An Overview On Legal Liability In Performing Regulated Professions

AN OVERVIEW ON LEGAL LIABILITY

IN PERFORMING REGULATED PROFESSIONS.

FAMOUS LEGAL MALPRACTICE CLAIMS

Prof. univ. dr. Dragoș CHILEA

”Petru Maior” University

Faculty of Economics, Law and Administrative Sciences

Tîrgu-Mureș, Romania

Andreea Georgiana Enache

Lawyer

The Constanța Bar Association

Iulian Marius Grigorescu

Lawyer

The Constanța Bar Association

ABSTRACT:

This paper shows an overview on the legal liability in performing regulated professions. Legal malpractice law is mostly governed by state law, and in addition the laws vary from state to state. The attorney is going to be liable for nearly any loss the client sustains that's proximately caused from the attorney's lack of skill ordinarily possessed by simply similarly situated members with the legal profession.

According to the Judicial Council of California, 75 percent of family court litigants are self-represented because they cannot afford an attorney. Yet many courts cater to attorneys and the parties they are paid to represent, while denying the indigent meaningful and effective access to family court services.

Further more the paperwork shows evidence of some of the most famous legal malpractice claims. An example would be the case of:

Sacramento Divorce Lawyer D. Thomas Woodruff and Woodruff, O'Hair, Posner and Salinger Sued by Former Client for Over One Million Dollars in Malpractice Case. Nationally recognized legal malpractice attorney Edward Freidberg filled in 2014 a first amended complaint in a malpractice lawsuit alleging more than $1 million in damages against well known Sacramento family law firm Woodruff, O'Hair & Posner, Inc., and firm partner D. Thomas Woodruff. The alleged malpractice occurred in 2001 and the firm is now known as Woodruff, O'Hair, Posner & Salinger. Partners Tom Woodruff, Bob O'Hair, Jeff Posner and Paula Salinger have been involved in a number of other controversies, including filling counterfeit court documents, attempting to obtain a final dissolution judgment while an appeal in the same case was pending, filling documents not in compliance with state law, and, according to family court watchdogs, collusion with family court judges.

The paper also mentions about arhitectural malpractice, toward an equitable rule for determining when the statute of limitations begins to run, as well as legal liability of the financial institutions.

KEYWORDS:

legal liability, famous malpractice claims, Thomas Woodruff One Million Dollars Malpractice Case, legal liability of the financial institutions

JEL CODE: K4

1. LIBERAL PROFESSIONS

1.1 Overview

There is an increased role of the liberal professions in the legal system but also in the economic system, which necessarily involves presenting in detail, the various legal perspectives that enveloped professions. It's about the competitive perspective, the one of protecting consumer rights, advertising and commercial.

Liberal professions meet worldwide, tens of millions of members and in the international community there are a socio-economic factor of great importance. Liberal professions give expression to the right of the free movement of persons and services. (Niculeasa, 2006)

According to the definition, the liberal profession is an intellectual pursuit exercised by a person on his own part, necessarily, of a professional nature. A person who practices a liberal profession acts in the best interest of the client and the community, is often subject to a code of ethics and specific legislation regarding the profession concerned and is personally liable for his professional deeds.

The following professions are basically regarded as liberal professions:

bookkeeper, accountant, company auditor, tax consultant

architect, land surveyor, interior designer, real-estate agent If a person combines the activities of an interior designer with other activities (providing goods, fabrics, et cetera) or if he does the decorating himself (painting, papering, etc.), he engages in commercial activities, and his business will be registered

lawyer – legal advisor, notary public, bailiff

doctor, specialist doctor, dentist, medical labaratory, patient transport, parademic

physiotherapist, veterinary surgeon, pharmacist.

For certain liberal professions, the professional association forbids its members to exercise commercial activities, for example: lawyer, notary public, bailiff, bookkeeper, bookkepper-tax specialist, accountant, tax consultant, company auditor.

1.2 History

A profession is a vocation founded upon specialised educational training, the purpose of which is to supply disinterested objective counsel and service to others, for a direct and definite compensation, wholly apart from expectation of other business gain. pp -475mber 2000, in 2005,ry of Modern Thought, London, Harper-Collins,1999, p.689lt of courageous choices based on an enterpris..The term is a truncation of the term "liberal profession", which is, in turn, an anglicisation of the French term "profession libérale". Originally borrowed by English users in the nineteenth century, it has been re-borrowed by international users from the late twentieth, though the (upper-middle) class overtones of the term do not seem to survive retranslation: “liberal professions” are, according to the Directive on Recognition of Professional Qualifications (2005/36/EC) “those practised on the basis of relevant professional qualifications in a personal, responsible and professionally independent capacity by those providing intellectual and conceptual services in the interest of the client and the public” (Sidney Webb, 1917).

