Georgia Legal Malpractice Law

Georgia Legal Malpractice Law Written by: J. Randolph Evans, Esq. Shari L. Klevens, Esq.

Except as noted on pages 282-285 all content is the exclusive copyright of ALM Media Properties, LLC 2011 ALM Media Properties, LLC. All rights reserved. No part of this work may be reproduced or copied in any form or by any means graphic, electronic, or mechanical, including photocopying, recording, taping, or information and retrieval systems without prior written permission of the publisher. ISBN 978-1-57625-478-3 Printed in the United States of America Authors disclaimer: The materials contained herein represent the opinions and views of the authors and should not be construed to be the views or opinions of the law firm with whom such persons are in partnership with, associated with, or employed by. Nothing contained in this book shall be construed as the rendering of legal advice, either generally or in connection with any specific issue or case. Readers are responsible for obtaining legal advice from their own lawyer or other professional. This book and any forms and agreements contained herein are intended for educational and informational purposes only. ALM disclaimer: This publication is intended to provide lawyers with current and accurate information about local practices. The information in this book, however, may not be sufficient in dealing with a client s particular legal problem, and neither ALM Inc. nor its employees warrant or represent its suitability for such purpose. The information published in this book should not be relied upon as a substitute for independent research to original sources of authority. For additional information on any of the Daily Report books contact: ALM Media, LLC c/o Daily Report 190 Pryor Street, S.W., Atlanta, Ga. 30303 http://books.dailyreportonline.com Other titles from Daily Report Books: Library of Georgia Family Law Forms Library of Georgia Personal Injury Forms

Acknowledgment Georgia Legal Malpractice Law is the product of the collaborative efforts of many people over many years. If truly exhaustive, it would include law professors, mentors, and family members who have all contributed in varying degrees. Since it is the culmination of two earlier books, the proper beginning is with those who helped with The Practical Guide to Legal Malpractice Prevention and The Practical Guide to Purchasing Legal Malpractice Insurance. Larry Jones, director of the Georgia Institute of Continuing Legal Education, really is the person who started it all. From there, many others have helped. The partners, attorneys, and staff at Arnall Golden Gregory were instrumental in making both earlier books happen. This includes Jeffrey M. Smith, a recognized national scholar and author in the area of legal malpractice (now at Greenberg Traurig); Karen B. Bragman, a talented litigator and expert in her own right (still at Arnall Golden Gregory); and Charles T. Huddleston, a litigator and all-around good guy (now at Baker, Donelson, Bearman, Caldwell & Berkowitz). Of course, Anthony Morris (co-author of The Practical Guide to Purchasing Legal Malpractice Insurance with Author Randy Evans) was a major contributor to both earlier books. McKenna Long & Aldridge LLP has provided the same kind of support of this most current iteration of the books. No law firm likes to see valuable billable time diverted to non-billable books, but McKenna Long & Aldridge, and in particular, Tami Lyn Azorsky, chair of the litigation department of McKenna Long, has been completely supportive throughout the process. The most significant single contributor to the book is Alanna Clair, Esq., of McKenna Long & Aldridge. Her work has been tireless, thorough, and impressive. In many respects, she is a co-author to this current work. Other attorneys have also contributed to the book. They include McKenna, Long & Aldridge attorneys Michael Freed; Christopher Baker; Michelle Swiren; and Paul Hurdle; and former McKenna Acknowledgment iii

Long & Aldridge attorney Seth Kirby (now at Freeman Mathis & Gary, LLP). In addition, various professionals have helped including Octavia ( Del ) Smith; Vanessa Mussenden; Chelsea Titi; and Jill Cropper. Finally, the legal editor for the book was John Gelzer a talented young lawyer who made the book much better. There are many colleagues in the Bar who have read chapters, made helpful comments, and otherwise provided meaningful guidance. Many thanks to everyone who helped make this book a reality. J. Randolph Evans, Esq. Shari L. Klevens, Esq. iv Acknowledgment

Preface Georgia legal malpractice law has been a work in progress since Georgia s first reported legal malpractice decision in 1849. As the concepts of duty and causation evolved in other jurisdictions, Georgia courts worked hard to strike a careful balance in lawyer liability. Not surprisingly, the boundaries of lawyer liability have expanded and contracted over the past 162 years as appellate courts defined and redefined the law. In some respects, Georgia lawyers enjoy some of the most significant protections in the United States. In others, Georgia lawyers face some of the most significant risks. Some part of the schizophrenic nature of Georgia lawyer liability law stems from the mixed theories for recovery against lawyers under Georgia law. In Georgia, a legal malpractice claim can be a tort claim, a contract claim, or both. The blending of both contract and tort theories for the same recovery has created interesting challenges for the courts. For example, the trigger for the statute of limitations for a tort claim under Georgia law is the date that damage occurs. On the other hand, the trigger for a contract claims is the date of the breach. From a purely academic perspective, this predicament meant differing dates for the same claim. But, Georgia courts have consistently held that malpractice claims accrue on the same date regardless of whether the claim sounds in tort or contract. How? Georgia appellate courts solved the riddle by presuming damage on the date of the breach. But, this presumption created a different problem. If damage is presumed, can a claimant recover even if there is no actual damage? Georgia courts had also consistently held that a breach without damages (like speeding through a school zone without hitting anyone) was not actionable. When confronted with this issue, Georgia courts concluded that presumed damage (for purposes of the statute of limitations) is not actual damage for purposes of evaluating the causation requirement on a motion for summary judgment. Basically, not all damages are damages for purposes of legal malpractice law in Georgia. Preface v

