Risk Management Feed


Business FeesLawyers are usually well aware of the three-(3)-year statute of limitations period to commence a legal malpractice action. However, many are unaware that an action to recover unpaid legal fees opens the door to limited counterclaims for legal malpractice, regardless of the timing.

The best way to avoid having to sue for fees is great accounting practices. Sending invoices on a regular basis and promptly addressing delinquent accounts minimizes an attorney’s exposure.[1] Two recent decisions, discussed below, serve as practical reminders that commencing a legal action to recover unpaid legal fees should be the practitioner’s remedy of last resort.

Limitations Period for Legal Malpractice Claims

The three (3) year limitations period for legal malpractice claims is set forth in CPLR § 214(6). The period is calculated from the date of the alleged malpractice, irrespective of the date of discovery. See Farage v. Ehrenberg, 996 N.Y.S.2d 646 (2d Dept. 2014).  The only circumstance which will have a “tolling effect” on a legal malpractice claim is where the attorney provides continuous representation to the client “…with respect to the matter underlying the malpractice claim.” See Debevoise & Plimpton, LLP v. Candlewood Timber Group LLC, 102 A.D.2d 571, 959 N.Y.S.2d 43 (1st Dept. 2013).  There, the limitations period is tolled until the ongoing representation of a client with the particular matter is completed. Id.  This suggests an absolute bar for any legal malpractice claim asserted after the three (3) year limitations period closes.  Consequently, many practitioners hold the misapprehension that they bear little-to-no risk if they commence an action to collect unpaid legal fees more than three (3) years after the representation ended.  This is incorrect.

Recent Decisions of Note

Balanoff v. Doscher, 2016 NY Slip Op 04896 (App. Div. 2d Dept. June 22, 2016) underscores the risks of collections actions for legal fees.  Plaintiff sued to collect legal fees, and the defendant counterclaimed, asserting legal malpractice.  The lower court granted Plaintiff’s motion to dismiss the counterclaims.  The Appellate Division reversed, finding that the counterclaim for legal malpractice should not have been dismissed “…to the extent that counterclaim seeks to offset any award of legal fees…”  This counterclaim, which ordinarily would be time-barred by limitations period imposed by CPLR § 214(6), is afforded the benefit of the relation-back doctrine, as codified in CPLR § 203(d).  The Balanoff Court unambiguously sets forth the limitations of counterclaims pursuant to CPLR § 203(d), holding that the provision may serve “…only as a shield for recoupment purposes, and does not permit the defendant to obtain affirmative relief…”

Lewis, Brisbois, Bisgard Smith, LLP v. Law Firm of Howard Mann, 2016 NY Slip Op 05484 (App. Div. 2d Dept. July 13, 2016) treads in murkier waters.  The facts are procedurally convoluted, and the wording of the decision is ambiguous.  In an action to recover unpaid legal fees, defendant asserted nine counterclaims.  Plaintiff moved to dismiss the counterclaims.  Plaintiff’s motion was granted only with respect to the first counterclaim.  On appeal, the Appellate Division affirmed the lower court’s decision that counterclaim alleging “professional negligence” was timely.[2]

The difficulty arises when considering the damages sought in the legal malpractice counterclaim. Rather than demand a “refund,” “recoupment,” or “offset,” defendant demanded “an amount to be determined at trial, plus interest.” Lewis Brisbois. The Appellate Division held that the legal malpractice counterclaim was timely “…to the extent of the demand in the complaint.” Id. The decision does not address the counterclaim demands whatsoever. 

One could argue that a party asserting an otherwise untimely malpractice claim may now seek affirmative recovery. However, it more likely appears that the Court was performing a cursory analysis of the counterclaims to see if they satisfied the requirements of CPLR § 203(d).  Pursuant to CPLR § 203(d), an otherwise untimely counterclaim is permissible only if it “…arose from the transactions, occurrences, or series of transactions or occurrences, upon which a claim asserted in the complaint depends, it is not barred to the extent of the demand in the complaint.”  Counterclaims are limited to the extent of the demand in the original complaint. See Goldberg v. Sitomer, Sitomer & Porges, 97 A.D.2d 114, 469 N.Y.S.2d 81 (App. Div. 1st Dept. 1983) aff’d 63 N.Y.2d 831, 472 N.E.2d 44 (1984). As such any counterclaim to an action to collect a sum certain of legal fees appears necessarily limited to recoupment. See Alvarez v. Attack Asbestos Inc., 287 A.D.2d 349, 731 N.Y.S.2d 431 (1st Dept. 2001).  Here, the Lewis Brisbois Court summarily held that the “subject counterclaims…all arise from the transactions and occurrences upon which the complaint depends,” noting that the appellant failed to address the CPLR 203(d) issue—leaving little for the Court to deliberate.  The decision did not give the basis of its finding.  The Court also held that the counterclaim for legal malpractice was timely “to the extent of the demand in the complaint.”  Again, the Court gave no rationale behind the determination.

