Trying To Live In An Ethically Challenged World

We live in an ethically-challenged world. The every-day pressures of business economics, project deadlines, and client demands conspire against all design professionals every day to drive “professionalism” out of their practices. Design professionals, however, must strive to maintain an ethical practice because quite simply – lives depend on it. Integrity Ethics

The National Society of Professional Engineers (NSPE) states as its fundamental Canon of Ethics that all engineers shall “hold paramount the safety, health, and welfare of the public.” And yet, every day, not infrequently with catastrophic consequences in terms of lives and financial costs, some engineers succumb to a corporate culture that tolerates or even promotes placing project economics ahead of an ethical responsibility to the public.

Strong, corporate ethics programs make sense financially. At least one industry consulting group, FMI, calculates clients lose between $5,000 and $50,000 for each million dollars spent on a project. FMI also acknowledges unethical behavior negatively impacts employee morale, project safety, and long-term company reputation.

Some companies have implemented stringent ethics programs to comply with the Federal Acquisition Regulations (FAR). FAR does not set forth any specific requirements or how a company should best implement its ethics program. Any company contemplating federal work should be aware that FAR requires the following minimum:

With 30 days of being awarded a contract:

  • Prepare a written code of business ethics and expected conduct, if one does not already exist, and provide it to all employees.
  • Implement a due diligence program to detect and prevent criminal conduct.
  • Promote a corporate culture encouraging employees to exercise ethical conduct and comply with the law.
  • Implement an ongoing ethics awareness and compliance program, including ongoing effective ethics training for employees.
  • Promote a corporate culture encouraging employees to exercise ethical conduct and comply with the law.
  • Implement an ongoing ethics awareness and compliance program, including ongoing effective ethics training for employees.
  • Establishment of an employee business ethics and compliance awareness program and internal system of controls if such program does not already exists.

Within 90 days of being awarded the contract:

  • Establishment of an employee business ethics and compliance awareness program and internal system of controls if such program does not already exists.
  • Implementation of an anonymous hotline for reporting improper conduct and specific instructions to employees, encouraging them to make such reports.
  • Implementation of an anonymous hotline for reporting improper conduct and specific instructions to employees, encouraging them to make such reports.

Any company can implement a strong ethics program once leadership has made a commitment to do so. The NSPE Code of Ethics provides a clear outline to follow to protect the health, safety and welfare of the general public, and preserve the integrity of the profession. The key to every strong ethics programs should be reinforcement of the basic tenants set forth in the NSPE’s Code of Ethics.

In ever corporate ethics policy, public safety trumps everything. All design professionals must be empowered by their corporate ethics policy to take decisive action to protect the public safety free of public pressure or economic concerns related to a project.

The NSPE, for example, directs an engineer to first report his concerns to the building owner, manufacturer, or other professional to take remedial actions. The engineer, however, must take action to report a safety concern to the appropriate authorities if no action is taken to remedy the situation within a reasonable time by the owner, manufacturer, or other professional. To fail to do so, is an abrogation of the professionals’ fundamental responsibility and obligation.

A corporate ethics policy must empower all employees to strictly adhere to the letter and spirit of all applicable federal, state, and local laws and regulations.  A strong ethics policy, however, should clearly advise the design professional that no obligation exists for a professional to become a zealot. The NSPE limits the duty to report to appropriate legal authorities where the engineer’s personal safety concerns are not supported by “scientific consensus” or “widely-accepted engineering standards.” The standard for most policy should be one of acting “reasonably.” The NSPE, however, permits the engineer to decline to perform additional services on the project, and a strong ethics policy should reinforce the professional’s same option.

A corporate ethics policy should encourage design professionals to “stick to their guns” and not yield to the economics of business on issues of public safety. The professional should seek to become the voice of reason on the project. An ethics policy should reinforce that everyone involved in the project that some matters can never be compromised despite the potential costs because the potential risk of loss is simply too great.

The NSPE, for example, acknowledges that fire codes are among the most fundamental requirements for the protection of the public health and safety. An engineer can make no concessions where they believe the public safety is at risk in such circumstances, and must continue to report their concerns up the chain of command if the concern is not resolved.

No design professional should ever feel compelled to work outside their area of competency. Clients and employers rarely want to hear from a professional that another yet professional with a particular expertise must be retained on a project. A good corporate policy however, will remind the professional to not try to become “all things to all people” despite the pressures to avoid costs.

This aspect of any corporate policy can be tricky to implement. Most state licensing agencies identify broad categories rather than sub-specialties. For example, a civil engineer may be highly qualified to prepare plans for a public park, but not possess any specific experience with a particular kind of pedestrian bridge called for by a project design.  An engineer should never feel compelled to affix her seal to project plans even if they are obtained from or prepared by some else highly qualified in the field.

No one ever wants to become the company “snitch,” but any valid corporate ethics policy must provide clear directions, and equally clear support, for reporting an impaired colleague. In addition to the public safety concerns, every professional and corporation should fully appreciate the legal liability arising from continuing to permit an impaired design professional to work on a project after any suspicion or knowledge of an impair arises. A decision to ignore or failure to intervene can form the basis of a negligence finding against any professional or corporation who fails to act.

In addition to reporting a colleague, a strong ethics policy must also empower the design professional to report impairment or violations by other contractors and professionals working on adjacent job sit not within the reporting engineer’s immediately control. The NSPE requires the engineer to at minimum report to his immediate supervisor.

In the absence of a state “Good Samaritan Law” that imposes a duty under such circumstances, the design professional likely could not be held liable for a failing to report even where an injury or death occurs. But a design professional who reports such a safety concern because the corporate ethics policy supports his decision to do could prove the key to a successful defense or even the key to avoiding litigation altogether.

Professional excellence can only be maintained by a culture of honesty, integrity and fairness.  A strong ethics policy must clearly prohibit employees from conflicts of interest, and impose a duty to make a full disclosure of all potential conflicts to the appropriate company personnel and client. In the event of an apparent conflict, the company should obtain a written waiver from the client.

Conflicts of interest may arise from, but are not limited to, some of the following examples:

  • Any attempt by employees to use their positions within the company for personal gains.
  • A professional owns shares in privately-owned companies, which do business with the company. Typically, this prohibition would not apply to shares held in publicly traded companies
  • A professional’s family member possesses a role as director, partner, shareholder or influential employee in companies or businesses which have any form of business dealings with the company.
  • A professional accepts gifts from contractors doing business with the company that could place an employee in a position where his independent business judgment may be prejudiced.  A strong ethics policy should place clear limits on the types and value of gifts that can be accepted, and require all such gifts to be disclosed.
  • Any professional’s acceptance of payments, services, loans or bribes from a supplier, contractor, subcontractor or other third parties should be prohibited.
  • A professional’s acquisition of property acquired as a result of company information.

