Law firms should be aware of cyber breaches.
Law firms can be seen as easy targets to hackers wanting to obtain confidential client information. Hackers can be looking for your client’s personal identifiable information such as names, addresses, social security numbers, driver’s license numbers, tax information, etc. Hackers may also be after confidential client information, such as details regarding undisclosed mergers and acquisitions that can be used for insider trading. The risk of experiencing a cyber breach has become so great that many current and potential clients are requesting verification of law firm’s electronic security practices.
Simple steps such as the use of strong passwords can be used to prevent a cyber breach. Additionally, deploying spam filters, firewall software, anti-spyware, pop-up blockers, and computer virus scanners can block many types of cyber attacks. Training employees on cyber risks, testing computer systems to uncover potential weaknesses, and hiring an independent third party to conduct a full cyber security assessment is also money well spent.
Finally, in the event of a cyber breach, it is always a good idea to have a cyber breach response plan in place.
The American Bar Association has issued Formal Opinion 466, “Lawyer Reviewing Jurors’ Internet Presence,” to provide guidance to lawyers on yet another evolving issue regarding their use of social media.
Lawyers Should be Aware of Ruling in Glazer v. Chase Home Finance LLC Finding Mortgage Foreclosure is “Debt Collection” Under the FDCPA.
The Sixth Circuit ruled:
Lawyers who meet the general definition of a ‘debt collector’ must comply with the FDCPA when engaged in mortgage foreclosure; a lawyer can satisfy that definition if his principal business purpose is mortgage foreclosure or if he ‘regularly’ performs this function. Fair Debt Collection Practices Act, §803 (6), 15 U.S.C.A. § 1692a(6).
The court also offered some insight on the definition of “debt collection”:
Unfortunately, the FDCPA does not define ‘debt collection,’ and its definition of ‘debt collector’ sheds little light, for it speaks in terms of debt collection… But the statute does offer guideposts. It defines the word ‘debt’ for instance, which is ‘any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family or household purposes.
Careful review of the case and its impact on your firm is highly recommended.
Glazer v. Chase Home Finance LLC, No. 10-3416 (6th Cir. 2013)
Law firms need to review and take steps to implement IRS Code § 6050W which became effective as of January 1, 2013.
Alert! Law firms need to review and take steps to implement IRS Code § 6050W which became effective as of January 1, 2013. The new regulation has the potential to adversely impact law firms and potentially cause ethical issues. Many State Bar Associations have provided detailed guidance. Please check your State Bar Association website for information related to the new regulation and local resources that may be available to assist you with questions. If you are unable to locate information from your State Bar Association, VA State Bar Association has provided a useful summary, which can be found at, http://www.vsb.org/site/news/item/new-irs-credit-card-requirements. The IRS has provided answers to frequently asked questions at http://www.irs.gov/uac/FAQs-on-New-Payment-Card-Reporting-Requirements. Please review the new requirements carefully and take necessary actions to protect your law firm.
Bona Fide Error Defense Inapplicable to Fair Debt Collection Practices Act
In a ruling that could result in an increase in legal malpractice claims filed against lawyers who collect debts, the United States Supreme Court recently found that debt collectors could not escape liability for violations of the Fair Debt Collection Practices Act by proving a “bona fide error” in interpreting the legal requirements of the Act. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 130 S.Ct. 1605, 78 USLW 4301 (2010). Justice Sotomayor, writing for the majority, stated:
Today’s decision does not place unmanageable burdens on debt-collecting lawyers. The FDCPA contains several provisions expressly guarding against abusive lawsuits, and gives courts discretion in calculating additional damages and attorney’s fees. Lawyers have recourse to the bona fide error defense in § 1692k(c) when a violation results from a qualifying factual error.
Justice Kennedy and Justice Alito dissented, noting:
[The court’s] decision aligns the judicial system with those who would use litigation to enrich themselves at the expense of attorneys who strictly follow and adhere to professional and ethical standards.
… the Court, by failing to adopt a reasonable interpretation to counter these excesses, risks compromising its own institutional responsibility to ensure a workable and just litigation system.
Lawyers who collect debts as part of their law practice need to be familiar with this new case and its impact on their legal liability for errors committed during the collection of debts. Careful review of the case and its impact on your firm is highly recommended. Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 130 S.Ct. 1605, 78 USLW 4301 (2010).
New York High Court Holds that a Personal Representative of an Estate May Sue Lawyers for Malpractice
On June 17, 2010, the New York Court of Appeals reversed a ruling that dismissed a case alleging attorney malpractice brought by an estate representative for the benefit of the estate. The lawsuit alleged that the attorney had failed to counsel the decedent on the tax repercussions of naming the estate as beneficiary to a $1 million life insurance policy. In defense, the attorney argued that the estate was not his client, and had no privity with respect to the attorney/client relationship. The lower court agreed, relying on the long held rule that “a third party, without privity, cannot maintain a claim against an attorney in professional negligence, absent fraud, collusion, malicious acts or other special circumstances.” Estate of Schneider v. Finmann, --- N.E.2d ----, 2010 WL 2399564 (Slip op. 05281, June 17, 2010, N.Y), subject to revision.
In reversing the lower court, the Court found:
We now hold that privity, or a relationship sufficiently approaching privity, exists between the personal representative of an estate and the estate planning attorney. We agree with the Texas Supreme Court that the estate essentially ‘stands in the shoes’ of a decedent … The personal representative of an estate should not be prevented from raising a negligent estate planning claim against the attorney who caused harm to the estate.
. . . .
Despite the holding in this case, strict privity remains a bar against beneficiaries’ and other third-party individuals’ estate planning malpractice claims absent fraud or other circumstances. Relaxing privity to permit third-parties to commence professional negligence actions against estate planning attorneys would produce undesirable results uncertainty and limitless liability. These concerns, however, are not present in the case of an estate planning malpractice action commenced by the estate’s personal representative.
In making this ruling, the New York Court of Appeals adopted the majority rule that while beneficiaries are not proper parties to suits against the decedent’s estate planning attorney, the estate’s personal representative steps in the shoes of the decedent and has sufficient privity to bring such a claim. The case clearly assures that the trend of estate representatives pursuing such claims - almost certainly at the behest of beneficiaries who cannot bring such claims themselves - will continue. As a result, the successful use of the privity defense to block legal malpractice suits in probate matters is likely seeing its demise. In fact, it is likely that the estate representative has a fiduciary duty to bring such claims, where viable, resulting in the claims becoming far more common.