Avoiding and Defending Avoiding and Defending Malpractice Complaints and Malpractice Complaints and

GrievancesGrievances

By Patrick J. Olmstead, Jr.By Patrick J. Olmstead, Jr.Hoover Hull LLPHoover Hull LLP

November 10, 2011November 10, 2011

Malpractice Suits and Malpractice Suits and GrievancesGrievances

A malpractice suit is a personal injury suit A malpractice suit is a personal injury suit designed to recover monetary damages.designed to recover monetary damages.

The grievance process is designed to The grievance process is designed to determine the fitness of an attorney to determine the fitness of an attorney to practice and to protect the public and practice and to protect the public and Courts.Courts.

2008-2009 Reporting Period2008-2009 Reporting Period

17,187 active lawyers17,187 active lawyers 1,456 grievances received1,456 grievances received 949 grievances dismissed949 grievances dismissed 507 requests for response507 requests for response 53 grievances53 grievances 62 Verified Complaints for 62 Verified Complaints for

Disciplinary ActionDisciplinary Action

Areas of PracticeAreas of Practice

Criminal (31%)Criminal (31%) Domestic Relations (19%)Domestic Relations (19%) Tort (8%)Tort (8%) Bankruptcy (6%)Bankruptcy (6%) Contracts (6%)Contracts (6%) Probate (4%)Probate (4%)

What to do if a Grievance is filedWhat to do if a Grievance is filed

Contact your insurance carrier or agentContact your insurance carrier or agent If you do not contact your carrier If you do not contact your carrier

immediately, they may decline coverage on immediately, they may decline coverage on the grievance as well as subsequent the grievance as well as subsequent malpractice suit.malpractice suit.

The carrier may even provide counsel to The carrier may even provide counsel to represent you in the grievance process. represent you in the grievance process.

Consult an attorneyConsult an attorney Do not contact your client about Do not contact your client about

dismissing the grievance. dismissing the grievance. Matter of Matter of RamirezRamirez, 853 N.E.2d 121 (Ind. 2006)., 853 N.E.2d 121 (Ind. 2006).

Screening ClientsScreening Clients This is your best chance to avoid This is your best chance to avoid

malpractice suits and grievances.malpractice suits and grievances. Conflict Check before meeting.Conflict Check before meeting. Make sure you can comfortably handle the Make sure you can comfortably handle the

representation (both the expertise and representation (both the expertise and time) and the client suits you.time) and the client suits you.

Watch out for: Watch out for: Unrealistic expectations;Unrealistic expectations; Too emotionally involved; Too emotionally involved; Nothing else to do but monitor the litigation;Nothing else to do but monitor the litigation; Overly involved;Overly involved; Has already had one attorney (this should be a red flag);Has already had one attorney (this should be a red flag); Prior history as a litigant.Prior history as a litigant.

Prospective ClientsProspective Clients

““Duties to Prospective Clients”Duties to Prospective Clients”

Duty to maintain the confidential nature of Duty to maintain the confidential nature of the communications shared by the the communications shared by the prospective clients.prospective clients.

In re AnonymousIn re Anonymous, 932 N.E.2d 671 (Ind. , 932 N.E.2d 671 (Ind. 2010) (violated 1.9(c)(2) by disclosing that 2010) (violated 1.9(c)(2) by disclosing that client was getting divorced) (no exception client was getting divorced) (no exception for public information). for public information).

Rule 1.18(d)(2) Safe Harbor.Rule 1.18(d)(2) Safe Harbor. Independently verify the facts – (proper Independently verify the facts – (proper

parties, statute of limitations issues, etc.). parties, statute of limitations issues, etc.).

Evaluation LetterEvaluation Letter

Send a letter informing the client you Send a letter informing the client you are assessing whether to accept the are assessing whether to accept the representation.representation.

Until you accept the case, Until you accept the case, in writingin writing make it clear that no attorney-client make it clear that no attorney-client relationship has been formed and relationship has been formed and you do not represent them.you do not represent them.

Ask them to waive all conflicts in Ask them to waive all conflicts in return for your evaluation and make return for your evaluation and make them sign it.them sign it.