Once a decision to implement a strong corporate ethics policy has been made and drafted, the real hard work begins. Construction companies and design professional firms notoriously suffer from a disconnect between management and the frontline field personnel. Any corporate ethics policy must be handed down from the top, straight from the board room and president’s office. Otherwise, an ethics policy will never become instilled as part of the “corporate culture.”

A successful ethics policy should be simple and concise. A successful policy will set forth clearly defined procedures and guidelines for an employee to follow when confronted with a uniquely challenging situation, but it is the basic principles loudly endorsed by senior management of “do the right thing” that will prove most effect. Some of the most ethical companies have developed their reputations as a result of generations of employees and senior managers who have never known any other way to do business.

The company must provide ongoing, meaningful ethics training at all levels of the company from employees to supervisors to senior management. No corporate ethics policy can succeed until the rank-and-file employees see first-handed the senior company leadership taking an active leadership role in ethics training sessions, policy initiatives, and implementation.

Every truly effective ethics policy requires a champion at the senior leadership level, who becomes the face and voice of the company’s ethics policy. Every company who leaves even a hint of doubt that senior management does not wholeheartedly endorse long-term, top-to-bottom ethical behavior over short-term business financial decisions has doomed the company ethics policy from the start.

The board of directors must publicly embrace the commitment to ethics. FAR guidelines require continuing board interaction with the company ethics program. An effective ethics policy should be announced by a strong, clearly worded board resolution announcing its implementation. Regular reporting to the board and from the board will signal to every level of the company that the ethics policy is more than “lip service,” but rather an established part of the company’s culture.

Just like professional sports programs talk about bringing in “good character” guys to provide leadership in the locker room, a company must endorse character and ethics as an integral part of the hiring and promotion process. The newest generation of graduates place a high emphasis on going to work for companies with strong values and ethical cultures. Companies who promote long-term ethical behavior will create corporate cultures where they find it easier to hire and retain the best and brightest stars within their companies.

The hallmark of any successful ethics program is self-reporting and an open-door policy. The program must include regular risk assessments, confidential evaluations of management level positions by employees, and even outside, independent audits and reviews.

Many times companies implement successful helplines for employees to call when confront with a uniquely challenging situation. Mentoring programs can be very successful to help develop a corporate culture that fosters ethical behavior in the promotion process. Every corporate ethics program should be constantly evaluated and updated, becoming an integral part of the ongoing business strategies.

Finally, no corporate ethics policy can be successfully implemented without adequate resources devoted to taking action when a situation arises. Internally, senior management must be empowered to take decisive action to protect the interest of both the company and the employee who reported unethical or professional misconduct. The consequences of violations of the policy should be clearly articulated, as should any retaliation against the person reporting, including public reprimands, suspension, and termination.

The company must established guidelines that empower the appropriate individuals within the company to determine whether to retain outside legal counsel to investigate reported unethical or professional misconduct. Typically, outside legal counsel should be retained early in the process, including even before a violation of the policy has been confirmed, to should preserve attorney-client confidentiality of such investigations against future litigation.

Corporate ethics policy will become wide-spread in the next decade as the commitment to ethics increasingly becomes an expected part of the bid process. Like the federal commitment to FAR, private owners are increasingly placing a premium on corporate relationships with any other companies who are viewed as ethical.

Design professional companies can not expect to change their corporate cultural overnight. But a long-term commitment to ethical conduct will pay dividends in the future as the company successfully avoids risk, manages loss, and creates an positive climate to do business with other likeminded companies.

ETHICS POLICY CHECKLIST:

  • Establish written ethics policy
  • Adopt an ethics policy resolution by the board of directors
  • Appoint an ethics omnibusman
  • Establish a confidential ethics hotline
  • Establish a confidential ethics helpline
  • Establish an internal ethics committee
  • Establish an internal conflicts of interest policy
  • Implement regular employee ethics training
  • Establish an internal due diligence process to investigate complaints
  • Implement an internal ethics compliance program
  • Establish a pre-existing relationship with qualified legal counsel

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

20170712_113656Timothy B. Soefje is the Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC based in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje and search #ProfessionalLiability. For more information, visit us at www.realclearcounsel.com or contact him at tsoefje@realclearcounsel.com.

 

Legal Dabbling: Hurricanes Create Calm Before Legal Malpractice Storm Surge

As Texans continue cleaning up the destruction of Hurricane Harvey and Floridians brace for Hurricane Irma bearing down on them, many lawyers in the regions will be seduced by the money to be made from the sheer number of insurance claims and lawsuits soon to be filed.

Unfortunately, many of these lawyers will instead find themselves professionally devastated by a legal malpractice claim because they chose to “dabble” in an unfamiliar area of law into which they never shoulMan Storm Umbrellad have ventured.

We already have seen several law firms ramping up on social media and in news reports to grab a piece of the inevitable FEMA, inverse condemnation, and first-party insurance claims to come.

Both massive storms, however, will spur other kinds of complex litigation as well.

We will inevitably see an uptick in claims involving professional negligence against architects, engineers, and design professionals; director and officer liability; building owners, real estate development and management companies; and landlord-tenant disputes just to name a few.

None of these types of claims are any place for a novice. Unfortunately, attorneys unfamiliar with an area of practice often simply don’t know what they don’t know.

Each of these areas of law are exceedingly complex and nuanced. Issues relating to liability, defense, and damages often are not easily identifiable by an inexperienced attorney. A single misstep can lead to disaster for the client and attorney.

The American Bar Association Rules and every other state impose a duty that “a lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” ABA Model Rules 1.1.

“Dabbling” in an area of law in which an attorney is not familiar, however, remains among the top five reasons for legal malpractice claims nationwide despite the ABA model rules, state bar rules, and the legal and insurance professions’ constant warnings.

The ABA “Profile of Legal Malpractice Claims: 2012-2015” reports that 46 percent of all legal malpractice claims involve “substantive errors,” including a failure to know or apply the law, failure to know or calculate deadlines, inadequate discovery, and errors in procedure strategy.

The ABA report found that more than 60 percent of all malpractice claims involve an area of the law in which the subject attorney works less than 20 percent of the time. Attorneys who practice in a single area of the law account for less than 7 percent of all legal malpractice claims.

According to panelist on a recent ABA webinar, “Avoiding Common Malpractice Missteps: What Every Lawyer Needs to Know (On-Demand CLE),” 13 percent of legal malpractice claims arose specifically because the attorney did not know the area of law.

