Problems When Transactional Counsel Act as Trial Counsel

When disputes arise involving a contract that your company’s law firm drafted, does it make sense to have that firm litigate the case? The answer is often no. 

It is common for issues to arise after parties sign a contract that no one considered during the drafting process, and the parties’ lawyers may become trial witnesses. In California, it is unethical for lawyers to be trial counsel and trial witness on substantive issues without informed written consent. Even with consent, it’s almost always a bad idea.

While legal malpractice may have nothing to do with the cause of the transactional dispute, a potential malpractice claim may cloud issues surrounding the transaction, and the judgment of trial counsel if they or members of their firm drafted the transactional documents. Therefore, it is critical for clients to hire an outsider to the underlying transaction to advise the client candidly about its chances for success in the litigation, whether there is a malpractice issue, and what steps are required to preserve the statute of limitations. 

When transactional attorneys testify at trial, attorney-client privilege issues can arise. Clients may decide to waive the attorney-client privilege, but it is much easier to begin the waiver process than it is to end it.

Many companies seek smaller firms to provide trial expertise and marry them to larger firms to provide litigation support. In the coming years, this paradigm may become the rule, rather than the exception.