Archive for May, 2012

Pennsylvania Supreme Court to Revisit the “Error in Judgment” Defense

Wednesday, May 30th, 2012

Last year, in Passarelo v. Grumbine, a three judge panel of the Superior Court retroactively applied the 2009 ruling in Pringle v. Rapaport, which banned the use of the “error in judgment” defense.  The Supreme Court has now agreed to hear arguments on the retroactivity of the ban, but also on whether whether trial judges ever have discretion to instruct that doctors are not liable for non-negligent errors in judgment.

-Josh J.T. Byrne, Esquire (H.T. Jeff McCarron, Esquire)

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Interesting opinion on legal malpractice, indemnity, and contribution

Friday, May 25th, 2012

United States District Judge William W. Caldwell of the Middle District of Pennsylvania issued a 31 page memorandum and order in Kohn et al v. School District of City of Harrisburg, et al.  The case in general is quite interesting, involving an alleged conspiracy by the Mayor of Harrisburg to fire the superintendent, deputy superintendent and assistant superintendent of the school district.  The fired administrators brought an action alleging their civil rights had been violated because they were not given a hearing before being fired.  The school district then brought a third party complaint against Mayor Linda Thompson and the lawyer for the school district, James E. Ellison, and the law firm where he works, Rhoads & Sinon.

Judge Caldwell’s opinion is interesting because he held that there can be no indemnity owed by Ellison to the school district because the school district cannot claim passive liability, nor were they entitled to contribution because they were not joint tortfeasors with respect to the legal malpractice.  However, the judge allowed claims for contribution with respect to a civil conspiracy claim and a tortious interference with contract claim to proceed finding that the law firm and the mayor were joint tortfeasors for purposes of those claims.  Although the judge dismissed all legal malpractice claims based upon contribution or indemnity, he allowed the independent legal malpractice claims to proceed.  The discussion regarding contribution and indemnity could be useful in the defense of future legal malpractice actions.

-Josh J.T. Byrne, Esquire

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Lawyers and Social Media

Monday, May 21st, 2012

As more lawyers use social media (such as this blog) to promote themselves, or their clients’ interests, greater attention is being paid to the potential pitfalls.  The lawyers surrounding George Zimmerman, charged in the death of Trayvon Martin, used social media to put out Mr. Zimmerman’s side of the story, but were criticized for possible ethical violations, and they eventually fired their client.  Lawyers who use social media to promote themselves face concerns of privacy, giving advice that perhaps they should not, ethical questions regarding criticism of judges, and inadvertent clients.

The takeaway is obvious.  While social media can be very useful to lawyers, it needs to be utilized with caution.  As we have repeatedly stated, do not publish anything you would not want to see blown up as an exhibit.

-Josh J.T. Byrne, Esquire

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Where to begin. . .

Thursday, May 17th, 2012

The website Overstock.com has been engaged in battle with a number of Wall Street entities.  Among the most contentious of these battles has been Overstock.com v. Goldman Sachs.  The contention in the action is that Goldman Sachs was involved in “naked short selling” of Overstock.com’s stock, leading to a decline in the stock price.  Goldman Sachs denied the allegations.  Allegations of Goldman Sachs involvement in “naked short selling” has been around for some time, and they have previously paid fines due to the practice, albeit while not admitting they engaged in the practice.  However, the Overstock.com law suit was unsuccessful due to a jurisdictional issue.

After the lawsuit ended, Overstock.com, along with several news organizations, sought to have a number of documents in the case made public, and Goldman Sachs resisted.  This is where the potential professional liability issue began.  Morgan Lewis, the attorneys, for Goldman Sachs, filed an opposition to an Overstock.com motion to unseal certain documents.  Attached to the motion was an unredacted copy (see pages 14-22) of a previous motion by Overstock.com which contained quotes from the very documents Overstock.com was seeking to have made public.  The quotes from the e-mails paint an unflattering picture of Goldman Sachs’ opinions of rules and regulations, and appear to confirm that it was actually engaged in naked short selling.  One of the more interesting exchanges came after a Merrill executive expressed concern that a colleague “intentionally failed” a short sale, an executive at the clearing unit responded, telling the executive to “F— the compliance area — procedures, schmecedures” (the executive apparently told the court that this was a joke).

There is probably no actual damages attached to any error by Morgan Lewis, as the judge had previously ruled that at least some of the discovery would be unsealed, but had held it pending appeal.  However, the embarrassment is significant.

Perhaps the easiest/most important lesson for professionals to take from this comes not from any mistake or potential legal malpractice by the lawyers, but the mistakes of the bankers.  Naturally, attempting to skirt around regulations is always a problem.  Also important, in this age of electronic discovery, one should take care not to put anything in an e-mail that you would not want to see blown-up as an exhibit at trial.

