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Archive for the ‘Professional Liability and MPL’ Category

Considerations For CPAs Dealing With Unpaid Fees

Posted on: April 15th, 2020

By: Nancy Reimer, Nicole Graham, Elizabeth Lowery, Zinnia Khan, and Caroline Wu

Many Certified Public Accountants and accounting firms will likely be increasingly confronted with collecting fees as the COVID-19 health crisis continues.  In dealing with unpaid fees, a CPA must pay close attention to their professional duties and obligations with respect to the release of client records, tax returns and even their own workpapers. 

In every instance, a CPA must adhere not only to the American Institute of CPAs’ (“AICPA”) Code of Professional Conduct and guidance from the Internal Revenue Service (“IRS”), but also to state-specific statutes and regulations.  There are often key differences between the AICPA Code, IRS guidance and state law.  For example, the release of client records, including a tax return or audit report, is left to a CPA’s discretion under the AICPA Code – as it states that a CPA should provide certain records upon a client’s request.  In contrast, IRS Circular 230, § 10.28 provides a CPA must, at the request of a client, promptly return the client’s records.   

Accordingly, it is best to start with the requirements of the AICPA Code of Professional conduct and IRS Circular 230 (for tax returns) and then proceed to examine the obligations set forth under the laws of the state in which the CPA is licensed. 

AICPA Code section 1.400.200.07 governs a client’s request for records or the CPA’s work product in the CPA’s custody or control and which have not previously been provided to the client.  Under section 1.400.200.07, the CPA should respond by providing the prepared records and work product, except that such records may be withheld if fees are due to the CPA for that specific work product.  This language, however, is subject to the rules and regulations of other authorities, including state laws and regulations. 

Under IRS Circular 230, § 10.28, a CPA must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations.  The existence of a dispute over fees generally does not relieve the CPA of this responsibility.  IRS Circular 230 also defers to requirements under state law.  If the applicable state law permits the retention of a client’s records in the case of a fee dispute or unpaid fees, the CPA need only return those records that must be attached to the taxpayer’s return. 

The laws and regulations concerning the return of client records and other documents for various states are set forth below.  Not coincidentally, the states below are those where Freeman, Mathis & Gary, LLP maintains one or more offices.

California  

Regardless of whether there are unpaid fees, California CPAs are required to return all client’s records. California Board of Accountancy Regulations Article 9 § 68 specifically states that: “Unpaid fees do not constitute justification for retention of client records.  Although, in general the accountant’s working papers are the property of the licensee [CPA]…”  

California’s Business and Professions Code § 5037 goes on to say that the CPA’s “working papers”, “except the reports submitted by the [CPA] to the client…shall remain the property of the [CPA] in the absence of an express agreement.”  But it is unclear what “reports submitted by the [CPA] to the client” means, and whether it includes a CPA’s work product such as prepared returns.  

California Board of Accountancy Regulations Article 9 § 68.1 defines “working papers” as the “[CPA’s] records of the procedures applied, the tests performed, the information obtained and the pertinent conclusions reached in an audit, review, compilation, tax, special report or other engagement” and “include, but are not limited to, audit of other programs, analyses, memoranda, letters of confirmation and representations, abstracts of company documents and schedules or commentaries prepared or obtained by the [CPA].” Thus, the definition of “working papers” arguably includes all of a CPA’s work product.  This makes sense since, in the case of unpaid fees, there is no specific return requirement for any documents other than a client’s own records.

Connecticut                                                        

Conn. Gen. Stat. § 20-281k(b) provides, a CPA shall return a client’s original records to his client or former client upon the client’s request and reasonable notice.  The CPA may make and retain copies of such documents of the client when such documents form the basis for work done by him.  Unlike the AICPA Code, this language imposes a mandatory duty on CPAs to return client records upon request

Florida

Florida’s provides that a CPA must return all of the client’s own records upon request, and can charge reasonable fees for costs incurred in doing so.  Section (c) of the same rule appears to build in the requirement of payment by the client before any work product is released, as it defers to the terms of the engagement between the CPA and client.  Florida’s Regulation of Professions and Occupations, Title XXXII Chapter 473.318 addresses the ownership of working papers, and is almost word for word identical to that of California’s BPC § 5037 quoted above which states that working papers remain the property of the CPA. 

