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Avoiding Communications Claims: Corporate Law

November 28, 2014 By: TimLemieux Category: Communication errors, Corporate

No matter what the area of practice, the number one source of claims at LAWPRO is a breakdown in communication between the lawyer and client.

Between 2008 and 2013, nearly 4,600 communications claims – an average of 762 a year – have been reported to LAWPRO. The total cost of these claims to date is about $158 million – and likely to rise as more recent years’ claims are resolved.

In the Fall 2011 issue of LAWPRO Magazine we asked LAWPRO claims counsel with expertise in the various areas of law to provide insights into the communications mistakes they see in their daily handling of claims files. We hope this approach makes it easier for you to implement risk management steps in your own practice.

Anna Reggio, claims counsel (PPL), says corporate communication claims often arise from confusion over the breadth of the insured’s retainer and who is representing the interest of whom in an environment of fast paced, and sometimes large-dollar, transactions where the niceties of communicating may get overlooked.

Know who your client is – and communicate this clearly

A question which frequently arises is the question of who the lawyer is acting for and whether it is the corporation or one or more of the shareholders. The interest of the corporate entity may be different from that of one or more of the shareholders and therefore, the corporate entity should be separately represented.

Certainly, in any given proposed transaction or agreement, each shareholder’s interest may vary from that of one or more of the other shareholders. Therefore, in fact, the corporate entity and each of the shareholders should really be represented by a separate lawyer.

Often, in closely held corporations, the lawyer will meet with all of the directors, officers and shareholders to discuss the terms of a transaction to be entered into by the corporation or the terms of a transaction or agreement amongst the shareholders. A shareholders’ agreement, for example, is one of the more common agreements under discussion.

In many cases, the parties are of the view that it is not financially expedient for the corporate entity and each of the shareholders to be separately represented. In other cases, the transaction may be clipping along and the parties are too focused on their negotiations to care about the lawyer’s oral caution that they should obtain independent legal advice or independent representation.

Later, a disgruntled party may allege that he or she relied on the lawyer and may accuse the lawyer of having been in a conflict of interest, preferring the interest of one party over another (particularly where the lawyer has represented the other party or parties in the past) or failing to consider and advise that party of the implications arising from the particular transaction or agreement. The lawyer may well respond by saying that he or she was not acting for the complaining party, but rather acting for the corporate entity or, possibly, for another shareholder. But if this was never clearly communicated, in writing, the lawyer is faced with a credibility dispute.

The lawyer should write to all principals to clarify and confirm whom he or she is acting for. The lawyer should confirm that the other parties will not be provided with any advice and that they should not be relying on the lawyer for that purpose.

Further, the lawyer should tell the other parties or entities to retain independent counsel or obtain independent legal advice, preferably as evidenced by way of a Certificate of ILA, depending upon the circumstances. Otherwise, the lawyer must obtain a signed, written acknowledgement of this advice together with a waiver of independent counsel or ILA.

“There is no shortcut for this,” says Reggio. “The lawyer needs to get written, signed acknowledgements to protect him or herself.” If the lawyer chooses to proceed to act for more than one party, the lawyer faces the inherent risks of failing to meet the onerous burden of providing the best possible advice to all of the clients in the circumstances. Also, depending on the deductible chosen, the lawyer may also face the obligation of a double deductible under the LAWPRO policy if he or she is subsequently sued, even if a written acknowledgement and waiver was obtained.

Be clear about the services you are providing

Lawyers should also communicate clearly and in writing to confirm that they are not providing business advice and they are not reviewing financial statements or providing any tax advice, where applicable. Lawyers should specifically advise the client in writing to get advice from tax specialists, accountants or other experts where necessary and applicable.

Avoiding Communications Claims: Litigation

November 27, 2014 By: TimLemieux Category: Communication errors

No matter what the area of practice, the number one source of claims at LAWPRO is a breakdown in communication between the lawyer and client.

Between 2008 and 2013, nearly 4,600 communications claims – an average of 762 a year – have been reported to LAWPRO. The total cost of these claims to date is about $158 million – and likely to rise as more recent years’ claims are resolved.

