Legal Malpractice Law Review : Professional Responsibility Case Summaries & Commentary : Bennett J. Wasserman : LegalMalpractice.com : Lawyer Malpractice & Legal Ethics

Campagnola v. Mulholland, Minion & Roe, (pdf)
76 N.Y.2d 38 (N.Y. 1990); 555 N.E.2d 611

N.Y. Underlying personal injury action

Student Contributor: Jason Klein

Facts: Plaintiff was struck by a car while working as a crossing guard and was permanently disabled. Plaintiff retained Defendant to pursue a claim for personal injuries and agreed to a contingency fee of one third for any money recovered. The owner of the car that struck Plaintiff was insured for only  $10,000. Plaintiff herself was insured under a Government issued policy for underinsured benefits for $100,000. The Government policy required consent prior to the settlement of any claim against the person deemed responsible for the insured’s injuries. Defendant failed to notify the Government insurance company before settling with the car owner for $10,000, of which $3,150 was deducted as a fee and $550 for expenses. When Plaintiff submitted a claim under the Government issued policy, her claim was denied because the settlement with the car owner was made without consent. Plaintiff commenced this action against Defendant seeking $100,000 in damages for malpractice and Defendant asserted an affirmative defense to reduce any recovered damages by the amount Defendant would have received as attorneys’ fees and expenses in the personal injury action.

Issue: In a malpractice action against an attorney, can the attorney deduct the “hypothetical” fee that would have been payable to the attorney in the underlying action?

Ruling: No. An attorneys’ malpractice constitutes a failure to honor faithfully the loyalty owed to a client. Thus, the plaintiff’s recoverable damages are not limited by a deduction for the fee that she would have paid the defendant had the defendant  properly performed the contract of representation.

The Lesson: A reduction in the plaintiff’s recovery  equal to what the attorney would have earned but for his negligence, is impermissible because a negligent attorney is precluded from collecting a fee. 

• Email This
• Print
• Comments (15)
• Trackbacks
• Share Link

Profit Sharing Trust for Marprowear Corporation v. Lampf, Lipkind, Prupis, Petigrow & Labue
267 N.J. Super. 174, 630 A.2d 1191 (1993)

NJ Underlying Investment Transaction

Student Contributor: Natalie Resto

Facts: A law firm asked a long term client  if it would be interested in investing money in an insurance group. Without advice from independent legal counsel, the client invested $449,600 in the insurance group relying on the assurance of the firm's attonreys. The law firm, however, did not reveal either in writing or verbally the fact that attorneys of the law firm were directors of the insurance group or that the law firm also represented the insurance group. The insurance group eventually filed for bankruptcy.
Later, the law firm sued the client   for unpaid legal fees. Client counterclaimed for legal malpractice claiming that it would not have made the investment if they had been provided the notices that were required under R.P.C. 1.8, and advised that the losses were foreseeable at the time of investment. The law firm argued that it did not proximately cause the damages sought.

Issue: Was the law firm’s negligence the proximate cause of the plaintiff’s damages?

Ruling: The court found that the law firm’s failure to inform Marprowear and the Trust of its relationship with the insurance group directly caused Manprowear and the Trust to invest. The court held that a reasonable jury could find, as the jury did, that the law firm’s failure to disclose its relationship was the legal and proximate cause of the injury.

Lesson: R.P.C 1.8(a) states that a lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms in which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel of the client’s choice concerning the transaction; and
(3) the client gives signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

Editor's Note:  Here the Court was particularly upset that the law firm used the confidential information of the client's financial well being to target it as a potential investor.

 If proximate cause is ultimately a question of fairness and policy, imposing liability on these facts is both fair and good policy. Lawyers who fail to inform clients of their own interests, fail to advise clients to seek other counsel, unabashedly sell their clients the notion that an investment with them or their colleagues is a good and safe one, and use their clients as sources of investment funds, must accept responsibility for the outcome. Lawyers may not burrow their way into their clients' confidences and then exploit those confidences for their own ends. This is the law in New Jersey.

• Email This
• Print
• Comments (10)
• Trackbacks
• Share Link

Let's take a break for the Thanksgiving holiday with some easy to read  classics from the

Lawyers' Professional Liability Committee of the American Bar Association

    Happy Thanksgiving!

     from

The Legal Malpractice Law Review

          Editorial Board

   Ben, Krishna and Claudia

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Jackson v. Gary L. Sweitzer Enterprises, Inc., 67 Pa. D. & C.4th 239 (York County 2004)

Student contributor: Justin Lieberman

PA: Underlying Real Estate Matter

Facts: Plaintiffs filed a complaint against multiple Defendants, including Attorney Sedor, in December 2003 for professional negligence, fraud, and violation of Pennsylvania’s Consumer Protection Law. The complaint alleged that their attorney was aware, or should have been aware, that appraisals of Plaintiffs’ properties were inflated. Plaintiffs were allegedly damaged as a result of this negligence in that they were unable to obtain mortgages due to these inaccurate appraisals.

