In Utah, Attorney’s Fees Are Valid, Consequential Damages for Another’s Negligence If It Causes You to Be Sued

We all know that the ‘American Rule’ applies to bar an award for attorney’s fees unless otherwise permitted by statute or contract.  Utah recognizes an exception to the American Rule “when the natural consequence of one’s negligence is another’s involvement in a dispute with a third party,” which is also known as the “third-party tort rule.” South Sanpitch Co. v. Pack, 765 P.2d 1279, 1282-83 (Utah Ct.App.1988); see also Restatement (Second) of Torts § 914(2) (1979).  The fees may be limited because an “allocation is made between recoverable fees incurred in litigation with third parties and non-recoverable fees incurred in pursuing the negligent defendant or expended on causes of action not proximately necessitated by that defendant’s negligence.”  Id.

If your client gets sued because of the negligence or tort of another, even in breach of contract cases where the contract does not provide for attorney’s fees, remember to raise an affirmative claim against the other for attorney’s fees, costs, and other consequential damages if it is warranted.  Also, this claim can be raised after the fact in a separate claim against the allegedly negligent third-party.  Good luck.

Tax Planning for Small Business Owners

Wells Fargo Small Business Roundup, a newsletter service provided by Wells Fargo Bank, sent me a newsletter I thought was helpful in terms of tax planning together with audit avoidance or at least audit success.  (There were also a number of other helpful articles on the site).  Here’s the good stuff about what the IRS is interested in:

• Does your lifestyle square with your reported income? “An auditor sizes you up for dress, jewelry, car and furnishings in your home or office, if given a chance to make these observations. Someone who looks like a Vegas high roller, with the tax return of a missionary, will cause any auditor to dig deeper,” Daily says.
• Does your business handle a lot of cash? If your business handles a lot of cash, expect the auditor to suspect skimming, or diverting income into your own pocket, without declaring it.
• Did you write off auto expenses for your only car? Personal use of your business-deducted set of wheels is so common that auditors expect to find it. That doesn’t mean they’ll accept it, however. Auditors don’t believe you use your one-and-only auto 100% for business and never to run to the grocery store or the dentist. If you operate your car for both business and pleasure and claim a high percentage of business usage, keep good records (preferably a mileage log).
• Did you claim personal entertainment, meals or vacation costs as business expenses? Travel and entertainment business expenses are another area where the IRS knows it can strike gold. Document all travel and entertainment deductions. Taking buddies to the ball game and calling it business won’t fly if you can’t explain the business relationship in a credible fashion.
• Did you “forget” to report all of your business sales or receipts? If you failed to report significant business income—$10,000 or more—strongly consider hiring a tax pro to handle the audit. Remove yourself from the process altogether.
• If the auditor finds evidence of large amounts of unreported income, and it looks intentional, he may call in the IRS criminal investigation team.
• If you have employees, are you filing payroll tax returns and making tax payments? Employment taxes are a routine part of every audit of a small enterprise.
• And last but not least, if you hire people you call “independent contractors,” are they really employees? The IRS routinely conducts audits of businesses that hire independent contractors, because of the tax savings associated with hiring contractors instead of employees.

* * *

If you have questions about your taxes and successfully avoiding or managing a tax audit, get help from a professional.  It will be money well-spent.  Good luck.

You Are Not Limited to Rule 11 When Dealing With Unethical Conduct in Utah

I have been suffering at the hands of a less-than-ethical practicing attorney in Utah since 2000.  I recently ran across a case reminding me that we are not limited to bringing a Rule 11 motion for sanctions when things get out of hand.  The Utah Supreme Court expressed in Griffith v. Griffith, 1999 UT 78, ¶13, 985 P.2d 255, that district courts have an inherent power to control their courtroom and levy appropriate and potentially far-reaching sanctions:

It is undoubtedly true that courts of general and superior jurisdiction possess certain inherent powers not derived from any statute. Among these are the power to punish for contempt, to make, modify, and enforce rules for the regulation of the business before the court, … to recall and control its process, to direct and control its officers, including attorneys as such, and to suspend, disbar, and reinstate attorneys. Such inherent powers of courts are necessary to the proper discharge of their duties….

