Handling Discovered Errors

Handling Discovered Errors

Everything earlier in this chapter works before a mistake happens: insurance bought in advance, habits that prevent errors, and contract terms fixed at the start of an engagement. Model Rule 1.8(h)(1) belongs with them, because it forbids an agreement prospectively limiting a lawyer’s liability to a client for malpractice unless the client is independently represented in making the agreement.¹ This section starts after prevention has failed. A lawyer has found an error, or suspects one, and must answer four questions in roughly this order: whether the client must be told, what the client must be told, what the insurer must hear, and whether the lawyer can keep the matter at all.

Three interests pull on those answers. The client is entitled to candor about developments in the matter. The insurer wants to manage its exposure. The lawyer, who made the mistake, is tempted to wait and hope. The lawyer’s and the insurer’s interests may seriously conflict with the client’s, and until the attorney-client relationship ends the lawyer owes the client demanding fiduciary duties under which the client’s interests come first.² That ranking is the tiebreaker the subsections below keep returning to.

Duty to Disclose Errors

The duty to disclose a lawyer’s own error does not appear in a single rule. It comes from two sources working together. The first is the general expectation that lawyers keep clients reasonably informed. The second is the body of disciplinary rules and fiduciary principles requiring lawyers to analyze and disclose to clients information related to conflicts of interest.³ The second source explains why an error is special. After making a mistake, the lawyer’s interest in self-protection may conflict with the client’s interest in independent representation free from compromising influences.⁴

The Restatement states the core of the duty in one sentence: if the lawyer’s conduct of the matter gives the client a substantial malpractice claim against the lawyer, the lawyer must disclose that to the client. Its example is a lawyer who fails to file suit within the limitations period. That lawyer must tell the client, pointing out both the possibility of a malpractice suit and the resulting conflict of interest, which may require the lawyer to withdraw.⁵ The example asks for more than a report of what happened. The lawyer must also tell the client what the client may now do about it and acknowledge that the lawyer’s own position has changed.

Not every slip triggers the duty. If only “significant or serious errors” trigger it, lawyers should not be required to disclose minor errors, and arguably they need not disclose errors that do not affect the representation or that are easily correctable with no adverse consequences for the client.⁶

Another analysis organizes the problem as a spectrum. The Restatement example marks the serious end, since a lawyer who lets the limitations period run has cost the client a claim. At the other end are errors and possible errors that may never harm the client, either because any resulting harm is not reasonably foreseeable, because there is no prejudice to the client’s right or claim, or because the lawyer takes corrective measures reasonably likely to avoid prejudice. Missing a nonjurisdictional deadline, a potentially fruitful area of discovery, or a theory of liability or defense may cost the lawyer sleep, but it does not create an ethical duty to disclose. As one commentator put it, “Unless there are steps that can be taken now to avoid the possibility of future harm, there is probably no immediate duty to disclose the mere possibility of lawyer error or omission.” Lawyers should be given the opportunity to remedy any error before disclosing it to the client.⁷ Between the two ends lie innumerable errors that must be analyzed one at a time.⁸

Two further points keep the duty from becoming a trap for lawyers who acted in good faith. Whether a duty to disclose exists depends on the facts and circumstances known to the lawyer once the error was realized, not on what appears only through the prism of hindsight. And a later malpractice claim does not mean the lawyer breached a duty to disclose; this source adds that failure to disclose should not be construed as an independent claim against the lawyer.⁹ The first point judges the lawyer by what the lawyer knew at the time and not by how the matter turned out.

The first lawyer used the chance to remedy an error before disclosing it, and the second had nothing left to remedy. That chance is not a chance to wait. The lawyer remains a fiduciary while repairing the problem, and the client’s interests come first throughout.¹⁰

What to Tell Clients

Once a lawyer must tell a client about an error, the next question is how much the telling must contain. Ethics opinions answer differently, and the three approaches below show how authorities diverge; none of them is a single national rule. They differ mainly on how much of the lawyer’s own exposure goes into the disclosure.