Objective EvaluationObjective Evaluation

““About half the practice of a decent About half the practice of a decent lawyer consists in telling would-be lawyer consists in telling would-be clients that they are damned fools clients that they are damned fools and should stop.” and should stop.” Hill v. Norfolk & Hill v. Norfolk & Western Rwy. CoWestern Rwy. Co.., 814 F.2d 1192, , 814 F.2d 1192, 1202 (71202 (7thth Cir. 1987) (imposing Cir. 1987) (imposing sanctions for frivolous litigation).sanctions for frivolous litigation).

Letter Declining RepresentationLetter Declining Representation

An important tool for defending An important tool for defending malpractice suits and grievances is a malpractice suits and grievances is a letter declining representation. letter declining representation.

These malpractice lawsuits fall under These malpractice lawsuits fall under the category of “no good deed goes the category of “no good deed goes unpunished.” unpunished.”

Declination Letter LanguageDeclination Letter Language As we discussed in our telephone conversation, As we discussed in our telephone conversation,

no attorney-client relationship was formed.no attorney-client relationship was formed. No duty was owed to perform any research or No duty was owed to perform any research or

to do any work.to do any work. The confidential nature of the discussion will be The confidential nature of the discussion will be

maintained.maintained. There are certain notice requirements and There are certain notice requirements and

statute of limitations issues that may affect the statute of limitations issues that may affect the viability of your claim, and you should secure viability of your claim, and you should secure legal counsel. (Do legal counsel. (Do notnot provide expiration provide expiration date.)date.)

Avoid such statements as, “if you have any Avoid such statements as, “if you have any questions, please call me.”questions, please call me.”

CompetenceCompetence

An attorney must be competent in subject An attorney must be competent in subject matter of representation to accept the matter of representation to accept the case. Rule 1.1.case. Rule 1.1.

Only one of three options:Only one of three options: Be competent;Be competent; Become competent (through research); Become competent (through research); Hire competent co-counsel.Hire competent co-counsel. You cannot contract a lower standard of You cannot contract a lower standard of

care.care. Make sure you have a writing documenting Make sure you have a writing documenting

your client’s decision not to spend money. your client’s decision not to spend money.

Assisting the Unauthorized Practice Assisting the Unauthorized Practice of Lawof Law

In the Matter of AnonymousIn the Matter of Anonymous, No. , No. 10S00-1006-DI-288 (Ind. Sept. 3, 10S00-1006-DI-288 (Ind. Sept. 3, 2010) (private reprimand) (Indiana 2010) (private reprimand) (Indiana attorneys serving as local counsel for attorneys serving as local counsel for out-of-state attorneys are hereby out-of-state attorneys are hereby advised of the importance of their advised of the importance of their duty to ensure complete and timely duty to ensure complete and timely compliance with all the requirements compliance with all the requirements of ADR 3(2) [regarding of ADR 3(2) [regarding pro hac vice pro hac vice admission].”). admission].”).

Contracting Staff CounselContracting Staff Counsel

ABA Formal Op. 00-420 (2000) (“[A] ABA Formal Op. 00-420 (2000) (“[A] lawyer may … add a surcharge on lawyer may … add a surcharge on amounts paid to a contract lawyer amounts paid to a contract lawyer when services provided by the contract when services provided by the contract lawyer are billed as legal services” but lawyer are billed as legal services” but no surcharge if billed as an expense). no surcharge if billed as an expense).

See also ABA Formal Op. 88-356 See also ABA Formal Op. 88-356 (1988) (disclosure requirements for co-(1988) (disclosure requirements for co-counsel).counsel).

Clarify the Client and ConflictsClarify the Client and Conflicts

Who is your client? Make that clear!Who is your client? Make that clear! Rule 1.18.Rule 1.18. Joint representation can also cause a Joint representation can also cause a

conflict of interest. ABA Formal Opinion conflict of interest. ABA Formal Opinion 06-438, Feb. 10, 2006.06-438, Feb. 10, 2006.

Personal interests? Positional conflicts? Personal interests? Positional conflicts? Draft Conflict Waivers and recommend Draft Conflict Waivers and recommend

independent counsel to review the conflict independent counsel to review the conflict waiver.waiver.

