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

Adamopoulos v. Liotti, 708 N.Y.S.2d 706, (2000)

NY Underlying tort action

Student Contributor: Jason Zemsky

Facts: Plaintiff was injured when she tripped and fell on a stair case at an LIRR station. The plaintiff retained the defendant to represent her in the action, but the defendant failed to timely commence an action on her behalf. The plaintiff then brought an action for legal malpractice against the defendants. The Defendants filed a motion to dismiss, which was denied.

Issue: Did genuine issues of materials facts exist that the plaintiff could have proved to prevail if the defendant had timely commenced an action?

Ruling: Affirmed.

“To state a claim for legal malpractice, the plaintiff must show that the defendants failed to exercise the skill commonly exercised by an ordinary member of the legal community, that such negligence was the proximate cause of damages, and that ‘but for’ such negligence the plaintiff would have prevailed on the underlying action.”

Contrary to the defendants' contention, it cannot be concluded as a matter of law that the defect in the staircase was of such a trivial nature that it could not have given rise to a legal liability on the part of the LIRR. There is an issue as to whether or not the plaintiff would have prevailed against the LIRR had the defendants filed a timely action.  

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Builders Square, inc. v. Saraco,  868 F. Supp. 748 (E.D. Pa. 1994).

PA. underlying products liability suit

Student contributor: Cheryl Neuman

Facts: Plaintiff was a defendant in an underlying products liability lawsuit. Plaintiff was a retailer of the allegedly defective product. The distributor of the product was also named as a defendant. The distributor had $1 million of liability insurance coverage. Plaintiff retained defendant lawyer in the product liability suit. The plaintiffs in the underlying products liability offered to settle for $1 million, which was the limit of the insurance policy. Defendant lawyer, however, rejected the offer to settle and did not inform his client (plaintiff) about the settlement offer. After plaintiff found out about the settlement offer defendant attorney withdrew from representation. At trial, the parties agreed to settle for $4.25 million, of which the plaintiff was responsible for $3.25 million. Plaintiff therefore alleges that defendant’s failure to pursue the earlier settlement agreement placed plaintiff in a much weaker position to defend or settle the case.

Issue: Does a lawyer have the duty to explore and timely communicate to his client all settlement offers?

Ruling: Yes. An attorney had the duty to tell his client about all settlement offers as well as other important information relating to the representation.

Lesson:  The plaintiff in this case was dissatisfied  at having to settle a case on terms that were more disadvantageous than the terms of  the initial settlement negotiations.  Allowing this type of lawsuit to go forward heightens awareness and provides incentives to lawyers to fully communicate all settlement offers to their clients. It is, after all, the client's right to settle the case. 

Editor's Note: See RPC 1.4 re the lawyer's duty to communicate to the client. 

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Lawrence v. Miller 48 A.D.3d 1, 853 N.Y.S.2d 1 (1st Dept., 2007)

Student Contributor: Maninder (Meena) Saini

NY Underlying Estate Litigation-Attorney fees

Facts: A husband passed away and left the estate to respondent-wife and their three children. The will was admitted to probate in January 1982. The respondent (Lawrence) retained the Graubard law firm on an hourly basis to represent her in connection with the estate. Respondent was billed over $18 million in legal fees over a 22-year lengthy dispute over the estate. Throughout the years, more than $350 million in distributions were made to the beneficiaries. To conclude the litigation, a $60 million settlement was offered but the respondent declined. The respondent then renegotiated the existing agreement with the law firm. The law firm would continue to get an hourly rate, but there was an annual cap of 1.2 million. In addition, the agreement contained a 40% contingency fee provision for any additional monies that were distributed to the beneficiaries. Months later, the law firm reached a settlement agreement for approximately $104.8 million. The respondent refused to pay the law firm the 40% of the additional $40 million it obtained. The law firm filed a petition to compel payment. The respondent then brought a lawsuit for, inter alia, breach of fiduciary duty.

Issue: Whether the revised contract that contained a contingency fee of 40% of any future monies distributed to the beneficiaries is unconscionable on its face.

Ruling: The court found that a 40% contingent legal fee of $40 million for five months work was not unconscionable on its face, especially following years of litigation. Thus, the law firm did not breach any fiduciary duties.

 “Any determination of unconscionability generally requires a showing of both procedural and substantive unconscionability, requiring an examination of the contract formation process and the alleged lack of meaningful choice.”

Lesson: Should it be unconscionable for an attorney to place high contingency fees in the retainer agreement when the attorney is investing his time and risking collecting nothing in the event of a loss? The attorney must demonstrate that he did not exploit the situation and that the client understood the terms of the agreement. Even though it may seem excessive at first blush, the circumstances underlying the agreement must be fully evaluated. Agreements are to be enforced when no deception is involved in making the contract between competent adults. 

