Liability Minute

What do you get when you combine one part Bruce Willis with one part Cybill Shepherd and another part mid-1980s crime drama? Moonlighting. And what do you get when you combine moonlighting with the practice of law? If not handled appropriately, the answer is Nothing But Trouble (and we don’t mean the Demi Moore-Chevy Chase-John Candy film).

A Liability Minute blog post on Naming a Law Firm written by ISBA Mutual Risk Management Counsel Jeremy N. Boeder of Tribler Orpett & Meyer P.C.

A Liability Minute blog post on Conflicts of Interest written by ISBA Mutual Risk Management Counsel Jeremy N. Boeder of Tribler Orpett & Meyer P.C. Conflicts of interest can present mere road bumps in the course of an engagement when addressed via appropriate conflict waivers. But lawyers too often fail to take proactive measures, or they ...

Lawyers tend to accumulate a large volume of files, whether in hard-copy form, in electronic storage, or both. For many of us, the top question on our minds is, “when can I safely get rid of these?”

(Andrew Murray)  Illinois Supreme Court Rule 756(e) was adopted at the urging of the Illinois Lawyer Registration and Disciplinary Commission (ARDC) and requires private practice lawyers who don’t have professional liability insurance to undergo a four-hour, interactive self-assessment of risk.

(Marconi & Langs)  Many lawyers are still unaware that effective July 1, 2003, our Supreme Court promulgated rules which conferred protection from professional liability in certain circumstances. Illinois Supreme Court Rules 721 and 722 allow lawyers in Illinois to protect themselves against vicarious liability for legal malpractice committed by other lawyers at their firm provided that the law firm (1) maintains one of the business forms enumerated by Rule 721¹ and (2) maintains the minimum amount of malpractice insurance or other proof of financial responsibility required by Rule 722.

(Marconi & Langs)  Lawyers have traditionally created a great deal of paper. The amount of information kept on paper has been reduced as lawyers have been pulled into the electronic era by their more advanced clients. In this new era, the prevalence and sheer amount of electronic data created and received by lawyers can be absolutely overwhelming. Does a lawyer have a responsibility to preserve all this tangible and virtual clutter after a file has been closed? If so, for how long and at what cost? This article addresses the paper and electronic files that must be retained by a firm or small practice for some period of time under the law.

(Marconi & Langs)  E-mail and wire fraud risks increase in a cloud-based world. Data management safeguards can prevent possible legal malpractice from cyber-security breaches.

(Marconi & Langs)  Recent federal court decision reinterprets the Fair Debt Collection Practices Act (FDCPA) and may create venue defense for current or future debtor defendants in debt collection suits.

(Marconi & Langs)  How many lawyers assist a client in forming a corporation, but merely assist in filing the annual reports and do nothing else? Failure to advise of the risk associated with this minimal approach may now more likely result in veil-piercing to reach the client for individual liability.

(Marconi & Langs)  In a case of first impression, a First District Panel of the Appellate Court of Illinois issued an opinion confirming immunity from liability arising from fraud under the Illinois Limited Liability Company Act (“LLC Act”) (805 ILCS 180/10-10). Careful lawyers must consider the Illinois law before forming an LLC in another state. In Dass v. Yale, 2013 IL App (1st) 122520 (Ill. App. Ct. 1st Dist. 2013), the Court firmly established that a member’s personal immunity for “debts, obligations, and liabilities … whether arising in contract, tort, or otherwise” includes immunity for acts of fraud committed while acting as a member of the LLC.

(Marconi & Langs)  Estate planning often involves multiple professionals who must exchange confidential information regarding their clients’ affairs. The Illinois Court of Appeals provides an insightful opinion regarding when such privileges terminate, who can waive them after the client’s death, and what actions, if any, would put confidential information “at issue” and thus make discoverable.

(Marconi & Langs)  Even neophyte attorneys understand that their clients’ actions can be barred if they miss a statutory limitations period. However, experienced attorneys may forget that when handling claims against insurance companies under their clients’ uninsured or underinsured motorist coverage a contractual two-year limitation(2) will trump any longer statutory period. Failure to adhere to the two-year limitation period will terminate a claim as surely as a blown statute.

Claims involving special defendants, such as municipalities, mass transit companies, school and port districts, are subject to a special one year limitations period. Certain claimants, including policemen, firemen, and guardsmen, must make claims for death benefits within a year of death. In some cases, a special notice requirement is also imposed, as early as six months from the triggering event. This article reviews the main instances of these special limitations periods. One of the cardinal rules of malpractice avoidance is to always be cognizant of any statute of limitations that applies to your clients’ potential actions and to timely file their claims.