The summary jurisdiction which the court has over its attorneys as officers of the court … is inherent, continuing, and plenary … and ought to be assumed and exercised … not only to maintain and protect the integrity and dignity of the court, to secure obedience to its rules and process, and to rebuke interference with the conduct of its business, but also to control and protect its officers, including attorneys.

Id. (citing In re Evans, 42 Utah 282, 130 P. 217, 224-25 (Utah 1913) (cited in Barnard v. Wassermann, 855 P.2d 243, 249 (Utah 1993) (“[C]ourts of general jurisdiction … possess certain inherent power to impose monetary sanctions on attorneys who by their conduct thwart the court’s scheduling and movement of cases through the court.”))).

Don’t get mad and don’t try to get even—just protect the rights of your client to be free from unethical conduct.  The practice of law is enjoyable.  Don’t let the few bad apples spoil your fun.  Be safe out there.

The Judicial Proceedings Privilege Is Broader Than You Think

The absolute privilege is very broad in scope and is perhaps under-appreciated by the bar.  The Utah Supreme Court explained:

One of the absolute privileges is that granted to participants in judicial proceedings. The general rule is that judges, jurors, witnesses, litigants, and counsel in judicial proceedings have an absolute privilege against defamation. See 50 Am.Jur.2d Libel & Slander § 231 (1970); W. Prosser & P. Keeton, [The Law of Torts] § 114. This privilege is premised on the assumption that the integrity of the judicial system requires that there be free and open expression by all participants and that this will only occur if they are not inhibited by the risk of subsequent defamation suits.

Price v. Armour, 949 P.2d 1251, 1256 (Utah 1997).

Three elements must be satisfied for allegedly defamatory statements to qualify for an absolute privilege: (1) The statement must have been made during or in the course of a judicial proceeding; (2) the statement must have some reference to the subject matter of the proceeding; and (3) the statement must have been made by someone acting in the capacity of judge, juror, witness, litigant, or counsel.

Allen v. Ortez, 802 P.2d 1307, 1313 (Utah 1990).

First, note that the privilege is absolute and not conditional.  For example, in Price, the court was faced with a litigant who, during settlement discussions, appeared to defame the other party’s attorney to the other party in both words and conduct.  Essentially, those who are protected by the privilege are entitled to publish defamatory material without fear of retaliation as long as all of the elements are met.

Also from Price we learn that “judicial proceeding” is a very broad concept in terms of the type of proceeding involved and the circumstances under which the defamatory conduct occurred.  “Judicial proceeding” includes formal court proceedings as well as “proceedings of administrative officers, such as boards and commissions so far as they have powers of discretion in applying the law to the facts which are regarded as judicial or ‘quasi-judicial’ in character.”  Price, 949 P.2d at 1257 (quoting Mortensen v. Life Insurance Corp., 6 Utah 2d 408, 315 P.2d 283 (1957) (other citations omitted)).

The scope of the privilege also precedes the filing of a formal action: “The absolute privilege to publish a defamatory matter can occur in communications preliminary to a proposed judicial proceeding as well as during the course of or as part of a judicial proceeding if the matter has some relation to the proceeding.”  Price, 949 P.2d at 1256.  The privilege also governs settlement discussions: the “privilege applies to defamatory statements made in the institution or conduct of litigation or in conferences or other communications preliminary to litigation.”  Id. at 1256-57 (citing 50 Am.Jur.2d Libel and Slander § 302 (1997)).

Finally, the absolute privilege applies not only to defamation claims but also to defamation-related claims such as intentional interference with business relations (including contractual and economic relations).  Id. at 1258.

Under a broad set of circumstances the absolute judicial proceedings privilege can be a powerful defense.  You are now informed.  Use it wisely.

Twitter and Facebook Comments Fodder for Trial and Cross-Examination

The Secrets of Hispanic Surnames

A client asked me to help resolve an issue with a birth certificate in which the parents were Hispanic and the birth certificate misnamed the father’s surname (last name).  I realized that I did not know the first thing about Hispanic surnames and why there were sometimes two surnames and sometimes only one.  This was clearly the source of the mistake on the birth certificate.  The best and easiest to understand answer is found here.  I would summarize the information here but I would simply have to repeat the article.  It is fairly short and concise and easy to understand.  If you ever wondered or just need to brush up on the ins and outs, go see for yourself and be better informed.

