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The California Appellate Law Podcast - Kristi Thomas

Negligent Referrals and Other Ethical Traps When Referring Clients

Tim Kowal     February 21, 2023

For attorneys, the best referral is a referral from another attorney. But before you refer to another attorney, beware of the ethical traps. Kristi Thomas, a labor and employment attorney who also focuses on ethical issue, warns in a recent article that incautious referrals can lead to a conflict of interest, or an improper referral fee, or even liability for making a negligent referral.

Kristi discusses these traps, and offers some tips how to avoid them:

Given multiple names when making a referral, not just one. (Especially if you have a referral-fee arrangement with one of them.)

Don’t vouch for your colleagues. That doesn’t mean you can’t say anything about them, but instruct potential clients to do their own research.

Control the conversation with the potential client to avoid eliciting confidential information and creating conflicts—don’t let them “vent.”

Send non-engagement letters, confirming no attorney-client relationship has been formed.

Check your malpractice policy to see if it covers negligent referrals—not all of them do.

Kristi Thomas’s biography and LinkedIn profile.

Appellate Specialist Jeff Lewis' biography, LinkedIn profile, and Twitter feed.

Appellate Specialist Tim Kowal's biography, LinkedIn profile, Twitter feed, and YouTube page.

Sign up for Tim Kowal’s Weekly Legal Update, or view his blog of recent cases.

Use this link to get a 25% lifetime discount on Casetext.

Other items discussed in the episode:

Transcript:

Announcer  0:03
Welcome to the California appellate podcast, a discussion of timely trial tips and the latest cases and news coming from the California Court of Appeal and the California Supreme Court. And now your hosts, Tim Cole and Jeff Lewis.

Kristi Thomas  0:17 
Welcome, everyone. I am Jeff

Tim Kowal  0:18
Lewis. And I'm Jim Hall. Both Jeff and I are certified appellate specialists and uncertified podcast co host. Each episode we tried to bring our audience of trial and appellate attorneys some legal insights and news they can use in their practice. If you find this podcast helpful, please recommend it to a colleague.

Kristi Thomas  0:34 
And a quick thank you to our podcast sponsor case text. Keys text is a legal research tool that harnesses AI and a lightning fast interface to help lawyers find case authority fast. I've been a subscriber since 2019, and I highly endorse their service and listeners of our podcasts will receive a 25% lifetime discount available to them if they sign up at case text.com/cal. That's case text.com/ca, l p,

Tim Kowal  0:57 
and Jeff today we're pleased to welcome Christy Thomas to the show to talk about her recently published article about the legal and ethical traps to avoid when referring a client to another attorney Christy Thomas is a labor and employment attorney with Sheppard Mullin. She is also actively involved in the firm's pro bono practice. Christy's practice involves representing employers and the defense of complaints for class action and single plaintiff matters. Chris he also provides counseling and training to employers on issues like Wage and Hour disability and family and medical leave discipline and termination and sexual harassment and workplace behavior. Christy began her legal career in Philadelphia in 2008, before becoming a member of the California Bar in 2011. Christy, welcome to the podcast.

Kristi Thomas  1:43 
Thank you guys so much for having me. Very happy to be here.

Tim Kowal  1:48
Yes. terrific to have you. Now, I read a very brief version of your bio. Is there anything that I missed or something anything you'd like to talk about to kind of introduce yourself to our audience?

Kristi Thomas  1:56 

Yeah, you know, the bio does a great job at covering my my legal practice and my experience, but it doesn't really talk about what I like to do outside of work. So just just a few things to get to know me better. Beach gal. I love outdoor activities, mainly because I grew up back east in the cold. So I now like biking and running outside and hiking. In fact, my husband and I just hiked the most active volcano in Guatemala about a month ago. It's called Picasa. Very fun, but also very challenging. I golf just about every weekend, and I just got a new puppy. So super excited about that. No, that's

Tim Kowal  2:39 
terrific. Yeah, I was just I was just telling Christy offline that I took the family to Lego Land. for the weekend. We came back early because the kids were worried about their new kittens. They hadn't been away from their new kittens. So Chris, he's got a new puppy. My kids got new kittens. That's her always a fun challenge to have in the house. Well, Christy, you mentioned being from the cold back east in Philadelphia, what brought you out here and what and what brought you into labor and employment? Were you in labor and employment when you were practicing in Philadelphia as well, so

Kristi Thomas  3:08 
I wasn't. So I actually started off more as a general practitioner, and I handled, you know, a wide array of legal issues. But I remember getting my first employment law case, and I was representing the employer. And I remember opposing counsel, really trying to make my client look like the Big Bad Company, right. And I just kept thinking, look, this employer is doing the best that they can, given the many employment laws that they have to navigate. And now that I'm in California, especially the many employment laws here, and I just remember thinking, you know, they're trying to do everything right for their clients, maybe or their employees. I'm sorry, maybe they just need a little bit of help or guidance in doing so. And the case really appealed to me. And I decided to start specializing in employment law.

Tim Kowal  4:00 
Yeah. And are your cases usually in state court or federal court or arbitration? I know there's a lot of employment matters that that go to arbitration.