Editor's Note: The "bottom line" is given all the circumstances, the fee must be reasonable. RPC 1.5 (a). 

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Helmar v. Harsche, 296 N.J. Super. 194 (App. Div. 1996)

NJ: Underlying real estate transaction

Student Contributor: Michael H. Park

Facts: Plaintiff purchased a triplex rental property from broker partly based upon broker's representation that the building was up to code and did not require any licenses in order to rent the premises. The broker told plaintiff to retain an attorney to review the contract and to handle the closing. The plaintiff then retained an attorney, who failed to check that the building was in compliance with all laws and regulations. Subsequently, the property was inspected and found to be in violation of twenty-one different codes. Plaintiff filed a complaint against broker alleging, fraud, consumer fraud, and negligence. Before a motion judge and again at trial, the broker sought to name attorney as a third-party defendant, contending that his malpractice was the superseding intervening cause of the plaintiff's damages. However, the broker’s motion was dismissed and judgment was entered for plaintiff. The broker appeals the dismissal of its motion.

Issue: Was the motion to join the attorney as a third-party defendant properly dismissed?

Ruling: In reversing the decision by the Superior Court, Law Division, the Appellate division held that the broker should have been allowed to join attorney as a third party defendant for the following reasons:
1) In Stewart v. Sbarro, 142 N.J.Super. 581 (App.Div.), certif. denied, 72 N.J. 459 (1976), the court held:

“[When] an attorney undertakes a duty to one other than his client, he may be liable for damages caused by a breach of that duty to a person intended to be benefited by his performance.”

2) The broker presented expert testimony that established that once hired, it was the attorney’s duty to make sure the property was in compliance with the regulations. The expert opined that the attorney owed a fiduciary duty to the broker. Therefore, had the attorney done his job, there was a possibility that all the violations would have been revealed prior to closing.

Lesson: In cases where an attorney is called upon to handle a transaction between his client and a third party, a fiduciary duty may be owed to the third party. This duty demands that the attorney not only diligently pursue his client's interests, but also the interests of the third party in successfully completing the transaction. If this duty is breached, the attorney can be held liable for any damages arising from his negligence.

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Leder v. Spiegel, 9 N.Y.3d 836, 840 N.Y.S.2d 888 ( 2007)

Student Contributor: Maninder (Meena) Saini

NY Underlying will contest

Facts: Plaintiff (attorney) unsuccessfully represented defendants (clients) in a will proceeding and the defendants refused to compensate the plaintiff for the work done on their behalf. The plaintiff then petitioned for legal fees. The defendants counterclaimed for legal malpractice, alleging that “but for” the plaintiff’s negligent representation, which was failing to anticipate that certain evidence would be inadmissible, they would have settled. The plaintiff moved for an order dismissing the defendants’ counterclaim. The lower court dismissed the defendants’ counterclaim. Defendants appealed.

Issue: Did the defendants allege a prima facie case of legal malpractice?

Holding: The appellate division held that the defendants’ counterclaim alleging that the plaintiff failed to anticipate the court’s evidentiary ruling does not establish proximate cause. The plaintiff actively encouraged the defendants to settle but they refused to accept it. Thus, the defendants failed to make a prima facie case of legal malpractice. The lower court’s decision was affirmed.

Rule: “In order to sustain a legal malpractice claim, a client must establish that the attorney failed to exercise ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages, and that the client would have succeeded on the merits of the underlying action “but for” the attorney's negligence.”
Lesson: The plaintiff must be able to show that the attorney’s negligence was the proximate cause of the damages. The dismissal of a legal malpractice action is warranted if the plaintiff fails to demonstrate proximate cause regardless of whether the attorney was negligent. 

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Lawson v. Nugent, 702 F. Supp. 91 (D.N.J. 1988)

NJ Underlying Criminal Action

Student Contributor: Colleen Gaedcke

Facts: The plaintiff retained the defendant attorney as defense counsel after being indicted for the robbery of a post office. Upon the advice of the defendant attorney, plaintiff pleaded guilty and was sentenced to 25 years in prison. While in prison, the plaintiff retained new counsel and obtained a reduction in his sentence. Eventually, he was released after serving 5 years.
Upon release, plaintiff brought a legal malpractice suit against the defendant attorney alleging that, but for the defendant’s negligent legal representation, he would have served a maximum of only 40 months in prison. The plaintiff sought damages for emotional distress as a result of the anguish he suffered for the additional 20 months he spent in prison, allegedly, as a result of his attorney’s ineffective representation.

