Potential Liability Exposures from Internet Law Practice
by David A. Grossbaum
(County Bar Update, March 2002, Vol. 22, No. 3)

 

Potential Liability Exposures from Internet Law Practice

By David A. Grossbaum, Esq. of Cetrulo & Capone, LLP, Boston, Massachusetts. Grossbaum is a partner whose practice focuses on the defense of professional liability claims against lawyers and other professionals, and insurance coverage issues. He is the immediate past chair of the New England Steering Committee of PLUS and is the chair-elect of the ABA Professionals', Officers', and Directors' Liability Committee.

The use of the Internet by lawyers has grown geometrically in the last few years. They are using the Internet heavily for advertising their firms, receiving and responding to requests for legal advice, and communicating with their clients. Practicing law over the Internet creates new and unique liability risks to these lawyers and their insurers. The question is whether risk management and assessment is keeping up with the risks.

Use of the Internet as a Basis for Personal Jurisdiction over Lawyers

One of the consequences of practicing over the World Wide Web is that it really is "world wide", and this means that a lawyer may be subject to suit anywhere in the world. "Since information posted on a Web site becomes available worldwide almost instantaneously, imposing traditional [jurisdictional] concepts on commercial Internet users might have dramatic implications, subjecting them to nationwide or even international jurisdiction." Hasboro, Inc. v. Clue Computing, Inc. 994 F. Supp. 34, 39 (D. Mass. 1997).

While lawyers' use of Web sites accessible in foreign jurisdictions may not by itself always establish the necessary basis to sue them there, courts have found that a Web site, along with other contacts, is enough to allow a suit where the plaintiff viewed the site. See e.g. Cybersell, Inc. v. Cybersell, Inc. 130 F.3d 414 (9th Cir. 1997); CompuServe, Inc. v. Patterson, 89 F. 3d 1257 (6th Cir. 1996). The courts that have found the use of a Web site by itself to be a sufficient basis for jurisdiction have ordinarily noted the interactivity of the site, such as whether it contains an "800" number for prospective clients to call the defendant or whether the defendant directly contacted users of the site. See e.g. Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D.Conn. 1996); Contra Heroes, Inc. v. Heroes Foundation, 968 F. Supp. 1 (D.D.C. 1996); Maritz, Inc. v. Cybergold, 947 F. Supp. 1328 (E.D. Mo. 1996).

If the wrong itself is committed over the Internet, jurisdiction will likely exist wherever the victim is located. Thus, if a lawyer issued a negligent legal opinion or breached a duty by use of the Internet, that lawyer will probably be subject to suit wherever the Web site was accessed and the plaintiff harmed.

The expansion of jurisdiction over lawyers, especially the expansion to foreign countries, will have drastic consequences for insureds, underwriters and claims professionals. While all policies appear to apply to acts, errors or omissions committed anywhere in the world, many only provide coverage if "the claim is first made against the Insured within the United States of America, its territories or possessions or Canada...." Some policies provide that the insurer has the option, but not the obligation, to settle or defend claims brought in places other than the United States or Canada. A limited number of policies do provide worldwide coverage, and this universal coverage may become the norm.

The burden on the insurer of defending cases in distant jurisdictions is substantial. Insurers may not have panel counsel arrangements with lawyers located in that state, and may be forced to hire a law firm with whom it has no prior experience and no special rate arrangements. If, on the other hand, the carrier determines to use panel counsel from the state in which the insured is located, it may then be forced to employ local counsel, and this will end up duplicating some of the defense expenses.

Additionally, depending on the rules of the particular jurisdiction, insureds who are sued in other states may be compelled to travel there to be deposed. If so, this will dramatically increase the cost of these depositions by adding travel time and travel expenses for what may turn out to be numerous depositions.

These factors can be multiplied many times if the policy provides worldwide coverage. For example, in England, the insurer may be required to retain both a barrister and a solicitor. The exchange rates may result in dramatically higher rates paid to these counsel. Moreover, some countries have an inquisitorial system rather than an adversarial system, and this will undoubtedly result in a different dynamic in the defense of the case. One may also have to add translators to the case, and it will undoubtedly be impossible to handle a case in a foreign country without employing local counsel.

The Internet and the Unauthorized Practice of Law

The proliferation of Web sites through which lawyers can provide legal advice and legal opinions to persons in other jurisdictions fosters the belief among both lawyers and clients that geography provides no barrier to a close attorney-client relationship. The well-known California case of Birbrower, Montalbano, Condon & Frank, P.C. v. ESQ Business Services, Inc., 17 Cal. 4th 119, 949 P.2d 1 (1998), said that a lawyer could be practicing law in California without a license "although not physically present here, by advising a California client on California law in connection with a California legal dispute by telephone, fax, computer or other modern technological means." If the lawyer is not licensed to practice where the fee agreement is signed, this agreement may be unenforceable by the lawyer. Any rule giving clients another basis not to pay their legal bills will likely lead to more fee claims brought by lawyers and, consequently, more malpractice counterclaims, which is precisely what happened in Birbrower. Additionally, disciplinary actions against attorneys based on the unauthorized practice of law trigger the limited coverage sometimes afforded for such actions.

