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Archive for the ‘Professional Liability and MPL’ Category

How CPAs Can Minimize Liability When Assisting Clients With PPP Loan Forgiveness

Posted on: July 21st, 2020

By: Nancy Reimer and Elizabeth Lowery

The CPA’s client received funds from the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and is asking if and how they will qualify for PPP loan forgiveness. As of this date, there is uncertainty over some of the program details and businesses worry about meeting and maximizing the loan forgiveness requirements. With the uncertainty surrounding the loan forgiveness process how can CPA’s protect themselves from liability while assisting clients seeking loan forgiveness? 

The best protection tool in a CPA’s arsenal is the Engagement Letter. An engagement assisting clients seeking loan forgiveness under the PPP is considered a consulting engagement in accordance with the Statement on Standards for Consulting Services issues by the American Institute of Certified Public Accountants (“AICPA”). Like any engagement letter, the PPP loan forgiveness engagement letter should spell out the nature and scope of work to be performed, the CPA firm’s responsibilities, the client’s responsibilities and the work product to be delivered to the client.  The Engagement Letter should also contain limitation of liability and indemnification clauses. 

In drafting the engagement letter, the following considerations should be taken into account:

  • The terms and scope of the consulting services should be discussed with the client and clearly described in the letter
  • Describe the engagement’s objectives.
  • Describe the scope and limitations of the engagement.
  • List the services that are not within the scope of the engagement.
  • Summarize the tasks to be performed and completed.
  • Describe the deliverables.
  • List the applicable professional standards.
  • List the client’s responsibilities.
  • List the CPA’s responsibilities.
  • State when the services will begin and conclude.
  • State the limitations on the use of the deliverables.

We also recommend stating the CPA is not involved with and has no influence upon the loan forgiveness process and cannot guarantee the Application will be approved. It is important for the client to accept responsibility for the accuracy and completeness of all certifications included in the Application and maintain all required documentation to support the application.

While clients may be anxious to apply for forgiveness keep in mind the following factors:

  • Most lenders are not ready to process forgiveness applications as they are awaiting guidance from the Program.
  • Many lenders are developing forgiveness portals to make the process more efficient.
  • Businesses have 24 weeks to use the PPP funds leaving more time to take steps to help qualify for forgiveness
  • Payroll costs are a significant component of PPP forgiveness. Most payroll providers are developing special reports to help the process. But they too are waiting for guidance.
  • Payments are not due yet. Borrowers are not required to make loan payments before they apply for forgiveness or until 10 months after the covered loan period ends.

While it can be difficult for a client to be patient with the ongoing uncertainty prevented by COVID-19, as their trusted advisor, a CPA can help calm the fears while awaiting proper guidance from the PPP.

Even apart from Coronavirus issues, CPAs should periodically review and update their engagement letters. Stay tuned for our upcoming Webinar on Engagement Letters.

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

Are “Flat Fees” For Legal Services Okay in California?

Posted on: July 15th, 2020

By: Greg Fayard

Many lawyers in California charge their clients “flat fees.” That is, immigration lawyers, criminal defense lawyers, bankruptcy and estate planning lawyers, and patent lawyers all routinely charge “one price” for all services, regardless of the time it took the lawyer to do the work.

Under the old rules of Professional Conduct for California lawyers, if a lawyer received a flat fee, the rules were silent on where to put those funds—the lawyer’s trust account or operating account? Under the current rule, Rule 1.15, flat fees MAY go into the lawyer’s operating account.

Flat fees over $1,000 can go into the operating account provided the lawyer discloses in writing that the fee MAY go into the client’s trust account until earned and the client is entitled to a refund of any amount that is unearned.

If the lawyer does not have this disclosure in writing, which the client must sign, flat fees over $1,000 MUST go into the lawyer’s trust account.

Fortunately, the California State Bar has ethics guidelines to help lawyers determine what part of a flat fee is earned and when. For those California lawyers who charge flat fees, please read Rule 1.15 to make sure you are in compliance.

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

Attorneys, Beware Of The “Settle & Sue” Maneuver!

Posted on: July 6th, 2020

By: Elizabeth Lowery

Malpractice lawsuits against attorneys are often referred to as a “case within a case” because they must delve deep into the underlying lawsuit in order to determine whether an attorney’s representation fell below the standard of care, and if so, what damages, if any, resulted. There is a common misconception that an attorney is always insulated from a malpractice action if the client consents to a settlement. However, many jurisdictions, including California, permit a client to “settle and sue.”

Last month in Maselllis v. Law Office of Leslie F. Jenson, California’s Appellate Court upheld a lower court’s $300,000 judgment against a divorce attorney whose client, the Wife, consented to a $1.2 million settlement. In that case the value of marital estate, which included several businesses, was hotly contested. In addition, Wife was suspicious that Husband had been hiding assets. A few days before the trial, Wife’s attorney pressured Wife to accept an $800,000 settlement; when she refused, Attorney said “I’m done,” and left. Panicked and without counsel, Wife accepted Husband’s last minute $1.2 million offer. She then sued Attorney for malpractice. 

During the 11-day malpractice trial, one report from Wife’s expert valued her half of the marital estate at $1.62 million, and another at $1.49 million. Wife prevailed and obtained a $300,000 judgment against Attorney. During the appeal, Attorney did not directly challenge the jury’s finding that her representation of Wife was negligent. Instead, Attorney argued that the standard of proof for “settle and sue” cases was, or should be, higher than the “preponderance of the evidence” burden of proof typical applied in attorney malpractice lawsuits, and that Wife hadn’t satisfied this higher standard. Wife’s counsel argued that Wife did not need to show that Husband was going to reach a settlement higher than $1.2 million; it was sufficient to show that it was “more likely than not” that she would have received a better result at trial. The Appellate Court confirmed that the lower burden of proof, i.e. the preponderance /”more likely than not” standard was correctly applied in the underlying trial, and that Wife had satisfied this burden. As a result, Wife’s victory was upheld. 

The foregoing illustrates that attorney malpractice lawsuits present special challenges, especially in jurisdictions which allow a client to “settle and sue.”  If you have any questions or would like more information, please contact Elizabeth Lowery at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at

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

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].