A recent 2017 study by professional liability insurance leader Ames & Gough reveals that the number of new legal malpractice claims is stabilizing. Claims, however, remain well above historical experience in years preceding the 2007 – 2009 recession that forced many attorneys to expand into unfamiliar areas of practice.

Any lawyer considering assuming the representation or defense of a claim outside the lawyer’s ordinary practice area should answer several basic questions before taking on the client.

  • How complicated is the matter and area of law?
  • What is the amount in controversy?
  • Are the potential fees recoverable worth the risk?
  • How familiar are you with the jurisdiction or venue?
  • Can you spend the additional time necessary to get up to speed on the area of law?
  • Do you have the financial resources to take on the representation in an area where you will need to spend considerable time to learn the law?
  • Can you associate with or turn to experienced attorney for help on the matter?
  • How difficult will the client to be, and does the client have unreasonable pre-claim expectations?
  • Do you have adequate professional liability insurance coverage?
  • How devastating will a legal malpractice claim on the case in question be on your overall law practice and personal life.

If an attorney decides to take on a case outside their regular practice area, the attorney can take a few simple steps to help minimize the risk of a future legal malpractice claim such as:

  • Draft a clear engagement agreement signed by the client.
  • Engage experienced co-counsel early.
  • Research the law and procedure thoroughly upfront before taking on the case.
  • Designate time each day or week to continue learning the law and to work on the claim.
  • Take advantage of continuing legal education courses available online and from the state and local bar association.
  • Participate in networking opportunities with experienced attorneys in the area.
  • Prepare internal memorandum and case evaluations on legal issues as they are identified.
  • Keep the client thoroughly informed as the case progresses.
  • Don’t be afraid to ask for help.
  • Withdraw immediately if it becomes clear you’re over your head.

No lawyer should ever be unwilling to expand their scope of practice simply because of the fear of a legal malpractice lawsuit. No lawyer, however, should ever think that circumstances like Hurricane Harvey or Hurricane Irma present an economic windfall simply because of the volume of legal work that can be expected to result.

Now is no time to “dabble” in an unfamiliar area of law.

Attorneys also should resist the temptation to even “do a favor” for a friend or family member because it usually helps no one. The “favor” often gets pushed to the bottom of the attorney’s stack of things to do, and the client ultimately suffers from delays, missed deadlines, or less than competent representation.

If an attorney decides that now presents a unique opportunity to expand into a new area of practice, be willing to commit upfront the substantial time and resources necessary to comply with ABA Model Rule 1.1, or be prepared for the personal and professional devastation that inevitably will come from a legal malpractice claim.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

20170712_113656Timothy B. Soefje is the Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC based in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje and search #ProfessionalLiability. For more information, visit us at www.realclearcounsel.com or contact him at tsoefje@realclearcounsel.com.

Arbitration Clauses Remain Popular, But Frequently Misunderstood And Poorly Drafted

Arbitration continues to serve as a popular forum for resolving construction-related disputes, but unfortunately, clauses compelling arbitration frequently are poorly drafted and misunderstood by the parties involved.

Each state’s laws compelling arbitration are unique and continue to evolve, especially when it comes to compelling arbitration by non-signatories to the arbitration agreement itself. For example, in May 2017, the United States Supreme Court overturned a state-court opinion, ruling that an attorney-in-fact could waive the right to a jury trial on behalf of a decedent even where state law otherwise conveyed to the decedent a “God given right” to a jury trial.

In Kindred Nursing Centers, Limited Partnership v. Clark, the Supreme Court held that the Federal Arbitration Act requires state courts place arbitration agreements “on equal footing with all other contracts.” In so ruling, the Supreme Court overruled the Kentucky Supreme Court’s ruling that to agree to arbitration, “the representative must possess specific authority to waive his principal’s fundamental constitutional rights to access the courts [and] to trial by jury.”shutterstock_376726306

Arbitration presents numerous disadvantages often overlooked by inexperienced parties. Architects, engineers, and other design professionals should consent to a mandatory arbitration clause in their contracts only after a thorough consultation with an experienced, local attorney to fully understand the unique advantages and disadvantages of arbitration in the specific jurisdiction.

Many design professionals wrongly believe that arbitration always offers a more cost-effective and predictable alternative to the jury trial system. While this can be true in some large, complex litigation matters, arbitration can be exceedingly more expensive than some parties believe.

The expense of an American Arbitration Association arbitration, especially if it is a mandatory 3-member panel, easily can exceed five or six figures, which would not be incurred if the case is presented to a judge or jury.

A surprising number of design professionals do not understand exactly what rights they are giving up. Design professionals should fully understand that once they agree to arbitration they almost always waive all rights to appeal except in a few, limited circumstances. Typically, the right to appeal will exist only in cases of corruption, fraud, evidence of partiality or misconduct by the arbitrator, exceeding jurisdiction, or refusing to postpone an arbitration hearing for a good cause.

The limited right of appeal and sweeping decision-making power of a single arbitrator often creates significant levels of anxiety among the participants, especially in high-exposure cases involving issues of law that have not been well-settled in the jurisdiction. Such uncertainty may present a strong incentive by one party to settle a claim it otherwise might be willing to try to a jury if the right of appeal were not waived.

The parties also should carefully draft arbitration clauses to agree in advance about what rules of discovery and evidence will apply to avoid future misunderstandings and confusion. For example, it is not uncommon for design professionals to be surprised that pre-arbitration settlement offers and the limits of existing insurance policies regularly are made known to the arbitrator. Such offers of settlement or existence of insurance policy limits rarely would be shown to a jury in a typical jury trial. Many believe such knowledge of pre-suit offers and insurance policy limits can sway arbitrators to award at least some damages to a party that may not otherwise be awarded.

Arbitrations also have distinct advantages of course. Generally, the parties can obtain a final resolution substantially sooner than with a jury trial. It is not uncommon for an arbitration, even in a complex construction matter, to be scheduled within 6 months to a year. The same matter may take 24-36 months to reach a jury trial. When you consider the waiver of any right to appeal, matters routinely are resolved much quicker in arbitration.

Design professionals, however, are often surprised to find that the other side can frustrate the process by refusing to pay their share of arbitration. This can lead to unexpected delays, which frustrates the purpose of arbitration. A well-drafted arbitration clause should include a harsh penalty for any party that fails to fund its share of the arbitration promptly.

One of the significant advantages of arbitration is the ability to adopt more lax rules of evidence and procedure than available in a court of law. This can make it substantially easier to obtain and admit evidence and witness statements (ie., affidavits). This can prove especially helpful in some construction claims, where work crews who are key fact witnesses have moved on to projects in other states or countries.