Representing a Client Who Comes In Over the Internet and Receives Advice Via the Internet

The use of the Internet as a way to get and service clients can lead to numerous new pitfalls for attorneys and, in turn, their insurers. See Lanctot, Attorney-Client Relationships in Cyber-space: The Peril and the Promise, 49 Duke L.J. 147 (1999). People receiving online communications from a lawyer may erroneously consider that an attorney-client relationship exists. Disclaimers may not effectively defeat a legal malpractice claim, and, even if successful in getting a case dismissed down the road, there are substantial costs in having to defend such a claim.

When responding to an inquiry over the Internet, it's unlikely that lawyers can or will do the full conflicts check they would do if the client walked into their offices. Without such precautions, lawyers cannot be sure that they are free from conflicts of interest when giving Internet legal advice.

If legal advice or just friendly advice is provided through a Web site, a chat room or message board, it seems unlikely that a court will find the communication to be privileged. The client may nonetheless be disclosing sensitive information on the Web site, which is then sent to numerous subscribing lawyers who may or may not take the case. A client may have an unrealistic idea that all of this will be confidential and may sue if the disclosure of these communications compromises his or her legal position.

A lawyer's use of Web sites, including the law firm's own Web page, certainly implicates the ethical rules limiting lawyer advertising and direct solicitation of clients. Massachusetts Ethics Opinion 98-2 (1998); New York City Opinion 1998-2 (1998); Ohio Supreme Court Ethics Opinion 99-3 (1999); Arizona State Bar Association Formal Opinion 97-04. Because each state has different rules, it will be difficult for lawyers to comply with the rules of every single jurisdiction in which the Web site can be viewed. Violations of advertising or solicitation rules can result in disciplinary actions against an attorney, which are often covered to some extent under legal malpractice policies.

The Downside of E-Mail

With lawyers forsaking the telephone in favor of e-mail, much more of a lawyer's advice will be in writing. Obviously, this may sometimes be to the lawyer's advantage, but in some instances it may not be. E-mail may create ambiguity if there is a later dispute between the lawyer and the client, particularly where e-mail is used as a shorthand way of conveying the legal advice and may not state the full context of the advice or be edited with the same care as would a formal opinion letter.

Depending on whether the e-mail system integrates precisely with the client's or adversary's e-mail, the lawyer doesn't always receive confirmation that the e-mail has been received. Likewise, one doesn't necessarily receive notification if the e-mail was subject to a glitch in transmission. The lawyer who must communicate certain information to the client or to an adversary by a particular deadline may not have satisfied his or her obligation simply by sending an e-mail that was never received. In a similar vein, documents that are attached to e-mails and that may convey the most important information in the communication cannot always be opened by the receiver. Trying to file a document in court by a particular date through local counsel in another jurisdiction when local counsel cannot open the document can lead to liability.

A lawyer may also be sending more information than he or she intended when sending a document to an adversary. Embedded in the document in information referred to as "metadata", may be the earlier versions of the document. These drafts may be accessible to the person receiving the document and may reveal the lawyer's thought processes or other information that wasn't intended to be disclosed.

Using e-mails to communicate with clients or adversaries seems to bring with it the obligation to retain a copy of these e-mails. In the event that there is a dispute either with the client or with an adversary and these e-mails have to be retrieved, this may present a significant financial and administrative burden. In re: Brand Name Prescription Drugs Antitrust Litig., No. 94-C-897, MDL 997, 1995 U.S. Dist. LEXIS 8281, at 1 (N.D. Ill. June 15, 1995) (court ordered defendant to retrieve e-mail despite estimated cost of between $50,000 and $70,000). Moreover, if a law firm has a particular policy for deleting e-mails after a certain period of time, e-mails may no longer be saved on the system.

Conclusion

Lawyers are embracing and will continue to embrace the technology and opportunities offered by the Internet. This advancement will provide new challenges and exposures for lawyers and their insurers. Keeping an eye on the new types of claims and the cost of these claims is essential for everyone involved.

 

This article was originally presented at the LPL Symposium, one of the Insurance Symposia Series of the Professional Liability Underwriting Society (PLUS). It is reprinted here with the permission of PLUS. This article is intended to inform the reader of potential liability exposures for attorneys. This article reflects general principles only and does not render legal advice. Readers should consult legal, financial, insurance and other advisors if they have specific concerns. Neither the Los Angeles County Bar Association, Aon and its affiliates, the author nor PLUS assumes any responsibility for how the information in this article is applied in practice or for the accuracy and completeness of the information. Reproduction without written permission is prohibited. This article is reprinted with the permission of PLUS and is made available by Aon Direct Insurance Administrators, administrators of the LACBA Sponsored Aon Insurance Solutions Program, to LACBA members. www.aonsolutions.com

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