Preparing for Mediation of Professional Liability Cases

Written by admin on February 8th, 2012

by MARK WHITTINGTON and RANDY JOHNSTON

Reprinted with permission from the November 21,2011 issue of the TEXAS LAWYER

Cases involving business tort and negligence claims against professionals, such as Texas attorneys, accountants, engineers and health-care providers, are prime candidates for settlement through mediation. But they also require specific preparation by mediators and attorneys.

Professional liability cases lend themselves to early mediation for at least three reasons: insurance coverage, resource-drain and publicity. Speedy resolution may preserve the maximum insurance coverage available. Professional liability claims are complex, and as defense costs go up, coverage available for satisfying the claim goes down (which is why these insurance policies are known as cannibalizing or diminishing policies).

All litigation takes a toll on participants. However, the professional defendant loses billable time during the dispute. He or she also will be emotionally distracted — generally to a greater degree than anticipated.

Many professionals identify strongly with the roles for which they have undergone lengthy training and made significant sacrifices. An unhappy client’s or patient’s allegations that the work was substandard can create significant distress.

Early settlement also decreases the risk of adverse publicity. While the risk and cost of adverse publicity is never as big a motivation for the defendant as the plaintiff thinks, it is nevertheless a major factor to a professional defendant.

The mediator and the attorneys must be prepared for the professional liability mediation. Mediators must understand the profession at issue, including relevant industry standards and practices. They also should perform independent research regarding applicable law and regulations. Attorneys must counteract the strong emotions that permeate a professional liability case by discussing the case’s strengths and weaknesses with their clients.

Lawyers err when they depend on the mediator to be the first (and only) bearer of the bad news about a case’s flaws. Mediators usually cannot trump repeated glowing reports that the attorneys have given the clients about the chances of their case’s success.

Lawyers also must be ready for wide-ranging arguments at the mediation. Summary judgment motions and expert witnesses are a major part of almost all professional liability cases. Even if the mediation is conducted early in the litigation, both sides should be prepared to discuss summary judgment issues and the quality and strength of the experts’ opinions.

In Session

Who should attend? When the case is against the professional and his or her professional corporation, limited liability partnership or other professional entity, it is helpful to have the organization’s managing partner, general counsel or senior executive present in addition to the defendant-professional. That organizational representative usually will support the defendant-professional but will have a different perspective on the dispute. That detached view can be useful to all parties, including the insurance company representative.

Whose lawyers should be present? Coverage disputes are common in professional liability cases. It is a good idea for the defendant to have independent coverage counsel in addition to the defense counsel provided by the insurance carrier. Coverage counsel can aid the defendant in evaluating the strength of any reservations of coverage and can provide added motivation to settle when the defendant wants a settlement.

What tone is appropriate? Opening statements should be factual and strong but not inflammatory. At best, theatrics can weaken counsel’s arguments; at worst, they can become reasons for the other side not to settle. General respect for all parties helps everyone focus on the risks of litigation and could lessen the desire to make the opponent eat his or her words. Plaintiffs especially need to be prepared for the opening sessions. They may want their lawyers to really let loose on the professional in the opening. But plaintiff’s counsel should remind the client that the audience is the insurance adjuster and the mediator, not the professional.

What about consent clauses? Some insurance policies have a consent clause that requires the defendant to consent to any settlement. Such a clause creates a danger for the unhappy former client/patient and the defendant-professional. A defendant who refuses to consent to a settlement the insurance carrier wants to accept will reduce the available insurance coverage to the amount of the rejected settlement offer.

Plaintiff’s counsel must be careful when extending offers in the face of a consent clause for fear of reducing the insurance funds available and trying the case with inadequate insurance to cover the plaintiff’s losses.

Professional liability cases involve certain unique aspects that all participants should understand to maximize the chances of a successful mediation. If the mediator and attorneys are well prepared and participate in the mediation session with a full understanding of the law, facts and interests of the parties involved in the case, professional liability cases are excellent candidates for settlement through mediation.

Judicial Research

Written by admin on July 21st, 2011

There is an old story about the grandfather who was hit by a truck and his grandson told him he should sue the truck driver.  The grandfather said he could not afford a lawsuit.  The grandson reminded him that he could get a lawyer on a contingent fee and the grandfather said, “Oh, I got enough money to afford a lawyer.  I cannot afford the judge.”