(Marconi & Langs)  Two recent cases out of the First District of the Appellate Court in Illinois have bolstered the right of attorneys to assert the attorney client and work product privileges to withhold documents in the context of a malpractice claim against them. In Garvey v. Seyfarth Shaw LLP, 2012 Ill. App. LEXIS 132; 966 N.E. 2d 523 (1st Dist. Mar. 1, 2012) and MDA City Apartments, LLC v. DLA Piper LLP (US), 2012 Ill. App. LEXIS 201 (1st Dist. Mar. 22, 2012), the Court rejected the application of the “fiduciary-duty” exception to the attorney client and work product privileges. The opinions give instruction as to the underlying facts and factors which will frame and preserve an attorney’s asserted privilege as against his or her former client.

(Marconi & Langs)  For the past several years, Illinois Attorney General ("IAG"), Lisa Madigan, and the State of Illinois have conducted a campaign against companies that purport to assist distressed homeowners and debtors in dealing with their debt situation.1 The primary weapons in the IAG's arsenal are two statutes: the Mortgage Rescue Fraud Act, 765 ILCS 940/1 et seq. (eff. Jan. 1, 2007) ("MRFA"); and, the Debt Settlement Consumer Protection Act, 225 ILCS 429/1 et seq. (eff. Aug. 3, 2010) ("DSCPA"). However, in both the MRFA and the DSCPA there are exclusions for attorneys. The Acts apply to statutorily defined "distressed property consultants" or "debt settlement services", respectively. The MRFA excludes "attorneys licensed in Illinois who are engaged in the practice of law". The DSCPA excludes "attorneys licensed, or otherwise authorized, to practice in Illinois who are engaged in the practice of law." 765 ILCS 940/5; and 225 ILCS 429/10. The purpose of both of these exclusions is to allow attorneys who provide bankruptcy or other traditional legal services to debtors to continue taking retainers. However, some attorneys saw this as a loophole that would allow them to provide mortgage relief or debt settlement services and still take an up-front fee, contrary to either statute's otherwise clear prohibition. The danger that attorneys will be caught in the cross-fire in this war between the IAG and debtor assistance companies was highlighted in this space with regard to the MFRA.

(Marconi & Langs)  The Rules of Professional Conduct now requires attorneys to provide consent for the banks holding client funds to automatically report overdraws to the ARDC. This is an early detection system for possible financial malfeasance and a call for more discipline in managing and accounting for client funds.

(Marconi & Langs)  The Illinois Supreme Court recently issued its opinion in Reliable Fire Equip. Co. v. Arredondo, 2011 Ill. LEXIS 1836 (Ill. Dec. 1, 2011). The opinion enforced prior precedent that an employer’s legitimate business interest should be considered in deciding whether a restrictive covenant should be enforced, but it rejected the previously set “tests” and “formulas” employed by Illinois appellate courts in determining whether a legitimate business interest exists. Illinois lawyers should carefully consider the Supreme Court’s decision and reconsider their previous opinions to clients regarding the enforceability of certain covenants.

(Marconi & Langs)  Does a statutory limitations period stated in calendar years end on the anniversary date or the day before the anniversary date? Two recent cases, one withdrawn and one with an Illinois Supreme Court Justice’s pointed dissent, indicate that the answer you have been counting on may be subject to challenge.

(Marconi & Langs)  Effective September 1, 2011, the Illinois Supreme Court has amended Rule 1.15 of the Illinois Rules of Professional Conduct respecting the safekeeping of client funds deposited in trust accounts. As professional fiduciaries, attorneys have long been required to keep their clients’ funds separate from their own. Now, the Supreme Court has limited the options for accounts to hold client funds, imposed new record keeping requirements on attorneys, and now requires banks to notify the ARDC when client accounts are overdrawn.

(Marconi & Langs)  Lawyers are increasingly receiving emails from alleged potential foreign clients looking to collect debts from customers. More likely than not, the email is the first step in a fraudulent scheme which involves a deposit and withdrawal from your special client fund account. A basic knowledge of Article 4 of the UCC and simple precautions can help lawyers avoid becoming a victim of these schemes and protect against other potential fraudulent deposits into lawyer’s special accounts, including fraudulent settlement checks and retainer checks.

(Marconi & Langs)  Defense counsel engaged by ISBA Mutual Insurance Company (ISBAMIC) recently obtained a highly favorable interpretation of the repose provision contained within Illinois Code of Civil Procedure, §735 ILCS 5/13-214.3 (legal malpractice) on behalf of one of its insureds. In Snyder v. Heidelberger, 2011 Ill. LEXIS 1097 (Ill. June 16, 2011), the Illinois Supreme Court reversed a Second District Appellate Court decision that had reinstated a plaintiff’s legal malpractice claim originally dismissed by the trial court, per the repose provision in that limitations statute.