There are other challenges unique to Georgia legal malpractice law. For example, the Georgia legislature adopted an affidavit requirement for the filing of a professional malpractice complaint. Since that time, the number of cases related to that requirement rival the number of malpractice cases resolved on the merits. Even without the nuances of Georgia law, legal malpractice law is complicated by things like the case within a case analysis. With the overlay of the unique characteristics of Georgia legal malpractice law, the Rule Against Perpetuities seems simple. Hence, the legal malpractice area was in need of a hornbook to address these complexities. In 1985, Larry Jones of the Georgia Institute of Continuing Legal Education ( ICLE ) suggested a compilation of existing legal malpractice law so that Georgia lawyers would at least have the cases and some analysis in one place. Author Randy Evans prepared such a compilation, and Dennis Cathey decided to include it as a regular topic at the Recent Developments in Georgia Law annual seminar. Year after year, every legal malpractice case was reviewed and included in updated materials for the Recent Developments seminar. Eventually, in 1993, the assimilated materials, along with some practice tips, became The Practical Guide to Legal Malpractice Prevention by J. Randolph Evans. The purpose of that book was quite simple to provide a resource for lawyers attempting to understand what the law was, and more importantly, how it applied to them. Eight editions later, by the time the book became available on Amazon.com, it also had become a revered and much-used reference for courts and lawyers in an assortment of lawyers law cases. In 1995, lawyers became increasingly interested in not just legal malpractice risks and law, but also legal malpractice insurance. This lead to The Practical Guide to Purchasing Legal Malpractice Insurance by J. Randolph Evans and Anthony Morris. Over time, there were five editions of that book. In recent years, it has become clear that Georgia lawyers need more. Effective malpractice prevention involves much more than just malpractice law and professional liability insurance. Indeed, lawyers have become interested in the risks of social media, effective computer based docket control, email management, and effective law firm structures and those were just the beginning. The result is this new book Georgia Legal Malpractice Law addressing both the fabric of Georgia legal malpractice law with a vi Preface

focus on the cases and issues confronting the new millennium lawyer, including effective claim prevention and loss avoidance. Hence, this book is divided into three parts: Part One: Legal Malpractice Law And Defenses Part Two: Legal Malpractice Prevention Part Three: Insurance and Loss Avoidance When Ed Bean, Editor in Chief of the Daily Report, heard about the book, he expressed an interest in making it a part of the ALM, Inc. collection of books for lawyers. In so doing, it could be a readily available book for all Georgia lawyers. This partnership to provide something helpful to Georgia lawyers made good sense. There was another more important part, however. From the first compilation to the Practical Guide to Legal Malpractice Prevention to Georgia Legal Malpractice Law, the materials have always been focused on being helpful, not on making money. Consistent with that guiding principle, all royalties from Georgia Legal Malpractice Law will go to a scholarship fund at the University of Georgia Law School to help 2nd and 3rd year students facing hardships based on family obligations. Of course, it should go without saying that this book is no substitute for legal advice by someone with expertise in the area of Georgia legal malpractice law. Instead, this is intended only as a summary of the law, not actual legal advice. Anyone needing legal advice should hire a lawyer even if she or he is a lawyer. Unfortunately, the threat of legal malpractice has become a part of the modern law practice. Yet, there are answers to many of the questions lawyers and courts have about Georgia legal malpractice law. This book is just a start hopefully a good start but a start nonetheless. From here, the complicated Georgia legal malpractice law should be just a little less intimidating and the path toward effective claim prevention and loss avoidance a little more clear. J. Randolph Evans, Esq. Shari L. Klevens, Esq. Preface vii

About the Authors J. Randolph Evans is the chair of the Financial Institutions practice at McKenna Long & Aldridge. He handles high profile, complex litigation matters in Georgia and federal courts for some of the largest companies in the world. He is a frequent lecturer and prolific author on the subjects of professional liability and ethics, government ethics and politics. He is the author of two books, The Practical Guide to Legal Malpractice Prevention (Eighth Ed. 2000), a predecessor to this wholly revised volume, and The Practical Guide to Purchasing Legal Malpractice Insurance (Third Ed. 1999). Randy negotiates speaking, broadcast and literary contracts including three New York Times best-sellers for political clients. He also advises clients on corporate governance issues. He is a magna cum laude graduate of the University of Georgia School of Law. Shari Klevens is a partner at the law firm of McKenna Long & Aldridge. She represents lawyers and law firms in the defense of legal malpractice claims and advises and counsels lawyers concerning claims for malpractice, ethical violations, and breaches of duty. Shari is the practice group leader for the firm s Law Firm Defense and Counseling Practice and is a frequent writer and lecturer on issues related to legal malpractice. Shari also litigates complex commercial cases in state and federal courts across the country. She is a graduate of the George Washington University Law School. viii About the Authors

Summary of Contents Part One: Legal Malpractice Law and Defenses Chapter 1: Legal Elements of a Claim... 3 Chapter 2: Additional Requirements for a Malpractice Claim... 44 Chapter 3: Liability for or in Conjunction with the Conduct of Others... 94 Chapter 4: Defenses to Legal Malpractice Claims...113 Part Two: Legal Malpractice Prevention Chapter 5: Structuring a Law Firm Under Georgia Law...141 Chapter 6: Internal Audit...148 Chapter 7: Identifying and Resolving Conflicts of Interest...169 Chapter 8: Email and Attorney Marketing: New Issues in the Practice of Law in the 21st Century...192 Chapter 9: Jury Selection and Persuasion: Ethics for the Trial Practitioner...207 Chapter 10: Sanctions...228 Part Three: Insurance and Loss Avoidance Chapter 11: Purchasing Legal Malpractice Insurance...241 Chapter 12: The Tripartite Relationship...264 Chapter 13: Handing a Claim: Four Steps for Attorneys who Discover an Error or Receive a Legal Malpractice Claim...273 APPENDIX: Internal Audit Forms...281 Table of Cases...287 Index...301 Summary of Contents ix

