Risk Management Tips For Attorneys Serving As Local Counsel


Law360, New York (August 19, 2016, 11:32 AM ET) —

Patrick S. (Sean) Ginty

Seth L. Laver

Many attorneys are territorial animals. The thought of voluntarily exposing a client to potential competition may be frightening. Yet, given the licensing requirements attached to the practice of law, attorneys seeking to represent clients outside of their home state may require the use of local counsel. As such, they may be reluctant to risk the possibility of losing clients to competitors. Often, lead counsel maintains sole contact with the client and makes substantive decisions, merely relying upon local counsel only to serve in the requisite capacity to satisfy jurisdictional procedures. Therein lies the problem: absent appropriate precautionary measures, local counsel faces equal malpractice exposure for the substantive, strategic decisions of lead counsel even when the local attorney engages in what may appear to constitute inconsequential work on behalf of the client. What may be initially viewed as a stress-free opportunity includes inherent risks for local counsel.

Undefined Roles

In the typical scenario, lead counsel or the client may retain a local attorney for the limited purpose of representing a client in a venue in which the lead is not admitted to practice. Lead counsel may rely upon the local counsel to handle filings, including perhaps pro hac vice motions, to liaise with the court, to advise the lead counsel regarding any local rules and to serve as a registered mailing address for the client’s matter. On the other hand, lead counsel often may be engaged in rendering primary professional services by exclusively engaging with the client and making all substantive decisions.

The model outlined above is routinely utilized. Nevertheless, it is unquestionably flawed due to the high probability of miscommunication among the attorneys and/or the client. This relationship also may create unintended client expectations. The American Bar Association Model Rules of Professional Conduct, which are applicable in many states, do not distinguish between “local” and “lead” counsel. Rather, any attorney representing a client must comply with the ethical rules. This responsibility is, therefore, considered a nondelegable obligation. However, a client may agree to engage an attorney for a limited purpose as long as the limitation is expressly documented in an executed engagement letter. In the absence of such documentation, local counsel is vulnerable to the same risks facing lead counsel and, worse still, the local counsel may have had no involvement in the substantive decisions that could lead to a malpractice claim.

Defined Risks

Today, attorneys find themselves in high demand[1] but are subject to an increased risk of malpractice. Ever-evolving technology has affected how, when and where attorneys practice, thus contributing to heightened client expectations regarding the delivery of legal services. Moreover, client expectations may have shifted as a result of the “dramatic economic upheaval” of 2008.[2] Thus, in a relatively new approach to legal marketing, it is the client who strongly influences how attorneys deliver legal services.[3] When an attorney fails to meet these expectations, studies suggest that clients have become more willing than ever to sue their former attorneys for malpractice.[4]

The cause of the recent uptick in malpractice claims falls outside the scope of this article. Yet the ABA has identified the most common cause of legal malpractice lawsuits. According to its data, the most common legal malpractice claim by type of alleged error is the “failure to know/apply law.”[5] Approximately 11 percent of all reported legal malpractice claims are due to an attorney’s alleged failure to properly apply substantive law. The ABA provides a compelling hypothesis as to why substantive errors lead to the most legal malpractice claims:

Over the past few decades, legislation has become more complex and the law has become far more complicated. This means more lawyers now tend to specialize in a given area of law, with fewer general practitioners in the mix.[6]

Lawyers performing professional services outside of their typical practice area — dabblers — are significantly more likely to commit “failure to know” errors. Based upon CNA claim data from 2006 to 2015, solo law firms that have four or more different areas of practice report significantly more claims than solo firms with fewer than four different areas of practice. Dabblers may include the bankruptcy attorney who agrees to represent a neighbor in a landlord/tenant dispute or the commercial litigator who prepares his friend’s estate plan. Importantly, however, dabblers also include the attorney who agrees to serve as a local counsel in a matter outside of her practice area. The foregoing statistics underscore the risks and exposures facing local counsel who may be placed at the mercy of lead counsel’s substantive decisions.

