In the wake of the scandalous $1.7 billion

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1 page 5: Young Lawyer T H E O L D E S T L A W J O U R N A L I N T H E U N I T E D S T A T E S philadelphia, THURSDAY, MARCH 31, 2011 Attorney Hit With $100K in Sanctions By shannon p. duffy U.S. Courthouse Correspondent A federal judge has imposed sanctions of more than $100,000 on attorney Wayne A. Schaible of McCann Schaible & Wall for causing a mistrial in February 2010 that derailed a multiweek trial of a wrongful death suit. McLaughlin U.S. District Judge Mary A. McLaughlin had ordered the sanctions in a May 2010 opinion in Ferguson v. Valero Energy Corp. that included no dollar figure, but instructed the defense team to submit its bills. Sanctions continues on 10 By shannon p. duffy U.S. Courthouse Correspondent In the wake of the scandalous $1.7 billion collapse of Diagnostic Ventures Inc., investors have won the right to pursue class action fraud claims against the firm s auditors at Deloitte & Touche, but lost their bid to bring class claims against lawyers from Clifford Chance. The 3rd U.S. Circuit Court of Appeals has ruled that the auditors were properly sued under a fraud-on-the-market theory for allegedly issuing clean audit reports that hid DVI s improper accounting practices. But the appellate court held that the same theory could not be used to sue the Clifford Chance lawyers for allegedly advising DVI to omit negative information from its public filings with the Securities & Exchange Commission because investors had no knowledge of the law firm s VOL 243 NO. 62 $5.00 Panel Rejects Class Action Against Clifford Chance alleged role in the fraud. Because plaintiffs do not contend Clifford Chance s alleged role in masterminding the fraudulent 10-Q was disclosed to the public, they cannot scirica invoke the presumption of reliance necessary to bring a fraud-on-the-market claim, Chief U.S. Circuit Judge Anthony J. Scirica wrote in his 58-page opinion in In re DVI Inc. Securities Litigation. The decision upholds the class certification rulings of U.S. District Judge Legrome D. Davis that had sparked appeals from both the plaintiffs and the auditors. Legally, the decision is significant because it promises to limit the potential liability of law firms in securities litigation by holding that a lawyer s advice to a corporation cannot be the basis of a class action fraud claim by investors who were never aware of the advice. Scirica, who was joined by 3rd Circuit Judge Thomas L. Ambro and visiting U.S. District Judge John E. Jones III of the Middle District of Pennsylvania, adopted the reasoning of the 2nd Circuit in rejecting similar claims against lawyers from Mayer Brown. In Pacific Investment Management Co. v. Refco, the 2nd Circuit held that Mayer Brown could not be sued by a class of investors for allegedly participating in the drafting and disseminating of Refco s fraudulent public filings. The 2nd Circuit panel held that the plaintiffs were asking for too broad a reading of the U.S. Supreme Court s 2008 decision in Stoneridge Investment Partners v. Scientific-Atlanta Inc. because nothing Class Action continues on 9 SEPTA Settles Trademark Infringement Suit Against Law Firm By Gina Passarella Of the Legal Staff SEPTA has settled its trademark infringement suit against personal injury firm Mednick Mezyk & Kredo over the firm s use of a SEPTA bus on its website, and the firm s phone number, 888-SEPTA-LAW. As part of the settlement, which is still awaiting signatures though the terms have been agreed upon, Mednick Mezyk will take down the website and change its phone number, the firm s attorney, Benjamin Leace of Ratner Prestia, said. In their place, the firm will create a new website, com, and use a new phone number, 855-BUSLAW1. The defendants believe they had the ability to keep using the website but felt that it was in the best interest of their business to get back to their business, Leace said. SEPTA has agreed to a transition period in which Mednick Mezyk can change over the website and phone number, he said. Jeffrey S. Pollack of Duane Morris represented SEPTA in the case and said his client s goals for the litigation were met. The settlement was good for our client, he said. It basically resolved the case on the terms we were seeking. They won t use the [Stylized S ] mark and the website comes down, so I think that our client is pleased with the result. As part of SEPTA s suit, the transit authority argued Mednick Mezyk had advertised in local papers using SEPTA s colors and trademarks. Pollack said the settlement also includes an agreement that the firm will no longer use any of SEPTA s trademarks, such as the SEPTA logo or stylized S. He said the agreement is finalized and is just awaiting signatures. Leace said there were no damages at issue in the settlement and no money SEPTA continues on 9 INSIDE THE LEGAL Experts & Services Classified Public Notices 13 Legal Listings 15 Postal ID on Page 8