An opinion from Pennsylvania takes the narrowest view. It states that an attorney has a duty to disclose only material developments in a case, such as the dismissal of a case on a statute of limitations issue. That jurisdiction is in the minority.¹³ The client learns that the case has ended and why, but the duty does not reach an account of the lawyer’s own lapse or a warning about a possible claim against the lawyer.

The majority of jurisdictions that have considered the question, including Minnesota, New Jersey, New York, and Wisconsin, go further. They require the lawyer to notify the client promptly of both the failure to act and the possible malpractice claim against the attorney.¹⁴ Each half does its own work. Telling the client of the failure to act connects the outcome to its cause, so the client learns that the dismissal came from something the lawyer left undone. Telling the client of the possible claim identifies a remedy the client cannot weigh without knowing it exists. This matches the Restatement example, in which the lawyer who misses the limitations period must say so and point out the possibility of a malpractice suit.¹⁵

A Colorado ethics opinion takes a hybrid course. It states that an attorney need not advise the client about whether a claim for malpractice exists. It suggests, however, that the attorney disclose the facts surrounding the error and inform the client that it may be advisable to consult an independent lawyer about the potential impact of the error on the client’s rights or claims. The attorney should not simply admit liability and should consider the impact of disclosure on malpractice insurance coverage.¹⁶ The client receives the facts and a pointer to an adviser with no stake in the answer, and the lawyer is not asked to pronounce on his or her own liability.

An exam question that names the majority approach, or Minnesota, New Jersey, New York, or Wisconsin, calls for notice of both the failure to act and the possible claim. A question that describes a Colorado-style opinion calls for the facts, a suggestion to consult independent counsel, no statement on whether a claim exists, and no simple admission of liability. An answer that treats any one opinion as the national rule has missed the split.

Because the disclosure is sensitive and has insurance ramifications, a lawyer may wish to obtain guidance from legal counsel and the insurer before approaching the client. These experts may help formulate the manner and content of the disclosure.¹⁷ They cannot change who the message is for. The interests of both the lawyer and the insurer may seriously conflict with the client’s, and the client’s interests must come first.¹⁸ A lawyer who lets the insurer’s interest in limiting exposure, or his own interest in avoiding a claim, shrink the disclosure below what the governing rule requires has put those interests ahead of the client’s.

Insurer Notice and Cooperation

Once an error exists, the lawyer’s duties to the insurer come from the policy, and the policy cuts both ways: the insurer can supply help, and its conditions can limit what the lawyer may safely say. The policy’s own notice terms, covered earlier in this chapter, set when and how the lawyer must report. This subsection concerns what reporting brings and what the policy restricts afterward.

When a lawyer reports a potential malpractice claim to the insurer, the insurer may consult the lawyer on the steps to take to deal with the potential claim and the liability exposure it creates. Depending on the circumstances, the insurer may hire counsel to represent the lawyer even before a claim is filed. That counsel and the insurer may advise on the duty and advisability of disclosing the potential malpractice to clients, and the decision on disclosure takes into account the applicable ethics rules, the law in the jurisdiction, and the practical and logistical consequences of disclosure and of nondisclosure.²¹ A lawyer who has just found a mistake is judging a situation in which his or her own interests are at stake, and an adviser retained for the purpose can take a steadier view of what the client must be told and when.