The term needed a definition containing general characteristics of these professions and to be divided into different categories. Such definition should be general, in order to include new professions. A definition that is often seen in the legal literature is the one describing liberal professions as activities that requires specified education in their direction.

The earliest meaning of the term “profession” was religious, and referred to a proclamation of faith. A great “professor” was one whose religious devotion was unimpeachable: during the Salem witchcraft trials, Goody Nurse was termed an “old professor” in her defence, for she had long professed her devotion to God. By 1675, the term had acquired secular significance, meaning “having claim to due qualifications”. Thenewer professions drew sustenance from the old: medics and lawyers drew authority from the clergy, and both medical and legal practices were, until fairly recently, the province of clerics. (Brown, 2014).

The term had acquired new values with time to nowadays when considerable independence of professionals was established.

Medieval and early modern tradition recognised only three professions: divinity, medicine and law (Perks, n.d.)– the so-called "learned professions" (Fisher, 1846).

The liberal professions require special training in the arts or sciences, and their activities are usually closely regulated by national governments or professional bodies. The services they provide are very important for businesses and consumers.

Professionals are now defined as workers whose qualities of detachment, autonomy, and group allegiance are more extensive than those found among other workers. The difference is one of degree; professions differ from other occupations in attributes that are common to all work. Among professionals, these attributes include a high degree of systematic knowledge; strong community orientation and loyalty; self-regulation; and a system of rewards defined and administered by the community of workers. (Brown, 2014)

If we were to consider the development of the liberal professions, this can be seen from both the national level, as well as the international level. There is also an increase in the benefits of the economic terms.

With the rise of technology and occupational specialization in the 19th century, other bodies began to claim professional status:pharmacy, veterinary medicine, psychology, nursing, teaching, librarianship, optometry and social work, each of which could claim, using these milestones, to have become professions by 1900 (Buckley, 1974).

Some of the liberal professions may enjoy high status, public prestige and earn high salaries. An example of this significant inequality of compensation is a corporate defense lawyer working who can earn several times what a prosecutor or public defender earns.

Just as some professions rise in status and power through various stages, others may decline. Disciplines formalized more recently, such as architecture, now have equally long periods of study associated with them (Oslo School of Architecture and Design, n.d.).

Over the years, with the creation of norms, these terms were defined exactly, dividing them in different categories with qualifications requirements. Moreover with the founding of international and national bodies, control over such activities will carry out.

A profession arises when any trade or occupation transforms itself through "the development of formal qualifications based upon education and examinations, the emergence of regulatory bodies with powers to admit and discipline members, and some degree of monopoly rights" (Trombley, 1999).

1.3 Principles

The state sets the rules assigned to each free profession. These rules are referred bu not limited to the number of such professionals based in the region where they work, the needs for their services, their fee structure, the organization structure of their work and the publicity for the activity they perform.

Member States have set with their legislation, the principles for regulation of the liberal professions. The main principles are:

The principle of professional ethics. Ethics in the exercise of the liberal professions is a very important characteristic which makes these professions differ from other occupations practiced in the private sector, since they are closely related to the public interest.

The principle of professionalism. As talking about the protection of some primary human rights protected by the constitution of each member state and the rules of the European Union, or of assisting these free professional services, requires a professional attitude.

The principle of independence. Free professionals are independent in the exercise of their professions, in determining the mode of operation and service delivery. Their independence is reflected not only in self-regulation of their work, but also in terms of accountability to clients, which is a reflection of a free and democratic society.

The principle of bona fides and professional confidentiality. This means that in providing the services of free profession is required above all, to respect the personality of the client or recipient of these services, storage of personal data and privacy of their lives. In exercising these professions must exist mutual confidence between the givers and recipients of services.

The principle for performing their service personally. Free professionals perform services personally. In terms of their work have the right to authorize other persons to perform their tasks, but always taking full responsibility for such actions.

The principle of transparence. During their work the liberal professionals should be efficient and transparent and aimed to their clients/ patients and at benefitting the society.