2 2 THE LEGAL INTELLIGENCER THURSDAY, MARCH 31, 2011 VOL P PEOPLE IN THE NEWS Members of event sponsor Deeb Petrakis Blum & Murphy of Philadelphia gathered in front of the Dreams of Freedom exhibit at the National Museum of American Jewish History for the Arts and Business Council of Greater Philadelphia s private Business Backstage event March 10. Museum president and CEO Michael Rosenzweig welcomed guests and council volunteers before they enjoyed guided tours of the interactive exhibit on Independence Mall. Pictured, from left, are Arthur Armstrong and Frank Murphy of Deeb Patrakis; Rosenzweig; Karen Davis of the Arts and Business Council; and Stephen Frishberg, Inez Markovich, Joseph Blum and Colin Knisely of Deeb Petrakis. addition Teresa Gavigan has joined Blank Rome as of counsel in the employment, benefits and labor group and will be based in the Philadelphia office. Gavigan has more than 30 years experience in labor and employment law and human resources administration. She joins the firm from Sunoco where she most recently served as vice-president, human resources and administration for Sunoco Logistics. speakers Robert M. Cavalier, managing partner of Lucas & Cavalier, led a roundtable discussion titled Trends in Lawyers Professional Liability Due to a Deteriorating Economy. The presentation was made at the cavalier Council for Litigation Management s annual conference in New Orleans March 24. Daniel F. Ryan III, partner at O Brien & Ryan, recently spoke on the medical and legal issues of documentation at a seminar for health care professionals in Philadelphia. The presentation titled The Importance of Proper Documentation was addressed to residents, fellows and interns of multiple specialties from the Philadelphia area. Ryan discussed preventable causes for legal disputes involving the medical record and proactive steps to consider in order to avoid being drawn into litigation. announcements Levy Baldante has moved its New Jersey offices to 89 Haddon Ave., Suite D, Haddonfield, N.J. It has retained its phone number from its previous location. Each year, Community Legal Services of Philadelphia publishes a case law outline of Disability Under the Social Security Act, with emphasis on the 3rd District. For more information, call Richard Weishaupt at or All potential items for People in the News should be addressed to Stephanie Baum at The Legal Intelligencer, 1617 JFK Boulevard, Suite 1750, Phila., PA Fax: ,

3 VOL P THURSDAY, MARCH 31, 2011 THE LEGAL INTELLIGENCER 3 regional News N.J. Justices Asked: Can a Judge Change His Mind? By Michael Booth New Jersey Law Journal It s said that intelligence allows for a change of mind, but a judge who rethought and reversed his own summary judgment ruling after hearing new evidence has caused consternation enough to demand the state Supreme Court s intervention. At issue, in Lombardi v. Masso, argued Monday, is whether Burlington County, N.J., Judge Michael Hogan acted properly in dismissing claims against all but one defendant and then after a proof hearing on damages hauling them back into court a year later, saying the case was more complicated than he had thought. The Appellate Division held the law-ofthe-case doctrine didn t apply, since once the judge lost confidence in his own ruling, regardless of how he came to that epiphany, the overarching goal of the court rules the fair and efficient administration of justice warranted his acting on that uneasiness. At the court on Monday, that was some justices initial reaction, too. Why is that such a bad thing? asked Justice Roberto Rivera-Soto. The judge says, I think I made a mistake. I m going to reconsider. Andrew Luca, the attorney representing two of the dismissed defendants, said Hogan had other opportunities to reconsider his first decision and the dismissed defendants had rivera-soto albin rabner long since thought they were out of the case. Justice Barry Albin suggested the court was merely being asked to determine whether Hogan s initial grant of summary judgment was appropriate. Luca argued that the court should consider itself bound by the record that Hogan had before him when he first made his decision and not include evidence that came in later. Albin said the rulings below made it difficult to determine what record Hogan had and when he had it. Chief Justice Stuart Rabner asked what was unreliable about the information causing Hogan s change of mind. Luca said that at the damages hearing, he erroneously read transcripts of the remaining defendant s deposition testimony to reach Photos by Carmen Natale the conclusion that the dismissed defendants should be brought back into the case. Then we should disregard