Wireless Access in Utah’s Courthouses

Whether you know it or not, you can use the court’s wireless access while at a number of Utah’s courthouses.  Feel free to break out your iPhone and surf away while waiting for the jury to return with your verdict (viel glück).  You will need three things:

1. Username for all courthouses: Pathway

2. Password: it changes weekly and is posted on the Utah State Law Library Blog or can be obtained from the State Law Library at 801-238-7990 or library@email.utcourts.gov.

3. Willingness to agree to the court’s Wireless Internet Usage Policy:

Utah State Courts offers wireless access to the Internet for users with their own laptops or PDAs. Utah State Courts recognizes the privacy of the user and does not monitor the information or sites accessed by users.

Security in an electronic environment such as the Internet cannot be guaranteed and users are warned that all transactions and communications are vulnerable to unauthorized use. Utah State Courts assumes no responsibility for any damage, direct or indirect, arising from users’ use of particular sites.

Utah State Courts has no control over information available through the Internet and assumes no responsibility for the content, availability or accuracy of information provided by other agencies or institutions.

Users must be sensitive to the values and beliefs of others when displaying potentially controversial information or images on computer screens located in public areas. Some websites or material may be blocked due to content.

All users are expected to use the Utah State Courts Wireless Service in a responsible and courteous way. By using this wireless service, you agree to this Wireless Internet Usage Policy.

I know your eyes glazed over when you saw “Wireless Internet Usage Policy” so here it is in a nutshell (remember those books in lawschool?): “some websites may be blocked” + “users must be sensitive to the values and beliefs of others” = “we know it when we see it so keep your porn in the privacy of your own home or we’ll ban you from using the wireless access service”.

The following courthouses have wireless access available:

American Fork

Farmington

Ogden District & Juvenile

Orem

Provo District & Juvenile

Salt Lake City (Matheson Courthouse)

Silver Summit

Spanish Fork

Tooele

West Jordan

Legal Research on the Cheap Part 2: Loislaw

Last week I posted a number of online locations for free access to Utah law.  I’m not the only tightwad when it comes to legal research: Locke Lord Bissell & Liddell, a national firm with more than 675 attorneys, recently issued a firm-wide directive that all non-billable legal research should be done on Loislaw, a Wolters Kluwer/CCH publication available on purportedly lower-cost flat-rate basis.  For many firms, including Locke Lord, the long-time standard has been to do all legal research on either Lexis or Westlaw charged at a per transaction or time-rate basis often resulting in higher costs.  In its firm memo (published in its entirety by ATL here), Locke Lord directs that only billable legal research be conducted on Westlaw or Lexis (with an appropriate billing number) and where possible Loislaw should be used for billable research.

The bottom line is that although Lexis and Westlaw cannot always be replaced for certain legal research, it can be for some, if not most, legal research at a lower cost either with Loislaw or free online resources.  Not mentioned by Locke Lord or ATL, however, is the need to remain efficient.  There is no sense in stepping over a dollar to pick up a penny.  If the alternative legal research (free or otherwise) is too cumbersome, inefficient, or does not have the resources sufficient to permit accurate and thorough research then it threatens to waste an attorney’s time while on the billable clock.  The result would likely be more billable time spent researching which would eviscerate any cost savings.  And that is the bottom line.

The Hills Have Eyes: Do You Have Workers Compensation Insurance?

Ever wonder whether your employer has workers compensation insurance?  Or, if you are an employer, is your insurance up to date and on file with the Utah Labor Commission?  Look no further than the Utah Labor Commission’s free Compucheck web service to answer your questions.  From the free advice file: make sure you have insurance, otherwise the Labor Commission will crush you like a steroid homerun.  “Fear can hold you prisoner. Hope can set you free.”

Utah Budget Crisis Update: Court Budget Cuts

Utah State Bar President Nathan D. Alder, reported today via email:

The State Court has received an 8.5% total cut for FY’09.  This is dramatic and very concerning.  Proposals are being floated for an additional 11% to 19% cut for FY’10 which will only further erode our Court system.  I am deeply worried about this situation.  We can already see consequences from changes to our Court system; we must soon reverse these negative effects.  Utah can ill-afford to let our system of justice slip any number of notches below what our Constitution and democratic society requires and so rightly deserves.  I encourage you to read Chief Justice Durham’s State of the Judiciary Address which was emailed to all Bar members and has been posted at www.utahbar.org.  I encourage you to discuss these concerns with Legislators and other elected officials, decision makers, colleagues, neighbors and friends.  We are advocates for the Courts and must now step up to protect our judicial system from further insufficient funding scenarios.