In the Fall 2011 issue of LAWPRO Magazine we asked LAWPRO claims counsel with expertise in the various areas of law to provide insights into the communications mistakes they see in their daily handling of claims files. We hope this approach makes it easier for you to implement risk management steps in your own practice.

Jennifer Ip, unit director and counsel (Primary Professional Liability Claims Department) and Yvonne Diedrick, claims counsel (PPL) provide some insights into how breakdowns in communication with the client can derail litigation or leave the client dissatisfied with the outcome.

Put it in writing

One of the biggest issues in the litigation claims LAWPRO sees is a failure on the part of the lawyer to properly document instructions. Clients may later say they asked the lawyer to do X and it wasn’t done; or the lawyer may have done Y and the client claims he didn’t authorize this course of action. If there is no documentation of the lawyer client/conversations, the claim then turns on credibility, and the experience has been that courts are more likely to believe the client’s recollections (the case is top of mind for the client, but only one of several for the lawyer).

The same failure to document discussions can be seen when advising clients on the terms of settlements and what the client can expect. Clients can be left thinking they will receive more money out of the settlement than they in fact get. “They may try to claim they were not aware that a portion of the award would flow back to the lawyer in fees,” says Ip.

When it comes to motor vehicle cases, some lawyers will handle only the tort action or only the accident benefits claim, not both, but they fail to put this limited retainer into writing. The client then comes back and says the lawyer failed to follow instructions – but by then the limitation period has expired – and now the lawyer faces the prospect of a claim. Even if you have put the limited retainer into writing, make sure the client understands what this means.

Many communication errors result in accusations of an improvident settlement. For instance, the defendant in an action may offer to settle for a lower amount than is really justified by the facts of the case and the lawyer is obliged to present this offer to the client. The client may want to settle, but if the lawyer doesn’t recommend the settlement, this advice should be clearly documented and communicated. Otherwise the client may come back later, perhaps when the money runs out, and accuse the lawyer of not properly explaining the situation or not making clear that the settlement might have been greater had the matter been pursued further.

Take the time to explain – and document

During a trial, things can happen quickly. LAWPRO has seen claims in which an offer was communicated verbally mid-trial. The lawyer then quickly explains (or says she explained) the offer to the client. The client rejects the offer and the lawyer’s recommendation to accept it, and goes on to lose the case. The client then sues the lawyer saying, “had I properly understood the offer, I would have accepted it.”

On the flip side, it may be the client who chooses to accept an offer to settle for a lower amount – despite the lawyer’s advice to the contrary. No matter how rushed you are or how convincing (and happy) your client appears, take the time to make notes of your conversations with the client and make sure your client fully understands the implications of the decision he or she is making.

Similarly, lawyers should communicate (and document that they have done so) the prospects of winning or losing a case. This is especially so in cases where the client insists on pursuing the case “on principle.” When the client loses, it’s suddenly no longer about the principle. “If the lawyer is of the opinion that the client has a weak case, the client needs to be told so and instructions to proceed to trial, despite the lawyer’s recommendation not to proceed, should be written down,” says Ip.

Communicate clearly – face-to-face if possible

As in all areas of law, lawyers are using email to communicate – resulting in increased misunderstandings. Clients or lawyers read things into emails that aren’t there, miss the meaning of what was said, or read between the lines and make assumptions, says Diedrick. “You can’t replace face-to-face communication. If geographic distance makes that difficult, pick up the telephone and later document the call in a follow-up letter or email.”

This is particularly important in litigation matters, which can go on for long periods of time and involve strong emotions. There isn’t necessarily the same tradition of a pivotal lawyer-client meeting as often occurs before the closing of a transaction in other areas of the law. Consider at what point in a long piece of litigation you should meet with the client, and be sure to document your discussions.

Avoiding Communciations Claims: Real Estate

November 26, 2014 By: TimLemieux Category: Communication errors

No matter what the area of practice, the number one source of claims at LAWPRO is a breakdown in communication between the lawyer and client.

Between 2008 and 2013, nearly 4,600 communications claims – an average of 762 a year – have been reported to LAWPRO. The total cost of these claims to date is about $158 million – and likely to rise as more recent years’ claims are resolved.

