2024 Year-in-Review for Legal Ethics and Malpractice in D.C.: Flat Fees, Malpractice Causation, Artificial Intelligence, and a Primer for Local Counsel

As 2024 draws to a close, I thought it might be helpful to look back at some of the highlights in the world of legal ethics and malpractice in Washington, D.C. While not all-encompassing, hopefully this quick rundown will be useful to practitioners.

In brief, the year saw the D.C. Court of Appeals say flat fees aren’t earned until all work is done, the D.C. Circuit clarify what “causation” is in legal malpractice, and the D.C. Bar issue opinions on artificial intelligence and considerations for attorneys serving as local counsel.

I. When Is a Flat Fee Earned? – In re Alexei

The big splash from the D.C. Court of Appeals in 2024 was In re Alexei, 319 A.3d 404 (2024),and it really is worth a read if you work under flat fee arrangements.

There, the Court held as a matter of first impression that, absent attorney-client agreement to the contrary, lawyers do not earn any part of an advanced flat fee unless and until all legal services under that flat fee are complete. That means, without an agreement otherwise (and that agreement has certain requirements, as discussed below), if you make a flat fee arrangement with your client, and the client fires you or a conflict develops, you get nothing.

Under Rule 1.15(a), of course, advances of “unearned fees” are property of the client until earned unless informed consent is obtained from the client for a different arrangement (more on informed consent below). The question in Alexei was whether and when the attorney had earned portions of the advanced fee, i.e., when did the money belong to the attorney.

The client hired Alexei to file certain immigration documents on a flat–fee basis. The client paid half the total fee upfront with the remainder due after the filings were made. Alexei deposited the advance into his trust account but later made withdrawals prior to completion of the work. Alexei argued this was OK because each withdrawal was less than what he would have earned at each point in time if he had charged his hourly rate.

The Court rejected Alexei’s argument (although it ultimately did not apply its holding to Mr. Alexei himself due to the decision’s novelty). Among other reasons, the Court observed that measuring whether a flat fee is earned based on hourly rates sort of defeats the whole point of a flat fee. The client agrees to a flat fee for certainty and the default rule ensures that the money will remain available if the attorney does not complete the work (including if the attorney is fired). At the same time, flat fees may enable the lawyer to take advantage of efficiencies to potentially earn more (if reasonable) than she might earn through hourly rates.

The Court proposed two solutions to address drawbacks of its holding: (1) the lawyer and client may agree when and how portions of the flat fee are earned (e.g., milestones); and (2) the lawyer may obtain the client’s informed consent to treat the unearned fees as attorney property during the engagement. Two caveats for the latter: (a) the lawyer still must refund the full advance if the work is not completed and (b) the requirements for such informed consent are detailed and onerous to say the least (see In re Ponds (2022) for a checklist of the five specific things a lawyer must communicate to the client for such informed consent).

II. Can Unreasonable Delay on a Client’s Case Be the Basis for a Malpractice Claim? – Estate of Botvin

A client may have a legal malpractice claim against their lawyer where the lawyer’s mistake was the proximate cause of a client’s loss. In considering malpractice causation, the D.C. Circuit addressed an interesting question: Can a lawyer’s unreasonable delay in moving a case forward be the basis of a malpractice claim where more money would have been available to satisfy the judgment if the case had resolved more quickly? The answer is yes.

I previously wrote about the decision in more detail here.

The case involved the tragic death of 14-year-old Yael Botvin at the hands of Hamas suicide bombers in 2005. His estate sued Iran for its role in the bombing. Although Iran did not participate in the suit (not a surprise), the case dragged on for years due to a series of errors and delays by Botvin’s lawyers.

The lawyers eventually obtained judgments against Iran for $11.7 million, but that was just the beginning—the bigger issue was trying to collect on Iranian assets. The Botvins were able to collect $2.8 million from a fund for victims like Yael, but while the case had dragged on, they lost out on the distribution of $1.9 billion in Iranian assets.

The trial court had dismissed the claim for failure to plead causation sufficiently. The D.C. Circuit reversed. The Court held that the foreseeability requirement for causation was a jury issue and that a plaintiff need only plead the “type of harm” and not the exact method. Analogizing to medical malpractice, it’s malpractice to turn away a pregnant patient appearing ill with jaundice, even though she eventually died of an extremely rare (and perhaps unforeseeable) liver disease. In Botvin’s case, a lawyer could foresee that an extreme delay could make it more difficult to collect on a judgment, a vital part of a case against a country like Iran, even if the lawyer may not have foreseen the availability of the $1.9 billion.

III. D.C. Bar Legal Ethics Opinions

The D.C. Bar issued two ethics opinions in 2024: in reverse order, Opinion 388 regarding attorneys’ use of generative artificial intelligence and Opinion 387 regarding local counsel duties.

