The severity of legal malpractice claims arising out of business transactions is on the rise. Lawyers can take the following steps to avoid claims arising out of transactional work. If they are the target of a claim, however, or believe a storm may be on the horizon, they should carefully consider when and how to give notice of it to their insurer.
Do Not Unintentionally Create Attorney-Client Relationships
Transactional attorneys must be aware of who their clients are at all times and avoid unwittingly creating attorney-client relationships that could create duties to third parties. When an attorney represents an organization, the client is the organization itself. Cal. Rule of Prof. Conduct 3-600(A). An attorney who represents a corporation does not represent the shareholders. Skarbrevic v. Cohen, England, & Whitfield (1991) 231 Cal.App.3d 692. Similarly, a lawyer who represents a partnership generally owes no duty to the individual partners. Johnson v. Sup. Ct. (1995) 38 Cal.App.4th 463.
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