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2015 WL 1802933

Aspatore
*1
March, 2015

BEST PRACTICES FOR ADDRESSING PROFESSIONAL LIABILITY CLAIMS

LEADING LAWYERS ON PROTECTING AGAINST MALPRACTICE CLAIMS AND KEEPING UP WITH CHANGING
REGULATIONS
Michael L. O’Donnella1
Founder
Christopher P. Montvillea2
Partner
Wheeler Trigg O’Donnell

Copyright © 2015 by Thomson Reuters/Aspatore

NEW STRATEGIES FOR DEFENDING PROFESSIONAL LIABILITY

AND MALPRACTICE CASES

Introduction

Because any conceivable type of practice can give rise to a legal malpractice claim, lawyers who defend legal malpractice
claims might perhaps be some of the last generalists left in an increasingly specialized legal profession. Consequently, recent
trends in legal malpractice claims tend to follow the trends applicable to the profession as a whole. Although the subject
matter underlying legal malpractice claims varies widely, we have in our practices identified many legal theories, jury
themes, and strategies that fit many different kinds of claims.

In this chapter we begin by discussing recent trends we have seen in legal malpractice claims, both by subject matter as well
as the kinds of theories that plaintiffs have been asserting with increasing frequency. We will also discuss some of the
approaches that we have taken in recent successfully defended legal malpractices cases, both in the pretrial and trial phases.
Finally, we will discuss an area of legal malpractice law that we expect to grow significantly in the coming years--claims
against lawyers who choose to represent marijuana-related business.

Recent Trends Impacting the Professional Liability Claim Area

Trends in Underlying Subject Matter

Even the busiest of litigators handles no more than a couple dozen legal malpractice matters a year. Consequently, to discuss
the topic of what trends are impacting the professional liability claim area, we drew on our personal experience, but backed

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up our impressions with some rough keyword-based research into published case law over the period between January 2003
and December 2014.

What we found tracks our personal experience. Unsurprisingly, one of the clearest trends over the past decade is an increase
in claims against lawyers practicing in real estate-related areas, whether transactional or litigation. Based on research in state
and federal courts within ten bellwether states, we found that, in the period between 2003 and 2007, fewer than 20 percent of
legal malpractice claims involved real estate transactions. In the period between 2008 and 2012, this number increased by
16.8 percent. In the past two years, this number increased further by another 6.9 percent.

For anyone with even the most passing familiarity with economic conditions over the past decade, this trend is unsurprising.
In our own practice we have seen a significant volume of new matters over the past several years involving real estate
transactions and disputes. These matters have arisen both in the commercial and residential context, and involve transactions
ranging from raw land deals to finalized developments.

*2 Given that legal malpractice claims generally follow years of underlying litigation, it is also unsurprising that the
frequency of these claims continues to increase, albeit at a more modest rate. For example, we are currently handling a real
estate-related legal malpractice matter arising from a development that broke ground in 2005. The case is not set for trial until
mid-2015.

We have seen other subject matter trends, both in the data we analyzed and in our own practices. For example,
bankruptcy-related claims have greatly increased over the past two years. Again, we suspect that the procedural posture of
these cases contributes to the fact that this trend continues, despite the economic recovery. Individuals who faced financial
losses at the end of the last decade did not file bankruptcy petitions until their insolvency became inevitable. Those petitions
then had to be resolved before a legal malpractice case could be filed.

We also have seen a modest decrease over the past two years in the proportion of claims involving underlying securities and
business transactions. This trend makes sense, given the decrease in these sorts of transactions following the economic
decline.

Trends in Claims Brought by Non-Clients

In our personal experience, one of the most significant recent trends in legal malpractice litigation has been claims against
lawyers by non-clients. It has generally been the rule since the nineteenth century that, absent fraud or collusion, attorneys
have no liability to non-clients.1 This once near-absolute rule has become increasingly porous. Our rough statistical research--
especially in state court--places the trend into high relief. Between 2008 and 2012, the proportion of malpractice claims
involving non-clients in state courts increased by 56 percent. In 2013 and 2014, the proportion of claims brought by
non-clients increased by another 71 percent over the prior period.

In our view, there is one primary cause of such claims--creative plaintiff-side lawyering.2 In the past, when one party to a
commercial transaction felt slighted, he or she would file a breach-of-contract claim or perhaps a fraud claim against his or
her counterparty. Claims of this nature have long formed the bedrock of general commercial litigation.

