Published in New York Legal Ethics Reporter, April 2017
When a client suffers a loss due to legal malpractice, the client will often fire the negligent lawyer and hire another one. This article will refer to such lawyers as “mitigation counsel” — lawyers hired to fix a legal problem which has been either created or exacerbated by legal malpractice. Mitigation counsel tries to mitigate the legal malpractice damages by providing legal services which typically will not include suing the lawyer who committed the malpractice. Ordinarily a malpractice plaintiff will have a duty to mitigate damages. Failure to mitigate damages may enable the malpractice defendant to escape liability for damages that the malpractice plaintiff could have avoided thorough the exercise of reasonable care after the malpractice defendant’s alleged misconduct. Examples of mitigation counsel include (1) an appellate lawyer hired to prosecute an appeal after attorney negligence led to a bad result at the trial level; (2) a litigator hired to defend a judgment enforcement proceeding after attorney negligence led to an adverse judgment; (3) a tax lawyer hired after negligent transactional advice led to a corporate transaction being structured with an unforeseen tax consequence; (4) a transactional lawyer hired to re-negotiate documents which were negligently drafted or the product of negligent advice; and (5) a litigator hired to litigate a commercial dispute where attorney negligence in drafting the underlying contracts led to the dispute. As the above examples show, mitigation counsel span a broad array of the legal profession. Often the mitigation counsel is not a litigator, and even the ones who litigate usually have limited understanding of how their efforts may impact a legal malpractice case. Agreeing to serve as mitigation counsel poses unique challenges for lawyers. Like every lawyer, mitigation counsel must comply with the Rules of Professional Conduct and attempt to secure a good result for the client. But since by definition mitigation counsel is retained in the aftermath of legal malpractice, mitigation counsel must be wary of a potential legal malpractice case and the possibility of it being brought into the case by either side of the dispute. Mitigation counsel therefore must protect their clients’ rights to bring a legal malpractice case against the negligent lawyer while employing sensible risk management techniques to avoid becoming a party in the lawsuit. The following six practice pointers will help.
1. Avoid the Temptation to Serve as Mitigation Counsel & Legal Malpractice Lawyer
It is only natural for lawyers to want to help clients any way that they can within the bounds of the law. And clients would generally prefer to hire and pay one lawyer rather than two, especially for the same problem. To save money and hassle some clients will hire the same lawyer to both mitigate the legal malpractice and bring a lawsuit for legal malpractice damages against the negligent lawyer. This is almost always a bad idea. Lawyers sued for legal malpractice often contend that, whatever their mistake, the lawyer who came in afterwards had ample time and opportunity to fix the problem and either failed to do so, or made the problem worse. Sometimes mitigation counsel is brought into the legal malpractice case by the defendant attorney as a third-party defendant. Other times the defendant attorney simply pleads that the Plaintiff did not mitigate damages and then seeks the testimony of the mitigation counsel. An attorney who tries to mitigate legal malpractice is never immune from such an accusation, but it becomes much more likely that an attorney will be brought in as a third party defendant, or at least a witness, if the mitigation counsel is also the client’s legal malpractice attorney. The attorney who wears both hats becomes a very tempting target to become a third party defendant because the attorney cannot continue the legal malpractice representation if he is also a third party defendant. Even if the attorney is not sued, he may be disqualified if that attorney is a witness to underlying events. Under NY Rule of Professional Conduct 3.7, colloquially known as the “Advocate-Witness Rule,” an attorney usually cannot represent a client in a case where an attorney is likely to be a witness on a significant, contested issue of fact. And even if the argument for disqualification under the Advocate-Witness Rule is a weak one, defense attorneys who wish to find more palatable adversaries, or simply cause disruption and delay, may file motions to disqualify. Moreover, legal malpractice plaintiffs may want the mitigation counsel to testify on certain issues. For example, plaintiffs will usually seek the legal fees of mitigation counsel as damages in the legal malpractice case, and mitigation counsel may need to shed light on why certain expenditures were necessary. The Advocate-Witness rule does contain an exception that allows counsel to testify where the testimony relates solely to legal fees. But the testimony is generally more credible coming from a witness who is not the plaintiffs’ lawyer. There are also potential conflicts of interest. For example, mitigation counsel typically works on an hourly or fixed-fee basis. Legal malpractice plaintiffs’ lawyers are more likely to have at least some success/contingency fee component in their fee agreements. The success of a mitigation counsel in lessening the damages of legal malpractice will lessen the value of a legal malpractice case. This poses both the perception and the reality of a conflicted attorney when that attorney wears both hats but is compensated on a partial or full contingency for the legal malpractice case.
