Legal Malpractice

Is it The Economy or Just Plain Legal Malpractice?

By (Andrew Lavoott Bluestone)

Law.Com reprints an interesting article from the Texas Lawyer on the relationship between the economy and legal malpractice litigation.  One theory is that plaintiffs are more in need of recovery, and will either bring more legal malpractice law suits, or are willing to sue over smaller sums.  A second theory is that the economic downturn causes attorneys to take on too much work, which will in any economy create more mistakes, hence later legal malpractice litigation.

From the article; "Economic downturns often increase the risk that lawyers will face unhappy clients complaining of legal malpractice. While some lawyers may think they have nothing to fear since their practices do not involve areas of law many blame for the economic collapse, such a belief is unfounded. Some legal malpractice risks are not tied to any one specialized practice area but simply become more common when the economy goes bad.

Trouble sometimes arises because scenarios lawyers did not consider occur, or difficult economic circumstances test tough-to-draft language. Similarly, insignificant conflicts of interest -- either between the lawyer and the client or between clients in multiple representation situations -- take on heightened importance as clients face difficult financial circumstances.

Clients, desperate to stay afloat, may be more inclined to sue their lawyers, taking a chance that malpractice litigation will solve their financial problems. Lawyers, too, are more likely to sue clients for fees in a recession. Since legal malpractice is a mandatory counterclaim to a suit for fees, clients often elect to pursue a legal malpractice counterclaim rather than lose their opportunity to do so.

Some legal malpractice issues are simply an inevitable outcome of activity occurring more frequently in a bad economy. A spike in the number of foreclosures often means more people are unhappy with related legal services. People often sue lawyers who act as trustees in foreclosures, alleging failure to conduct the sale in a proper manner, though the more likely scenario is a suit to enjoin foreclosure."

As collection activities rise, more people will seek relief under the Fair Debt Collection Practices Act. Various state and federal fair debt collection practices laws may apply to lawyers involved in collection activities, including foreclosures and collection litigation, so all such lawyers should understand and abide by these laws' requirements if there is any doubt as to their application.

Lawyers, regardless of specialty, are more likely to have to consider the application of bankruptcy law and related issues applicable to insolvent adversaries in a tough economy. Failure to warn a client of the potential application of voidable preferences easily can trip up attorneys. Lawyers are sometimes sued for failing to make sure that a bankruptcy trustee completes the actions necessary for clients not in bankruptcy to consummate deals with debtors. Any time a lawyer is dealing with an adversary in bankruptcy, understanding the bankruptcy angles is critical.

Full post as published by New York Attorney Malpractice Blog on March 27, 2009 (boomark / email).