Kristi Thomas  4:10 
Yeah, so I haven't mixed most of mine are in state court or arbitration. And the reason we're seeing so many in arbitration is because employers nowadays have valid binding arbitration agreements with their employees. So we often move to compel the matter to arbitration. The cases that I have that have stayed in state court, the named plaintiff hasn't signed an arbitration agreement. So we're sort of stuck there. And then I do have a handful right now that are in federal court, and those typically started off in state court as class actions, but the same type of thing the named plaintiff, the representative did not sign an arbitration agreement. There is no class action waiver. And so unfortunately, the class action remains, we can't go to arbitration. So what do we typically do? We try to remove the case to federal court under something called the class action Fairness Act. But a lot of my cases are in arbitration right now,

Tim Kowal  5:10 
what stands out in your mind? I know, as attorneys, we and a lot of our listeners know some of the basic differences between state and federal court and arbitration. What are some things that stand out in your mind as distinct advantages of one forum over another, in particular, for your area of practice in labor and employment?

Kristi Thomas  5:27

Yes, let me talk a little bit about arbitration since so many of my cases are in that venue. I think any venue has pros and cons. Tim, but arbitration, I mean, we tend to like arbitration for our clients, because there's limited discovery involved, okay, usually moves along on a faster track than a case that's in court. There's usually some aspect of confidentiality to the proceeding, which the company or the employer likes. And then the big thing, the most important thing is that the case is not being tried by a jury, right? We have a neutral or there's supposed to be a neutral arbitrator hearing the case. So there was the pros. And then you know, in terms of cons disadvantages, I would say, for employers in California anyway, employers do have to pay the arbitrators fee, and sometimes that can get a little high. But, you know, pros compared to the cons, I think the pros outweigh the cons for arbitration.

And the biggest con, you'd have to say, is the lack of an appellate remedy and a lack of a role for appellate counsel in any arbitration. Right.

Right. Right.

Tim Kowal  6:38 
Yeah, very, very limited in terms of appellate remedies when you're in arbitration, it's not good for our business, Jeff.

Kristi Thomas  6:44 
Yeah, I do have to ask, you know, while we're on the subject, do you ever do I see, sometimes the AAA or JAMS offers unlimited arbitration appellate remedy where you have an appeal from the arbitration within the Jam's or AAA structure. Have you ever participated in one of those or No,

I have not. No, I have it. Interesting.

Tim Kowal  7:03 
All right. Christy, let me ask you this, what do you think that clients or opposing counsel would say is unique about your legal practice? Now your labor and employment attorney representing employers, what do you think makes you unique about the cases that you take on or the way that you practice?

Kristi Thomas  7:20 
So I think my clients would say, my ability to offer full service in all things employment law, right. So some employment attorneys only do litigation, some employment attorneys only do workplace investigations, others only do counseling, I do it all. So I not only litigate, but I'm on the phone with my clients, sometimes on a daily basis, advising them, counseling them on their policies, practices, procedures, daily workplace issues that they're dealing with, in order to try to avoid lawsuits. And then on top of that, I go out and perform trainings for the managers, the supervisors, and the employees at these various companies, at our clients. So I would say I would say, Yeah, my ability to really offer full service.

Tim Kowal  8:14 
Yeah, that seems somewhat rare and, and difficult to do to be able to offer that soup to nuts, doing the advisory services and counseling services, pre litigation in hopes that the employer will never have to be involved in litigation, but with the realization that probably sooner or later, you will, will have to be you will face a lawsuit from a former or current employee.

Kristi Thomas  8:33 
Sooner or later in California, it's bound to happen. Right?

Tim Kowal  8:36 
Christie? Do you have any good war stories, litigation stories that you'd like to share litigation mistakes, maybe that you've seen someone make that are just indelible, that you'll never forget, you'll always avoid making in your practice?

Kristi Thomas  8:49 
Yeah, I'm sure we've all seen just a ton of stuff. But one thing that comes to mind, and it seems pretty simple and straightforward, but make sure you're reviewing the items you turn over in litigation or to opposing counsel, before you turn them over. I had a case once I was representing the employer, and the employee had taken or my client thought they had taken a lot of confidential information, customer lists, stuff like that. And then they weren't went to work for another employer. And the thought was that they were using our clients confidential information at their new employer. So I obviously subpoenaed the records from that other employer and the other employer was represented, by the way, but when I got the records in, I mean, I just asked myself, I'm like, did the other lawyer really even look this stuff because there was no fight put up, you know, the stuff was just sort of handed over. And it was very, very helpful to me. So I think the lesson is just always, always review things you're turning over in litigation, even if it's just to be prepared and see what It's coming down the pipeline,

Tim Kowal  10:01
you don't want the first time you see a document you produce to be in a filing by your opponent.

Kristi Thomas  10:07 
Absolutely not.

Tim Kowal  10:10 
Okay, last question before we dive into your article about the ethical pitfalls in referring clients, Christie, what is your favorite part of your practice? You do it all in labor and employment from consulting and advisory services to the litigation itself? What do you like the best,

Kristi Thomas  10:25 
I like that it never gets boring. And I say that because the California employment laws, the regulations, the rolls, they're constantly changing, guys. I mean, every year I'm having to get up to speed on new employment laws that have been passed. I'm having to discuss them with my clients. And we're having to determine how to tackle all of these new requirements. Okay, the best example and the most recent example, I think, that I can give are all of the COVID 19 related laws and regulations. At one point, it seemed like Cal OSHA was changing the rules as they apply to employers on a monthly basis. And so you really got to be on top of that stuff. You have to know that stuff. So there's never a dull moment when it comes to California Employment Law.