2. Beware of the Expiring Limitations Period
While mitigation counsel should not also be legal malpractice counsel, the mitigation counsel should not ignore the client’s potential right to pursue a legal malpractice case. The statute of limitations for legal malpractice in New York is generally an unforgiving three years from the date of the malpractice. There is no discovery toll so plaintiffs usually cannot sue once three years have expired, even if the malpractice has gone undetected. There is a continuing representation toll for legal malpractice if the lawyer committing the malpractice continues to represent the client on the same or substantially related legal problem. Lawyers who continue to represent clients in mitigating the harm of the lawyers’ own malpractice may not realize that they may be extending the statute of limitations. But if a client retains separate mitigation counsel to remedy the ill-effects of another lawyer’s legal malpractice, then the continuing representation toll will end, at the very latest, when the mitigation counsel is retained. See generally McCoy v. Feinman, 99 N.Y.2d 295, 306, 755 N.Y.S.2d 693, 785 N.E.2d 714 (2002). Mitigation counsel usually know that their client may have a legal malpractice case, but they often erroneously assume that the legal malpractice case does not accrue until either discovery of the malpractice or the identification of specific damages. A mitigation lawyer who is trying to fix a problem caused by the legal malpractice of another lawyer may herself commit legal malpractice if the applicable statute of limitations expires while the mitigation lawyer is trying to fix the problem. To protect both the client and the mitigation lawyer, the mitigation lawyer should advise the client to consider consulting a legal malpractice lawyer, tell the client about the possibility of a legal malpractice case, and/or advise about the risks of an expiring limitations period. Prospective plaintiffs frequently need to make decisions as to whether to file a case when the result of the underlying legal problem remains uncertain. Mitigation counsel may encourage their clients to secure legal malpractice counsel to help make such a decision. Alternatives include entering into a tolling agreement with the prospective defendant, filing a summons with notice (assuming New York State Court) which can have the practical effect of buying a few more months to consider a potential case, or filing a lawsuit and then moving for a stay. If the limitations period is running out in a matter of days the mitigation counsel can also file the summons with notice herself while advising the client to secure different counsel for the lawsuit.
3. Do Not Worry That Your Good Work Will Lower Legal Malpractice Damages
Mitigating counsel and legal malpractice counsel are trying to accomplish the same thing: fix the malpractice such that the client is in the same position as it would be if no malpractice had been committed. But in practice this means that the more successful mitigating counsel is in lessening the effects of legal malpractice, the lower the legal malpractice damages. A mitigating counsel should not worry about this. It is the mitigating counsel’s job to get the very best result for the client, even if this lessens the value of a legal malpractice case. As a practical matter, the mitigating lawyer is usually in a better position to make the client whole than the legal malpractice lawyer. Legal malpractice cases are generally expensive to prosecute and hard to win. Settlements in legal malpractice cases can be substantial but they rarely make the clients whole. Defendants in legal malpractice cases are looking for any evidence that plaintiff, either itself or through mitigation counsel, may have failed to mitigate damages. A mitigation counsel should recognize the possibility of a separate legal malpractice case but should not take any steps to increase legal malpractice damages. Also, mitigation counsel should specifically limit the scope of the representation, as permitted by NY Rule of Professional Conduct 1.2(c), to exclude any work in connection with a legal malpractice case. This will free up mitigation counsel to focus on mitigating the damages while letting the client know it needs separate counsel to consider the possibility of a legal malpractice lawsuit.
