Starrs Mihm & Pulkrabek LLP

Court bars client from bringing legal malpractice case against former lawyer because she did not raise issues in collection action

2008-08-15T12:00:00.002-06:00

Does a former client have to raise her claims of legal malpractice when her lawyer sues for nonpayment of fees? According to the Colorado Court of Appeals decision of Allen v. Martin on June 12, 2008, the answer to that question is "yes."

In Allen, the client was an officer of a company which hired the defendant lawyers to advise it on business matters. Neither the company nor the individual (who personally guaranteed payment of the legal fees) paid the lawyers and a collection action ensued. Neither the company nor the individual participated in the collection action and the lawyers obtained a default judgment against them.

Two years later, the individual and the company sued the lawyers for malpractice. The Colorado Court of Appeals dismissed the malpractice case against the lawyers because they did not raise the issues in the collection action and therefore were forever barred from bringing it.

People who find themselves being sued for legal fees should not ignore this but seek legal advice to evaluate their options and consider whether they can counterclaim for legal malpractice.

Deceptive trade practices claims are worth consideration in circumstances of lawyer wrong-doing

2008-08-01T12:00:00.002-06:00

By Elizabeth Hyatt

In its important decision, Crowe v. Tull, the Colorado Supreme Court held that lawyers may be liable for deceptive trade practices under the Colorado Consumer Protection Act (the Act). § 6-1-105, C.R.S. Until the Crowe decision, it remained unclear whether a lawyer could be held liable under the Act. Some argued that a lawyer should never be held liable under the Act because Colorado lawyers are regulated separately by the Colorado Supreme Court. Others argued that a lawyer should be exposed to liability under the Act only for actions taken in “the business of law,” and not for actions taken during the “practice of law.” In its well-reasoned opinion, the Colorado Supreme Court rejected these arguments outright.

Lawyer liability under the Act is significant, since the Act provides for the recovery of attorneys fees and, sometimes, treble damages, which normally are not recoverable under general lawyer malpractice tort claims.

Possible claims under the Act might be based on statements by the lawyer concerning the quality of his or her legal services; a failure to disclose the lawyer’s inexperience in a certain area of law; or any false representation or over-billing. However, a client must satisfy the multiple elements of the deceptive trade practices claim, which include a showing that the unfair or deceptive trade practice significantly impacts the public as actual or potential consumers of the lawyer’s services, and a showing that the trade practice caused the client’s injury.

Although a deceptive trade practices claim against a lawyer may be difficult to prove, it is a potentially valuable claim worth considering in the face of lawyer wrong-doing.

Does a lawyer have to advise his client that he needs a separate attorney?

2008-07-18T12:00:00.005-06:00

By Elizabeth Starrs

Does a lawyer, hired by an insurance company to represent a professional in a malpractice case, have to advise the professional, his client, that he might need his own personal counsel to evaluate whether to demand that the insurance company settle on his behalf? According to the Colorado Court of Appeals in its July 10, 2008 decision in Morris v. COPIC, the answer is “yes.”

In Morris v. COPIC, Dr. Morris was sued for medical malpractice by a former patient. Dr. Morris was defended in this case by an experienced lawyer retained by COPIC Insurance Company, Dr. Morris’s medical malpractice insurance carrier. The jury returned a verdict for money damages in an amount which was greater than the insurance policy limits and Dr. Morris assigned his rights against COPIC for bad faith breach of his insurance contract to the former patient’s widow in exchange for the widow not pursuing Dr. Morris personally.

One of the issues before the Colorado Court of Appeals was the extent of information made available to Dr. Morris and upon which he could make an informed decision about whether to settle. In that regard, the Court commented that the lawyer should have sent his client copies of his letters to the insurance company about the potential size of the verdict.

The Colorado Court of Appeals also held that the insurance-company-retained lawyer had a duty to advise his client, the doctor, that he should get his own personal counsel to evaluate the impact of an adverse verdict in excess of the doctor’s policy limits and make a demand that the insurance company, COPIC, make every effort to settle the doctor’s case within the insurance policy limits.

Although this was a bad faith case against an insurance company, and although there is no evidence that the former client was critical of how the case was handled by his former attorney, the Colorado Court of Appeals made a point of indicating that the lawyer should have told Dr. Morris that he should have his own personal counsel before the trial to evaluate the potential of an excess verdict against him and should have copied Dr. Morris on his communications with the insurance company about the potential size of an adverse verdict. If this had occurred, it probably would have minimized the negative impact on Dr. Morris.

Court bars legal malpractice claims based on guilty plea to criminal charges

2008-07-01T10:28:00.007-06:00

By Ross Pulkrabek

Does a guilty plea to securities fraud and theft in a criminal case bar a client from later suing her securities lawyer for legal malpractice based on bad legal advice? According to the Colorado Court of Appeals's June 12, 2008 decision in Allen v. Martin, the answer is "yes."

In Allen, the client was an officer of the Women's International Investment Network ("WIIN"). WIIN hired the defendant lawyers to advise it and Allen on the the securities law implications of certain real estate transactions.

The client later was indicted on multiple counts of conspiracy to commit securities fraud and theft in connection with the same transactions on which the lawyers advised her. She ultimately pled guilty to one count of securities fraud and one count of theft.

The client attempted to sue her former lawyers for legal malpractice, arguing that they had provided negligent legal advice, causing her indictment, and that they breached their fiduciary obligations by not coming to her aid during the ensuing prosecution. The trial court dismissed the client's claims, finding that they were barred by virtue of her guilty plea. Having admitted to securities fraud and theft, the client was in pari delicto (equally at fault) with the lawyer defendants.

The court of appeals affirmed dismissal of the legal malpractice claims, holding that a plea of guilty bars a client from attempting to show that she did not commit a crime in a legal malpractice case. The court found, however, that the client can avoid having her legal malpractice claim barred by pleading nolo contendre (no contest). The court also left open the possibility that the legal malpractice claim will not be barred so long as the client attempted to plead nolo contendre, even if the trial court or prosecution refused to accept such a plea.

Corporate executives and other business persons who find themselves being prosecuted after receiving bad advice from a lawyer would be wise to bear the Allen decision in mind and consult with experienced legal counsel about their professional negligence claims against their former lawyers before entering a plea in a criminal case.