Monthly Archives: November 2014

When and How to Refer Out a Case:

WHEN: If you are asking yourself the question “should I refer this case out,” the likely answer is “yes.” After all, the lawyer subconscious and instinct is keen and it is usually correct. The question itself is most likely the by-product of an internal recognition that you either lack the experience, the resources or the time to provide competent representation. It is a validation that while you may not recall the rules by name and number, your ethical baptism has instilled in you a strong desire to follow the rules and to do so in the best interests of the client. Your inner voice has reminded you that:

  • Model Rule 1.1 requires that for any engagement, the lawyer must provide competent representation which by definition assumes that the attorney has the “legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.” NOTE: Comment 2 to Rule 1.1 permits the “association” of an attorney with established competence in the subject matter as a means of discharging the duty to provide competent representation.
  • Model Rule 1.3 requires that an attorney act with “reasonable diligence and promptness” in representing a client.
  • Practice Pointer: While no Model Rule specifically addresses the financial ability of an attorney to undertake representation, it seems fundamental that an attorney cannot provide competent representation in undertaking a matter for representation when the attorney lacks the resources which will be necessary in order to provide competent representation. The better practice in such situations is to refer the matter out and/or to associate outside counsel.

HOW: Congratulations. As Dirty Harry famously stated, “A man’s got to know his limitations.” You have recognized your limitations and have wisely decided to refer a matter out, rather than to commit malpractice. The real question is not how to refer out a case, but how to refer out a case and still participate in the fee – right? The following is a non-exhaustive list of the issues presented by this situation:

In house referrals: In house referrals are not subject to the rules on fee sharing. Model Rule 1.5(e) addresses the division of fees between lawyers “who are not in the same firm.” Implicitly, the Rule would apparently bless the referral of a matter within a firm to an attorney with specialized knowledge and still permit the referring attorney to participate in the fees. This makes some inherent sense as the referring member by virtue of their membership in the firm will have both financial and ethical responsibility over the matter.

Outside Referrals: Consistent with the Rules, the policy behind Model Rule 1.5(e) is client protection (not necessarily lawyer protection). Rule 1.5(e) permits the agreements for the division of fees between lawyers of different firms ONLY IF:

            1. The division is in proportion to the services performed by each attorney OR each lawyer assumes joint responsibility for the representation; NOTE: While the division may be based on the proportion of work performed OR on the premise that each lawyer will assume joint responsibility, do not give mere lip service to the joint responsibility option. Comment 7 to Rule 1.5 clarifies that joint responsibility requires both financial and ethical responsibility and contemplates that in this arrangement both attorneys should be available to the client throughout the representation and should remain knowledgeable about the subject matter of the representation.
            2. The client agrees to the arrangement, including the share each lawyer will receive, and the agreement is confirmed in writing; and NOTE: While the Rule refers to “confirmation in writing”, as opposed to “signed by the client,” the better practice is to have the client sign. After all, there can be no better confirmation than the client’s signature.
            3. The total fee is reasonable.

BOTTOM LINE: The failure to follow these Rules is a virtual invitation to have your referral counsel explain to you in the future that while he or she would love to remit a part of the fee on a nice case back to you, the Rules simply won’t permit it. While the lack of an agreement in compliance with the Rules is not a bullet proof shield, it does place the referring attorney in a very compromised position. If you follow the suggestions set forth herein, you should avoid this situation. Oh yes, one parting note: the association of outside counsel should not serve to increase the overall fee charged to the client. If it does, it begs the question of the benefit to the client when the referral or association is presumably to secure the services of an attorney with some level of expertise who likely can handle the engagement without the aid of the associating counsel.

Ronnie Richter and Eric Bland

Bland Richter Achieves $3,000,000 plus Medical Malpractice Settlement for Client

On November 17, 2011, 66 year old Patient X was admitted as a patient to a South Carolina hospital for a routine surgical procedure.  A retired speech therapist, Patient X’s prior medical history was significant for hypertension, which was well managed through medication. Surgery was uneventful and by November 19, 2011, Patient X was recovering well on a step down unit in the hospital.

