Legal ethics

At the intersection of ethics and entrepreneurial acts

A case written up by Mike Frisch earlier this month caught my eye because it involves a discussion of two still-evolving areas of claims that can get made against law firms.

Most of the case, and most of what Frisch focuses on, is the malpractice claim that was made regarding an alleged lost opportunity to settle a case. Although the Vermont Supreme Court did join a growing list of states to explicitly recognize that lost opportunity to settle can be a variety of actionable legal malpractice, the plaintiff’s loss at the summary judgment stage was affirmed. That was because, as difficult as proving a case within a case can be for a more garden-variety malpractice claim, proving that a case would have settled but for a lawyer’s negligence can be even more difficult. As the Vermont Supreme Court explained it succinctly, a plaintiff has to prove both that the case would have settled but for the error(s) and the probable terms of the settlement. While law firms often are wary of the risk of “settle and sue” malpractice claims, it bears remembering that there is some risk of claims for appearing to fail to pursue settlement.

But that part of the case was not really what motivated me to write this post, it was the second part of the case that did so. The second half of the Vermont case involved overturning a grant of summary judgment in favor of the law firm as to a claim under the Vermont Consumer Protection Act. The potential application of state consumer protection acts against lawyers and law firms is something I first wrote about back in 2006. (You can find the title of that article over on the Publications page if you’re interested.) Over the ensuing 17 years, general traction has been obtained for the notion that you cannot sue a lawyer or law firm under such statutes for claims relating to the core things that involve the practice of law such as rendering legal advice but that you can do so for things involving “entrepreneurial aspects of the practice of law.”

In the case before the Vermont Supreme Court, the consumer protection act claim turned on the fact that the defendant law firm, in landing the client, had been alleged to have made representations that certain tasks would be delegated to associates and others when appropriate. Now that sounds innocuous out of context, but the allegations were that the entire case was handled primarily by an associate at the firm. While the Court recognized that how a case is staffed is not an entrepreneurial aspect of the practice of law, a promise or representation made about how a case would be staffed to land a case was.

The commercial aspects of the practice of law that many courts will find can be the stuff of a consumer protection act claim are advertising, billing and collection activity, and not only statements made to obtain clients but even methods of keeping or discarding clients. Those issues are ones that lawyers mostly recognize as bringing ethics and disciplinary risks under rules such as RPC 7.1 and RPC 1.5 or even RPC 1.16 but it is worth keeping in mind that, even though the rules in most jurisdictions set out language in their Preamble or Scope sections to assert that the ethics rules are not designed for the purpose of providing a basis for civil liability, conduct that would violate those rules can also easily become the stuff of civil liability all the same through application of a state’s statutory framework seeking consumer protection or cracking down on deceptive trade practices.

This potential for liability can provide yet another justification for firms to give some scrutiny not only to making sure that their billing practices are reasonable and justifiable but also to reviewing the language their lawyers use in engagement agreements and even in making new client pitches.