Why Lawyers and Accountants Get Sued
By Warren R. Trazenfeld
Let’s face it: Lawyers and accountants get sued because that is where the money is. When a person or company has been economically wronged, invariably the professional has the only available deep pocket.
The focus of my lawyering for the last 20-plus years has been suing lawyers and accountants. During this time, I have observed certain actions that reliably result in professionals being sued. Some of these are discussed below. Avoiding such conduct will increase the chances of never meeting me in a courtroom.
The Client From Hell
The pressure to land new clients is a fact of life. Ironically, however, the most important client to your practice may be the one you turn away.
Frequently, lawyers and accountants sued for malpractice will say they knew at the outset they should not have taken on the client who sued them. Beware of clients who fired their previous advisor, or who have been turned down by other professionals. Think twice about a client who has more litigation experience than you do, or the one who has nothing good to say about lawyers or the legal system.
In the accounting field, audit clients must be carefully vetted before taking on the assignment and the work product thoroughly reviewed.Audit malpractice cases invariably turn on the very standards created by the accounting profession. Strict adherence to those standards is critical.
Additionally, audit cases often result from the inexperience of young accountants placed on the audit team, or from the more experienced member of the audit team who, under time or client pressures, deviates from what should be done.
Run from the clients who just don’t feel right. Chances are you have good instincts. Learn to trust them.
Despite adequate investigation, problems may develop after you are retained. The client’s expectations may become unreasonable, representations turn out not to be true, or the client does not provide timely responses. If this occurs, the best option is to fire the client in a professionally responsible way.
Use Effective Retention Agreements
The existence and scope of the client relationship must be adequately documented. Lawyers and accountants are often sued by people they never thought they represented or by clients they know they represent but on matters they did not think they were engaged to handle. Preparing specific engagement letters can help prevent these suits, or can at least provide strong defenses if you are sued.
The engagement letter need say nothing more than this: “Thank you for retaining me to represent you in the lawsuit entitled Smith v. Jones, now (fill in the blank). Although I would be happy to represent you in other matters should the need arise, this current representation will be limited to ….”
Moreover, many professionals represent clients on multiple matters. Although it may seem like a hassle at the time, preparing separate engagement letters for each new matter, and avoiding general representations such as “tax advice” or “general business matters” could be your salvation in a malpractice case.
Failing to Provide a Basis for Making a Cost/Benefit Analysis
“I didn’t know it would cost that much” are often the first words that a client utters before considering a malpractice suit. So often the professional fees outweigh the economic benefit that can reasonably be expected to be gained by the client. Is the risk of litigation worth the fees necessary? Do clients understand they could lose and be responsible for the opposing party’s fees? Are the costs of an audited statement warranted?
Professionals who get sued often simply do what the client requested without considering whether or not such action is in the client’s best interests or the most cost- effective way to achieve the client’s goals.You should act as a counselor, not merely a scrivener.
During the course of providing the client with a cost/benefit analysis for achieving certain goals, it is critical to document decisions and actions. Clients often decide that they cannot afford a course of action, such as due-diligence matters or different levels of accounting services. Under these circumstances, it is imperative that the client’s choice be clearly documented in a letter to the client. In a swearing match over whether the client made an informed decision about a particular course of action, the professional will lose.
Although documenting strategic decisions is important, not everything noted by the professional should be documented. In litigation, the “e” in “e-mail” refers to “evidence,” not “electronic.” Idle documented chatter, such as negative comments about the client (the dumbest rich guy I have ever met), the time pressures under which the work must be done (I don’t know how we are ever going to get this done in time), the limited likelihood of success (this argument will never fly) or billing issues (we are going to make a lot of money on this matter) can enflame a jury.
Manage your Clients’ Expectations
In order to appease the client, the professional will often tell the client what she wants to hear instead of what can actually be achieved. This is a recipe for disaster.
Rarely do clients view their issues with objectivity. They need their professional to explain concepts such as the adversarial system, the neutral fact finder, varying interpretations of the law and the tax code, competing policy concerns, inherent delays of litigation, realistic time frames for the delivery of services, controllable and uncontrollable expenses, and unpredictable outcomes.
Recognizing that a lawsuit for malpractice could really happen to you may be the most important lesson of all. Just imagine this scenari You get served with a lawsuit, you need to notify your insurance carrier, the local press writes about the suit, and I get to take away a day of your life for a deposition in which I ask beguiling questions with devastating consequences. That possibility should cause any thinking professional to heed the practice pointers set forth in this article.
Warren R. Trazenfeld focuses his civil trial practice on suing negligent attorneys and accountants for malpractice. He is a 1980 graduate of the University of Florida School of Law and has a science degree in management, with high distinction, from Babson College. He is rated “AV” by the Martindale-Hubbell Law Directory. He is board certified in legal malpractice by The American Board of Professional Liability Attorneys and is a member of the Million Dollar Advocates Forum. He is admitted to practice in the State of Florida.
South Florida Legal Guide Midyear 2012 Edition
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