However, in the early morning hours of November 20, 2011, Patient X’s blood pressure began to elevate, eventually reaching a systolic reading of 203 and a diastolic reading of 93. This highly elevated blood pressure required timely and effective management to prevent a certain and foreseeable stroke secondary to her unregulated blood pressure. Rather than initiate medicinal protocols to lower the blood pressure, Patient X’s surgeon (who later admitted having little experience managing hypertensive patients) directed the hospital’s on duty nurse to page the hospitalist who was covering the hospital that day to provide management of Patient X. about her elevated blood pressure. According to the Electronic Medical Record for the hospitalist referral, the surgeon made the request for consult on a “routine” basis, as opposed to issuing a “STAT” order.  In accordance with hospital policy, a “routine” page could be answered at any time within the eight (8) hour shift.  Without immediate intervention, Patient X’s blood pressure waxed and waned over the following 7 hours before peaking at 229 over 111. Further compounding the problem, the surgeon did not follow up to determine whether Patient X’s elevated blood pressure had been properly addressed and that she was stabilized. Ultimately, no care for the management of Patient X’s dangerously high blood pressure was provided from 8:23 a.m. until approximately 4:00 p.m., at which time Patient X experienced severe nausea and a marked change in cognition.

Following the event, the hospitalist was located in the hospital and was hurried to Patient X’s bedside, but it was too late. Patient X suffered an ischemic stroke with devastating permanent and debilitating injuries. Patient X now requires ongoing personal and health care.  She is unable to do for herself even the most basic day to day activities. Her speech, memory, motor skills and other essential life functions have been forever altered . Patient X was an artist who won awards for her watercolor paintings. She can no longer paint. Patient X’s husband (an occupational therapist himself) has been involuntarily drafted into the role of a full time care provider for his beloved wife for the rest of her life.  Plaintiffs alleged that the stroke and all associated damages would have been avoided had Patient X been given timely care and medicine to lower her blood pressure during the morning and early afternoon of November 20, 2011.

The Quick Facts: 

  • Total Settlement Amount: $3,000,000.00 plus
  • Date: October 2014
  • Plaintiff’s Attorneys: Ronald L. Richter, Jr and Eric S. Bland of Bland Richter, LLP Columbia and Charleston, SC
  • Plaintiff’s expert witnesses: Kevin Sheth, M.D. (Board certified Neurologist and Chief of Neurocritical Care and Emergency Medicine at Yale University Hospital);
  • Economist: Charles Alford, PHD;
  • Life Care Planner: Karen Lustig of Lustig Consulting
  • Nursing:  Lorin Stein

SC Supreme Court Issues Game Changer Opinion in Legal Malpractice – If you think Fabian only applies to trusts and estates lawyers, think again!

In 2009, our firm was unsuccessful in persuading our appellate court to extend the liability of trusts and estates lawyers to the intended beneficiaries of the instruments which they draft, as opposed to owing duties only to the Testator.  In Rydde v. Morris, 675 S.E.2d 431 (2009), the Plaintiff complained that because of the negligence of the lawyer in failing to prepare the Last Will and Testament in a timely manner consistent with the hand written directions provided to her by the Testator, Rydde and several other intended beneficiaries received nothing from a multi-million dollar estate that the Testator intended to gift to them.  Instead, an estranged aunt received an unexpected windfall.  Because of several other cases which seemed to indicate a softening of the privity requirement of a legal malpractice case, we felt that our Court was ready to expand the law of legal malpractice given the compelling facts of Rydde.  However, in addition to the lack of privity between the attorney and the intended beneficiaries, the Rydde case had another fatal flaw – there was never a Last Will and Testament.  Because South Carolina does not recognize Will substitutes, it was impossible to prove the decedent’s intent short of invading the attorney client privilege that existed between Morris and the Testator and our Court upheld the underlying dismissal of the Rydde case.  As a result, the Rydde case fell into a line of cases in South Carolina which held essentially that no duty is owed by an attorney to the intended beneficiaries of a testamentary instrument.  Even so, in dicta the Rydde court commented that it found persuasive the reasoning of other States, such as New Hampshire, Connecticut and Florida, all of which recognize a duty from an attorney to the intended beneficiary of a testamentary instrument “where it is shown that the testator’s intent has been defeated or diminished by negligence on the part of the attorney.”  So after Rydde, we were forced to wait and watch for a case in which the negligence of the attorney in preparing the testamentary instrument defeated or diminished its intent, thereby causing harm to the intended beneficiary.  Enter Fabian.

