Importance of Client Documentation

While it is impossible to avoid every single potential claim, there are plenty of risk management steps that can be taken to at least help defend such a suit.   One of the most important steps that can be taken is to maintain proper documentation of your communications with clients.   This becomes extremely important when the client and attorney disagree.

This came to light in a recent professional liability claim/ lawsuit.  The CEO of a shipping company retained counsel to settle a dispute with the board of directors of his company.  However, the CEO and Board engaged in settlement discussions without the hired counsel, who repeatedly advised the CEO not to proceed with the settlement.  Nevertheless, the settlement was reached and the CEO stated on records that he understood and approved the settlement.

Two years later, the CEO filed a malpractice claim against his former counsel claiming it was their ineffective representation which led to the unfavorable settlement.   The court ruled in favor of the law firm, as the CEO was unable to provide any evidence that he was not advised of the consequences of the proposed settlement.  In fact, there were at least 13 separate documents that showed the CEO proceeded against the advice of his attorneys.

This case shows that a well-documented client file can go a long way toward defending a malpractice claim. When settling cases, attorneys need to be mindful of the possibility of buyer’s remorse and take precautions to avoid liability.  Attorneys should be careful to explain all the terms of the settlement and give their client ample time to weigh their options.   Attorneys should also document their explanation of the settlement terms and the client’s consent in writing. This may not stave off the buyer’s remorse lawsuit, but may help to preclude liability.

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