In the aftermath of Hurricane Florence, which last month dumped up to 35 inches of rain on parts of the Carolinas, Virginia and Maryland, caused 48 deaths, and up to $22 billion in property damage, comes a timely new ABA opinion about our ethical obligations related to disasters.

The hurricane did not spare lawyers and law firms.  Ahead of the 1,000-year storm, Law360.com reported that firms in Florence’s projected path shuttered offices, activated contingency plans, and were glad if their firm systems and client data were stored in the cloud.  (Subscribers can access the story here.)  (And doing the profession proud, volunteer lawyers manned hot-lines to help storm victims get needed legal services.)

But what are our actual disaster-related ethics duties?

Communication, withdrawal, files and more

Disasters happen; that’s a fact of life.  The entire 13-page Opinion 482 (Sept. 19. 2018) repays reading.  Some highlights and nitty-gritty advice from the opinion:

  • Model Rule 1.4 requires us to communicate with our clients.  To be able to reach clients following a disaster, the opinion says, you should maintain or be able to quickly recreate, lists of current clients and their contact information.
  • You “must evaluate in advance storing files electronically” so that you can have access to those files via Internet or smart device, if such are available after a disaster.
  • If you can continue to provide services in the disaster area, you continue to have the same ethics duties as before; but in an emergency, you may be able to provide advice outside your area of expertise, as allowed by comment [3] to Rule 1.1 (“Competence”).  (We’ve previously written here about “emergency lawyering.”)
  • If you’re a litigator, check with courts and bar associations to see if deadlines have been extended across the board.
  • You “must take reasonable steps in the event of a disaster to ensure access to funds” you are holding in trust, the opinion advises.  Of course, your obligations will vary depending on the circumstances.  If you know of an impending disaster, you should determine if you should reasonably transfer client funds to an account that will be accessible; or even attempt to complete imminent transactions before the disaster hits, “if practicable.”
  • You may need to withdraw after a disaster, under Rule 1.16 (“Withdrawal”) and Rule 1.3 (“Diligence”), if a client needs immediate legal services that you will be unable to timely provide.
  • If client files are destroyed, your duty of communication will require you to notify current and former clients about the loss of client property with “intrinsic value.”  But there is no duty, the opinion concludes, to notify either current or former clients about the loss of documents that have no intrinsic value, for which there are electronic copies, or that serve no current useful purpose.
  • To prevent the loss of important records, “lawyers should maintain an electronic copy of important documents in an off-site location that is updated regularly.”

Disaster Prep 101:

The ABA has a committee devoted solely to the topic of disaster preparedness, and its website has helpful resources and tips on everything from getting insurance, to types and methods of information retention, and how you can assess damage and rebuild after a disaster strikes your practice.  The committee’s 44-page Surviving a Disaster — A Lawyer’s Guide (Aug. 2011) is also helpful.

And remember, calamitous disasters aren’t confined to weather, war, and the like.  A disastrous health event can leave your practice reeling, especially if you are a solo or in a small firm.  As we’ve pointed out before, one’s own death and disability are not pleasant to think about, but choosing a profession in which we owe fiduciary duties to others requires us to make contingency plans, like those laid out in my home bar association’s “What-If Preparedness” program.

In all events, thinking about the unthinkable is part of what we do.

As the legal market continues to change, attorneys face more challenges when it comes to client relations. While the trend has been for clients to slash attorney’s fees by hiring third party auditors to review bills, or to aggressively seek discounts on fees, ethical considerations, and now the United States Court of Appeals for the 10th Circuit, make it clear that overbilling clients cannot be a solution for legal revenue woes.

In a recent opinion, the Tenth Circuit left a law firm with a legal bill of its own when the Court ruled that the firm’s malpractice insurer was entitled to recover its expenses from defending an overbilling malpractice claim not covered under the firm’s policy.

What happened?

In 2012, the Colorado Attorney General’s Office began investigating attorney Michael P. Medved for allegedly overbilling clients, and later filed suit against him.  Additionally, Medved was facing a class action suit from former clients relating to the same allegations. Medved reached out to his firm’s malpractice insurance provider, Evanston Insurance Company, for representation in both matters.  At the time, Medved’s firm had a malpractice policy that covered “wrongful acts by reason of professional services.” Evanston agreed to defend Medved subject to a reservation of rights. Both cases resulted in relatively quick settlements.

Evanston later sued Medved seeking reimbursement for legal fees and costs incurred, arguing that the malpractice policy did not cover claims related to overbilling because overbilling was not a “wrongful act by reason of professional services.”

The 10th Circuit Court of Appeals agreed, reasoning that:  “The alleged wrongful act (overbilling) lacked the required connection to professional services rather than the claim itself, and the ‘by reason of’ phrase does not create a connection between the wrongful act and the professional services . . .”