The problem often encountered by plaintiffs in such cases (especially those involving special purpose entities with limited
assets) is that even a prevailing plaintiff will often find himself or herself attempting to squeeze blood from an insolvent
stone. As plaintiff-side lawyers have realized over the past decade, especially in large transactional matters, the parties are
almost always represented by counsel. And, unlike an insolvent counterparty, lawyers typically carry professional liability
policies that may run into the millions of dollars. Consequently, lawyers increasingly find themselves named as defendants
either along with, or in lieu of, their clients.

*3 In a few narrow areas, many courts have long accepted that a non-client may sue someone else’s lawyer. For example, a
lawyer who prepares a will may sometimes be sued by frustrated beneficiaries of that will--or relatives who believe they
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should have been beneficiaries.3 Non-clients will then sue the lawyer who prepared the will under a theory that a legal error
caused the beneficiary to receive less of the estate than the testator intended.

Many courts also hold that lawyers who offer opinion letters in corporate transactions have certain duties to the parties
relying on those letters, even if they are not the lawyer’s clients.4 This rule seems to make some sense. The lawyer drafting
the opinion letter does so knowing that a counterparty will rely on it, and it follows that the lawyer has some duty to ensure
that the letter is, at a minimum, non-fraudulent.

In recent years, however, we have seen non-client claims against lawyers become increasingly aggressive. One frequent issue
involves the assignment of legal malpractice claims to non-clients. This issue arises in various circumstances, including a
variant on a maneuver often seen in the insurance context. Specifically, defendants denied coverage by their insurer may
stipulate to a judgment and, in return for a promise that the plaintiff will not execute on that judgment, assign a bad faith
claim against the carrier to the plaintiff.5 We have seen similar cases where, rather than assign a bad faith claim, the client
will assign a legal malpractice claim to the client’s adversary to resolve underlying litigation.

Citing public policy considerations, many courts take a skeptical view of assignments. For example, in the leading case of
Law Office of David J. Stern, P.A. v. Sec. Nat’l Servicing Corp., 969 So. 2d 962 (Fla. 2007), a holder of a foreclosed
mortgage assigned the loan to a third party. Although the specific facts of the case are complex, the obligor ultimately
assigned a legal malpractice claim against his attorney to the noteholder. The legal malpractice court, however, held that the
defendant did not have standing to bring an action against the plaintiff for legal malpractice by general assignment.6

For defendant lawyers, however, the trend against assignability may be a hollow victory because some courts also hold that a
plaintiff may nonetheless assign a portion of proceeds from a legal malpractice claim to a third party.7 By assigning a portion
of the proceeds from the claim, rather than the claim itself, a former client can accomplish much the same result as if the
client had assigned the claim itself.

Public policy concerns similar to those implicated by assignments also arise when insurance companies file subrogation
actions based on legal malpractice.8 The majority of non-client claims we have seen, however, involve allegations of
intentional torts against a lawyer. These cases typically include allegations that a lawyer committed fraud, aided and abetted a
client’s wrongdoing, or conspired with the lawyer’s own client. We have defended several of these claims in our own practice
in recent years, including those brought by counterparties in business transactions and even by adversaries in underlying
litigation. Some courts place high threshold requirements on such claims, but few bar them outright.9

*4 Another recurring theme arises when a lawyer represents a corporation or other fictional entity. We have seen officers or
managers of organizations attempt to sue the lawyer for the organization, claiming that the lawyer represented them
personally. Although the Model Rules of Professional Conduct state only that “[a] lawyer representing an organization may
also represent any of its directors, officers, employees, members, shareholders or other constituents,”10 these plaintiffs often
bank on the idea that courts and juries will have difficulty seeing the distinction.

Falling Prey to Legal Malpractice Claims

One of the aspects of legal malpractice defense that makes it both challenging and rewarding is that claims rarely fall into a
set pattern. To the contrary, legal malpractice claims can arise from every conceivable type of legal work. There is no area of
practice in which lawyers can feel secure that they will never be the target of a legal malpractice claim.

With that said, patterns do emerge. One type of claim we have seen with great frequency are so-called “settle-and-sue”
claims. The classic model for a legal malpractice claim involves proof of a “case-within-a-case.” Simply put, a plaintiff must
show that, but for the lawyer’s malpractice, the plaintiff would have secured a more favorable verdict at trial. If proven, the
plaintiff could theoretically recover from the lawyer the amount the plaintiff should have recovered in the underlying case, if
the lawyer had not been negligent.

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The “case-within-a-case” model, however, creates two significant hurdles for a legal malpractice plaintiff. First, by its very
nature, the plaintiff has to win two trials--the hypothetical trial in the underlying case, as well as the negligence case against
the lawyer. Second, the vast majority of civil lawsuits result in a settlement, not an outright trial loss.

