NY: Novel Theories, Out-of-State Law and the Standard of Care
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.
I believe that there are specialists so that you get excellent care in one area of the law. Requiring a specialist to retain too much knowledge may hinder the idea of being a specialist. I think when going to a specialist, the scope of the agreement should be defined and the need for other counsel to help in other areas of the law should be advised to the client.
"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." I think this statement is definitely true and I agree with the holding of the case. Requiring lawyers to comply with novel and questionable theories of law would be impractical.
This is a good ruling. While a good lawyer should be aware of changes in the law and potential avenues to change the law if the right client comes along, a lawyer should not be liable for failing to do something that was a questionable or novel theory of law when they represented the Plaintiff client. The lawyer cannot know if this novel or questionable theory will become accepted in a field of law.
This case properly limits liability to where the attorney failed to exercise “the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession”. Anything else here would be a leap towards a reasonable clairvoyant lawyer standard that the Plaintiff appears to be advocating.