offering a service may outweigh the revenue generated by the service.

Firms should meet on an annual basis to review the direction of the practice and the client roster. It should determine how many clients it can comfortably serve, what services it performs best or at the highest rate of profit and the profile its ideal clients.  Problem or “toxic” clients should be terminated.

Once a firm has determined which clients it needs to terminate, it should devise a strategic plan for doing so. It is always a good practice to notify the firm’s insurer and liability carrier of its intent to terminate clients. Liability insurers may want to be informed of potential claims if a disgruntled client is terminated. Insurer’s loss prevention teams are experienced in terminating clients and may offer advice as to how to disengage a “problem” or “toxic” client.

Best practices dictate a disengagement letter sent by certified mail, return receipt requested is the best way to terminate a client. If, however, the client has formed a close personal relationship with a member of the firm then a face to face meeting may be warranted. Then a follow-up letter documenting the meeting should be sent.

Prior to notification, the firm should ensure all required documents are copied or scanned, all documents and authorizations are signed, all fees are paid (if possible) and all client documents are packaged and available for pick-up. Also, prepare the transfer authorization letter ahead of time for the client’s signature so the file can immediately be transferred to the successor CPA.

The disengagement letter need not identify any specific reason for the termination. Ideally, there are no impending, or tax filing, deadlines. If there are the firm should list those deadlines and what needs to be done to comply with the deadline. It is also a good idea to list all of the services the firm had performed for the client. If any projects are in progress, identify the stage of the project and what is necessary for completion.  The disengagement letter should identify the client’s responsibilities moving forward and issues to be addressed with the successor CPA. Finally, the firm should state it will assist in transferring the files to the successor CPA in accordance with the firm’s professional obligations.

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

California Attorneys Who Fail to Comply with the State Bar Re-Fingerprinting Rule Risk Monetary Penalties and License Suspension

Posted on: April 30th, 2019

By: Paige Pembrook

April 30, 2019 marks the initial deadline for California attorneys to comply with California Rules of Court, Rule 9.9.5—the rule that requires attorneys to re-submit fingerprints to the State Bar so the Bar can obtain records regarding attorney arrests and convictions.  Attorneys who fail to comply with the re-fingerprinting rule by April 30, 2019 will be subject to monetary penalties. Attorneys who fail to comply with the re-fingerprinting rule by the final deadline of December 1, 2019 will have their licenses suspended.

For the past 30 years the State Bar has not been complying with its statutory mandate to use attorney fingerprinting to obtain information about attorney arrests and convictions from the California Department of Justice (DOJ).  Although attorneys were fingerprinted at the time of admission to the State Bar, neither the Bar nor the DOJ retained those fingerprints for purposes of reporting arrests and convictions of admitted attorneys.

Rule 9.9.5 rectified this situation by requiring all active licensed attorneys to be re-fingerprinted by December 1, 2019. The State Bar and DOJ will retain the fingerprints to enable the Bar to receive state and federal criminal record information, including a summary of arrests, criminal charges, and sentencing.

Thus far, the re-fingerprinting rule has revealed that over 2,000 practicing attorneys have previously unreported criminal records, including 20 previously unreported felonies. The 20 previously unreported felonies have been sent to the State Bar’s Office of Chief Trial Counsel for review and potential disciplinary action.

Regardless of the re-fingerprinting rule, attorneys are required to report criminal convictions to the State Bar under the self-reporting mandate. The State Bar may discipline attorneys for failing to report a conviction to the Bar, for the conviction itself, or for both.  The best practice is to self-report any convictions as well as timely comply with the re-fingerprinting rules.

Even attorneys who have no criminal history should be sure to submit their fingerprints by the final December 1, 2019 deadline. Otherwise, such attorneys risk license suspension and exposure to liability for the unauthorized practice of law.

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

Engagement Letters Can Reduce The Risk of a Legal Malpractice Claim

Posted on: April 26th, 2019

By: Greg Fayard

Lawyers often ask: what can I do to reduce the risk of a legal malpractice lawsuit? They can do several things, but a clear, narrowly-tailored engagement letter can certainly help decrease the risk of a claim. Here are some tips on effective lawyer-client engagement letters.

• Treat the letter more as an opportunity to build rapport with the client, and less as a formal, intimidating contract. How the relationship begins often determines how it will end, thereby mitigating the risk of a dispute down the road.