Table of Contents Acknowledgment... iii Preface... v ABOUT THE AUTHORS... viii SUMMARY OF CONTENTS... ix Part One: Legal Malpractice Law and Defenses Chapter 1: Legal Elements of a Claim... 3 I. DUTY... 4 A. Who is the Client?... 4 1. Express Attorney-Client Relationship... 5 2. Implied Attorney-Client Relationship... 5 3. Duty to Non-Clients... 9 a. Third Party Beneficiaries... 10 b. Foreseeable Reliance... 11 c. Voluntary Agency... 13 d. Use of Disclaimers... 15 II. BREACH... 17 A. Standard of Care... 17 B. Factors Establishing Breach... 18 1. Failing to Properly Advise Clients... 18 2. Adverse Results... 19 3. Undertaking to Accomplish a Specific Result... 20 4. Ethical Rules... 21 5. Use of Expert Testimony... 22 III. PROXIMATE CAUSE... 23 A. Client Would Have Prevailed, Absent the Alleged Malpractice... 23 B. Collectibility of Underlying Judgment... 27 C. Viability of Underlying Action... 28 D. Negligence in Appeals... 33 E. Criminal Representations... 35 IV. DAMAGES... 36 A. Damages Cannot be Speculative... 38 B. Expenses of Litigation... 38 C. Loss of Settlement Position... 39 D. Punitive Damages... 39 1. Grounds for Punitive Damages in Malpractice Actions... 39 x Table of Contents

2. Punitive Damages From the Underlying Action... 43 Chapter 2: Additional Requirements for a Malpractice Claim... 44 I. AFFIDAVIT REQUIREMENT UNDER O.C.G.A. 9-11-9.1... 44 A. When is an Affidavit Necessary?... 45 1. What is Professional Negligence?... 46 2. Other Claims Against Attorneys and Law Firms... 51 a. Intentional Conduct... 51 b. Fraud... 52 c. Contract Actions... 52 d. Multiple Claims... 53 3. Type of Plaintiff... 53 a. Professional as Plaintiff... 53 b. Pro Se Plaintiff... 54 4. Counterclaims and Third Party Claims... 54 5. Clear and Palpable Negligence... 54 B. What Should the Affidavit Say?... 55 C. What Makes a Qualified Expert?... 57 D. Timing and Authenticity of Affidavit... 59 1. Timing of the Affidavit and the Statute of Limitations... 59 2. Curing Deficiency or Amending Complaint... 60 3. Oath and Authenticity... 62 E. Effect of a Motion to Dismiss... 64 F. Waiver... 64 G. 9.1 Affidavits as a Basis for an Independent Malpractice Action... 66 II. OTHER uses of expert evidence in malpractice cases... 67 A. Expert Evidence at Summary Judgment... 67 B. Other Requirements for Expert Testimony... 69 III. statutes of limitations... 69 A. Statute of Limitations for Actions Sounding in Contract... 70 1. What Constitutes a Written or Oral Contract Between an Attorney and Client?... 70 2. The Impact of Newell Recycling... 72 B. Statute of Limitations for Actions Sounding in Tort... 74 1. Malpractice Actions That Allege Tortious Injury... 74 2. Pure Tort Actions Against Attorneys... 76 C. When Does a Malpractice Action Accrue?... 77 1. Failure to Correct an Act of Malpractice... 80 2. The Springing Statute of Limitations... 80 D. Tolling the Statute of Limitations... 81 Table of Contents xi

1. Fraud... 82 a. Acts of Fraud Must Be Distinct From Acts of Malpractice... 82 b. Significance of the Attorney-Client Relationship... 84 c. Discovery of Fraud... 86 2. Client s Mental Incapacity... 86 3. Tolling Agreements... 87 IV. waiver of privilege... 87 V. ATTACKING the underlying claim not necessary as prerequisite to malpractice action... 88 VI. MALPRACTICE cases based on attorney s settlement authority... 89 VII. fiduciary duty... 91 Chapter 3: Liability for or in Conjunction With the Conduct of Others... 94 I. agency law generally... 94 II. vicarious liability in law firm partnerships... 95 A. Liability of Individual Partners for Her or His Own Acts... 95 B. Liability of Partnership for Acts of Individual Partners... 96 C. Liability of Individual Partners (and Exposure of Their Personal Assets) for Acts of the Partnership or Other Individual Partners... 97 1. Liability of General Partners... 97 2. Liability of Limited Partners and Limited Liability Partners... 98 III. VICARIOUS liability in attorney-client relationship... 99 A. Client Liability for Actions of Attorney... 99 B. Attorney Liability for the Actions of a Client...101 IV. ATTORNEY liability for assisting clients with wrongful conduct...102 A. Liability for Abusive Litigation...102 B. Tortious Interference...106 C. Conspiracy...106 D. Negligence...107 V. VICARIOUS liability in relationships between insurance representatives and the attorneys that they hire...108 A. Liability of Attorney for Actions of Insurance Representative/ Adjuster...109 B. Liability of Insurance Company for Actions of Attorney Representative...109 xii Table of Contents

Chapter 4: Defenses to Legal Malpractice Claims...113 I. general defenses...113 A. Duty...113 B. Breach...115 1. Failure to Prove Breach...116 2. Judgmental Immunity...116 3. Settled Law...119 4. O.C.G.A. 9-11-9.1 Affidavit...121 C. Causation...121 1. Events That Break the Causal Chain Between Breach and Damages...121 a. The Client s Duty To Read...122 b. Withdrawal or Substitution of Counsel As a Basis for a Malpractice Claim...125 2. Contributory Negligence...127 D. Damages...128 II. affirmative defenses...129 A. Collateral Estoppel, Res Judicata, and Judicial Estoppel...129 1. Collateral Estoppel...131 2. Res Judicata...133 3. Judicial Estoppel...134 B. Release...135 C. Waiver...137 D. Statute of Limitations...138 Part Two: Legal Malpractice Prevention Chapter 5: Structuring a Law Firm Under Georgia Law...141 I. General partnerships...141 II. professional associations...142 III. limited liability partnerships...143 A. Executing a Written Partnership Agreement That Complies With Georgia Statute...144 B. Defining a Partnership as a Limited Liability Partnership...144 C. Ensuring That the Individual Assets Belonging to Each Partner are Protected...145 IV. additional issues common to all structures...146 A. Identify What Happens When a Partner or Equity Holder Leaves the Firm...146 B. Periodically Re-Review the Partnership Agreement or Articles of Incorporation...147 Table of Contents xiii

