Limiting liability for legal malpractice

As wide-ranging as the practice of law is, so too is the range of potential legal malpractice claims. But, at their core, many claims of legal malpractice arise from similar sources. For that reason, by focusing on risk prevention in those areas, attorneys can limit their risk.

One of the biggest mistakes attorneys make is believing they can handle malpractice claims by themselves. Because malpractice claims can be very personal and involve specialized areas of practice, some attorneys believe they alone are best suited to defend their actions when accused of malpractice. But not only do legal malpractice claims involve unique defenses and issues not found in other types of litigation, a lawyer inexperienced in legal malpractice can severely prejudice their defense through simple missteps, particularly in the early stages of a claim.

What attorneys can do is brush up on some key concepts that help attorneys eliminate malpractice claims or, at a minimum, limit their exposure when they do occur. Below are three important issues to keep in mind.

Carefully Construct the Engagement Letter

Many law firms condition the opening of a new matter on obtaining a signed engagement letter. In the event of a legal malpractice suit, the engagement letter can be strong evidence for the defense. Engagement letters can be used to define the client (and, by exclusion, who is not a client), as well as the scope of the representation, in accordance with California Rule of Professional Conduct 1.2(b) ("A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances, is not otherwise prohibited by law, and the client gives informed consent.").

If a party who is not a client files suit, or if a client sues an attorney for a failure to do some task that was outside the scope of the representation, the attorney can use the engagement letter to rebut those allegations. Particularly given how complicated questions of legal malpractice can be, there are few stronger defenses for attorneys than being able to assert that the attorney did not agree to perform the task at issue. Courts have even granted motions to dismiss or for summary judgment on that basis, which can be a challenge for otherwise fact-intensive legal malpractice claims.

If no engagement letter is used, the terms of the representation may have to be recreated by other evidence. Or, it may just be assumed that, if there was no engagement letter, the representation was a general one for all purposes, which can increase the likelihood of liability.

Attorneys who use their engagement letters to define their role -- and anticipate what terms they would want in writing in the event that there is ever a claim -- may be better positioned to defeat a lawsuit alleging professional negligence.

Judgmental Immunity

Although attorneys are often asked to predict the future and make recommendations, it is possible to get it wrong. In any representation, there are "fork in the road" moments, where attorneys may elect not to pursue a certain strategy at trial or may elect to dismiss a seemingly viable claim in favor of another. In hindsight, clients may allege that some of these judgment calls constituted errors that cost the client their case.

Where the alleged malpractice is simply a reasoned and professional judgment that turned out not to be helpful in hindsight, California and many other jurisdictions provide a safe harbor for attorneys through the "judgmental immunity" doctrine. The doctrine relieves an attorney from a finding of liability even where there was an unfavorable result if there was an "honest error in judgment concerning a doubtful or debatable point of law." Blanks v. Seyfarth Shaw LLP, 171 Cal. App. 4th 336, 378 (Cal. Ct. App. 2009).

Attorneys can take advantage of this defense through preparation. In making recommendations to clients on issues of strategy, attorneys can take steps to document their advice and the basis for the same. If the strategy does not work out and the client brings a malpractice suit, a documented strategic decision may help the attorney invoke the judgmental immunity doctrine.

Not Every Mistake Is Malpractice

Many legal malpractice complaints allege serious errors or breaches in judgment by attorneys. But legal malpractice claims have an added layer of complexity because the errors often occur in the context of litigation or some other complex proceeding for which the likely outcome in the absence of the errors is also very unclear. For that reason, the element of causation is critically important to legal malpractice cases. In fact, a lack of causation is one of the most common and successful defenses to legal malpractice allegations.

In many legal malpractice actions, a plaintiff seeking to recover is typically required to prove that the attorney breached a duty during the representation and that, as a result of that breach, the plaintiff lost that underlying case. This analysis, sometimes referred to as the "case within a case," usually requires evidence that the underlying representation would have necessarily been successful, which can be quite a high bar.

Litigating issues of causation sometimes turns the focus away from the attorney's conduct and focuses instead on the merits of the underlying case. Because a great number of cases are resolved in favor of the defendant attorney on issues of causation, most attorneys will take care not to admit "liability" for malpractice upon committing a mistake, even if the ethical rules obligate the lawyer to disclose the facts of the error to the client. Such an admission of legal liability (as opposed to a simple summary of fact) could also put an attorney's legal malpractice coverage at risk. Even in the event of a serious error, an error without causation is generally not actionable, such that admissions may create liability that did not otherwise exist.

While mistakes happen, with preparation and a basic understanding of the key sources for legal malpractice claims, attorneys can limit the likelihood that those mistakes amount to a judgment for legal malpractice. 