The ability to selected arbitrators with specific industry experience and technical backgrounds not usually possessed by a trial judge presents another strong factor in favor of arbitration. While the use of such specialized arbitrators can be substantially more expensive, many design professionals prefer arbitrators experienced in their industry because they believe they can more readily predict the results. If the design professional considers this a significant factor, the requirement to use an arbitrator with specific industry experience in construction-related claims should be included in the arbitration clause itself.

Some design professionals prefer arbitration because it affords the parties the opportunity to resolve their dispute without the public nature of a jury trial. The private resolution of disputes can prove especially advantageous when it involves a high-profile claim, the loss of life on a project, or the potential for long-term, reputational damage to the design professional that may far exceed the amount involved in the dispute.

Finally, many design professionals believe arbitration can level the playing field where they are the “out-of-town” party or the less influential or politically-connected party, such as in disputes with local governmental entities or a large, local employer.

Undoubtedly, arbitration clauses are here to stay in the construction industry. Design professionals, however, should carefully review with an experienced attorney whether arbitration may be the right choice on the project, and then carefully draft an arbitration clause that achieves the benefits intended.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

20170712_113656Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC based in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje and search #ProfessionalLiability. For more information, visit us at www.realclearcounsel.com or contact him at tsoefje@realclearcounsel.com.

Professionals Risk Waiver Of Confidentiality By Using Unencrypted File-Sharing Programs

A growing number of professionals routinely share large files via cloud-based, file-sharing technology that puts them at serious risk of waiving claims of privilege, trade secrets, or proprietary information if litigation should arise in the future.

In the recent case of Harleysville Insurance Company v. Holding Funeral Home, Inc., a federal judge ruled that this common practice of sharing documents can be the “cyber world equivalent of leaving [privileged documents] on a bench in a public square and telling its counsel where they could find it.”

The judge went on to state, “It would be hard to imagine an act that would be more contrary to protecting the confidentiality of information than to post the information to the worldwide web.”

The facts of the underlying claim were not uncommon. There, a funeral home and insurance company were involved in litigation over the denial of a fire claim. The insurance company claimed the fire was intentionally set aBox Cloud Storagend denied coverage.

The insurance companies’ senior fire investigator sought to share his investigative file with his colleagues at the National Insurance Crime Bureau, and uploaded it to a common file-sharing program on the internet. He then sent an email to the NICB containing a hyperlink to the folder.

The cloud-based, internet folder was not password encrypted. Anyone with the hyperlink could access the entire contents of the folder. The investigator, however, included the following commonly-used statement in his email, presumably believing it was sufficient to maintain the confidentiality of his investigative file:

CONFIDENTIALITY NOTICE: This email contains information that is privileged and confidential, and subject to legal restrictions and penalties regarding it unauthorized disclosure and other use. You are prohibited from copying, distributing or otherwise using this information if you are not the intended recipient. If you received this email in error, please notify me immediately by return email, and delete this e-mail and all of its attachments from your system.

The investigator, thereafter, chose to upload the insurance companies’ entire claim and investigative file to the same Box, Inc. folder so that it could be accessed by the insurance companies’ litigation attorneys. The insurance companies’ attorney downloaded the entire file, including the senior investigator’s original email to NICB that contained the original hyperlink.

In response to written discovery requests from the defendant, the insurance companies’ attorneys produced the senior investigator’s email to the NICB as part of written disclosures. The email, of course, contained the hyperlink to what now included the insurance companies’ entire claim and investigative file. Defense counsel used the hyperlink to access the folder and downloaded the insurance company entire claim and investigative file, which included arguably privileged information.

After discovering the inadvertent disclosure, the insurance company sought to disqualify defense counsel and obtain a court ruling that its claim and investigative file as protected by the attorney-client privilege and the work product doctrine. The defendant argued that the insurance company had waived any privilege by disclosing the hyperlink to the folder in the senior investigator’s email.

The court first addressed whether the privilege was waived under state law, ruling the insurance companies’ disclosure was “inadvertent,” but nonetheless, any privilege was waived because the insurance carrier “knowingly provided access to the information by failing to implement sufficient precautions to maintain the confidentiality.”

The court concluded:

“It does not matter whether this employee believed that this site would function for only a short period of time or that the information uploaded to the site would be accessible for only a short period of time. Because of his previous use of the Box Site, this employee either knew – or should have known – that the information uploaded to the site was not protected in any way and could be accessed by anyone who simply clicked on the hyperlink.”

The court further concluded that the insurance company’s counsel also knew – or should have known, the information was readily available on the internet to anyone with access to the hyperlink.

Applying state law, the court held any privilege was waived because “waiver may occur if the disclosing party failed to take reasonable measures to ensure and maintain the documents confidentiality, or to take prompt and reasonable steps to rectify the error.” Virginia law mirrors many other state jurisdictions.

The court finally concluded the insurance company waived its right under Fed.R.Civ.Evid. 502, that to assert a work product privilege because neither it nor its defense counsel took reasonable steps to prevent its disclosure or rectify the situation.

The court concluded, “the agent’s actions in posting the Claims File where it could be accessed by anyone on the internet is certainly a release of protected information in way that did not limit its future use.”

The court went further, however, to justify its opinion as fostering the better public policy, concluding:

“The technology involved in information sharing is rapidly evolving. Whether a company chooses to use new technology is a decision within that company’s control. If it chooses to use a new technology, however, it should be responsible for ensuring that its employees and agents understand how the technology works, and more importantly, whether the technology allows unwanted access by others to its confidential information.”

As admitted by the court, the outer boundaries of what constitutes a waiver of privilege arising from the use of file-sharing technology is evolving. Few, if any, state or federal courts have specifically addressed the question of waiver or unauthorized access by opposing counsel.

For now, the use of encryption and other password protected, secured portals would seem to be the best practice for professionals who choose to share files that may contain documents that may be protected by privilege, proprietary information, or trade secrets.  At minimum, any documents shared through unencrypted, cloud-based, file-sharing technology should be immediately removed from the internet after shared to prevent unintended disclosure and waiver of any rights to privilege.

Best risk management practice, for now, calls for every professional or firm that chooses to use a cloud-based, file-sharing program to consult with outside legal counsel to develop and implement stringent, internal protocols to protect privileges and other rights, and every professional should insist that all internal risk management teams, insurance carriers, and outside litigation attorneys do the same.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

20170712_113656Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC based in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje and search #ProfessionalLiability. For more information, visit us at www.realclearcounsel.com or contact him at tsoefje@realclearcounsel.com.

Indemnification Clauses Remain Among Most Dangerous Terms In Any Contract

Past experiences support that indemnification clauses can be among the most dangerous terms in a design professional’s contract.

An indemnity contract arises when a design professional takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual such as an owner, contractor, or subcontractor.

