Shari Klevens, left, and Alanna Clair, Dentons (photo: Courtesy Photo)

When employing legal counsel, clients may expect that their attorney will not only have knowledge of the relevant legal procedures, but also will be able to counsel the client regarding the risks and possible outcomes for a matter. For litigators, that can mean that the client is looking to the attorney for an evaluation of their potential liability or recovery in connection with a lawsuit. Indeed, in most litigations, settlement is at least considered at some point during the matter, which necessarily requires the client to consider the strengths and weaknesses of the case in formulating a settlement position.

However, although many attorneys strive to assist their clients in making informed decisions, the act of predicting results can be less than certain. There are a wide range factors that may impact the result in a case besides the facts and the applicable legal principles. This can include a mix of objective data, such as jury verdict reports, and other more subjective factors, such as an assessment of the tendencies of the judge assigned to the case. Because of the volatility associated with these factors, most experienced attorneys are aware of at least one instance (if not many) where a verdict comes in for an amount that is completely unexpected based on the facts of the case.

Still, even if true, some clients may find it less than helpful if their attorney simply tells them that “anything can happen” in a litigation. Thus, there can be a tension between trying to provide guidance to the client in evaluating a case and accounting for the unpredictability that is inherent in lawsuits.

The risk is that where the actual outcome differs dramatically from the attorney’s prediction, the clients (or their insurers) may blame the attorneys for not seeing it coming, especially where the client had the opportunity to settle the case prior to trial but failed to do so in reliance upon the attorney’s valuation.

Whether an attorney’s inaccurate valuation under such circumstances constitutes legal malpractice can of course be fact-specific. In some instances, it may be that the attorney overlooked a critical legal element or other detail that might have impacted the valuation; in others, the attorney can do everything right and there can still be an unforeseen outcome. As discussed below, there are a number of ethical and legal considerations that can vary by jurisdiction and that may impact an attorney’s potential liability for an inaccurate evaluation.

The Applicable Standard of Care

One potential consideration is Rule 1.1. of the California Rules of Professional Conduct, which requires that an attorney provide a competent representation to a client. “Competence” in performing legal services is defined in part as the “learning and skill…reasonably necessary for the performance of such service.”

However, what constitutes the necessary “learning and skill” could vary based on the customs of the attorneys in the jurisdiction and the type of practice. For example, if jury verdict reports are widely relied upon by attorneys in a particular area, then an attorney may want to consult such reports when assessing a defendant’s potential liability in a personal injury case.

At the same time, courts in some jurisdictions have noted that jury verdict reports can be of little value because it is nearly impossible to find “apples to apples” comparisons between prior cases and the case at issue. Instead, many attorneys will thoroughly review the facts and law and, relying on her or his experience with similar cases, make an educated conclusion regarding the client’s likelihood of success.

The Judgmental Immunity Doctrine

In California, attorneys facing a claim based on an inaccurate valuation potentially have another line of defense: the judgmental immunity doctrine. The doctrine “relieves an attorney from a finding of liability even where there was an unfavorable result if there was an honest error in judgment concerning a doubtful or debatable point of law … .” Blanks v. Seyfarth Shaw, 171 Cal. App. 4th 336, 378, 89 Cal. Rptr. 3d 710, 743 (2009) (citations omitted).

In order to invoke the judgmental immunity doctrine, an attorney must show: (1) “that there were unsettled or debatable areas of the law that were the subject of the legal advice rendered;” and (2) that the “advice was based upon ‘reasonable research in an effort to ascertain relevant legal principles and to make an informed decision as to a course of conduct based upon an intelligent assessment of the problem.’” Id. (citations omitted).

The fact that an attorney made a judgment call will not always be adequate to avoid liability; instead, the attorney typically must ensure that her or his exercise of judgment was sufficiently informed based on reasonable research and consideration of the applicable legal principles.

Accordingly, when providing a valuation, it can be helpful for attorneys to articulate the key reasons for the attorney’s opinion and the variables that may affect the case. Having this information in writing can act as a shield in the event that the client later questions whether the attorney took adequate steps in considering the client’s potential liability.

Valuations for Insurers

An attorney’s potential liability for an error in a valuation can be even more complicated where a client’s insurer is involved. Insurance policies typically require that the insured obtain the insurer’s consent prior to settling a claim. In such a situation, the insurer may ask defense counsel to prepare a valuation for the insurer’s use in determining whether to consent to a settlement.

However, although the insurer may of course consider defense counsel’s opinions, many states hold that an insurer’s duty to perform an independent analysis of the merits of the claim against the insured is non-delegable. Thus, in the event that an insured is subjected to an unexpected excess judgment, it can be a difficult question as to who should bear the potential liability between defense counsel and the insurer.

While valuing claims may sometimes seem like nothing more than an educated guess, attorneys can still take steps to try to read the tea leaves for their client in a way that reduces their (and their client’s) overall risk.

Shari L. Klevens is a partner at Dentons US and serves on the firm’s US Board of Directors. She represents and advises lawyers and insurers on complex claims, is co-chair of Dentons’ global insurance sector team, and is co-author of “California Legal Malpractice Law” (2014). Alanna Clair is a partner at Dentons US and focuses on professional liability defense.  Shari and Alanna are co-authors of “The Lawyer’s Handbook: Ethics Compliance and Claim Avoidance.”