the extraneous material and give no deference to his ruling? Albin asked. That s correct, Luca replied. Albin asked why it was improper for Hogan to revisit his first decision. Because, Luca said, there was nothing that gave the judge pause when he first decided to grant summary judgment. There was not one item. Then he heard evidence that was never presented to him before when the dismissed defendants were not around, said Luca, of Mount Laurel, N.J. s Reger Rizzo & Darnall. In the suit, Debra Ann Lombardi, a buyer N.J. High Court continues on 8 3rd Circuit Privilege Ruling Worries Defense Attorneys By Sue Reisinger Corporate Counsel Corporate executives may need to be more careful about what they say to outside counsel during internal company probes. And they ll want to make sure that the lawyers they talk to are representing them personally, and not just their company. That s the implication of a 3rd U.S. Circuit Court of Appeals ruling last week in the case of Ian Norris, one-time CEO of the Morgan Crucible Co. in the United Kingdom. At trial in federal district court in Philadelphia last July federal prosecutors were able to use the company s outside counsel as a witness against Norris. The company was accused of price-fixing, and Norris was convicted of obstruction of justice in trying to cover it up. Norris had argued that he believed the outside counsel, Sutton Keany, was representing him as well as the company. But the government insisted that Keany s client was only the company, which had waived privilege. The district court had applied a five-part test to determine that Keany was not representing Norris at the time of their discussions. The appeals court quickly dismissed 3rd Circuit continues on 8 PARTNERS, SENIOR ATTORNEYS AND PRACTICE GROUPS WHAT CAN YOU OFFER A SUBURBAN FIRM? WHAT CAN THEY OFFER YOU? MORGAN WENTWORTH, LLC. IS ACTIVELY WORKING TO ASSIST THE MAJOR SUBURBAN LAW FIRMS IN MAINTAINING AND GROWING THEIR FIRMS. YOU CAN JOIN THE EXCITEMENT WHILE REALIZING THE SAME GROWTH AND ADVANCEMENT FOR YOUR CAREER GOALS AND YOUR VALUED CLIENTS IMMEDIATELY SOUGHT ARE PARTNERS IN THE AREAS OF: TAX. TRANSACTIONAL and CORPORATE ELDER LAW HEALTH CARE ESTATE PLANNING ENVIRONMENTAL COMMERCIAL LITIGATION INTELLECTUAL PROPERTY OTHER AREAS OF LAW WILL BE CONSIDERED AS SYNERGIES EXIST CALL PATRICIA IN STRICTEST CONFIDENCE TO DISCUSS YOUR NEXT STEP

4 4 THE LEGAL INTELLIGENCER THURSDAY, MARCH 31, 2011 VOL P NATIONAL NEWS Sting Operation Focus of Dismissal Motions By Mike Scarcella The National Law Journal Criminal defense lawyers representing a group of weapons dealers in a foreign bribery prosecution in Washington want a federal judge to throw out the case over allegations the government crafted and closely scripted a conspiracy just to prosecute it. Attorneys in the Foreign Corrupt Practices Act (FCPA) case this month filed court papers urging Judge Richard Leon of Washington s federal trial court to dismiss charges that stem from a government undercover sting set up around the sale of $15 million in military and law enforcement equipment to Gabon. Leon is set to hear the defense motions, which also include claims of entrapment, on April 4 in the U.S. District Court for the District of Columbia. The sting, which played out for more than two years, nabbed 22 executives in the arms industry last year. The U.S. Department of Justice s large-scale use of undercover techniques that are typically seen in drug investigations generated considerable attention in the white-collar criminal defense bar. Justice Department prosecutors allege that executives, agents and employees in the arms industry participated in a conspiracy to bribe a fictitious Gabonese official through an agent. Defense lawyers in the case contend most of the defendants didn t know each other and that the government manufactured a crime, intentionally obfuscating the terms of a transaction that appeared legitimate. The essence of a sting is you should make it crystal clear that it s an illegal deal, said Orrick Herrington & Sutcliffe partner Michael Madigan in Washington, who represents a lawyer, John Godsey of Atlanta, who was Court Upholds Closed-Captioning During Redskins Games By Leigh Jones The National Law Journal Music blasted over the public address system during Washington Redskins games is part of the entertainment experience, and deaf fans should have access to the lyrics of those songs, a federal appeals court has ruled. The 4th U.S. Circuit Court of Appeals ruled that the Americans with Disabilities Act requires the team and the operators of FedEx Field to provide song lyrics and additional aural content of games for deaf fans. The March 25 decision upheld a lower court that granted summary judgment to the plaintiffs. At the same time, the court concluded that access to play-by-play coverage provided