Tim Kowal  11:17 
Okay, Christie, let's talk about the article that you published in the Orange County Lawyer magazine back in August 2022. It's titled, avoiding pitfalls when making a referral to another lawyer. So let's talk about some of the ways that an attorney can avoid becoming incurring liability in the process of making referrals. And the first one that jumped out at me, it's frankly, one that I had not given enough thought to is the potential liability for making a negligent referral. That was one trap I was aware of another trap I want learn more about was about referral fees, which was another one that you talked about, but negligent referrals. Christie, so let's say you refer a client to another attorney and that attorney screwed up, can you really as the referring attorney, be made liable for making a negligent referral?

Kristi Thomas  12:04 
So the short answer there is, yes, you can. But I think there's a distinction to be made here between legal malpractice claims on the one hand, okay, and general negligence claims. On the other hand, for a legal malpractice claim, the person needs to be your client. Okay, and I'm sure we'll talk about this in a little bit, how to avoid forming an attorney client relationship with a prospective client. But for a legal malpractice claim, the person needs to be your client, when you're acting and we all know this, when you're acting as somebody's lawyer, you have a fiduciary duty to that person, okay. It's probably a heightened standard of care that you owe them, I would be willing to bet that that if you were sued for legal malpractice, somebody could probably persuade a judge to include a heightened standard of care language in the jury instruction. Okay. But that's legal malpractice. Switching gears to general negligence. That's a much lesser standard. I mean, let's think about those elements from law school, right? There's just four of them. You need duty, breach, causation, and damages. Okay? Really, anyone can be sued for general negligence. You don't have to have just your client sue you for for negligence that can be a prospective client, who can sue you for general negligence? And so the question becomes, how do we avoid a lawsuit that's related to a negligent referral, and there are a few things that you can do to keep in mind. So when you are talking with a prospective client, and you're referring them, number one, you want to give them the names of several attorneys, okay, don't just give them the name of one lawyer, provide them with several names. Number two, you want to say that you can't vouch for these other attorneys. Okay, this is not an endorsement by you. Yes, you're providing them with some names, but you're not vouching for them. Number three, suggests that the person actually conduct their own research, including interviewing these other attorneys to see if they're going to be appropriate for their case. Okay, that's number three. And then the last one, and this is especially important, if you have a prospective client who was going down the path of thinking that they are your client, put something in writing. You can obviously word it in a diplomatic way. But say something to the effect of I'm not your attorney. I mean, maybe you even send out like a non engagement letter saying something to the effect of, you know, as you know, we've had to decline representation. Okay, there's nothing better than having that in writing. All right. And then And one other thing I do want to mention on this, and I think it's worth mentioning, there is one exception to the idea that only your client can sue you for legal malpractice. And that exception comes into play when we're dealing with intended beneficiaries. And I think this is worth mentioning, okay. And the best example, the number one example I can think of there involves beneficiaries to a trust. So let's say that you are a trust attorney, and you're preparing a trust, and you make some sort of mistake, okay, an error, you miss a roll, I don't know what it is, but you mess up. All right, and the trust store ends up dying. Well, the trust store obviously can't sue you, maybe his or her estate can but he or she can't. But think about it. I mean, who's really going to damage in that situation? It's the beneficiaries. And you may say, Well, I prepare this trust and these beneficiaries were not even born yet. There's no way they can sue me know, if there are expressor intended beneficiaries, they can sue for legal malpractice. And the other interesting rub there is that, you know, not only can trust work really opened the door or expand the class of people who can sue you for legal malpractice. But there's also a statute of limitations issue. So the statute of limitations on legal malpractice claims in California is one year. And so again, you might be thinking, great, awesome, that's going to come and go, I'm not going to get sued. But the thing is, the statute of limitations does not start to run until an actual injury occurs. So that's usually some specific event. Usually, it's the wealthy trust or dying, right? So you can prepare this trust. And then 20 years later, you're sued. I mean, for legal malpractice, it can happen. Okay. But yeah, setting that aside, prospective client, how to avoid the negligent referral, the names of more than one attorney say you can't vouch for them, tell them to conduct their own research, and really put something in writing. That's,

those are three really good tips. Let me ask you to back up one second, we're talking about the difference between suing someone for malpractice and the difference between a general negligence case and a lower standard of care or the lower burden of proof. You know, in a legal malpractice case, you always have to prove the case within a case that but for the malpractice, you would have won the underlying case, it's usually hard to prove that causation. Is there no equivalent requirements for negligent referral cases that you don't have to prove that but for the negligent referral, you would have won the prior case, etc?

That's a great question, Jeff, I'm not aware of that now,

makes it easy. Hey,

Tim Kowal  17:43 

you wouldn't approve that. If you wouldn't have referred me to this derelict, I would have found this top notch attorney who would have won my case for me. Right, right.

Kristi Thomas  17:53 
And then the other question I had isn't, don't provide me anything that's super secret or anything. But do larger firms like Sheppard Mullin, have policies regarding if a prospective client calls us and asks us for a referral? Do not give a referral? Or here's what you do if you're going to give a referral to they have expect policies and their procedures?

