Legal Malpractice: Entrepreneur Claims Andrews Kurth Conflicts Cost Him His Company

legal malpractice conflictsTexas Lawyer reported that an entrepre-neur who sued a venture capital firm for defrauding him out of his company, has amended his complaint to add a legal malpractice claim against the law firm that represented him, AmLaw 200 member Andrews Kurth.

Kyle Samani co-founded Pristine Eyesight in 2013, to use Google glass to deliver a video communication platform, primarily for health care providers. It changed its name to Pristine, and its focus to enabling field workers, i.e., inspectors, technicians, process engineers, claims adjusters, etc., to col-laborate with remote colleagues via video communication.

Samani alleges that Pristine hired Andrews Kurth to prepare a financing agreement be-tween it and venture capital investor S3 Ventures, which along with two other venture capital firms, invested $5.4 in the company in 2014. The other firms aren’t named in the suit, but a sister company of S3, and two S3 executives, who also invested in Pristine,  are named in the suit.

However, while “Andrews Kurth purported to represent (Pristine’s) interests”, it actually represented “S3’s interests to the detriment of Kyle Samani”.

Samani claims that an Andrews Kurth lawyer who drafted the financing agreement told him, “‘I am about to send you a bunch of documents. It is my job to read them, so you should probably just go through and docusign them.'”

He states that he took that lawyer’s advice, not realizing – because it was never ex-plained to him – that Andrews Kurth was representing only Pristine, and not him per-sonally.

He alleges that a year later, after S3, its sister company, and its executives who had invested in Pristine, learned that some of its shares had traded privately for $1.20 a share, and that the company was on the verge of closing several more large sales con-tracts, they terminated him as CEO, “claimed the right to force a sale of (his) roughly 700,000 unvested shares in Pristine for $0.01 each”, and barred him from participating in governance of the company, even though he’s a member of its board.

The defendants allegedly bought his 700,000 shares for $7,000, even though they had a market value of more than $1 million.

“After the financing agreement was executed, the same one he was instructed not to read,…Mr. Samani was stripped of his job without cause, and stripped of his ownership of the company without compensation.”

Samani alleges that Andrews Kurth placed S3’s interests ahead of his interests, advised him not to read important documents before signing them, and failed to advise him of:

  • Obvious conflicts between S3 Ventures, its employees and the firm;
  • The conflict of interest between him and Pristine;
  • That he should hire his own counsel before signing the financing agreement;
  • His potential downside in the financing agreement.


Law Practice Risk Management:

I. Conflict of Interest

A. According to the Texas Lawyer article, Samani claims that Andrews Kurth (AK) “had a long relationship with S3, providing legal work to a number of S3 portfolio com-panies”, which is presumably the basis of his allegation that there were “obvious conflicts” between AK and S3.

However, Samani doesn’t allege that AK represented S3 in this matter, so there was no  violation of Texas Disciplinary Rules of Professional Conduct Rule 1.06. Conflict of In-terest: General Rule, which prohibits a lawyer from representing opposing parties to the same litigation, or representing a person if it:
(1) involves a substantially related matter in which that person’s interests are materially and directly adverse to the interests of another client of the lawyer…; or

(2) reasonably appears to be or become adversely limited by the lawyer’s or law firm’s responsibilities to another client or to a third person or by the lawyer’s or law firm’s own interests.

Samani will likely be unable to prove this allegation, because a lawyer is not precluded from representing a party in a matter, just because it once represented the other party or its partners, especially when the present representation is non-adversarial, as this one was.

B. Samani alleges that AK failed to inform him of the conflict between himself and Pris-tine. 

Rule 1.12. Organization as a Client states:

(a) A lawyer employed or retained by an organization represents the entity…

Section (e) states:

(e) In dealing with an organization’s directors, officers, employees, members, share-holders or other constituents, a lawyer shall explain the identity of the client when it is apparent that the organization’s interests are adverse to those of the constituents with whom the lawyer is dealing or when explanation appears reasonably necessary to avoid misunderstanding on their part. (Emphasis added)

Further, Comment 4 to Rule 1.12 states

4. …when the organization’s interest (becomes) adverse to those of one or more of its constituents…the lawyers should advise any constituent whose interest the lawyer finds adverse to that of the organization of the conflict… (and) that the lawyer cannot repre-sent such constituent, and that such person may wish to obtain independent represent-ation. Care should be taken to assure that the individual understands…the lawyer for the organization cannot provide legal representation for that constituent individual…(Emphasis added)

Here, Samani may have a stronger case, because in his role as Pristine’s CEO, he app-arently hired AK, was its primary contact, and approved payment of its bills, but claims to have been was unaware that AK represented only Pristine, but not him personally. As co-founder of the firm, its CEO, and a major, if not majority stockholder, he probably saw no distinction between himself and Pristine.