Georgia

In Georgia, section 20-12-.12. of the Rules of the State Board of Accountancy Public Accountancy Act of 2014, states:

A licensee[CPA] shall furnish to his or her client or former client, upon request made within a reasonable time:

(a) Any accounting or other records belonging to, or obtained from or on behalf of, the client which the [CPA] removed from the client’s premises or received for the client’s account, but the [CPA] may make and retain copies of such documents when they form the basis for work done by him or her; and

(b) A copy of the [CPA’s] working papers, to the extent that such working papers include records which would ordinarily constitute part of the client’s books and records and are not otherwise available to the client.

The Georgia State Board of Accountancy issued a Statement of Policy (Policy No. 5) relating to section 20-12-.12. of the rules.  The Statement of Policy explains:

During the course of a professional engagement, a [CPA] may possess certain records of a client, or may have developed certain records without which the Client Records would be incomplete. Retention of Client Records after the client has made a request for them is a violation of Rule 20-12-.12. The [CPA] does not have a lien on these records, and they must be returned regardless of the fact that the fee of the [CPA] may remain unpaid. For purpose of this Rule, the term “Client Records” refers to those journals, ledgers, bank statements and cancelled checks, copies of invoices and similar documentation of the transactions that are reflected in financial statements. It is anticipated that the client will have retained copies of financial statements, income tax returns, and similar documents. A [CPA] is not required to convert records that are not in electronic format to electronic format. However, if the client requests records in a specific format and the [CPA] was engaged to prepare the records in that format, the client’s request should be honored. If a [CPA] is engaged to perform certain work for a client and the engagement is terminated prior to the completion of such work, the [CPA] is required to return or furnish copies of only those records originally given to the [CPA] by the client. Any working papers developed by the [CPA] incident to the performance of the engagement which do not result in changes to the Client Records or are not in themselves part of the records ordinarily maintained by such client, are considered to be solely “accountant’s working papers” and are not the property of the client.  Once the [CPA] has returned the Client Records or furnished the client with copies of such records and/or necessary supporting data, the [CPA] has discharged the obligation in this regard and need not comply with any subsequent requests to again furnish such records. If the [CPA] has retained copies of Client Records already in possession of the client, the [CPA] is not required to return such copies to the client.

Kentucky               

Kentucky Revised Statutes Chapter 325.420(a) requires the licensee[CPA] to return any of the client’s own records upon request. Kentucky Revised Statutes Chapter 325.420(b) then builds in the requirement for payment by the client for services rendered, before the [CPA] is required to provide their work product, which specifically includes tax returns.

Maine

Maine compels the return of client records upon the client’s request.  Me. Rev. Stat. tit. 32, § 12280 states a CPA shall furnish to his client or former client upon request and reasonable notice:

  1. A copy of the CPA’s working papers, to the extent that the working papers include records that would ordinarily constitute part of the client’s records and are not otherwise available to the client; and
  2. Any accounting or other records belonging to, or obtained from or on behalf of, the client that the CPA removed from the client’s premises or received for the client’s account. The CPA may make and retain copies of those documents of the client when they form the basis for work done by him.

Massachusetts

Under 252 C.M.R. 3.03(3), a CPA shall furnish to a client or former client, upon request made within a reasonable time after original issuance of the document in question, if not previously furnished:

  • A copy of the tax return of the client;
  • A copy of any report or other document issued by the CPA to or for such client;
  • Any accounting or other records belonging to, or obtained from or on behalf of the client (but the CPA may make and retain copies of such documents of the client when they form the basis for work done by the CPA); and
  • A copy of the CPA’s workpapers, to the extent that such workpapers include records that would ordinarily constitute part of the client’s books and records and are not otherwise available to the client.

New Hampshire

Pursuant to N.H. Rev. Stat. Ann. § 309-B:19 (II), a CPA shall furnish to the client or former client, upon request and reasonable notice:

  • A copy of the CPA’s working papers, to the extent that such working papers include records that would ordinarily constitute part of the client’s records and are not otherwise available to the client; and
  • Any accounting or other records belonging to, or obtained from or on behalf of, the client that the CPA removed from the client’s premises or received for the client’s account. The CPA may make and retain copies of such documents of the client when they form the basis for work done by the CPA.
  • A copy of computer-prepared client data diskettes containing client ledger data, spread sheet data, client documents and any other such data of the client or former client that would ordinarily constitute part of the client’s records and not otherwise be available to the client.