In the Fall 2011 issue of LAWPRO Magazine we asked LAWPRO claims counsel with expertise in the various areas of law to provide insights into the communications mistakes they see in their daily handling of claims files. We hope this approach makes it easier for you to implement risk management steps in your own practice.

Real estate claims make up the largest share of communications claims. Busy, high-volume practices often lead to situations where the lawyer is not taking the time to communicate with the clients properly. Mitchell Goldberg, unit director and counsel and Nadia Dalimonte, claims counsel, both in our Specialty Claims Department, provide some examples of the kinds of claims they see in this area of practice.

Meet the client – yourself – and ask questions

The common thread running through the examples that follow is that many real estate lawyers say they are too busy to communicate directly with clients. They rely on clerks, so the lawyers themselves become removed from the process. “It is always preferable for the lawyer to meet with the clients and review the important documentation in the file with the clients at that time. In the event of a claim, it’s not usually a strong defence for the lawyer to say to us ‘well, the clerk met with the client,’” says Dalimonte.

Some lawyers, she adds, take the position that their job is to carry out only the title conveyancing, when what they should have done is take the time to speak to the client to ensure they’ve gathered all the relevant information.

For example, although only one person may be registered on title, there could be a spousal interest in a matrimonial home. LAWPRO has seen a number of claims where the lawyer did not get the consent of the spouse to change the ownership status or encumber the property with a mortgage. Take the time to discuss important information such as the client’s marital status to determine whether the consent of a spouse – or any other person with an unregistered interest in the property – needs to be obtained, or whether the spouse needs to be sent for independent legal advice (depending on the nature of the transaction).

Another source of claims involves situations in which parents get involved in their children’s real estate dealings – such as the transfer of a parental property to a son or daughter, or the purchase of a home by the child with the parents guaranteeing the mortgage or taking title with the child and actually becoming mortgagors. The parents often later claim the lawyer did not properly communicate the potential consequences to them (e.g. if the children did not keep up the mortgage payments, the lender could come after them) or failed to send them for ILA.

There may be issues of capacity or language barriers preventing the clients from fully understanding the proceedings. Until you sit down and talk to the clients, these kinds of complicating factors might not be apparent.

Use title insurance wisely

Lawyers using title insurance also need to take the time to communicate directly with clients. Often the lawyer fails to ask clients about possible future uses of the property that the client might have in mind, and as a result fails to get a title insurance endorsement that would protect the clients (e.g., they planned to build a pool, but later discovered a subdivision agreement prevents it). Similarly, lawyers sometimes fail to discuss whether a client wants a survey or a particular search done.

“They just assume title insurance takes care of issues that could arise, so that the lawyer has no documentation in the file to demonstrate that the lawyer discussed what the client did or didn’t want,” says Goldberg. Failure to have that conversation may constitute negligence, and also may violate the commentary to the Rules of Professional Conduct that addresses informing clients about options to assure title.

Remember the lender client

Lawyers also need to remember that lending institutions are also their clients. We’ve seen claims in which lawyers have failed to communicate material information to the lender client so the lender can make an informed decision on whether to advance mortgage funds. Such details could include the correct purchase price, current ownership, or whether the purchaser is going to reside on the property.

Recruiting and Retaining Top Talent: Part 4 – How To Create A Superior Working Environment

November 25, 2014 By: TimLemieux Category: Law Practice Management

Attracting the best possible lateral associates is critical to a law firm’s ability to maintain its competitive edge, financial leverage, internal succession and future success.

The January 2012 issue of LAWPRO Magazine included an article by Cleo Kirkland, a senior recruitment consultant at The Counsel Network in Toronto, which discussed what firms can do to both attract the best new talent and retain the best people they already have. It features examples of different approaches firms have take to address this challenge.

The single most valuable tool in associate retention is effective communication. All too often, lawyers in management positions fail to communicate critical information about the firm and where it is going to its associates. These managers become absorbed in and distracted by in the day-to-day practice of law or firm management and mistakenly assume that the associates at the firm know what is taking place ‘at the top’.

If an associate is not performing, firm managers often assume that the associate knows he or she is underperforming and needs to pick up his or her game. Perhaps even worse, many firms do not communicate to star associates that they are doing a good job, meeting or exceeding expectations, and are valued for their contributions to the success of the firm. as a result, the law firm misses a considerable opportunity to recognize and reward the efforts of its stars in a meaningful way.