We talk all the time about lawyer’s ethics, but we also need to occasionally talk about judicial ethics.  At the start of modern trials, one of the warnings that judges give to jurors is that the jurors are not to google the parties, or go drive by the site of the wreck, or do any independent research to help them decide the issues that will be presented to them.  “Limit yourself to what you hear in court,” we tell them.  Well, does the same thing apply to judges?

No one seriously argues that the judge cannot go do her own legal research and decide a case or a motion based on legal principles that the parties did not even bring up. It happens all the time, especially in Federal Courts where the judges have law clerks to do research for them. Is the judge’s research limited to case law, however?

Should a judge be permitted to look up a lawyer’s website when the judge has no experience with that lawyer?  We specifically tell the jurors not to do that.  What if the lawyer is applying for admission to that court for a specific case pro hac vice, as an out-of-state lawyer?  Can or should a judge be permitted to google the parties if the case is a jury trial and the jury will be making the fact-finding decisions?  We tell the jury not to do that.

Imagine a case where one party is proffering an expert witness to testify that trailer parks attract tornados, something like funneling of electrical ions because of the abundant aluminum siding, perhaps.  Imagine also that the other side is not really doing a very good job of showing that this is junk science.  Should the judge go online to check this expert out before she lets this expert testify in her court?  Can the judge do that, ethically?  Or, has the judge become an advocate for one side or the other when that occurs?

If the judge just lets the expert testify, basically because the other side did not do its job adequately to challenge the expert, the judge has given the expert the badge of credibility and her decision will be cited by the expert in other cases where he wants to testify as an expert.  The judge could be embarrassed by that.  The case could reach the wrong result.  Is that justification for the judge to go do independent scientific research before letting the expert testify?  And if such online research is permitted, is the judge competent to evaluate the research alone, without the aid of an expert?

These questions are not easy ones and different judges have different answers, depending on the circumstances.  I fear, however, that many judges are doing their own research online, just as jurors are, notwithstanding the judge’s warnings.  Technology is way out ahead of our ethical rules.  Perhaps in the mean time, we should at least have a rule that requires judges to disclose their independent research to the parties, so that the lawyers and the parties have the chance to respond to the conclusions that the judge may have reached from independant research.  By the way, a friend of mine once actually hired as an expert witness an electrical engineer who was doing research on whether the mass of aluminum represented in trailer parks might have some of ionic effect that resulted in a pull on thunderstorms, to explain why tornados always hit the trailer park.  He fired the witness when he found out about the research.

You Are Free To Move About The Job Market

Written by admin on July 21st, 2011

In Petroleum Wholesale Inc. v. Marshall, the Dallas Court of Appeals severely restricted an attorney’s freedom to change jobs.  In that case, a defense firm had hired an associate from a plaintiff’s firm at a time when the two firms had one case in common.  The associate had never worked on this one case but had apparently attended firm meetings where the case was discussed.  The defense firm implemented an elaborate system of procedures to ensure that its new lawyer was not exposed to this one case or to the 20 or 30 other related cases being handled by the defense firm.

The Dallas Court ruled, however, that “Chinese walls” (now referred to as “ethical screens”) were an inadequate protection for the client of the plaintiff’s firm and the Court disqualified the defense firm not only from the one case it had in common with the plaintiff’s firm but from all other related cases as well.  The legal fiction created by the court to warrant the disqualification of the defense firm and the rejection of the ethical screens should be offensive to any practicing attorney: the Court said that there was an irrebuttable presumption that a lawyer changing jobs would violate his / her ethical rules and would disclose the former client’s confidential information to the new firm.

In contrast to the “presumed–to–be-unethical” lawyers, the Court ruled in another case that no such irrebuttable presumption would apply to secretaries or support staff who change jobs.   Phoenix Founders, Inc. v. Marshall.   Support staff could be appropriately screened by those same “presumed-to-be-unethical” lawyers, to ensure that any information they acquired at the old firm was not shared at the new firm.