New Jersey

N.J.A.C. 13:29-3.16 provides:

(a)  A licensee[CPA] or the [CPA’s] firm shall furnish to the [CPA’s] client or former client, upon request made within a reasonable time after original issuance of the document in question:

1.  A copy of a tax return of the client;

2.  A copy of any report, or other document, issued by the [CPA] to or for such client;

3.  Any accounting or other records belonging to, or obtained from or on behalf of, the client which the [CPA] removed from the client’s premises or received for the client’s account, but the [CPA] or the [CPA’s] firm may make and retain copies of such documents when they form the basis for work done by the [CPA]; and

4.  [CPA]-prepared client records that would ordinarily constitute part of the client’s books and records, are contained in the [CPA]’s or his or her firm’s working papers, and are not otherwise available to the client. Copies of such records shall be produced to the client in the same manner, media, and format as the record was created by the [CPA].

(b)  A [CPA] or the [CPA’s] firm shall not withhold client records for the non-payment of fees for services performed.

Pennsylvania 

A CPA shall furnish to its client or former client upon request made within a reasonable time after original issuance of the document in question:

(1) A copy of a tax return of the client.

(2) A copy of any report or other document issued by the [CPA] to or for such client and not formally withdrawn or disavowed by the [CPA] prior to the request.

(3) A copy of the [CPAs] working papers to the extent that such working papers include records that would ordinarily constitute part of the client’s records and are not otherwise available to the client. However, a [CPA] may require that fees due the [CPA] with respect to completed engagements be paid before such information is provided.

(4) Any accounting or other records belonging to, or obtained from or on behalf of, the client that the [CPA] removed from the client’s premises or received for the client’s account. The[CPA]  may make and retain copies of such documents of the client whenever those documents form the basis for work done by him.

(5) If a [CPA] can document compliance with the foregoing requirements, he need not comply with subsequent requests to again provide such information.

63 P.S. s. 9.11(b).

Rhode Island

Rhode Island law does not expressly address the return of client records, though R.I. Gen. Laws Section 5-3.1-22 governs the ownership of such records.  In Rhode Island, all statements, records, schedules, working papers, memoranda, and any other data, including, but not limited to, a data bank, that are retained by a CPA or accounting firm incident to or in the course of professional services rendered to clients are the property of that CPA or accounting firm in the absence of an express agreement to the contrary.

CPAs licensed in Rhode Island must therefore comply with the requirements prescribed by the AICPA code and IRS Circular 230, § 10.28 when examining their obligations to return client records.

Vermont 

Under Vt. Stat. Ann. tit. 26, § 81(c), original copies of client documents in the possession of the CPA are the property of the client and must be returned to the client upon request.  Subsection (a) provides, however, statements, records, schedules, working papers and memoranda made by a CPA are the property of the CPA.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to view upcoming webinars.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Ready Camera One: Remote Litigation in the Era of Social Distancing

Posted on: April 7th, 2020

By: Jennifer Adair, Jennifer Markowski and Andy Treese

Evaluating claims to move them towards resolution or trial is the lifeblood of a defense practice. This typically requires direct interaction with a plaintiff and key witnesses, either at deposition (to hear their testimony, to form impressions of how they will be received by a jury), at mediation (to assure the plaintiff personally understands the strengths and weaknesses of the case), or at trial.  In person interaction is simply not as practical as it used to be and, in some places, it might be illegal.  It is not surprising that we have been fielding inquiries from claims professionals and their insureds about whether we can continue to move their cases forward by conducting discovery and settling claims in an age of social distancing. 

The answer is yes.  At Freeman Mathis & Gary our attorneys routinely take depositions remotely and have had great success with remote mediation.  Both, however, carry their own practical considerations.