Legal Ethics Opinion 388 – Use of Generative Artificial Intelligence

In Opinion 388, the D.C. Bar weighed in on the topic many jurisdictions and courts have grappled with this year: attorneys’ use of generative artificial intelligence.

Many saw the widespread coverage in the legal press last year about the lawyer in New York who used ChatGPT to help write a brief and ended up citing to cases that didn’t exist—so-called AI “hallucinations.” The D.C. Bar uses the case, Mata v. Avianca, Inc., 678 F. Supp. 3d 443 (S.D.N.Y. 2023), as a springboard for its AI guidance.

Quoting from a piece by Emma Bowman for NPR, the Opinion sums up AI as follows: “The best way to think about [AI] is you are chatting with an omniscient, eager-to-please intern who sometimes lies to you.”

After discussing the various pitfalls, the Opinion breaks its analysis into several categories corresponding to a lawyer’s duties:

• Competence (Rule 1.1) – As the comments to Rule 1.1 say, to provide competent representation, a lawyer should “keep abreast of changes in the law and its practice.” That includes technology. Before using AI, attorneys must understand how it works, what it does, and its potential dangers.
• Confidentiality (Rule 1.6) – Rule 1.6(f) addresses a lawyer’s duty to prevent service providers from disclosing or using client confidences. That includes AI providers. Before using AI, a lawyer must ask herself questions, such as: Will information I provide be visible to the AI provider or other strangers? Will my interactions affect the answers for later users that could reveal confidential information I provide?
• Responsibility for Assistants (Rules 5.1 and 5.3) – A lawyer should take reasonable measures to ensure that any lawyers or nonlawyers she supervises use AI in conformance with the Rules of Professional Conduct. This may include vetting AI tools or ensuring that such persons verify the accuracy of AI output.
• Candor to the Tribunal and Fairness to Opposing Parties and Counsel (Rules 3.3 and 3.4) – In sum, lawyers can’t make false statements to a court. The comments to the Rule already address knowing false representations of the law. The Opinion makes clear that this applies to nonexistent case citations like those in Mata.
• Fees (Rule 1.5) – The Opinion repeats an admonition the D.C. Bar stated back in 1996 in Legal Ethics Opinion 267 – a lawyer billing on an hourly basis may never charge a client for time not expended, even where a lawyer is more efficient than expected in accomplishing a task. The same still applies to saving time using AI.
• Client File (Rule 1.16(d) – As reviewed in Legal Ethics Opinion 333, a lawyer’s duty to surrender a client’s file when requested includes the “entire file,” including internal notes and memoranda. While a lawyer need not retain every piece of paper or data, the Opinion suggests she should consider whether any interactions with AI should be preserved as part of the client file.

The Opinion recognizes that AI may eventually provide great benefits to the legal industry, but it cautions that lawyers must be vigilant to ensure that the use of AI does not lead to violations of the Rules.

Legal Ethics Opinion 387 – Duties of Local Counsel

I wrote about Opinion 387 when it came out here. As I noted, while your ethical obligations forprimary versus local counsel aren’t much different, serving as local counsel can raise unique issues, and the Bar’s opinion does a good job of laying out a checklist of the concerns:

• Scope of Representation – Serving as local counsel may constitute a limited representation under Rule 1.2(c). Counsel should make this clear with the client and memorialize any limitations on the representation in writing.
• Duty to Communicate – Even if representation is limited, a lawyer still has a duty to keep the client reasonably informed about the matter. Coordination with lead counsel is key.
• Written Notice of Fees – Where fees are billed through lead counsel, Rule 1.5(e)’s fee–sharing provisions may be implicated. Where so, a lawyer should identify the lawyers sharing the fee, their respective responsibilities, and the effect of the association of lawyers outside the firm on the fee charged.
• Conflicts of Interest – It may seem obvious to many, but the Bar cautions that the normal conflict-of-interest Rules 1.7, 1.8, and 1.9 still apply regardless of a limited representation.
• Duties to the Court – A lawyer’s duties to the court don’t go away just because she is serving in a local counsel role. She still must not make frivolous claims and must remediate frauds on the court she is aware of (subject to the rules on confidentiality).
• Duties upon Withdrawal – The court’s withdrawal rules still apply, whether lead or local counsel, and if the lawyer concludes she has a right or duty to withdraw under Rule 1.16(a), she must inform the client and lead counsel in a timely manner.
• Reporting Professional Misconduct – Local counsel must make reasonable efforts to ensure lead counsel abides by the D.C. Rules of Professional Conduct and report violations that raise substantial questions about the violator’s honesty, trustworthiness, or fitness as a lawyer, according to Rule 8.3.
That’s all for now. On to 2025!

December 23, 2024

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