Counsel for the Plaintiffs failed to file a certificate of merit against the defendnant attorney, within 60 days of filing the complaint, as required under Pennsylvania Law (Pa.R.C.P. 1042.3) in cases alleging a professional liability claim. Defendant Sedor, therefore, moved for judgment non pros. The trial court entered judgment  in favor of Defendant Sedor.

Issue: Will the failure to file a certificate of merit bar all causes of action against an attorney?

Ruling: The Court denied Plaintiffs’ petition with respect to their claim of professional negligence against the attorney, but granted it on the remaining fraud and consumer protection law violation claims. The Court reasoned that the certificate of merit requirement was created to prevent frivolous professional negligence claims, not to bar all other causes of action a plaintiff may have against his attorney.

Lesson: The failure to file the required certificate of merit in a professional negligence claim will not preclude plaintiff’s other causes of action which are not based on professional negligence, against the defendant-attorney:

When a plaintiff fails to file a certificate of merit in an action alleging professional negligence, only those claims based on professional negligence should be dismissed.

• Email This
• Print
• Comments (5)
• Trackbacks
• Share Link

Congratulations to Professor Bennett J. Wasserman and his Hofstra Law Students on launching the Legal Malpractice Law Review. This e-journal provides meaningful guidance on legal malpractice developments and prevention.

In writing Legal Malpractice Law: Problems and Prevention, Professor Vincent  Johnson and I wanted to give law students a practical guide for studying legal malpractice issues. Our hope is that the text helps students understand the  anatomy of a legal malpractice case, common malpractice traps, and steps that lawyers can take to protect clients, while reducing legal malpractice  exposure. In that spirit, I am very pleased to see how Hofstra Law students have  moved forward in publishing summaries of recent cases with insightful lessons.

The study of legal malpractice cases and commentaries reveals that all lawyers  are subject to being sued for malpractice. Good lawyers as well as "not so  good" lawyers get sued. What distinguishes lawyers is how they handle  challenges to their own conduct, including legal malpractice claims.
Psychologists who have studied emotional intelligence, report that lawyers as a
group are less resilient than most other professionals. The good news is that  resilience can be learned. See, "The Bounce-Back Factor", ABA Journal, April 2003  at 66.

To start a discussion thread on how lawyers handle their own errors, I invite  comments on how law schools help students develop resilience. What are law  schools currently doing and what steps can law schools take to prepare future  lawyers to handle mistakes and challenges to their conduct?

I look forward to your observations and suggestions.

Editor's Note: Practicing lawyers are  encouraged to join the discussion by posting their own inisghts and comments. Just click the "Comments" icon below.

• Email This
• Print
• Comments (32)
• Trackbacks
• Share Link

Baldasarre v. Butler, 132 N.J. 278 (N.J. 1993)

Student Contributor: Jason Klein

NJ Underlying Real Estate Transaction

Facts: Plaintiffs inherited undeveloped land from their father and retained Defendant to act as attorney for the estate. The will directed the property to be sold and the proceeds divided between the Plaintiffs. Plaintiffs told Defendant that they wanted a price of $110,000 per lot. Defendant discussed the property with another client, DiFrancesco.

DiFrancesco wanted Defendant to represent him in the purchase of the property, despite the fact that Defendant had alerted him to the potential conflict of interest that could arise from his dual representation. After obtaining signed conflict of interest letters from both Plaintiffs (sellers) and DiFrancesco (buyer), the contract for sale was executed.

Pursuant to the contract, closing was subject to subdivision approval. During the subdivision approval process, DiFrancesco, represented by Defendant, entered into contract to sell the subject property to Messano Construction for $200,000 per lot, subject to DiFrancesco obtaining title to the property.

Defendant did not inform Plaintiffs of the Messano Construction contract, and when Plaintiffs were later informed, they brought a legal malpractice action against Defendant, and sued DiFrancesco, alleging legal and equitable fraud. They sought a rescission of their contract of sale with DiFrancesco, and compensatory and punitive damages. DiFrancesco counterclaimed, alleging tortious interference with his prospective economic advantage.

Issue: Can an attorney represent both buyer and seller in a real estate transaction?

Ruling: No. The potential for conflict in a real estate transaction is too great to permit even consensual dual representation of buyer and seller.

Lesson: The court adopted a new bright-line rule as a result of this case, prohibiting dual representation in real estate transactions because of the risk of disastrous consequences, given the inherent conflict of interest between a buyer and seller of real estate, the number of contingencies and options involved, and the large sums of money at stake.

• Email This
• Print
• Comments (13)
• Trackbacks
• Share Link

Toth v. Vazquez, 3 N.J. Super. 379 (Ch. Div. 1949) (PDF with permission of Thomson West)

Student Contributor: Anthony J. Forzano

NJ Underlying Real Estate Transaction

Facts: Plaintiff, a potential land buyer, brought an action for legal malpractice against the defendant-attorney, Arthur A. Wolpin, who had been engaged by the plaintiff to examine the title and procure a survey of the premises prior to closing.  Plaintiff alleged that Wolpin failed and neglected to obtain an accurate survey.