  • Depositions.  Remote depositions have been around for well over a decade, but the increased demand is changing the marketplace.  Many lawyers who have never used or have avoided remote deposition technology no longer have a practical choice.  Some are adapting more quickly than others:  we have seen some opposing counsel take clean, effective depositions by video, but we have also seen opposing counsel take depositions that were not effective due to lack of familiarity with the technology and/or a misunderstanding of the different methodologies necessary to prepare for a remote deposition.  Counsel should consider several factors when preparing for and conducting an online deposition: 
    • Is this a deposition you are willing to take remotely?  Minor witnesses, some experts, or witnesses in cases with low exposure can probably be deposed remotely without concern.  Depending on the facts and exposure associated with the case, there may be some witnesses you may simply want to depose in person, even if it delays the case for 45-60 days. 
    • Prepare for your deposition at least two days early.  Identify the exhibits you are certain to use at the deposition and assure they can be presented cleanly to the witness.   For those that are obvious (complaint, incident report, interrogatory responses, etc.) consider having them pre-marked and distributed by email to opposing counsel, the witness and court reporter to speed the deposition along.  Also, identify documents you may want to use (medical records, photographs, etc.) and have those available and ready to present during the deposition. These can be circulated by email and shown to the participants using the screen sharing function of most videoconferencing technology.
    • Understand the technology. What program will be used? How will exhibits be presented?  Have you tested the video conferencing software or any other technology you need to use during the deposition?  How does the audio system work (i.e. can more than one person speak at a time or would an objection by counsel also inadvertently mute the witness’ microphone)?
    • Consider the logistics of the oath.  Who will place the witness under oath and where will they be?  Does your state permit oaths to be administered remotely?  Consider making a formal stipulation on the record that, due to the pandemic, the parties agree to the sufficiency of an oath administered remotely.
    • Decide how objections will be handled.  If it suits your purpose strategically, you and opposing counsel may choose to reserve some objections that would typically be made on the record.
    • Understand the cost and the final product.  How much is the vendor charging for this deposition as opposed to a standard deposition?  Are they generating a traditional transcript or is the deposition also being recorded?
    • Make a plan for confidentiality. If the witness is your client, plan in advance how you will communicate (by email, texting, etc.) during the course of the deposition to avoid inadvertent disclosures. Make sure you know how to turn off your camera and microphone or, better yet, go into another room to converse with your client.
    • Expect the deposition to take longer than usual. Don’t allow logistical limitations to curtail zealous representation.
  • Mediations.  Mediation and other forms of ADR are effective because a knowledgeable, competent mediator can provide litigants and their counsel on both sides a “reality check” as to the strengths and weaknesses of their cases.  The process works better when the mediator can speak directly to the parties and for that reason, our instinct in the past has been to require personal attendance at mediation.  So far, however, we have found remote mediation to make sense for several reasons:
    • Remote mediation is generally effective.   Some cases simply don’t settle until a mediator twists a metaphorical arm or two.   Is that effective when the literal arms aren’t in the same room as the mediator?   So far, anyway, the answer seems to be yes – when the technology works.  Where that is the case, mediators can still engage in private caucuses and have the ability to review or share exhibits, documents, etc. as needed.   We can envision specific cases where a video mediation might not be appropriate but so far, remote mediation has been getting cases resolved.
    • Remote mediations keep cases moving.  Governmental orders aside, many of our adjusters and risk managers have been restricted by their employers from non-essential travel for the foreseeable future.  Remote mediation presents a cost-effective opportunity to resolve cases now.
    • Remote mediation is cost effective (for now).  Most of our vendors are currently providing remote mediation services at no extra charge.  Remember, mediation centers are a business, too, and have a vested interest in keeping their dockets full by providing the technology and know-how to make mediation convenient to the parties, via Zoom or similar systems. 
    • Litigants may have a greater motivation to settle their claims when faced with the reality that jury trials for civil cases seem unlikely to take place for at least several months after state and local judicial emergencies resolve.
    • Attorneys want to keep cases moving, too. Counsel may view remote mediation as a step that can be taken towards trial.  Most courts already require ADR / mediation before trial.  Others are likely to being imposing that requirement to control their post-coronavirus dockets. 
    • Understand privacy issues related to the technology. Media reports suggest that Zoom and potentially other platforms are at risk for security issues.  Make sure the mediator provides a password for participants to gain access, and that meetings are locked so that nobody can join without the moderator’s permission. Ensure that the mediator has disabled the recording function, and that chat is not archived. Ask your mediator to send instructions in advance so that you are comfortable with the measures being taken, and can request any additional protections you deem appropriate.

At Freeman Mathis & Gary, our team will continue to monitor and report on the use of emerging technologies to litigate claims and obtain favorable outcomes for our clients.

Additional information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on finances and loans, the FFCRA, the CARES Act and more. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.**

Will E&O Policies Protect Attorneys for Claims Arising Out of Remote Notarization During the COVID-19 State of Emergency?

