Law Firms
Heller Asks Ex-Clients Considering Malpractice Claims to Sue Now
Posted Mar 2, 2009 1:20 PM CST
By Debra Cassens Weiss
The dissolved law firm Heller Ehrman is inviting former clients considering malpractice claims to file suit, and to do so quickly.
Heller is spending about $20,000 to print notices in major publications inviting former clients who want to sue to do so before malpractice insurance coverage expires, Legal Pad reports.
Heller’s malpractice coverage ends June 15, and a federal bankruptcy judge has refused to allow the law firm to buy tail coverage covering claims filed over the next three years. U.S. Bankruptcy Judge Dennis Montali of San Francisco sided with creditors who contended the risks didn’t outweigh the estimated $10.2 million cost, according to Legal Pad.
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Comments
Bill Dugan
Mar 2, 2009 2:20 PM CST
Imagine that—a law firm inviting clients to “sue me”!!!!!! What is the world coming to?
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CJT
Mar 2, 2009 2:47 PM CST
This is actually a very interesting case. I can’t say I agree with the judge and here’s why.
In the disolving firm there are no shareholders, just creditors and partners. The partners (who made the decisions prior to the bankruptcy) have every incentive to maximize the amount of cash left over to pay creditors (as they get what’s left over). If the partners as a group think that buying tail coverage at this cost is a good idea, than they should. Who is in a better position to know whether there might be some malpractice claims brewing than the former partners who worked there? Certainly not the creditors.
Now if it were a different situation and the partners were on the hook for any malpractice verdicts (I’m pretty sure they aren’t save their own), than the creditors might have a case that the partners have a conflict of interest. This problem doesn’t seem to be present here.
The creditors will lose a lot more money if a large malpractice case is successful.
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B. McLeod
Mar 2, 2009 3:16 PM CST
Well, let’s think about it. If a client realizes next month that it has a malpractice claim, and no tail coverage is in effect, what’s the analysis?
The client could spend time (and money) litigating an unliquidated, post-petition claim against the defunct firm. But, however that claim might be valued, it would likely be paid only fractionally, or not at all, in the bankruptcy. This probability would tend to lead the client to take its recourse against the individual attorneys that commited the malpractice. Obviously, the Heller partners think so too. I agree with CJT that it does also look like they don’t have great confidence in the quality of their work product. I think the creditors knew what they were doing, and canned the tail coverage because the real effect would have been to protect the finances of individual Heller attorneys at the expense of the firm’s creditors.
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post protection
Mar 3, 2009 12:47 PM CST
McLeod, aren’t you being a bit judgmental here? I think the prudent thing for ANY attorney, even those having great confidence in the quality of their work product, is to obtain tail coverage. The point of insurance is to cover you “in case.” You might buy a lower amount of insurance, but you still buy it. Or are you saying that when you retire, you do not plan on purchasing tail coverage?
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