-Josh J.T. Byrne, Esquire

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When is a retainer not just a retainer

Monday, May 14th, 2012

Former New Jersey State Sen. Wayne Bryant, who is serving a four-year sentence for a corruption conviction, has been back in court on allegations that he was bribed by a North Carolina developer.  Mr. Bryant received an $8,000/per month (total of $192,000) “retainer“ from Cherokee Investment Partners.  No work was done by Mr. Bryant for the funds.  The government has asserted the payment was simply a bribe in exchange for Mr. Bryant’s support of projects being pursued in New Jersey.  Mr. Bryan has argued that he was “on call” for Cherokee.

-Josh J.T. Byrne, Esquire (H.T.- B.C.B.)

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Case Within a Case in Detail

Friday, May 11th, 2012

Last week, the U.S. Court of Appeals for the Federal Circuit affirmed the district court of New Jersey’s summary judgment in Minkin v. Gibbons P.C., finding that Gibbons was not liable for legal malpractice in writing and prosecuting a patent application for a hand tool called extended reach pliers (ERP).  Minkin alleged that the patent application was too specific, which allowed a competitor to create a nearly identical device.  The court found “Minkin did not raise a genuine dispute of material fact as to the patentability of its alternate claims,” and therefore “the causation element was not shown as a matter of law.”  The upshot is, in order to establish the causation element in a professional liability action arising out of allegedly deficient language in a patent application, the plaintiff must establish that the alternative language they assert should have been used would have been patentable.

-Josh J.T. Byrne, Esquire

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Ethics Opinion on Cloud Computing

Wednesday, May 9th, 2012

The issue of cloud computing, the storing and sharing of data on/with remote servers, has been a hot topic in attorney ethics circles recently.  The most obvious issues arise out of Rule 1.6, regarding the confidentiality of information.  The Pennsylvania Bar Association Committee on Legal Ethics and Professional Responsibility has issue its formal opinion 2011-200 on the ethical obligations of attorneys using cloud computing.  The Committee’s opinion is:

Yes. An attorney may ethically allow client confidential material to be stored in “the cloud” provided the attorney takes reasonable care to assure that (1) all such materials remain confidential, and (2) reasonable safeguards are employed to ensure that the data is protected from breaches, data loss and other risks.

Importantly, the opinion sets forth a set of guidelines to ensure compliance with the attorney’s ethical obligations, that is the “reasonable safeguards” required:

Thus, the standard of reasonable care for “cloud computing” may include:

• Backing up data to allow the firm to restore data that has been lost, corrupted, or accidentally deleted;

• Installing a firewall to limit access to the firm’s network;

• Limiting information that is provided to others to what is required, needed, or requested;

• Avoiding inadvertent disclosure of information;

• Verifying the identity of individuals to whom the attorney provides confidential information;

• Refusing to disclose confidential information to unauthorized individuals (including family members and friends) without client permission;

• Protecting electronic records containing confidential data, including backups, by encrypting the confidential data;

• Implementing electronic audit trail procedures to monitor who is accessing the hidden data;

• Creating plans to address security breaches, including the identification of persons to be notified about any known or suspected security breach involving confidential data;

• Ensuring the provider:

o explicitly agrees that it has no ownership or security interest in the data;

o has an enforceable obligation to preserve security;

o will notify the lawyer if requested to produce data to a third party, and provide the lawyer with the ability to respond to the request before the provider produces the requested information;

o has technology built to withstand a reasonably foreseeable attempt to infiltrate data, including penetration testing;

o includes in its “Terms of Service” or “Service Level Agreement” an agreement about how confidential client information will be handled;

o provides the firm with right to audit the provider’s security procedures and to obtain copies of any security audits performed;

o will host the firm’s data only within a specified geographic area. If by agreement, the data are hosted outside of the United States, the law firm must determine that the hosting jurisdiction has privacy laws, data security laws, and protections against unlawful search and seizure that are as rigorous as those of the United States and Pennsylvania;

o provides a method of retrieving data if the lawyer terminates use of the SaaS product, the SaaS vendor goes  out of business, or the service otherwise has a break in continuity; and,

o provides the ability for the law firm to get data “off” of the vendor’s or third party data hosting company’s servers for the firm’s own use or in-house backup offline.

• Investigating the provider’s:

o security measures, policies and recovery methods;

o system for backing up data;

o security of data centers and whether the storage is in multiple centers;

o safeguards against disasters, including different server locations;

o history, including how long the provider has been in business;

o funding and stability;

o policies for data retrieval upon termination of the relationship and any related charges; and,

o process to comply with data that is subject to a litigation hold.