Issue: Can a criminal defendant recover damages for emotional distress in a legal malpractice action?

Ruling: Yes. The United States District Court, District of New Jersey, held that the plaintiff may pursue emotional distress damages if he could first establish (1) the existence of some egregious or extraordinary circumstance; and (2) the allegedly negligent attorney was retained to protect something other the plaintiff’s economic interests.

Lesson: Given that the attorney-client relationship in a criminal proceeding is predicated upon the protection of the client’s interest in his freedom and sovereignty, “an attorney who commits malpractice is liable to his client for any reasonably foreseeable loss caused by his negligence, including emotional distress resulting from [his] loss of liberty."

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With this post, Legal Malpractice Law Review  inaugurates a new section called "Brain Teasers".

 All too often, common transactions we  come across  give rise to complicated legal malpractice (and ethics) issues. With "Brain Teasers" we challenge you to see the issues and discuss how you would approach their resolution. Feel free to post  and share with all of us your comments.

If you have a "Brain Teaser" to share, please email it to us at: experts@legalmalpractice.com. Make sure to use fictitious names. And we'll post it so that everyone can benefit. 

And now, Bill Freivogel, shares with us the Inaugural "Brain Teaser":

Eighteen months ago Tom represented the borrower in a loan transaction. Tom’s client is now in deep trouble and may be headed for bankruptcy court. One of the bankruptcy lawyers in the firm, Bob, while reviewing the loan transaction, notices that the remedies opinion in Tom’s closing opinion did not contain a critical provision dealing with bankruptcy. Bob goes to Tom and asks whether that omission was intentional. In looking at his notes Tom quickly realizes that his assistant had misinterpreted one of his edits. This could further complicate life for Tom’s already shaky client and for Tom’s law firm. Tom goes to his firm’s general counsel, Barbara and asks for guidance. Barbara pulls in another partner, Jerry, for a second opinion about what should have been done.

While the above scenario raises many issues, here are a few. First, what, if anything, must Tom tell his client? The trickier question is when must Tom tell his client. Second, are any of the communications that have just occurred within Tom’s law firm among Tom, Bob, Bill, Barbara, and Jerry, protected by the attorney-client privilege? This second issue will almost certainly arise if either Tom’s client or the lender sues Tom and his law firm for the mistake. Last, when, if ever, should the law firm notify its malpractice carrier or broker. What should the notice say?

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Salamoni v. Karoly, 2005 WL 3823056, 74 Pa. D. & C.4th 378 (Pa.Com.Pl. 2005)

PA Underlying personal injury claim

Student Contributor: Christopher S. Henn

Facts: Plaintiff suffered personal injuries after being struck by a car. Plaintiff engaged the Defendant attorney, Karoly, to seek recovery for his injuries in the accident. Defendants filed for issuance of a summons one day before the expiration of the applicable two-year statute of limitations. It was issued the same day but expired a month later because it was never delivered to the sheriff for service.

After the summons was reinstated, however, Plaintiff's case was dismissed on summary judgment because of the expiration of the statute of limitations. Subsequently, Plaintiff filed suit against Defendant Karoly and his associate for legal malpractice. Despite naming two Defendants, Plaintiff submitted a single certificate of merit as to both defendants. The Clerk of the Court, therefore, dismissed the malpractice action for failure to prosecute.

Issue: Is a single certificate of merit sufficient where there are multiple defendants?

Ruling: The Court held:

It was not the clerk's function to evaluate the sufficiency of this certificate. The clerk was without authority to enter a judgment of non pros under these circumstances…Where several defendants acting together are responsible for the same negligent act or omission, a single certificate of merit naming both or all defendants [is sufficient].

Lesson: The purpose of filing a certificate of merit is to ensure that the Plaintiff has not asserted a frivolous claim against the Defendant for professional negligence. Although the Plaintiff here did not comply with the technical requirements of Pennsylvania’s Certificate of Merit rule for each separate Defendant, the Court found that the purpose of the requirement had been fulfilled “[w]here both parties [were] jointly responsible for the same negligent act or omission”.

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Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537 (2nd Cir. 1994)

NY Underlying Commercial Action/Conflict of Interest

Student Contributor: John Anzalone

Facts: Defendant law firm represented Plaintiff, through an agent, in her attempt to purchase the assets of a bankrupt company. Eventually, however, Plaintiff dismissed the agent. The agent, thereafter, advised Defendant law firm of his interest in purchasing the assets of the same bankrupt company.

Despite being fully aware that Plaintiff still sought to purchase the assets, Defendant law firm informed the Plaintiff that it would represent the agent in his attempt to purchase the assets, and despite Plaintiff’s objections, proceeded with the representation. Ultimately, the agent outbid Plaintiff with the firm's assistance.

