Mistakes Happen: Don’t Make It Worse
Legal MalpracticeEven the most diligent attorneys can make mistakes. Mishandling of mistakes, however, is entirely preventable. And failure to properly handle mistakes may make things far worse, including potential disciplinary proceedings, loss of coverage under your malpractice policy, additional causes of action and damages in a legal malpractice claim, not to mention fee disgorgement. This article discusses tips on how to avoid mishandling the situation after an attorney discovers that she has made a mistake that may adversely affect her client.
A material mistake by the lawyer should be disclosed with the client as soon as practicable.
An attorney has an ethical duty under Rule 1.03 of the Texas Disciplinary Rules of Professional Conduct (“Texas Rules”) to keep clients “ reasonably informed about the status of a matter” and may not withhold information to serve the lawyer’s own interests. Comment 4 to Rule 1.03.
Not all mistakes, however, require disclosure to the client. Under American Bar Association’s Standing Committee on Ethics and Professional Responsibility Formal Opinion 481, the lawyer must inform the client if a disinterested lawyer would conclude that the error is either “reasonably likely to harm or prejudice a client” or the nature of the error “would reasonably cause a client to consider terminating the representation even in the absence of harm or prejudice.” Opinion 481 appears to limit such disclosures to instances in which there is no question that a mistake has been made. Under this Opinion, whether the client has a viable legal malpractice claim appears to be immaterial as to whether the mistake should be disclosed.
Determine whether representation may continue
Under Texas Rule 1.06(b)(2), a lawyer is prohibited from continuing representation if it “reasonably appears to be or become adversely limited by … the lawyer’s or law firm’s own interests.” In other words, if a material mistake requiring disclosure is not made, the lawyer risks violating Rule 1.06 due to the possibility that such representation is limited by her own personal interest.
To continue representation pursuant to Texas Rule 1.06(c), the lawyer must reasonably believe that she can still effectively represent the client, and the lawyer must obtain the client’s consent to the representation after “full disclosure of the existence, nature, implications, and possible adverse consequences.”
Withdrawal is usually permitted where there is a potential conflict regarding a possible legal malpractice claim. And withdrawal is required if continued representation violates the disciplinary rules. Texas Opinion 557 (“ in the case of malpractice for which the consequences cannot be significantly mitigated through continued legal representation, under Rule 1.06 the lawyer-client relationship must end as to the matter in which the malpractice arose”).
Of course, withdrawal must be carried out in a way that does not prejudice the client, and requires the consent of the court if the representation involves litigation. Comment 3 to Rule 1.15.
If the mistake is one that requires an attorney to withdraw as counsel due to the conflict of interest with her client, she must take steps “to the extent reasonably practicable to protect a client’s interest” under Texas Rule 1.15(d), such as:
giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payments of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law only if such retention will not prejudice the client in the subject matter of the representation.
Take care before attempting to settle a legal malpractice claim
Under Texas Opinion 593, an attorney is prohibited from settling a legal malpractice claim with an unrepresented client unless the attorney:
(1) discloses the malpractice and the termination of the lawyer-client relationship to the client, (2) advises the now former client in writing that independent representation is appropriate with respect to the client’s consideration of the lawyer’s offer to settle the malpractice claim, and (3) does not engage in conduct involving dishonesty, fraud, deceit or misrepresentation in connection with the negotiation and settlement of the malpractice claim.
Failure to adhere to these requirements may be used in a subsequent malpractice claim, not to mention subject the attorney to disciplinary action.
Understand the consequences of mishandling a mistake and don’t make it worse
From a practical standpoint, if a client is promptly notified of the mistake and the attorney is entirely forthcoming, the client may decide not to pursue a legal malpractice claim. On the other hand, mishandling a mistake in violation of the ethics rules can have severe repercussions, including:
- Disciplinary proceedings
- Increased malpractice exposure
- Increased damages and theories of liability (negligence claim can turn into claims for double damages for breach of fiduciary duty and punitive damages)
- Fee disgorgement
- Loss of coverage under the legal malpractice insurance policy
- May extend the statute of limitations applicable beyond the applicable two years
Call TLIE promptly and report a potential claim
It is recommended that the lawyer seek the advice of her malpractice insurance carrier before disclosing any error to the client, and should discuss with the carrier what information should be provided to the client about the lawyer’ malpractice coverage.
Keep in mind that failing to give prompt notice of a claim to the malpractice insurance carrier may jeopardize coverage for an otherwise covered claim under the policy. An attorney should report the potential claim even if he believes it can be fixed.