in the stadium concourse via the team s radio station, Red Zebra, was not required. The National Association of the Deaf sued in 2006 on behalf of three deaf or hearingimpaired fans. Shane Feldman, one of the plaintiffs, in 2003 requested that the operators provide captioning on the stadium Jumbotron for announcements made over Photo by Diego M. Radzinschi Madigan indicted in the sting. You have to make it clear that this is an illegal transaction and you can make some money in it. The government does exactly the opposite. Madigan and other defense attorneys in the case who joined various motions challenging the evidence said informant Richard Bistrong and his FBI handlers misled the arms dealers, saying time and again the deal was legal, including statements about State Department approval of the transaction. One of the defendants, Saul Mishkin, ran the deal by a lawyer, who advised the proposed sale could violate the FCPA, in addition to money laundering statutes. Bistrong, court papers show, was upset when Mishkin announced he was backing out of the deal and said he planned to tell others to abandon their involvement in the sale. Todd Foster, a Tampa, Fla.-based lawyer for a defendant named John Benson Wier III, said in court papers filed on March 7 that through a combination of threats, inducements and misrepresentations Bistrong persuaded Mishkin to abandon his plan to notify other suppliers about the illegality of the Gabon deal. OK, if you wanna go ahead and try to make this deal that I know is a good deal and that is a righteous deal, if you re gonna go ahead and try to infect that for me that s wrong, Bistrong told Mishkin on a recorded call that is evidence in the case. Bistrong said, according to court papers, that he had a severe problem with Mishkin and that you and I can get really sideways with each other and I don t wanna do that the public address system. According to the appeals court decision, the defendants balked because doing so would take up too much room on the screen. After the lawsuit was filed, the stadium operators began captioning much of the content on light-emitting ribbon boards. The defendants argued that because they had begun providing captioning, the issue was moot. But the appellate court agreed with the district court that even though the stadium had provided an accommodation, the dispute remained live because the defendants could readily stop providing the service. The court also agreed that song lyrics were an important part of the football experience, even though the plaintiffs had waited to raise that argument until filing summary judgment papers. By having access to the lyrics, plaintiffs have the opportunity to participate in the communal entertainment experience, the court said in a 2-1 decision. Without access to lyrics played, for example, during cheerleader dance routines and the halftime show, plaintiffs would not fully and equally experience the planned and synchronized given how much we work with each [other]. Foster, a name partner at Cohen Foster & Romine, said Bistrong inserted himself between Mishkin and his attorneys, lied to Mishkin and threatened him, all in a successful effort to preclude the other defendants from learning the truth. AN ACTUAL FOREIGN OFFICIAL Drinker Biddle & Reath partner Charles Leeper, in his own filing of March 9, said the FCPA prohibits an offer or payment made to an actual foreign official to obtain a business advantage. The history of the FCPA reinforces the common-sense conclusion that in order to know that money will be passed through an intermediary to a foreign official, an actual foreign official must be shown to have been involved, Leeper said. The FCPA, Leeper said in urging Leon to dismiss the case, does not criminalize attempts to bribe foreign officials. A Justice Department spokeswoman declined to comment about the litigation. But Justice attorneys, including Laura Perkins of the fraud section and Assistant U.S. Attorney Matthew Solomon, said in court papers filed on March 17 that the arms dealers readily agreed to participate in the corrupt deal. The defendants did not question the payment to the government official, decline to participate because the deal involved a corrupt payment or otherwise balk at the terms of the deal, DOJ lawyers said. Nor did they register hesitation or express surprise. The executives and employees, prosecutors alleged, produced price quotations and invoices containing a hidden commission for a person who was splitting part of the fee with the fictitious Gabonese official. The evidence of an illegal deal, prosecutors Sting continues on 8 promotional entertainment that large stadiums like FedEx Field provide. Washington Redskins General Counsel Dave Donovan said that his clients and the stadium owners already were complying with the decision. He