Chapter 6: Internal Audit...148 I. pre-file opening...148 A. Identify the Client...149 B. Conflicts of Interest...149 C. The Attorney s Expertise...150 D. Fee Arrangement...151 E. Anticipating Withdrawal...153 F. Creating an Attorney-Client Relationship...155 II. file opening...156 A. Engagement Letters and Fee Contracts...157 1. What Should be Included in the Engagement Letter or Fee Contract?...157 2. Should Attorneys Use an Engagement Letter or a Retainer Letter?...157 B. File Opening Memos...159 III. representation of the client...159 A. The Obligations of a Georgia Attorney...159 B. Areas in Which Attorneys are Particularly Susceptible to Legal Malpractice Claims...160 C. Calendar Control Systems...163 D. Communication...164 E. Financial Controls...166 F. Billing Procedures...167 IV. file closing...168 Chapter 7: Identifying & Resolving Conflicts of Interest...169 I. overview of conflicts of interest...169 II. the intersection of ethics and malpractice...169 III. multiple representation...170 A. Multiple Representation in General...171 B. Application of Rule 1.7 in Georgia...171 1. Will the Representation Adversely Affect Another Client?...172 2. Is the Conflict Waivable?...173 3. Has the Attorney Fully Advised the Clients of the Risks Related to the Conflict?...173 4. Has the Client Adequately Consented to the Representation?...174 C. Disqualification Due to Multiple Representation...175 D. Imputed Disqualification...176 IV. SUCCESSIVE representation: the former client rule...178 V. intermediary representation...183 VI. prohibited transactions...185 xiv Table of Contents

VII. CONFLICTS issues unique to specific representations...187 A. Issues Unique to Corporate Representations...187 B. Issues Unique to Criminal Representations...190 C. Issues Unique to Internal Investigations...190 Chapter 8: Email & Attorney Marketing: New Issues in the Practice of Law in the 21 st Century...192 I. email and malpractice...192 A. Using Email as a Calendar Reminder System...193 B. Lack of a Systematic Approach to Handling Emails...194 1. How Attorneys Can Determine if an Email Problem Exists...195 a. Subject Surfing...195 b. Attachment Deferral...195 c. Email Skimming...196 d. Email Billing...196 2. Addressing an Email Problem...196 a. Electronic Cut-Off for Old Emails...197 b. Electronic Cut-Off for Too Many Emails...197 C. Correcting an Email Problem...198 1. The Risk That Emails Will be Forwarded to Unintended Recipients...198 2. The Risk of an Unintended Recipient...199 3. One Solution: Email Disclaimers...200 II. social networking and malpractice...202 A. Risk of Implied Attorney-Client Relationship...203 B. Risk of Unauthorized Practice of Law...204 C. Solution...205 Chapter 9: Jury Selection and Persuasion: Ethics for the Trial Practitioner...207 I. The rules...207 A. Trial Conduct...207 B. Disclosing Adverse Authority & the Duty of Candor...208 C. Degrading the Court...209 D. Perjury by the Client...210 E. Lawyer as Witness...212 F. Contact with Witnesses...213 G. Communications with Jurors and Officials...215 1. Jurors...216 2. Officials...217 H. Trial Publicity...218 Table of Contents xv

II. JUDICIAL decisions governing attorney trial conduct...221 A. Opening Statement...221 B. Questions From the Jury...223 C. Closing Statement...225 D. Conflicts Between the Court and Trial Counsel...226 Chapter 10: Sanctions...228 I. discovery sanctions...228 II. attorneys fees and expenses...230 A. Mandatory Liability...230 B. Discretionary Liability...232 C. Actions Under O.C.G.A. 13-6-11...233 D. Defenses...234 III. abusive litigation...234 IV. contempt...235 A. Courts Inherent Power...235 B. Contempt...236 Part Three: Insurance and Loss Avoidance Chapter 11: Purchasing Legal Malpractice Insurance...241 I. FACTORS to consider when choosing an insurance provider...242 A. Factors to Analyze in Choosing a Carrier...242 B. Look at the Insurance Industry Rating of the Carrier...243 II. coverage provisions...243 A. The Insuring Agreement...243 B. Scope of Coverage, Generally...244 C. Prior Acts Coverage...245 D. Prior Law Firm Claims Coverage...245 E. Personal Injury Liability...246 F. Innocent Insured Coverage...246 G. Retroactive Date...246 H. Inception Date...247 I. Expiration Date...247 J. Benefitting From Coverage...248 III. who is insured?...248 A. Definition of Insured and Predecessor Firms...248 B. Changes or Additions to Named Insured...249 IV. limits and deductibles...249 A. Limits...249 B. Deductible and Self-Insured Retentions...250 xvi Table of Contents