Unfortunately, that same past experience tells us these indemnification clauses often are misunderstood or misconstrued by both parties.shutterstock_528853693

Additionally, non-specific indemnification language can lead to enormous, unintended exposure for the design professional.

Typically, indemnification clauses are governed by state law. And each state’s law of indemnity is unique. Always consult with local counsel to be fully informed about indemnity terms you are being asked to agree to.

But generally, for an indemnification provision to be enforceable, it must provide “fair notice” of “a commitment by one party to pay for the damages resulting from another party’s own negligence. Generally, “fair notice” is a question of law for the trial court. But, in layman’s terms, it means the indemnification clause must be conspicuousness.

This requirement is included so that one party can’t “sneak” indemnification language into a contract. Examples might include the use of all capital letter, large or bold-faced type, or anything that calls the reader’s attention to the indemnification language.

Indemnity provisions hidden among unrelated terms and conditions, or on the reverse side of a document, generally won’t satisfy the conspicuousness requirement.

One pitfall for design professionals arises where they agree to a contract that requires them to “defend” another party to the contract, in addition to the duty to “indemnify. The “duty to defend” is contractual in nature, and is separate from the “duty to indemnify.”

Professional liability insurance policies frequently include contractual liability exclusions. In other words, a professional liability insurance policy may not provide coverage if the design professional contractually agrees to “defend” an owner, contractor or other third party.

Design professionals also should be cautious about entering into contracts that hold the design professional to the same terms and conditions as the prime contract between the owner and architect.

At minimum, request a copy of the prime contract and have it reviewed by an attorney. Frequently, the prime contracts may contain indemnification language creating liability for clams the policy holder never intended to assume.

Indemnification clauses are a minefield of potential liability. By exercising “Contract Review Services,”  it may be possible to avoid agreeing to a duty to “defend” or “indemnify”that the design professional never intended to assume, and even avoid resulting claims and lawsuits altogether.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

Tim Soefje Headshot 01Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC based in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje. For more information, visit us at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com.

Design Professionals Should Seek Pre-Claim Assistance Early To Avoid Claims

Even for the most cautious and conscientious design professionals, mistakes are made. Things go wrong. Disputes arise.

It’s a sign of the times that design professionals increasingly are becoming targets for claims and lawsuits. Litigious clients. Injured parties. Construction firms with “cost-recovery” programs trying to re-coup lost profits. Claims can come from anywhere and anyone – all hoping to take advantage of a design professional’s assets or professional liability insurance policy. When an issue arises, seek “Pre-claims Assistance” early.

What’s the difference between a pre-claim and a claim you might ask? Every insurance policy is unique. So, always check with your insurance agent to Contract-Review-01understand your policy terms. But generally, the difference is found in the definitions in your policy.

Typically, an insurance policy defines a claim as a “demand” against the insured for money or services that caused a loss or damages.

A pre-claim is merely an issue or circumstance reported to the insurer that the professional believes could lead to a claim. What kind of issues or circumstances? Obviously, when there’s been an accident or loss on the job, pre-claims assistance should be sought immediately. But it could be something simple. Something much less obvious.

Maybe you’ve encountered unexpected and unique soil conditions on a job site. Or you’ve learned the contractor or a subcontractor is not following specifications.  Maybe it’s an ethical issue involving the contractor or subcontractor. Maybe an inspector, governmental entity or architectural review committee is delaying the project by unreasonably refusing to approve your work.

“Pre-claim Assistance” should be considered when any issue the policyholder believes could lead to a claim. Usually, it’s best to report the issue to the agent or broker first. Let them help you follow the steps set out in the insurance policy to obtain “Pre-claim assistance.”

Again every policy is unique, but typical requirements might include:

  • Written notice on how the professional learned of the issue;
  • What work the professional is performing;
  • A description of what happened;
  • Names of the potential claimants; and
  • A summary of the potential damages or injuries.

Some professionals make the mistake of not seeking “Pre-claim Assistance” quickly enough because they are concerned that reporting an issue will increase their future premiums. Always check with your agent to clearly understand your policy, but seeking “Pre-claim Assistance” is sound, risk-management best practice regardless of the effect on future premiums. But typically, the expenses for “Pre-claim Assistance” are incurred by the insurer, paid outside of the policy limit, and are not subject to a deductible.

Why would insurers do this? Because experience has proven that early intervention by an experienced, pre-claims specialist may help resolve the claim before it develops into a lawsuit, saving the insurer – and the insured – money. Involving experienced claims professionals during the pre-claims period can help prevent costly mistakes that increase the insurer’s ability to settle a claim later, or make it more difficult to defend a claim that develops into a lawsuit.

Sometimes during “Pre-claim Assistance,” the insurer may pay for legal counsel, experts, testing or mediators if the insurer believes they determine it could mitigate the loss or avoid a claim altogether. The professional also benefits in other ways. By seeking “Pre-claim Assistance,” the design professional can lock in the insurance policy limits in effect when the issue is report. Also, expenses incurred by the insured during “Pre-claim Assistance” may count toward the insured’s deductible.

Design professionals deal with problems and conflicts on projects daily. Fortunately, few will ever lead to a claim. But a design professional should trust their instincts and experience to know when an issue or unusual circumstance could lead to a costly claim or lawsuit. Act quickly and decisively to take advantage of “Pre-claim Assistance,” and hopefully avoid a claim altogether.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

Tim Soefje Headshot 01Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC. in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje. For more information, visit us at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com

Take Advantage of Contract Review Services To Avoid Costly Claims

You’ve won that big project. Now, it’s time to sign that big contract. But, you’re a design professional; you’re not a lawyer. What can you do to avoid making a mistake?

In a perfect world, you would be able to avoid all futures claims and lawsuits. Of course, that’s probably not going to happen. But developing well-defined, internal risk management best practices is a good first step.

“Contract management” is the most basic risk management best practice. “Contract management” is the process of systematically and efficiently managing your contracts – from creation to execution – to maximize profits while minimizing risks.

In short, your roles and responsibilities in any project, and the risks and exposures you choose to assume will largely be determined by the contract language.

As result, “Contract Review Services” should be a high priority on every project for every design professional.

This collaborative effort involves both the design professional and an attorney. Outside consultants will work with a risk manager or contract review committee, if you have one, and if you don’t, we can you set one up.contract-reviews

The available Contract Review and Risk Management services are intended to provide best practice recommendations to the design professional.

A typical “Contract Review Report” will highlight as many as 10 different contract provisions, including:

  1. Scope of Services;
  2. Owner’s Obligations;
  3. Billing & Payment Terms;
  4. Schedules;
  5. Termination of the contract should that be necessary;
  6. Consequential damages that can flow from a breach of the contract;
  7. Indemnification, Insurance & Limits of Liability Clauses;
  8. Dispute Resolution should that become necessary;
  9. Certifications, Guarantees & Warranties; and
  10. Copyright and Instruments of Service.