4. Zealously Preserve Privileges & Work Product Protections
Defendants in legal malpractice cases are often aggressive in challenging assertions of privilege between the plaintiffs and any lawyer hired to assist the plaintiff in fixing the legal malpractice. While some older cases held that a plaintiff waives attorney client privilege with subsequent counsel when plaintiff brings a legal malpractice lawsuit, most recent cases are fairly protective of attorney client privilege in legal malpractice cases. See Veras Investment Partners v. Akin Gump Strauss Hauer & Feld, 52 A.D.3d 370, 374 (1st Dept. 2008) (holding that a plaintiff does not place a communication with a subsequent attorney “at issue” unless the advice received from counsel is necessary to prove the privilege-holder’s own claims or defenses). While the law has become somewhat more protective of privilege, some defense lawyers have not gotten the memo. Lawyers sued for malpractice remain intensely interested in the contents of communications between their former clients (who have become litigation adversaries) and their subsequent attorneys. The interest is especially acute where there is temporal overlap between the representations by the legal malpractice defendant and the mitigating lawyer. Litigators representing plaintiffs in legal malpractice cases routinely need to place privileged documents between plaintiff and mitigating counsel on a privilege log. Even if the privilege is ultimately sustained, the presiding judge may conduct an in camera review of some privileged communications. It will be cold comfort to a client if the privilege is sustained after the presiding judge has reviewed an embarrassing document. Mitigating counsel should therefore not assume that their private written communications with their clients will remain secret during the pendency of a legal malpractice suit. Counsel should be especially wary of putting anything in writing that may harm the client if it were revealed in a subsequent legal malpractice case. Phone calls are often better than e-mails. And following general best practices for preserving privileges is especially important for mitigating counsel.
5. Be Meticulous in Recording Time
One silver lining to what is usually a bad situation is that prevailing clients in legal malpractice cases can recover the legal fees they have incurred by hiring mitigating counsel. (By contrast, clients usually cannot recover the legal fees they have paid to legal malpractice counsel). This is true regardless of whether and to what extent mitigating counsel was able to help the client. Defense counsel often challenge the propriety and reasonableness of the fees incurred by a plaintiff who has hired a mitigating counsel. If such fees are substantial, the claimed legal fees are likely to be a key issue in the legal malpractice case. Defense lawyers are also likely to suggest that some of the fees were not related to fixing the alleged legal malpractice. Mitigating counsel should be aware from day one that their legal fees may be front and center of a contested court proceeding. Some lawyers are used to having their fees scrutinized by courts, but for others, it will be a first-time experience. Either way, the importance of keeping detailed contemporaneous time records cannot be overstated. The time records should explain not only what work is being done but, where ambiguous, why specific tasks are being undertaken.
6. Be Prepared to Testify & Provide Documents If Necessary
Lawyers generally have no obligation to help a former client in a legal malpractice case. On the other hand, the lawyer can be subpoenaed by either side of the dispute to testify at trial and/or deposition, and to provide relevant non-privileged documents. If the legal malpractice plaintiff is a current client of the mitigating lawyer, the lawyer is considered an agent of the client, such that no third-party subpoena will be necessary to obtain the law firm’s responsive documents. A document request directed at a client will require the client to turn over the law firm’s responsive files (minus privileged documents, of course). This will require active cooperation between the client’s legal malpractice lawyer and mitigating counsel. Some lawyers hate being fact witnesses. That is a reason for perhaps not agreeing to serve as mitigation counsel. But when a lawyer agrees to try and fix another lawyer’s legal malpractice, the lawyer should understand that providing documents and live fact testimony in a legal malpractice case is a very real possibility.
Daniel L. Abrams is the principal of The Law Office of Daniel L. Abrams, PLLC. He represents clients in legal malpractice cases, other cases involving the law governing lawyers, and business litigation. He can be reached at Dan@LawyerQuality.com.
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