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CONNINGConning theIADC NewslettersInternational Association of Defense CounselCommittee members prepare newsletters on amonthly basis that contain a wide range ofpractical and helpful material. This section of theDefense Counsel Journal is dedicated tohighlighting interesting topics covered in recentnewsletters so that other readers can benefit fromcommittee specific articles.POTENTIAL LIABILITY FORATTORNEYS ENGAGING CO-COUNSEL AND REFERRALSBy: John T. Lay andChilds Cantey ThrasherThis article originally appeared in theJuly 2012 Professional LiabilityCommittee Newsletter.Professional liability claims againstattorneys using outside counsel are beingfiled more frequently than ever before.However, there are ways to avoid suchactions. The purpose of this article is toprovide an overview of the issuessurrounding professional liability in legalmalpractice claims arising when onelawyer or law firm associates with orrefers a case to another lawyer or lawfirm.John T. Lay is ashareholder inGallivan, White &Boyd, P.A.'s Columbia,South Carolina office.With over 20 years ofexperience managingcomplex, high-stakeslitigation for clients, his practice focuseson business litigation, professionalmalpractice, insurance bad faith andcoverage, financial services litigation,and product liability. Mr. Lay wasrecently elected to serve on the IADC’sBoard of Directors and served as Chairof the IADC's Business LitigationCommittee for the past year. ChildsCantey Thrasher is an associate inGallivan, White &Boyd, P.A.'s Columbia,South Carolina office.Her practice focuses onbusiness and commerciallaw, environmentallaw, andlitigation includingproducts liability, professional liabilityand internet law. Prior to joining GWB,she served as an Assistant AttorneyGeneral in both the civil and criminaldivisions of the South Carolina AttorneyGeneral's Office, where she prosecutedcriminal matters and represented theState in civil disputes such as the SC vs.NC Catawba River Water suit in theUnited States Supreme Court.
Newsletters Page 491Joint Ventures and Sub-agencyIn general, "a firm is not liable forthe acts or omissions of a lawyer outsidethe firm who is working with firmlawyers as co-counsel or in a similararrangement." 1 The outside lawyer isusually an independent agent of the clientover whom the firm has no control. He isnot an agent or a contractor of the firm.However, there are primarily twoinstances when this is not the case: jointventurers and sub-agents. Whether or nota joint venture is created by a referral is afact-specific question. Two cases canshed some light on when such arelationship may be found to exist.In In Re Fox, the South CarolinaSupreme Court found that "where anattorney retained on a contingent fee toprosecute a claim engages another lawyerto assist in the litigation, upon anagreement to share the fee in case ofsuccess . . . [the attorneys] become jointventurers." 2 The Court went on to say that"relations among joint venturers aregoverned by partnership law." 3 As such,one partner may be held liable for themisconduct of another depending on thespecific fact scenario.In W.B. Duggins, Jr. v. Guardianshipof Washington, the Supreme Court ofMississippi rejected attorney Duggins'argument that the associated attorney,Barfield, was an independent contractorbecause Duggins and Barfield divided the1RESTATEMENT (THIRD) OF THE LAWGOVERNING LAWYERS, § 58, Comment e.2 In Re Fox, 490 S.E.2d 265, 271 (S.C. 1997)(citing 46 Am.Jur. 2d Joint Ventures § 54(1994)).3 Id. (citing Tiger, Inc. v. Fisher Agro, Inc.,391 S.E2d 538, 543 (S.C. 1989)).responsibilities for preparing the case andsplit the fees equally. 4 Accordingly, "eachattorney [had] an equal stake in theoutcome of the case and . . . joint controlof the case." 5 Thus, the Court found thatDuggins and Barfield were jointventurers. 6 If Barfield were anindependent contractor, he would havebeen compensated under a fixed feearrangement rather than a contingency feearrangement. The Court further reasonedthat fraud committed by a partner actingwithin the scope of his actual or apparentauthority could be imputed to thepartnership. 7The ABA Model Code ofProfessional Conduct requires that thedivision of fees between lawyers is properonly if the division of fees isproportionate to the services performedand the responsibility assumed by eachlawyer and the total fee is reasonable. 8Additionally, a firm can subject itselfto vicarious liability if the representationis structured so that the referred-to firm oroutside counsel has no direct relationshipwith the client. This creates a sub-agencyrelationship, making the referred-to firm asub-agent of the law firm that hired it. Inthat situation, the outside counsel isacting as the firm's sub-agent and,therefore, vicarious liability is transferredto the initial firm or lawyer. In AliceWhalen v. DeGraff, Foy, Conway, Holt-Harris & Mealey, the New York4W.B. Duggins, Jr. v. Guardianship ofWashington, 632 So.2nd 420, 427 (Miss.1993).5 Id.6 Id. at 429, n. 12.7 Id. at 430.8 ABA MOD. CODE OF PROF. COND., EthicalConsideration 2-22.
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