Once completed, the “Contract Review Report” is intended to help the design professional better understand the terms of the contract being negotiated. And more importantly, better understand the risks the design professional is agreeing to assume.

Design professionals always should check with their insurance agent or broker to discuss any questions regarding insurance coverage or compliance with the policy terms when negotiating a contract.

A “Contract Review Report” provides clients the benefit of advice from both a real world business and legal perspective. It provides that “second set of eyes” during the contract negotiating process to minimize, or avoid, future claims and potential lawsuits.

This video is just one in a 10-part series developed to better assist architects, engineers, and design professionals, and anyone involved in the construction industry, to help manage risks and liability on their projects.

To subscribe to the Professional Liability Update, click HERE, provide your contact information, and receive notice of our updates. 

Tim Soefje Headshot 01Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC. in Dallas, Texas. For regular information about professional liability matters, follow him on Twitter at @TimSoefje. For more information, visit us at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com

The First 5 Things To Know About Your LPL Policy

Your law firm has made the wise decision to purchase lawyer’s professional liability insurance, or as it’s commonly referred to LPL coverage.  Now it’s time to get acquainted with that coverage.

I often hear clients and prospective clients say, “Mr. Hirsch, why do I need to get acquainted with my policy? They’re all the same, or I’m never going to need it.”

After quietly cringing, I usually retort; you wouldn’t purchase a new vehicle without test driving and researching it would you?

The short morale of the story is no two lawyers’ profeInsurance policyssional liability policies are created the same. They are built by a group of humans usually consisting of lawyers, underwriters, financial gurus and other experienced insurance professionals.

Every insurance carrier has their own experts create their policy form by putting in features they feel will help sell that policy, but make the program profitable.

The important part is knowing some of the important features in the policy so that you can use them when it’s absolutely necessary.

Let’s take a look at my top five features of the typical Lawyer’s Professional Malpractice Insurance policy.

1.  Pre-Claims Assistance:

I’ve had numerous clients over the years email me and ask me for advice about a situation, incident or potential claim that has arisen with a lawyer in the firm and whether they should report that as a claim?  Here’s my advice to the firm.

First, I’m always going to make sure you refer to your actual policy about what triggers your policy’s claims made coverage. It’s important that you have read the definitions and familiarized yourself with what’s in your policy.  You can usually find the Pre-Claims Assistance under the insuring agreement, coverage or supplemental coverage portion of the policy.

The second bit of advice, and something that’s often over looked in professional liability policies, is that almost every reputable carrier selling LPL insurance now offers free risk management hotlines, where the insured law firm can call a 1-800 number and speak with a insurance defense lawyer about your firm’s situation or incident before the actual claims reporting process.

Generally, the insurance carrier hires an outside law firm or will have in-house staff counsel available. These on-call attorneys will give free legal advice about your firm’s situation or potential incident. These defense lawyers are experienced in lawyer’s professional liability attorneys, and more importantly, are familiar with your firm’s LPL policy. Some of these risk management hotlines offer continuing legal education hours for your firm’s lawyers, as well.

There’s a lot of incentive for an insurance carrier to provide this type of pre-claims assistance. The sooner the insurer learns of the client’s problem, the more likely the chance of a better resolution. Even where circumstances later become a claim, early involvement can help mitigate and prevent mistakes that might increase the cost of settling a claim and can create a chain of documentation that assists in the ultimate resolution.

To encourage the use of pre-claims assistance, most insurers do not include expenses related to pre-claims assistance within an insured’s loss history. This eliminates the risk of a premium surcharge for using the service.

Often the expenses the insurer incurs in providing legal or other assistance to resolve a problem get paid out of the policy limits and not subject to a deductible.  Please make sure you refer to your policies risk management hotline features to get a full understanding of the features available to your firm.

2.  Disciplinary Coverage:

In 2011, the State Bar of California reported 16,156 new complaints against California lawyers. Use this blog as your friendly reminder of the great risk a grievances present to your law firm. They can often be messy and the severity can sometimes resemble a legal malpractice claim in total defense costs.

While it seems fairly straight forward, different LPL policies have different coverage limits and different types of coverage for which they will provide defense costs. Make sure you understand how the limits of the disciplinary hearings coverage work in your policy.

Limits for disciplinary hearings coverage are most often a sub-limit, which does not affect or erode your actual limits of liability of your LPL Policy. However, there is most often a per proceeding limit within that sub-limit and an aggregate limit for total proceedings.

The amount of disciplinary coverage can range from $10,000 – $100,000 depending on the policy and generally not subject to a deductible.

Since it’s likely a reimbursement by the insurance carrier, the law firm sometimes can pick their defense counsel. The reimbursement usually provides for attorney’s fees and reasonable costs, expenses, or fees paid to third parties, resulting from any one disciplinary proceeding.

Pay special attention to the definition of a “disciplinary hearing” in your LPL policy. Definitions often include, but are not limited, to state or federal licensing boards, peer review committees, courts, bar associations, or a regulatory body. You can always find any definition you need clarification on in the definitions portion of the policy. This will lay out exactly who or what is covered.

The very definition might determine whether this coverage would apply to your specific proceeding. One caveat – make sure you follow your policy’s procedure to disclose the grievance proceeding in writing to the carrier. Remember your firm’s LPL policy is the controlling document, so make sure to follow its reporting procedures accordingly. Never deviate or you run the risk of voiding coverage altogether.

3.  Punitive & Exemplary Damages:

Punitive or exemplary damages seem to be a very hot button topic in the legal field. Punitive damages are intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit.

The purpose behind punitive damages is to punish the defendant for outrageous misconduct and to deter the defendant and others from similar misbehavior in the future. While some states refuse to award punitive damages in any action and some have limited those damages, they certainly exist.

There has been a significant increase in Fair Debt Collection Practices Act (“FDCPA”) actions against lawyers in recent years. This has become a leading cause of claims in LPL the last few years. It’s important to determine whether your LPL policy covers awards arising under the FDCPA. Make sure to check your state’s laws on punitive damages, as well.

Most older LPL policies exclude punitive and exemplary damages in the definition of damages.  Some polices do not specifically exclude coverage for punitive and exemplary damages, however there is no direct language as to whether they are covered in the policy.

You should consult with your broker, if no such language exists in the policy. However, I’m seeing a trend of newer LPL polices including punitive and exemplary damages, where insurable by law, in the definition in order to differentiate that policy form from the others.

