Law firm mergers and legal malpractice

February 2nd, 2015

Good article in The Recorder, Don’t Make These Five Law Firm Merger Mistakes.

Number 3 on the list is creating gaps in insurance coverage. When firms merge, legal malpractice insurers may either combine coverage for the merging firms with that of the new firm or may offer extended reporting endorsements (tail coverage) for one or both of the merging firms to cover claims that may be asserted after the date of the merger. The merging firms should be certain how old liabilities will be handled.

Number 4 on the list is failing to address conflicts. Conflicts and potential conflicts between merging firms can result in serious embarrassment or liability. Addressing conflict issues before the merger is easier, particularly if lawyers take the time to analyze and discuss the conflict issues with clients before there is an actual conflict as a result of the merger. Keep in mind “soft” conflicts, too-clients who will not appreciate representation of certain other clients, even if the disciplinary rules do not forbid representation of competing or antagonistic clients.

Lawyer Admits Computer Illiteracy, Gets Sanctioned

January 30th, 2015

From a sanctions opinion in New Jersey:

National’s counsel offered a different explanation (for failing to update a spreadsheet): “I have to confess to this Court, I am not computer literate. I have not found presence in the cybernetic revolution. I need a secretary to help me turn on the computer. This was out of my bailiwick.”

Professed technological incompetence is not an excuse for discovery misconduct.

Contingent Fee Case: What to do if the client suggests that a lawyer should reduce the fee because of legal malpractice.

January 28th, 2015

An article on this subject in the Wisconsin Law Journal advises lawyers not to seek a release of malpractice liability from the client when disbursing the settlement if the fee is reduced.

Texas ethics rules are very similar to Wisconsin on this issue. Texas Ethics Opinion 557 addresses the conflicts that may arise when a client suggests malpractice has occurred, and Texas Ethics Opinion 593 outlines considerations in settling malpractice claims with clients.

Failure to catch error costs client $1.5 billion security interest

January 26th, 2015

A paralegal for a law firm representing GM erroneously included a loan for $1.5 billion in a UCC-3 release. The error caused no harm to GM, but the lenders’ lawyer apparently failed to notice the erroneous inclusion of the $1.5 billion loan in the release, and the release was filed. On appeal to the Second Circuit, the court has held that while there was no intent to release the collateral secured, the filing of the erroneous document was authorized by the lender’s representative, JPMorganChase. The extent of damage to the lenders is not clear from the court’s opinion, but may be substantial. In Re Motors Liquidation Co., Docket No. 13‐2187 (2nd Cir. Jan. 21, 2015).

It is entirely too early to assume there will be a malpractice claim in this matter. However, given the facts as stated in the opinion, liability would be most likely for the lender’s firm should a claim be asserted. Because GM’s lawyers had no duty to the lenders, it seems unlikely that the lenders’ lawyer could seek contribution from GM’s lawyers.

What Lawyers’ Professional Liability Limits Do Lawyers Need?

January 22nd, 2015

This is one of the most frequently asked questions at TLIE. If you had a crystal ball and could tell us what legal malpractice claims you will have, we could give you a perfect answer. Since that is unlikely, here are some factors we suggest lawyers consider when deciding on appropriate limits.

Lawyer Referral Service Requirements. A number of lawyer referral services require certain limits. Check with those in your area to find out their requirements.

Client Requirements. Some clients may require certain limits. We understand that some insurance companies, title companies and banks require certain limits before hiring counsel.

The Nature of Your Work. Many lawyers consider it a matter of professionalism to protect clients against honest mistakes. Consider the likely impact of a serious error in the services you ordinarily provide.

Defense costs. Remember that the insurance pays for defense as well as a settlement. At TLIE, we have found that a little more than one-third of our payments have been for defense costs. Ideally, your limits should cover both defense costs and possible judgments and settlements. A low limit may force consideration of an early settlement.

Your Assets. If you have significant assets that could be attached, the assets you have may affect the amount of insurance you choose to carry.

Price. You may not be able to afford the ultimate protection you’d like to have. If so, consider carrying a lower limit or higher deductible.

Ultimately, the right level of insurance should help you sleep at night. You will feel like you’ve spent a reasonable amount to protect yourself and your clients.