said that they were providing, through s, typed lyrics to songs performed by the cheerleaders. Truth be told, this has only been about attorney s fees. For years the plaintiffs firms managed to keep it alive, Donovan said. Joseph Espo, who represented the plaintiffs, said that his clients had tried to settle the case many times and that the attorney fees, which were in the low six figures, were a result of the defendants unwillingess to settle. It completely distorts reality to say that we are the ones who drove the fees, Espo said. The decision is a great day for deaf sports fans and reaffirms the obligation of the owners and operators of sports venues to make sure their product is accessible to all of their customers. Leigh Jones is a reporter for The National Law Journal, a Legal affiliate based in New York. Job Discrimination Hits Low-Income Women Hardest, Study Shows By Karen Sloan The National Law Journal Discrimination lawsuits brought by working professionals tend to draw public attention, but it s low-wage workers who suffer the harshest consequences in those circumstances, according to a report by the Center for WorkLife Law at University of California Hastings College of the Law. The report, titled Poor, Pregnant, and Fired: Caregiver Discrimination Against Low-Wage Workers, analyzes 50 workplace discrimination lawsuits most resolved during the past five years brought by low-wage workers. It highlights ways in which employers violate workers rights. Author Stephanie Bornstein, deputy director of the center, said that low-wage breadwinners often face more caregiver demands from children and older family members, but often have less social support in part, because they are more likely to be single parents. Caregiver discrimination lawsuits brought by low-wage workers document clearly that work-family conflict is not just a professional women s problem, Bornstein said. In fact, it s most acute and extreme for low-income families. To help move families out of poverty, we can t just focus on fixing the worker. We also need to look at how caregiver discrimination in low-wage jobs undercuts economic stability. The report concludes that women transitioning out of the welfare system into the workforce often are caught in a cycle of entry-level employment because they lose jobs as a result of family responsibilities. This underscores the fact that we need to look at the jobs themselves, not just the job-readiness of those coming out of the welfare system, Bornstein said. Among the problems low-wage workers face is that their jobs often come with too few hours, leading them to juggle multiple jobs. Those jobs can come with unpredictable or inflexible schedules. Not only that, low-income families are less likely to have access to paid sick days or unpaid family or medical leave, the report concludes. Private employers are not required to provide sick days or vacations, except in San Francisco, Milwaukee and Washington. Companies put themselves at financial risk when they maintain policies that violate workplace laws, the report warns. Caregiver discrimination lawsuits have a higher success rate than overall employment discrimination suits, and the average verdict awarded among cases the center analyzed was $500,000. Those cases included that of a worker at an aerospace parts company who received a $761,279 settlement after he was fired as a result of absences to care for his son, who has AIDS. A housekeeper was Discrimination continues on 8

5 VOL P THURSDAY, MARCH 31, 2011 THE LEGAL INTELLIGENCER 5 By Maurice Zilber The Recorder Are Young Teaching the Practical Business Aspects of the Legal Profession Maurice Zilber is an adjunct professor at Golden Gate University School of Law and a fulltime arbitrator and mediator, as well as managing director of Maurice L. Zilber & Associates, a management consultancy for professional firms. He may be contacted at or through your students using anything that you taught them? This not-so-innocent question from a reporter set me wondering. I had no good answer for her. I had heard from time to time from a few students asking for references, and I occasionally saw a student from the year before in the halls, but I really didn t have a clue whether the 16 weeks we had spent together had any real impact on their professional lives. After a successful career as a business lawyer and a commercial arbitrator, I decided to give back to the profession by bringing my experience and wisdom to the classroom to prepare the next generation of lawyers for the business challenges they would face as they entered practice. I began my career as an adjunct professor eight years ago, co-teaching a course on business planning at Golden Gate University School of Law with a tenured professor who was an arbitrator colleague. While the students, particularly