What is legal malpractice?
Legal malpractice occurs when an attorney or law firm fails to perform according to the standards set by the State Bar Association in which they practice. This breach of standard may be due to either simple negligence or a more serious misconduct. Either way, as a result of the lawyer’s poor representation, the client will suffer financially.
This definition can be broken down into two distinct components, breaches of fiduciary duty and breaches of contract.
The common element is that the attorney’s conduct must have been unprofessional and exposed the client to excessive liability or prevented the client from receiving monetary benefits.
Examples of negligent actions may include:
• Missing a statue of limitations.
• Making unpleasant comments about the court or jury in front of them.
• Failing to file a lawsuit.
• Failing to respond to or misinterpret an IRS tax notice .
• Overlooking critical information about an estate or investment.
• Making incorrect statements of law based on a particular state.
• Ignoring financial issues in an a divorce settlement.
• Failing to retain expert witnesses, or naming the wrong witnesses.
• Posing potential ethical violations by ignoring conflict of interests or failing to obtain informed consent.
• Breach of contract
An attorney has a silent agreement with his or her client upon retaining representation. The agreement is based on common law assumptions that the attorney will complete his/her legal work within a reasonable time and according to the professional status of the profession and sound judgment. These opinions are not written into law, but are assumed. An attorney who fails to follow these assumptions may be liable for breach of contract.
The Importance of Settlements in Legal Malpractice Cases
**The Importance of Settlements in Legal Malpractice**
As is the case with many other forms of civil litigation, the vast majority of legal malpractice cases end in settlements rather than a trial. The number of settlements in this field is heightened by the financial reasons, which we previously discussed here. Among the 2,000 plus of cases in settlement, their importance will be discussed.
A settlement, that is a mutual agreement to resolve the dispute before the courts issue a final judgment, is in many ways far more preferable than enduring a trial or an appellate (2nd, 4th or 9th) court. Satisfaction that the dispute is resolved, especially when viewed in combination with the- relative certainty of settlement income, is a boon to the commercial malpractitioner. On the other hand, it is equally true, that the other side may have had little to lose in a trial and that settlement represents the defendant’s low point in a case of certain exposure. But perhaps the greatest argument in favor of settlement is a question of perception. Litigants feel that they have more control over outcome when they can choose than when their fate is held in the hands of a jury or an appellate judges. As to control, actual or perceived, a settlement represents a truth: it is a way of controlling unreasonable expectations. This is especially true in a legal malpractice case where damages are so unpredictable and dependent on factors outside of the litigants control.
Factors That Affect Settlement Amounts
The amount you can typically expect to have agreed to for settlement of your legal malpractice case will depend on several factors, including the magnitude of the underlying error, the amount of damages you incurred, and the ability of your former attorney to pay.
Severity of Error
Every case must involve some form of negligence. However, the most severe errors tend to inspire higher settlement offers than lesser mistakes. A critical factor in this situation is whether it would have been better as a plaintiff or defendant.
The circumstances of your case may mean that it was a poor choice for either party and considered a "no-win" situation. Nevertheless, if the attorney was negligent and caused you to lose the case, your legal malpractice case will likely yield a settlement number higher than the value of a "no-win" case. The reason for this assessment is that regardless of how you would have performed as either plaintiff or defendant, the attorney made errors of law that made your loss unavoidable.
Amount of Damages
Some legal malpractice cases have constituents who suffered physical damage, such as serious injury or even loss of life. Others have widespread ramifications of property loss or loss of future earning potential. The amount of damages in these cases significantly affects settlement amounts. A larger impact means a more substantial settlement offer as a means of making the situation right.
Ability to Pay
A firm or solo attorney involved in a legal malpractice case may not have the financial resources necessary to compensate you fully for the amount of your loss. This reality may limit your options and result in a settlement amount less than what you would receive from a larger firm that could afford to pay you out of the firm’s general funds.