Beyond sharing information to retain lawyers, there is another and more important aspect of good communication and that is the need to listen. Law firms are typically chock-full of great talkers, with great listeners a considerably scarcer resource. To retain people, especially star associates, firms must become good at listening. One of the most valuable tools a law firm has is the ability to receive and provide regular feedback. This can be achieved in any number of ways, including formal orientation programs, an internal mentoring program, written procedures manuals for new lawyers, a designated professional development director, and regular reward and recognition programs.

Commercial debt collection scam using the names Simon Foteck Fonji and Tomiko Holdings

November 25, 2014 By: FraudInfo Category: Confirmed frauds

Firms in Florida and California notified us that they received an email from the purported Simon Foteck Fonji of Tomiko Holdings looking to retain them with regards to a commercial debt collection.

This is a classic bad cheque scam that presents as legal matter requiring the assistance of a lawyer. In this scam lawyers will be duped into wiring real funds from their trust accounts after depositing a fake cheque received as payment from the debtor (who is part of the fraud). See our Confirmed Fraud Page for more of an explanation of how these frauds work and to see other names associated with it. Our Fraud Fact Sheet lists the red flags of a bogus legal matter that is really a fraud.

Here is the initial email from the fraudster to the lawyer:

From: Simon Foteck Fonji (sffonji) [mailto:sffonji@memphis.edu] On Behalf Of Tomiko Holdings
Sent: Monday, November 24, 2014 2:32 PM
Subject: [Bulk] Breach Of Contract:

I wish to request for your legal services and possible representation on a legal matter, Please do let me know if your office is currently accepting new clients.

If you have been successfully duped, please immediately notify LAWPRO as there may be a claim against you. Instructions on how to report a claim are here.

For more immediate updates on fraud and claims prevention, subscribe to the email or RSS feed updates from LAWPRO’s AvoidAClaim blog.

Fraud Fact Sheet More fraud prevention information and resources are available on the practicePRO Fraud page, including the Fraud Fact Sheet, a handy reference for lawyers and law firm staff that describes the common frauds and the red flags that can help identify them.

In the practicePRO Lending Library: Being Prepared – A Lawyer’s Guide for Dealing with Disability or Unexpected Events

November 24, 2014 By: TimLemieux Category: Law Practice Management

being_prepared

Being Prepared is the essential workbook and guide for protecting your law practice against casualty or other unexpected event. If you haven’t started thinking about, or formulating, an action plan to properly protect your law firm, your clients, and your family in the event of temporary disability, incapacity, or other unexpected event, this book will jump start the process. It is a “how to” workbook designed to lead you through a series of active and immediate steps aimed at establishing your protection plan. Use this book to safety-net your financial and professional integrity.

The practicePRO Lending Library is a free resource for Ontario lawyers of more than 100 books on a wide variety of law practice management related topics. You can see a full listing of our books here. You may borrow a book in person or via e-mail.

The practicePRO Library is located in our office at 250 Yonge Street, Suite 3101 in Toronto and can be visited during our regular business hours (Mon to Fri, 8:30 to 5:00). We invite you to come by anytime (please email in advance)to peruse our selection. All titles in the practicePRO Lending Library can be shipped to Ontario lawyers at our expense, and returned at yours after three weeks.

If you would like to borrow this or any other book please email us. Most of our titles are also available from the American Bar Association Web Store or the major booksellers here in Canada.

Equipement purchase scam using the names Alex Inamoto and Gosho Industrial

November 24, 2014 By: FraudInfo Category: Confirmed frauds

A Florida firm notified us that they received an email from the purported Alex Inamoto of Gosho Industrial looking to retain them with regards to making a large commercial purchase.

This is a bad cheque scam that presents as legal matter requiring the assistance of a lawyer. In this scam lawyers will be duped into wiring real funds from their trust accounts after depositing a fake cheque received as payment from the purchaser (who is part of the fraud). See our Confirmed Frauds page for more of an explanation of how these frauds work and to see other names associated with it. Our Fraud Fact Sheet lists the red flags of a bogus legal matter that is really a fraud.