the night students, were bright and interested, there was a very low likelihood that they would begin practice in one of the large firms in town; those firms tended to look to UC-Berkeley, Stanford, Hastings, Harvard and other socalled tier one schools for their associates. What these students could use was a course that taught them about going solo or forming a small partnership with friends. Even if they did join a firm, their knowledge of the business aspects of practice would give them a leg up. So, six years ago, with the blessing of the dean and the curriculum committee, I started a course titled The Business of the Practice of Law. Much of what I taught was based on my more than 20 years in the management of my old firm in Boston, seven of them as managing partner. Students are divided into teams of two to four, depending on the number in the class in any given year. Half of their grade is based on team projects and half on individual effort. Students, among other things, individually, keep time sheets and a journal, and prepare a resume and life plan. As a team, they select an entity in which to practice, outline the provisions of a partnership agreement or shareholders agreement, and prepare a Lawyer client representation letter and a three-year business plan. Most students are third-year day or fourthyear evening students, but I have had some graduate students, as well as second-year day and third-year night students. All have had courses in professional responsibility and business organizations, but we cover many topics in professional responsibility as they naturally arise. In different years, I have had guest lecturers on marketing, space planning and technology, and most recently, I have had a life coach come at the beginning and end of the course to discuss values and life balance. To answer the reporter s question, I recently surveyed the students who have completed the course. Some students did not intend to practice law and are engaged in what they talked about in their life plan: government civil service, money management, human resources and political consulting. One entered a Master of Laws program after having been a contract attorney for an Am Law 100 firm. Two are assistant U.S. Students said the course gave them the confidence to go into practice, particularly the business plan exercise. y o u n g l a w y e r o n l i n m attorneys, who expect to go into private practice in the future. One is in the Honors Program at the Justice Department. Two opened independent paralegal practices while waiting for bar passage; one of them is in a bankruptcy support firm, too busy at the moment to go into law practice. Three are working in medium and large firms in California and eight are in solo or two-person practices either by design or necessity. In addition, two students who did not respond to the survey have informed the school that one is in solo practice and one is with a large firm. Regardless of what they are doing, all said the course gave them the confidence to go into practice, particularly the business plan exercise. Many who are in practice say they consider most valuable the teaching about billing, retainers and when not to accept a client. Most kept their course books, and some have even referred to them. (I use Jay Foonberg s excellent book, How to Start and Build a Law Practice, Fifth Edition (ABA 2004), and the California Young Lawyer continues on 10 Third Annual In-House Counsel Conference The Doubletree Hotel 237 South Broad Street, Philadelphia, PA April 7, :30 am - 5 pm Followed by a Cocktail Reception Contact Chris Stewart, DELVACCA Administrator at or The Third Annual In-House Conference features cutting-edge CLE programming exclusively designed by legal experts for in-house counsel. 10 Morning Break-Out Sessions 10 Afternoon Break-Out Sessions Breakfast/Lunch/Cocktail Reception Included Earn Up to 6 CLE Credits (PA, NJ and DE approved), including up to 4.5 Ethics Credits. New Member Orientation Members free Not a member? $295 includes 1 year membership to DELVACCA (and admission to conference) Outside Counsel: $1,000 For more information, please visit:


7 VOL P THURSDAY, MARCH 31, 2011 THE LEGAL INTELLIGENCER 7 litigation Effective Client Reporting: A Lawyer s Best Friend Editor s note: This article describes hypothetical scenarios. By Seth L. Laver and Matthew G. Laver Special to the Legal Keeping your clients informed through effective reporting is the Golden Rule of malpractice risk management. Clients do not like bad results, but their willingness to live with a bad result, without suing you over it, is a product of their expectations. Effective reporting is your single best means of managing your clients expectations, and hence, your exposure to malpractice claims. Disappointing jury verdicts and failed transactions are not exclusively caused by attorney error. The uninformed client, however, may not see it that way. Malpractice often results from a client s uncontrolled expectations. While experienced lawyers are aware of the risks and uncertainty of the judicial process, the uninformed client is not. Absent timely and clear communication between lawyer and client, the client is left to create his own reality, which may never be achieved. All too often, a client suffers from apparent amnesia after lengthy conversations. All too often, something is lost in translation between client and attorney. It is this uninformed, detached client who is more likely to turn on his lawyer when something goes awry because he was not aware of the risks. Effective written communication between attorney and client is the safety net to avoid dire consequences. CASE STUDIES The following case studies reflect those instances that are seemingly benign, but resulted in legal malpractice lawsuits due to an attorney s failure to properly communicate with his client. The Initial Report You are retained to defend the interests of the president of a small investment company in a suit sounding in breach of contract, breach of fiduciary duty and conspiracy. Your client orchestrated the removal of a junior board member because of a perceived poor work performance. The ousted shareholder now alleges in his suit against his former employer and president that the termination was a violation of the company s corporate bylaws and was done in bad faith. After evaluating the underlying facts and allegations, you conclude that the tort claims should be dismissed under the gist of the action doctrine. You are so confident that this theory will result in the dismissal of these claims that you do not address the potential consequences and damages that could result from the tort claims in your initial written report to your client. One year later, the court has denied your client s preliminary objections and subsequently your client s motion for summary judgment. As a result, the tort counts remain at the time of trial. Following trial, Seth L. laver Matthew G. laver Seth L. Laver is a senior associate in the Philadelphia offices of Goldberg Segalla. He focuses his practice within business litigation on employment and labor law and professional liability defense, including the representation of lawyers, architects and particularly accountants. He can be reached at or Matthew G. Laver is an associate with Weber Gallagher Simpson Stapleton Fires & Newby. He represents clients in general liability and professional liability matters. He can be reached at or a jury finds that your client breached his fiduciary duty and awards considerable damages. Your enraged client claims that he was never properly informed of the potential risks posed by the tort claims. Moreover, he suggests that you failed to take appropriate steps to defend these claims. According to your client, had he been informed of the possibility that the tort claims could eventually be in the hands of the jury, he would have negotiated a settlement months earlier. A malpractice suit follows. Analysis: In all likelihood, a well-developed, detailed initial report would have helped to prevent a malpractice suit. Good practice calls for an initial report discussing all pending counts and defenses, the relevant law, and an analysis of potential damages against your client. Despite confidence in a gist of the action defense, the lawyer should have addressed all possible scenarios so the client was in a position to make educated decisions regarding case strategy. Documenting Conversations with Clients, 1.0 You have been retained by a longtime client, a banking institution, to document a loan transaction between the bank and a local hardware store seeking to expand by opening a new store. At the request of the bank, you draft and circulate to all parties the loan documents, which include standard personal guaranties to be executed by the owners of the hardware store. You learn from the prospective borrowers, however, that they refuse to execute any personal guaranties. After some negotiations between the parties, it is your understanding that the personal guaranties are to be removed from the loan documents and you prepare a revised set of materials for execution. Months later the hardware store expansion proves to be a bust and the store defaults on the loan. In a declaratory judgment action initiated by the bank, the court determines that the individual owners of the store cannot be held personally liable to the bank because the executed loan documents lack personal guaranties. Next, your longtime client claims that it was not aware that the personal guaranties had been omitted from the loan documents and sues you for malpractice. Analysis: In this scenario a writing from lawyer