Issue: Can an attorney be held liable for malpractice for failing to find a deficiency in the work of another professional, even though he acted in a prudent manner in selecting that professional on behalf of his client?

Ruling: No. Although it is the duty of an attorney who is retained to examine the title to real estate to make a reasonably diligent and zealous investigation of the public records, and to impart to his client all of the observable defects, deficiencies, and imperfections of the title, he is required only to exercise ordinary care, skill and diligence.

Given that Wolpin inspected all pertinent records and rendered an accurate report of record title, he had satisfied the standard of “ordinary care, skill, and knowledge”. The Court further noted:

“Nor is it evident that this defendant in acting for the plaintiffs failed to exercise reasonable care and precaution in the selection of a competent surveyor, even assuming a duty so to do. Assuredly, this defendant did not expressly agree to warrant the precision and accuracy of the survey”.

Lesson: An attorney must act in a reasonably diligent fashion in terms of his investigation of the pertinent issues and retention of other professionals, and cannot be held liable for malpractice as a result of damage incurred by his client owing to the negligence of others involved in the transaction.

Editor's Note: What if the attorney had engaged a process server who negligently failed to properly serve a complaint and the statute of limitations ran?  The lawyer's immunity for the negligence of an independent contractor hired to aid in the representation of a client is not so clear. See, e.g., Kleeman v. Rheingold, 81 N.Y.2d 270 (1993):

As plaintiff's attorneys, defendants had a non-delegable duty to her and, accordingly, they cannot evade legal responsibility for the negligent performance of that duty by assigning the task of serving process to an "independent contractor."

• Email This
• Print
• Comments (7)
• Trackbacks
• Share Link

Fraser v. Bovino, 317 N.J.Super. 23 (App. Div. 1998)

Student Contributor: Lisa Larato

NJ Underlying Real Estate/Land Use Transaction

Facts: A deal for the sale of land fell through due to delays caused by challenges to the municipal approval of a condominium project. The real estate agent (Fraser) and the landowners (Genlaws) brought an action against the adjoining landowner (Defendant Bovino) who objected to the condominium project, his attorney, and others involved in ruining the deal. Fraser asserts that Bovino’s attorney (Allen) committed malpractice and acted unethically. The Genlaws also filed a claim against their attorneys Martini and Blessing who had been retained to prosecute their action against Bovino and his attorney.

The only claims still viable for the Genlaws were those which fell under the six year statute of limitations. It was undisputed that the attorneys returned the Genlaws’ file to them a few weeks before this statute of limitations expired, on January 28, 1997. The complaint, however, was not filed until April 25, 1997.

The Superior Court, Law Division, granted summary judgment to certain defendants in both actions. Appeals were filed and consolidated.

Issues: (1) Is Bovino’s attorney liable to the real estate agent, Fraser, for legal malpractice? (2) Are Martini and Blessing liable to the Genlaws for failure to file a timely complaint?

Ruling: (1) Bovino’s attorney (Allen), representing an individual who contested the proposed land use application, did not owe Fraser, the broker, even a limited duty of care. (2) Since Martini and Blessing returned the Genlaws’ file to them several weeks before the statute of limitations on their claims expired, their withdrawal from representation did not adversely affect the clients’ interests so as to warrant liability.

Lesson:

• Allen, who was not Fraser’s attorney, but the attorney of his adversary, did not owe Fraser any level of a duty of care so as to make him liable to Fraser under a professional malpractice claim.
• Under New Jersey Rule of Professional Conduct 1.16, Martini and Blessing did not commit malpractice because they (1) did not wait for the statute of limitations to run before withdrawing, and (2) left enough time for the Genlaws to file their complaint within the statute of limitations. That the Genlaws failed to timely file their complaint, was entirely their own negligence, and bore no relation to the decision of Martini and Blessing to withdraw as counsel in a timely manner.

Editor's Note: In  all cases, make sure that before withdrawing, there is a reasonable amount of time left for the client to get substitue counsel to file a complaint before the statute of limitations runs. If it's getting close, consider a pro se complaint for the client thus giving the client even more time to get new counsel and thereby preventing the client's claim from becoming time barred. Do what is reasonable to help the client preserve their cause of action if you're not going to continue with representation, at least until they get new counsel.