C. Defense of Disciplinary Proceedings...251 D. Defendant s Reimbursement...251 E. Defense Costs and Claim Expenses Within Policy Limits...251 F. What are Endorsements?...252 V. exclusions...253 A. Bodily Injury/Property Damage Exclusion...253 B. Securities Exclusion...253 C. Financial Institution Exclusion...254 D. Workers Compensation Claims Exclusion...254 E. Contractual Exclusion...254 F. Dishonest, Fraudulent, Malicious or Criminal Acts Exclusion...254 G. Personal Profit Exclusion...255 H. Insured vs. Insured Exclusion...255 I. Business Enterprise Other Than Named Insured Exclusion...255 J. Business Enterprise Owned by Attorney or Spouse Exclusion...255 VI. extended reporting periods...256 A. Claims-Made Policies...256 B. Extended Reporting Periods (ERP) Available...256 C. Mini-Tail Availability...256 VII. defense and settlement...257 A. Duty to Defend...257 B. Insured s Consent to Settlement...257 C. Insurer s Consent to Settlement...257 D. Arbitration of Claims...257 E. Subrogation...258 viii. terms and conditions...258 A. Notice...258 B. Territory...258 C. Other Insurance...259 D. Assignment of the Policy to a Third Party...259 E. Cancellation...289 F. Legal Action Limitation...260 ix. EXPOSURE or non-coverage as a result of the insurance application process...260 A. Rescission of Policy for Misrepresentation in Application...260 B. Policy Exclusions for Acts Arising Out Of Excluded Claims...262 Chapter 12: The Tripartite Relationship...264 I. rules of professional conduct...265 II. who is the client?...266 Table of Contents xvii

III. COMPLICATIONS arising from the retention of panel or cumis counsel...267 IV. DOES a reservation of rights letter create a conflict?...268 V. CONFLICTS arising from the attorney-client privilege...269 VI. WHO owns the claim against the attorney in the tripartite relationship: the insured or the insurer?...270 A. Georgia Law is Unsettled as to Whether an Insurer has Standing to Sue Defense Counsel for Legal Malpractice...270 B. If an Insurer Does Have Standing to Sue Defense Counsel Directly for Malpractice, Can Both the Insured and the Insurer Bring a Claim?...271 Chapter 13: Handing a Claim: Four Steps for Attorneys Who Discover an Error or Receive a Legal Malpractice Claim...273 I. NOTIFY the client of the error, without admitting liability...273 A. Admitting Liability May Give Support to an Otherwise Weak Malpractice Claim...274 B. Admitting Liability May Lead to a Lack of Insurance Coverage...275 C. Denying Responsibility When Claims are Asserted May Lead to Liability...276 II. IDENTIFY legal malpractice carrier to the client...276 III. ADVISE the client to obtain independent counsel...277 A. Continuing the Representation of the Original Matter...277 B. Advising the Client to Obtain Separate Counsel While Remaining Involved as Co-Counsel...278 C. Withdrawing From the Matter Entirely...278 IV. NOTIFY malpractice insurance carrier without delay...278 APPENDIX...281 Table of Cases...287 Index...301 xviii Table of Contents

PART ONE: Legal Malpractice Law and Defenses

Chapter 1 Legal Elements of a Claim Legal malpractice law is booming. Every year, more Georgia lawyers face malpractice claims or grievances filed with the State Bar. Indeed, in 2010 in Georgia, the Office of General Counsel received 2,059 grievance forms for screening and further consideration. 1 Of those, 284 contained allegations which, if true, would constitute violations of Georgia s Rules of Professional Conduct. 2 Meanwhile, it is becoming more expensive for attorneys to defend against malpractice claims. Indeed, claims resulting in indemnity payments in excess of $2 million have increased in recent years to an unprecedented degree. 3 Thus, it is critical that practitioners develop an understanding of the basic elements of a legal malpractice cause of action. Although a legal malpractice action may sound in tort or contract, the requisite elements of this claim closely track the elements of a simple negligence claim. Specifically, in Tante v. Herring, the Georgia Supreme Court reiterated the following three elements of an action for a legal malpractice claim: (1) the employment of an attorney; (2) failure of the attorney to exercise ordinary care, skill and diligence; and (3) damages proximately caused by that failure. 4 The first element corresponds with the existence of a duty of care to the plaintiff and 1. 2011 Report of the Office of the General Counsel, State Bar of Georgia Board of Governors, available at: www. gabar.org/public/pdf/ogc/ogc_report_10_11.pdf. 2. 3. ABA Standing Comm. on Lawyers Prof l Liability, Profile of Legal Malpractice Claims 2004-2007 (Sept. 2008). 4. 453 S.E.2d 686, 687 (Ga. 1994). See also Fortson v. Hotard, 684 S.E.2d 18, 20 (Ga. Ct. App. 2009); Gilbert v. Montlick & Assocs., P.C., 546 S.E.2d 895, 901 (Ga. Ct. App. 2001); Chaney v. Blackstone, 547 S.E.2d 340, 341 (Ga. Ct. App. 2001); Tunsil v. Jackson, 546 S.E.2d 875, 877 (Ga. Ct. App. 2001); Allen Decorating, Inc. v. Oxendine, 483 S.E.2d 298, 301 (Ga. Ct. App. 1997); Perry v. Ossick, 467 S.E.2d 604, 606-07 (Ga. Ct. App. 1996); Huntington v. Fishman, 441 S.E.2d 444, 446 (Ga. Ct. App. 1994); Guillebeau v. Jenkins, 355 S.E.2d 453, 456 (Ga. Ct. App. 1987); Rogers v. Norvell, 330 S.E.2d 392, 396 (Ga. Ct. App. 1985). Chapter 1: Legal Elements of a Claim 3