While I understand the desire for a bright line (read, “irrebuttable presumption”), it seems to me that we ought to be able to handle this on a case by case basis.  AND, I really do hate this irrebuttable presumption:  “You are all so unethical that we will not even let you try to prove you are not.”  When a lawyer has virtually no confidential information that could be of any value to the opposing side anyway, like apparently was the case in Petroleum Wholesale Inc. v. Marshall, why should we not allow ethical screens?  On the other hand, if lead counsel wants to change jobs, that is probably too much of a burden to place on an ethical screen.  Is this really that hard that we need the bright line of an offensive presumption?

This legal fiction of an irrebuttable presumption of unethical conduct by lawyers appears to be finally crumbling.  In 2009, the ABA adopted Model Rule 1.10 which would allow a lawyer to change jobs notwithstanding common cases between the two firms with the help of ethical screens.  This rule would permit job changes without client consent so long as the new lawyer is effectively screened from the litigation, is given no part of the fee, and written notice of the lawyer’s presence at the new firm is provided to the former client.  In addition, the new employer has to certify compliance with the ethical screen on a regular basis during the case.  While Texas has not yet adopted this change in the rules, Chief Justice Wallace Jefferson has indicated on a couple of occasions in speeches and seminars that he is prepared for the Texas Supreme Court to revisit the issue of ethical screens for lawyers, with a view towards perhaps modifying the strict rule in Texas.

Further trending toward a change in Texas law is the recent decision of the U.S. 5th Circuit Court of Appeals, Kennedy v. Mind Print,which challenged the irrebuttable presumption that an attorney changing jobs possesses client confidences of all of his former firm’s clients after he leaves the firm.  The next step would appear to be a direct challenge to the Petroleum Wholesale“irrebuttable presumption” that confidences will be shared.

From Lawyer to Debt Collector; Can You Go Much Lower?

Written by admin on July 12th, 2011

Writing a demand letter may not seem like down-and-dirty debt collection. You don’t interrupt people’s dinner or call them at work. But laws passed to prevent abusive collection practices may also apply to a lawyer who is simply sending a demand letter.

Many lawyers fail to recognize that their demand letter may violate the Federal Fair Debt Collection Practices Act (the FFDCPA).  This Act defines debt as an obligation to pay money arising out of a transaction undertaken primarily for personal, family or household purposes, what we generally think of as consumer transactions.  The statute would therefore not apply to transactions between two businesses or obligations arising out of tort claims.

The Federal law applies only to third-party debt collectors (attempting to collect the debt of someone else) and only to consumer debts. The Texas Debt Collection Act (the TDCA) applies to attempts to collect your own debts as well as third-party debts. Before you sign and mail that demand letter, ask yourself if you are collecting a consumer debt.  If the answer is yes, a quick review of these two statutes would be well advised.

In their demand letters, lawyers often fail to give the consumer the exact amount of the debt and the exact name of the creditor.  Both statutes also require the lawyer to affirmatively tell the consumer that he or she has 30 days to dispute the debt.  Also be careful not to make false or misleading representations to the consumer.  Lawyers, it seems, are accustomed to making threats they have neither the legal ability nor intention of carrying out.  When that type of exaggeration or puffery finds its way into a demand letter that is subject to the Federal or State debt collection statute, there is a significant probability that the lawyer has violated the statute.

Violations of the statute are subject to a one-year limitations period and can result in an award of actual damages, supplementary damages not to exceed $1,000 per violation, and attorneys’ fees.  While these claims are typically covered by your malpractice insurance, it is not uncommon to have the claim fall within your deductible or self-insured retention, so that you pay the damages yourself.

Before you write the next demand letter, prepare a checklist to avoid writing a letter subject to the debt collection practice statutes.

With Friends Like These, You May Need Your Own Lawyer

Written by admin on July 12th, 2011

MySpace. Facebook. Twitter. For those of us of a certain age, let me explain that  they are internet-based, digital social networks, where you can join and then communicate with friends in numerous ways.

Most marketing people believe a Facebook page is essential today. The first thing you do when you join Facebook is complete your profile by answering questions about yourself.  They provide an opportunity for you to identify your religious, political, and sexual preferences.  Your profile can reveal a lot of personal information, so think before you complete your profile.

Your next act is usually to upload a photo for your profile page.  After that, you are ready to start gathering “friends.”  Once you find someone you know, you send a request to be friends.  That person confirms your request, and congratulations, you have a Facebook friend.