The policy also constrains what the lawyer does while the matter develops. A cooperation condition may restrict an insured’s ability to confess liability by providing that insureds shall not, except at their own cost, voluntarily make a payment, make a settlement, or assume an obligation.²² The clause raises a question whether a disclosure to the client might itself violate it, and the practical answer is to avoid the question: an insured lawyer should consult the insurer before making any disclosure.²³

One reported appellate decision shows how a court resolved the collision. It held that the voluntary-payment provision in the policy was unenforceable because it violated public policy. It is unclear whether other courts would find that rationale persuasive, so the safer course is to avoid a coverage dispute altogether: insureds should consult their insurers before disclosing errors. If consulted, an insurer may retain defense counsel to assist the insured in fulfilling ethical obligations to clients.²⁴

Consulting the insurer does not hand the insurer control over what the client hears. The lawyer’s interests and the insurer’s may seriously conflict with the client’s, and until the attorney-client relationship ends the lawyer owes the client fiduciary duties under which the client’s interests come first.²⁵ The lawyer takes the insurer’s help on the manner and content of the disclosure and does not accept a narrower disclosure than the governing rule demands.

The third step is the one lawyers most often overlook, because the wish to make amends can lead a lawyer to promise payment before anyone has spoken with the insurer.

Consequences of Nondisclosure

After discovering their own malpractice, some lawyers take an ostrich approach, hoping that the matter will go away or never be discovered by clients or others. That approach can have serious consequences.²⁹ The error is a lapse in competence or diligence, and silence where a duty to disclose applies adds a second wrong, a breach of the duties described above. The client came to the lawyer as an advisor who was expected to be honest and candid and to put the client’s interests above the lawyer’s own, and concealment betrays that expectation.³⁰

The sharpest professional consequence attaches to misrepresentation. Lawyers who engage in a cover-up involving misrepresentation could face suspension or disbarment.³¹ A lawyer who only stays silent has failed to communicate, while a lawyer who tells the client something false to hide the error has added dishonesty to the original mistake.

The consequences also reach the courtroom. When the lawyer is sued, the failure to disclose can be used to portray the lawyer as a scoundrel who took advantage of a client who relied on the lawyer to be honest and candid. That characterization can seriously damage jurors’ perceptions of the lawyer and the lawyer’s conduct, and it may lead jurors to question the lawyer’s credibility generally, including accurate accounts of the facts in the case.³² Whether silence supports a separate claim is a different question. One source takes the view that failure to disclose should not be construed as an independent claim against the lawyer, even though silence still colors how jurors see the lawyer.³³

A different lawyer, facing the same missed deadline, tells the client promptly after consulting counsel and the insurer. The client may still sue, because the lost claim is real, and disclosure does not undo the error. What disclosure removes is the cover-up story that silence hands to the plaintiff.

Conflicts and Withdrawal

Rule 1.8(h)(1) governs promises about liability made before any error exists, and the standard that governs a lawyer who has already found a mistake is the general personal-interest conflict rule. Rule 1.7(a)(2) states that a conflict of interest exists if the lawyer’s representation of a client would be materially limited by a personal interest of the lawyer.³⁶ A mistake supplies exactly that kind of interest. After making an error, the lawyer’s interest in protecting himself or herself may conflict with the client’s interest in independent representation free from compromising influences.³⁷ The Restatement example reflects this when it tells the lawyer who missed the limitations period to point out the resulting conflict of interest that may require withdrawal.³⁸

The conflict is easy to overlook because lawyer and client appear to want the same thing, a good result in the matter. The error divides them at the point where the lawyer’s stake in how the matter is handled competes with the client’s need for representation uncompromised by that stake. A client cannot give informed consent to a conflict the client does not know about, so the disclosure analysis comes first.

The consequence follows in two steps. After discovering an error or omission that constitutes malpractice, the lawyer must determine whether continued representation is proper with informed client consent. Depending on the nature and status of the representation, the lawyer may be required to withdraw because the conflicts would be deemed nonconsentable.³⁹ At withdrawal, the lawyer could inform the client of the advisability of seeking independent counsel.⁴⁰

The usual mistake is to assume that a signed consent resolves every conflict an error creates. Consent is the first question and it is not always available. The lawyer has to look at the nature and status of the representation and ask whether the error has become the very thing the matter is about.

The third step does the real work, because it separates the error a client can reasonably accept from the error that has become the subject of the matter.