Posted on: April 2nd, 2020

By: Kathleen Cusack

As stay-at-home orders increase in number, duration, and severity across the country, many businesses have moved to remote functions to avoid business interruption and limit in-person contact.  Most states, though, require that notaries public acknowledge the signing of a document in person.  Attorneys in many practice areas are routinely called upon to acknowledge documents. Even though attorneys providing services such as real estate closings or estate planning have been deemed in some states to be “essential” and are permitted to continue operations, they and their clients are understandably looking for alternatives to face-to-face meetings. One such alternative being considered is remote notarization, which utilizes audio-visual technology to see and communicate with a signor rather than being physically present with the signor. Currently, 23 states allow for remote notarization.  Four other states have authorized plans for remote notarization in the future and ten states are considering legislation to allow for remote notarization.  In addition, federal legislation regarding remote notarization was introduced on March 18, 2020, by Sen. Kevin Cramer (R, ND) in bill S.3533.    

In response to COVID-19, several states that do not permit remote notarization are considering implementing temporary emergency measures to allow for it.  Attorneys who plan to notarize documents remotely should take note of the language in their relevant insurance policies, including their errors and omissions (“E&O”) policy, to determine whether claims arising out of a document that was acknowledged remotely will be covered.  Many E&O policies exclude from coverage claims that arise out of documents that were acknowledged when the signor was not present “in person”.  Whether the term “in-person” will be interpreted to include signors that were present by audio-visual technology may depend on the insurance provider.  Thus, for attorneys acknowledging documents remotely – even on a temporary basis – it is important to know whether their policy contains such exclusion and, if so, seek guidance on how the exclusion is being or has been interpreted.            

You can review guidance for which states allow for remote notarization here. As stated herein, some of the states that do not currently allow for it are considering temporary emergency measures in direct response to COVID-19.

Additional Information:

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues on a regular basis. Topics include COVID-19’s impact on the construction industry, employment issues arising from the virus, the real-world impact of business restrictions, and education claims. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients.  Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments.  For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER:  The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19.  The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement.  We can only give legal advice to clients.  Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG.  An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest.  As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce education content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such.  We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

Facing Increased Cyber Threats Against Legal and Accounting Professionals During the COVID-19 Pandemic

Posted on: March 24th, 2020

By: Renata Hoddinott

Millions around the world have had their daily routines disrupted and a wide variety of companies are participating in the largest “work from home” mobilization in history. While the ability for professionals to work remotely is key to business continuity in the midst of this pandemic, in doing so, firms and professionals have open their networks to unprecedented exposure.

Bad actors are capitalizing on the intense focus on COVID-19 panic and fear and security professionals have already noted an increase in malicious schemes. Those include phishing emails framed as alerts regarding the coronavirus outbreak containing attachments purportedly with information about COVID-19 and how to protect against the virus. When people are already stressed, fearful, and desperate for the most up-to-date information to protect themselves and loved ones, there is a significant risk to the security of any network.

Another prevalent threat for professionals, and particularly for CPAs, is in the realm of wire transfer requests. These types of scams are on the rise and can be very convincing, duping even the most cyber-savvy of professionals. Bad actors often begin well in advance of an attack by laying in wait and collecting information over an extended period. When the opportunity presents itself, such as now, these criminals use that information to launch convincing wire transfer requests. They can be framed as emails from “clients” requesting emergency funding and providing fraudulent wire instructions. CPAs often find themselves on the front lines against these malicious schemes and need to remain diligent and exercise extreme caution when responding to any requests. With professionals working remotely it can be more difficult to ensure a request is valid, but it is vital for requests to be double and triple checked and validated directly by phone or video to ensure accuracy before a single dollar is transferred.

Now is the time for all professionals to be vigilant about the cyber dangers. An unprecedented number of professionals are accessing company networks remotely and continuing to service clients including handling sensitive and confidential client data. In an office environment, when a threat is detected, IT can immediately quarantine and disconnect the compromised device and conduct an investigation of the company network. Now, however, employees may be connecting to firms’ servers from their own perhaps less secure networks and IT professionals are not on-site in those locations to troubleshoot issues and contain threats more easily. Failure to appropriately protect the sensitive and confidential data of clients may be the cause of malpractice claims in certain circumstances.

