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CalAttorney2, Attorney
Category: Legal
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Experience:  Civil litigation attorney for individuals and businesses.
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When can an attorney sue a client for fraud?

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When can an attorney sue a client for fraud?

William B. Esq. :

Dear Customer, thank you for choosing Just Answer. Can you provide me with some more information about your situation? In most cases it is very difficult for an attorney to sue a client for fraud due to the attorney client privilege but perhaps there is a special circumstance that would create a different result.

Customer: I'm seeking answers on behalf of my mother. She had a case against a franchise she owned/operated. When the franchise counter-claimed against her wrongful termination suit, there were discrepancies in the bookkeeping/accounting. Her attorney then accused her of underreporting and claimed that that was fraud under which he had undertaken to represent the case on a contingency-fee basis.
Customer: He then persuaded her to sign a promissory note for $25K to cover the costs of his services that had been on a contingent-fee basis. There's a current balance of $10K remaining on the note. I've advised my mother that she should halt payment considering whether he had basis for getting out of the contingent-fee contract and now he's threatening to file fraud charges against my mother in Minneapolis, where he lives, though the case he represented for my mother was in NY and that's where she's domiciled.
Customer: Welcome any thoughts/feedback
William B. Esq. :

The situation you have described is very unusual, it appears from my understanding that the attorney is blackmailing your mother into paying a higher fee for services (switching from a contingency to an hourly rate after taking on the case) and is now threatening suit for fraud based on her statements to him which would fall within the attorney/client privilege.

William B. Esq. :

The change in fee agreement under duress will make the new contract "voidable" meaning that your mother can withdraw from the contract (return to the old one) because she was forced to do so under the improper threat of criminal prosecution by her attorney.

Customer: Based on my preliminary internet research and discussions with attorney friends, that sounds like the case to me as well
William B. Esq. :

The threat of a civil case of fraud in an improper venue to achieve an economic advantage over a client is not only unethical, and in the wrong jurisdiction, but it is likely against the terms of the legal services contract between your mother and the attorney (I am guessing, but most require litigation in the forum where the work is to be done).

Customer: He interpreted her later admission of bookkeeping errors as "underreporting" and a violation of the franchise agreement and he's saying that he would never have accepted the case if he had known and that she purposely committed fraud
Customer: So if he was to bring fraud charges, it should be in NY?
William B. Esq. :

Your mother may indeed have a claim for fraud (the attorney promised a contingency fee case, and changed it to an hourly rate case. Your mother relied on the original representation to her detriment, and now has suffered a loss). Any attorney who has represented a client in litigation that claims he has never found in a case facts to have shifted or otherwise changed (specifically on an issue subjective to the attorney) would be very rare indeed.

Customer: That is helpful to hear. In going forward, if he does try to collect on the outstanding balance or bring charges, what is the appropriate or best course of action for my mother to take? She has very limited means. Would she require an attorney?
Customer: In the meanwhile, should we pursue a complaint via the NY Grievance Committee?
William B. Esq. :

I can't give you specific legal advice or instruction. Many individuals with limited means will wait for the other party to sue first and then file a counter-claim so that they do not have to incur the costs of a lawsuit first (it is not a huge savings, but in some instances the other side will not file and you can avoid further litigation). If you do choose to litigate, a case such as this would be difficult to win without an attorney given the procedural issues involved (however, the process is set up to litigate individually, it is just easier if you have someone helping you who does this for a living).

You can file with the NY Bar Association or Grievance Committee, it will definitely upset the attorney, but it is an opportunity to bring bad conduct to light with minimal costs.

Customer: If we were to file a grievance, better to do before his lawsuit?
Customer: Or does the timing not matter?
William B. Esq. :

The timing of the grievance does not matter. If you do choose to file a legal malpractice case however, the statute of limitations is 3 years (but it is a good idea to file earlier in most instances).

Customer: If he files for fraud in Minnesota, can we have the case moved to NY?
William B. Esq. :

Does your mother (or this case) have any ties to Minnesota at all?

Customer: None
William B. Esq. :

If a case is filed in the wrong jurisdiction (state), the Court in that state has no jurisdiction over the defendant (your mother), and any judgment rendered against that defendant is unenforceable.

Customer: That would be strange then that that he would threaten a suit against her and specifically name Minneapolis where he lives, no?
William B. Esq. :

I do not have a good explanation for that one.

Customer: Are there other avenues he can pursue to come after my mother for the remaining balance on the promissory note?
Customer: Sorry for so many questions
William B. Esq. :

He can sue in NY (the proper jurisdiction), but that only corrects the jurisdiction problem, it does not change anything with regard to whether the promisory note was drafted properly, or the change in fee schedule was permissible.

Customer: In order to pursue for the remaining balance, would litigation be required on his end?
William B. Esq. :

(I should note that it is possible in some cases for attorneys and clients to change a fee arrangement from contingency to hourly or vice-versa, but doing so based on a threat or coercion is not one of those circumstances).

William B. Esq. :

He may transfer the file to a collection agency, but to take any real action on the debt he would have to file a collection action in civil court and get a judgment against your mother. If he decided to do that your mother could raise all of the affirmative defenses regarding the circumstances of the debt and quality of representation etc. (obviously there is risk in litigation, but contesting the circumstances of a promisory note is not unreasonable).

Customer: Can that collection action be taken in Minnesota?
William B. Esq. :

The collection suit cannot take place in Minnesota - the Court has no jurisdiction there unless your mother is domiciled there or the contract is related to the state. After a judgment is entered, the enforcement of the judgment can take place in that state (a NY Judgment can be enforced in Minnesota).

Customer: Many thanks! So either fraud charges or collection action via civil court would need to take place in NY.
Customer: Can I represent my mother if she needs to go to civil court as English is not her first language?
William B. Esq. :

That is correct, you cannot represent your mother in Court (you are not an attorney), but most Courts will allow you to assist as a translator.

Customer: That was very helpful. Thank you!
William B. Esq. :

You are welcome, I hope this works out quickly for you and your mother. Please do not hesitate to ask if you have further questions.

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