Articles Posted in Attorney-Client Relationship

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You are an employee of a corporation. Something bad happens and the corporation’s internal lawyer (or an outside lawyer) tells you he wants to talk to you. When the interview starts, he tells you that he does not represent you, he only represents the corporation. You don’t think about the significance of this statement and you start talking. Later, the corporate lawyer prepares a report or refers you for prosecution, all in the name of protecting the company. You have fallen into a trap and you can’t get out.

When you hear that statement (I represent the corporation, not you), you need to understand this:

(1) the corporate lawyer is not here to protect me;

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Davis v. Fenton, Dist. Court, ND Illinois 2014 – Google Scholar.

Chief Judge Castillo has stayed an unusual legal malpractice case pending the outcome of arbitration. The case is highly unusual because it was filed by Kelli Dudley a lawyer who defends against foreclosures.  In this case her client alleges that her former foreclosure defense attorney, Ernest Fenton, engaged in violations of the Fair Housing Act, 42 U.S.C. Section 3601 and the Civil Rights Act of 1866, 42 U.S.C. §§ 1981 and 1982, as well as common law legal malpractice.

The district court followed well-settled law in enforcing an arbitration clause in the engagement letter and staying the case in favor of arbitration, pursuant to the Federal Arbitration Act. The district court also rejected claims that the Defendant had waived the arbitration clause.

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Cabrera v Collazo 2014 NY Slip Op 00622.

This is an opinion of the New York Supreme Court, Appellate Division. The facts were simple. The attorney missed the applicable statute of limitations and the client’s claim was barred. In such cases, the lawyer is liable for legal malpractice if the client can prove that, but for the attorney’s error, he would have won the underlying case.

Here, the lawyer’s estate raised an unusual defense. The attorney defendant passed away before the statute of limitations on the client’s claim ran. The lawyer’s estate is really making this argument: the lawyer passed away while the client’s claim was still viable, therefore, the client could have chosen another lawyer and filed the claim in timely fashion.

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In Frechtman v. Gutterman, 2014 NY Slip Op 00437, the Supreme Court, Appellate Division, a lawyer received an irate letter from his client in which his services were terminated. The lawyer sought to sue for defamation. The trial court dismissed the defamation case and the Appellate Division affirmed.

The letter contained the following statements: “We do not believe you adequately represented our interest,” “We believe your failure to act in our best interest in reference to certain matters upon first engaging in the matter may equate to misconduct, malpractice, and negligence,” “We believe that your future representation on this matter only became necessary, as a result of mistakes and oversights made by you acting as counsel,” and “[w]e believe that we should not pay for the value of services for which any misconduct or counsel oversight relates to the representation for which fees are sought.”

The trial court held that the statements above were merely statements of opinion, not statements of fact, and, thus, were not actionable. The court found the use of the phrase “we believe” significant. The court further held that statements by a client discharging a lawyer are absolutely privileged.  Finally, the court also held that a qualified privilege would apply and that the plaintiff did not allege malice sufficient to overcome the privilege.

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The case is captioned Iowa Supreme Court Attorney Disciplinary Board v. Robert Allan Wright, Jr., 13-0780, December 6, 2013.  The Iowa Supreme Court disciplined Wright for (a) failing to recognize a Nigerian scam and (b) allowing other clients to participate in the scam.  This case has received a fair amount of press attention, but the press has ignored the main issue in the case from a lawyer discipline perspective.

The trouble began when Wright was contacted by a client, Floyd Madison who informed Wright that Madison was the beneficiary of a large bequest from a long-lost cousin in Nigeria. Madison told Wright that he needed to pay $177,660 in inheritance taxes and then he (Madison) would receive the money. Most lawyers would have told Madison that the transaction was a scam. Wright, however, drafted a contingency fee agreement under which Wright would receive 10% of the inheritance in exchange for representing Madison.

Wright then made more mistakes. He urged several of his clients to loan money to Madison to help Madison pay the “inheritance taxes.”  At Wright’s urging, several of his other clients made loans to Madison. Wright placed the proceeds of the loans in his trust account. The opinion states “Wright stipulated that he failed to advise White, Stodden and Nunneman that they should seek independent counsel before making the loans to Madison.”

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The case is captioned In the Matter of Thomas M. Dixon, 71S00-1104-D1-196.

The Indiana Supreme Court dismissed all charges against Thomas Dixon, an attorney who represented 85 pro-life protestors in proceedings before Judge Jenny Pitts Manier.  Judge Manier is married “to Professor Edward Manier, who was a tenured professor at Notre Dame and taught there for 48 years.”