It’s an excellent selling point, and these policies do exist because I sell them. You should consult with an expert broker in LPL about finding those particular policies that do include punitive and exemplary damages.

Depending on the types of cases your firm handles this could be a huge difference in covering the type of liability the firm might be exposed to.

4.  Mediation Incentive Deductible Clause:

Mediation Incentive Deductible Clauses are a relatively new supplemental coverage or incentive that I’m seeing in LPL policy forms, and it’s certainly a great selling point, if the firm carries a larger deductible.

The mediation incentive clause usually states that if mediation of the claim takes place either without institution of an arbitration proceeding or service of suit, or within a set period of time (ie., 60, 90 or 180 days) of the institution of such proceedings or service of suit, and such claim is ultimately resolved for an amount acceptable to the insured and the insurer by the process of mediation, the insured’s deductible is reduced by (50%) or some other amount.

Generally you can find this clause in the settlement portion of the LPL policy or possibly in the supplemental coverage. The rationale behind offering this clause is that both indemnity and defense costs will be typically lower when claims are settled by mediation, which can save the carrier significant amounts of money in quickly dealing with a variety of LPL claims.

Make sure to carefully review the LPL policy forms under consideration for the broadest provisions that give you the best opportunity to take advantage of this incentive.

5.  Extending Reporting Options:

What are extended reporting periods (“ERP’s”) better known as tail coverage? I strongly recommend you get intimately familiar with this provision in your policy.

I often get the following question. “What does the law firm or individual lawyer do when the firm dissolves or the lawyer leaves the firm?”  This is where tail coverage comes into play and will ultimately help the firm decide on their next move.

Tail coverage extends the period of time during, which an insured lawyer can report a claim based upon an act or commission that occurred after their retroactive date, if any, and prior to the effective date of the tail coverage.  There will always be an extended reporting period option portion of the policy detailing the different options available to the firm.

Remember the firm can only purchase tail coverage through its current insurance carrier, it is not sold, as a stand-alone product.

If the firm dissolves, generally LPL polices offer a 30-60 day period to purchase tail coverage after that policy cancels or expires. Once that window expires you can no longer purchase the tail coverage and the firm can go unprotected from claims that arise later.

In addition, some LPL policies offer individual lawyers the option to purchase tail coverage upon leaving the firm, but I would suggest you review the LPL policy to see, if such a provision exist.

Most, if not all, LPL insurance carriers offer tail coverage for lawyers that retire or cease the private practice of law.  Some carriers offer these (retirement or cessation of practice) lifetime tails for free after you have had three years of continuous coverage with that carrier.

Tail coverage pricing is almost always listed in your LPL form under extended reporting coverage. The premium for the tail coverage will depend on the length of the extended reporting period purchased.

Generally, ERP’s are calculated as a multiple of the regular policy premium for that period, (e.g., 100 percent of the annual premium for a 1-year ERP; 175 percent of the annual premium for a 3-year period; or all the way to an unlimited option, although not every carrier has an unlimited ERP option.

When determining the right length of an ERP for your firm, here are my suggestions tp consider.

  • The most critical factor is the area of law your firm practices. This will determine the types of statute of limitations that may arise in cases the firm handles, which can lead to longer periods for a claim to arise and become known.
  • How many claims the firm has had in the past might also service as a good measure of the likelihood of a future claim.
  • Also, consider the firm’s caseload. How many files the firm has handled in past? How many closed files are there in that last 2 or 3 years?  This might be a good opportunity for the firm to review its file closing procedures and other firm risk management practices in the wind down.

To subscribe to the Professional Liability Update, click HERE and provide your contact information to receive notice of our updates.

ZacZack-portrait-SM-8346hary A. Hirsh, J.D. is the President & CEO of the Hirsch Insurance Brokerage, LLC. Follow Zach on Twitter at @Hirschinsurance. For more information, visit www.hirschinsuranceagency.com, or contact Mr. Hirsch at zach@hirschinsuranceagency.com.

Top 5 Ways Social Media Will Get You Disbarred

Social media for lawyers has become the legal equivalent of playing with fire. Unfortunately, far too many lawyers and law firms wade into using social media lacking even a cursory understanding of the applicable ethical rules in their jurisdiction.

Here are the Top 5 ways social media can get you disbarred, disciplined or fined.

1. BARRATRY

Ambulance chasing has moved to the internet.Social Media Ethics

A lawyer commits barratry when he solicits professional employment arising out of a particular event or series of events from anyone who has not sought the lawyer’s advice or with whom the lawyer has no family, or past or present attorney-client relationship. ABA Model Rules on Professional Conduct 7.3.

For example, assume a lawyer on Facebook sees an old high school friend post she has just been injured in a car wreck and is being transported to the hospital. Without thinking, the attorney posts: “Praying for you. If you need my help with filing a claim, give me a call.” What likely was a genuine desire to help an old friend has become clear case of barratry.

Imagine a lawyer sees a friend’s tweet expressing frustration about his attorney’s inability to resolve a contested probate matter quickly. The lawyer tweets back: “Sounds to be me like you have a need for speed. #TopGunForHire.” The responding attorney may have only thought he was being cleaver. Unfortunately, he also has committed barratry. The tweet also could subject the lawyer to discipline for communicating with a person the lawyer knows is represented by counsel as discussed further below. ABA Model Rule 4.2.

Lawyers are subject to disbarment or severe discipline for acts of barratry, which also has been a crime in most states for some time. See, Texas Penal Code 38.12. In addition, lawyers who commit barratry are subject to forfeiting their hard-earned attorney fees even after a case is concluded at least in most states.

Recently, some states are enacting laws that create civil causes of actions against the attorney. These barratry statutes typically permit the alleged victim to recover substantial, statutory penalties and an award of attorney fees. See, Texas Government Code, §82.065 et. seq. In Texas at least, a lawyer may not require a client to sign an engagement agreement that waives the client’s right to bring a claim for barratry under the statute. (Texas Opinion 637).

Unfortunately, an entire cottage industry of lawyers filing civil barratry claims now has sprung up in some states. Almost every time, the lawyer has a simultaneous grievance claim filed against him with the state bar.

As these claims grow in number, some members of the defense bar and legal industry analysts are left wondering whether at least some of these civil barratry claims were themselves unlawfully solicited, and in some cases fabricated entirely. Regardless, with tens of thousands of dollars available per claim, lawyer can be assured their social media accounts will be trolled for evidence they have unlawfully solicited anyone who chooses to file one of these civil barratry claims.

2. LACK OF CANDOR TOWARD THE TRIBUNAL

As trial judges and other lawyers become more savvy about social media, unethical lawyers will find themselves held to answer for false statements made to the court or to others. ABA Model Rules 3.3 and 4.1.