Consequently, so-called “settle-and-sue” cases have become prevalent in the legal malpractice context. These cases involve a
client who settles an underlying case, allegedly on the lawyer’s advice, and then sues the lawyer for malpractice, claiming
that the client would either have obtained a better result if the case had been tried, or could have secured a better settlement.

In theory, these cases should fit within the case-within-the-case framework. The settling client should have to prove not just
that he would have won the underlying case, but that he also would have recovered more than the amount of the settlement in
that trial. The difference between the theoretical recovery in the underlying case and the settlement would constitute the
client’s damages.

In many settle-and-sue cases, however, the client will claim that, but for the lawyer’s actions, he would have received a better
settlement, rather than a more favorable trial outcome. Such claims are arguably speculative. Liability and damages turn not
on a retrial of the underlying case, which a legal malpractice jury is well positioned to decide, but on a hypothetical “what if”
analysis of what the counterparty in the underlying case would have settled for under a different set of facts. It is a rare legal
malpractice case where the defendant in the underlying case will testify that, if her opposing party’s attorney had done
something different, she would have settled for a larger amount. The underlying defendant’s attorneys, meanwhile, are
typically barred by the attorney-client privilege from giving such testimony. This leaves the jury to guess about what the
settlement would have been if the lawyer had not breached the standard of care.

*5 Some courts are highly skeptical of such claims.11 Nevertheless, many courts have permitted settle-and-sue claims that rest
on speculation about a hypothetical settlement in an underlying case.12 One typical way to avoid the rule against speculative
damages and the requirement for causation is to frame these settle-and-sue claims as ones for breach of fiduciary duty, rather
than negligence.13

In our own practice, we have seen many different variants of the settle-and-sue theory. In each case, the parties have fought a
fierce battle at the threshold about whether the claim was inherently speculative and whether the plaintiff could ever prove
causation. We believe that, with scant clear judicial guidance, these battles will continue for the foreseeable future.

Tactics and Themes from Successfully Defended Legal Malpractice Lawsuits

One recent case we successfully defended in a federal jury trial was a settle-and-sue lawsuit brought against a large national
law firm by a former client. The case, however, presented an unusual twist--the underlying case had actually gone to trial,
resulting in a verdict favorable to the plaintiff. The lawyers were on the verge of securing a post-trial settlement with the
underlying defendants while the underlying defendants’ motion for judgment notwithstanding the verdict remained pending.
Before settlement papers were executed, however, the underlying court granted the motion and entered judgment against the
plaintiff. By threatening to enforce the near-settlement, the lawyers finalized a smaller, but still substantial, settlement.

The plaintiff then sued his lawyers, claiming that the case could have been settled for the larger amount if the lawyers had
agreed to stay the pending post-trial motions and then negotiated a settlement with the stay in place.

The case was successfully defended by employing a number of strategies equally applicable to many other sorts of legal
malpractice claims. First, as in many legal malpractice cases, the client had been profusely complimentary of his lawyers, not
just during the representation, but long thereafter. His tone changed only much later, after he consulted with a legal
malpractice lawyer. The stark inconsistencies in his views on his lawyers supported an argument that this case was driven by
the plaintiff’s counsel, not by the plaintiff or by anything that the defendant lawyers had done wrong. This same strategy fits
the facts of many legal malpractice cases.

Second, as is surprisingly common in legal malpractice cases, the lawyers had actually secured a great result for the plaintiff.
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The underlying court ultimately ruled that the case was worth nothing. The lawyers nonetheless obtained a very large
settlement of these legally worthless claims. In other words, the plaintiff had received one windfall, and now sought another
by suing his lawyers. Again, this argument is widely applicable in the defense of malpractice cases.

*6 Third, as with any settle-and-sue case, the plaintiff’s claims were inherently speculative. The lawyers had secured the
near-settlement because the underlying defendants feared both that the underlying defendants’ motion for a new trial would
be denied, and that the court would instead grant enhanced damages and attorneys’ fees to the plaintiff. If the lawyers had
rushed to settlement, as the plaintiff suggested they should have, the case might actually have settled for far less.

A second case we recently successfully defended before a jury was brought by a medium-sized company that, years earlier,
had sold all of its assets to a competitor. The only asset that the plaintiff company had left was the legal malpractice claim
against its former lawyers. The company sued the defendant law firm, which acted as transactional counsel in the sale as well
as litigation counsel in several lawsuits tangentially related to the sale, under more than a dozen distinct theories of liability
and damages.