The importance of the “friend” designation is that only friends can see your profile, write on your wall, or add and tag pictures of you.  Be prepared to receive friend requests from people you do not know, or do not remember that you know. Those friends can write anything they want on your wall, including things that are defamatory or embarrassing. No one knows yet whether you can be sued for defamation based upon someone else’s words on your wall, but that lawsuit is probably coming.

You, of course, can delete postings on your wall, and the lesson here is to monitor your wall daily, to ensure there is nothing on your wall that you would be unwilling for the world to see.  Yes, only friends can see your wall, but each of them can also copy it and sent it around the world in a nano-second.

Remember that profile picture you uploaded of your country estate, with your Black Lab beside you?  That will not be the only picture that others can see.  Friends can add their own pictures of you, and they will automatically cross reference to your profile page. Remember, some of your friends may be judges, clients or potential clients.

Lawyers sometimes tout recent successes or comment on their cases on Facebook. Such postings could disclose confidential information or be an ex parte communication if you are friends with a judge.  In addition, postings on Facebook are probably subject to Disciplinary Rule 7.02, which severely restricts what a lawyer can say about past successes.

Social networks are here to stay, and lawyers will use them, both as personal and professional networks. But like atomic energy, internet social networks can provide power to run your life and practice, or they can explode into unimagined problems.  Do not take them lightly.

One last thing, will you be my Facebook friend?

Are You A Super Lawyer, Or Do You Just Play One on Your Website?

Written by admin on July 12th, 2011

The State Bar’s restrictions on when you can call yourself an expert or a specialist in a particular practice area are not that well known, even though you probably know about Rule 7.04, which governs advertisements in the public media. Just because you don’t advertise on television for car wreck cases doesn’t mean you can ignore Rule 7.04.  Anyone who has a website is advertising in a public forum.

Here are five things Rule 7.04 says we CAN do:
(1)    If you have been admitted to practice before the United States Patent Office, you may use the designation of Patent Attorney or Patent Lawyer.  A lawyer engaged in trademark practice may use the designation of Trademark Attorney or Trademark Lawyer.  If you are engaged in both patent and trademark practice, you may promote yourself as specializing in intellectual property law, patent, trademark, copyright law, or unfair competition, or any of those terms.
(2)    A lawyer may permit his or her name to be listed under a specialized area of law in a qualified lawyer referral service that meets the requirements of Occupational Code Title V (b) Ch. 952.
(3)    A lawyer may advertise that he or she is available to practice in a specialized area of law in directories and publications intended for other lawyers.
(4)    A lawyer awarded a certificate of special competence in his or her area of practice by the Texas Board of Legal Specialization may advertise that fact in any public medium.
(5)    Lastly, a lawyer who has received an award from or been admitted to an organization that has been accredited by the Texas Board of Legal Specialization may advertise that fact in any public forum.

Other than those exceptions, you cannot suggest that you are a specialist or that you possess any special competence or have any exceptional experience in an area of law in any public medium.  You also cannot state that you have received any recognition or award that implies special competence or experience.  That prohibition covers a lot of ground!

By now, most of you have surely received some form of a ballot or inquiry from some publication, asking you to help them pick the best lawyers in your practice area.  Maybe you are lucky enough to have been one of the lawyers honored.  If you have received such an honor, you have probably also received offers to sell you a plaque for your office, along with a request for several thousand dollars of your hard-earned money to purchase advertising in the publication honoring you.

Buy the plaque, hang it up, and tell everyone you know about this honor.  But before you buy advertising in a publication that is not intended to go primarily to lawyers, and before you publish this honor on your website, look back at Rule 7.04(b) 2.  It prohibits any statement that a lawyer has been designated as possessing special competence unless that designating organization has been accredited by the Texas Board of Legal Specialization.

I have seen the ads and I have looked at lots of websites.  Lawyers routinely advertise in the public media that they are “super this” and “best of that” and “who’s who in whatever.”  The State Bar has been very lax in their enforcement of this Rule.  My advice is that you proceed with the publication of these honors in the public media with extreme caution. Ask them if they have been accredited by the Texas Board of Legal Specialization and make sure your ad is approved by the Advertising Review Committee.