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The referral is a form of currency in the legal profession. Directing a client to a fellow attorney, other client or a professional acquaintance fosters goodwill, strengthens relationships and — in the best of circumstances — results in a referral back. More importantly, the referred client receives informed direction toward the help he needs. Given their “win-win-win” nature, it is not surprising that most attorneys are quick to make referrals. But attorneys should be aware that the price for trafficking in referrals and enjoying their benefits may be additional exposure to legal malpractice claims. Every referral carries the risk that the referred client will receive substandard service and incur damages as a result. The referred client may seek to recover his damages from the referring attorney, particularly when the client is unable to recover his damages from the service provider. Several states penalize attorneys for negligent referrals to other attorneys. The question whether a referred client may recover damages from the referring attorney, however, is not definitively resolved in some states, including under Texas law. It is well established in Texas that a physician owes a duty to a patient when referring that patient to another physician. The referring physician must act in good faith and with reasonable care in the selection of the referred physician. To satisfy this duty, the referring physician must select a duly licensed physician in good standing in the profession and must not possess knowledge that the referred physician is incompetent or lacks skill. The mere act of referring a patient does not create potential liability for the referring physician. Failing to meet the standard of care, however, will subject the referring physician to a claim for negligent referral. WHAT’S AT STAKE? Jurisdictions such as New Jersey and California have imposed a similar duty of care on an attorney referring a client to another attorney and have recognized legal malpractice claims based upon a breach of this duty. Other jurisdictions such as Florida and New York have imposed liability for the actions of the referred attorney based solely on the referring attorney’s acceptance of a referral fee. These states maintain that acceptance of the referral fee constitutes an assumption of joint responsibility for the case. A recent Georgia Court of Appeals case expanded the scope of a referring attorney’s duty in Georgia to also apply to referrals to non-attorney service providers. In that case, Williamson v. Abellera, the attorney recommended an “exchange facilitator” to the clients to be used in connection with a tax-free, like-kind exchange of property under �1031 of the Internal Revenue Code. The attorney’s sole knowledge of the recommended exchange facilitator included the details set forth in a brochure sent to him as a part of a mass mailing. The attorney made no effort to ascertain or verify the credentials or trustworthiness of the exchange facilitator. After the exchange facilitator fled the country with the clients’ money, they sued the attorney for negligent referral. The attorney was awarded summary judgment based on his argument that the exchange facilitator’s intervening criminal act severed the causal connection between any negligence by the attorney and the clients’ damages. Overturning the summary judgment award, the Georgia Court of Appeals held that the attorney failed to exercise ordinary care, skill and diligence in referring the exchange facilitator, which made the subsequent theft foreseeable. Consequently, the causal connection between the attorney’s negligence and the clients’ damages remained intact under Georgia law. Unlike other jurisdictions, Texas courts have not squarely addressed this issue. In an unpublished 1993 case, Scoggin v. Henderson, the client asserted a negligent referral claim against the lawyer-defendants alleging they had knowledge that the referred attorney was likely to charge excessive fees and not handle the case properly. Without comment as to the validity of negligent referral claims against attorneys, the Dallas Court of Appeals reviewed the record for evidence that the lawyer-defendants indeed had knowledge that the referred attorney likely was to charge excessive fees or mishandle the case. Finding that the record did not contain such evidence, the Court of Appeals affirmed the trial court’s summary judgment. The implication of Scoggin is that negligent referral claims may be brought against referring attorneys in Texas and that the duty imposed upon referring attorneys is substantially similar to the duty imposed upon referring physicians. Referral alone will not create potential liability; however, referral with knowledge of incompetence, lack of skill or knowledge of excessive billing may expose the referring attorney to liability. The absence of analysis or citation to authority regarding the validity of negligent referral claims against lawyers in Texas, coupled with the fact that the opinion was not designated for publication, however, make Scoggin of dubious precedential value. Unfortunately, it is the only Texas appellate decision to date to approach the issue. Until another Texas court takes up the issue of negligent referral claims against attorneys, the prudent practitioner must assume that potential liability exists in connection with referrals to attorneys and nonattorneys. Short of abstaining from referrals altogether, attorneys can employ some or all the following precautions: WAYS TO PLAY IT SAFE � Refuse Referral Fees: A financially onerous step but it will prevent imposition of liability based on a theory of assumption of joint responsibility. � Know Your Service Providers: Regardless of their profession, the referring attorney should investigate the most rudimentary aspects of the service providers, such as credentials and reputation among its trade association. � Warning: The referring attorney should inform the client of the extent of the lawyer’s knowledge about the referral and suggest an independent investigation by the client. � Refer Several Names: Providing clients with more than one name may shift the burden back to the client to evaluate the suitability of the service provider. Until a Texas court speaks out on the issue, the best attorneys can do is to play it safe. Robert M. Hoffman is a 19-year practitioner and member of the trial section of Gardere & Wynne. Hoffman concentrates on the defense of lawyer malpractice claims. Michael L. Zweber is a three-year practitioner and member of Gardere & Wynne’s trial section. Zweber handles various complex litigation matters. Send questions or comments to [email protected]

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