April 2019 Ethically Speaking - Are Lawyers Immune From Liability When Making Judgment Calls?

by Robert K. Sall

In performing legal services, lawyers are called upon to make a myriad of judgment calls concerning which strategies to pursue, claims or defenses to assert, or legal paths to follow. Reasonable lawyers may differ in the exercise of such judgment. But when does making the wrong call lead to liability, and when is a lawyer who makes the wrong judgment call immune from liability? This article examines those questions.

A lawyer’s duties to his or her client are established by the Rules of Professional Conduct which, along with statutes and general principles relating to fiduciary relationships, help to define the scope of a lawyer’s professional duties. Mirabito v. Liccardo, 4 Cal. App. 3d 41, 45 (1992). California’s comprehensive new Rules of Professional Conduct took effect on November 1, 2018. Rule 1.1(b) defines competence in the performance of legal services as requiring the lawyer “to apply the (i) learning and skill, and (ii) mental, emotional and physical ability reasonably necessary for the performance of such service.” If the lawyer does not have sufficient learning and skill when the legal services are undertaken, Rule 1.1(c) allows the lawyer to satisfy the duty of competence by (i) acquiring sufficient learning and skill before performance is required, (ii) associating with or professionally consulting another lawyer whom the lawyer reasonably believes to be competent, or (iii) referring the matter to another lawyer reasonably believed to be competent. It is a violation of Rule 1.1(a) for a lawyer to intentionally, recklessly, with gross negligence or repeatedly fail to perform legal services with competence.

In a legal malpractice action, CACI Jury Instruction No. 600 (as appropriately modified) guides juries with respect to the standard of care. It provides:

A lawyer is negligent if he or she fails to use the skill and care that a reasonably careful lawyer would have used in similar circumstances. This level of skill, knowledge and care is sometimes referred to as the “standard of care.” You must determine the level of skill and care that a reasonably careful lawyer would use in similar circumstances based only on the testimony of expert witnesses including [name of defendant].

A reasonably careful lawyer would perform legal services with competence as defined in our professional rules. Lawyers practicing in California are required to adhere to the rules as minimum standards of professional conduct. However, these rules are intended to establish standards for purposes of discipline and were not designed to be the basis for civil liability. Thus, a lawyer’s violation of a rule does not itself give rise to a civil cause of action either for enforcement of a rule or for damages that may result from a lawyer’s failure to comply with the rule. Violation of an ethics rule may, however, be evidence of a breach of a lawyer’s fiduciary duties or other substantive legal duties in a civil, non-disciplinary context. See Rule 1.0, Cmt 1.

The elements of proof in a legal malpractice action require the plaintiff to establish that the lawyer’s conduct in question fell below the standard of care and resulted in damage to the client. Proof of the standard of care and its violation is usually supplied by expert testimony. Lipscomb v. Krause, 87 Cal. App. 3d 970, 975 (1978) (affirming grant of nonsuit where the plaintiff failed to present expert testimony to establish the standard of care). In most cases, expert testimony is necessary to establish the elements of duty and breach of duty because the professional standard and the level of required skill is not a matter of general knowledge and can only be supplied by expert testimony. Lysick v. Walcom, 258 Cal. App. 2d 136, 156 (1968).

When does a lawyer fail to meet the standard of care? Performance that will satisfy the standard of care may vary widely. Legal services often involve analysis of complex and varied issues that will present many options. Reasonable lawyers are bound to take different approaches in formulating strategic and tactical decisions. Lawyers routinely advise their clients of the risks of taking particular courses of action and the reasonably available alternatives to achieve their goals. In determining whether a lawyer has “met the requisite degree of competence” in handling a legal matter, “the crucial inquiry” is whether the lawyer’s advice “was so legally deficient when it was given that he [or she] may be found to have failed to use ‘such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake.’” Smith v. Lewis, 13 Cal. 3d 349, 356 (1975) (quoting Lucas v. Hamm, 56 Cal. 2d 583, 591 (1961)).

A closer look at Smith is instructive on the standard of care. Smith involved a legal malpractice claim against a family lawyer who failed to assert in a dissolution action the wife’s rights to an interest in her husband’s military career retirement benefits. The defendant lawyer’s testimony at trial established that previously he assumed the husband’s retirement benefits were not subject to community property treatment in the division of property. Smith, 13 Cal. 3d at 358, n.7. The defendant lawyer asserted that his conduct did not fall below the standard of care because, at the time, substantial uncertainty existed in the law with respect to whether military retirement benefits would be treated as community property. It could properly have been argued that the client had an interest in her husband’s vested retirement benefits, or alternatively, that those benefits were separate property belonging entirely to the husband. However, the defendant had failed to conduct any research and did not discuss the matter with his client. Id.

