MAY 3, 1999

99 LWUSA 415

By Elaine McArdle

Chicago lawyer Michael Flaherty's clients love him when he successfully defends their legal malpractice suit – but if they pass him on the street, they won't say hello.

"If I see a client walking down the street, he's apt to put his head down, simply because he doesn't want people to know I'm his lawyer," says Flaherty, who has focused his practice on legal malpractice defense for 14 years.

"I don't think you end up with the animosity that the plaintiffs' bar has to deal with, or with bitter lifelong enemies. And sometimes you end up with great friends. But it can be awkward when they see you in public."

Flaherty doesn't mind this aspect of his work. And he says that lawyers, by and large, make great clients.

"As a group of clients they're receptive to the legal process, and you don't need to go through the level of handholding you do with some other types of clients. And I think they're more respectful of me and my time," he says.

He admits, however, that some lawyers are difficult to deal with.

"They act like their entire professional reputation is on the line and get very emotionally invested in the case," he says. "Typically they can be dissuaded from looking at it that way, when we explain how pervasive malpractice claims are."

Litigators are the most difficult clients, Flaherty says. "They think they should be running the case or at least have a lot of input. At their own deposition, they don't act the way they want their own clients to act at a deposition. They talk too much."

Transactional lawyers are much more willing to view their malpractice attorney as an expert and to take their lawyers' advice, he says.

Still, litigators are better in front of juries because they're comfortable with them. By contrast, successful transactional lawyers are the worst. "They're either very meek in front of a jury, because it's a foreign process to them, or they act like they're running a partners' meeting where they're the judge."

What Flaherty enjoys the most is the intellectual stimulation of legal malpractice work. Because each case involves an underlying case upon which the legal malpractice claim in based, he's handled a wide variety of matters: patents, securities, every type of tort imaginable, complex business transactions and highly technical intellectual property cases involving computers and cutting-edge technology.

It's never mundane.

And it pays well. Flaherty was working for a large Chicago firm when he and another lawyer decided to start up their own practice devoted to legal malpractice defense. It opened in 1996, with his old firm as one of his best referral sources. Since then, the firm has added two more lawyers and is looking to add a third.

It now counts a number of large Chicago firms as clients as well as a dozen insurance companies. The firm not only defends legal mal cases, but also defends attorney disciplinary cases, gives preventive advice when a malpractice problem is brewing, and does risk-management, advising firms and lawyers on how to avoid malpractice problems.

Flaherty, who is the immediate past president of the Lawyers Risk Management Association, speaks at about 10 national conferences a year on legal malpractice and risk management. Last year, a large insurance company hired him to run a malpractice seminar for the top partners of large firms from all over the country.

But if he were just looking to get rich, he says, he'd be on the other side of the bar.

"If I were just in it for the money, I'd probably do nothing but sue lawyers. I think a decent lawyer can make an inordinate amount of money suing other lawyers," he says. "But I just don't have much of an appetite for that."

Flaherty says the biggest problem facing firms today is that, in their rush to make money, they take any client who walks in the door.

"The emphasis on the hourly billing and on getting new business has really changed the way people progress through law firms," so that rainmakers and those with the most billing hours are rewarded with partnership, Flaherty says. "So there's much more emphasis now on making lawyers look good statistically rather than having them do what's in the best interest of the clients. These systems make people do things they probably wouldn't otherwise do."

Taking any client that walks in the door is a huge mistake, Flaherty says, because it later turns out that many of them can't pay their legal bills. And when the attorney decides to sue them for the fees, the client "doesn't have much choice, if they can't pay, than to look at what the law firm did and try to figure out a reason not to pay."

It isnít until after a malpractice case or ethics claim is filed, Flaherty says, that the firm admits the client was a poor risk.

"In 80 percent of my cases, the lawyers can run through a laundry list of why they shouldn't have taken the client, and the warning signs they ignored," he says.

Most of the cases he defends don't make it to trial, Flaherty says. Often lawyers want to settle because their exposure may be quite large compared to the amount of their insurance, and – despite what plaintiffs' lawyers say – the lawyer-defendants are afraid their personal assets will be vulnerable.

But many cases don't make it any further than pretrial motions because Flaherty wins a large number of them at that point. "I think these cases are more defensible than the typical tort," he says.

Often Flaherty prevails pretrial by attacking the underlying case upon which the legal malpractice claim is based. For example, on a claim that a lawyer failed to make a securities offering in a timely fashion, Flaherty can win by showing that the information the client gave the lawyer about the offering was incorrect; if the filing had been done in a timely fashion, it would have violated federal securities law. Therefore, the client has no valid claim against the lawyer.

A large part of his work is advising lawyers before problems arise, he says. He's on retainer for a number of firms that will call him when they think trouble is brewing. He advises them on how to mitigate their malpractice exposure and also notifies their insurance carrier of the potential problem. In the best scenario, heís able to smooth things over to the point where the client is happy and chooses to stay with the firm.

Or a firm may call when one of its lawyers announces heís leaving and taking clients with him.

"We get involve there to minimize the ethical exposure of the firm and to make sure all the clients are protected," he says.

He expects business to continue to grow as more malpractice suits are filed against lawyers. And he welcomes the growth.

"It really is an enjoyable practice," he says.

Related stories