This case, too, was defended with several widely applicable strategies. First, the company’s principals were very litigious.
Prior to the malpractice case, the company and its constituents had filed more than a dozen lawsuits and administrative
actions against each other and against third parties. One primary defense theme therefore was that the malpractice case had
been filed because the plaintiff had no one left to sue.

Second, as in the first case discussed, the defendants had achieved a great result for their client. The plaintiff and its owners
netted millions of dollars from the asset sale. Indeed, they had sold the company at the pre-recession peak of the market and
likely would never have obtained this outcome if the law firm had not diligently and expediently closed the sale. Again, the
plaintiff had received a windfall and was now looking for another.

Third, the plaintiff, although nominally an assetless corporation, was directly or indirectly controlled or influenced by a web
of minority shareholders, estranged family members, and their lawyers. There was evidence that these parties had reached
numerous confidential agreements among themselves and that supposedly disinterested lawyers were helping with the
malpractice suit in the background. Based on these facts, we were able to argue that these claims were lawyer-driven.

Fourth, the damage claims were extraordinarily speculative. Among other things, the plaintiff claimed that it should have
received a better deal in the asset sale; that it could have disposed of some real estate on more favorable terms; and that
certain loan liability could have been avoided. The plaintiff was unable to prove, however, that even if the defendant lawyers
had taken different actions, any of these damages could have been avoided.

Based on their facts, the two cases discussed above could not be more dissimilar. One involved a straightforward settlement
of a lawsuit, where the defendant lawyers had been involved for only a few months. The other involved a complex business
sale, several massive underlying lawsuits that had dragged on for years, and numerous damage claims. Yet several
fundamental themes and defenses in these cases overlapped.

*7 The lesson we take from this is not that the cases were defended with a cookie-cutter approach, but rather that legal
malpractice cases, by their very nature, often share common persuasive themes. They are often attorney-driven. They often
involve speculative damages. And they often are brought by plaintiffs who received the best result possible in the underlying
case or transaction, yet remain dissatisfied.

To be sure, it is critical that the defense of these cases be driven by a fact-specific and expert-supported proof that the
defendant lawyers met the standard of care. We believe, however, that big-picture arguments such as those discussed above
have strong persuasive value. Lawyers defending such cases should always find time to step back from technical niceties and
find overarching themes.

Situations Triggering a Legal Malpractice Claim

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Despite the variety found in legal malpractice cases, we have seen a few specific situations repeatedly trigger a claim. The
most significant of these is when a lawyer either takes a very aggressive approach to fee collection or actually sues for fees.
The statistical research described above indicates that the number of legal malpractice suits that also involve a lawyer
claiming fees grew by more than 30 percent between 2008 and 2014. Although economic conditions should not be the
scapegoat for every litigation trend, it would seem to be a particularly likely driver of this trend.

There is only one way to avoid such claims: Lawyers should sue for fees only when it is absolutely necessary. Even the most
satisfied clients are susceptible to having epiphanies that their lawyers committed malpractice once the lawyers ask to be paid
for their services. In addition, lawyers should keep in mind that professional liability policies typically do not cover fee
claims, which may mean incurring the expense of obtaining separate counsel for the aspects of the malpractice case that the
carrier deems primarily related to the fee claim.

Another high-risk activity is agreeing to be a client’s second or third successive lawyer on a case. This is a pattern that we
have seen repeat many times. Clients often have legitimate reasons for jettisoning their lawyers and replacing them with more
responsive, competent, or specialized counsel. In some circumstances, however, the first lawyer may have withdrawn due to
non-payment, lack of client cooperation, or other client control issues. Because the prior counsel still owes confidentiality
obligations to his client, replacement counsel is rarely able to learn the true reasons for the withdrawal--which may not be the
same as the reasons given by the client.

A lawyer therefore should apply healthy skepticism before agreeing to be the second lawyer representing a client. When the
lawyer is asked to be the client’s third lawyer on a matter (as was the case in a lawsuit we recently successfully defended),
the lawyer should almost always, absent a very strong rationale to the contrary, decline the representation.

The Role of the Client in the Legal Malpractice Litigation Process

*8 It is critical in all litigation that clients remain accessible and involved in their defense, but this is especially true in a legal
malpractice action. Early client involvement is particularly important for initial document disclosures. In most litigation, a
defendant might disclose core documents in initial disclosures and allow subsequent written discovery requests later in the
case to control the flow of document production. In legal malpractice cases, however, lawyers typically produce their entire
client file for the matter at issue near the onset of the case. Leaving aside the fact that FED. R. CIV. P. 26(a)(1) and its state
analogues arguably require production of the entire client file, the client would be entitled to the file even without filing a
lawsuit.14 It therefore generally is counterproductive to resist a file’s timely production.