The net effect of the size of budget cuts imposed and proposed for next year likely mean a longer wait for trials or decisions by courts, longer wait times in adult and juvenile criminal cases, furloughed court employees (at least temporarily), higher filing fees, fewer court hours or days, closure of some courthouses, no new judges to replace openings, longer lag time between filing and report on the docket, and fewer staff at the courts.  Not a happy prospect.

SLCBA: Justice Tongue update

If you are a member of the Salt Lake County Bar Association then you are likely familiar with “Justice Tongue,” a regular contributor to the Bar & Bench quarterly newsletter published by the SLCBA.  In the recent Bar & Bench, I found that Justice Tongue dispensed a bit of good advice to young lawyers (those “pampered, directionless, underachievers who would conceive that ‘managing partner’ is an ‘entry level position’”):

1. The practice of law is a profession, not a business.  (Debate ensues . . . which came first the chicken or the egg?  Does being a professional keep you in business or do paying clients?  Or, does being a professional guarantee you will have paying clients to keep you in business?  Or, does being a lawyer mean more than making money and if you actually make money at it you can call it a bonus and consider yourself lucky?)
2. You must always be proactive.
3. You will be paid for thinking, planning, researching, studying, and effectively communicating.
4. Your rewards and satisfaction in the practice of law will be in direct proportion to your commitment and effort.
5. Above all, retain your integrity.  (Amen.)

Does Your Smartphone Adequately Protect Client Communications?

Nearly every attorney I know has a phone that can access email, edit documents, and receive text messages and many can carry reams of electronic documents.  If you can access your work email then it is fairly certain that your client commucations are at risk.  It was recently questioned whether President Obama would give up his Blackberry when he took office (apparently he has not) in light of the Presidential Records Act and security concerns.  If the President’s smartphone is a security risk to the country’s national security, is it a risk to your clients’ privileged communications?  According to a law.com article and common sense: Definitely.  Don’t worry, however, there are some things you can do to moderate the risk significantly:

• Password protect your smartphone.  You don’t need a dramatic 15-character password to thwart the bulk of the would-be information thieves.
• Limit the number of email your smartphone stores at any one time.  Adjust your phone’s settings so that it is not storing your entire inbox, outbox, trash, work in progress, cabinet, etc.
• Establish a procedure in case of a lost or stolen phone.  You should know your service provider number in order to immediately cancel all service to the phone.  Some providers and phones are also equipped to disable the phone’s utilities remotely before any information is accessed.  Now is also a good time to review your organization’s lost or stolen phone policy.
• Old smartphones should be professionally wiped clean of any information.  Even if you remove your SIM card from a smartphone, the email settings and other access items can remain with the phone.  For example, I am aware of an attorney who sold his old smartphone on eBay and when the purchaser inserted his SIM card was able to access the attorney’s email account and send email.
• Finally, protect your smartphone as if it were your client file back at the office– it holds much of the same information.

“Hey, let’s be careful out there . . .”

Where to Find Utah Law for Free

Maybe you’ve tried looking for laws, statutes, rules, or regulations but you either do not want to pay a fee to Lexis-Nexis or Westlaw or you just have a defiant streak that tells you that such information should be free.  Whatever, here is where you can find the information on the web:

Current Utah Statutes and Constitution

Utah Administrative Code

Utah Rulemaking Law

Appellate and Supreme Court opinions since 1996

Utah State Bulletin (state equivalent of the Federal Register)

Bills before the Utah Legislature (since 1991)

Tips for Navigating in Troubled Financial Waters

Times are tight (duh!).  You or your clients may have debt, mortgages, or loans on the brink.  The folks at Utah Business (written by Steven L. Ingleby and Scott M. McCullough at Callister, Nebeker & McCullough) were kind enough to offer some tips to remember to which I have added a few notes for dealing with struggling clients:

• Recognize when you or your clients are in financial trouble and don’t procrastinate.  Are your clients keeping current on their bills?  Are you carrying an ever larger A/R balance (making you the de facto bank)?  The sooner you make the call the better off you will be—regardless which side of the debt you are on.  Communication with a lender early on will make a big difference to the lender if you want to try to restructure the debt.  Yes, there is the risk that the lender will know about your financial condition but in the current climate of bankruptcy and foreclosure, “lenders are keenly aware of their borrowers’ problems.  if your lender is, or can become comfortable with the belief that you can ultimately pay off the renegotiated loan, lenders may see that it is in their best interest to restructure your loan.”