Diligence and Adequate Diligence and Adequate CommunicationCommunication

Most common disciplinary complaintsMost common disciplinary complaints Rule 1.3 regarding diligence and promptnessRule 1.3 regarding diligence and promptness 1.4(a) keeping client adequately informed1.4(a) keeping client adequately informed 1.4(b) explaining matter sufficiently to client1.4(b) explaining matter sufficiently to client

Do not accept cases your office cannot handle.Do not accept cases your office cannot handle. Do not procrastinate, use your calendar.Do not procrastinate, use your calendar. Keep copies of all communications (includes Keep copies of all communications (includes

notes of voicemails from and phone conferences notes of voicemails from and phone conferences with clients).with clients).

Establish guidelines for communication – e-mail, Establish guidelines for communication – e-mail, letter? How often?letter? How often?

Keep client reasonably informed – provide Keep client reasonably informed – provide objective analysis of case (including weaknesses objective analysis of case (including weaknesses and worst case recoveries). and worst case recoveries).

Engagement LettersEngagement Letters

You must draft a careful and proper You must draft a careful and proper engagement letter. Very important engagement letter. Very important tool for defending malpractice tool for defending malpractice complaints and grievances.complaints and grievances.

Written fee agreements are Written fee agreements are increasingly recommended for all increasingly recommended for all cases. cases.

Scope of EngagementScope of Engagement

Carefully describe the scope of your Carefully describe the scope of your services to limit your responsibility. RPC services to limit your responsibility. RPC 1.1, 1.2. 1.1, 1.2. Flatow v. IngallsFlatow v. Ingalls, 932 N.E.2d 726 , 932 N.E.2d 726 (Ind. Ct. App. 2010), (Ind. Ct. App. 2010), trans. denied.trans. denied.

What matter does the engagement cover?What matter does the engagement cover? Scope of services in the matter?Scope of services in the matter? What are you What are you notnot doing? doing? (Ex: Corporate formation only. Separate (Ex: Corporate formation only. Separate

engagement for further legal work.)engagement for further legal work.)

Litigation Hold LettersLitigation Hold Letters

Increasing emphasis. Increasing emphasis. 1100 West, LLC v. Red Spot Paint & 1100 West, LLC v. Red Spot Paint &

Varnish Co., Inc.Varnish Co., Inc., 2009 WL 1605118 (S.D. , 2009 WL 1605118 (S.D. Ind. 2009) (default judgment due to Ind. 2009) (default judgment due to discovery abuse and sanctions against discovery abuse and sanctions against client and attorneys) (“BME compounded client and attorneys) (“BME compounded the problem by, like a chameleon, the problem by, like a chameleon, becoming indistinguishable from its client becoming indistinguishable from its client and allowing Red Spot … to evade the and allowing Red Spot … to evade the truth.”). truth.”).

Advice on Billing and Fees Advice on Billing and Fees

Non-refundable retainer is an Non-refundable retainer is an anachronism. anachronism. Matter of O’FarrellMatter of O’Farrell, 942 , 942 N.E.2d 799 (Ind. 2011) (public reprimand N.E.2d 799 (Ind. 2011) (public reprimand for non-refundable flat fees). for non-refundable flat fees).

You cannot stop rendering services until You cannot stop rendering services until you receive payment.you receive payment.

Rule 1.4(a), duty to keep client reasonably Rule 1.4(a), duty to keep client reasonably informed, likely includes estimating costs informed, likely includes estimating costs versus likely recovery. (Ability to collect?) versus likely recovery. (Ability to collect?)

Must Explain FeesMust Explain Fees

In re LauterIn re Lauter, 933 N.E.2d 1258 (Ind. , 933 N.E.2d 1258 (Ind. 2010). Lauter agreed to $750 fee to 2010). Lauter agreed to $750 fee to take case through EEOC process. EEOC take case through EEOC process. EEOC found no probable cause. Suit filed found no probable cause. Suit filed anyway, and client paid additional anyway, and client paid additional $4,250. Recovered $75,000. So, client $4,250. Recovered $75,000. So, client grieved Lauter. Public reprimand for not grieved Lauter. Public reprimand for not disclosing “what the additional retainer disclosing “what the additional retainer would be or how it would be would be or how it would be determined.” determined.” IdId. at 1262.. at 1262.