At first glance, Lewis Brisbois may indicate a change in this area of practice.  However, a closer reading suggests that the Court was simply stating legal conclusions and terms of art in the absence of argument from the appellant.  It seems unlikely that the Court would break with decades of legal precedent on an issue that was not disputed.


While neither Balanoff nor Lewis Brisbois signals a sea change in the law governing counterclaims for legal malpractice, they exemplify the prudence of good accounting practices.  Regular and consistent accounting is quite simply the best preventative measure against large accounts receivables and exposure in any later recoupment efforts.[3]


* This article was prepared by Andrew R. Jones, Esq. of the New York City-based law firm of Furman Kornfeld & Brennan LLP.  A longer form version was published in the NYSBA Winter 2016 Journal. Andrew works as part of a team of 15 lawyers devoted to the defense of attorneys and other professionals in malpractice and disciplinary matters.  For more information about the above topic or the author, please visit: www.fkblaw.com.

We trust that the above article was useful and thought provoking; however, please note that it is intended a general guide only, not a complete analysis of the issues addressed, and readers should always seek specific legal guidance on particular matters.

For more information on LPL coverage generally and how conflict checking and client selection can affect the exposure of your firm to malpractice claims, contact USI Affinity today.


[1] For a more in-depth discussion of the limitations period for legal malpractice actions, seeHow to Avoid Being Sued When Collecting Legal Fees,” Professional Liability Defense Quarterly, 7:2: pp. 8-12 (Spring 2015).

[2] Although the counterclaim for legal malpractice was found to be timely, the Appellate Division dismissed a number of the other counterclaims as duplicative. When concurrent claims are based upon the same set of operative facts as the legal malpractice claim, the concurrent claims will be properly dismissed as redundant. See Ullman-Schneider v. Lacker & Lovell-Taylor, P.C., 121 A.D.3d 415, 944 N.Y.S.2d 72 (1st Dept 2014).


[3] See Footnote 1.

Conflict Check Systems and Maintaining Conflict Database


For DMW - shutterstock_93823924For many practices, there has been a recent uptick in the mobility of both lawyers and clients from firm to firm. This significant departure from traditional practices has required law firms to establish and maintain a reliable conflict checking system to avoid unnecessary conflict-based malpractice claims.

Many attorneys view the conflict checking process as a chore, but a necessary evil when taking on a new case or bringing in a new employee. However, performing a conflict check does not have to be a dull or daunting. The best practice is to have a methodical procedure in place that prevents a file from being opened until a conflicts check has first been performed. Several types of conflict software exists for all law firm sizes, and virtually every firm has some kind of document management or file management system with search capabilities that can also be utilized.

If a conflict exists, it must be identified and where possible resolved through the use of appropriate conflict waiver agreements before proceeding with the client. If a known conflict of interest is not immediately addressed, the law firm basically is a “sitting duck” for a legal malpractice claim if a problem subsequently develops. This is because at any point where a client loses a case, or suffers a financial loss in connection with a matter involving a transaction in which the “conflicted” law firm is providing legal services, the client will blame the law firm once the conflict is revealed. Judges and juries do not look favorably on professional liability claims concerning a conflict of interest and the claims are difficult to defend. The mere appearance of impropriety from an undisclosed conflict of interest is highly inflammatory to jurors. The onus is on the law firm to protect itself.