Well, I'm not aware of something formal in writing at large firms. I mean, maybe some large firms have them. But like, I think the biggest thing is whether there's going to be a client relations issue possibly, right, because if a prospective client calls you and they want a referral, and it turns out that you maybe your firm already represents someone adverse to them. I mean, you can my understanding is you can make the referral for the prospective client. I'm not aware of California law saying you can't In fact, there are cases in New York and District of Columbia that say you can make the referral. But from a client relations standpoint, are you going to want the other client at the firm or the partner handling their case to be calling you up and saying, Why did you refer this person out to somebody who's now suing my client? Right? You got to make that decision? I think on a case by case basis,

Tim Kowal  19:06 
is there any room for avoiding liability? Let's go back to the your three tip. To avoid this pitfall of liability for negligent referrals you suggested, give multiple names. Rather than just giving the prospective client just one name, which could lend the suggestion that this is your go to this is the person who's going to serve you best give multiple names, don't vouch for any one of them, and instruct the potential client to do their own research and send out a non engagement letter. Is there any way to avoid or limit liability by if it's your legal assistant giving out the name rather than the attorney personally?

Kristi Thomas  19:41 
So that's a great question too. I think a lot of firms and a lot of firms for the intake process. They do have a paralegal or some sort of intake specialist handling this right, not the attorney. And so the paralegal or intake specialists may be great, they're probably well trained. They're probably better at During the onboarding, then the attorney but what I would think of putting in place is some sort of policy that says the onboarding process is not complete or the intake process is not complete until x, y, w, x, y, z have occurred, right. That way, the intake specialists and the paralegals know really what needs to be done. And then maybe there is maybe you do have a battery or a list of people like if you do personal injury, you can't take it, you have a list of people that you refer to and the paralegal or the intake specialist can give the person that. So I think that would be helpful.

Tim Kowal  20:39 
Yes. If you're just kind of sending out instead of the attorney personally saying, you should really talk to Christie Thomas about this. You could have your legal secretary saying, Here's a list of some of the attorneys that we know of who practice and labor and employment law Christy Thomas Jane Doe and John Smith than that suggested this is just a standard list. No one of them is being vouched for or referred as a specialist in your particular case.

Kristi Thomas  21:01
I think that would be helpful. Yeah.

Tim Kowal  21:04
And I think Jeff, you know, thinking back our episodes about using legal tech, I'm getting some ideas for some text expanders to put in emails. I'm not your client. I'm not your attorney. This is legal advice. And I don't vouch for any of these attorneys that I'm whose names I'm giving you.

Jeff Lewis  21:19 
Yeah, yeah.

Tim Kowal  21:21 
Okay, Christy, let's go back to your something else. You said in your article avoiding pitfalls. When making a referral to another lawyer in Orange County Lawyer magazine, you said something in that article I wanted to ask you about because it was just a great line that stood out to me. When making a referral. Obviously, you want to refer, you know, you want to be able to refer to someone who's going to be a winner we talked about you shouldn't vouch for that person, don't make any guarantees or representations. But you want to have a good feeling about this person. Obviously, if you're going to refer a potential client to them, you cautioned that meant a long list of victories on this refer ease the attorney that referring to you might look on their website, and it'll show a long list of victories. But that doesn't always mean that the attorney is any good you point out because you say in your article that quote, someone with a long history of well publicized victories might not promptly return client phone calls, or may be abrupt or even rude when doing so and quote. And then here's the line that stood out to me you say, quote, they may be a lion in the courtroom, but a dud in the library and quote, I wanted to ask you what you meant by that. A lion in the courtroom, but a dud in the library.

Kristi Thomas  22:25 
Yeah, I'm glad you guys asked this question. So we could flush this out a little bit. Okay, so what do I mean aligned in the courtroom and died in the library? What I mean is, yes, we are all attorneys, right. But we're also all human. So some of us are very good or excel in one area. And maybe we don't excel as much in another area. So maybe the best way to think about this, maybe we've seen this with some of our colleagues that this is a way to describe it. So you have one colleague who is very good at presenting, but they're not as good at negotiating. Or you have one colleague who's very good at research, but they're not as good at writing. Okay, I'm not saying that they're a bad attorney at all. I'm not saying that. I'm just saying they tend to excel in one area over another. So when you're referring someone, the prospective client, you don't want to say to them, Look, I have the best attorney for you. This is the best. Okay, what does best attorney even mean? How is that defined? Okay. Instead, what you should be asking yourself, What am I looking for in the person I'm referring to, in the context of this issue or case, because maybe you don't need the line in the courtroom, maybe this looks like it's going to be a small case, it's going to resolve fairly quickly, you don't need the lion. Or maybe you see that this might be a super high profile case, very contentious, it's going to go to trial, and you know, and stellar trial attorney to refer them to, but you also know that that attorney sends out very, very heavy bills, are the heavy bills gonna matter in that situation? Maybe not. And then I'll just give you a third example. Let's say you have a prospective client who has called you 10 times within 24 hours, despite you, you know, talking to them each time and saying, I'm gathering some names for you to refer you to, and you have attorneys in mind, but you know, that two of those attorneys are very, very bad at promptly returning client calls. Maybe this is not the person to refer to them. Okay. So whenever you're referring, you just want to think about what am I looking for in the person I'm referring to in the context of this issue or case?

Right, right. Yeah. Jose, interesting, you know, also The cases, sometimes you have somebody who's alive yesterday, but today and tomorrow might not be alive. And I wonder if Tom gerar gotten any referrals in the waning years of his practice whether any of the referring lawyers there are facing negligent referral lawsuits?

Tim Kowal  25:14 
Oh, my goodness.