• Specifically, identify who the client is to avoid confusion. For example, an engagement letter can state the client is a corporation while excluding officers, directors and shareholders. Stating who is not the client can be as important as stating who is the client.

• State clearly how long the representation will last. Will it end upon settlement, a plea, a conviction, judgment enforcement, but not an appeal? For transactional matters, will the representation end when funds have been transferred and received or after any monitoring provisions lapse? A well-defined length-of -representation clause can also aid the lawyer in a statute of limitations defense. Statutes of limitation begin to toll on termination of the lawyer-client relationship.

• A good engagement letter should also specify precisely the fees in a matter, how fees are calculated, how fees are different than costs, and who is responsible for costs. Contingency matters should also be precise in terms of the percentage going to the attorney, and if different percentages apply, when those percentages apply. Whether a personal injury attorney is entitled to additional funds upon successfully negotiating a medical lien should be succinctly laid out as well. However, the client should be given the opportunity to consult independent counsel with regard to extra attorney compensation for negotiating a medical lien.

• Most importantly, an engagement letter that specifies the scope of representation can help address any misunderstandings over whether the lawyer was to advise a client on all legal issues faced by the client, or only a specific matter. A general scope of representation clause in an engagement letter can lead to a client believing the lawyer represents the client on all of its legal issues, indefinitely, causing some clients to believe the lawyer has an ongoing duty of representation.

For any questions, please contact Greg Fayard at [email protected].

Georgia Court of Appeals Provides Guideline for Drafting Enforceable Exculpatory Clauses in Georgia

Posted on: April 23rd, 2019

By: Bart Gary and Jake Carroll

Exculpatory clauses are terms in a contract that shift the risk of loss to the other party or a third-party, or attempt to limit one’s obligations under a contract. A typical exculpatory clause is a “limitation of liability” provision, which is commonly used in agreements for services—especially professional services, rendered by accountants, architect, engineers and consultants.

Attempts to limit one’s liability to agreed amounts are sometimes challenged in court on the ground that they violate “public policy,” but are nevertheless generally enforceable in Georgia, provided such clauses are “explicit, prominent, clear and unambiguous.”

While these requirements have been addressed in prior appellate decisions, in Warren Averett, LLC v. Landcastle Acquisition Corp.[1] the Georgia Court of Appeals discussed in detail the “prominence” requirement for limitation of liability clauses in a contract for accounting services. The Court observed that a number of factors are considered when evaluating the enforceability of an exculpatory clause or limitation of liability clause:

  • Font. The clause should not be in the same font size used throughout the contract. It should be “capitalized, italicized, or set in bold type for emphasis.”
  • Setoff. The clause should be set off in a separate section that specifically addressed liability or recoverable damages, with a bold, underlined, capitalized or italicized specific heading, such as “Limitation of Liability” or “DAMAGES.”
  • Location. The clause should be in a prominent place within the contract to emphasize the importance of the clause’s limitation on recoverable damages, such as being adjacent to another similarly significant provision or being next to the parties’ signature lines.[2]

These factors should be used as a guide for parties when drafting and negotiating contracts with exculpatory clauses. For example, in construction contracts, the parties should pay close attention to the font and location of indemnity and no-damage-for-delay clauses. In commercial and professional services contracts, common exculpatory clauses that merit close scrutiny address indemnity, limitation of lability, waivers of certain types of damages, and insurance terms.

Finally, while the opinion is helpful as concerns what is not prominent, it does not offer a clear statement of what is prominent. For example, does the font need to be bold, capitalized, and italicized, or will one choice work? In light of the Warrant Averett decision, it would seem that the more factors met, the less risk the clause is found unenforceable.

If you have questions regarding this decision, or any other contract drafting questions, please contact Bart Gary at [email protected] and Jake Carroll at [email protected]. Mr. Gary and Mr. Carroll practice construction and commercial law as members of Freeman Mathis & Gary’s Construction LawCommercial Litigation, and Tort and Catastrophic Loss practice groups as well as representing business and commercial entities in a wide range of disputes and corporate matters involving breach of contract, business torts, and products liability claims.

[1] Warren Averett, LLC v. Landcastle Acquisition Corp., 2019 Ga. App. LEXIS 178, Case no. A18A2117, March 13, 2019. (physical precedent only). Because one judge of the three-judge panel concurred in the judgment, the opinion is limited, physical precedent.
[2] 2019 Ga. App. LEXIS 178 at 9-10 (emphasis by the Court) (internal citations omitted).