For example, a lawyer who chooses to lie to a judge or opposing counsel to obtain a continuance by claiming to be in trial or in a deposition out-of-town in another proceeding should be careful to turn off his Facebook location setting or insure his wife’s Instagram photos don’t reveal his Las Vegas getaway.

As early as 2009, one Texas lawyer learned how dangerous social media can be. The lawyer sought a continuance on the pretext her father had died.  The social media savvy judge, however, used the lawyer’s social media accounts to uncover the lawyer had posted photos of herself drinking and partying instead of mourning her father’s death.

3. UNINTENDED ATTORNEY-CLIENT RELATIONSHIP

Social media is about engaging with other people. Lawyers, however, are not like other people.

In general, no lawyer should engage with anyone on social media about a specific legal matter unless the lawyer intends to create an attorney-client, or at minimum a “prospective client” relationship. ABA Model Rule 1.18.

The Restatement (Third) of the Law Governing Lawyers, Section 14 provides a two-part test to create an attorney-client relationship.

First, a person manifests an intent that a lawyer provide legal services. Second, the lawyer either; (a) manifests consent, or (b) fails to manifest lack of consent and knows or reasonably should know the person reasonably relied on the lawyer to provide the services.

All the obligations of the attorney-client relationship such as a duty of competency, confidentiality, competency, and diligence are imposed on an attorney who even unintentionally enters into an attorney-client or “prospective client” relationship. See, ABA Model Rule 1.7. Under ABA Model Rule 1.10, even an inadvertent client relationship  can be imputed to the lawyer’s firm.

In other words, an attorney who engages a friend or follower on Facebook or Twitter should follow the same rules that would apply in an in-office setting.

The lawyer should clearly disclaim that any attorney-client relationship exists until an engagement agreement is signed by both parties. Additionally, the lawyer should clearly manifest his lack of consent to an attorney-client relationship after deciding to reject the client.

4. PROHIBITED COMMUNICATIONS

Social media can be a minefield of potential ethical violations for any lawyer who ventures into communications with anyone about a specific legal matter.

Sending a friend request or invitation to connect to the opposing sides of a case for the purpose of obtaining access to the person’s social media content will subject a lawyer to discipline, especially where the lawyer knows the person is represented by counsel. ABA Model Rule 4.2.

Lawyers also should proceed with caution before connecting via social media with a witness in a specific matter. Some jurisdictions require the lawyer to affirmatively disclose to the witness the reason for the lawyer’s attempt to connect via social media.

In other states, the lawyer is prohibited from using false pretenses, dishonesty, or an alias to gain access the other individual’s social media content. Kentucky (Op. KBA E-434), New York City (Op. 2010-2), New York State (Op. 843), and Oregon (Op. 2013-189).

The “real-time” nature of social media subjects uninformed lawyers to unintentionally disclosing confidential client communications. ABA Model Rule 1.9. For example, one lawyer forfeited a substantial settlement when his daughter violated the confidentiality term in a settlement agreement by posting details about the settlement on Facebook.

A public defender was suspended for 60 days after posting on social media that his client may have committed perjury. In re Peshek, M.R. 23794 (Ill. May 18, 2010). Even a nonspecific tweet such as, “just had a client lie on the stand for the first time,” could subject a lawyer to discipline if lawyer’s location or time of the tweet revealed the particular client’s identity.

5. UNAUTHORIZED ADVERTISEMENT

Most lawyers and law firms wouldn’t dream of publishing an advertisement in a newspaper or on television without submitting it to their state bar association for approval. A surprising number of lawyers, however, remain unaware that social media landing pages can be advertisements subject to the local disciplinary rules.

A lawyer’s profiles and home pages on social media sites such as Facebook, Twitter, and LinkedIn can be advertisements where the landing page is generally available to the public. As such, lawyers must comply with their state’s version of the ABA Model Rules 7.1, 7.2, 7.3 and 7.4.

The California state bar concluded that the advertising rules do not come into play if a lawyer’s social media post merely announces a victory or recent publication without suggesting that the lawyer is in the market for new clients. But when a message expresses the lawyer’s willingness to be hired, the advertising rules apply. California (Op. 2012-186).

The California committee concluded that a Facebook post “Case finally over. Unanimous verdict! Celebrating tonight” did not constitute an advertisement because it was not an offer or message about the attorney’s availability for employment. Id.

The panel, however, concluded that when the lawyer posted. “Won a million dollar verdict. Tell your friends to check out my website,” the message asked readers to tell others to look at her website so that they may consider hiring her, and therefore, was subject to the state’s rules on lawyer’s advertising. Id.

Lawyers who chose to use social media for the purpose of advertising must comply with any rules requiring submission of such advertising to any Advertising Review Committee. See, Texas Disciplinary Rules of Professional Conduct, Rule 7.07. Every state’s rules are unique.

The California panel made clear that California lawyers were required to comply regardless of how difficult it may be to comply.

“The restrictions imposed by the professional responsibility rules and standards governing attorney advertising are not relaxed merely because such compliance might be more difficult or awkward in a social media setting.”

California (Op. 2012-186).

Some states, however, have enacted rules that don’t require submitting to an advertising review committee any social media that contains only basic information.

For example, in Texas a lawyer or law firm is not required to submit social media that only includes biographical information, sponsorship of certain activities, or where the communication was not significantly motivated by a desire for, or by the possibility of obtaining, pecuniary gain. Texas Disciplinary Rules of Professional Conduct 7.07(e).

For example, a law firm would not be required to submit their social media posts, encouraging the public to follow their Facebook page, LinkedIn page, or Twitter account.

CONCLUSION

Social media has become pervasive in most lawyers’ every day and professional lives. At least one state’s bar association already has concluded that ABA Model Rule 1.1 requires lawyers to have “a basic knowledge of how social media websites work,” as well as the ability to advise clients about the legal ramifications of using the sites. Pennsylvania (Op. 2014-300).

As a result, best risk management practice suggests that every lawyer and law firm should implement a strong, written social media policy into their firm’s employee handbooks and regularly train their employees on the ethical rules that apply to lawyers and law firms. And, every lawyer should developing a personal, working knowledge of how social media works to avoid the ethical traps waiting for them in cyberspace.

To subscribe to the Professional Liability Update, click HERE and provide your contact information and you’ll receive notice of our updates. 

Tim Soefje Headshot 01Timothy B. Soefje is Managing Member and head of the professional liability section at the boutique firm of Seltzer │Chadwick │Soefje, PLLC. in Dallas, Texas. Follow him on Twitter at @TimSoefje. For more information, visit at www.realclearcounsel.com or contact Mr. Soefje at tsoefje@realclearcounsel.com