This means that review of both electronically stored information and physical client files needs to begin as soon as the matter
is filed. This review process also requires particular diligence because it is not unusual for a client file of any size to contain a
small amount of misfiled material related to other clients. Even inadvertent disclosure of this material may constitute a
violation of Rule 1.6 of the Model Rules of Professional Conduct.

For this reason, the earliest client discussions need to include a thorough analysis of what material the lawyer has in his
possession and establish a plan for turning that material over to counsel.

The Importance of Client Communication

We cannot overstate the importance of client communication in a legal malpractice case. More than any other kind of client,
lawyer clients are likely to understand the legal underpinnings of claims against them, at least in a general sense. They often
have strong views on how their case should be defended from a strategic perspective and may also have insight into legal
theories that can be advanced. And, given that these lawyers’ professional reputations are on the line, consistent substantive
communication may provide a sense of security.

Legal malpractice defense lawyers, who practice in a specialized area of law, may naturally resist suggestions on legal

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strategy from clients who practice in unrelated fields. It is therefore important that defense lawyers take an active role in
educating their clients and explaining why they might take a different defense tactic than the client would in defending one of
his or her own cases.

It is important, however, to recognize that the converse is true as well. It is rarely the case that a legal malpractice lawyer will
defend a client who practices in an area where the legal malpractice defense lawyer is also an expert. The defense lawyer
therefore should view his or her client as the very first expert that he or she retains in the case--and one who will help free of
charge.

Lawyers defending legal malpractice claims should avoid the instinct to feign familiarity with the legal subject matter of the
underlying case for fear of appearing ignorant in front of a client. Most clients are surprisingly understanding of the fact that
their lawyer will have to learn the underlying substantive law as they go along. Clients rightfully place far more value on
their lawyer’s knowledge of professional liability law than on their lawyer’s initial understanding of the client’s practice area.
Defense lawyers should rely on their clients to understand the issues in the underlying case and turn to legal research and
retained experts only to confirm and deepen this understanding.

Key Elements of a Defense Strategy for Professional Liability Claims

*9 Because of the diversity of legal malpractice claims, there are no hard and fast rules to defending these claims. Some trial
themes and strategies have been discussed above in the context of successfully defended cases, but more technical pretrial
strategies are also important.

Ideally, every case can be successfully defended with a dispositive motion. We recognize, however, that many judges view
negligence cases of any kind as presenting fact questions resolvable only at trial. This does not mean, however, that defense
counsel should simply give up on motions practice. Rather, we often have met with success in whittling down a plaintiff’s
claims through a combination of partial motions to dismiss, motions for determination of matter of law (if available in the
jurisdiction), and partial summary judgment motions, even when a full dispositive motion is unlikely to succeed. Because of
the unique nature of the attorney-client relationship, legal malpractice claims and damage theories are particularly susceptible
to these kinds of motions. Among other things, we frequently ask courts to take the following steps, even if the court will not
dispose of the case in its entirety without a jury trial:

• Apply the general rule that lawyers do not owe duties of care or fiduciary duties to non-clients, and dismiss all
non-client plaintiffs.15

• Enforce the doctrine of in pari delicto, holding that a plaintiff who has committed a wrongdoing cannot sue a
party of equal or lesser fault.16

• Strike speculative damages.17

• Eliminate allegations that the lawyer breached a standard of care when the breach is not causally connected to
the claimed damages.

• Strike all negligence theories not supported by expert testimony.18

• Dismiss breach of fiduciary duty claims that duplicate negligence claims.19

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• Determine any pure issues of law that would have driven the outcome of the case-within-the-case.

• Strike claims for punitive and non-economic damages in jurisdictions where those damages cannot be
recovered in legal malpractice cases.20

One other significant strategy also deserves mention: the mock trial or focus group. Many kinds of lawsuits benefit from this
kind of exercise, but we feel that they are particularly valuable in legal malpractice cases. This is so for a few reasons. First,
the general population holds powerful preconceptions about lawyers and their responsibilities. Through jury research,
however, we have repeatedly found that these preconceptions are not as universally negative--or as harmful to the defense--as
many might imagine. A mock trial exercise is a valuable opportunity to tailor a defense strategy that is bolstered by, rather
than harmed by, these preconceptions.

Second, as we have suggested above, in legal malpractice cases the best trial defense can truly be the best offense. To be sure,
the “blame the plaintiff” approach is neither appropriate nor effective in some cases--for example, those involving clear
breaches of the standard of care or when the underlying dispute involves a serious personal injury. In many cases, however,
juries are rightfully willing to look skeptically on the plaintiff’s motivation in suing his lawyers, and also to ask whether the
plaintiff engaged in any wrongdoing that led the plaintiff to have to retain the defendant lawyer in the first place.

