Risk Update

Conflicts Complexities — Negligence Sanction Reversed on Appeal, Solicitor’s Challenge Backfires

Court of Appeals Reverses Professional Negligence Sanctions Against Scrudder Bass” —

  • “The Georgia Court of Appeals recently overturned half a million dollars in professional negligence sanctions against law firm Scrudder Bass Quillian Horlock Lazarus & Adele.”
  • “Doing so, the court found a DeKalb County trial court abused its discretion by issuing the penalty and addressing a firm’s duty of confidentiality when a conflict is discovered which requires the firm’s immediate withdrawal from the case.”
  • “Four years later, at the outset of the trial, Scrudder Bass told the court it just became aware of a conflict of interest and would need to withdraw because it could no longer represent all three clients. When asked when it became aware of the conflict, the firm said it would have arisen years ago, but the information it received that morning was ‘brand new’ and it had only just begun investigating its legal and ethical obligations.”
  • “The trial court scheduled a hearing on Scrudder Bass’ emergency motion to withdraw, but the firm instead asked for an in-camera revue because it couldn’t publicly disclose the basis for the conflict because of client confidentiality.”
  • “The judge, however, refused to grant an in-camera review and instead declared a mistrial and ordered the defense to pay a half-million dollars in sanctions, reasoning that the plaintiffs would have to completely redo their work in preparation for a new trial and Scrudder Bass should have been aware of the potential conflict when it came on as counsel because Green testified she wasn’t sure where the work order entries in question came from the year before. The order also noted that the disclosure of conflict itself wasn’t improper, but rather the timing of the disclosure because it unnecessarily expanded the proceedings.”
  • “The unanimous opinion, authored by Presiding Judge Stephen Dillard, reasoned that the firm did the right thing by withdrawing, and even if it had known about the conflict of interest before such a late stage in the proceedings, withdrawing wasn’t a severe enough offense to warrant so much sanctions—though he said his analysis might be different if the evidence showed the firm purposefully waited until the last possible minute.”
  • “He cited the trial court’s refusal of an in-camera review as a second error. ‘doing so, the trial court erred in suggesting that it could not hear such evidence without risking disqualification,’ Dillard explained.”
  • “At oral argument, many of Dillard’s questions focused on this decision to not grant in-camera review and indicated some skepticism toward whether the trial court judge was correct in refusing it. Dillard asked the defendant-appellants if the judge was fully aware of the details of the conflict and, had he considered those details, could have led him to make a different decision. Judge Trenton Brown noted that the plaintiff-appellants said there was a thorough hearing after Jacobs denied in camera review, and whether after that hearing, in camera review would have been beneficial.”
  • Decision here.

Solicitor’s reprimand challenge backfires with tougher penalty for acting in conflict” —

  • “The founder of an NSW boutique firm was hit with a harsher penalty after appealing the reprimand she received for acting in conflict by representing both a longstanding client and her family members.”
  • “Maria Di Giovanni, a founder of Iron Cove Law in Drummoyne, was ordered to complete an ethics course and issue an apology to a client she had known for a decade and had formed a relationship with that was “closer to friendship” than solicitor-client.”
  • “In May 2023, the Council of the Law Society of NSW found Di Giovanni engaged in unsatisfactory professional conduct by advising both the client and her family members in a commercial property conveyance of a multimillion-dollar property in Sydney.”
  • “The council originally imposed a reprimand and ordered that she undertake an ethics course, which, ‘to her credit,’ Di Giovanni completed despite challenging the findings simultaneously.”
  • “This month, NSW Civil and Administrative Tribunal (NCAT) principal member Aaron Suthers and senior member Michelle Sindler said Di Giovanni’s conduct in the appeal ‘indicates that she has not learnt from the course in respect of having gained an understanding of the fundamental complications of acting for both parties.'”
  • “Given Di Giovanni’s evidence that conveyancing forms ‘a considerable part of her practice,’ she was ordered to complete a further course on informed consent and how conflicts arise.”
  • “The tribunal was told that by the time of the conveyancing, the client was struggling with regulatory compliance issues from owning a commercial property in a superannuation fund – which Di Giovanni also acted for – and this was ‘exacerbated’ by his wife’s death.”
  • “The client had asked Di Giovanni to assist with selling the property but, when he changed his mind, Di Giovanni discussed the potential advantages of a private sale and advised him ‘certain members of her family … may have an interest in purchasing it.'”
  • “After the contract was executed, Di Giovanni wrote to her family members about the potential dangers of acting for both parties and advised them the firm would cease acting if this became an issue. She did not issue this same advice to the client at that time.”
  • “When the client said he wanted to resile from the contract, Di Giovanni did not cease acting. Instead, she attempted to negotiate mutual rescission, with the client’s company to pay the family member’s reasonably incurred costs. NCAT said this did not work.”
  • “It was then that Di Giovanni told the client it ‘may be prudent for you to obtain independent legal advice.'”
  • “The client alleged in a letter to the Law Society that he ‘felt like the property had been stolen from under my nose by my solicitor and sold to her relatives for the same price I paid for it two years earlier.'”