United States: Reduce The Risk Of Malpractice Claims

Legal malpractice claims just keep coming. Rarely does a week go by without another article about a new high-profile legal malpractice lawsuit. Sometimes, these claims are the result of a simple mistake. Claims can arise when an attorney is overworked and may be tempted to pay less attention to the details of his practice. Yet most claims do not involve any mistake or error by the attorney. Well over one-half of all malpractice claims against attorneys lack any merit.1

While meritless claims are usually dismissed or abandoned, that's little comfort to attorneys who have had a claim brought against them. After all, when a claim is made, attorneys must deal with it, investing time to defend the claim, reporting it to colleagues and insurers, and paying whatever deductible might apply. Needless to say, it is a distraction from the practice of law.

Beyond that, claims leave a lasting impact. From the moment a legal malpractice claim is made, attorneys must answer "yes" to the question, "Has a claim ever been made against you?" This answer does not change even if the claim has been dismissed or abandoned.

The bad news is that most attorneys will face more than one claim over the course of their careers. The good news is that there are things attorneys can do to reduce the risk of having a legal malpractice claim made against them. An important first step is recognizing the difference between actual legal malpractice and a legal malpractice claim.

Legal malpractice occurs only when an attorney's breach of a professional duty proximately causes damages.2 Anything involving less than all three elements—duty, breach, and proximately caused damages—is a claim but is not malpractice.3 Moreover, in Colorado, unless it involves fraud or malice, with few exceptions, a legal malpractice claim must be based on the existence of an attorney-client relationship between the plaintiff and the defendant.4

Duty

Attorneys' duties are in a state of flux. Certainly, attorneys owe their clients a professional duty. More uncertain is the question of to whom, besides their clients, attorneys owe a duty. It is clear that attorneys do owe some duties beyond the duties to their clients.5 For example, Rule 1.18(b) of the Colorado Rules of Professional Conduct states, "Even when no client-lawyer relationship exists, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation." Generally, however, attorneys do not owe a duty of reasonable care to nonclients, including prospective clients.6

Most often, this amorphous duty risk arises out of a transaction involving only one attorney, such as a residential real estate transaction with a single closing attorney or a dissolution of marriage agreement with only one attorney. The common denominator is a misconception by non-clients that the attorney is looking out for their interests as well as those of the attorney's clients.

The key to minimizing this risk is to leave nothing to chance or misinterpretation. First, attorneys should make clear whom they represent. In addition, they need to make clear that they have not undertaken, and are not undertaking, any duties to anyone besides the client. For example, in the residential real estate context, this involves a simple one-paragraph disclaimer signed by all the participants at the closing. It does not have to say much but should confirm three things: (1) the identity of the attorney's client; (2) that the attorney is not undertaking and has not undertaken any duty to anyone else; and (3) that the signatories understand and agree that the attorney has not undertaken any duty to anyone other than the client.

Attorneys can use a similar approach in other situations involving non-clients. For example, if an attorney interacts with an unrepresented spouse in a divorce proceeding, the attorney should communicate only in writing unless the unrepresented spouse signs a disclaimer. The disclaimer should match the attorney's engagement letter to the client. This way, the identity of the client in the disclaimer letter precisely tracks the identity of the client in the disclaimer. Any ambiguity is typically to the attorney's disadvantage.7

Breach of Duty

Attorneys have the duty to exercise the level of knowledge, skill, and judgment ordinarily possessed by members of the legal profession in carrying out the services for their clients.8 This means that an attorney must do what an ordinarily skillful Colorado attorney would have done at the time the action was taken.9

As the practice of law evolves, so does the standard of care in Colorado. This has always been true. Computers replaced word processors, which replaced typewriters, which replaced quills. The specifications for briefs in some jurisdictions now involve word counts and formatting restrictions; attorneys have a duty to comply with the restrictions or face the risk that a court will strike their briefs.

Colorado attorneys must stay abreast of these changes (and changes in the law) and adapt their practices accordingly.10 Saying that "it is the way things have always been done" is not a defense to a legal malpractice claim. Instead, attorneys must perform their legal services in accordance with the standard of care today.11

An attorney's minimal level of competency may also include knowledge of the technology relevant to her practice. For example, in June 2015, the State Bar of California Standing Committee on Professional Responsibility and Conduct issued an advisory opinion setting forth nine areas of technological competence for attorneys who practice in that state.12 Further, comment 8 to American Bar Association Model Rule of Professional Conduct 1.1, which Colorado has yet to adopt, states that "[t]o maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology . . . ."13

CLE programs are an effective way of obtaining the resources necessary to stay up to date on the law and the modern-day law practice. But attorneys must do more than just attend CLE seminars. Attorneys and law firms must stay abreast of the law and adapt their law practices accordingly, or face higher risks of legal malpractice. As the practice changes, so must attorneys and law firms.