How Settlements Are Reached
The settlement process in legal malpractice cases often resembles the general litigation process, but there are some unique aspects to it. Legal malpractice settlements in the pre-litigation phase are more likely than court-filed cases to be confidential, but are often composed of reduced fiduciary fees or fractional refund payments. In a court-filed case, the same considerations apply to any damages amount agreed on as plaintiff’s counsel is only entitled to a reduced fiduciary fee and a share of any other recovery made for the client. In a pre-litigation settlement that is kept confidential the law firm, in essence, buys the case for a reduced fee (often half, depending on litigation expense and the probability of success) and exits the picture forever. The client retains the right to sue an adverse party, but now does not have any attorney assisting them in the case. Sometimes, but not always, the buying law firm will continue to represent the client in the action against the adverse party; many times, the first law firm will retain appellate counsel. In a court-filed matter, either type of settlement would likely be subject to judicial review and approval prior to consummation. Before filing a court action, client and counsel will have discussed a range of topics related to the case(s), including: Each of these issues will play a vital role as the case moves forward, so that by the time negotiations are entered into, both sides have a clear understanding of the nature of the matter, the likely outcome, and the desired result. Legal malpractice cases tend to part of a spectrum of damage one step removed from personal injury, wrongful death and products liability cases; if a plaintiff were to sue for a direct personal injury for the same events for which they had filed a legal malpractice claim, the potential recovery would be much higher. For this reason, defense attorneys will often insist that the legal malpractice case "swap" be included in any discussion of settlement. Mediators are frequently used in these situations, either to obtain the resolution in a court-filed case, or to help parties arrive at a settlement during pre-litigation discussions.
Difficulties and Traps in Settlement Negotiations
While most legal malpractice cases that make it to the settlement stage will end in a successful negotiation, there are times when negotiations can come off the rails. Miscommunication, oppositional negotiation tactics, or unrealistic expectations can all lead to a failed mediation. 2 Harper on Lawyering and Influencing: Persuasion Tools & Techniques § 33:3 provides an excellent checklist.
Anticipate pushback:
Know your opponent’s positions, reservations, and vulnerabilities will prepare you for pushback.
Establish reciprocity:
Explain the reasons and benefits of making a concession. This facilitates deal making by establishing the basis for all concessions made in the process of reaching an agreement.
Know your audience:
Present information in terms a specific audience is likely to accept.
Make a request:
Present the offer or request for reconsideration. To maximize your advantages, anticipate pushback and objections and refine the offer or request.
Use evidence:
Use facts and evidence to substantiate your position.
Use arguments:
A technique of arguing that can be used when facts and evidence are not available.
Acknowledge the other’s point of view:
Demonstrate understanding of the other party’s position or key concern. Acknowledging the other party’s position helps to establish rapport, which can facilitate deal making. If they feel that they have been understood they will be more likely to listen to what the other side has to say.
Active listening:
Active listening is confirming that you understand by restating the other person’s comments and then restating your understanding.
Persuade through repetition:
Reinforce a response by repeating it multiple times . Repetition over time is a powerful notion that supports the idea that human beings will move if they stay exposed to something long enough.
Contrast the other party’s position with a reasonable standard:
Contrasting highlights the reasonableness (or lack of reasonableness) of both positions. Highlighting the reasonableness of your offer while contrasting it with the other party’s offers makes the position more acceptable.
Present incremental demands:
Incremental demands are multiple, sequential demands that gradually increase in value.
Exploit cognitive biases:
Exploiting cognitive biases allows you to increase payoff and minimize losses.
Influence nonverbal communication:
Nonverbal communication sets people at ease, relaxes the situation, enhances your legitimate authority, and gives your words more weight and impact. This nonverbal communication needs to be balanced against. Effective communicators do not tend to be too formal or too casual. When a message is too informal it can undermine the seriousness of the communication, but being too formal can make it uncomfortable for the audience.
Prioritize:
Prioritization sets very specific goals for yourself which makes it easier to make tough decisions about when to stand your ground and when to back away.
Opening offer:
This is the offer that begins the negotiation process. The initial offer is the high point in negotiation because once someone has moved off of their opening offer they lose the ability to recover the original position.
