In rare cases, attorneys will steal from their clients and lie about it or engage in other intentional acts. Fortunately, these cases are pretty rare, but when they occur, the liability portion of the case is easy and the issue is usually either: 1) whether the defendant attorney has any money to recover; or 2) whether the defendant attorney’s insurer will agree that there is coverage.
An example of the first type of case occurred when The Entrekin Law Firm was contacted about an attorney who was a drug addict and had stolen over $2,000,000 out of his own trust account. The attorney was a transactional attorney who held the money for his developer clients and he had stolen the money in order to purchase drugs. Unfortunately, subsequent investigation revealed that the attorney had no money, no assets and no liability insurance, so while he was disbarred by the Arizona State Bar, there was no way to recover money in a legal malpractice case against him.
Another famous intentional acts case in the lawyer misconduct context was Elliot v. Videan, 164 Ariz. 113, 791 P.2d 639 (App. 1989). In Elliot, the attorney invested in his client’s company and later, when the company was struggling, assisted his client in obtaining some co-investors who would take effective control of the client’s company. The attorney lied to the client and indicated that the co-investors would keep the client on as an executive and pay him a generous salary for an agreed period after investing.
The attorney was in league with the investors and as soon as they took control of the company, they kicked the client out of the company and the attorney drafted opinions indicating that they would not have to pay the client any money. The client brought suit against the attorney and while the underlying facts are complicated, the court found that the attorney’s actions were an appropriate basis for a fraud claim against the attorney by the client: the attorney had knowingly, deliberately deceived the client and all other elements for common law fraud were met. The holding was later upheld on appeal.
The other issue that arises in intentional act cases is whether the insurance policy covering the attorney will cover intentional acts. Many policies contain an”intentional acts” exclusion and it is important for the victim of legal malpractice to determine relatively early whether the defendant attorney’s liability insurer will try to assert this as an affirmative defense against paying out on the liability insurance policy.