• Email This
• Print
• Comments (10)
• Trackbacks
• Share Link

The Editorial Board of the

Legal Malpractice Law Review

      is pleased to invite you to an online discussion starting on

Monday morning November  16, 2009

   led by:

Professor Susan Saab Fortney

   Paul Whitfield Horn Professor of Law
       Texas Tech University School of Law

on

"Bouncing Back After Malpractice"

Professor Fortney is on the Board of Contributors of the Legal Malpractice Law Review and is a renowned expert in the field. She is co-author with Professor Vincent Johnson of

LEGAL MALPRACTICE LAW: PROBLEMS AND PREVENTION (Thomson-West, 2008) 

 We look forward to your joining us in this fascinating and  timely discussion. Please share your Comments directly to Professor Fortney's  blog post, which will appear right above this invitation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Christie v. Jeney, 167 N.J. 509 (2001)

Student Contributor: Daniel Schick

NJ Underlying Civil/Commercial Litigation

Facts: Christie retained Jeney to pursue three claims on his behalf. Christie then alleged that in the course of the representation, Jeney failed to answer discovery requests in a contract claim, failed to properly serve and plead a civil-rights claim, and negligently allowed the statute of limitations to run on a defamation claim.

Plaintiff subsequently retained new counsel (Lucas) and filed a three-count malpractice complaint against Jeney. Jeney answered the complaint and demanded that Christie serve an affidavit of merit pursuant to the New Jersey Affidavit of Merit statute (“AMS”). Upon Plaintiff’s failure to do so, Jeney moved to dismiss the action for failing to satisfy the AMS. Christie then submitted the requisite Affidavit of Merit. Since dimissals under the AMS were without prejudice, and Christie could simply re-file the malpractice action, the Law Division denied Jeney's motion to dismiss, despite the fact that Christie’s Affidavit of Merit had not been submitted within the time limits set forth under the AMS.

Thereafter, the Supreme Court of New Jersey affirmed a portion of Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218 (1998), an earlier case, holding that dismissals under the AMS were to be with prejudice. In light of this decision, Jeney moved for reconsideration. The Law Division concluded that Christie's claims against Jeney accrued after the effective date of the AMS, and therefore, Christie's failure to provide a timely affidavit of merit required dismissal of the claims with prejudice.

Christie then filed a second amended complaint adding Lucas as a defendant, alleging that Lucas negligently failed to provide an affidavit of merit, leading to the dismissal of the action against Jeney. Lucas challenged the Law Division order dismissing Christie's complaint against Jeney. The Law Division denied the motion and the Appellate Division denied leave to appeal. The Supreme Court granted Certification.

Issue: How do you determine whether a legal malpractice action is or is not subject to the requirements of the AMS?

Ruling: The critical inquiry under the AMS is whether the actual conduct underlying the legal malpractice claim took place before the effective date of the statute (June 29, 1995). As the Law Division recognized, the allegations of malpractice against Jeney almost entirely referenced his conduct prior to June 29, 1995. Therefore, the AMS did not apply to Christie's claims against Jeney. The lower court’s holding was reversed and the action was remanded for further proceedings.

Lesson: The AMS became effective June 29, 1995, and explicitly states that it would apply to causes of action which “occur” on or after that date. Accordingly, the statute applies only to cases where the acts constituting the alleged malpractice took place on or after the effective date of the statute. The “filing” date of the malpractice action is irrelevant.

• Email This
• Print
• Comments (2)
• Trackbacks
• Share Link

Bailey v. Pocaro & Pocaro, 305 N.J.Super. 1, 701 A.2d 916 (App. Div.1997). 

Student Contributor:  Todd Feinstein

NJ: Underlying Litigation

Facts:   This case found its way back to court after it was initially dismissed under the “entire controversy” doctrine which required plaintiffs to "present all claims, even those against different parties, that stem from the same transactionally related facts in one controversy before one court." A later NJ Supreme Court decision, Olds v. Donnelly,150 N.J. 424 (1997)  held that the entire controversy doctrine does not compel joinder of legal malpractice claims in underlying actions.

This court was called on to address Plaintiffs argument, that they were entitled to be reimbursed for their legal expenses, which included costs and attorneys' fees incurred in pursuing the legal malpractice action against defendant, and the trial Judge erred by not including these expenses as an element of consequential damages. Plaintiffs also contend that prejudgment interest was not properly calculated.

Issues:  (1) In determining damages, is it proper to include legal fees that were incurred in pursuing the legal malpractice action against the defendant?
    (2) What is the correct way to peg prejudgment interest in a legal malpractice claim?

Ruling:   (1) Under Saffer v. Willoughby, 143 N.J. 256 (1996),  a client may recover for all losses which are proximately caused by the attorney's negligence or malpractice, including the legal fees and expenses incurred in successfully prosecuting a legal malpractice action.

 The purpose of a legal malpractice claim is 'to put a plaintiff in as good a position as he or she would have been had the attorney kept his or her contract.       

(2) In awarding prejudgment interest, such an award, represents payment for use of money, and in another sense is compensatory, to indemnify claimant for loss of what moneys due him would presumably have earned if payment had not been delayed.

The award of prejudgment interest in a legal malpractice action should not be limited to the tort recovery rule, but should be guided by equitable principles with the concept of making the victim whole of paramount significance.