Rules of the Game

Local counsel cannot operate under the assumption that lead counsel is exclusively responsible to the client in the event of a poor, unexpected or avoidable result. Even if lead counsel made all substantive decisions and kept the local on the outskirts, the ABA Model Rules consider a lawyer’s role as “all-inclusive.”[7]

Local counsel must consider his or her ethical obligations arising under several ABA Model Rules. In particular, Rule 1.1 requires that a lawyer “provide competent representation to a client” and to inform the client of any areas that transcend the lawyer’s expertise. Rule 1.3 requires that a lawyer act with “reasonable diligence and promptness in representing a client.” Rule 1.4 requires that the lawyer “keep a client reasonably informed about the status of the matter.”

Attorneys may take for granted these fundamental obligations when serving as local counsel based upon a misguided belief that the responsibility of competence, diligence and communication fall exclusively on the shoulders of lead counsel. According to the New York Committee on Professional Ethics, “merely being designated as ‘local counsel’ does not necessarily limit the attorney’s role, nor does it narrow her ethical obligations to the client.”[8]

Courts also take these responsibilities seriously. In Curb Records v. Adams & Reese LLP, the Fifth Circuit Court of Appeals considered an attorney’s duty to bypass “lead counsel and report directly to the client.”[9] In Curb, local counsel complied with specific instructions from lead counsel not to engage in any dialog with the client and accepted lead counsel’s representation that the client approved lead counsel’s recommendations. Notably, local counsel did not obtain an engagement letter with the client. Ultimately, lead counsel’s “malfeasance” resulted in a default judgment against the client and the malpractice suit followed. On appeal, the Fifth Circuit reversed the district court and held that there is an “inherent and non-delegable duty of care that requires local counsel to inform its client” of pertinent information regardless of lead counsel’s instructions. With reference to the ABA Model Rules 1.1, 1.3 and 1.4, the court concluded that the local counsel, even with “secondary responsibility for a case,” must maintain his ethical responsibilities to the client and his failure to do so constituted malpractice.

Consider whether the outcome would have been different for the defendant in Curb had local counsel obtained an executed engagement letter with the client. Although counsel cannot contract around the obligation to communicate pertinent information to the client, courts are cognizant of the reality that “local counsel does not automatically incur a duty of care with regard to the entire litigation … when the client vests lead counsel with primary responsibility for the litigation.”[10] If the law were otherwise, the costs involved in retaining local counsel would increase substantially and would result in a duplication of effort that would “foster problematic public policy.”[11] The accepted method of achieving that balance between ethical obligations and maintaining client expectations is through an effective, limited scope engagement letter.

Limitation-of-Scope Provisions

An attorney seeking to define her limited role as local counsel should do so through an agreement to limit the scope of the representation under ABA Model Rule 1.2(c), which all jurisdictions have adopted in some form. A limited-scope agreement “does not absolve a lawyer from complying with her ethical duties,” but it “narrows the universe within which those ethical obligations apply, by limiting the lawyer’s role in the matter and specifying the tasks she is to perform.”[12] A written agreement that clearly defines the role of local counsel can benefit all parties by managing expectations, avoiding misunderstandings, and ultimately minimizing disputes regarding the allocation of responsibility between lead and local counsel and by managing the client’s costs.

Pursuant to Rule 1.2(c), a “lawyer may limit the scope of his representation if the limitation is reasonable under the circumstances and the client gives informed consent.” Therefore, if local counsel reaches an understanding with lead counsel that the local counsel’s role, for example, will be limited to attending hearings and reviewing pleadings researched and prepared by lead counsel, the following limiting language may be appropriate:

Our responsibilities will include attending court hearings and oversight of all pleadings to ensure that each is filed in the proper form and providing advice concerning [forum venue] law and practice when appropriate. While we will monitor the communications that we receive, it will not be our role to identify issues of importance, develop case strategy, or respond to any discovery unless there is a specific request from you [lead law firm] to us in writing to do so.

