A Few Simple Risk Management Tips
By Mary C. Nevius, Esquire, Legal Mutual Liability Insurance Society of Maryland

As Supervising Claims Counsel for Legal Mutual since 1995, I am sometimes tempted to think that I have seen or heard just about every conceivable way in which an attorney might get into trouble with clients. I know that that is probably an optimistic perspective, and that I will continue to be surprised as time goes by. I would, nonetheless, like to pass on to our readers some of what I have learned in the form of a few suggestions which, in my opinion, may help you to avoid both legal malpractice and ethical problems.

1. Resist the temptation to join your clients' boards of directors

ABA Formal Ethics opinion 98-4 makes it clear that serving as a board member of a client is bad business for both you and the client. Among other problems raised by the arrangement, all of the files in your office related to that client may be rendered discoverable as "board related files" as opposed to attorney/client files. Moreover, any time that you are both the client and the attorney (as you are when you sit on a client board), you have an inherent conflict of interest.

2. Reduce it to Writing

Always confirm significant conversations with clients and opposing counsel in writing. This may not only prevent claims being asserted in the first place, but will surely help to quickly defeat many claims that are asserted. Discussions regarding, as examples, settlement authority; litigation strategy (including the retention of experts); estate and tax planning options; even the scope of the representation itself, should be reduced to writing. This is especially true in instances when the client elects to reject your advice in some regard. In situations where a confirming letter may be inappropriate, at least keep your own file documented with detailed notes.

3. Maintain a computerized conflicts database

Whether yours is a large established firm or a small one just getting started, the need for a computerized conflicts system cannot be overstated. Even if your client list seems manageable on a manual basis now, with time (and success), you will represent enough clients that the potential for overlooking a conflict is enormous. In addition, it is not possible to manually record and cross check all of your client's interlocking relationships. The best solution to this problem is to maintain a computerized conflicts database.

In addition to identifying information about the actual client, you should maintain identifying information regarding, inter alia, immediate family members, businesses in which the client might be involved, and other potential or actual parties to a conflict. It is not necessary that you purchase expensive conflicts software in order to set up such a database. Excel or any other spreadsheet type format that will permit you to add names and will automatically alphabetize the entries can serve the same purpose, although it may be bit more labor-intensive. Most office computer systems probably already have such a feature.

As a caveat, any "free consultations", such as those given at family gatherings and cocktail parties, may establish an attorney/client relationship. Identifying information regarding those individuals with whom you have such conversations should be entered into your database, even if there is never a formal retention. The sharing of confidential information in a situation where the other person reasonably believes that such information will be kept confidential may create an attorney/client relationship and the potential for a conflict in the future. It is not necessary that fees be paid in order for such a relationship to be created.

4. Do not enter into business relationships with clients

This point may be of particular relevance in today's economy. Some attorneys may be tempted to think that they can make a lot of money by entering into a business deal with a client or by accepting client stock in lieu of fees. The risk of encountering ethical and/or malpractice problems as a result of such activity far exceeds the chances of striking it rich. If the relationship goes bad, there is an excellent chance that the client will accuse you of self-dealing. In addition, other investors may see the lawyer as being to blame for their losses. If the business deal with your client is too good to pass it up, either withdraw from the representation or advise the client to seek independent counsel on the issue.

5. Promptly return telephone calls and be on time for appointments

In the overall scheme of your practice, a particular legal matter may not be all that high on your list of priorities. That is not, however, a message that you want to convey to your clients. To the client, their matter may be one of the most important things going on in their life. (Beware, however, the client for whom it is the most important thing, as that client will most likely have unrealistic expectations.) No client wants to be ignored or treated as inconsequential. If you are unable to return a call promptly, have a knowledgeable staff member do so, with an appropriate apology and explanation. If, after such a call, the client still wishes to speak with you directly, return the call as soon as possible.

Similarly, when meeting with a client, be on time and be prepared. Make sure both the client's file and your office appear organized. If necessary to carry this off, consider meeting with the client in a neat conference room or other locale.

6. Do not give non-attorneys authority to sign for the Client Trust Account

The ABA Model Record keeping Rules for client trust accounts specifically state that only attorneys should have signature authority on such accounts. This may not always be practical for solo practitioners or those who do a lot of real estate transactions. But the rules exist for a reason, and my experience is that nothing will get Bar Counsel's attention faster than a trust account violation.

In addition, remember that the onus is on the attorney at all times to keep the trust account reconciled. This means that at no time can it be out of balance. Any overdraft or other irregularity is required to be reported by the bank to the Attorney Grievance Commission.

The basic rule is, do not commingle funds. If it is the client's money, it must be kept in the trust account. If it is your money, it cannot be kept in the trust account.

7. Courts do not favor non-refundable retainers

Although the attorney-client relationship is a private contractual one, and can arguably include any terms to which the parties voluntarily agree, non-refundable retainers may nonetheless prove highly problematic. If the relationship goes sour before the entire retainer has been earned, the impression will be that the attorney is taking advantage of the situation in order to keep the client's money. In addition, the client may need the unearned portion in order to retain substitute counsel. Your refusal to refund the balance may be interpreted as creating an impediment to the client's right to counsel of his or her choosing.

(Based on an article by Robert W. Martin, Jr., Florida Lawyers Mutual Insurance Company appearing in the Risk Manager, Spring 2002 - Used with permission)

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