Potential Pitfalls for Solo and Small Firm Attorneys

By: Lori T. Williams, Esq., Owner/Managing Attorney of Your Legal Resource, PLLC

There are many advantages to owning your own law practice, or being a small firm professional.  You have more control over your choice of clients and the matters you handle. You have more flexibility in your schedule.  There are no hierarchical limits to your earning capacity.

However, there can also be pitfalls for the unwary solo or small firm practitioner. It is important to keep up with best practices, changes in the law, and follow the rules of professional responsibility to protect both yourself and your client.

According to Southfield attorney Harvey Heller, professional liability claims for attorneys fall into the following 7 categories:

• Conflict of interest between clients or between the lawyer and a client
• Calendering issues (missed deadlines, court appearances, etc.)
• Failure to know the law
• Improper drafting of pleadings or contracts
• Inadequate discovery
• Clerical errors
• Breach of fiduciary duty to the client

The practice areas with the largest number of claims against lawyers include:

• Real estate
• Securities
• Trusts and Estates
• Corporate and Business transactions
• Collection and Bankruptcy
• Intellectual Property

Heller noted that 70% of claims in business transactions involve attorneys who devote 5% or less of their practice to business transactions. The clear message is: Do Not Dabble!  This is a hotbed of litigation for the untrained practitioner. Defense costs of business transactions are twice as high as other areas of litigation.

Did you know….

• Law firms with 5 or less attorneys make up 70% of all legal liability claims.
• The average firm size is 2-3 attorneys.
• More than 37% of claims are against solos.
• Solos represent 48% of all law firms.

According to Heller, “attorneys should report material errors to their client whenever the client’s rights are prejudiced or damaged.  The attorney should report it promptly or as soon as he or she learns of the error and determines it can’t be remedied.”  It is best to communicate the error face to face whenever possible.  If that’s not possible, the telephone is the next best way to communicate the error to the client. Voicemail should be avoided for discussing the mistake.  Email should never be used to break the news, and should only be used to confirm the discussion between the lawyer and client.

Michael Barrett, Consulting Director of Risk Control, LPL recommends that attorneys meet with prospective new clients in person, to avoid any internet fraud that is so commonly perpetrated over email these days.   Barrett also suggests the following best practice tips:

• Run conflict of interest checks before receiving any confidential information from the client.  Advise the client not to share anything confidential prior to the attorney deciding to represent that client.
• Reach an understanding with the client about the scope of representation, along with fees and expenses and the client’s ability to pay and then confirm the understanding in an engagement letter.
• If you decide not to represent the client, send a declination letter and advise the client to promptly seek other counsel to preserve any rights.  Be sure to advise of any applicable statute of limitations dates in the letter.
• When representation ends, send a closing letter to the client.

For additional information about best practices for solos and small firm practitioners, visit the State Bar of Michigan practice management resource center.

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Lori T. Williams is a 23 year attorney based in Birmingham, MI. She owns a legal referral and legal consulting business called Your Legal Resource, PLLC. She assists individuals and small businesses in need of legal advice or representation by connecting them with the right legal specialist for their situation. She also provides consulting services for attorneys and other professional service providers on how to generate more business through effective branding, marketing, networking, and by creating strategic partnerships. For more information, visit www.bestlegalresource.com.

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