Here is the initial contact email sent by the fraudster to the lawyer:

From: drjinchung44@comcast.net [mailto:drjinchung44@comcast.net]
Sent: Thursday, November 20, 2014 1:31 PM
Subject: YOUR LEGAL SERVICE IS NEEDED..

Dear Sir,

This letter is to inquire if your law firm handles Purchase transactions and agreements.

Regards,
Alex Inamoto
President & CEO
GOSHO Industrial Co. Ltd.
6-4-10
NANKO-NAKA, SUMINOE-KU,
OSAKA, JAPAN 559-0033

Replying to the email brought this response:

This is a follow up email in regards to my request to you in my previous email; my company is in the process of selling one of its Dredgers. Please find below the name of the proposed buyer for your conflict check. I want to know your hourly rate for preparing a purchase agreement, I have attached some necessary details of the Dredger for your review please advise me on your rate, initial retainer fee and forward me your retainer agreement.

PROPOSED BUYER:

Goodloe Marine, Inc.
525 Crestview Rd.
Wimauma, FL 33598
USA.

I await your prompt response.

Sincerely,

Alex Inamoto
President & CEO
Miyamoto Industrial Co. Ltd.
6-4-10 NANKO-NAKA, SUMINOE-KU,
OSAKA, JAPAN
559-0033

How to handle a real or suspected fraud

If you have been targeted by any of these frauds, please forward any of the emails and supporting documents that you have received to fraudinfo@lawpro.ca.

If you suspect you are acting on a matter that might be a fraud, call LAWPRO at 1-800-410-1013 (416-598-5899). We will talk you through the common fraud scenarios we are seeing and help you spot red flags that may indicate you are being duped. This will help you ask appropriate questions of your client to determine if the matter is legitimate or not. If the matter you are acting on turns out to be a fraud and there is a potential claim, we will work with you to prevent the fraud and minimize potential claims costs.

If you have been successfully duped, please immediately notify LAWPRO as there may be a claim against you. Instructions on how to report a claim are here.

For more immediate updates on fraud and claims prevention, subscribe to the email or RSS feed updates from LAWPRO’s AvoidAClaim blog.

Fraud Fact Sheet More fraud prevention information and resources are available on the practicePRO Fraud page, including the Fraud Fact Sheet, a handy reference for lawyers and law firm staff that describes the common frauds and the red flags that can help identify them.

Commercial debt collection scam using the names Ashford Riku and Biohit Healthcare

November 21, 2014 By: FraudInfo Category: Confirmed frauds

An Ontario firm notified us that they received an email from the purported Ashford Riku of Biohit Healthcare looking to retain them with regards to a commercial debt collection.

This is a classic bad cheque scam that presents as legal matter requiring the assistance of a lawyer. In this scam lawyers will be duped into wiring real funds from their trust accounts after depositing a fake cheque received as payment from the debtor (who is part of the fraud). See our Confirmed Fraud Page for more of an explanation of how these frauds work and to see other names associated with it. Our Fraud Fact Sheet lists the red flags of a bogus legal matter that is really a fraud.

Here is the initial email from the fraudster to the lawyer:

From: Ashford Riku [mailto:ashfordariku@biohihealthcare.com]
Sent: Thursday, November 20, 2014 2:12 AM
To:
Subject: Contract Dispute

What’s the process of retrieval of funds owed to us by our client?

Yours Sincerely,
Ashford Riku * Global Diversity Director Biohit Healthcare*Laippatie 1*00880
Helsinki*Finland
Tel: +358 9 231 61063*Fax: +358 9 413 58201 www.biohithealthcare.com

How to handle a real or suspected fraud

If you have been targeted by any of these frauds, please forward any of the emails and supporting documents that you have received to fraudinfo@lawpro.ca.

If you suspect you are acting on a matter that might be a fraud, call LAWPRO at 1-800-410-1013 (416-598-5899). We will talk you through the common fraud scenarios we are seeing and help you spot red flags that may indicate you are being duped. This will help you ask appropriate questions of your client to determine if the matter is legitimate or not. If the matter you are acting on turns out to be a fraud and there is a potential claim, we will work with you to prevent the fraud and minimize potential claims costs.