If AK informed him in writing at the start of its representation of Pristine, that it wasn’t also representing him personally, then it will likely prevail, but if it didn’t, it should have, if not at the start, then after it prepared the financing agreement, which while presumably in Pristine’s best interests, may have been “adverse to those of the organization’s constit-uents with whom the lawyer is dealing”, i.e., Samani.

Finally, Comment 5 to Rule 1.12 states in part:

5. A lawyer representing an organization may, of course, also represent any of its di-rectors, officers, employees, members, shareholders, or other constituents…

It’s unclear why AK didn’t represent Samani, as it doesn’t appear that representing both him and Pristine would have been adverse to either one.  However, it would have been adverse to S3, because AK would have been obligated to advise Samani not to sign a financing agreement that gave S3 “the right to force a sale of (Samani’s) roughly 700,000 unvested shares in Pristine for $0.01 each”, which Samani alleges was well-below their market value.

Samani’s counsel will likely try to prove that AK didn’t represent Samani in order to aid S3. If he succeeds, then AK may face a potentially large judgment, and punitive dam-ages.

AK should have either represented both Samani and Pristine, or advised Samani to ob-tain his own counsel. The onus is on the law firm to clarify which party it is – and isn’t – representing, so if AK failed to do so, it may be found to have committed malpractice.

Will a jury of Kyle Samani’s peers – which will include small business owners, if his attorneys are adept at jury selection – believe him if he testifies that he thought AK was representing both himself and Pristine, the company he co-founded and led? Al-most certainly yes.

II. Engagement Letter

If AK produces a properly drafted engagement letter signed by Samani, then it will almost certainly prevail, perhaps via summary judgment. However, based on the com-plaint, it appears that AK either didn’t send Samani an engagement letter, or did, but didn’t require him to sign and return it, before it began work on the financing agreement.

If true, that was a mistake, because an engagement letter may have eliminated any confusion by Samani: according to legal malpractice insurer the Bar Plan, a properly drafted engagement letter will “clearly define” the “client, scope, subject matter and goals of the representation.”, disclose any potential conflict of interest, and set forth “the client’s right to independent counsel”.

Just as a kingdom was lost for want of a nail, Andrews Kurth may find that a legal malpractice claim was lost for want of an engagement letter.

Further reading:

Pristine Inc. co-founder sues S3 Ventures LLC alleging unjust termination – Austin Business Journal

Tech Lawyer Analyzes Kyle Samani’s Case  


Family Law: Malpractice Risks and Remedies (Part II of II)

bridge_the_gap_1332691857Part I examined the types of legal malpractice claims commonly filed against Family Law attorneys. The risk management measures discussed here will help them avoid such claims.

I. Screen Potential Clients Carefully – Turn Away Potential Problems

Problem clients are not only more likely to sue you, they can disrupt your practice even if they don’t sue you. According to legal malpractice insurer LAWPRO, these are warning signs of a problem Family Law client (bottom of page):

Has changed lawyers two or more times;

  • Owes money to  the previous lawyers;
  • Criticizes the previous lawyers;
  • Has unreasonable/unrealistic expectations about the case;
  • Places unreasonable demands on you and your staff, i.e., insists that immediate attention be given to every aspect of his case;
  • Either cannot or will not provide proper financial disclosure;
  • Instructs you to take positions that you believe lack merit.

If you detect two or more of these warning signs when interviewing a potential new client, don’t hesitate to decline the case. Confirm your declination via a non-engagement letter.

II. Use Engagement Letters

  • Use an engagement letter on every case that you accept. Specify who you’re representing and the services you’ll perform, and your retainer, billing rate, and billing procedures.
  • Answer any questions the client has about the letter clearly and completely: that’s the time to prevent misunderstandings.
  • Don’t begin working on a matter until you’ve received a signed copy of the engagement letter from the client, and the retainer check has cleared.