Even when conflict waivers are executed, conflict situations still pose risk, and circumstances arise where the conflict is, or becomes, unwaivable. In such situations, the client loses out financially, having invested fees in one law firm, only to have to retain new counsel, and/or the law firm may be exposed to disqualification on the matter. Worse, if the client is disappointed in the result of the underlying matter, the conflict could form the basis of a legal malpractice suit, alleging that the client would not have proceeded with the underlying case or transaction “but for” the undisclosed or unwaivable conflict.

So what are some necessary elements for establishing and maintaining an effective conflicts check system? Here is a helpful checklist that all law firms can employ to avoid potential conflict problems:

  • Before opening any new file, perform a conflicts check. If this procedure is used, it will prevent a file number from being assigned, and will prevent a lawyer from doing any work and billing the client until the conflict search is complete and documented.
  • The law firm should prepare formal written conflict checking and resolution procedures, which set forth the law firm’s position with respect to conflicts of interest.
  • Ensure that your chosen conflict checking system can search name variations and spellings and show any party’s relationship with any client and the nature of that relationship. To properly identify conflicts, the current and former names of every person or entity represented by the law firm must be entered, as well as that of employees and lateral hires.  As noted, conflicts software is readily available, and law firms of all sizes can utilize such software to search all active and closed files – the results may even yield helpful information to the case itself.
  • A conflict check is only as good as the information submitted to the conflicts computer system. The most technologically advanced conflicts software in the world is useless if the information submitted is not accurate. Therefore, quality control -- such as training and supervision of support staff -- is essential.
  • In the event that a conflict exists, it must be identified and addressed by a formal or ad hoc conflicts committee in the firm. The originating attorney should not be involved in the evaluation and determination of the potential conflict as their objectivity may be questioned.
  • If a conflict is identified, the use of an appropriate conflict waiver agreement may resolve the conflict. However, enter into such waivers with caution as noted above.
  • Conflict checks should be performed: (i) before opening a new case; (ii) before a new matter for an existing client is opened; (iii) whenever a new party, attorney, witness or expert enters the representation; and (iv) whenever the firm decides to interview perspective new employees.

As conflict-based malpractice claims are among the most rapidly increasing problem areas in the legal profession, the proper identification and resolution of conflicts of interest has become a major concern facing law firms today. However, an established conflict-checking system can help effectively detect and minimize conflict-based problems before they arise.*


* This article was prepared by Andrew R. Jones, Esq. and Ashley R. Graham, Esq. of the New York City-based law firm of Furman Kornfeld & Brennan LLP.  Andrew and Ashley work as part of a team of 15 lawyers devoted to the defense of attorneys and other professionals in malpractice and disciplinary matters.  For more information about the above topic or the authors, please visit: www.fkblaw.com.

We trust that the above article was useful and thought provoking; however, please note that it is intended a general guide only, not a complete analysis of the issues addressed, and readers should always seek specific legal guidance on particular matters.

For more information on LPL coverage generally and how conflict checking and client selection can affect the exposure of your firm to malpractice claims, contact Mike Mooney at 800.265.2876 x 11441 or click here to email Mike Mooney

Cyber Breach Prevention Ethical Duty for Law Firms

Shutterstock_254824216Hackers are executing sophisticated data breaches on large and small companies all over the world, making the need to protect your law firm from the dangers of cyber breach more important than ever.

Although many lawyers prefer to believe that their firm is unlikely to be the target of a hack, such thinking often proves to be naïve. Cyber criminals are continually adapting looking for easy targets and sources of potentially valuable data. Because law firms are essentially warehouses of client and employee data, they should acknowledge that they are not immune to such attacks.

Personally Identifiable Information

Law firms are often considered to be perfect targets by cyber criminals looking to hack into businesses that keep lots of data containing personally identifiable information (PII) but lack protective security. Some examples of PII include:

  • Names, identifying numbers, symbols, or other identifiers assigned to particular individuals
  • Information that describes anything about a person
  • Information that indicates actions done by or to a person
  • Information that indicates a person possesses certain characteristics

Most, if not all, law firms possess a great deal of PII. This information was historically kept in paper files, but is not stored electronically for the most part. The most commonly reported cyber breach reported by law firms is related to the loss or theft of a laptop, thumb drive, smart phone, tablet, or some other mobile device. If the information on the lost or stolen device was not encrypted and contained PII, a breach likely occurred. With access to office email and other law office networks, cyber criminals can gain access to and steal confidential information.