PART ONE: Legal Malpractice Law and Defenses the second element requires a breach of that duty. The third element comprises the elements of proximate cause and damages. I. DUTY An attorney is not necessarily liable for every harm her or his negligence causes to a potential plaintiff. Instead, an attorney s liability is limited to the class of people to whom the attorney owes a duty to exercise ordinary care, skill, and diligence in the performance of professional services. Typically, an attorney owes a duty only to her or his clients. Indeed, the law is clear that to make out a case of legal malpractice, a lawyer-client relationship must exist between the plaintiff and the defendant attorney. 5 This proof is essential in establishing the element of duty that is necessary to every lawsuit based upon a theory of negligence. 6 However, as discussed herein, there are additional circumstances that give rise to an implied attorney-client relationship or which support a duty to a non-client third party. A. Who is the Client? Given the contract-based origins of legal malpractice, it seems axiomatic that an attorney owes to a client the duty to competently perform the services which the attorney bargained to perform on the client s behalf. However, as the case law in Georgia demonstrates, to say that an attorney owes a duty to clients raises the question of who qualifies as a client. In Georgia, there are essentially three ways in which a plaintiff can demonstrate the existence of an attorney-client relationship that would sustain a legal malpractice claim. First, if an at tor ney acknowledges having been retained by or serving as counsel for the plaintiff, then it is indisputable that an attorney-client relationship exists. This is an express attorney-client relationship. Such an acknowledgment can be evidenced by the existence of an engagement letter, a fee con tract, or other correspondence in which the attorney acknowledges that he or she represents or that he or she is counsel to the plaintiff. Second, if the attorney acts in a way that causes a plaintiff to reasonably believe that the attorney is repre senting the interests of the plaintiff, then the plaintiff can prove an implied attorney-client rela tionship sufficient to sustain a legal malpractice action. 5. Crane v. Albertelli, 592 S.E.2d 684, 685 (Ga. Ct. App. 2003). 6. Guillebeau v. Jenkins, 355 S.E.2d 453, 457 (Ga. Ct. App. 1987) (internal citations omitted). 4 Chapter 1: Legal Elements of a Claim

DUTY Third, Georgia courts have found that professionals owe a duty to those persons whom the professional is actually aware will rely upon the professional in the trans action, even non-clients. 7 1. Express Attorney-Client Relationship The existence of an attorney-client relationship is the threshold question in a legal malpractice case. 8 An express relationship, however, is the easiest to identify and is rarely contested or litigated. 9 In such a representation, the attorney-client relationship is generally expressed by written contract. 10 An express attorney-client relationship is personal and not vicarious. 11 Additionally, an attorney in an express privileged relationship with a client may not relieve by contract the duty to exercise reasonable care; indeed, any attempt to do so is void as against public policy. 12 2. Implied Attorney-Client Relationship Though an attorney-client relationship generally is a matter of express contract, it may be implied from the conduct of the parties. The employment of an attorney is sufficiently established when it is shown that the advice or assistance of the attorney is sought and received in matters pertinent to his profession. 13 Following the general rule that contracts are formed according to the objective manifestation of mutual intent, an attorney-client relationship cannot be created unilaterally by the client. 14 However, an attorney-client relationship 7. Badische Corp. v. Caylor, 356 S.E.2d 198 (Ga. 1987). 8. Mays v. Askin, 585 S.E.2d 735 (Ga. Ct. App. 2003). 9. Indeed, the existence of an attorney-client relationship is infrequently litigated because the parties typically recognize it when they have agreed to an express relationship. One of the only contexts in which the express relationship is litigated, therefore, is in determining who the real party in interest is after a bankruptcy. See, e.g., Thornton v. Mankovitch, 626 S.E.2d 189 (Ga. Ct. App. 2006) (when a bankruptcy trustee settles an estate during an involuntary Chapter 7 bankruptcy proceeding, the corporation becomes defunct and thus lacks standing to sue, leaving the bankruptcy trustee as the real party in interest); Gingold v. Allen, 613 S.E.2d 173 (Ga. Ct. App. 2005) (determining that when a cause of action for legal malpractice arises prior to the litigation of a bankruptcy case, the bankruptcy trustee is the real party in interest to prosecute the case because the interest in the property belongs to the bankruptcy estate). 10. Huddleston v. State, 376 S.E.2d 683 (Ga. 1989). 11. Crane v. Albertelli, 592 S.E.2d 684, 685 (Ga. Ct. App. 2003). 12. Little v. Middleton, 401 S.E.2d 751, 754 (Ga. Ct. App. 1991). 13. Cleveland Campers, Inc. v. R. Thad McCormack, P.C., 635 S.E.2d 274, 276 (Ga. Ct. App. 2006) (internal citations omitted). 14. Guillebeau v. Jenkins, 355 S.E.2d 453, 458 (Ga. Ct. App. 1987). Chapter 1: Legal Elements of a Claim 5

PART ONE: Legal Malpractice Law and Defenses will be implied where the client has a reasonable belief, induced by the attorney s representations or conduct, that the client was being represented by the attorney. 15 Thus, in determining whether an attorney-client relationship has been created by implication, there are a number of factors to consider. While the payment of a fee from client to attorney is a factor to be considered in determining whether an implied attorney-client relationship exists, it is not dispositive. 16 Other factors include the request for and receipt of legal advice, the sophistication of the client, any history of representation between the parties, and the involvement of another attorney advising the alleged client (such as in a closing). Because a written contract is often evidence of an express attorneyclient relationship, the existence of any quasi-contractual documents between attorney and client may weigh in favor of an implied attorney-client relationship. Indeed, in Peters v. Hyatt Legal Services, the plaintiff-husband, Mr. Peters, consulted with an attorney at Hyatt regarding a divorce agreement proposed by his wife. 17 Specifically, the plaintiff discussed with the attorneys the terms on which he would agree to a divorce and signed a document entitled fee statement. The fee statement provided that when half the total fees were paid, Hyatt would complete preparation of the pleadings. The fee statement further stated that your signature allows us to represent you after payment is made. 18 The plaintiff paid half of the fee and was subsequently called out of the country on military duty. While the plaintiff was out of the country, his wife hired the same Hyatt attorney who then filed for, and obtained, a divorce on the wife s behalf. Upon discovering this, plaintiff brought an action for legal malpractice and moved for partial summary judgment on the issue of liability. The Court of Appeals found that there was an issue of fact as to whether Hyatt represented the plaintiff. Specifically, the court found the fee statement unclear in whether the representation began at payment of half of the fee or all of the fee. 19 A chief factor in determining whether an attorney-client relationship is implied is whether the client requested and then received legal 15. 16. at 457. 17. 440 S.E.2d 222, 223-24 (Ga. Ct. App. 1993). 18. at 226. 19. at 226-27. 6 Chapter 1: Legal Elements of a Claim