Liberal professions support an innovative Europe: Liberal professions form a key sector of the European economy. As a driving force behind innovation they make an important contribution to the realization of the Europe 2020 goals. The medium-sized structure of the liberal professions enables them to ensure the futuhigh quality services in Europe. (Sujman Ahmedi, n.d.)

1.4 Autonomy

Professions tend to be autonomous, which means they have a high degree of control of their own affairs: "professionals are autonomous insofar as they can make independent judgments about their work" (Bayles, 1981). This usually means "the freedom to exercise their professional judgement" (Anon., 2005).

However, it also has other meanings. "Professional autonomy is often described as a claim of professionals that has to serve primarily their own interests…this professional autonomy can only be maintained if members of the profession subject their activities and decisions to a critical evaluation by other members of the profession " (H., 2000).

The concept of autonomy can therefore be seen to embrace not only judgement, but also self-interest and a continuous process of critical evaluation of ethics and procedures from within the profession itself.

One major implication of professional autonomy is the traditional ban on corporate practice of the professions, especially accounting, architecture, medicine, and law. This means that in many jurisdictions, these professionals cannot do business through regular for-profit corporations and raise capital rapidly through initial public offerings or flotations. Instead, if they wish to practise collectively they must form special business entities such as partnerships or professional corporations.

1.5 Characteristics of a profession

There is considerable agreement about defining the characteristic features of a profession. They have a "professional association, cognitive base, institutionalized training, licensing, work autonomy, colleague control… (and) code of ethics," (Larson, 1978) to which Larson then also adds, "high standards of professional and intellectual excellence," that "professions are occupations with special power and prestige," and that they comprise "an exclusive elite group", in all societies.

A profession has been further defined as: "a special type of occupation…(possessing) corporate solidarity…prolonged specialized training in a body of abstract knowledge, and a collectivity or service orientation…a vocational sub-culture which comprises implicit codes of behaviour, generates an esprit de corps among members of the same profession, and ensures them certain occupational advantages…(also) bureaucratic structures and monopolistic privileges to perform certain types of work…professional literature, legislation, etc" (Jackson, 2010). A professional should love what they do and take it seriously.

The most important of these are the professionals in the field of justice who contribute to the development of a democratic state by protecting the rights of citizens and their obligations. Also professionals from the field of health care have an important role as a freelance. Architects and engineers protect collectivity from the risks related to the construction, develop and maintain public urbanism, promoting innovation at the same time.

1.7 Professional ethics

“The legal profession has existed for over two thousand years; from the Greek city-states and the Roman Empire to the present-day. Legal advocates have played a vital and active role in the formulation and administration of law. Because of their role in society and their close involvement in the administration of law, lawyers are subject to special standards, regulation, and liability”. (Namwambah, 2009)

The rules of professional conduct have a long history that dates back to over two centuries. Many jurisdictions regulate the conduct of the legal profession through statutes and codes of professional conduct and ethics. These codes prescribe what is ethical and unethical in the practice of law.

Regard must be had to the fact that what is unethical according to the standards of the legal profession may not necessarily be what is regarded as unethical in ordinary standards. Ordinarily, ethics would refer to a system of moral principles or moral rules governing the appropiate conduct for a person or group. Legal ethics involves regulation of legal professionals in a manner that conforms to minimum moral standards required by the legal profession. Debora L. Rhodes and David Luban, in their book Legal Ethics (1992) write in this regard that: “In one sense, the term ‘legal ethics’ refers narrowly to the system of professional regulation governing the conduct of lawyers. In a broader sense, however, legal ethics is simply a special case of ethics in general, as ethics in the central traditions of philosophy and religion. From this broader perspective, legal ethics cuts more deeply than legal regulation: it concerns the fundamentals of our moral lives as lawyers.” (Debora L. Rhodes, 1992)

By all means professional ethics encompass the personal, organizational and corporate standards of behaviour expected of professionals. Professionals are capable of making judgements, applying their skills and reaching informed decisions in situations that the general public cannot, because they have not received the relevant training. One of the earliest examples of professional ethics is the Hippocratic oath to which medical doctors still adhere to this day.

2. RESPONSABILITY AND LEGAL LIABILITY IN PERFORMING REGULATED PROFESSIONS

2.1 Professional responsibility

The rules to regulate the conduct of professionals and the expectation that professionals will conduct themselves in an acceptable, ethical manner, give rise to professional responsibility.

