Lawyer Malfeasance Causing Sleepless Nights? What You Need to Know.
June 01, 2016Board members, heads of business, C-level executives from all walks of life. I can’t tell you how many times throughout my career I’ve talked with people in powerful positions who are actually losing sleep, sick over what they’ve discovered their own, trusted lawyers failed to do to protect the company they represent. The terror is real, the disappointment is personal, and the costs can be astronomical. All too often, a CEO or board member somewhere wakes up to the horror of a lawsuit that’s been filed against their company because they received flawed legal advice. It could be about an important merger or acquisition deal. Or, the company’s lawyer, legal team or firm may have made flawed decisions during litigation, (or even trial) that then result in a large, unexpected and costly loss – sometimes multiple millions of dollars. Sometimes the cost is greater even than one measured in currency. Company executives suddenly and unexpectedly find themselves in the difficult predicament of needing to immediately hire separate, new legal counsel regarding potential liability created by their own trusted lawyer.
The ShipwreckI have received a lot of these calls. Law is not just knowing the legal system and having the right experience to handle a case successfully; it’s also handling the psychology and emotions at play when the stakes are very high. I’m proud that people know they can call on me when they are dealt this unexpected hand. When I receive this type of call, almost always, I learn that (for example), CEOs and board members realized too late that the board was not properly counseled on how to navigate its fiduciary role in the midst of approvals of a complex M&A deal. Or, perhaps the CEO and board wake up to the terrible news, after the fact, that a lawyer’s failure to take required steps needed to properly protect the Company’s interests in litigation or trial directly resulted in the huge loss of an important case. How do you protect yourself? You trusted your legal counsel to protect you and your company, to look out for its interests, and they failed.
Righting the BoatI bring understanding, clarity and a plan of action to these calls. Returning some measure of control to a CEO or board, along with a proven methodology to seek proper recourse in these cases can bring an immediate level of relief – just knowing there’s someone involved who can navigate these complex waters can be a huge weight off the shoulders. As long as the person you call on knows what they’re doing. These are complex matters not for the faint of heart, but for someone with the needed experience who will partner with you, your board, your company, to give you back that measure of control, give you an understanding of what happened, evaluate the problem, and enact a plan to best address any wrongs that were committed. Knowing what happened is half the battle to avoiding the situation. Here’s what you should know.
What if We Hit the Iceberg?It is critically important for CEOs and Boards to be prepared if and when these cases arise. The “how” is more complex, but the simple answer is, legal malpractice cases arise when work performed by trusted lawyers falls below the required standard of care for that situation. Harm to the company may occur as a direct result of these mistakes. These errors can be actionable. Acting quickly if they do occur is crucial. You must already know who to call. The line of protection must already be available. I’ve heard from CEOs that simply did not realize that there are a limited number of extremely competent lawyers who have the relevant experience to take on significant legal malpractice problems. The vast majority of law firms simply will not consider advising about (or actually suing) other firms. Of the firms that do handle legal malpractice, many don’t have experienced enough lawyers to provide this advice. In this time of crisis, CEOs and boards must have skilled and experienced counsel lined up. Such counsel can advise the board on whether they have a claim, the nature of the claim, and the best strategy to approach the problem: addressing the harm sustained by the company as a result of legal malpractice.
Wake Up and Be Prepared to ActThe first and most significant decision these CEOs and Board Members must make when they find themselves shipwrecked, waking up in the middle of a corporate nightmare, is “Who is our lifeline?” Spending time combing the internet or calling firm after firm to find someone competent not only eats up valuable time, it may not get you someone with the experience you need. Have the right firm in your contacts now.
What Can the Right Firm Do?Here’s the crux of it: there are a series of questions I suggest clients in this situation must immediately address:
- Determine whether a mistake that actually constitutes malpractice was made; and, if so, whether or not it caused harm.
- Determine whether there is a time-related urgency in pursuing the claim due to a looming statute of limitations; for example should a Tolling Agreement (extension of the SOL) be agreed upon?
- Are there approaches to solving this problem that do not require the filing of a potentially costly lawsuit? Is mediation an option? What’s the most cost-effective way to manage this crisis?
- How does the company continue to work properly with the firm in question? Or can they? Or should they?
- Finally, if there no other alternative, is there a claim that should be filed against the law firm, and is your legal malpractice counsel experienced with such matters?