BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
Cooperating with Client’s Attorney When There is a Claim
Q: I recently closed on a property representing the buyers. Today, three months after we closed, I received a call from an attorney who tells me that she is representing the buyers. She told me that they discovered some water damage to the property that appears to have been covered up and buyers believe that the sellers are at fault. The damages could be as high as $50,000. The sellers have denied any liability in a letter responding to the attorney’s claim letter to them, and have consulted an attorney. So, buyers’ attorney has just demanded mediation with the sellers, and will pursue litigation if the matter is not resolved. She told me that neither she nor the buyers are upset with me and they will not sue me. That is a relief.
The attorney wants to interview me about what happened in the transaction and to sign a statement. She also wants me to be a witness in the case and testify at the mediation. Finally, she has asked for a complete copy of our transaction file.
My question is: Should I go to the attorney’s office and bring a copy of our office transaction file? I don’t want to disappoint my buyers.
A. In a word: NO.
What is occurring here is the beginning of a claim and, likely, a lengthy litigation process. Your clients’ attorney is being friendly toward you now because she needs your help. But, remember that, while you may like and want to help your clients, their attorney is not your friend.
While at this point there may be nothing to suggest that you or your brokerage will be involved, that can, and often does, change. For example, the attorney may seek to bring in other “deep pockets,” by suing the brokers, home inspector, etc., to help put together a larger settlement pool.
You and your brokerage could be brought into this dispute several ways: (1) by a cross-complaint from the seller or the other broker; or (2) the buyers’ attorney could change her mind and sue you after all.
The attorney may, for example, allege in a suit filed against you and your brokerage that you, as the buyers’ fiduciary, should have discovered the defects, or recommended further inspections. Your buyers will then apologetically say something like: “We aren’t mad at you, but our attorney insists that we go after your insurance company. Still friends, right?”
If you talk to the attorney, or sign a statement or affidavit, you may unwittingly make statements that later could harm your defense should you and your brokerage become involved in the claim. A seemingly innocuous statement today could possibly be twisted into something supporting the plaintiff’s case against you later.
Regarding the file, you should never turn over the transaction file, or a copy of that file, to an attorney. If requested by your client, you may give to the client or their attorney copies of those documents which were delivered to your client during the transaction. Nothing else.
PRACTICE TIPS:
1. MEETING WITH THE ATTORNEY: If asked by your client, or client’s attorney, to meet with the attorney, or take the attorney’s phone call, to discuss a pending or prospective claim, do NOT do so without first discussing that request with your manager who will contact your company attorney for guidance. You can tell your client that you are not trying to be difficult but that your company requires you to discuss this with management before proceeding.
2. SIGNING STATEMENTS: You may be asked by the client’s attorney to make a statement, or sign a declaration or affidavit. Do not sign anything without having the copy approved by your manager and your company’s attorney. Those statements may come back to hurt you later.
3. TRANSACTION FILES: If you are asked to produce the broker’s transaction file, do NOT agree to do so. Advise the client or attorney that you must discuss this with your manager or broker prior to releasing the file. Usually your company’s litigation attorney should be involved at this point.
4. ATTENDING HEARINGS: You may be requested by an attorney or a past or present client, or any third person, to appear at a hearing, arbitration, mediation or deposition. You should never participate in any such proceeding without the approval of your manager. Upon receiving such a request, immediately contact your manager before agreeing to appear at any such proceeding. Your company attorney will also be involved at this state.
5. SUMMMONS AND SUBPOENAS:
A. FOR YOU: If you receive a summons or subpoena that is directed to you individually, you may accept it; however, immediately notify your manager when you receive any such summons or subpoena which relates in any way to the business of the brokerage.
B. FOR THE BROKERAGE: Never accept a summons or subpoena that is directed to the brokerage. Instead, contact your manager. Only officers or attorneys of the brokerage should accept summons or subpoenas directed to the brokerage.
C. These documents always require immediate handling by the company’s attorney.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2013 3/01/13