Do's and Don'ts

• Nov 01, 2000

Part I of this article, which appeared in our Oct. '00 issue, addressed what environmental consultants can do and should not do in attempting to avoid malpractice claims. Part II of this article covers the need to carefully screen potential clients, avoid or clear potential conflicts of interest, and think twice before collecting from debtor clients.

Screening potential clients
Consultants usually can tell a lot about a prospective client during the initial meeting. Clients who balk at paying or refuse to pay an advance are likely to later refuse payment or at least bicker about the amount of the consultant's bill. Clients who criticize their accountants, attorneys and other professionals in an initial interview likely will do the same to their environmental consultants. These types of reprobate clients fail the smell test and should be avoided - no matter how desperate the consultant may be for new business. The cost of collection and malpractice defense will swallow whatever benefits may be derived from a problem client.

Conflicts of interest

The maxim that no one can serve two masters holds true for consultants as much as anyone. When it comes to possible malpractice claims, the presence of a conflict of interest, while not technically violating a professional standard of care, will most certainly impact a jury's view of a consultant that violated the standard of care while at the same time harboring a conflict of interest. Conflicts of interest most certainly can exacerbate any damage award against an environmental consultant. For this reason alone, consultants should avoid conflicts of interest at all times. While this may be difficult, especially when competition for new projects is stiff, it is nonetheless a good rule of thumb.

Conflicts of interest can take several forms. A conflict is present when a consultant performs pre-acquisition environmental site assessment of commercial property for a buyer while being paid by the seller, but the buyer has no control over the scope of work, evaluation or final report. Whether it is true or not, the consultant's allegiance is viewed as tied to the purse of the seller.

A conflict of interest arises when a potential buyer of commercial property enters into an agreement with the seller's consultant for pre-acquisition site assessment work. In this situation the consultant would not likely find that its previous analysis for the seller was flawed. Another conflict may arise where a consultant may monitor air quality emissions for a state agency but represent a polluter against an alleged air quality violation based on the monitoring results gathered by the consultant for the state. The polluter may want the insight of the "inside" consultant, but the consultant in that situation would be hesitant to question its own monitoring as a defense to the alleged violation. Moreover, the state may seek to disqualify the consultant after the alleged violator has invested in using the consultant in preparing a defense.

Before consultants take on projects that may present a possible conflict of interest, they should consider applying the same principles that the legal profession uses in addressing conflicts of interest. First, consultants should determine whether the consultants' work will somehow adversely affect the consultant's relationship with another client or whether the consultant's work will be adversely affected. Moreover, consultants should consult with their clients about the possible ramifications of the conflict and ask for the written consent of both clients. Although some may view these recommendations as excessive and unnecessary, if consultants are truly risk averse, they will heed this counsel.

Where a seller pays the consultant for the site assessment work performed for the buyer, the consultant should demand that the buyer be able to control the scope of work, evaluation and final report, unless the buyer is willing to expressly waive the conflict after consultation about the risks of relinquishing control to the seller and holder of the purse. In the situation where the potential buyer of commercial real property uses the seller's consultant, the consultant should disclose the conflict. At the very least the consultant should have the buyer-client agree in writing that the consultant's work is completely independent from the work the consultant performed for seller, that the prior work does not present a conflict of interest and to the extent that one does exist, the client waives the conflict. Finally, the consultant should get a written waiver of the conflict from the seller. This same strategy should be used by the consultant who defends the polluter after providing the state agency the dat a forming the basis for the alleged air quality violation. In addition, the consultant should have the state agency agree not to seek disqualification of the consultant.

Collecting debts
Finally, consultants should think twice before collecting unpaid account balances from their clients because collection is a door that swings both ways. If a consultant sues a client to collect unpaid amounts, the consultant should be ready for a counterclaim for damages based on theories of breach of contract, negligent misrepresentation, negligence or unjust enrichment, among other possible theories. In Delta Envt'l Consultants of North Carolina, Inc. v. Wysong & Miles Co., 510 S.E.2d 690, (N.C. Ct. App. 1999) a property owner asserted a counterclaim against a consultant for unjust enrichment and negligence after the consultant sued the landowner to recover some $30,000 owed for services. A jury awarded the consultant the money owed by the landowner but also awarded $234,000 to the landowner for the consultants' negligence and unjust enrichment. This jury award was overturned on appeal, and the matter was remanded back to the trial court for further proceedings. This case demonstrates that collecting money owed by a client may well lead to counterclaims against the consultant and in the end may not be worth pursuing for the consultant, after losing time in litigation, paying attorney fees and court costs and facing the possibility of losing on the client's counterclaims. Consultants can require by contract that all disputes with the client be resolved through mediation or arbitration in an attempt to hold down the cost of dispute resolution. But even these types of proceedings can escalate quickly. Perhaps the best strategy is to require the client to advance a retainer to be held until after the final bill is paid - which lawyers have done for years. This of course follows the principle that a bird in hand is better than five in the bush.

Conclusion
Environmental consultants should not expect to avoid malpractice claims under all circumstances. They can implement in their practices, however, safeguards to decrease the likelihood of clients' bringing such claims.

Bradley R. Cahoon is a partner with the Salt Lake City office of Snell & Wilmer where he practices administrative law and litigation in the areas of environmental, land use, water and telecommunications law. Nothing contained in this article is to be considered legal advice for a specific case, and readers are responsible for consulting with their own council for legal advice.

This article originally appeared in the 11/01/2000 issue of Environmental Protection.