Of course, local counsel must adhere to the limited-scope provision in order to be protected by it. If local counsel provides legal services that go beyond the agreed-upon written limitations, such limitations would no longer be in effect and the local counsel may assume joint liability for any errors made by the lead counsel.

Other Engagement Letter Considerations

As an initial matter, lead counsel must decide, in conjunction with the client, who will retain local counsel — i.e. the client or the lead counsel. In making this decision, consistent with the duty of loyalty owed to the client, the best interests of the client should be the determinative factor. Lead counsel must resist the temptation to shield the existence or identity of the local counsel from the client due to concerns that the client may engage the local counsel for future assignments.

Regardless of who engages local counsel, it may be appropriate for the substance of the engagement letter with local counsel to contain the following elements.

Fees and Expenses

If the legal fees are being shared between lead and local counsel, the engagement agreement must comply with the relevant jurisdiction’s corollary to Model Rule 1.5, which states that “a division of a fee between lawyers who are not in the same firm may be made only” if the division “is in proportion to the services performed by each lawyer,” the client agrees in writing to this allocation and the total fee is “reasonable.”

If lead counsel is not sharing fees with local counsel, the client need not execute the engagement letter. Yet, lead counsel must obtain the client’s informed consent to hire local counsel — preferably in writing.

In addition to deciding whether they will charge the client on a contingent fee, flat fee or hourly basis, lead and local counsel also will seek to agree on:

  • who will bill the client and how often;
  • who will discuss any expenses not covered in the engagement agreement with the client;
  • who will advance payments for expenses when the client will not;
  • who will maintain any client funds;
  • who will pay local counsel’s fees and expenses; and
  • how they will address nonpayment or partial payment issues with the client.

The engagement agreement between lead and local counsel should convey not only the fee basis but how often the client will be billed, what expenses the client is responsible for paying, and what steps the law firms will take if the client fails to pay legal bills on a timely basis.

Indemnification Agreement

In attempting to avoid liability in the event that the other attorney commits an error during the representation, lead and local counsel may consider a joint indemnification agreement. Local counsel has little to no control over lead counsel’s conduct and should not risk liability for an error for which the lead is solely responsible. The lead law firm may encounter difficulty in avoiding liability for the mistakes of local counsel if the lead law firm neglected its supervisory responsibilities. See Whalen v. DeGraff Foy Conway Holt-Harris & Mealey, 53 A.D. 3d 912, 914 (N.Y. Sup. Ct. 2008) (lead law firm “assumed responsibility” for local counsel’s failure to timely file a collection action when it failed to verify whether a complaint had been filed within two-year time period). Courts, however, have been willing to adjudicate indemnity claims by lead counsel against local counsel where the error is solely the fault of local counsel. See, e.g., Musser v. Provencher, 48 P.3d 408 (Cal. 2002) (lead law firm/family lawyer allowed to pursue equitable indemnification claim against the local counsel/bankruptcy attorney where that attorney provided erroneous legal advice to the client about the effect that the client’s spouse’s bankruptcy proceedings would have on the client’s support hearing).

File Retention and Destruction

While the lead counsel will wish to maintain the primary client file, it should have an agreement with local counsel about how and when documents that local counsel receives will be forwarded to lead counsel, and what original documents, if any, local counsel will maintain. At the conclusion of the matter, lead counsel should instruct local counsel to forward any file substantive materials not previously received by the lead law firm. The engagement agreement should instruct the client as to how the files will be stored, how long lead counsel will maintain the client file, and whether and how much the law firm will charge for copying costs.

Client Review of Agreement

Before clients countersign an engagement letter, they should confirm that they have read the entire letter, understand its terms, and agree to abide by these terms. Clients also should be informed that they have the right to have another lawyer review the engagement letter outside the presence of the retained law firm, and prior to countersigning the letter. This section of the engagement letter also should clearly state that the attorney-client relationship does not commence unless and until the countersigned letter is received by the law firm and any corresponding retainer is paid.