This is an ethical dilemma for attorneys for several reasons. Besides the common law duty owed by attorneys to protect the confidential information entrusted to them by clients, the ABA Rules of Professional Conduct requires an attorney to maintain the confidentiality of information related to the representation of current and former clients, and state and federal law also imposes a duty upon attorneys to protect PII for clients.

To learn more about data breach and cyber liability coverage, Jeremy Del Priore at USI Affinity today.

How to Properly Respond to a Subpoena

Shutterstock_139897957You’ve just been advised that a subpoena has been served. So what do you do? Ignore it? Refuse to comply? Produce all the requested documents without question?

Properly Responding to a Subpoena

Subpoenas serve a very important function in the litigation process, and the wrong response to one can have very serious ramifications. Here are several guidelines regarding properly responding to a subpoena:

  • Determine the subpoena’s validity. It is generally recognized that a court cannot issue a valid subpoena absent a pending civil, criminal or administrative proceeding, and a subpoena cannot be used to compel a person to appear or to produce documents ex parte before an attorney, a party or a representative of the party.
  • Learn about the underlying lawsuit. It is imperative a company served with a subpoena learn as much as possible about the existence of the lawsuit or proceeding from which the subpoena was issued. Knowing the identity of the court or administrative agency and the matter’s case identification number is important to identify what case management orders or other rules may exist.
  • Determine potential objections. Generally, objections to a subpoena range from procedural defects to more substantive ones, such as privilege. Examples include lack of personal service, unreasonable response time, and service after the discovery deadline has passed.
  • Issue a litigation hold. After receipt of the subpoena, you will need to issue a written litigation hold notice requiring employees to preserve all potentially responsive documents and information.
  • Begin document collection and review. A company served with a document subpoena must produce all responsive documents within its control, and the recipient’s duty to preserve is triggered regardless of whether it believes that the subpoena is objectionable. Ultimately, it is the court (not the recipient) that determines the subpoena’s validity.
  • Don’t just blindly comply. Courts have quashed or modified subpoenas when compliance would have resulted in the public disclosure of trade secrets or otherwise confidential information. When faced with a subpoena, a company needs to understand and evaluate how public disclosure of the requested testimony or information will affect its business or operations.
  • The subpoena’s recipient should ensure that the requested documents arrive at the location stated in the subpoena on or before the return date. The party responding to the subpoena should prepare and retain proof of service in its files and present it to the court if the issuing party claims that the recipient did not comply with the subpoena’s demands.

For more information the proper way to respond to a subpoena, contact USI Affinity today.

Winging It: How to Approach a Case Outside Your AOP

Shutterstock_338830598Lawyers are frequently approached by friends, family and clients to give advice regarding a legal matter that is outside their area of practice (AOP). While it can be difficult to say no to such requests, there is one valid reason to do just that: you could be increasing your risk of a malpractice claim.

According to the American Bar Association (ABA), failing to know or apply the law is the number one most common legal malpractice claim made against an attorney. While you may be vaguely knowledgeable about an unfamiliar area of law, you likely are not aware of what else may be lurking there, such as a shorter notice requirement or an obscure statute of limitations. Missing those important details can lead to an ethics complaint, even against a well-meaning attorney who was just trying to help someone out.

So how can you minimize the risk of a malpractice claim stemming from a foray into an unfamiliar practice area?

  • Just say no. Don’t take on a case outside your customary area of practice – no exceptions.
  • Refer all cases in a recognized specialty to a recognized specialist.
  • If a current client refuses to allow you to make a referral to a recognized specialist, withdraw representation.
  • If you are unable to withdraw representation, hire a recognized specialist out of your own pocket.
  • If you can’t afford to hire a specialist, immediately immerse yourself in that area of practice and prepare to provide competent representation. That’s the standard you will be held to by the ABA.

 Don’t Fail to Act with Competence

Failing to act with competence is not only a basis for a legal malpractice claim, but is also an ethical violation. Rule 1.1 of the Model Rules of Professional Conduct states: A lawyer shall not fail to provide competent representation to a client. "Competent representation" is defined as having the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. Time and effort are required to become competent in a particular AOP, and cutting corners to do someone a favor is usually not worth the risk.

For more information about the risks of practicing outside your practice area, contact USI Affinity today.