The jury found that the firm's representation of Plaintiff's agent breached its fiduciary duties to her and was a "substantial factor in preventing her from obtaining assets she sought in the transaction."

Issue: Did the firm breach its duty to Plaintiff by representing her former agent in the same transaction?

Ruling: In affirming the lower court, the Second Circuit held that the firm had breached its fiduciary duty to Plaintiff, and reasoned as follows:

1. The firm committed a serious breach of its fiduciary duties to Plaintiff by representing a party with interests adverse to the Plaintiff in the same transaction.
2. The nature of this breach triggers the prophylactic rule so that, instead of establishing proximate cause, plaintiff has to prove only that the firm’s actions were a substantial factor in the resulting damages.
3. Here, the substantial factor test was satisfied given the likelihood that (a) the agent and the firm conspired to use Plaintiff’s escrow funds for the agent’s purchase of the bankrupt entity’s assets; (b) this conspiracy interfered with Plaintiff’s negotiations to purchase the same assets; and (c) the firm and the agent conspired to use confidential information regarding Plaintiff’s bid.

Lesson: If an attorney or a law firm terminates its relationship with one client and commences an engagement with another party with directly adverse interests in the same transaction, they will be subject to the “prophylactic rule” which makes it easier for a plaintiff to prove malpractice by substituting the usual "but for" causation in fact  requirement with the “substantial factor” test.

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Utica Mutual. Ins. Co. v. Maran & Maran, 142 N.J. 609 (1995)

NJ Underlying workers comp proceeding

Student Contributor:  Lisa Larato

Facts: Defendant Ingala sustained work related injuries and had been receiving workers compensation benefits from the Plaintiff, Utica Mutual Insurance Co. (Utica). Ingala retained a separate attorney to handle a products liability claim against the third party liable for his injuries. That attorney failed to file suit within the statute of limitations. Plaintiff then retained  Maran & Maran, to sue that attorney for malpractice. The malpractice suit settled for $585,000.

Utica contended that it had a workers compensation lien on the legal malpractice settlement proceeds, but Maran & Maran disagreed. Utica filed the instant lawsuit and the parties cross-filed for summary judgment. Maran & Maran argued that even if such a lien could attach to a legal malpractice recovery, it should not attach if the malpractice and workers compensation recoveries do not fully compensate the injured worker. They also argued that the workers compensation carrier had no claim because it failed to institute its own action against the tortfeasor.

The Superior Court, Law Division, granted Ingala and Maran & Maran’s motion and held that the lien did not attach to a malpractice recovery. Utica appealed, and the Supreme Court, Appellate Division, affirmed. Utica then moved for reconsideration and the Supreme Court granted that motion.

Issue: Whether, pursuant to N.J.S.A. 34:15-40, a workers compensation lien attaches to the proceeds of a malpractice suit brought to recover damages from an attorney who failed to institute an action against the third-party tortfeasor?

Ruling: The Supreme Court held that the statute establishing workers compensation liens prevents Maran & Maran from retaining any workers compensation benefits that have been supplemented by recovery against a liable third party, even if recovery and benefits when combined would leave Ingala less than fully compensated. Under N.J.S.A. 34:15-40, Utica is entitled to reimbursement, irrespective of whether or not Ingala is fully compensated.

Lesson: The Purpose of N.J.S.A. 34:15-40 is to prevent recovery from different sources for the same injury; no justification exists for allowing an injured employee who receives a legal malpractice recovery to be in a better position than an injured employee who recovers directly from the tortfeasor. The court reasoned that the “no double recovery” rule should not be different when the third-party recovery is against a party other than the tortfeasor.

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University of Massachusetts Memorial Medical Center, Inc. v. Christodoulou
360 N.J. Super. 313, 823 A.2d 51 (2003)

NJ Underlining collection action for workers comp benefits.

Student Contributor: Anthony J. Forzano

Facts: A hospital brought action against deceased patient's estate, his employer, and employer's workers' compensation insurer for payment of medical bills. It also includes a cross-claim by the compensation petitioner against the compensation carrier  for counsel fees in defending against the medical providers' action. The Plaintiffs named their  attorney   as a party in this action solely for the purposes of obtaining discovery. Shortly before a scheduled trial date, plaintiffs  then moved for permission to file a claim against their attorney  for malpractice on the grounds that he failed to protect their claim in the compensation proceedings. Their motion was denied because of the impending trial date. During the argument on the motions for summary judgment, plaintiffs asked for permission to dismiss their complaint against the attorney  without prejudice. The attorney opposed. The trial court agreed with plaintiffs, and the attorney now seeks to reverse the “without prejudice” aspect of the order. The attorney claims he should not have to face a substantive action because plaintiffs knew all the facts bearing on that claim when they filed their initial suit. Plaintiffs respond that they should not be foreclosed from pursuing their malpractice claim.

