A recent NY Appellate Division decision serves as another reminder of the importance of carefully defining the scope of engagement in an engagement letter. This is because, under New York law, an attorney may not be held liable for failing to act outside the scope of their retainer.
In Attallah v. Milbank, Tweed, Hadley & McCloy, LLP, 168 A.D.3d 1026 (App. Div. 2d Dep’t 2019) a client brought an action against a law firm alleging legal malpractice in a case where the client had retained the law firm to assist on a pro bono basis regarding the client’s expulsion from osteopathic-medicine college. Despite the law firm’s efforts, the college refused to reconsider the client’s dismissal.
When the client retained the law firm in 2011, the parties executed a letter of engagement, which provided, in relevant part, “Our services will include all activities necessary and appropriate in our judgment to investigate and consider options that may be available to urge administrative reconsideration of your dismissal from the New York College of Osteopathic Medicine (the ‘College’). This engagement does not, however, encompass any form of litigation or, to the extent ethically prohibited in this circumstance, the threat of litigation, to resolve this matter. This engagement will end upon your re-admittance to the College or upon a determination by the attorneys working on this matter that no non-litigation mechanisms are available to assist you. The scope of the engagement may not be expanded orally or by conduct; it may only be expanded by a writing…”
After the college refused to reconsider the client’s dismissal, the client commenced a malpractice action against the law firm. The Appellate Court upheld the lower court’s dismissal of the plaintiff’s amended complaint reasoning that the law firm had never promised to negotiate administrative reconsideration on the plaintiff’s behalf, but rather, had only agreed to “investigate and consider options” that may be available to urge reconsideration of the dismissal. Since the law firm’s alleged failure to negotiate with the school or to commence litigation against the school fell outside of the parties’ letter of engagement, the Appellate Division, Second Department, ruled that dismissal of the amended complaint was warranted.
Although this article pertains to legal services, we have continually emphasized that for all accounting professionals a strongly worded engagement letter is the best form of defense in a lawsuit.
There have been several postings on this site to underscore the importance of engagement letters:
Or just search the blog posting for “engagement letters”.
There is also a private library of specimen engagement letters at: http://cpagold.com/risk-management/. Go to: “Engagement letters”. Please ask you agent for the password.
Regardless, a carefully crafted engagement letter will give your defense attorneys strong grounds for a dismissal and the foregoing case is a firm precedent.
Jorgensen & Company are not attorneys and do not offer any form of legal advice. Consult with appropriately qualified local counsel for more assistance. Rickard Jorgensen is President and Chief Underwriting Officer for the CPAGold™ program and may be contacted at (201) 345 2440 or firstname.lastname@example.org