Dr. Fabian died on February 5, 2000, leaving an estate with an estimated value of $13,000,000.00.  He was survived by his wife, his brother and two nieces.  Dr. Fabian’s brother died just weeks after Dr. Fabian.  One of the nieces, Erika Fabian, had always been told that she would be provided for in Dr. Fabian’s estate.  Following his death, however, she received a letter explaining that she would not be receiving anything, along with two pages from Dr. Fabian’s trust.  In reviewing the instrument, Erika identified what she believed to be a drafting error which defeated her intended gift. In part, the Trust provided that “If my said brother, Eli Fabian, predeceases me, then one half of his share shall be distributed to his daughter, Miriam Fabian, … and the other half of his share shall be distributed to my niece, Erica (sic) Fabian.”  Because Dr. Fabian’s brother did not predecease him, the trigger in the Trust was never pulled and Erika received nothing.  Erika brought her claim for malpractice and sought to introduce extrinsic evidence to prove Dr. Fabian’s true intent, which was to included her in the Estate regardless of the timing of Eli Fabian’s death.  The Circuit Court dismissed the claim relying upon the long line of prior cases that stood for the proposition that no duty was owed to an intended beneficiary of a testamentary instrument.

In reviewing the matter, our Supreme Court first undertook a lengthy review of the traditional privity requirement in legal malpractice actions, noting in part that as early as the 1950’s, jurisdictions throughout the United States began to abandon strict privity as a requirement in legal malpractice.  The Court noted that the majority of jurisdictions around the Country now recognize a cause of action by a third-party beneficiary of a will when the lawyer’s error defeats or diminishes the testator’s intent.  In joining the majority of other States, our Court found:  “In sum, today we affirmatively recognize causes of action both in tort and in contract by a third-party beneficiary of an existing will or estate planning document against a lawyer whose drafting error defeats or diminishes the client’s intent.”  Fabian v. Lindsay, Opinion No. 27460 (October 29, 2014).

THE BIGGER PICTURE:  While it is clear that Fabian now extends liability to intended third party beneficiaries in a trust and estate setting, its implications are likely far broader.  The lynchpin of the Fabian decision was the abandonment of privity as an absolute requirement in legal malpractice claims.  Indeed, a large part of opinion itself explores the historical basis for privity, as well as its historical softening.  Why would the same principles not be equally applicable in other attorney client engagements?  Do we not routinely draft contracts that are intended to benefit non-client, third-parties?  Do we not recover money in cases where third parties have known lien rights?  If the representation of the attorney will confer a direct benefit (as opposed to an inferential or tangential benefit) on a known and identifiable third party, why would the logic that led to liability in Fabian not apply in the same fashion?  We think Fabian will have long and broad implications far beyond trusts and estates.

PRACTICE POINTER:  If it is not the intent to benefit third parties through a particular engagement, it would probably be beneficial to state the intent clearly in the letter of engagement or in the instrument itself. If you are an estate attorney that drafts wills and trusts and are concerned about the implications of Fabian on your practice and that it will open the floodgates of disinherited or frustrated beneficiaries who are not in privity with you and will sue, here is some good advice. After reviewing the prior will or trust and noticing that beneficiaries have been changed or distribution of assets has changed, include language in the new will or trust from the testator explaining the reason for the disinheritance or the change in the distribution of assets. This is just good practice.

Ronnie Richter and Eric Bland