Kristi Thomas  25:16
Yeah. Sorry, Tim,

Tim Kowal  25:18 
go ahead. Well, no, that's right, the right attorney for every occasion. But it's interesting how these issues kind of bookend that, you know, it's important to find the attorney who has the right niche, not just any old labor and employment lawyer, you might be ready to go to trial next week. And you need like a last minute trial attorney who only does trials and they relish getting the file the night before the trial and working it up and going in there and cross examining witnesses. And then you have the other need are just, I want to avoid lawsuits, I want to be best positioned to defend myself in a lawsuit if I get them. So you want to be able to know the person you're, you're referring to the potential client so that you're giving them the best referral. But again, back to your first advice, you don't want to vouch for anybody and say that this is really the person who's going to serve you best for your situation, because again, you don't want to, you want to limit your exposure to liability for negligent referrals if that attorney doesn't wind up serving the potential client well. Okay, tell us about referring an existing client to another attorney, we've been kind of talking about, you get a phone call from somebody and you're turning down the representation or it's not your practice area, and you're referring it out to someone, someone else that you may know, because you want to help other colleagues maybe or you just happen to know someone that may help be able to help the potential client, but what about, are there different considerations, Christy, for existing clients, you have an ongoing relationship with the client, they have a need for something that you don't provide? And you're going to refer them outside yourself or your law firm? Do you have what duties do you have to your existing client? When you refer them out to another attorney? Do you have to research the attorney? How much do you have to know about the other attorney before you refer them to your existing client?

Kristi Thomas  26:58 
I think it's a great question to ask your existing client how much they want you to do for them. Okay, so you may start off by saying, or you may initially say to them, Hey, do you just want my off the cuff thoughts on attorneys to refer you to? And they'll probably say, Yes, stop there. Or you say, Do you want me to conduct more research on these attorneys? Okay, some attorneys will even go out. And I can share this with you, Attorneys at my firm, have gone out of state to places where we don't have offices to sit down and meet with attorneys at other firms to see if they would be a good fit for existing clients. And they've actually charged the existing clients their whole rates in order to do that. So I think it depends on what the client wants. I also would probably bet that because it's an existing client, there is probably a heightened duty there when it comes to referrals. I mean, look, this is your client, maybe whether they're high paying clients or not, they're going to expect you to refer them to attorneys who are well equipped to handle these cases or these situations, but have an open line of communication with them and see how they want you to proceed.

Tim Kowal  28:17 
Right. Yeah, I guess that's a good conversation to have before you start billing your client for doing that research, if that's not something that the client envisioned? Absolutely. Okay, let's review some basics that sometimes some of us might forget about avoiding the formation of an attorney client relationship during the referral process, volunteer that I could use a refresher on this. So when I pick up the phone with a potential new client for the first time, exactly, when does the attorney client relationship get formed? And what steps can I take to avoid forming that relationship before I'm ready for it?

Kristi Thomas  28:55 
Yeah, so this is a tough one. So look, in a perfect world, in a perfect world, you should tell the prospective client not to divulge confidential information to you and only to give you enough of information that you need to run a conflict search. Okay, because what's the danger if the prospective client gives you too much information? Well, it's twofold. Okay, so number one, let's say that you've had the call with a prospective client, and you're running a conflict search. And oh, it comes up during the conflict search that another attorney at your firm is actually representing the party that's adverse to this prospective client. And then on top of that, oh, I just got a ton of information from this prospective client during my phone call with them. All right, the risk there is that the partner at your firm already representing the adverse party could be conflicted out and I can tell you he or she is not going to be here. Happy Abell. So that's number one. The second thing is that you form an attorney client relationship with a prospective client. So let me give you an example here to try to illustrate this. Let's say you're at a dinner party. Okay. And everyone's chatting small talk, and somebody says, Can you believe I got sued the other day? And you say, Oh, really? Well, I'm an attorney. What? What kind of case is it? What do you get sued for? And they say, a car accident, and you to get to talking throughout the evening, and the dinner party ends. You don't hear from this person until 28 days later, you get a phone call from her saying, Hey, are we going to respond to this complaint? It seems like we should probably do something here. What's the holdup? Right. So that person obviously thinks that you are her attorney. Now the standard for forming an attorney client relationship, or whether one has been formed is what would a reasonable person in the shoes of the prospective client had thought? What would a reasonable person in the shoes of the prospective client had thoughts? So the relationship is really in the eye of the beholder? And that Beholder here is the prospective client? Okay, so how do we avoid forming the attorney client relationship during your phone call? I mean, the biggest thing is don't onboard confidential information. If you're just kicking the tires around, and not divulging confidential information, there's no relationship. But in the real world, that's really, really tough, because maybe you're talking to this person for the first time, you haven't talked with them before, you're trying to obviously make a good impression, because they could be a potential client. They want to get things off their chest and tell their story. And you don't really know where to draw the line. So is it that they're just giving you their name, their adversaries name and the type of case? Oh, it's an employment law case sexual harassment claim? Or are they really getting into the details with you? Well, you know, in December, we conducted an investigation at the workplace, we interview these people, we determine, maybe employee X did harass employee, why? Oh, and by the way, we don't have a policy on this, we need your help in drafting a policy. Okay. It's really when they start getting into the details. Again, it's hard to know when to draw the line. But I would just tell them guys right up front in your conversation, don't divulge confidential information to me. And then the second big thing is try not to do or say anything that would make them reasonably believe a relationship has been formed. Tell them you're not their attorney, the biggest thing is communicating that there is no relationship. And I know I had mentioned earlier about putting something in writing, do it here. I mean, send them an email. Hi, so and so great. speaking with you today, you know, we're running a conflict search. But please continue not to divulge confidential information to me, an attorney client relationship has not yet been formed, or it has not been born, something like that. Does that make sense? Yeah, I