Editor's Note: New Jersey is purported to have been the only state that recognizes the primacy of making the victim whole in legal malpractice cases, by treating legal fees and costs of the legal malpractice action as being consequential damages.  The Texas Supreme Court has recently similarly so held. See our blog posts from Paul M.Koning  of November 2, 2009  regarding Akin Gump v. NDR.

• Email This
• Print
• Comments (17)
• Trackbacks
• Share Link

Albee Associates v. Orloff, Lowenbach, Stifelman and Siegel, P.A., 317 N.J.Super. 211 (App. Div. 1999)

NJ Underlying Civil Litigation

Student Contributor:  Joshua D. Aronson

Facts: Defendant attorneys were hired by the plaintiffs to represent them in a civil fraud action. An entry of default was granted in favor of the plaintiffs. Following the entry of default, one of the defendants in the underlying action filed for Chapter 7 Bankruptcy. The defendant attorneys failed to list the plaintiffs as creditors in the bankruptcy petition and, subsequently, failed to file an adversary proceeding for non-dischargeability of the debt before the passing of the bar date. This prevented plaintiffs from collecting any money from the debtors due to the discharge in bankruptcy, and thereafter, plaintiffs pursued an action for legal malpractice against their former attorneys. The defendant attorneys submitted a motion for summary judgment under the theory that even if the plaintiffs were successful in a non-dischargeability complaint, they would still not have been able to collect due to the financial status of the debtors. The trial court granted the defendants’ motion for summary judgment, holding that even if the plaintiffs’ judgment had not been discharged, the debtor would not have had the assets to be able to satisfy plaintiffs’ judgment. Plaintiffs appealed the trial court’s decision.

Issue: Did the trial court improperly grant the attorneys’ motion for summary judgment in the legal malpractice action based upon the plaintiff’s inability to collect on their judgment against the debtors?

Ruling: The Appellate Division reversed and held that collectibility is ultimately a question of proximate cause. It remanded for a fuller factual record. The evidence submitted to the motion court  did not clearly establish that a reasonable juror could conclude that the debtor would have been unable to satisfy plaintiffs’ judgment.

By virtue of the "no-asset" Chapter 7 bankruptcy proceeding, [the debtor] may, at the time of the asset searches at least, have had no assets. But he was, as far as the record reveals, at one point capable of maintaining an income and acquiring assets.   To the extent a substantial portion of his prior debts have been extinguished, he has benefited from the bankruptcy and there is nothing in the record that would suggest that his "no-assets" status is anything but temporary or that he does not now have viable income.

Lesson: It would seem that in order to prevail in a legal malpractice case, the burden of proving a former client's inability to collect an underlying debt, might well have shifted in some cases to the malpractice defendant. Of interest, see also Hoppe v. Ranzini,  (PDF) with permission of Thomson/Reuters, Westlaw.

• Email This
• Print
• Comments (6)
• Trackbacks
• Share Link

Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 179 N.J. 343 (2004)

Student Contributor:  Melissa Goldberg

NJ Underlying  Litigation (Personal Injury Action)

Facts: In this case, Plaintiff settled an underlying action involving a car crash and later alleged that her lawyer had negligently failed to include a responsible party in the underlying lawsuit. Plaintiff attempted to include this necessary, responsible party as a defendant in the underlying suit, but summary judgment was granted in favor of the new defendant under the statute of limitations. In the malpractice action, Plaintiff argued that failure to include the responsible party lessened her po-tential recovery. The attorney argued that (1) Plaintiff’s settlement barred any recovery in the mal-practice action; and (2) the value of her claim would have been no different with or without the new defendant. Plaintiff, however, proceeded to prove her case using expert testimony regarding the settlement and other evidence regarding her case. The defendant objected to the expert testimony and argued that the “suit within a suit” method, where Plaintiff presents evidence that would have been presented at trial in the underlying action had the malpractice not occurred, was the only way the Plaintiff should be allowed to prove her case.

Issue: Is the “suit within a suit” method the only way to prove proximate cause in a  legal malpractice case based on underlying litigation?

Ruling: No.

The proper approach in trying a legal malpractice action will depend on the facts, the legal theories, the impediments to one or more modes of trial, and, where two or more approaches are legitimate, on Plaintiff’s preference.

Lesson: Alternative approaches to the “suit within a suit” method are permitted to prove  the causation element  in legal malpractice, so long as the jury is provided with an independent basis to determine the effect of the alleged malpractice and the value of plaintiff’s losses.

• Email This
• Print
• Comments (5)
• Trackbacks
• Share Link

Antonis v. Liberati 821 A.2d 666 (Pa. Cmwlth. 2003)

Student Contributor: Evan Kusnitz

PA Underlying Mortgage Transaction

Facts: Plaintiff hired Attorney to prepare a mortgage and note as a security on a loan to Borrower. Attorney delivered the documents to the Recorder of Deeds. Plaintiff called Attorney several times to ask if the mortgage was recorded correctly, and Attorney repeatedly assured him that it was. However, due to a clerical error, the mortgage was in fact not recorded correctly. As a result, Borrower was able to sell the land subject to the mortgage without disclosing the existence of the mortgage, and without paying anything to Plaintiff. Plaintiff successfully sued Attorney. On appeal, Attorney argued that the trial court erred by not requiring expert testimony to show that he had a duty to Plaintiff to ensure that the mortgage was recorded correctly. Attorney also argued that Borrower’s fraud was an intervening cause of Attorney’s harm.