*10 This kind of strategy, however, is dangerous when used inappropriately; a lawyer who attempts to vilify a sympathetic
plaintiff will only reinforce existing stereotypes about the legal profession. Jury research exercises therefore can provide
valuable confirmation that a jury will agree that the plaintiff is greedy, overlitigious, or has engaged in fraudulent acts. It can
also help defense lawyers--often mired in the facts of a case for years prior to trial--recognize that an actual jury might not be
quite as critical of the plaintiff as are the defense lawyer and his or her client.

Finally, the “case-within-the-case” dynamic makes even the simplest of legal malpractice cases more complex than the
typical civil litigation matter. Only through jury research can defense counsel learn the most effective ways to communicate
the most significant facts to the jury in the most persuasive way. Equally as important, jury research allows defense counsel
to learn which facts the jury views as extraneous, irrelevant, or even counterproductive to the defense case. Indeed, we have
seen instances where a mock jury turns out to be completely indifferent to certain facts that the plaintiff’s counsel has
characterized as the “smoking gun” throughout the lawsuit. For instance, in one recent case, the plaintiff had on many
occasions emphasized a document, drafted by the lawyer and signed by the plaintiff, that the plaintiff claimed breached rules
of professional responsibility. It was apparent that the plaintiff viewed this document as a highly favorable element in his
case. In the end, however, the mock jury viewed this document as favoring the defense, placing far more focus on the fact
that the sophisticated client “knew what he was doing” when he signed it. With this knowledge, we knew that we could focus
on issues at trial that mattered more to the mock jury, rather than take a defensive position on the document.

Upcoming Changes

It is often the case that cutting-edge areas of law can later develop into target-rich environments for legal malpractice
plaintiffs. As lawyers with a Colorado-based national practice, we would be remiss not to mention one possible new example
of this phenomenon looming on the horizon--claims against lawyers representing state-licensed marijuana retailers and
growers. This is not just a Colorado issue--as of this writing, four states and the District of Columbia have legalized the
growth and sale of recreational marijuana. About nineteen other states have legalized, at least in some circumstances, the sale
or use of medical marijuana. That number can reasonably be expected to grow.

We have not yet seen, nor have we identified through research, legal malpractice claims filed against lawyers who chose to
advise state-licensed marijuana businesses. The rapid growth of this industry, however, as well as its uncertain legal status,
makes such claims inevitable. Although the wisdom of representing these businesses is subject to serious debate, we

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recognize that dozens of lawyers in Colorado have already chosen to specialize in this field, and that hundreds, if not
thousands, already do so nationwide. When claims against these lawyers do arise, we expect them to raise a series of novel
legal questions--and create uncertainty both for these legal professionals and for their insurers.

*11 The immediate concern with the intersection between state-licensed marijuana and the legal profession has, thus far,
centered largely on state rules of professional conduct. Under Rule 1.2(d) of the Model Rules of Professional Conduct
(adopted in Colorado), “[a] lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is
criminal or fraudulent ....” Recognizing that Section 841(a)(1) of the Controlled Substances Act criminalizes the growth and
sale of marijuana, the Ethics Committee of the Colorado Bar Association in November 2012 issued Formal Ethics Opinion
125, concluding that federal law places strict limits on the advice that lawyers may provide to marijuana businesses. It
concluded that lawyers may run afoul of Rule 1.2(d) by undertaking routine tasks, such as drafting leases or supply contracts,
for licensed marijuana businesses.

The Colorado Supreme Court--over the dissent of two justices--then attempted to add some clarity to the situation. It recently
added a comment to Colorado’s Rule 1.2(d) stating that a lawyer “may assist a client in conduct that the lawyer reasonably
believes is permitted by ... constitutional provisions” allowing the retail sale of marijuana. Further confusing the situation is
the fact that the language of Rule 1.2(d) itself remains unchanged, and that comments to the rules of professional
responsibility do not change the substantive governing rules.

Given the issues that licensed marijuana has caused in the professional responsibility context, it seems inevitable that similar
issues will arise in the professional liability context. We cannot begin to anticipate what these issues might be, but a few
come immediately to mind. For example:

• If the Department of Justice ultimately changes its enforcement policy regarding state-licensed growers and
retailers, might lawyers who helped clients structure businesses that violated federal laws, without providing
extraordinarily strong caveats, be liable to a client ultimately convicted for violating these laws?