Dixon filed a motion for a change of judge. He sought Judge Manier’s recusal “based on her husband’s alleged advocacy in favor of pro-choice causes and academic freedom for Notre Dame, along with Judge Manier’s failure to disclose this alleged advocacy. [Dixon] argued that his clients were arrested because they acted on beliefs about abortion and academic freedom for Notre Dame that were directly contrary to the beliefs allegedly advocated by Professor Manier during her career….In addition [Dixon] cited Judge Manier’s allegedly erroneous rulings in [a prior case involving abortion-rights protestors.].”

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Recently, the undersigned encountered an arbitration clause drafted by a successful Chicago law firm.

I will quote the relevant language in full and then discuss what the language means for a client.  I am not in any way criticizing the clause or the lawyers who drafted it.

“This Agreement shall be construed under the laws of the State of Illinois and any disputes concerning the Agreement, our fees that relate in any way to our representation, including any claims relating to our billings for breach of fiduciary duty, professional negligence or malpractice or other disputes over our representation, shall be resolved under Illinois law in Chicago, Illinois through a summary procedure involving limited discovery in which we will jointly appoint a qualified arbitrator who specializes in such matters to promptly resolve any disputes through arbitration, whose decision shall be final and binding upon the parties.  These limitations shall be imposed on any arbitration: (i) five (5) depositions, thirty (30) interrogatories, forty (40) document requests and fifty (50) requests for admissions per side; (ii) pre-hearing briefs totaling fifteen (15) pages per side; (iii) post-hearing briefs totaling twenty-five (25) pages per side; (iv) no more than three (3) days for hearing testimony and argument. Because this procedure for dispute resolution involves a waiver of [Client’s] rights and ours, we jointly acknowledge that this alternative procedure for dispute resolution waives our respective rights to seek relief through litigation or to have a trial by jury or to conduct full discovery or to appeal or to otherwise exercise rights available in litigation, rather than through arbitration. It is therefore, important that this matter be carefully discussed with independent counsel and only after that review has been completed can we jointly agree to this alternative dispute-resolution procedure. In the event agreement cannot be reached on a suitable arbitrator, we shall jointly seek the assistance of the American Bar Association for the selection of a suitable person. (Emphasis supplied).

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KLINGELHOEFER v. PARKER, GROSSART, BAHENSKY & BEUCKE, LLP, 20 Neb. App. 825 – Neb: Court of Appeals 2013 – Google Scholar.

This case concerns whether a member of an LLC can sue for legal malpractice the lawyers who represented the entity. The Nebraska Court of Appeals held that the plaintiff, Donald Klingelhoefer, lacked standing to sue.

Nebraska follows the traditional rule that the shareholder of a corporation or member of a limited liability company lacks standing because the corporation or LLC suffered the injury, not the shareholder or member.

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This case is a somewhat routine affirmance of a bank fraud conviction and the rejection of an ineffective assistance of counsel claim. The Defendant alleged that her lawyer rendered ineffective assistance of counsel by failing to call certain witnesses at the trial of the case. In the criminal world, an ineffective assistance claim is equivalent in many ways to a legal malpractice claim. If there is a finding of ineffective assistance of counsel, the defendant is sometimes entitled to a new trial.

Here, the defendant fired her lawyers, but was assisted by stand by counsel at her trial. Counsel decided not to call certain witnesses because the potential risk of their negative testimony far outweighed the potential reward. This case makes it clear that these decisions are for the lawyer to make at trial, except in unusual circumstances.  The Seventh Circuit explains the rules applicable to witness testimony issues: “A “lawyer’s decision to call or not to call a witness is a strategic decision generally not subject to review. The Constitution does not oblige counsel to present each and every witness that is suggested to him.” United States v. Best, 426 F.3d 937, 945 (7th Cir. 2005) (quoting United States v. Williams, 106 F.3d 1362, 1367 (7th Cir. 1997)). Indeed, Parker acknowledges that the decision whether to call a witness was her attorney’s to make.”

Comment: the point here is that it is almost impossible to win a legal malpractice case on the ground that the lawyer failed to call a witness. That decision was the lawyer’s to make in his professional judgment.

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DRAFT COMPLAINT.

The ARDC has filed a complaint against two lawyers who handled a case on a contingency basis.  The first agreement from 2005 gave them a legal fee of 33 and 1/3 of the gross amount recovered.  After they had obtained a recovery for the client, they lawyers prepared a new agreement in 2008 which increased the fee to 40% of the total amount.  The ARDC alleged that the increased fee constituted overreaching and a breach of fiduciary duty.

Generally, it is taboo to renegotiate a contingency fee agreement after a recovery has been made.  The client is vulnerable and the lawyer, who may be holding funds in a trust account, is in a stronger position.

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