DUTY advice. 20 In Huddleston v. State, a criminal defendant argued that the prosecutor should have been disqualified based upon the defendant s prior consultation with the prosecutor while he was in private practice. 21 Specifically, the defendant contacted the prosecutor regarding her potential divorce from the victim, but received only general information regarding the nature of contested and uncontested divorces and the fee that would be charged; there was no specific discussion of the facts. 22 The trial court refused to disqualify the prosecutor and the Georgia Supreme Court affirmed, finding that no attorney-client relationship was formed between the prosecutor and the defendant. In so holding, the court expressly stated that the basic question in regard to the formation of the attorney-client relationship is whether it has been sufficiently established that advice or assistance of the attorney is both sought and received in matters pertinent to his profession. 23 In Richard v. David, the Court of Appeals applied this standard in the context of a closing. The buyer of a house brought a legal malpractice action against the closing attorney alleging that the attorney was negligent in failing to warn him of the significance of certain findings in the termite report. 24 The trial court granted summary judgment to the attorney, finding that no attorney-client relationship existed despite the fact that the buyer picked the attorney, made the initial contact with the attorney, and paid the attorney s fee as part of the closing costs. The Court of Appeals affirmed, citing the fact that the buyer never sought the attorney s legal advice or told the attorney that such advice would be relied on. Indeed, no legal advice was offered. 25 In so holding, the court expressly found that the mere fact that the buyer selected and paid the attorney was not sufficient to raise a fact question regarding the existence of an attorney-client relationship. 26 20. See, e.g., Oswell v. Nixon, 620 S.E.2d 419, 421 (Ga. Ct. App. 2005) (declining to find an implied attorney-client relationship because plaintiff never sought legal advice from any of the attorney defendants and none of the attorney defendants ever offered any legal advice). 21. 376 S.E.2d 683, 684 (Ga. 1989). 22. 23. See also In re Raynard, 171 B.R. 699, 702 (Bankr. N.D. Ga. 1994). 24. 442 S.E.2d 459 (Ga. Ct. App. 1994). 25. See also Legacy Homes, Inc. v. Cole, 421 S.E.2d 127, 128-29 (Ga. Ct. App. 1992) (where attorney conducted closing in which buyer failed to present funds to builder, there was no attorney-client relationship between attorney and builder because builder never met or spoke to the attorney prior to closing, the builder never requested any legal advice, and the attorney never offered any). 26. See also Carmichael v. Barham, Bennett, Miller & Stone, 370 S.E.2d 639, 640 (Ga. Ct. App. 1988); Guillebeau v. Jenkins, 355 S.E.2d 453, 457 (Ga. Ct. App. 1987) ( the payment of a fee does not necessarily demonstrate the existence of the [attorney-client] relationship ). Chapter 1: Legal Elements of a Claim 7

PART ONE: Legal Malpractice Law and Defenses A closing presents a unique and complicated setting for determining the parties to an attorney client-relationship. Typically, at a loan or real estate closing, the closing attorney acts only as a representative for the clients who retained the attorney. 27 Indeed: where there is a lender and a borrower and the closing attorney was retained by the lender, the closing attorney represents only the lender. Even the selection of the attorney and payment of the attorney s fees under the terms of the sales contract does not create an attorney-client relationship when the attorney represents the lender, because professional standards regarding conflict of interest prohibit such conflicting multiple representations. 28 This standard regarding the creation of an implied attorney-client relationship has also been applied in the litigation context. In Horn v. Smith & Meroney, P.C., the defendant-attorney represented the decedent s wife in a wrongful death action arising out of an airplane crash. 29 After the wrongful death claim was settled, the decedent s parents brought a malpractice action. The trial court granted the attorney s motion for summary judgment and the Court of Appeals affirmed, finding that the parents never sought any legal advice from the attorney, never informed the attorney that they were relying on him for legal advice, and in fact were represented by their own counsel for most of the period at issue. 30 Thus, the decedent s parents did not share an attorney-client relationship with the attorney that would permit them to bring a malpractice claim. In Calhoun v. Tapley, however, the Court of Appeals found that a genuine issue of material fact existed as to whether the parties shared an implied attorney-client relationship. 31 In Calhoun, the plaintiff purchased a residence by taking out a mortgage and subsequently deeded the residence to a third party in a wraparound transaction where the third party was to make the mortgage payments. When the residence was destroyed by fire, the third party hired the defendantattorney to assist in making the insurance claim. When the attorney 27. Legacy Homes, Inc. v. Cole, 421 S.E.2d 127 (Ga. Ct. App. 1992). 28. Garrett v. Fleet Fin., Inc. of Ga., 556 S.E.2d 140, 145 (Ga. Ct. App. 2001) (internal citations omitted). 29. 390 S.E.2d 272 (Ga. Ct. App. 1990). 30. at 273. 31. 395 S.E.2d 848, 850 (Ga. Ct. App. 1990). 8 Chapter 1: Legal Elements of a Claim