• Determining whether:

o data is in non-proprietary format;

o the Service Level Agreement clearly states that the attorney owns the data;

o there is a 3rd party audit of security; and,

o there is an uptime guarantee and whether failure results in service credits.

• Employees of the firm who use the SaaS must receive training on and are required to abide by all end-user security measures, including, but not limited to, the creation of strong passwords and the regular replacement of passwords.

• Protecting the ability to represent the client reliably by ensuring that a copy of digital data is stored onsite.

• Having an alternate way to connect to the internet, since cloud service is accessed through the internet.

An attorney or law firm which has followed all of these guidelines should be well protected from any potential claim of professional liability and/or breach of ethical duties.

- Josh J.T. Byrne, Esquire

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An important rule

Tuesday, May 8th, 2012

The Rules of Professional Conduct, as our courts have repeatedly held, cannot form the basis for a professional liability action, but they can be a good guide for staying out of trouble.  One of the best rules, in terms of helping attorneys stay out of trouble is Rule 1.4- Communication.

Pursuant to Rule 1.4:

(a) A lawyer shall:

(1) promptly inform the client of any decision or circumstance with respect to which the client’s informed consent, as defined in Rule 1.0(e), is required by these Rules;

(2) reasonably consult with the client about the means by which the client’s objectives are to be accomplished;

(3) keep the client reasonably informed about the status of the matter;

(4) promptly comply with reasonable requests for information; and

(5) consult with the client about any relevant limitation on the lawyer’s conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

(c) A lawyer in private practice shall inform a new client in writing if the lawyer does not have professional liability insurance of at least $100,000 per occurrence and $300,000 in the aggregate per year, subject to commercially reasonable deductibles, retention or co-insurance, and shall inform existing clients in writing at any time the lawyer’s professional liability insurance drops below either of those amounts or the lawyer’s professional liability insurance is terminated.  A lawyer shall maintain a record of these disclosures for six years after the termination of the representation of a client.

Making certain that your client has sufficient information (preferably in writing) to make “informed decisions” regarding the representation will go a long way in making certain that client expectations are controlled.  Controlling client expectations goes a long way to avoid legal malpractice claims (warranted or not).

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Dewey Dismal System- Implosion

Thursday, May 3rd, 2012

One of the largest law firms in New York City appears to be imploding.  Dewey & LeBoeuf partners have been encouraged to look for work elsewhere, and law students have been told that they will not have summer associate jobs they had previously been offered.  The end of a large firm is not unique, large firms fail and close with regularity.  However, this particular failure may be the largest in history.

For purposes of our blog, the end of a law firm is not merely the subject of morbid fascination, but a point of discussion of potential pitfalls.  As the 2009 failure of Wolf Block showed, failed law firms are subject to lawsuits from disgruntled former partners, as well as former clients and vendors.  These disputes can take years to sort out.

The legal malpractice and ethical implications of a firm break-up are myriad.  They include continuing duties to clients, potential conflicts as partners leave for new firms, and confidentiality and safe-keeping problems.  Issues can arise out of client file and property transfer; statements to clients about the lawyers’ services; and neglect or abandonment of client files (many of these same issues arise anytime a lawyer leaves a firm).  In order to avoid professional liability, ethics problems, and/or legal malpractice actions, a law firm break-up requires as much careful planning on all levels as a law firm start-up.  Unfortunately, careful planning of break-ups does not always happen.

-Josh J.T. Byrne, Esquire

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$34.5 Million Verdict in Legal Malpractice Case

Tuesday, May 1st, 2012

A Los Angeles jury awarded $34.5 million dollars to a group of investors who had brought a legal malpractice action against the law firm Holland & Knight last week.   The verdict against Holland & Knight followed a seven week trial and six days of deliberation.  The verdict on legal malpractice, fraud and breach of fiduciary duty claims came despite the law firm’s denial that it had ever represented the plaintiffs.  After the $34.5 million dollar verdict, the jury retired to consider additional punitive damages, before a deal was worked out to avoid punitive damages.

Plaintiffs in the action were investors in real estate.  Plaintiffs alleged developer, Shi Shailendra, their former partner had defrauded them, and Holland & Knight had protected Shailendra’s interests.

This case graphically illustrates the necessity of making sure attorneys identify not only who they represent, but who believes they are represented by the attorney.  Making the scope and nature of your representation (or non-representation) abundantly clear is a good way to avoid professional liability claims.

-Josh J.T. Byrne, Esquire

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