It is expected that professionals exude confidence to the public by upholding the morals of the profession and to uphold the high level of standards expected of them by the society. Consequently, professional responsibility refers to obligations and mandate relating to or belonging to a profession. It revolves around taking responsibility for the acts and or omissions of members of a profession. (Ojienda, 2015)

2.2 Legal malpractice

Not every mistake made by an attorney is considered legal malpractice. Instead, legal malpractice happens when an attorney handles a case inappropriately due to negligence or with intent to harm and causes damages to a client. In many cases, an attorney chooses a strategy in good faith, and at the time this strategy is chosen it is reasonable. However, if a reasonably prudent attorney with the skill and competence level necessary to provide the same legal service would not make the decision made by the attorney, there may have been a breach of duty. It is also important to note that a simple ethics violation is rarely the basis of a legal malpractice action, even though it is a breach of duty.

An attorney will be deemed neglijent if he or she fails to exercise that degree of knowledge, skill, and care that normally would be exercised by members of the profession under the same or similar circumstances. A lawyer must be familiar with well-settled principles of law and rules of practice that are of frequent application in the ordinary business of the profession. (Gibson, 2014)

Some common kinds of malpractice include failure to meet a filing or service deadline, failure to sue within the statute of limitations, failure to perform a conflicts check, failure to apply the law correctly to a client’s situation, abuse of a client’s trust account, such as commingling trust account funds with an attorney’s personal funds, and failure to return telephone calls.

3. $1 MILLION LEGAL MALPRACTICE CASE

Nationally recognized legal malpractice attorney Edward Freidberg filed in 2014 a first amended complaint in a malpractice lawsuit alleging more than $1 million in damages against well known Sacramento family law firm Woodruff, O'Hair & Posner, Inc., and firm partner D. Thomas Woodruff.

This is an action for legal malpractice, in which the defendant lawyers' errors caused a dispute about plaintiffs management and authority to sell or exchange real property, in plaintiffs capacity as a trustee of a family trust (the Harrison Children's Trust) and as both the general and limited partner of a limited partnership (Harrison Family Enterprises II), while the defendants represented plaintiff as the respondent in a family law proceeding (In Re Marriage of Harrison, Sacramento Superior Court Case No. 99FL07719). That dispute is ongoing and is the subject of a pending legal action (the "underlying lawsuit"). Due to the uncertain application of CCP. § 340.6, the statute of limitations for suits against lawyers, plaintiff, in an abundance of caution, files this suit before the underlying lawsuit has been finally resolved and before the family law proceedings has been finaly resolved. If attorney Woodruff had exercised the required skill, care, knowledge, competence and diligence possessed by reasonable and competent attorneys who specialize in family law, marital property divisions, and estate planning, plaintiff would not have entered into the binding contracts to sell and exchange property unless such contracts were conditioned upon the seller's receipt of written consent and approval from the co-trustee (Alan) and beneficiaries (Kim and Lynn) of HCT; and such contracts also provided that seller did not'have to perform until Seller obtained a Court Order authorizing and approving such sale by Wei-Jen as co-trustee of HCT (Sacramento Family Court News, 2014).

4. ARCHITECTURAL NEGLIGENCE

Of all the profession – Architecture clearly takes into account the physical, emotional and even the spiritual needs of a man no other profession could properly address in practical terms. (Cadiz, 2013)

The line between tort and contract claims in architectural negligence cases has become blurred over the years.  Both legal and architectural negligence claims were at one time strictly divided into tort and contract sides of the equation.  Each had its own statute of limitations, and each was doctrinally different. 

In the past, plaintiffs asserting architectural malpractice claims had to exercise care in pleading their claims, making sure to assert both contract and tort theories to ensure that both contract and tort damages would be available to them. Cases such as Brushton-Moira and 17 Vista indicate that plaintiffs no longer need to expressly define the theory under which their malpractice claims are brought, and if the claim is properly pled and proven, they will be able to recover both contract and tort damages for architectural malpractice (Bluestone, 2012).

5. BANKING MALPRACTICE

Doctors, lawyers and accountants can be sued for malpractice if their negligence harms their clients. But suits against corporate officers and directors are treated differently. If corporate leaders make bad decisions, the "business judgment rule" can shield them from liability to shareholders who claim the mistakes cost them money. That rule says that, even if an officer or director blunders, he or she will not be liable unless the challenged decision involved fraud, illegality or self-dealing. The business judgment rule has worked for a long time to prevent suits against officers and directors for routine business misjudgments. 