Issue:

1. Is expert testimony required to show that an attorney has a duty to a client to ensure that a mortgage is recorded correctly?
2. Is a borrower’s fraud––selling mortgaged land without disclosing the incorrectly recorded mortgage––an intervening cause of any harm caused by an attorney’s failure to ensure the mortgage was correctly recorded?

Ruling: In affirming the decision of the trial court, the appellate court ruled:

1. Expert evidence . . . is not required when the issue of negligence is clear enough to be concluded as a matter of law.

Since it is the responsibility of the mortgagee to ensure that the mortgage has been properly recorded, that duty undoubtedly falls upon his attorney, who represents him in the matter.

2. A borrower’s fraud is not an intervening cause of the harm caused by an attorney who failed to ensure that a mortgage was correctly recorded. If the attorney did not breach his duty to his client, the fraud could have never happened.

Lesson:

1. A mortgagee’s attorney has a duty to ensure that the mortgage is recorded correctly.

2. When an attorney’s negligence is obvious, expert evidence may not be required.

• Email This
• Print
• Comments (11)
• Trackbacks
• Share Link

Fishman v. Brooks, 396 Mass. 643; 487 N.E.2d 1377 (1986) (PDF)

MA Underlying Personal Injury Action

Student Contributor: Natalie Resto

Facts: Brooks hired Fishman to represent him in an action for personal injuries he sustained when a negligently operated motor vehicle collided with the bicycle Fishman was riding. Fishman did not commence the personal injury suit until 16 months after the accident, and did not obtain service on the driver defendant for more than 10 months after filing the complaint. He also made a settlement demand of $250,000 on the driver’s insurer when the insurance coverage was $1 million. Shortly before trial, after Fishman told Brooks that he could not win if he went to trial, Brooks agreed to settle his personal injury claim for $160,000. The client sued the attorney for malpractice. The jury found for clients and the attorney appealed.
     
Issue: Whether the trial court properly admitted the testimony of an adjuster and tort lawyer as to liability and causation?

Ruling: The court affirmed the lower court’s holding. It found that expert testimony from an experienced tort lawyer and an experienced claims adjuster as to reasonable settlement value of underlying claim was properly admitted, and that

evidence of the fair settlement value of the underlying claim was admissible to prove not only Fishman’s negligence but also that his negligence caused a loss to Brooks. Id. at 648.

Lesson: An attorney is liable when he causes a client to settle a claim for an amount below what a properly represented client would have accepted. The court states that the typical case of malpractice liability for an inadequate settlement involves an attorney who, having failed to prepare his case properly or lacking the ability to handle the case through trial (or both), causes his client to accept an unreasonable settlement.

EDITOR'S NOTE: With our thanks to Westlaw, Thomson Reuters for permitting the case hyperlink.

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

Baxt v. Liloia, 155 N.J.190 (1998)

Student Contributor: Ryan O’Donnell

NJ Underlying Commercial Action

Facts: Plaintiffs, who were previously defendants in a foreclosure action, filed a complaint against the attorneys who represented the mortgage bank. Plaintiffs sought damages for a breach of the Rules of Professional Conduct, alleging that the bank’s attorneys actively mislead plaintiffs during the pendency of the foreclosure proceedings.

Issue: Can a violation of the Rules of Professional Conduct alone serve as the basis for a cause of action in legal malpractice?

Ruling: No.

Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached…Consonant with the intent of the ABA, no New Jersey case has allowed a cause of action based solely on a violation of the RPCs….Moreover, our research has found no case in any other jurisdiction permitting the RPCs to be used in this manner…[S]tate disciplinary codes are not designed to establish standards for civil liability but, rather, to provide standards of professional conduct by which lawyers may be disciplined…[Various rules] are framed as precatory guidelines…Many of the disciplinary rules are aspirational in nature and therefore, particularly unsuitable for use outside of the disciplinary system.

* * *

While violations of ethical standards do not per se give rise to tortious claims, the standards set the minimum level of competency which must be displayed by all attorneys.   Where an attorney fails to meet the minimum standard of competence governing the profession, such failure can be considered evidence of malpractice.

Lesson: A cause of action for legal malpractice cannot be premised solely on an attorney’s alleged breach of a Rule of Professional Conduct. But violation of an RPC can nonetheless be some evidence of a departure from the applicable standard of care.