Medved argued that Evanston’s failure to properly reserve its right to challenge the representation should estop Evanston’s claims, but the Court of Appeals quickly dismissed this argument, finding that Medved had failed to show prejudice.

Ethical considerations

Model Rule 1.5 prohibits a lawyer from collecting unreasonable fees or an unreasonable amount of expenses from a client. While this rule seems pretty simple on its face, there is no bright-line test to determine what is, or is not, reasonable. Given there is no bright-line rule, the ABA Model Rules provide eight factors you should consider when determining the reasonableness of a fee.

All jurisdictions have adopted some version of Rule 1.5.  Clients and courts have been paying more attention to attorneys’ billing practices; the Tenth Circuit’s ruling here points to the risk of not being able to rely on malpractice insurance to cover the cost of defending against overbilling claims.

The Tenth Circuit ruling also shines a light on the importance of heading off billing problems with clients before they start.  Communicating with clients about fees is more important than ever, and it’s also part of your duty under your jurisdiction’s version of Model Rule 1.4 (Communication). Thoughtful communication with the client throughout the course of a matter is the best practice.  However, the more transparently you communicate with clients about your fees and billing practices on the front end, the less likely it is that you’ll have to defend against an action based on overbilling on the back end.

*Imokhai Okolo is a rising second-year law student at the University of Akron School of Law where he serves as an Assistant Editor on the Akron Law Review, member of the Akron Law Trial team, Vice President of the Akron Black Law Students Association, and Student Director of the Driver License Restoration Clinic.

If you believe that you may have materially erred in a current client’s representation, your duty of communication under Rule 1.4 requires you to inform the client.

That’s the unsurprising conclusion that the ABA’s Standing Committee on Ethics and Professional Responsibility reached in its latest opinion, issued April 17.

Of note, though, is that the Committee firmly concluded that no similar duty applies to former clients. Also interesting is the excursion into substantive law that the Committee takes in order to delineate when a current client becomes a former client.

What we have here is a duty to communicate…

Even if you’ve only seen the Paul Newman classic Cool Hand Luke on YouTube clips, you know the classic line about communication. Not failing to communicate is important whether you’re on a chain gang or just working hard for your client.

As the ABA Committee said in the opinion, unfortunately, “even the best lawyers may err in the course of clients’ representations,” and if material, you have to ‘fess up to the client. “An error is material if a disinterested lawyer would conclude that it is (a) reasonably likely to harm or prejudice a client; or (b) of such a nature that it would reasonably cause a client to consider terminating the representation even in the absence of harm or prejudice.”

The Committee identified several parts of Rule 1.4 that potentially apply where a lawyer may have erred in the course of a current client’s representation:

  • the duty to reasonably consult with the client about how the clients objectives are to be accomplished;
  • the duty to keep a client reasonably informed about the matter;
  • the duty to comply with reasonable requests for information; and
  • the duty to explain a matter so that the client can make informed decisions about the representation.

Errors exist along a continuum, the Committee said, ranging from errors like missing a statute of limitations, which can undermine the client’s objective, to minor typographical errors, or missing a deadline that only causes delay.
It’s not only errors that could support “a colorable legal malpractice claim” that must be communicated – because an error can “impair a client’s representation even if the client will never be able to prove all the elements of malpractice.”

Rather, the measure of the obligation to disclose errors to current clients is the materiality of the error.

But not to former clients

Significantly, “nowhere does Rule 1.4 impose on lawyers a duty to communicate with former clients.” That led the Committee to conclude that although a lawyer must inform a current client of a material error, there is no similar duty to former clients.

But how do you distinguish between current and former clients? For instance, if you represent a client only “episodically,” is the client a “current client” in between times?

Interestingly, the Model Rules themselves, and their state analogs, decline to touch those issues; rather, in order to determine whether a lawyer-client relationship exists, a lawyer must consult “principles of substantive law external to these Rules,” says section 17 of the Scope section.

The Committee, however, was not reluctant to deal with substantive law principles, and undertook a case analysis, concluding that “if a lawyer represents a client in more than one matter, the client is a current client if any of those matters is active or open,” and that the “episodic” client’s reasonable expectations guide whether it is a current or former client.

Calling all gurus

Once you’ve determined that you have a duty to communicate with a current client about a material error you’ve made, or even during the process of that decision, you are going to want to get some expert ethics advice. In its opinion, the Committee points to the confidentiality exception that Rule 1.6(b)(4) extends, permitting a lawyer to reveal client confidential information to get legal advice about complying with the Rules.

We’ve also written before about the trend toward upholding the in-house firm counsel privilege, which can allow that type of advice to fall within the attorney-client privilege.

In any event, this is an area where it pays to tread carefully, in order to maintain the rights of both lawyers and clients.