to client, whether by or formal report, confirming that the loan documents had been altered could have avoided this outcome. It would appear that the lawyer assumed that his client was in the loop, when in fact the client was unaware of the legal ramifications of the revised loan documents. Although the client had an opportunity to read the loan documents prior to execution, it is the lawyer on the line because he did not take the precaution of confirming his understanding in writing to the client. Documenting Conversations with Clients, 2.0 You represent a plaintiff who files suit against his former father-in-law alleging breach of a partnership agreement. In the suit, your client alleges that he and the father of his exwife entered into an agreement to equally split any profit derived from flipping real estate. Your client located and managed the real estate while his former father-in-law provided the capital. When your client engaged in an extramarital affair and the marriage fell apart, his former father-in-law refused to provide him with the profits associated with several flipped properties. At a bench trial, you assert one legal theory: breach of a partnership agreement. You consider and discuss with your client potential avenues of recovery, including equitable principles, but opt to exclusively pursue the breach claim for strategic reasons, namely to simplify the claim. The court holds that no formal agreement was in place and that the business relationship was contingent upon your client s faithfulness, and hence marriage, to his daughter. In a published opinion, the court suggests that a claim of quantum meruit may have dramatically affected the outcome. In preparation for the defense of your legal malpractice case, you recall several conversations with your former client in which you discussed alternate legal theories including quantum meruit but chose, with client s agreement, to simplify the issues. Additionally, you recall lengthy conversations in which you discussed this very topic with your client but cannot locate a single document, even an , evidencing this conversation. Analysis: Understandably, some attorneys are reluctant to pepper their client with letters that serve for little other purpose than confirming earlier conversations. However, discussions involving case strategy or big picture developments should always garner some follow-up to confirm that the lawyer and client are in agreement. In the above scenario, a brief confirming that the lawyer was authorized to proceed exclusively with a partnership theory could mean the difference between victory and defeat in a malpractice action. The Botched Settlement It is important to maintain a comfortable balance between zero communication and such constant reporting that the client is overwhelmed. You represent the wife in a contentious divorce action. After months of discovery and emotional testimony, your client expresses her interest in reaching a resolution and moving on with her life. Your client provides authorization to negotiate settlement, and instructs you that her first priority is ownership of the vacation home. At the bargaining table, with the goal of retaining the vacation home for your client, you make certain concessions including relinquishing all rights to alimony. Upon learning that the vacation home is hers, your client eagerly signs all paperwork effectively settling the divorce proceedings. Only later, however, does your client learn that she is no longer entitled to alimony and files suit against you for failure to advise her of material settlement terms before reaching an agreement. Analysis: It would appear that the client in this example was so blinded by the prospect of securing the vacation home that she did not sufficiently contemplate the remaining terms of the settlement agreement. Here, it is the lawyer s responsibility to review the settlement terms with client prior to execution. Perhaps the most effective means to review settlement terms is through a brief report identifying the material terms of the agreement and the potential affect on your client. This strategy will protect both attorney and client. LESSONS LEARNED Each of the foregoing examples resulted in well-intentioned, respected attorneys finding themselves as defendants in legal malpractice suits. Of course, the common thread between each of these scenarios is the attorney s failure to properly document conversations or report important aspects of the case or transaction. Clearly some blame can be attributed to the clients, who arguably failed to exercise common sense. In the foregoing case studies, it would be reasonable to expect different outcomes had the client or the court behaved differently. It would be fair to assume: Litigation continues on 9

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