Issue: Does a voluntary dismissal of a claim against an attorney, filed only for the purpose of discovery, preclude a subsequent filing of a legal malpractice action?

Ruling: The Court held that the dismissal without prejudice was entered pursuant to Rule 4:37-1(b). Under that rule, the court may impose “such terms and conditions as the court deems appropriate.” R. 4:37-1(b). The main object of this rule is “to protect a litigant where a termination of the proceedings without prejudice will place him in the probable position of having to defend, at additional expense, another action based upon similar charges at another time”. Since the attorney was only sued for purposes of discovery, it did not defend against a malpractice claim. Therefore, the dismissal without prejudice would not expose it to another action on similar charges.

Lesson: In this case, a voluntary dismissal of medical providers' claim against attorneys, filed for purposes of discovery, did not prevent subsequent filing of action for legal malpractice, where second action was not based on same allegations. In general, the court will not enforce an estoppel when the subsequent malpractice allegations are based on a different set of facts. 

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Collas v. Garnick, 425 Pa. Super. 8; 624 A.2d 117 (1993)

Underlying PA Tort Action

Student Contributor: Colleen Gaedcke

Facts: The plaintiff employed the defendant to represent her in an automobile tort action. The defendant reached a settlement with the plaintiff for $245,000. The plaintiffs were asked to sign a general release, which discharged the driver and all other parties who might be liable for the damages. The plaintiff asked the defendant whether the release would have any effect on her desire to sue the manufacturer of the vehicle. The defendant responded that it would not. In reliance on his advice she signed the release. She subsequently filed an action against the manufacturer, which the court dismissed stating that the action was barred by the release. The plaintiff then filed this action against the defendant for legal malpractice.

Issue: “If a lawyer negligently advises a client regarding the effect of a release and the client, in reliance on the lawyer’s advice, signs a release which unintentionally has the effect of barring an action contemplated by the client, is the lawyer immune from liability because the release was executed as part of the settlement of a prior, separate action?”

Ruling: No.

1) A lawyer has a duty to know how a proposed settlement will affect his client…conducting  legal research sufficient to allow the client to make an informed decision.

2) Here,

the fact that the written agreement was prepared as part of the settlement of their prior action was incidental; it did not relieve counsel of an obligation to exercise care in determining the effect of the agreement which his clients were being asked to sign…counsel was required to exercise the same degree of care as he or she would have exercised in advising a client about a complex agreement not a part of the settlement of a legal action. 

Lesson: An attorney is not expected to be perfect.  But, where the attorney gives erroneous advice that falls below standards that the client has a right to expect form their lawyer they will be held liable for malpractice.

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Insight and Commentary from Ben Wasserman and Krishna Shah

In order to drive a car in New Jersey, you need a license and insurance. If your negligent driving injures someone, you have insurance not only to protect yourself, but to protect the person you injure.

In order to practice law in New Jersey, you also need a license, but not insurance. If your negligence dmages a client and you have no insurance, then it's too bad for the client.

Is there something wrong with this picture? We think so. We lawyers are fiduciaries to our clients. That means that first and foremost we have to put our clients' interests ahead of our own. Even at our own cost.

Is New Jersey destined for universal mandatory legal malpractice insurance?

Read more from this week's New Jersey Law Journal's Professional Malpractice Supplement.

The article linked to this post may express the opinions of its authors. It is not intended as a statement or position of the editorial board of The Legal Malpractice Law Review.

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Jolley v. Marquess, 393 N.J.Super. 255 (App. Div. 2007)

NJ Underlying automobile negligence action; insurance coverage for malpractice.

Student Contributor: Colleen A. Gaedecke

Facts: A New Jersey auto insurance company retained a New Jersey law firm to defend its insured in an auto negligence case.. The malpractice defendant, a partner at the firm, was assigned the  case.  During his representation, disputes arose between the defendant and the other partners at the firm which  led to the firm’s dissolution. The defendant signed a dissolution agreement with the firm relinquishing his status as partner but continuing as  trial attorney until his final termination date. As such, the defendant agreed to continue  to represent the insurance company. Ultimately, a legal malpractice claim was filed against the defendant as a result of his representation. The defendant filed a third party claim against the firm’s malpractice carrier, asserting that they were obligated to provide him with a defense and indemnification concerning the malpractice claims brought against him. The defendant argued that he was entitled to coverage because he tried the negligence action on behalf of the firm and the file remained the firm’s file at all times. The firm’s malpractice carrier denied him coverage and argued that he was not entitled to coverage because he was not a member of the firm and because the firm surrendered all responsibility for the file when they asked him to handle the case.