Written Fee AgreementsWritten Fee Agreements

Clauses you should consider include:Clauses you should consider include: The client shall pay reasonable costs and The client shall pay reasonable costs and

expenses regardless of recovery in suit. expenses regardless of recovery in suit. Representation will not begin until the Representation will not begin until the

attorney receives payment in full of the attorney receives payment in full of the advance fee. advance fee.

The client consents to the attorney’s The client consents to the attorney’s withdrawal in the event the client does not withdrawal in the event the client does not promptly pay the attorney’s bill. promptly pay the attorney’s bill. Fidelity Fidelity Nat’lNat’l, 310 F.3d 537 (7th Cir. 2002) (permitting , 310 F.3d 537 (7th Cir. 2002) (permitting attorney to withdraw).attorney to withdraw).

Attorney shall have a lien on the proceeds Attorney shall have a lien on the proceeds and the file until paid in full.and the file until paid in full.

1.5 Reasonable Fees and Billing1.5 Reasonable Fees and Billing

Factors Regarding Whether Fee is ReasonableFactors Regarding Whether Fee is Reasonable Taking retainer & performing “no meaningful Taking retainer & performing “no meaningful

service”service” Collecting private fee when paid by government. Collecting private fee when paid by government.

Matter of BrownMatter of Brown (2006) (60 day suspension for (2006) (60 day suspension for taking a fee as a public defender).taking a fee as a public defender).

Taking a large percentage of initial payment in a Taking a large percentage of initial payment in a structured settlement structured settlement

Charging a fee for withdrawing from the case. Charging a fee for withdrawing from the case. Charging fees after client has terminated Charging fees after client has terminated

attorney-client relationship. attorney-client relationship. Billing client for work done but not provided to Billing client for work done but not provided to

client. client.

Billing (Cont’d)Billing (Cont’d)

Send interim billing to keep the client Send interim billing to keep the client informed. informed. Matter of AreauxMatter of Areaux (2005) (public (2005) (public reprimand where final bill of $12,195.18 reprimand where final bill of $12,195.18 exceeded $4,000 estimate).exceeded $4,000 estimate).

You cannot stop rendering services until You cannot stop rendering services until you receive payment. (You must get you receive payment. (You must get approval to withdraw.) approval to withdraw.)

Disclaim personal liability for third party Disclaim personal liability for third party costs. costs. Kelly v. LevandoskiKelly v. Levandoski, 875 N.E.2d 850 , 875 N.E.2d 850 (Ind. Ct. App. 2005) (jury ordered attorney (Ind. Ct. App. 2005) (jury ordered attorney to pay towing company $18,827).to pay towing company $18,827).

Don’t sue your client for feesDon’t sue your client for fees

90% of fee claims result in a 90% of fee claims result in a counterclaim for legal malpractice. counterclaim for legal malpractice.

Oftentimes, your insurer will ask Oftentimes, your insurer will ask whether you sue for fees (because it whether you sue for fees (because it makes you a higher risk). makes you a higher risk).

There is little point in suing a client There is little point in suing a client who cannot pay. who cannot pay.

Don’t sue (cont’d)Don’t sue (cont’d)

Matter of BeachamMatter of Beacham, 934 N.E.2d 735 , 934 N.E.2d 735 (Ind. 2010). In 2003, agreed to (Ind. 2010). In 2003, agreed to nonrefundable retainer of $5,000, plus nonrefundable retainer of $5,000, plus the greater of $200/hr. or 25%. Work the greater of $200/hr. or 25%. Work “provided no value,” and was “of poor “provided no value,” and was “of poor quality and rambling.” Final bill of quality and rambling.” Final bill of $233,484. Client settled her case for $233,484. Client settled her case for $20,000. Beacham sued for fees (in $20,000. Beacham sued for fees (in Indiana), defaulted client, forcing her Indiana), defaulted client, forcing her into bankruptcy. into bankruptcy.

TimesheetsTimesheets

Always keep track of your time, Always keep track of your time, regardless of the fee arrangement.regardless of the fee arrangement.

They are a valuable tool for defending They are a valuable tool for defending malpractice complaints and grievances.malpractice complaints and grievances.

They are They are admissibleadmissible as business as business records.records.

Think “defensively” when writing your Think “defensively” when writing your narrative.narrative.

