Clients are as diverse as the practice of law. While some clients have little or no understanding of the legal system or the matters for which they are being represented, others are substantially more knowledgeable. The term “sophisticated client” refers to a client who possesses a higher level of expertise and experience than an average client in a particular field. When representing a “sophisticated client,” it is not unusual for that client to direct his or her attorney to take a particular course of action based upon the client’s knowledge. A “sophisticated client” may impose a strategic decision on counsel or direct counsel to take a calculated risk based upon the client’s own experience and assessment of risk.
The Sophisticated Client Doctrine
Unfortunately, there are times where a client’s decision is not successful, and the client subsequently asserts a claim against his or her attorney for legal malpractice. In these circumstances, the “Sophisticated Client Doctrine” may a useful defense or can even serve as a complete bar to a legal malpractice claim. The premise of the Sophisticated Client Doctrine is that an attorney should not be held liable where a “sophisticated client” independently determines its own strategy for the handling of a legal matter based upon its own knowledge and objectives. In other words, where a sophisticated client makes its own judgment call, it cannot be said that “but for” the supposedly incorrect advice of counsel, the client would have prevailed in the underlying action or would have achieved a better result.
Case Law Applying the Sophisticated Client Doctrine
Just recently, the New York State Appellate Division, First Department dismissed a legal malpractice claim on the ground that the plaintiff was a “sophisticated client.” In Menkes v Solomon & Cramer LLP, 161 N.Y.S.3d 766 (1st Dept. 2022), the plaintiff, who was a licensed attorney, hired a law firm to represent her in an attorney fee dispute between herself and two other attorneys. In dismissing the plaintiff’s legal malpractice complaint stemming from that representation, the Court held that:
Nor does the fact that defendants signed a stipulation on plaintiff's behalf, releasing the holder of the escrow account from liability, constitute malpractice. Plaintiff, an experienced personal injury attorney, executed an affirmation in which she agreed to most of the terms proffered by the escrow counsel, one of which released him from any liability once the amounts in the account were distributed. As a result, defendants' execution of a stipulation containing largely the same language was consistent with plaintiff's express representations and not the “but for” cause of any alleged loss.
The client need not be an attorney for the Sophisticated Client Doctrine to apply. For example, in Stolmeier v. Fields, 280 A.D.2d 342, 343 (1st Dept. 2001), the New York State Appellate Division, First Department dismissed a legal malpractice claim commenced by a contractor finding that the failure of a law firm to advise the contractor of the need to obtain a license before entering into a home improvement contract, was not the proximate cause of the contractor's loss because the contractor was aware of the requirement to obtain a license in order to perform work.
Limitations to the Doctrine
However, practitioners should be aware that Courts are more hesitant to apply the Sophisticated Client Doctrine when the client is a lay person, or the issue is a legal question, even if that person is knowledgeable, generally. For example, in Kram Knarf, LLC v. Djonovic, 74 A.D.3d 628 (1st Dept. 2010), the Court refused to apply the Sophisticated Client Doctrine to a real estate professional, finding that despite the client’s sophisticated knowledge of the real estate industry, the attorney was required to advise the client regarding the terms of a contract to purchase real property.
In sum, while the Sophisticated Client Doctrine is a very useful defense to a legal malpractice claim, its applicability is fact specific. While in some circumstances it may serve as a complete bar to a claim for legal malpractice, in other circumstances is may only serve to bolster a defendant-attorney’s affirmative defenses or may not apply at all.
* This article was prepared by Shari Sckolnick of the New York City-based law firm of Furman Kornfeld & Brennan LLP. Shari is part of a team of 36 lawyers and paralegals devoted to the defense of attorneys and other professionals in malpractice and disciplinary matters, as well as the defense of construction and personal-injury accidents. For more information about the above topic or the authors, please visit: www.fkblaw.com
We trust that the above article was useful and thought-provoking; however, please note that it is intended as a general guide and opinion only, not a complete analysis of the issues addressed, and readers should always seek specific legal guidance on particular matters. For more information on LPL coverage generally, contact USI Affinity today.