Firms should ensure IT security professionals are accessible to remote working professionals and able to isolate remote devices when necessary and limit the potential damage to the firm’s network through that compromised device. Now more than ever firms and professionals must remain diligent and prepared against new risks of fraud and cyber-attacks. Keeping mindful of cyber threats in the midst of this crisis is critical to ensuring ongoing success.

Additional information: 

The FMG Coronavirus Task Team will be conducting a series of webinars on Coronavirus issues every day for the next week. We will discuss the impact of Coronavirus for companies in general, but also for business in insurance, healthcare, California specific issues, cybersecurity, and tort. Click here to register.

FMG has formed a Coronavirus Task Force to provide up-to-the-minute information, strategic advice, and practical solutions for our clients. Our group is an interdisciplinary team of attorneys who can address the multitude of legal issues arising out of the Coronavirus pandemic, including issues related to Healthcare, Product Liability, Tort Liability, Data Privacy, and Cyber and Local Governments. For more information about the Task Force, click here.

You can also contact your FMG relationship partner or email the team with any questions at [email protected].

**DISCLAIMER: The attorneys at Freeman Mathis & Gary, LLP (“FMG”) have been working hard to produce educational content to address issues arising from the concern over COVID-19. The webinars and our written material have produced many questions. Some we have been able to answer, but many we cannot without a specific legal engagement. We can only give legal advice to clients. Please be aware that your attendance at one of our webinars or receipt of our written material does not establish an attorney-client relationship between you and FMG. An attorney-client relationship will not exist unless and until an FMG partner expressly and explicitly states IN WRITING that FMG will undertake an attorney-client relationship with you, after ascertaining that the firm does not have any legal conflicts of interest. As a result, you should not transmit any personal or confidential information to FMG unless we have entered into a formal written agreement with you.  We will continue to produce educational content for the public, but we must point out that none of our webinars, articles, blog posts, or other similar material constitutes legal advice, does not create an attorney client relationship and you cannot rely on it as such. We hope you will continue to take advantage of the conferences and materials that may pertain to your work or interests.** 

You, You, and You: Implied Waiver of Attorney-Client Privilege Extends to Attorney and Non-Party Attorneys Sued for Malpractice

Posted on: March 13th, 2020

By: Jake Loken

The Supreme Court of Georgia recently decided in Hill, Kertscher & Wharton, LLC v. Moody, No. S18G1436, that the implied waiver of attorney-client privilege that occurs when an individual sues his former attorney also extends to other attorneys who represented that individual, so long as those other attorneys were representing the individual in the “same underlying transaction or litigation.”

In Hill, Kertscher & Wharton, LLC v. Moody, the plaintiff filed a lawsuit against his former attorneys from Hill, Kertscher & Wharton, LLP who provided legal advice about how to complete a corporate takeover. The former attorneys told plaintiff about what actions would need to be done to complete his goal of a corporate takeover, including the filing of a lawsuit.

The former attorneys filed the lawsuit, but through the course of the litigation, they were forced to withdraw from the suit, and a second suit that had been filed in another state declared all actions taken to complete the corporate takeover to be void. After this, plaintiff filed a lawsuit against his former attorneys alleging malpractice.

During the malpractice suit, the former attorneys raised the defense that non-parties caused some or all of the damages alleged by the plaintiff, including attorneys from the law firm of Holland & Knight LLP. The former attorneys alleged the plaintiff directed his former attorneys to follow the instruction of Holland & Knight over the course of their interactions with plaintiff.

When served with a request for production of documents, Holland & Knight raised attorney-client privilege and work product protection as reasons for not producing documents. Plaintiff then also filed for a protective order on the same grounds as Holland & Knight. The trial court denied the protective order, and the plaintiff appealed. The Court of Appeals reversed, and an appeal was made to the Supreme Court.

The Court was faced with the question of whether the implied waiver of attorney-client privilege “extends to the client’s communications with other attorneys who represented the client with respect to the same underlying matter, but whom the client chose not to sue.”

All the Justices, less one who was not participating and another who was disqualified, held that “when a client sues his former attorney for legal malpractice, the implied waiver of the attorney-client privilege extends to the client’s communications with other attorneys who represented the client with respect to the same underlying transaction or litigation.” The Court also commented on the work product exception, saying that trial courts must still protect the work covered by this exception, even in the face of a malpractice claim, by requiring the parties requesting such work satisfy the required test to obtain such work.

If you have any questions or would like more information, please contact Jake Loken 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.