Countersignature of Client

Requiring a client countersignature is a good risk management practice for all engagement agreements and imperative if lead and local counsel are splitting the legal fees.

There are, of course, numerous other provisions that should appear in an engagement letter irrespective of whether the engagement is for local counsel. Sample engagement letters with multiple provisions and draft language can be reviewed in the CNA Lawyers’ Toolkit 3.0, which is available here.


The practice of law can be incredibly rewarding, yet it is fraught with risk. Those risks amplify when an attorney steps outside her primary practice area or fails to effectively communicate with the client. Serving as a local counsel can be beneficial to all — client, lead and local counsel — as long as expectations and communication are clear. An appropriately tailored engagement letter with local counsel may represent a suitable method of managing these risks.

—By Patrick S. (Sean) Ginty, CNA Global Specialty, and Seth L. Laver, Goldberg Segalla LLP

Patrick (Sean) Ginty is a risk control consulting director for CNA’s Lawyers Professional Liability Insurance Program. He is responsible for the design and content of lawyers’ professional liability risk-control services, products and publications. He also authors articles focusing on law firm risk control and professional responsibility issues. He is admitted to practice in Illinois and the U.S. District Court for the Northern District of Illinois.

Seth Laver is a partner in the Philadelphia office of Goldberg Segalla. He defends attorneys, accountants and other professionals in malpractice matters and provides presuit risk consultation. He is the editor of Professional Liability Matters, Goldberg Segalla’s blog focusing on the professional liability community, and the vice chairman of DRI’s professional liability committee. He is admitted to practice in Pennsylvania, New Jersey and New York.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] See, Commerce Department’s Report on Professional Services Industry. http://selectusa.commerce.gov/industry-snapshots/professional-services-industry-united-states.html.

[2] ABA Journal. Dubious Honor: Real Estate Leads the Practice Field for Malpractice Claims, 12/1/2012.

[3] 2015 Report on the State of the Legal Market, Georgetown Law Center for the Study of the Legal Profession. http://www.law.georgetown.edu/academics/centers-institutes/legal-profession/upload/FINAL-Report-1-7-15.pdf

[4] Insurance Journal, Insurers See Rise in Severity of Lawyers’ Malpractice Claims, 7/2/2014. http://www.insurancejournal.com/news/national/2014/07/02/333572.htm

[5] ABA Law Practice, Avoiding Malpractice — Are You at Risk?, 7/2010, Vol 36, No. 4, http://www.americanbar.org/publications/law_practice_home/law_practice_archive/lpm_magazine_articles_v36_is4_pg29.html

[6] Ibid.

[7] LegalNews.com, Not-so-limited role and exposure of local counsel, 5/20/2010, http://www.legalnews.com/ingham/683403

[8] The Association of the Bar of the City of New York Committee on Professional Ethics, Formal Opinion 2015-4: Duties of Local Counsel; http://www.nycbar.org/ethics/ethics-opinions-local/2015opinions/2188-formal-opinion-2015-4-duties-of-local-counsel-.

[9] Curb Records v. Adams & Reese LLP, 1999 U.S. App. LEXIS 39003 (5th Cir. La. Nov. 29, 1999)

[10] Macawber Eng’g v. Robson & Miller, 47 F.3d 253 (8th Cir. Minn. 1995)

[11] Id.

[12] The Association of the Bar of the City of New York Committee on Professional Ethics, Formal Opinion 2015-4: Duties of Local Counsel; http://www.nycbar.org/ethics/ethics-opinions-local/2015opinions/2188-formal-opinion-2015-4-duties-of-local-counsel-.

2 Responses

  1. I know a few lawyers in broward county that had no business representing homeowners let alone representing the banks. All the bad lawyers jumped on the foreclosure bandwagon. Worthless vultures!

  2. Reblogged this on Matthews' Blog.

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