DUTY failed to timely make that claim, the original buyer sued the attorney for malpractice. The trial court granted the attorney s motion for summary judgment concluding that no attorney-client relationship existed, but the Court of Appeals reversed. In so holding, the court relied on testimony that the attorney openly discussed the case with the plaintiff without regard to the other client s confidentiality and failed to inform the insurance company s representatives that the plaintiff was not a client when they requested permission to contact her directly. The court found that this evidence raised a genuine issue of material fact. 32 3. Duty to Non-Clients Even in the ab sence of an express or implied contract, certain non-clients will have stand ing to sue professionals for negligence. 33 In Badische Corp. v. Caylor, 34 the Supreme Court of Georgia held that a professional could be liable to non-clients where those non-clients: rely upon the information in circumstances in which the maker was manifestly aware of the use to which the information was to be put and in tended that it be so used. This liability is limited to a foreseeable person or limited class of persons for whom the information was intended, either directly or indirectly. 35 The Georgia Court of Appeals has also outlined some situations in which an attorney may owe a duty to a third party. For example, the Georgia Court of Appeals has outlined some of the situations at Georgia law in which an attorney may owe a duty to a third party 36 : The Court of Appeals stated as follows: For example, a lawyer representing the guardian ad litem of a minor owes a duty to the minor also, who is the real party with the legal interest warranting representation and the intended beneficiary of the 32. 33. See Badische Corp. v. Caylor, 356 S.E.2d 198 (Ga. 1987); Robert & Co. Assoc. v. Rhodes-Haverty P ship, 300 S.E.2d 503 (Ga. 1983) (allowing partnership that purchased building to bring negligence action against engineering firm that prepared inspection report, where engineer who prepared report was aware that prospective purchasers could rely on report); Travelers Indem. Co. v. A.M. Pullen & Co., 289 S.E.2d 792 (Ga. Ct. App. 1982). 34. 356 S.E.2d 198 (Ga. 1987). 35. at 200 (internal citations omitted) (emphasis in original). 36. Rhone v. Bolden, 608 S.E.2d 22, 29 (Ga. Ct. App. 2004). Chapter 1: Legal Elements of a Claim 9

PART ONE: Legal Malpractice Law and Defenses relationship between her guardian and the guardian s attorney. Additionally, a real property buyer who relied on an attorney s title certification of the property purchased has a cause of action against the attorney if the seller had no interest in the property. Finally, in a wrongful death case, the surviving spouse acts as the children s representative and owes them the duty to act prudently in asserting, prosecuting, and settling the claims and to act in the utmost good faith. 37 These situations and others can be grouped into three categories, as discussed herein. Indeed, attorneys in Georgia may owe a duty to a third party where that party is a third-party beneficiary to an existing attorney-client relationship, where an attorney could foresee that a third party would rely on information shared by the attorney, and where the attorney voluntarily acts pursuant to a third party s legal interest. a. Third Party Beneficiaries In general, a plaintiff cannot recover in a legal malpractice action unless there is an attorney-client relationship with attorney defendant. However, in certain circumstances, an attorney may owe a duty to a party who is not a client but who is a third-party beneficiary to an agreement between the attorney and her or his client. 38 For that exception to apply, it must clearly appear from the agreement between the attorney and client that it was intended for the benefit of that third party. 39 The mere fact that the third party would benefit from performance of the agreement is not alone sufficient. 40 In Young v. Williams, attorney Young represented decedent Mr. Williams in drafting his will. 41 After Mr. Williams died and the will failed to pass the marital residence on to Williams wife, as Mr. Williams had requested, Williams wife filed a malpractice claim against Young. Despite the fact that Young and Mr. Williams did not have a written contract governing the representation, Young admitted that Mr. Williams intended for the marital property to pass on to 37. at 29-30 (internal citations omitted). 38. Young v. Williams, 645 S.E.2d 624, 626 (Ga. Ct. App. 2007). 39. 40. at 625. See also Legacy Homes, Inc. v. Cole, 421 S.E.2d 127 (Ga. Ct. App. 1992). 41. Young, 645 S.E.2d at 625. 10 Chapter 1: Legal Elements of a Claim

DUTY Mrs. Williams and that Young had failed to include an appropriate provision in the will for that purpose. 42 However, Young opposed the malpractice action on the grounds that there was no privity of contract between him and Mrs. Williams. The Court of Appeals disagreed, noting that [i]t is clear from the record that James Williams hired Young to draft a will so that certain people [including Mrs. Williams] would inherit his property upon his death. 43 As such, summary judgment was appropriate in Mrs. Williams favor as a third party beneficiary. 44 b. Foreseeable Reliance The doctrine of foreseeable reliance permits certain non-clients to maintain an action against a professional for misinformation or misrepresentations negligently made. If the professional willfully and intentionally made the misrepresentations to induce the non-client to rely on the misrepresentations to his detriment, then the non-client could assert the independent tort of fraud, regardless of the existence of any attorney-client relationship or obligations. However, if a professional is aware that his representations will be used to induce a non-client s reliance, the attorney s duty to use skill and diligence in making those representations extends to certain non-clients who would foreseeably rely on the representations. Those non-clients would then be able to bring a legal malpractice claim against the professional. Importantly, as the Georgia Supreme Court has made clear, a professional s duty does not extend to all non-clients just because their reliance is foreseeable. 45 Instead, the court has adopted the middle ground between an unlimited foreseeability rule and the narrow privity rule. 46 Specifically, the duty to a non-client exists under the doctrine of foreseeable reliance only when the following elements are met: (1) the professional was manifestly aware of the use to which the information was to be put and intended that it be so used; (2) the non-client recipient was a foreseeable person or a member of a limited class of persons 42. 43. at 625-26. 44. Compare to Rhone v. Bolden, 608 S.E.2d 22, 30 (Ga. Ct. App. 2004) (holding that a lawyer hired by an estate representative did not owe duty to decedent s two parents, where parents interests were at odds with estate; thus, the heirs of the estate may not bring a malpractice claim against the lawyer because the heirs are not automatically thirdparty beneficiaries of the attorney-client relationship. ). 45. Badische Corp. v. Caylor, 356 S.E.2d 198, 200 (Ga. 1987). 46. at 200 n.2. Chapter 1: Legal Elements of a Claim 11