Tim Kowal  33:25 
wonder if I can ask you just a couple of follow ups about that. Just because confidential information, you know, I'm going to put that in quotation marks you and I, as attorneys have an idea of what that means the potential client might not always know what that means. Same thing about or similar problem with saying that I'm not your attorney. If you say that at the end, we know that the attorney client relationship is formed. It's kind of a subjective standard, whether the client believes that an attorney client relationship is formed. So sometimes we announced that pablum that not your attorney, I'm not your attorney, I'm not your attorney. But if the client believes, well, I but I told you all this stuff. And I told you, I'm desperate for an attorney and you talk to me. And anyway, I wonder what if it might be a best practice during a phone call, say with a potential client to for the attorney to control the conversation and make sure that the attorney is asking questions. And you know, make sure that kind of like conducting a deposition, don't let the client or potential client go off on a narrative explanation, because you're gonna wind up getting all the the inside information about the case.

Kristi Thomas  34:24 
Yeah, I completely agree with that. Look, they want to vent right, they want somebody to tell their story to so when it might make sense to do and this goes along with the intake policy that I had referenced before. But maybe you have at the firm some sort of policy or questions that are to be asked of the prospective client, just keeping it very basic, you know, what is your name? Okay, what company do you work at? What's the name of the party suing you give us that information? What type of case is it what you know, what are the claims in the complaint, you know, something like that, and Just leave it very basic. I completely agree.

Tim Kowal  35:03 
It's probably a best practice, we attorneys figure that we like to have our assistants and paralegals take down the initial intake information, because obviously, it saves our time. But I think that's probably also a good firewall to make sure that, that we're not conflicting ourselves out because the that intake person knows, just to ask this, these types of questions, and the potential client probably knows not to don't bother giving a narrative explanation of the case, because this is only person, only a person who's filling in blanks on an intake form.

Kristi Thomas  35:31 
Mm hmm. Yeah. I mean, sometimes there's a lot to be done before the intake process is actually complete, right, and they become your clients. So some firms I know, check the person's credit worthiness, some firms do a background check, you obviously need an engagement letter signed, maybe you need a retainer agreement, right. So it's best to probably indicate look, until we get all this stuff ironed out, is there there may be quite a few things. There's no attorney client relationship yet?

Tim Kowal  36:00 
Yeah. Yeah, the trouble for me personally, is I am an exception for I don't make referrals from other colleagues go through my intake person will usually take their call directly. And now I'm going to be more wary that I could get into trouble there. Because, you know, suddenly, they've got an attorney on the phone, and they want to vent, they want to divulge all the confidential information about their case, because they might think that a trusted person already vouch for you. So you're my guy, I'm gonna give it all to you right now. So you have to be very defensive in your initial phone call with a potential client? Yes, I want to ask you something else. This is kind of off off the cuff. But it's specific to Jeff and my practice as appellate attorneys, a lot of the time, we will consult directly with the trial attorney. And I wonder if that sparks any ideas for you about potential ethical issues, or opening up liability for to the client. Sometimes in my relationship, I might not even speak directly with the client. I'm just more or less a consultant for the trial attorney. But my understanding is that I'm still I'm still an attorney, and the ultimate client is still the client, even if I am relating indirectly with the client through the trial attorney. I wonder if that raises any potential issues there. If I'm taking direction from the trial attorney, at what point do I have to go to the client for something if let's say that I detect a potential malpractice issue, for example, that could get very sticky, I imagine.

Kristi Thomas  37:22 
Yeah. Oh, my gosh, yeah. That's a good question. And definitely a tough area, and it can get sticky. So I, I mean, thinking just offhand right now for appellate lawyers in particular, I don't know of issues that can come up offhand. If I think of any, I will reach out to

Christy. I know most of your works in arbitration. But if you take nothing away from this podcast, take this away, always ask for a statement decision, and always bring a court reporter to a big hearing. And if you don't do those things, or if you're an appellate lawyer, you've discovered the trial lawyer has not done those things. That's an uncomfortable conversation that an appellate lawyer has to have with the client about those topics.

That's a great point. Yeah, that's

Tim Kowal  38:05 
right. Okay, let's talk about conflict referrals. This happens from time to time for litigation and trial attorneys. So in the instance where you two clients and then suddenly a conflict arises, and one or both of those clients will now need a new attorney. So Christie, can I refer those clients you know, that conflict client out without tainting the new attorney with the conflicts if I have, you know, two clients, and now one of them has a conflict, I want to keep one and send the other out. I guess I have to be careful not again, back to your first tip, not to vouch for the other attorney, I give them multiple options. But to the extent that I have a pre existing relationship with that other attorney as a colleague, do I have to worry about having tainted that colleague with the with my conflict?