• Email This
• Print
• Comments (7)
• Trackbacks
• Share Link

First American Title Ins. Co. v. Lawson, 351 N.J. Super. 407 (App. Div. 2002)(PDF)

Student Contributor: Evan Kusnitz

NJ Underlying Legal Ethics Action

Facts: Three attorneys formed a law firm in New Jersey. In addition to engaging in the unauthorized practice of law in New Jersey, one of the attorneys, Wheeler, also misappropriated client funds. When another of the attorneys, Lawson, discovered the misappropriation and confronted the attorney engaged in this violation, Wheeler tried to explain his actions in light of the financial difficulties facing the firm and convinced Lawson to join in his scheme in order to pay off the firm’s liabilities.

In the meantime, the firm had been notified by the Office of Attorney Ethics that it would be conducting an audit of the firm’s books in response to several grievances. Shortly thereafter, Wheeler completed an application for malpractice insurance, along with two warranty statements, denying that he was aware of any actual or potential malpractice claims against the law firm.

Eventually, two title insurance companies were forced to make payment to several of the firm’s defrauded clients. These title insurers subsequently filed claims against the firm for reimbursement of monies paid as a result of the firm’s wrongful conduct. When the firm attempted to seek a defense and coverage from its malpractice carrier, the carrier filed a declaratory judgment action seeking to rescind its policy, given Wheeler’s misrepresentation to the carrier that he was unaware of potential malpractice claims.

Issue: May a malpractice carrier rescind a policy due to deliberate misrepresentations on its application?

Ruling:

1. Equitable fraud provides that a party may rescind a contract where there is proof of (a) a material misrepresentation of a presently existing or past fact; (b) the maker’s intent that the other party rely on it; and (c) detrimental reliance by the other party. In the context of an application for insurance, an additional inquiry must be made into whether the insured knew that the information was false when completing the application.
2. This rule applies even if the insurer might not have been diligent in investigating the background of the insured.

Lesson: A malpractice insurer may rescind a policy when the insured deliberately conceals information concerning known ethical and professional violations that may serve as the basis of legal malpractice actions.

EDITOR'S NOTE: The New Jersey Supreme Court affirmed the Appellate Division’s decision to allow the malpractice carrier to rescind its policy with regard to the liability of the partners who engaged in unlawful conduct, however, based on partnership law, it reversed the rescission of the policy with regard to the innocent partner. First American Title Ins. Co. v. Lawson, 177 N.J. 125 (2003)(PDF).

• Email This
• Print
• Comments (5)
• Trackbacks
• Share Link

Joyce A. Popwell v Law Offices of Broome and Horn, 363 N.J. Super. 404 (App. Div. 2002)

NJ Underlying  Personal Injury action

Student Contributor: Candice Deaner

Facts: After the court appointed arbitrator found that plaintiff had no cause of action for negligence against the underlying defendant plaintiff’s attorney failed to file for a trial de novo within the time limits set out by R. 4:21A-6(b)(1),  A trial de novo filing would have preserved plaintiff’s claim for trial and would not have subjected it to dismissal. Defendants made a cross motion to dismiss, alleging that Plaintiff’s failure to submit an affidavit of merit in the legal malpractice action,  as required by statute, required the  grant  of summary judgment  dismissing the malpractice complaint.

Issue: Does the Plaintiff’s failure to submit an expert's affidavit of merit  to support its allegation of legal malpractice when it was common knowledge that failure to file a timely application for a trial de novo amounts to negligence per se for which no expert affidavit or testimony would be necessary.

Ruling:   The requirement of the filing of an affidavit of merit is not applicable in this matter because Plaintiff's allegations do not require the testimony of an expert in order to permit the jury to determine the issue of negligence.  Affidavits of merit are not required where, as here, it was  “common knowledge” that the defendant attorney was negligent in blowing a time limit the consequences of which included the dismissal with prejudice of plaintiff's causes of action.

Lesson: In clear cases of attorney negligence, where it is common knowledge that the attorney was negligent by violating a statutory time limit  that caused plaintiff to forefeit her claim, no expert's affidavit is required,  because the jury can determine whether the Defendants is negligent based on "common knowledge" and without the need for expert testimony.

• Email This
• Print
• Comments (3)
• Trackbacks
• Share Link

The Editorial Board of the

Legal Malpractice Law Review

is pleased to invite you to an online discussion starting on

Monday morning November 2, 2009

led by:

Paul M. Koning  of K & L Gates, LLP

on the  Texas Supreme Court's new decision awarding Attorney's Fees as compensable damages in a legal malpractice action:

Akin, Gump, Strauss , Hauer &  Feld, LLP  vs. National Development and Research Corp.  decided October 30, 2009:

"The Hidden Issue in Akin Gump v. NDR"

and

"Akin Gump v. NDR:

Practicial Consequences of Allowing Attorney's Fees as Damages"

With this new decision in  Akin Gump,  has Texas joined New Jersey, (with its Saffer v. Willoughby,) in recognizing the prevailing malpractice plaintiffs' right to be made whole again with an award of attorney's fees when they prove that they have been  damaged by their lawyer's malpractice? What implications does this have for the practicing lawyer?  Does this signal a trend that we might see in yet other states?

