Tight times tempt lawyers to cut corners

The tight economy and scarcity of work is tempting many lawyers to take bigger ethical risks than they would during better times.

Small-firm and solo lawyers experimenting in new practice areas are at particular risk.

Business lawyers are also being blamed by clients whose deals went south.

With a new batch of solos hanging out their shingles straight out of law school as a result of the dismal job market, more lawyers are practicing without a lot of experience.

For new or experienced lawyers, one of the most common risks during tough economic times is taking every case that walks in the door.

While most risks can be addressed up front by making sure the client understands the case is not a slam dunk and explaining the weaknesses, lawyers are often skipping this conversation.

“If you’re taking on a risky matter, make sure you manage your client’s expectations and get it in writing,” said Michael Downey, a partner at Hinshaw & Culbertson in St. Louis, who moderated a teleconference on this topic last month.

For existing cases, a common risk is doing unnecessary work – and overbilling as a result – because you have nothing else to do, he added.

Dabbling can be dangerous

While there’s nothing wrong with grazing in greener pastures than your own practice area, dabbling in unfamiliar areas can lead to ethical issues if you’re not careful.

Nothing in the model rules of professional conduct requires experience in order to be competent in a legal area.

However, preparation is required. And lawyers new to a practice area are often not doing the hard work necessary to get up to speed.

“Lawyers underestimate the difficulty and are all too willing to skip the preparation, rely on friends and tap dance around a court hearing rather than sit down, study and learn,” warned Paula Frederick, general counsel for the state bar of Georgia.

Hot areas like bankruptcy and immigration are attracting new lawyers, but these are also highly technical, code-driven areas that require hitting the books in order to become competent.

Being honest with your client about your lack of experience can go a long way in setting expectations.

Let your client know if, for example, you have never handled a bankruptcy case before.

You can explain to a client, “‘I’ve never done this type of case before, but here’s the type of work I have done,'” Downey suggested.

In addition, find an experienced lawyer in your new practice area and tell the client you have someone to consult if questions arise.

On the other hand, advertising for clients in a practice area in which you are not experienced could arguably be misleading, said Harry Bryans of Aon Risk Services Northeast, a legal malpractice insurer in Radnor, Pa., who also spoke at the conference.

Curbing conflicts

Conflicts of interest can quickly make a malpractice claim “much harder to defend, because it’s such an easy, visceral thing for a jury to grab hold of,” Downey said.

Most conflicts needn’t get to that stage, because the vast majority can be waived with a client’s informed consent.

This should include a discussion with the client, as well as a written confirmation that includes an adequate explanation and reasonable alternatives.

For example, if you represent two clients going after the same defendant on the verge of bankruptcy, you should sit down with both clients and explain that there’s not enough money to satisfy both judgments and try to reach a mutually agreeable solution, such as splitting what money there is, said Frederick.

On the other hand, you may be handcuffed by what the clients are willing to disclose, Bryans said.

“You might want to force them to consult with another lawyer or someone who is disinterested to make sure consent is in the [best] interests of the clients,” Frederick suggested.

Lawyers are often reluctant to tell a client that an alternative is to find another lawyer.

But this is not something to omit.

“Often when problems arise, people say ‘I didn’t understand I could hire another lawyer,’ ” Downey said.

Trust account issues

Dipping into a trust account is a common temptation when a lawyer is having trouble paying the rent.

“We see a lot of check kiting – borrowing from Peter to pay Paul,” said Frederick.

Forty states have imposed mandatory reporting of overdrafts by banks to disciplinary authorities. Twelve states conduct random audits of lawyer trust accounts.

Once an overdraft is discovered, it’s easy to prove.

“One look at the records can prove or not prove a case. As soon as one ball falls out of the air and bounces, it becomes clear the lawyer was dipping into the escrow account,” said Frederick.

Alternative billing

Many law firms are experimenting with alternative fee arrangements to compete for clients on a tight budget and looking to save on legal bills.

It takes some skill, however, to set a non-hourly fee.

“The question is whether a fixed-fee arrangement can affect representation. If you made a bad deal, are you going to start to cut corners in your representation because you’re underwater in the case? Might you in fact advocate early disposition to make your deal with the client profitable?” asked Bryans.

A fixed fee should spell out the work it covers.

“Another thing that upsets clients is an agreement to do something on a fixed fee but you don’t agree what’s going to be done,” said Downey.

For example, a client might think a fixed fee to perform legal work on the sale of a business includes tax work.

Collecting fees on late or non-paying clients is another conundrum.

“Think twice. Then think 11 more times before you sue a client for a fee,” said Bryans, who noted that counterclaims on suits for legal fees are the single greatest source of malpractice claims.

“At the end of the day, you’ll wish you hadn’t filed it,” he said.

RISK: ‘You’ll wish you hadn’t’
sued your client over fees