Kristi Thomas  38:51
Yes. So this is a very difficult question to answer. And I'm going to try my best to answer it by talking about a few different scenarios here. Okay. So let's talk about where I usually see this issue arise or come up. It's in the context of joint representation. So talking about my bread and butter for a moment, which is employment law, let's say that I represent a company, the employer, and I'm also representing one of their employees, okay, one of their employees got individually sued. So I'm representing both of them. And maybe the company is called, we call them the Alpha clients. So they're the ones paying the bill. And the employee is the beta client. They're not paying the bill. All right. But something happens during the representation. So I don't know the employee ends up stealing stuff from the company, he has to be terminated. And so there's a conflict issue. You should already have in place, a joint representation letter or agreement, discussing the pros and cons of joint representation, okay. And you should really have language in that agreement, which allows you To decide which client you're going to continue on with, that allows you to drop a client. And you want both clients to be acknowledging that they understand that, okay, now when you need to draw, for example, the employee client, the new attorney, and again, this is in the context of joint representation, the new attorney, is there going to get a copy of the file? Because with joint representation, you can't keep communications from joint clients? So they're gonna get the copy of the file? But yeah, to your question, can you refer that employee client out to the new attorney? And so let me sort of present another scenario here, and maybe it'll help us answer this. So let's say you're not in the situation of joint representation, your firm just represents two clients to separate matters. Okay, and the conflict was not picked up on at the outset. And you just now determine the conflict. So can you refer one or both of them out? I think that's the conundrum. And I think it's going to be problematic there. Because on the one hand, you have, like we talked about earlier, you have an existing client, who wants you, of course, to refer them to well equipped counsel to handle their case. But on the other hand, you're essentially picking their adversary, right, the other clients, attorney, right, I think that's gonna, I think that's going to pose a problem. Now, if you do decide to refer out, you have to be very, very careful about not divulging confidential information you have on the other client. And let me just throw a third scenario out there. Because we see this one a lot, too. Let's say that your firm or you want to serve a records, it's just a record subpoena on a firm client. In California. Anyway, that's going to be considered direct adversity, serving a record subpoena on a firm client is direct adversity. So what do you do you probably call up the relationship partner at the firm? So the partner who represents the client, you want to serve the subpoena on? You tell them the situation? And then he calls up his client who says, Look, I have a colleague, they're just serving a record subpoena on you, is that okay? And most of the time, they'll say, Okay, but what if they say, nope, nope, that's not okay. So what do you do? You're gonna have to call up outside counsel, you're gonna say, Look, I need conflicts. Counsel, I need you to take this very small portion of this case, it's just serving a subpoena. Can you do that for me? And again, the question is, you know, what, can you tell them? How much can you share with them? You cannot divulge confidential information concerning the other client. I mean, it's you don't want to give them the keys to the kingdom? Because they could then be conflicted out if that makes sense. And it's sort of like remember that crazy fruit of the poisonous tree doctrine from law school is sort of like that, you know, you have confidential information you're conflicted out, okay. Here's the new attorney don't pass the confidential information on to them, or they're going to be conflicted out as well. So it's really a hairy issue, guys. It's tough.

Tim Kowal  43:15 
Yeah. So I guess that means don't have in depth conversations with the potential new counsel certainly don't divulge any any confidential information. But I guess just giving a name and phone number to the soon to be former client would probably not get you into too much trouble. Is that right?

Kristi Thomas  43:31 
Probably not. Yeah. Yeah.

I don't even know if you can whisper to your successor to this new lawyer, that there's a conflict the existence of a conflict that might plant ideas in their head? I don't know.

Yeah, it may. So that's, yeah, that's a really difficult one.

Tim Kowal  43:46 
That is hard. Because when you're looking for a new attorney, that new attorney is going to want to know, you know, what's the deal here? How come you're leaving the representation? Because, you know, when you're not the first attorney on a case, that's, you know, that raises a red flag in the attorneys mind that you don't like to be the second third, fourth in line because that suggests that there's a could be a problem with taking on the representation. So they want to know that it's, you know, I don't think there's any problem letting them know that there's a conflict and that should trigger another warning flag that okay, I should be careful in eliciting information from the former counsel, that could disqualify me that could imbue me with the same conflict that former counsel has. So yeah, so these are important questions to ask because again, these are it's a it's a conversation that is attractive to have for the new counsel because look, I can get all that I can get the scoop I don't have to go through and you know, investigate the file. I can just kind of get the skinny on what this case is about from former counsel but be very careful there. You could conflict yourself out. Yeah, be very cautious. Okay. All right. The last question I want to ask you Christy about your article, avoiding pitfalls when making a referral to another lawyer. And in this is about the question of referral fees. Now there are a lot of attorneys who swear by referral fees love to give and to get referral fees and other attorneys who just won't touch them. won't ask for and won't take and what should attorneys know about giving and retaking referral fees?