If you have been successfully duped, please immediately notify LAWPRO as there may be a claim against you. Instructions on how to report a claim are here.

For more immediate updates on fraud and claims prevention, subscribe to the email or RSS feed updates from LAWPRO’s AvoidAClaim blog.

Fraud Fact Sheet More fraud prevention information and resources are available on the practicePRO Fraud page, including the Fraud Fact Sheet, a handy reference for lawyers and law firm staff that describes the common frauds and the red flags that can help identify them.

Recruiting & retaining top talent: Part 3: Money and other things

November 21, 2014 By: TimLemieux Category: Law Practice Management

Attracting the best possible lateral associates is critical to a law firm’s ability to maintain its competitive edge, financial leverage, internal succession and future success.

The January 2012 issue of LAWPRO Magazine included an article by Cleo Kirkland, a senior recruitment consultant at The Counsel Network in Toronto, which discussed what firms can do to both attract the best new talent and retain the best people they already have. It features examples of different approaches firms have take to address this challenge.

Although people work for a variety of reasons (professional fulfilment, personal challenge, desire to serve the community, meaningful work, contributing to society), the principal reason most people work is to get paid.

Even those for whom money ranks farther down the list of reasons for working are not interested in being unfairly compensated. Fair compensation is the first and most critical component of a successful recruitment and retention program. Only once this initial hurdle is cleared can a firm and its associates focus on issues of productivity and practice development.

That said, fair compensation does not always equate to top-of-market compensation. If your firm expects its lawyers to docket more than 2,000 billable hours every year, then it can and should pay top dollar. But many of today’s associates are focused on more than just compensation. They are seeking responsibility and recognition for their efforts, the chance to learn from and work with skilled practitioners, professional growth and development, some measure of control over
their personal and professional lives, an opportunity to have a hand in the firm’s evolution, and to receive timely and thoughtful feedback.

The old law firm maxim that “no news is good news” simply does not work anymore and is, in fact, a fail-safe way of having associates walk out the door “out of the blue.” On the question of bonuses, many firms offer their associates plans that are intended to reinforce and reward the principles valued by the firm. If your firm only cares about financial profitability, then bonuses on billable hours alone will suffice. Too many firms claim they want their associates to contribute in ways beyond the billable hour but only reward those who are exceptionally profitable.

Inconsistent recognition programs are a guaranteed path to high associate turnover.

Recruiting & retaining top talent: Part 2 – How to be a choice law firm

November 20, 2014 By: TimLemieux Category: Law Practice Management

Attracting the best possible lateral associates is critical to a law firm’s ability to maintain its competitive edge, financial leverage, internal succession and future success.

The January 2012 issue of LAWPRO Magazine included an article by Cleo Kirkland, a senior recruitment consultant at The Counsel Network in Toronto, which discussed what firms can do to both attract the best new talent and retain the best people they already have. It features examples of different approaches firms have take to address this challenge.

Becoming a law firm of choice requires both a clear understanding of exactly what associates want and a strategy to provide them with the platform through which they can achieve their professional goals. Assessing what superstars are seeking and figuring out how your firm is best positioned to respond is crucial to any recruitment and retention strategy.

A law firm is an employer of choice when its lawyers believe they are working at a great firm and tell people as much. The best associates do their due diligence and ask the lawyers employed at the firm what it is like to work there. They also ask trusted friends and advisors (including legal recruiters) about the reputation of the firm and the likelihood that it will deliver on the career opportunities promised.

Stars will ask the difficult questions about work platform, career trajectory and fit. Strong indicators that a firm is an employer of choice include:

  • it has positive name recognition on the street;
  • prospective candidates and clients tend to choose the firm over others;
  • there is a low turnover rate of top performers;
  • lawyers at the firm deliver a consistent message on why the firm is a great place to work;
  • there is a record of ‘recruiting back’ former associates and partners to the firm;
  • the firm appears in the “best” lists of legal publications such as Lexpert; and,
  • legal recruiters speak positively of the firm.

Law firms of choice consistently have the most effective recruiting and retention programs. Those programs may vary from firm to firm, but what all of them have in common is that they recognize associates financially, create an exceptional working environment and have a clear understanding of what their associates want (and why some of them leave).