In many states, the same rule applies to bank officers and directors. Where it applies, the good-faith lending decisions made by bank officers and directors are protected from liability, even if the loans turn bad and cause the bank losses. The uncertainty surrounding the interpretation of the business judgment rule has real ramifications for community banks that are competing tooth and nail against larger banks, and each other, for quality loans. Community bank directors want the freedom to exercise their honest business judgment when it comes to lending, but unlike other corporate directors, they run the real risk of being sued if the loans default and the bank fails. (Berns, 2014)

5.1 Commission’s report outlining measures to change banking for good

The threat of prison sentences would give bankers “pause for thought” in acting in a reckless, irresponsible and unsustainable manner, according to a major report by the parliamentary commission (June 2013) on banking standards.

In its fifth report, the commission, which was set up in the wake of the Libor scandal in 2012, outlines measures to “change banking for good”. These include greater personal responsibility among bankers and more appropriate remuneration policies, which the commission says will help restore confidence in the banking sector among the public. The commission also calls for an upheaval in the actions of regulators and governments, which it says have “contributed to the decline in banking standards”. Commission chair Andrew Tyrie MP, said, “Taxpayers and customers have lost out. The economy has suffered. The reputation of the financial sector has been gravely damaged. Trust in banking has fallen to a new low.”

However, he added, “High standards will strengthen Britain as a global financial centre. International co-ordination, while desirable, should not be allowed to delay reform. We must get on and do what is right for the UK. Bankers must be responsible for their actions, customers need more choice and freedom to switch when unhappy and the economy needs trustworthy regulators” (Green, 2012)

Paul Ellis, chief executive of Ecology Building Society said the banking commission’s report “represents a crucial shift in attitudes towards banking: recklessness and impunity will no longer be the status quo.” But, he added, “Crucially it recognises that a fundamental change has to occur in the whole infrastructure of banking including support mechanisms such as regulation and audit. However, the challenge of overhauling the entire regime, while allowing a route through for new entrants will be the biggest challenge.”

This report was a measure adopted to change the banking standards for good.

5.2 Swiss operation of keeping accounts secret from tax authorities

The HSBC files, February 2015, the biggest banking leak in history, reveal the full scale of malpractice at its Swiss subsidiary. In one case that illustrates the bank’s conduct, a wealthy British client, Stoke City football club director Keith Humphreys, frankly told his HSBC manager that his father’s $430,000 Swiss account was “not declared” to the UK tax authorities. Humphreys, whose wealth originated from the sale of a local supermarket chain, explained that one HSBC manager had already advised how to extract undeclared offshore money via a credit card. The credit card is thus used to enable the Humphreys family to make withdrawals from ‘cash points’ when they are outside the UK. The banker, who even brought paperwork to Humphreys’ stately home in Cheshire because the client was uneasy about “walking around with a set of account-opening documents”, recorded how Humphreys was also alarmed to hear a Swiss lawyer might realise he had a secret HSBC account. On clinching arrangements in London, the bank manager wrote: “We subsequently repaired to the Ritz, for a very enjoyable lunch.” Humphreys told his father eventually had to repay about $224,000 for evading tax due to the UK. (Guardian, 2015)

This tax evader also ended up repaying UK authorities, as part of a $205m haul Britain has so far recovered from HSBC’s tax-dodging customers. Chris Meares, then overall head of HSBC private banking, assured the Treasury committee in 2008: “We prohibit our bankers from encouraging or being involved in tax evasion.” But former tax inspector Richard Brooks, author of The Great Tax Robbery, who was interviewed about HSBC said: “I think they were a tax avoidance and tax evasion service. I think that’s what they were offering. They knew full well that people come to them to doge their tax liabilities. There are very few reasons to have an offshore bank account, apart from just saving tax.” (Guardian, 2015)

CONCLUSIONS

There is a growing concern over the subordination of service and professionalism to profit, personal aims and ambitions. We need to remind ourselves of the honourable nature of the profession otherwise there is little point talking about ethics. It is the substance and not the form that matters here. It is to be borne in mind that all barristers are members of a profession as distinct from being engaged in a trade. A trade or business is an occupation or calling in which the primary object is the pursuit of pecuniary gain. Honesty and honourable dealing are, of course, expected from every man, whether he be engaged in professional practice or in any other gainful occupation. But in a profession, pecuniary success is not the only goal. Service is the ideal, and the earning of remuneration must always be subservient to this main purpose.

“In law a man is guilty when he violates the rights of others. In ethics he is guilty if he only thinks of doing so.” (Immanuel Kant)

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