In affirming the trial court’s denial of motions for nonsuit and judgment notwithstanding the verdict, the California Supreme Court held that, although an attorney is not a guarantor of the soundness of his or her opinions nor liable for every mistake made in legal practice, “[h]e is expected . . . to possess knowledge of those plain and elementary principles of law which are commonly known by well-informed attorneys, and to discover those additional rules of law which, although not commonly known, may readily be found by standard research techniques.” Id. at 358. “Even as to doubtful matters, an attorney is expected to perform sufficient research to enable him to make an informed and intelligent judgment on behalf of his client.” Id. at 360.

Smith exemplifies the defendant’s attempted reliance on a doctrine sometimes referred to as “judgmental immunity,” where a lawyer will not be held liable for making an error in judgment in a matter in which the law is unsettled. If the law on an issue is doubtful or debatable, the argument goes, an attorney will not be held responsible for failing to anticipate correctly how the uncertainty will later be resolved by the courts. The defendant in Smith, however, had failed to conduct research or inform himself of the basic principles of the law, preventing him from exercising discretion or making an informed judgment on behalf of his client. “There is nothing strategic or tactical about ignorance,” the court stated, citing Pineda v. Craven, 424 F.2d 369, 372 (9th Cir. 1970). The decision to forego the wife’s claim on the retirement benefits was based upon a “culpable misconception of the relevant principles of law,” and the jury was entitled to find that conduct negligent. It was difficult, the court said, to conceive of any tactical advantage which could have been served by neglecting to advance a claim so clearly in plaintiff’s best interest. Smith, 13 Cal. 3d at 359.

The so-called judgmental immunity argument has been applied in certain cases to relieve an attorney from a finding of liability for incorrectly choosing a particular course of action where there was “an honest error in judgment concerning a doubtful or debatable point of law.” See Davis v. Damrell, 119 Cal. App. 3d 883, 887 (1981). The facts in Davis presented a situation similar to those in Smith as to whether a military pension would constitute divisible community property in a dissolution action. The defendant attorney advised his client that her husband’s military pension did not constitute community property. As a result, the marital settlement agreement contained no allocation of pension benefits. Unlike in Smith, however, the record in Davis revealed that the defendant had researched the law, was aware of the relevant literature and the then controlling legal precedents, and his advice was based upon his legal analysis. The Davis court concluded that the community character of vested military retirement benefits was at the time an “unsettled point of law.” Therefore, the failure to accurately predict how the law would be resolved in the future could not be the basis of a finding of liability for legal malpractice. Even though the advice later proved to be erroneous, the court found that it was based upon the reasonable exercise of professional judgment. Id. at 888.

While Davis held that “respondent’s error in judgment on a question of law is immune from a claim of professional negligence” (id.), the case does not involve a statutory immunity. Rather, it turns upon evidence having established that the lawyer’s actions satisfied the standard of care. The defendant performed the research, engaged in analysis, advised the client, and proceeded on the basis of those actions. Davis described “the controlling test” for an “error-in-judgment” rule as one invoking “a two-pronged inquiry: (1) whether the state of the law was unsettled at the time the professional advice was rendered; (2) and whether that advice was based upon the exercise of an informed judgment.” Id. at 887. The second prong of this test is the standard of care.

To refer to the Davis test, however, as “judgmental immunity” is a misnomer. The defense merely addresses a question of proof, being whether or not the attorney has breached the standard of care. Blanks v. Shaw, 171 Cal. App. 4th 336, 378-79 (2009).

In order to prevail on this theory and escape a negligence finding, an attorney must show that there were unsettled or debatable areas of the law that were the subject of the legal advice rendered and this 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. at 378 (quoting Smith, 13 Cal. 3d at 359). A lawyer has “a duty to avoid involving his client in murky areas of the law if research reveals alternative courses of conduct. At least he should inform his client of uncertainties and let the client make the decision.” Horne v. Peckham, 97 Cal. App. 3d 404, 416 (1979). “Even if the law is unsettled, an attorney’s decision must be informed, based upon an intelligent evaluation of the case.” Blanks, 171 Cal. App. 4th at 379.

Where the law is in doubt, the error-in-judgment rule will not protect a lawyer from liability for recommending an incorrect course of action if he or she fails to satisfy the standard of care. It is important in the face of uncertainty—indeed essential—for the lawyer to perform the necessary research and legal analysis, inform the client of the risks and reasonably available alternatives, and guide the client in choosing an appropriate course of action. That is the standard of care.

Robert K. Sall is the founding shareholder of Sall Spencer Callas & Krueger in Laguna Beach where his practice focuses on business litigation, legal malpractice, professional ethics, and expert witness matters. He is a Certified Specialist in Legal Malpractice Law by the State Bar of California’s Board of Legal Specialization and a member of the OCBA’s Professionalism & Ethics Committee. The views expressed herein are his own.