Proximately Caused Damages

Legal malpractice involves more than just the breach of a professional duty; there must also be proximately caused damages.14 For example, an attorney who misses the statute of limitations for filing a frivolous or meritless claim has not committed legal malpractice.15 Similarly, an attorney who fails to timely file a meritless appeal has not committed legal malpractice.16

To establish a legal malpractice claim, the former client has the burden of proving "a case within a case."17 The former client must establish that, but for the attorney's mistake, the former client would have achieved a successful result. Accordingly, an attorney error that deprives the former client of the opportunity to pursue a frivolous claim or appeal does not establish legal malpractice because the former client could not prove that, but for the attorney's negligence, the underlying suit would have succeeded. Of course, the reverse is also true. There are times when a client suffers damages but there is no duty or no breach of the standard of care.18 This is an important distinction.

Far too often, when confronted with an error, attorneys admit to legal malpractice. This is a costly mistake. First, they are undertaking liabilities that would not otherwise exist. Second, most professional liability insurance policies contain a "no admission" clause. Attorneys who admit liability in violation of such a clause risk the forfeiture of their insurance coverage.19

The party asserting a legal malpractice claim bears the burden of proving that the attorney's mistake caused some damage.20 In the litigation context, this means proving that there would have been a different result if the attorney had provided reasonably skillful and prudent legal services.21 With regard to closing documents, it means that the alleged error actually impaired or damaged someone to whom a duty was owed.22 A mistake without consequence is not legal malpractice.

Conclusion

Legal malpractice happens, but it does not have to be inevitable. The first step is understanding what constitutes legal malpractice and what does not.

Footnotes

1. Klevens et al., The Lawyer's Handbook: Ethics Compliance and Claim Avoidance 1 (1st ed., ALM Media Properties, LLC, 2013).

2. Bebo Constr. Co. v. Mattox & O'Brien, P.C., 990 P.2d 78, 83 (Colo. 1999).

3. Stone v. Satriana, 41 P.3d 705, 712 (Colo. 2002).

4. State Farm Fire & Cas. Co. v. Weiss, 194 P.3d 1063, 1065 (Colo.App. 2008).

5. Colo. RPC 1.18.

6. Allen v. Steele, 252 P.3d 476, 482 (Colo. 2011) (citing Mehaffy, Rider, Windholz & Wilson v. Central Bank Denver, N.A., 892 P.2d 230, 240 (Colo. 1995). See also Colo. RPC 1.18, cmt. [1] ("prospective clients should receive some but not all of the protection afforded clients").

7. See Moland v. Indus. Claim Appeals Office, 111 P.3d 507, 511 (Colo.App. 2004) ("Absent such evidence or intent [derived from the language of the contract], as a last resort, the court may apply the principle of construing the ambiguous language against the drafter.").

8. Stone, 41 P.3d at 711.

9. Id. at 712.

10. Colo. RPC 1.1, cmt. [6] ("To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, engaging in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject.").

11. See Stone, 41 P.3d at 712.

12. See State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Op. No. 2015-193 (2015).

13. ABA Model Code of Professional Responsibility Rule 1.1, cmt. [8] (2015) (emphasis added).

14. Bebo Constr. Co., 990 P.2d at 83.

15. See Giron v. Koktavy, 124 P.3d 821, 825 (Colo.App. 2005).

16. See Bebo Constr. Co., 990 P.2d at 83 ("The plaintiff must demonstrate that the claim underlying the malpractice action should have been successful if the attorney had acted in accordance with his or her duties.").

17. See id. at 824.

18. E.g., Stone, 41 P.3d at 709

19. Saab Fortney, "Legal Malpractice Insurance: Surviving the Perfect Storm," 28 J. of the Legal Profession 41, 61 ( June 11, 2004).

20. Hopp & Flesch, LLC v. Backstreet, 123 P.3d 1176, 1183 (Colo. 2005).

21. Fleming v. Lentz, Evans, & King, P.C., 873 P.2d 38, 40 (Colo.App. 1994) ("In order to prove causation and damages in a malpractice suit, a plaintiff must demonstrate that his unpursued claim would have been successful had the attorney actually litigated the claim.").

22. See Aller v. Law Office of Carole E. Schriefer, P.C., 140 P.3d 23, 25 (Colo.App. 2005) (plaintiff unable to prove attorney's breach of fiduciary duty caused her to sustain damages in matter involving termination of a business).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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