III. Develop Strong Client Relationships

  • Build a strong relationship with each client by being an active listener. This will help you understand a client’s needs, and identify the issues and      outcomes that are most important to him/her.
  • Manage the client’s expectations about the cost, timeframe, and outcome of the  matter. Explain early on how the law applies to the client’s case, and the range of possible outcomes that may occur. Offer your best estimate of costs and timeframe, but explain that there are factors beyond your control that may cause the case to cost more and take longer to resolve than you expect.
  • Work with each client to develop a strategy for their case, counseling them when their positions are improper or unrealistic. A client’s feelings and needs, and thus their goals may change as the matter progresses, so check with  them periodically, and get them to refocus if their emotions lead them to suggest actions that are irrational or damaging. Never let a  client’s ”anger, greed, and grief… impede a successful legal resolution”.
  • Keep your clients updated about their case, and ensure that they understand what’s  happening.
  • Obtain clients’ input about the terms of any settlement negotiations, and keep them involved throughout the process.
  • Fully explain the settlement terms of a divorce, separation agreement, etc., to a client before he/she signs it.

IV. Document Your Files

According to attorneys Simpson, Borja, and Ashmore of Wiley Rein “The strong emotional component associated with (family law) matters makes it…critical to document thoroughly all key communications and decisions”.

  • Document your file after every interaction with a client. Include the information your client gave you, your advice to the client, the client’s instructions to you, and your response to those instructions. For important matters,      supplement your notes with a letter or email to the client confirming the discussion and any action that you’re going to take.
  • Document your file in detail: “Telephone conference with client regarding…”, not “telephone conference with client.” Create a “paper trail” showing the work that you did, and that the client was well-informed and      participated actively in the decision-making.
  • If a client’s emotional state leads him/her to be uncooperative or make irrational decisions about the matter, document that.

V. Implement Sound Billing Practices

  • Provide a new budget to the client if your fees and costs will far exceed your estimate.
  • Consider using “evergreen retainers”, whereby clients pay a fixed amount whenever their initial retainer declines by a certain percentage, i.e., 50%.
  • Bill frequently, i.e., every 30 days, rather than infrequently, i.e., every 90 days: your bills will be smaller, and thus more likely to be paid. You’ll also be able to identify “non-payers” earlier.
  • Describe your services in detail: a client who can understand the work you did is likely to …pay promptly.
  • Don’t bill for red-flag” items like intra-office conferences and file review unless the client approved it beforehand.
  • If a client is in arrears beyond an amount and time period that you deem reasonable, and payment isn’t imminent, consider withdrawing from the case (but do so in accordance with the Rules of Professional Conduct).
  • Don’t sue for fees without first considering the amount you’re owed versus the time and cost of prosecuting the suit (the ratio should be at least 2:1), the probability that your client will file a counter-claim for malpractice, and  your chances of collecting on the judgment if you prevail.

VI. Embrace Technology

Many attorneys use calendaring and conflicts-checking software, but few take full advantage of technology to reduce their malpractice risk.

According to the Massachusetts LOMAP “one essential technology to incorporate into your practice”, which will reduce your malpractice risk and increase your productivity, is “a law practice management program”, which will help you:

  • Manage clients and matters;
  • Conduct IOLTA accounting;
  • Keep track of deadlines and tasks;
  • Track time and create invoices;
  • Check for conflicts;
  • Manage documents

Some programs even enable your clients to access their case details and status, which can be an enormous time-saver for you and your staff.

Law practice management programs are available via a CD/DVD or download that you buy and install on your computer, or online via a monthly subscription; online programs allow you and your staff to access your case files “24/7” from any location that has Internet access.

These programs will reduce your risk of incurring a malpractice claim due to a conflict, calendaring error, lost file, etc., and will enable you to work more efficiently, which will give you more time for substantive matters like researching and applying the law. This in turn will reduce your risk of incurring the second most common type of malpractice claim filed against Family Law attorneys: failure to know or properly apply the law.

VII. Know Your Limitations

Seek expert advice where appropriate:

  • For complex tax law or estate planning issues, a lawyer who specializes in that area;
  • For business valuations, a forensic accountant;
  • For jewelry, antiques, fine art, etc., an appraiser.

VIII. Use Checklists

IX. Keep Learning

Given the complexity of family law, and the fact that legislation and case law frequently change, practitioners should actively take CLE courses.