Issue: Whether a malpractice insurance carrier is required to defend and provide indemnification to a former partner of the law firm for alleged acts of malpractice committed after the partner’s dissolution from that firm?

The Ruling: Affirming the trial court’s grant of summary judgment in favor of the defendant, the Appellate Court held that the firm’s insurance policy required their carrier to defend the defendant.

1) When the language of the malpractice insurance policy is clear, the courts should not rewrite the insurance policy. But when a policy is ambiguous, the court should interpret the ambiguous phrase in favor of coverage.

2) Also, the court should consider whether adding more precise language would have avoided the matter.

The Lesson: The use of precise language in a malpractice insurance policy may relieve a malpractice insurance carrier from their duty to defend and to indemnify former partners for malpractice. Without such precision, any ambiguity in the policy is usually decided in favor of coverage.

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Distefano v. Greenstone, 357 N.J. Super. 352, 815 A.2d 496 (2003)

NJ Underlying personal injury action; statute of limitations

Student Contributor: Evan Hess

Facts: Defendants represented Plaintiff in a personal injury action where, Defendants did not pursue the Plaintiff’s claim in a timely matter. As a result, Plaintiff was time barred from filing the matter by the statute of limitations. At the time of appeal, Plaintiff and Defendants had partially settled the malpractice claim for $90,000 in compensatory damages. Defendants claimed they should receive a reduction in the settlement based upon the pre-existing contingency agreement. That terms of the agreement set forth that one-third of the total recovery by the Plaintiff would be paid to the Defendants, thus entitling the Defendants to a $30,000 reduction in total payout based upon the settlement figure of $90,000.

Issue: Can a Plaintiff receive the sum of their settlement without a deduction for contingency fees in a legal malpractice action, and can the Plaintiff recover the amount that would have otherwise been awarded to the Defendants as a fee for damages?

Ruling: Based upon the Supreme Court’s holding in Saffer v. Willoughby, 143 N.J. 256 (1996), the Appellate Division held that:

1) Attorneys cannot recover contingency fees based upon settlements or judgments against them in an action for legal malpractice;
2) The Plaintiff may recover fees based upon the settlement as malpractice damages even though in doing so the Defendant is subjected to duplicate recovery;
3) A Plaintiff may not recover hourly fees under the “lodestar” method that were not contemplated if a contingency fee agreement exists with Plaintiff’s attorney in the malpractice action.

Lesson: A Plaintiff may recover the total sum of the value of the underlying case without offset for the fees the negligent attorney would have received in that case. In addition, under NJ law, the fees and expenses paid to the attorney who prosecuted the malpractice action are recoverable as compensatory damages. 

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Wallenstein v. Cohen, 45 A.D.3d 674, 845 N.Y.S.2d 428 (App. Div. 2007)

NY Underlying  Fee Arbitration

Student Contributor: Maninder (Meena) Saini

Facts: Defendant-attorneys represented the plaintiff-client in a matrimonial action that resulted in a judgement for divorce pursuant to a stipulation of settlement. The plaintiff then complained to the grievance committee that the defendants over-charged her for their services and did not protect her interests. The case was transferred to Fee Arbitration. During the arbitration, it was found that defendants were entitled to the fees, which they sought. Two years later, the plaintiff commenced an action, alleging that defendants charged excessive fees and committed legal malpractice in representing plaintiff.

Issue: Can plaintiff re-litigate the issue of excessive attorney’s fees that was formerly resolved in arbitration?

Ruling: The Appellate Division held in this case that the action was barred by fee arbitration award and by collateral estoppel because all of the allegations in the complaint were “reasonably and plainly comprehended to be within the scope of the dispute submitted to arbitration.”

[T]he determination fixing the value of the defendants' services necessarily determined that there was no malpractice.

Lesson: If the excessive fee allegation in the complaint was resolved by previous arbitration, the fee awarded to the attorney during arbitration may ultimately conclude that there is no malpractice. This is a fact sensitive ruling.  The  jurisdiction of the Fee Arbitration Committees in New Jersey, however, does not extend to deciding issues of legal malpractice, even if they are raised in the fee arbitration proceeding. 