 Paul is the Texas Law Contributor to the Legal Malpractice Law Review and is a renowned expert in the field. He has served as: 

• Co-Chair of the American Bar Association's Professional Liability Litigation Committee (2006-2009)
  
• Designer and Project Coordinator of its "50 State Survey of Legal Malpractice Law"
  
• Co-Chair, Attorneys' Liability Subcommittee (2005).
  

We look forward to your joining us in what will prove to be a lively and timely discussion. Visitors are encouraged to post their Comments to both of Paul's blog posts. 

Just scroll down to  Paul's 2 blog posts immediately below. 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

The Texas Supreme Court’s new opinion (October 30, 2009) in Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. National Development and Research Corporation  holds that

1. “collectibility” must be determined no earlier than the time of the underlying judgment, and
2. “a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence.”

The first holding seems non-controversial, whereas the second may or may not open Pandora’s box (more on that in a separate comment posted immediately below this one).  Yet there is another consequence of the Akin Gump decision – hidden and significant – that reporters and commentators may have missed.

Because the holding on the first two issues required reversal, the Texas Supreme Court declined to review the lower court’s ruling regarding contingent fee offsets. The contingent fee offset issue is simple: If a lawyer’s malpractice results in the loss of a collectible judgment of $1,000, but the client had a 40% contingent fee agreement with the lawyer, is the client entitled to recover $1,000 or $600? If one applies a pure “but for” causation analysis the answer should be $600, because even if the case had been handled perfectly, the client would only have netted $600. Yet, the Dallas Court of Appeals held that the client’s damages are not to be offset by the amount of the lawyer’s contingent fee. Because the Supreme Court declined to review this issue, the Dallas Court’s ruling remains the law.

The Dallas Court observed:

Akin Gump was entitled to its contingency fee only if NDR prevailed in the [underlying] Panda lawsuit. Due to Akin Gump's negligence, NDR did not prevail and thus Akin Gump did not earn its contingency fee. To give the firm a credit for a contingency fee it failed to earn would be to reward its wrongdoing.

Is this logical? Does it conform the Texas Supreme Court’s reaffirmation of the “but for” standard for causation in Akin Gump? Are there any other reasons to disregard a lawyer’s contingent fee interest in determining the amount of damages?

The Dallas Court also held:

To secure the damages it would have been awarded in the Panda lawsuit, NDR was required to pay two sets of lawyers and endure the aggravation of a second lawsuit and a second appeal. The attorney's fees and expenses incurred to prosecute a legal malpractice suit are not recoverable as damages, absent some statute or agreement not applicable here. Simply put, NDR must pay attorneys twice to be in the same position it would have been in absent Akin Gump's malpractice. It should not be forced to “pay” a contingency fee that Akin Gump never earned. (citation omitted).

Does the Texas Supreme Court’s new ruling that attorneys’ fees may be recovered as damages remove the logical underpinning for the Dallas Court’s ruling on the contingent fee offset?

• Email This
• Print
• Comments (4)
• Trackbacks
• Share Link

The Texas Supreme Court’s new opinion in Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. National Development and Research Corporation holds that

a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence.

Prior to this holding, Texas courts had generally disfavored the recovery of attorneys’ fees qua damages unless allowed by statute or contract.

At first glance, the Akin Gump Court’s holding appears straightforward and logical, and in some cases will be easy to implement. For example, if a lawyer fails to file an answer, resulting in a default judgment, the plaintiff should be able to recover the fees it must pay a second attorney to have the default set aside. In this example, 100% of the extra fees are attributable to cleaning up the first lawyer’s mistake. Most cases, however, are not so cut and dried. 

I fear several unintended consequences from the Court’s ruling: 

• First, will there be a new class of cases in which there are no damages but attorneys fees? For example, if a lawyer obtains a total victory for the client, will the client (perhaps hoping to bargain for a fee reduction) comb the record for inconsequential errors that nevertheless may have increased the total fee by some amount?
• Second, will the new rule be used to avoid summary judgment in cases in which the undisputed facts prove the negligence caused no damages? Take appellate malpractice. If a trial court decides as a matter of law that the client would have lost the appeal regardless of the malpractice, will the client’s claim now survive based on a “fact issue” regarding increased appellate costs due to the negligence?
• Third, how much will the rule expand the number and costs of mandatory expert witnesses? Expert testimony is needed to prove causation in all but the most obvious situations. Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113 (Tex. 2004).(PDF) Doesn’t this mean a new set of experts will be needed in every malpractice case in which the plaintiff seeks attorneys’ fees as damages? The experts will need to review the record and opine whether the malpractice proximately caused an increase in attorneys’ fees and, if so, how much.

Question: Does Akin Gump open Pandora’s box or is it simply a logical extension of “but for” causation? Are there any special rules or limits that should apply?

• Email This
• Print
• Comments (13)
• Trackbacks
• Share Link