Prepare to negotiate:
Practiced negotiators see themselves as playing a game. They need to find good values, make good moves, and pursue the best strategies.
What Legal Advice Should Plaintiffs Have About Settlements?
Seeking legal advice is essential for clients who are pursuing a legal malpractice case against their former attorney on retaining the best counsel possible to lead them through this complicated and time consuming procedure. Clients must recognize that an experienced litigator in the field of legal malpractice will have more knowledge than just the law. Such individuals are able to help litigants through the antagonizing and exhausting process and furthermore, they can direct a client in a way that forces the other party to negotiate a settlement. Finding just the right legal representative can take time and even countless consultations; however, it is well worth it in the end. In searching for the right attorney there are some guidelines. First, all referred counsel should be interviewed, but the attorney with the most experience in the field should be retained. Clients should ask about how many legal malpractice cases the attorney has worked on in the past and how successful they were at litigating those cases. Once the client has found the ideal counsel, they must expect progress and feel secure in their choice of attorney. Litigation can be very tiring and overwhelming, but a good legal malpractice attorney will be able to keep their clients from reaching the breaking point. Litigation can be especially tiresome when settlement appears to be hopeless, but a good attorney will be able to keep an even pace with the litigation and help guide the case toward a settlement. The faster a legal malpractice case is resolved the better it is for all parties involved. Settling eliminates the added time and stress of continuing the litigation, and prevents the occurrence of further malfeasance.
Non-Disclosure Agreements in Settlements
Often both sides of a legal malpractice case will insist on including a confidentiality clause in the settlement document. Defendants do so for obvious and practical reasons as for plaintiffs, who with relatively few exceptions, do not want their case to be publicized or known by others. Legal malpractice has its own social stigma in that many clients feel "if my lawfirm did this to me, what would a hospital or other institution do. It is really an indictment of a profession." There is also concern and fear that saying anything may leave them open to discussions with more lawyers who may "find" something wrong.
In order for confidentiality to work, care must be used in selecting what language is included in the settlement. The requisite language must include an explicit requirement to destroy all documents or evidence relating to the settlement within a certain time, usually 30 days. References to prior agreements must be expunged from the set title and cover. Care must be taken to provide that the clause does not violate public policy or preclude a client from reporting a crime.
Examples of Significant Settlements
An examination of several notable legal malpractice settlements can provide insight into common mistakes and their consequences:
1. A probate court sells real estate owned by a decedent, without anyone having a power of attorney or a will, and the money, $20,000 is deposited in a "passbook account" in a Savings Bank. A Lawyer buys the account in the belief that it can be converted to cash. It cannot under the Banking laws. He gives up his law practice, moves to the State where the bank is and sues the bank to convert the account. He could have opposed the sale in probate court instead. Neither he nor the bank has the power to change the account from non-transferrable to transferrable. The settlement requires that plaintiff pay $16,500.00 as restitution to the bank for money it owed to a third party who deposited the surplus; the bank has more than doubled its investment. The Plaintiff pays $5,000.00 to the Estate as an accommodation. He resigns as the administrator. He has spent money for copies and stamps and lost his life savings, except $700 .
Lessons: This is a situation where the lawyer’s lack of understanding of the probates laws and the banking laws resulted in a bad mistake that cost the life savings of the lawyer and his Client. He should have discussed the matter with a Lawyer who was a specialist in the areas of probate and banking law.
2. Defendant Lawyer and his Associates were retained to represent plaintiff in an action for wrongful death. This action was settled for $500,000 and defendant received $20,000 as attorney fees. Plaintiff sued the defendant for legal malpractice, claiming that the value of her claim was $900,000.04. Defendant moved for summary judgment on the grounds that plaintiff had released all claims against him in the settlement agreement and because plaintiff’s deposition testimony contradicted her sworn averments in her complaint.
Lessons: A release is a contract which may negate an action for damages. Release language must be closely examined to determine whether it covers certain legal theories, or just some or none. It is clear from this case that even a sworn statement upon which litigation is based may be contradicted by a sworn statement made at deposition.