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Darby & Darby, P.C. v. VSI International, Inc. 95 N.Y.2d 308 (2000)

NY Underlying insurance coverage

Student Contributor: Maninder (Meena) Saini

Facts: Defendant (VSI International Inc.), a Florida corporation retained plaintiff (Darby & Darby) a New York law firm to represent it in two Florida lawsuits. Even though defendant paid a portion of a substantial legal bill, the defendant still owed nearly $200,000 in outstanding legal fees. Plaintiff moved to withdraw as counsel because the defendants did not pay them. The plaintiff was relieved as counsel in October 1993. In August 1996, plaintiff commenced an action to recover the outstanding amount in legal fees, plus interest and incidental costs. The defendant then asserted a counterclaim, alleging the plaintiff committed legal malpractice and breached a fiduciary duty by failing to advise defendant that its then-existing general liability insurance policy could have covered defendant’s litigation expenses.

Issue: Does a NY law firm specializing in patent litigation,  retained to defend a corporate client in a Florida patent infringment action have a duty to advise the client about possible insurance coverage to cover the cost of litigation?

Ruling:

 ...attorneys should familiarize themselves with current legal developments so that they can make informed judgments and effectivey counsel their clients... However, [the law firm] should not be held liable for failing to advise [the client] about a novel and questionable theory pertaining to their insurance coverage.

In a legal  malpractice action, a party must demonstrate that an attorney failed to employ “the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession”. What is reasonable skill and knowledge is to be determined at the time of representation.

Lesson: The standard of reasonable care applicable even to specialist-attorneys does not require attorneys to comply with   novel and questionable theories of law. An attorney only has a duty to represent a client in a manner that is reasonable and consistent with the law, as it existed at the time of representation.

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Levinson v. D'Alfonso & Stein, 320 N.J.Super. 312 (App. Div. 1999)

NJ Underlying personal injury action

Student Contributor: Michael Park

Facts: Plaintiff hired attorney to handle his personal injury/automobile negligence claim. Plaintiff and attorney entered into a written retainer agreement, which contained a clause that provided that any settlement would require plaintiff's authorization before being accepted. However, at some time during the case, the attorney accepted settlement on plaintiff's behalf, despite not having authorization. The client filed an action against the attorney alleging negligence-professional malpractice, fraud, and breach of contract, but failed to provide an affidavit of merit. The action was then dismissed for failure to provide the affidavit of merit.

Issue: Was an affidavit of merit required to file a complaint of negligence-professional malpractice?

Ruling: The Superior Court, Appellate Division affirmed in part, and reversed and remanded in part the decision by the Superior Court, Law Division for the following reasons:
1) The court affirmed that the Affidavit of Merit statute, N.J.S.A. 2A:53A-26 to 29, applied to the plaintiff's claims of malpractice because the legally significant facts that gave rise to the cause of action did not occur until after June 29, 1995, the effective date of the statute. The court deferred to the Supreme Court's interpretation in Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218 (1998), where an affidavit requirement was not applicable where the principal facts that gave rise to a cause of action that occurred before the statute's effective date. Therefore, the plaintiff should have provided an affidavit from an appropriate licensed person, which would state that there is a reasonable probability that a departure from acceptable standards occurred.
2) The fraud alleged by the plaintiff was simply a repeat of the malpractice charge with the word “fraud” tacked on, and should therefore be dismissed.
3) The court reversed and remanded the decision by the lower court to dismiss the breach of the retainer agreement's approval-of-settlement clause because an expert evaluation is not needed to see that a simple breach of contract had occurred.

Lesson: When a complaint against an attorney alleges legal malpractice, an affidavit of merit must be provided, with few exceptions. The only way for the court to know whether a standard of care has been deviated from is if an expert in that profession will attest to that possibility by affidavit. For matters that would be obvious to laymen or those which do not involve a deviation from a professional standard of care,  such as breach of a  clause in a contract, an affidavit of merit is not required.

Practice Note:  Play it safe. Get your expert's affidavit of merit before you file your Complaint. You might even attach the Affidavit to your Complaint and file and serve them together. That eliminates the chance of missing the time limitations for timely serving an affidavit of merit, which can then lead to a dismissal of an otherwise meritorious Complaint. 

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Aquino v. Kuczinski, Vila & Associates, P.C. 39 A.D.3d 216, 835 N.Y.S.2d 16 (A.D.1st Dpt. 2007)

Student Contributor: Maninder (Meena) Saini

NY Underlying personal injury action

Facts: On July 4, 2002, plaintiff-client slipped and fell in the lobby of a casino that caused back injuries. On July 9, 2002, plaintiff retained an attorney to represent her in this matter. The attorney wrote letters to the casino on two separate occasions, advising them of the plaintiff’s claim and requesting insurance information and surveillance footage. The casino failed to send the requested information. In July 2004, the plaintiff contacted the attorney where he told her no action was commenced and the two-year statute of limitations had expired. Plaintiff then brought a lawyer malpractice action against the attorney and law firm alleging the failure to investigate plaintiff’s case and to timely commence an action.

