Referring Lawyer Liability

September 2008

Lawyers often refer clients, or particular client matters, to other lawyers. There are a host of reasons one lawyer will make a referral to another, from seeking to rely on the other attorney's experience to the need to find local counsel in a state in which the referring lawyer does not practice.

In the vast majority of these situations, everyone benefits. The client obtains representation, the referring lawyer has a happy client, and the lawyer to whom the client was referred is able to practice law, earn a fee, and enhance his or her relationship with the referring lawyer and with the client.

Sometimes, however, disputes arise and a client may assert a malpractice claim against the lawyer to whom the client's matter was referred - and against the referring lawyer. A number of New York court decisions, as well as ethics rules and bar association opinions, help explain how the issues raised by such a claim typically are resolved.

Liability Questions

Generally speaking, where a lawyer to whom a client referred a matter is sued for malpractice by his or her client, and the complaint also names the referring attorney, the referring attorney will raise a number of defenses to the malpractice claim. The referring attorney may argue that there is no "privity," meaning no connection between the alleged negligence of the lawyer to whom the matter was referred and the referring attorney. Indeed, the rule in New York is that the plaintiff must establish the existence of an attorney-client relationship to bring such a claim. That principle is illustrated in a recent decision where an intermediate appellate court upheld dismissal of a legal malpractice claim after finding that the plaintiffs had "failed to establish the existence of an attorney-client relationship" with the defendant. The referring attorney also would argue that he or she should not be held liable because the referring attorney did none of the legal work, and thus was not the active tortfeasor.

Negligent Referral

This is not to necessarily suggest that a referring lawyer has absolutely no legal concerns regarding a malpractice claim stemming from a referral. In fact, a claim for negligent referral might be actionable, depending on the particular circumstances.

Generally speaking, a lawyer is not responsible for the acts or omissions of a lawyer outside the firm who serves as co-counsel or in a similar arrangement. But a lawyer who makes a referral to another attorney may have to exercise "reasonable care" when making that referral. In one case, for example, a New York lawyer referred a client to a New Jersey lawyer; the New Jersey lawyer was listed in an attorney directory as licensed but had been indicted for defrauding an insurance carrier. Subsequently, the New Jersey lawyer allegedly embezzled settlement funds from the referred client.

A federal district court concluded that a referring lawyer could be held liable for negligent referral (and for negligent supervision) if the referring lawyer does not "reasonably inquire" as to the other attorney's qualifications, where knowledge of past conduct would have led the referring lawyer not to make the referral. It should be noted that, in this case, the New Jersey lawyer's indictment was not the dispositive factor in the court's decision to find the referring lawyer potentially liable.

Where a referral is made with the client's consent, there would be no derivative or vicarious liability for the errors made by the lawyer to whom the client is referred (at least assuming that the referring lawyer does not act in a supervisory role and there is no fee sharing arrangement). Along those lines, a court has determined that a referring lawyer's failure to independently verify factual reports made by local Puerto Rico counsel or to determine if pleadings were correct did not result in liability for the referring lawyer.

Vicarious Liability

Recently, an intermediate appellate court suggested a vicarious liability rule in a case of a New York lawyer referring a matter to another New York lawyer. The ruling might be fact-specific, however: here, both firms' names were on the retainer agreement; both firms handled personal injury work; and there was no writing regarding sharing of responsibilities or the fee. The appellate court found that questions of fact existed as to the nature and extent of the referring lawyer's responsibilities. It did not find vicarious liability as a matter of law, but allowed the matter to proceed against the referring lawyer to determine the referring lawyer's involvement on the client's behalf.

Significantly, the ethics rules and some bar associations have opined that a referring lawyer who takes a disproportionately large fee (without regard to actual legal work performed) may be vicariously liable for the negligence of the lawyer to whom a matter was referred.

Lack of Supervision

One of the most recent New York cases examining the liability of referring attorneys held that a New York lawyer can be liable for an out-of-state attorney's malpractice for lack of supervision.

The plaintiff in this case initially retained the defendant lawyer to recover her interest in a partnership. The defendant lawyer obtained a judgment for more than $1.2 million against an individual who was a resident of Florida. Before the judgment could be satisfied, the Floridian passed away. The defendant lawyer thereafter sought the assistance of a Florida attorney in preserving the plaintiff's rights as against the Florida estate. At first, the defendant lawyer requested that the Florida lawyer determine whether an estate had been opened and advise as to the time in which it would be necessary to make a claim against the estate and the manner of doing so. Shortly thereafter, the Florida lawyer advised the defendant lawyer that an estate had not yet been opened and that he would take no further actions regarding the estate until instructed to do so by the defendant lawyer. The defendant lawyer notified the plaintiff that the defendant lawyer had retained the Florida lawyer "to follow" the Florida estate "and file any claims . . . required with respect to [her] judgment."

In the meantime, the defendant lawyer was negotiating with the estate's attorneys to attempt to settle the plaintiff's judgment. The defendant lawyer apparently instructed the Florida lawyer to file a notice of claim but no such notice of claim was filed within the required time. The estate's attorneys withdrew all offers of settlement, and the plaintiff brought suit against the defendant lawyer, alleging that the defendant lawyer was vicariously liable for the negligence of the Florida lawyer and/or negligently failed to supervise the Florida lawyer in filing the notice of claim in Florida. The defendant lawyer maintained that its duty to the plaintiff had been completely met when it retained the Florida lawyer to file the notice of claim and that it was entitled to rely on that lawyer to perform that act.

In its decision, the court stated the general rule that "[a] firm is not ordinarily liable . . . for the acts or omissions of a lawyer outside the firm who is working with the firm lawyers as co-counsel or in a similar arrangement," because such a lawyer usually is an independent agent of the client. In this case, however, the court pointed out that the defendant lawyer had solicited the Florida lawyer and had obtained the lawyer's assistance without the plaintiff's knowledge. The court added that although the plaintiff was later advised that the Florida lawyer had been retained by the defendant lawyer, the plaintiff had no contact with the Florida lawyer and did not enter into a retainer agreement with his firm. Instead, the court said, the plaintiff "completely relied" on the defendant lawyer to take the necessary steps to satisfy her judgment - which it characterized as a "relatively simple matter." Under these circumstances, the court held, the defendant lawyer had assumed responsibility to the plaintiff for the filing of the Florida estate claim and the Florida lawyer became the defendant lawyer's subagent. Therefore, it concluded, the defendant lawyer had a duty to supervise the Florida lawyer's actions.

This decision does not necessarily imply that referring lawyers must be fully familiar with a foreign jurisdiction's laws or face potential liability. The need to file a notice of claim was a ministerial act that did not require a detailed understanding of Florida jurisprudence.

Whether the court would have reached the same conclusion under different and more complicated facts is not clear.

 Reprinted with permission from the Fall 2008 issue of OneBeacom Professional Partners Newsletter.



David S. Wilck, Partner


Insurance Coverage & Litigation

Professional Liability