• Be honest and accurate.  Oftentimes in order to avoid the short-term problem a borrower will be overly optimistic about their financial condition and chances of repaying a loan.  When dealing with clients who have ever-increasing outstanding bills, sit down with them and discuss the scope and goals of the work you perform for them and its value to their business.  Drill down to the core of the borrower’s or client’s problem and face the issues up front.  Borrowers risks later claims of misrepresentation, non-disclosure, and possibly fraud (assuming there is a policy to chase or a few nickels in your pocket) if they try to “fudge the facts.”  Also, the better information you have the better able you are to establish a workable and ultimately successful plan of action.  This is particularly true in litigation matters which may require expediting a more creative but less expensive/lucrative resolution (depending on which side of the case you are on).

• Lastly, don’t be afraid to bring in outside help.  For debt workouts, there are numerous professionals to assist including CPAs, attorneys, consultants and workout specialists.  Run some cost-benefit numbers and make a decision early on.  Lenders appreciate the third-party objective view.  In terms of assisting your client determine whether their present litigation will be successful (in terms of prosecution or defense) there are litigation services available to help make that decision.

Good luck.

Alternative Billing Strategies for Lawyers

The New York Times published an article today regarding the billable hour.  The article questions whether there is a trend towards eliminating the billable hour for lawyers.  The present economy appears to be a threat to lawyers billing by the hour when businesses are looking for ways to shore up budgets and insert some certainty into their business.  Are lawyers in Utah being pressured to find alternative ways to be compensated?  Some alternative billing strategies identified include fixed fee arrangements, fixed fee plus a successful outcome bonus, and lower hourly fees with an early resolution bonus.  What compensation alternatives to the billable hour have you used (other than a straight contingency fee)?

Salt Lake County Bar Ethics Luncheon

In case you missed it (which is likely since seating was limited), the Salt Lake County Bar Association together with the Utah Minority Bar held a luncheon and ethics CLE on professionalism and civility.  The panel members included Third District Court Judges Judith Atherton, Michele Christiansen, Vernice Trease, and U.S. Bankruptcy Court Judge William Thurman.  Overall the hour passed quickly and painlessly (for the most part) and was highlighted by a moderately spirited discussion of appropriate brief commentary.  The gist of the discussion was: know your judge and write to him or her.  The audience consensus appeared to be that if you think your judge will find your flippant analogy to O.J. Simpson or Britney Spears appropriate then go ahead and use it.  Above all, however, use your discretion and think about your reputation.

One comment from Judge Trease, however, gave me pause: she said that her clerks often relay to her questions and comments from counsel (we knew that) and stated that counsel’s ex parte comments or questions to the clerks were contrary to the Rules of Professional Conduct.  Some of the example questions included questions about the judge’s disposition towards certain motions and questions about her preferences and quirks.  Do you perceive this contact with the court clerk a this as a problem or a violation of the Rules?  Rule 3.3 and 3.4, Utah Rules of Professional Conduct, do not appear to bar ex parte contact with clerks.  Ex parte contact with the “tribunal” appears limited to the judge and not his or her clerk (Rule 3.3) and requesting information from the clerk does not appear to violate any fairness doctrine (Rule 3.4) since the same information is available to all parties.  Is the issue one of perception or is this a real problem that should be dealt with by the courts or the bar?

Your Utah Legal Community

The beginning of an era.  The start of something new for the Utah’s unique legal community.  This site is meant to be a combination of legal information, news, and opinion—both yours and ours.  Without your input the story is only half-told and information only slightly accurate.  We expect you to be active participants.  You may remain anonymous or you can identify yourself; it’s your choice.  Your comments will be lightly monitored (primarily for spam and patently offensive content), however, you are expected to be professional and courteous.  That said, let’s get started.