• Might fee agreements between lawyers and medical marijuana retailers be found void against public policy?
(And would that result change if the lawyer practices outside the state that has repealed laws against the
production and sale of marijuana?)

• Can legal malpractice suits brought by licensed marijuana businesses ever be adjudicated in federal court?21

• Might a criminal acts exclusion in a professional liability insurance policy leave a lawyer who assisted a
licensed marijuana business without coverage against a malpractice claim?

• So far, most banks, wary of federal drug laws, have refused to deal with licensed marijuana businesses. What
sort of liability does a lawyer face who accepts cash payments from marijuana clients--and then perhaps holds
them in a client trust account?

• Would the doctrine of in pari delicto bar any plaintiff in the business of violating federal drug laws from ever
suing a lawyer who offered legal assistance to that business?

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*12 We have repeatedly seen that lawyers who aggressively pursue novel practice areas--for example, by offering tax shelters
that have only recently become in vogue--can find themselves facing significant liability a few years down the line. A similar
risk would seem to exist for lawyers who choose to practice marijuana law. We have little advice other than that lawyers
carefully consider whether the risks are worthwhile, and if they are, to tread very, very carefully.

Key Takeaways

• Sue for fees only when it is absolutely necessary. Keep in mind that professional liability policies typically do
not cover fee claims, which may mean the expense of obtaining separate counsel for the aspects of the
malpractice case that the carrier deems primarily related to the fee claim.

• Take care when agreeing to be a client’s second or third successive lawyer on a case.

• Review of both electronically stored information and physical client files needs to begin as soon as the matter
is filed. The earliest client discussions need to include a thorough analysis of what material the lawyer has in his
possession and establish a plan for turning that material over to counsel.

• Do not feign familiarity with the legal subject matter of the underlying case. Rely on your clients to help
educate you about their practice areas.

• Whenever possible, whittle down a plaintiff’s claims through a combination of partial motions to dismiss,
motions for determinations of matters of law (if available in your jurisdiction), and partial summary judgment
motions--even when complete summary judgment is not achievable.

• In every case, consider at the onset whether the specialized legal rules applicable to legal malpractice claims
might allow you to dismiss some or all of the claims against the lawyer at the onset of the case.

• Note that jury research enables defense counsel to learn the most effective ways to communicate the most
significant facts to the jury in the most persuasive way. Jury research also allows defense counsel to learn
which facts the jury views as extraneous, irrelevant, or even counterproductive to the defense case.

• Be very wary of practicing in a cutting-edge area of law.

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Footnotes

a1
Michael L. O’Donnell, a founder and the chairman of Denver-based Wheeler Trigg O’Donnell, has tried over fifty
cases to verdict and has appeared as lead counsel in state and federal courts in twenty-five states. His national
litigation practice focuses on defending Fortune 500 and other companies in complex civil litigation involving
product liability, professional liability, tort, class action, commercial, and bet-the-company litigation matters. A
fellow in the International Academy of Trial Lawyers and the American College of Trial Lawyers, Mr. O’Donnell has
been voted by his peers the #1 lawyer in Colorado Super Lawyers in each of the past three years.

a2
Christopher P. Montville, a partner at Denver-based Wheeler Trigg O’Donnell, focuses his national litigation
practice on legal malpractice defense and complex commercial litigation at both the trial and appellate levels. His
experience includes successfully defending law firm clients, including large regional and international firms, against
claims of malpractice, negligence, and breach of fiduciary duty relating to complex underlying cases. Mr. Montville
was selected to the Colorado Super Lawyers Rising Stars list in 2013 and 2014.

1
See, e.g., Nat’l Savings Bank v. Ward, 100 U.S. 195 (1879) (holding that, absent fraud or collusion, an attorney is
not liable to non-clients).

2
We take this opportunity to mention a corollary trend. In the past, plaintiff-side legal malpractice work has arguably
carried some level of professional stigma and a relatively small number of practitioners pursued such claims. We have
seen this perception change in recent years as more sophisticated lawyers, often at larger law firms, have become
involved in prosecuting legal malpractice claims. The same type of unconventional thinking that experienced lawyers
bring to pursuing commercial litigation, class-action claims, and other sophisticated practice areas is increasingly
appearing in legal malpractice cases.

3
See Biakanja v. Irving, 320 P.2d 16 (Cal. 1958) (holding, perhaps for the first time, that a plaintiff may sue a
lawyer despite a lack of privity when the plaintiff is a beneficiary of a will drafted by the lawyer).

