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In legal malpractice, lawyers get benefit of doubt

The basic concept of a trial is that one side wins and the other loses. Being a lawyer means accepting the inevitability of losses.

A hard lesson for every young lawyer is that one’s level of legal competence isn’t always the most important factor driving the outcome of a case. While poor advocacy can turn a slam dunk into a sure loser, even the best advocacy in the world can’t reliably perform the opposite trick.

Lawyers, a tribe that includes most judges, understand the difficulties of the legal profession in an intimate way. Anyone who has spent time in the legal trenches bears the scars to prove it. We’ve all had our share of professional humiliations and undeserved defeats, and sympathize with beleaguered colleagues. Perhaps for that reason, legal malpractice was slower to develop as a viable field of professional specialization than medical malpractice.

Another, less-creditable reason is that lawyers take care of their own, and that legal malpractice, like any other form of internal review, pits an entrenched in-group against outsiders.

Still, over the past couple of decades the field has gained in respectability and economic importance. An internet search for “legal malpractice statistics” turns up little in the way of useful data, but it does call up the websites of many law firms eager for business, which in their own way show how the tide has turned. According to a survey released by the State Bar a few years ago, about 80 percent of New Mexico lawyers in private practice carry malpractice insurance. Those without coverage are required by our ethical rules to disclose that fact to their clients.

To prove a case of legal malpractice, it’s not enough to show that the attorney made bad choices or pursued a harebrained strategy. The client must also prove that the attorney’s mistakes caused concrete harm. Sometimes, of course, causation is easy to prove, as when a lawyer blows a deadline and the client has to pay a default judgment.

But often it’s difficult to pinpoint the precise contribution a lawyer’s blunder makes to a poor outcome. This is especially true when the error consists of bad advice. After all, the client always had the option to reject the advice. And in business, it’s rare that a lawyer’s interpretation of the law provides the sole basis for any decision to proceed with a deal. Usually, it’s just one input among many.

The problem of proving causation was illustrated by a legal malpractice case that chugged through our court system from 2009 until this past April. The client made a large loan to a Las Vegas, Nev., real estate developer, receiving in return two things: an empty promise of big and fast returns (so big and so fast that in retrospect an extra dollop of caution was probably warranted), and a document bearing the title “Secured Promissory Note.” Before accepting the note, the client asked his attorney to review it. Unfortunately, the attorney failed to inform him that, despite its title, the note did not actually convey any kind of security interest. It provided no recourse if the borrower defaulted. The client was unknowingly making an unsecured loan.

The difference between a secured loan and an unsecured one is frequently the difference between repayment and loss. In bankruptcy, secured lenders are paid in full before unsecured lenders see their first penny. For that reason, making unsecured loans is risky at the best of times. But the timing of this particular loan could hardly have been worse. It was made in February 2008, one month before the Las Vegas real estate market began its epic collapse. The developer went belly up and the client lost all his money. So he sued the lawyer who failed to alert him that the “secured” note was anything but.

The New Mexico courts had no difficulty finding that the attorney gave substandard legal advice. But did that failure cause the client’s loss? The client testified, “I would have walked away if this lawyer had told me this stuff.” That’s direct evidence of causation. The trial judge, hearing the case without a jury, found the lawyer 35 percent responsible for the loss, implicitly finding the client’s testimony credible. (The other 65 percent of responsibility apparently lay with the client himself, who too credulously believed in the promise of big and fast returns.) But our Court of Appeals reversed because the trial judge’s finding of credibility was only implicit, not explicit. The appellate court relieved the attorney of any responsibility to make his ill-served client whole. In legal malpractice cases, members of the in-group still receive the benefit of the doubt.

Joel Jacobsen is an author who recently retired from a 29-year legal career. If there are topics you would like to see covered in future columns, please write him at legal.column.tips@gmail.com

 

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