Are there other situations in which lawyers might find themselves exposed to aiding and abetting liability?
Aiding and abetting liability is not limited to client situations. For example, a lawyer representing an organization, such as a corporation or partnership, might be accused of aiding and abetting an officer’s or partner’s — typically a non-client — breach of fiduciary duty to the entity — the lawyer’s client. Where the business has failed, it is commonly a bankruptcy trustee or receiver who is suing the lawyer.
Many states, including Pennsylvania, now recognize aiding and abetting liability in some form, and the theory provides a difficult and dynamic battleground for even the finest and most cautious law firms.
What other risk management advice can you offer to lawyers and law firms?
Prudent lawyers also should strive to understand the context in which their services are being used and the purposes for the tasks or transactions with which they are being asked to assist. Again, very few matters will be troublesome. In most cases, context and purpose will be apparent.
In other instances, the timing of a transaction, the nature of a task, the absence of any apparent economic substance to a deal, or other factors may raise a red flag — or at least a pink one. In those cases, the lawyers involved should reasonably consult with the client to understand the matter’s full context and the client’s objectives. If that inquiry raises doubts in the lawyers’ minds about the nature of the matter or their role in it, they should raise the issue with appropriate lawyers in their firm who are positioned to objectively analyze the situation and evaluate the firm’s position.
Although there is authority for the proposition that a lawyer need not probe beneath the surface of a representation when doubt ripples, but can instead strictly adhere to the engagement terms, this approach is not necessarily advisable. Indeed, there is a substantial risk that it will appear unreasonable or worse in the bright light of hindsight.
While following a ‘heads down’ approach may still permit a firm to extricate itself from litigation in which it has been wrongly targeted, the more cautious approach we advocate may enable a firm to avoid being sued in the first place.
Richard Hager jr. is a vice president and senior account
executive in the Pittsburgh office of Aon Risk Services Central Inc.
Reach him at (412) 594-7574 or [email protected].