4
See Mehaffy, Rider, Windholz & Wilson v. Cent. Bank Denver, N.A., 892 P.2d 230 (Colo. 1995) (holding that a
lawyer can be liable to a non-client for negligent misrepresentation when the opinion is issued to the non-client for the
purpose of inducing the non-client to engage in a transaction).

5
See, e.g., Nunn v. Mid-Century Ins. Co., 244 P.3d 116 (Colo. 2010).

6
Id. at 970. See also Gurski v. Rosenblum & Filan, LLC, 885 A.2d 163 (Conn. 2005) (holding that a legal
malpractice claim is not assignable to an adversary in the same litigation that gave rise to the alleged legal
malpractice). But see Villanueva v. First Am. Title Ins. Co., 740 S.E.2d 108 (Ga. 2013) (refusing to adopt a rule that
legal malpractice claims are per se unassignable).

7
See, e.g., Baker v. Mallios, 971 S.W.2d 581 (Tex. App. 1998) aff’d, 11 S.W.3d 157 (Tex. 2000) (holding that

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the plaintiff could assign part of the proceeds of the plaintiff’s legal malpractice claim to a third party who financed
the lawsuit) But see Gurski v. Rosenblum & Filan, LLC, 885 A.2d 163, 164 (Conn. 2005) (holding to the
contrary).

8
See, e.g., Villanueva v. First Am. Title Ins. Co., 740 S.E.2d 108 (Ga. 2013) (holding that a subrogation claim was an
impermissible assignment).

9
See generally Katerina P. Lewinbuk, Let’s Sue All the Lawyers: The Rise of Claims Against Lawyers for Aiding and
Abetting A Client’s Breach of Fiduciary Duty, 40 Ariz. St. L.J. 135, 135 (2008).

10
MODEL RULES PROF’L CONDUCT R. 1.13 (emphasis added).

11
See, e.g., Barnard v. Langer, 1 Cal. Rptr. 3d 175 (Cal. Ct. App. 2003) (holding that the plaintiff did not and could
not prove damages and merely suggested speculative harm when alleging legal malpractice after the underlying case
had settled); Envtl. Network Corp. v. Goodman Weiss Miller, L.L.P., 893 N.E.2d 173 (Ohio 2008) (holding that
the plaintiff must establish that he would have prevailed in the underlying matter and that the outcome would have
been better than the outcome provided by the settlement).

12
See, e.g., Bloomberg v. Kronenberg, No. 1:06-CV_0733, 2006 WL 3337467 (N.D. Ohio Nov. 16, 2006) (rejecting an
argument that the professional judgment rule precluded a plaintiff from bringing a legal malpractice action based on a
settled underlying action).

13
See Crist v. Loyacono, 65 So. 3d 837 (Miss. 2011) (allowing a settle-and-sue case to proceed based on a
breach-of-fiduciary-duty claim).

14
See MODEL RULES PROF’L CONDUCT R. 1.16(d).

15
See, e.g., One Nat’l Bank v. Antonellis, 80 F.3d 606, 609 (1st Cir. 1996) (explaining the general rule that lawyers do
not owe duties to non-clients).

16
See, e.g., Whiteheart v. Waller, 681 S.E.2d 419, 422 (N.C. Ct. App. 2009) (applying doctrine to dismiss legal
malpractice claim).

17
See, e.g., Giambrone v. Bank of New York, 677 N.Y.S.2d 608 (N.Y. App. Div. 1998) (affirming dismissal of legal
malpractice claim based on speculative damages).

18
See, e.g., Grimm v. Fox, 33 A.3d 205, 211 (Conn. 2012) (applying the rule that expert testimony is generally required
to establish a lawyer’s breach of the standard of care).

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19
See, e.g., Majumdar v. Lurie, 653 N.E.2d 915 (1995) (“when ... the same operative facts support actions for legal
malpractice and breach of fiduciary [duty] resulting in the same injury to the client, the actions are identical and the
later should be dismissed as duplicative.”).

20
See, e.g., Aller v. Law Office of Carole C. Schriefer, P.C., 140 P.3d 23, 26 (Colo. App. 2005) (holding that
noneconomic damages are unavailable in claims based on a breach of duty owed by a lawyer to a client).

21
Cf. In re Arenas, 514 B.R. 887, 895 (Bankr. D. Colo. 2014) (dismissing a bankruptcy petition brought by a marijuana
business, holding that “[as] a federal court, the Court cannot force the Debtors’ Trustee to administer assets under
circumstances where the mere act of estate administration would require him to commit federal crimes under the
[Controlled Substances Act].”).

ASPATORE

End of Document © 2020 Thomson Reuters. No claim to original U.S. Government

Works.

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