Explain: who, what, why.Explain: who, what, why. ““Clients lie, and clients die.” Olmstead.Clients lie, and clients die.” Olmstead.

Letter Terminating RepresentationLetter Terminating Representation

Never assume the attorney-client relationship Never assume the attorney-client relationship has been terminated. Write a letter.has been terminated. Write a letter.

Letter should establish the date of termination. Letter should establish the date of termination. Letter should be short but designed to cover Letter should be short but designed to cover

you in case of subsequent lawsuit or grievance.you in case of subsequent lawsuit or grievance. Letter should inform client of potential lien Letter should inform client of potential lien

against client’s file and proceeds of the against client’s file and proceeds of the litigation as security for your fees and litigation as security for your fees and expenses.expenses.

Helps defend claims of continuous Helps defend claims of continuous representationrepresentation. .

Trust AccountsTrust Accounts

An increasing point of emphasis is An increasing point of emphasis is the proper maintenance of trust the proper maintenance of trust accounts. accounts.

Separate ledger for each client.Separate ledger for each client. Each client must have balance above Each client must have balance above

$1.$1.

Trust Accounts (Cont’d)Trust Accounts (Cont’d)

Matter of GoldbergMatter of Goldberg, 2011 WL 3793677 (Aug. , 2011 WL 3793677 (Aug. 24, 2011) (failed to keep adequate records, 24, 2011) (failed to keep adequate records, failed to hold funds in trust, used some fund failed to hold funds in trust, used some fund to pay filing fees for other client) (90 days, 30 to pay filing fees for other client) (90 days, 30 served with 60 stayed subject to 2 years of served with 60 stayed subject to 2 years of probation). probation).

Matter of SmithMatter of Smith (2006) (60 days because he (2006) (60 days because he didn’t use attorney trust account or IOLTA didn’t use attorney trust account or IOLTA account for awhile and then mismanaged the account for awhile and then mismanaged the accounts he opened).accounts he opened).

Collecting on Your Fees (1.8)Collecting on Your Fees (1.8)

Four Winds, LLC v. Smith & DeBonisFour Winds, LLC v. Smith & DeBonis, 854 , 854 N.E.2d 70, 75 (Ind. Ct. App. 2006) N.E.2d 70, 75 (Ind. Ct. App. 2006) (approving of termination clause which (approving of termination clause which rendered the client liable for attorney rendered the client liable for attorney fees upon discharge and retaining lien on fees upon discharge and retaining lien on file). file).

Estate of JohnsonEstate of Johnson, 855 N.E. 2d 686, 693 , 855 N.E. 2d 686, 693 (Ind. Ct. App. 2006) (lien on proceeds). (Ind. Ct. App. 2006) (lien on proceeds).

Grimes v. CrockromGrimes v. Crockrom, 947 N.E.2d 452 (Ind. , 947 N.E.2d 452 (Ind. Ct. App. 2011) (valid retaining lien on Ct. App. 2011) (valid retaining lien on medical records). medical records).

Arranging for a Surrogate AttorneyArranging for a Surrogate Attorney

Lawyers should have an agreement Lawyers should have an agreement with another local attorney to step in with another local attorney to step in for each other in an emergency. This for each other in an emergency. This is a point of increasing emphasis with is a point of increasing emphasis with the Disciplinary Commission. the Disciplinary Commission.

Prepare arrangement on how to split Prepare arrangement on how to split fees.fees.

Make sure surrogate is competent to Make sure surrogate is competent to handle the case.handle the case.

What to Do When You Mess UpWhat to Do When You Mess Up

Notify your insurance carrier/agent.Notify your insurance carrier/agent. Prepare a letter explaining the Prepare a letter explaining the

mistake made and what can be done mistake made and what can be done about it.about it.

Owning up to your mistake Owning up to your mistake immediately can mitigate your immediately can mitigate your damages.damages.

If any questions, contact:If any questions, contact:

Patrick J. Olmstead, Jr.Patrick J. Olmstead, Jr.

Hoover Hull LLPHoover Hull LLP

111 Monument Cir., Ste. 4400111 Monument Cir., Ste. 4400

P.O. Box 44989P.O. Box 44989

Indianapolis, IN 46204-0989Indianapolis, IN 46204-0989

(317) 822-4400(317) 822-4400

polmstead@hooverhull.com

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