When the defendant’s lawyer becomes a defendant in estate lawsuits

All too often, a lawyer hired by an executor or trustee to defend claims of breach of fiduciary duty becomes a defendant in the lawsuit.  The plaintiff joins the lawyer as a defendant alleging that the lawyer and his/her client engaged in fraud or conspiracy to breach fiduciary duties owed to the plaintiff (the beneficiary of the will or trust).

Rather than being based on actual evidence of the lawyer’s bad conduct, the tactic may be used to dissuade the attorney from representing the defendants in the litigation as the costs associated with the attorney’s defense are borne by the attorney.

To help reduce the impact of this possibility, some lawyers include in their engagement agreements a provision that the client will pay the lawyer’s defense expenses if the lawyer is joined as a defendant.

The issue addressed in Opinion No. 581 of The Professional Ethics Committee for the State Bar of Texas is whether the inclusion of this provision is proper.

The bottom line is that the Committee decided that the inclusion may be proper.  Here is the conclusion of the opinion:

Under the Texas Disciplinary Rules of Professional Conduct, a lawyer-client engagement letter may include a provision under which the client agrees to pay the defense expenses incurred by the lawyer in the event of a joinder of the lawyer as a defendant in the client’s litigation provided that (1) the agreement does not prospectively limit in any way the lawyer’s liability to the client for malpractice and (2) the obligation for payment of the lawyer’s legal defense fees and the obligation to pay the fees billed by the lawyer for his work do not taken together constitute a compensation arrangement that would be unconscionable within the meaning of Rule 1.04(a).

Special thanks to Sharon Gardner (Crain Caton & James, Houston, Texas) for bringing this opinion to my attention.