Issue: Did the plaintiff show that “but for” the negligence of the attorney she would have prevailed in the litigation?

Ruling:: The Appellate Court held that plaintiff failed to show she would have succeeded on the merits of the case “but for” the attorney’s negligence. Specifically, the court stated that “[d]efendants' negligence in failing to investigate plaintiff's case and timely commencing an action does not relieve plaintiff of her burden of proving that she would have prevailed in that litigation but for defendants' negligence”.

 In order for a plaintiff to succeed on a lawyer malpractice claim, a plaintiff must plead and prove  a prima facie case of legal malpractice. The proximate cause element of he cause of action requires that she demonstrate that she would have succeeded on the merits of the underlying claim “but for” the attorney's negligence.

Lesson: Even though the attorney was negligent in failing to investigate the plaintiff’s case and timely commence an action, the plaintiff failed to prevail  because she could not demonstrate a "but for" causation utilizing the "trial within a trial"  method of proof.  

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Dynasty Building Corp. v. Ackerman, 376 N.J. Super. 280 (App. Div. 2005)

NJ: Attorney Trust Account Funds

Student Contributor: Michael Park

Facts: Attorney received funds from Plaintiff through an accidental wire transfer directly into his trust account. Plaintiff learned of the accidental transfer a couple weeks later and demanded that the monies be returned. Attorney insisted that the monies belonged to his client. After consulting with his client, the attorney turned the monies over to his client instead of Plaintiff. Plaintiff filed a complaint to recover the monies four years later, and was awarded a default judgment after the complaint went unanswered almost a year later. Attorney was then granted his motion to vacate the default judgment because the motion judge ruled that Plaintiff failed to give notice of the default judgment to attorney, and the complaint was barred by a six-year statute of limitations, which had run by one day.

Issue: Was the motion to vacate properly granted?

Ruling: In reversing the motion judge, the Appellate Division held that the motion to vacate the default judgment was not properly granted for the following reasons:
1) The court found there was little prejudice to the attorney as he had obviously been aware of the default judgment because he filed his motion to vacate twenty-four days later.
2) Instead of counting from the date that the monies were turned over to attorney’s client, the time started to run when the attorney breached his duty to the Plaintiff. The motion judge had started counting from the day that the funds went into the attorney’s trust fund, incorrectly concluding that was when the conversion occurred, when in fact the funds were just sitting there and no damages had been suffered.

If in fact the plaintiffs can establish that it was their funds, a fiduciary relationship developed between them and [attorney] even though he did not represent them in any matter.

Lesson: Although the plaintiff was not a client of the attorney, and it was unclear how the money had been transferred into his clients’ trust account; the attorney still owed a fiduciary duty to the Plaintiff to not touch the money.

The attorney argued that he had consulted with his client and was instructed to give the client the monies, which he did, having no reason not to believe him. However, the court reasoned that the attorney should have left the monies untouched in the trust fund account until it was discovered who the monies belonged to, instead of deciding himself who was telling the truth.

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Cost v. Cost, 450 Pa. Super. 685 (1996)

PA Underlying Commercial Action

Student Contributor:  Rachel Morris

Facts: In connection with the “buyout” of ownership interests in several family businesses, the Plaintiff signed various agreements including “spousal joinder” forms. The spousal joinder forms created an indemnification obligation and release on the part of the Plaintiff in favor of the party selling the ownership interests and another third-party. Plaintiff subsequently filed an action against the attorney for the seller alleging breach of his professional duty to explain the legal ramifications of the buyout, and more specifically, the consequences of the various forms signed by the Plaintiff to complete the transaction.

Issue: Is a lawyer liable for malpractice because he failed to explain to a non-client the legal ramifications of entering into a particular transaction or signing certain documents?

Ruling: No, absent any written or oral retainer agreement between the lawyer and the complainant. Here, the court found that there was (1) no express contract for legal representation between the lawyer and the Plaintiff, (2) the Plaintiff never sought advice or assistance from the lawyer, and (3) the lawyer never expressly or impliedly agreed to represent the Plaintiff. Therefore, the court ruled that the Plaintiff could have had no reasonable expectation that the lawyer was looking out for her interests, much less that he had any duty to explain the legal significance of the documents she signed.

Lesson: A plaintiff’s subjective belief that an attorney is representing her interests is insufficient, absent other indicia of an express or implied attorney-client relationship, to successfully assert a cause of action in legal malpractice.

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