Kristi Thomas  45:06 
Yeah, so So my response here, I think, is pretty short and to the point, and it's if you have a referral fee agreement, it will be void unless you have client consent. Okay, the referral fee agreement needs to have client consent. So and I like to give this example, let's say that you have a huge wrongful death case that you're considering referring out to somebody who specializes in these types of cases. And you and that attorney agree that you're going to get a 10% referral fee, okay, and the case ends up going to trial, and the plaintiff does much better than anyone had expected. In fact, they recover 50 million at trial, and the attorney that you refer them to decides, no, you know what, I'm not going to give him his 10% referral fee now, okay, and you sue for that referral fee. The number one way that you're not going to get that referral fee is lack of client consent, a lot of attorneys agree on referral fees in the dark without the client knowing about it can't do that it needs to be in writing with their consent. I think just to tie into our other issue on negligent referrals, I think referral fees could also in a way, affect a negligent referral case. And what I mean there is, let's say that you have two really good attorneys in mind that you want to refer a case to, but they don't pay a referral fee, you come across somebody else who pays a referral referral fee, and you give them the case, okay, and that attorney loses, and you're sued for making a negligent referral, the optics there, guys are going to look very bad that you passed up two really good attorneys, because they didn't pay a referral fee and went with the other one who did pay them for paying you that referral fee. I mean, what if you have a trail of emails, a ton of them just showing you shopping around for the highest referral fee? It's not going to look good. It's not going to look good. And then just, you know, one more point on that. I think the role that you need client consent for referral fees really illustrates something here about the Rules of Professional Conduct, the Rules of Professional Conduct are enforced by the State Bar, okay, you can't have a cause of action for damages for violating a rule of professional conduct. The State Bar enforces them, but I will tell you courts look at them, and they borrow from them. So if you are in court on this referral fee issue, and you say to the judge, wait, we wait, Your Honor, we had a binding contract here, myself and this other attorney where he agreed to pay me 10% In referral fees, you have to enforce this, the court can say no, I'm not going to enforce it, because you don't have client consent there.

Tim Kowal  48:01 
Yeah, well, one thing that occurred to me while you were explaining about how referral fees can play into liability for negligent referrals was back to your rule, again, about providing multiple potential referrals. And not just one attorneys name, but multiple names, and especially if one or more of those names that you're giving gives you back referral fees. If you're recommending somebody who gives you a referral fee, make damn sure that you are also referring giving the name of one or more other attorneys who don't have a referral fee relationship with you. Absolutely. Absolutely. And if you are the referring attorney, do you need to disclose to the potential client? If you're giving the name of another attorney who gives you referral fees? Do you need to disclose that to the attorney? Or can you just leave that for the referring the other attorney you're referring to count on them to disclose that to the client?

Kristi Thomas  48:49 
So but I believe it needs to be disclosed in the agreement that the client needs to consent to. So there's a rule of professional conduct on this, and I'm blanking on the exact roll number, there are so many, but it basically says it needs to be in writing, you need client consent, the actual terms of the referral fee agreement need to be in writing who's involved who's going to get what, and then the fee that the client is paying cannot be increased solely because you're dividing fees, right? So I'll just throw things I mean, if you usually charge $100 just throwing this out there, but now it's $110 because you're gonna give a $10 referral fee. You can't up the fees just because you're going to be dividing them if that makes sense.

Tim Kowal  49:35 
Yeah, yeah. Yeah. Okay. Well, Christy Thomas, thank you so much for coming on and talking with us about your article avoiding pitfalls when making a referral to another lawyer. Just as we close here. Were there any advice that we didn't cover that you want to cover with our audience or any parting remarks or advice for our audience, not legal advice, you are not their attorney, but any parting waiting? Well, we

Kristi Thomas  49:57 
we did establish that Christine her firm are lawyers of record for all of our listeners establish that during the podcast?

No, I mean, I this was great, guys. Thank you so much. I mean, I think I guess the only other question that that I have had before and that others might have is, you know, will my will the insurance like the malpractice policy cover a negligent referral? There may be people wanting to know that I think the easiest answer there is just take a look at your policy and read the exclusions and ask yourself if I make a referral, is it going to be covered under the insuring agreement. Some of them guys are very, very broad these agreements and they cover any act error omission, they may even cover paralegals, and we know that paralegals aren't supposed to be practicing law, but they may even cover them. And some agreements are more narrow, they could just cover you know, professional services, professional legal services rendered. So you really need to take a look at the policy exclusions there.

I wonder to the extent a plaintiff is trying to avoid the high burdens of proving a legal legal malpractice case and they want the easy standard of a mere negligence case. If such a claim for negligent referral might be covered by just a general commercial liability policy, if not your legal malpractice case. It's negligence. It's like a trip and fall.

Yeah, it possibly could it possibly could. Interesting.

Tim Kowal  51:24 

Yeah, that was a big lightbulb moment. For me, Christy, when you mentioned about this is just general negligence rules, not necessarily professional malpractice, but general negligence. That's and I think a lot of attorneys in our audience should stand up and take note of that. That is a little scary. But as Jeff pointed out the other maybe an additional way to address that because it is just general, it just like a slip and fall. Okay, well, that's gonna wrap up this episode. Again, we wanted to thank our sponsor case text for sponsoring the podcast and each week we include links to the cases we discussed using case text. listeners of the podcast can find a 25% discount available to them, but they sign up at case text.com/kalp. That's case text.com/c A LP. If you

Kristi Thomas  52:06 
have suggestions for future episode, go ahead and email us at info at Cal podcast.com. And our upcoming episodes look on tip look for tips on how to lay the groundwork for an appeal when preparing for trial. All right, thanks.

Tim Kowal  52:17 

See you next time and nothing in this podcast establishes an attorney client relationship. I see you next time.

Kristi Thomas  52:23
Thank you guys.

Announcer  52:23 
You have just listened to the California appellate podcast, a discussion of timely trial tips and the latest cases a news coming from the California Court of Appeal and the California Supreme Court. For more information about the cases discussed in today's episode, our hosts and other episodes, visit the California appellate law podcast website at ca l podcast.com. That's c a l podcast.com. Thanks to Jonathan Cara for our intro music. Thank you for listening and please join us again.

Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at CALpodcast.com, and publishes summaries of cases and appellate tips for trial attorneys. Contact Tim at [email protected] or (949) 676-9989.
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