Navigating Claim Exposures for Attorneys

Ethical Issues Leading to Malpractice Claims

OCTOBER 3, 2024

This case study highlights a legal malpractice claim involving a personal injury attorney that originated from an ethical grievance.

Case Overview:

Attorney Johnson represented Driver, Driver’s Minor Child, and Passenger in an auto accident involving another vehicle driven by Defendant. Attorney Johnson was aware of the testimonies from Driver and Passenger and recognized that both the Minor Child and Passenger had more severe injuries than Driver, making their claims potentially more valuable.

Before the trial, Defendant discovered a witness asserting that Driver had failed to stop at a stop sign, thus claiming Driver was at fault. As a result, Defendant's attorney filed a counterclaim against Driver. Attorney Johnson informed Driver that he could no longer represent him due to a conflict of interest but assured Driver that he would secure a favorable settlement for Driver’s Minor Child. Subsequently, Attorney Johnson filed a motion to withdraw from representing Driver, citing “failure to cooperate,” and initiated a counterclaim against Driver.

Driver's insurance company then assigned an attorney to defend him against the counterclaims. On the eve of the trial, both Defendant's attorney and Driver's attorney moved to disqualify Attorney Johnson from representing any party due to an unwaivable conflict of interest, arguing that Attorney Johnson possessed knowledge that could be detrimental to Driver. Attorney Johnson contended that he had properly withdrawn and claimed there was no ongoing conflict.

The judge disagreed, disqualifying Attorney Johnson from representing any party in the case. Consequently, both Passenger and Driver’s Minor Child had to quickly find new legal counsel just days before the trial. This new attorney managed to settle the cases for amounts significantly lower than what had been previously discussed.

Ethical Grievance:

Encouraged by the new attorney, who specialized in legal malpractice, Driver and Passenger filed an ethical grievance against Attorney Johnson with the State Bar. Attorney Johnson did not inform his malpractice insurance about the grievance and chose to respond without consulting an experienced ethics attorney. He ultimately provided extensive discovery and over five hours of sworn testimony during the process.

The State Bar subsequently filed a formal complaint against Attorney Johnson for conflicts of interest, including prioritizing his interests over those of his clients. Following a hearing, Attorney Johnson faced a one-month suspension from practicing law.

Legal Malpractice Claim:

Once the ethical complaint was concluded, the new attorney filed a legal malpractice suit against Attorney Johnson on behalf of Driver, Passenger, and Driver’s Minor Child. The lawsuit alleged negligence and breach of fiduciary duty for each client, resulting in them accepting smaller settlements than they would have without the conflict.

The new attorney leveraged the discovery and testimony obtained from the ethical proceedings to strengthen the malpractice claim, precluding several potential defenses that Attorney Johnson might have raised.

Ultimately, the new attorney secured a larger civil settlement for his clients by including the additional breach of fiduciary duty claim.

Outcome:

The underlying conflict of interest was central to both the ethical grievance and the malpractice claim. However, Attorney Johnson might have mitigated his situation had he recognized the implications for his legal practice and sought counsel on the ethical grievance. The new attorney strategically utilized the findings from the disciplinary matter to bolster the civil claim, resulting in greater damages.

It’s not uncommon for legal malpractice claims to stem from ethical grievances, which can provide additional avenues for discovery and claims like breach of fiduciary duty, leading to increased potential damages.

Best Risk Management Practices:

Attorneys should treat ethical grievances with the same seriousness as legal malpractice claims. Consulting with ethics attorneys before responding to any grievances can be crucial in protecting against future malpractice claims. Many insurance carriers provide disciplinary coverage, and attorneys should verify their coverage details with their agents.