The demands of your busy practice may prevent you from implementing risk management measures, but not implementing them makes you more susceptible to a legal malpractice claim and the resulting costs: lost billable time defending the claim, expenditure of your malpractice insurance deductible and a higher premium when you renew, damage to your reputation, stress, etc.

Further, remember that good risk management is good practice management, and good practice management will make you successful and presumably happy.

So in conclusion, good risk management will make you happy!

About the author:
Curtis Cooper is principal of Lawyers Insurance GroupLegal Malpractice Insurance Brokers, which procures comprehensive legal malpractice insurance at the lowest possible cost.

Connect with me:

View Curtis Cooper's profile on LinkedIn


Family Law: Legal Malpractice Risk and Remedies (Part I of II)

Gap-In-MountainFamily Law attorneys are sued for malpractice more often than attorneys in every other practice area except Real Estate and Plaintiffs’ Personal Injury, according to the American Bar Association’s most recent Profile of Legal Malpractice Claims.

The profile doesn’t specify the types of malpractice claims that are filed against Family Law attorneys, but an analysis of such claims by legal malpractice insurer Lawyers Professional Indemnity Co., supplemented by further research, reveals that they generally fall into one of these categories:

I. Poor Communication

  • Failure to inform client, i.e., that even though he transferred the marital home as part of his divorce settlement, he’ll still be liable for the mortgage if his name is on it and his ex-wife doesn’t make the payments. More gen- erally, failing to manage client expectations, i.e., regarding the likelihood of achieving the desired outcome, such that the client is angry or disappointed when those expectations aren’t met.
  • Miscommunication with client, i.e., explaining the terms of a divorce settlement, vis-itation agreement, etc., incorrectly or unclearly, thus causing the client to make a decision that he/she otherwise wouldn’t have made. More generally, failing to clarify the client’s responsibilities vs. the attorney’s responsibilities, resulting in an error or omission that damage’s the client’s case.
  • Failure to obtain client’s consent, i.e., to enter into negotiations for or to include cer-tain terms in a divorce settlement, visitation agreement, etc. (May be due to mis-communication.)
  • Failure to follow client’s instructions, either intentionally, i.e., the attorney disagreed with them, and didn’t communicate that to the client, or unintentionally, i.e., the attorney either forgot or misunderstood them.

II. Failure to know or properly apply the law:

  • Improperly determining a) whether a client is entitled to receive or obligated to pay spousal or child support, or b) the amount and/or duration of such support.
  • Failure to properly transfer assets from the other spouse’s retirement plan, resulting in an unanticipated tax liability for the client spouse; negotiating a settlement agreement that stipulates that the spouses will divide the assets in the other spouse’s retirement plan, but that plan isn’t divisible; etc.

III. Inadequate discovery of facts or inadequate investigation

  • Inaccurately assessing the value of marital assets.
  • Failure to retain an expert to examine hard-to-value assets like a business, antique  collection, etc.
  • Failure to uncover hidden assets that would have been subject to equitable dis-tribution.
  • Failure to identify all issues that need to be addressed in a settlement agreement, litigation, etc.

IV. Failure to Properly Draft Legal Documents

  • Administrative failure: a drafting error or omission in a contract or agreement.
  • Substantive failure: drafting an agreement that includes terms that the client opposes (may be due to miscommunication).

V. Conflict of Interest

  • Representing a spouse in a divorce after initially consulting with the other spouse.
  • Being a family’s “family lawyer”, and then representing one of the spouses in a divorce.
  • Drafting a will for a couple, and then representing one of the parties in a divorce.

VI. Fee Disputes  

  • Charging fees that are excessive or unreasonable relative to the assets at stake and/or the result obtained.
  • Charging fees far greater than the initial estimate.

 VII. Other 

  • Failure to act in a timely manner, i.e., not filing a motion or request for pendente lite relief on time, thus pressuring a cash-strapped client to accept a reduced settlement.
  • Failure to identify and choose the most favorable jurisdiction for a client’s matter when more than one jurisdiction is available.

Part II of this article will discuss risk management measures that Family Law attorneys can take to avoid these and other types of malpractice claims.

About the author:
Curtis Cooper is principal of Lawyers Insurance GroupLegal Malpractice Insurance Brokers, which procures comprehensive legal malpractice insurance at the lowest possible cost.

Connect with me:

View Curtis Cooper's profile on LinkedIn