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

Garten v. Shearman & Sterling LLP, 859 N.Y.S.2d 80 (N.Y. App. Div. 1st Dep't 2008)

Student Contributor: Melissa Goldberg

NY: Underlying Commercial  Real Estate Transaction

The Facts: Plaintiff stated a cause of action for legal malpractice by alleging that "but for" Defendant's failure to prepare and procure documents necessary to provide him with a first-priority security interest, he would have been able to recover the amounts owed to him by the defaulting borrower. The agreement between Plaintiff and Defendant mentioned the  "Documentation relating to Security Agreement".  Defendant's closing documents checklist included "[e]vidence that all other action that the Lender may deem necessary or desirable in order to perfect and protect the first priority liens and security interests created under the Security Agreement has been taken (including, without limitation, UCC-3 termination statements)."

Issue:
1) Did the Defendant commit legal malpractice by failing to prepare and procure documents that would be necessary to provide Plaintiff with a first priority security interest?

Ruling:
1) The documentary evidence did not establish a defense because Defendant was obligated not only to prepare the loan documents, but also to protect Plaintiff's expectation that the agreement that he would hold a senior security interest was effective.
• Neither the borrower's failure to repay the loan nor the senior creditors' eventual failure to act honorably and adhere to the understanding that their liens were to be junior to Plaintiff's relieves Defendant of potential liability for its negligence.
• The Plaintiff is not responsible for his own loss simply because he executed the documents that Defendant prepared for him.

Lesson: Generally, the actions of other parties do not relieve a Defendant’s liability for its own legal malpractice. A lawyer has a duty to protect his client’s interests, first and foremost. 

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Boerger v. Levin, 812 F. Supp. 564 (E.D.Pa 1993)

PA: Underlying mortgage foreclosure

Student Contributor: Joshua D. Aronson

Facts: The plaintiff hired the defendant to represent him in a mortgage foreclosure action. The plaintiff is suing the defendant for malpractice for his handling of the matter. He claims that the defendant failed to bring the foreclosure action to trial before the defendant in the foreclosure action filed for bankruptcy, thereby staying the foreclosure proceedings. Although the foreclosure action is still pending in the courts, the plaintiff claims this negligence thereby delayed, reduced, and possibly eliminated the plaintiff’s mortgage recovery. The plaintiff is also claiming that he must bring this malpractice action now because of the statute of limitations on the malpractice claim.

Issues: 

1) Can a client bring a malpractice action against his attorney for anticipated loses when an actual injury to the client has yet to be established?

2) When does the statute of limitations start on a malpractice claim when the underlying action is still pending in the courts?

Ruling:

1) As to Issue #1 the court held that the plaintiff can point to no actual loss which can constitute an injury at the hands of the defendant. The court further held that since the underlying suit in which the defendant represented the plaintiff had not yet concluded, the plaintiff cannot show that the defendant’s performance proximately caused his injury or even that he was slightly injured at all.
*This holding hinged on Pennsylvania case law which established that legal malpractice plaintiffs must prove actual loss resulting from the defendants conduct.

2) As to Issue #2 the court held that the statute of limitations on a malpractice claim such as this one will not start running until the plaintiff suffers actual damage. In this case since the claim has not yet been settled, the limitations period cannot yet begin.

Lesson:

1)Under Pennsylvania law, a client cannot bring a malpractice claim against his attorney until he suffers an injury as a consequence of his attorney’s negligence.

2) The statute of limitations on a malpractice claim does not start running until the plaintiff suffers actual damage.

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Sklodowsky v. Lushis, et al ., HNT-L-649-09 (March 19, 2010, J. Buchsbaum)

Facts: In November 2003, the Plaintiff agreed to sell his marital home and real estate to “Developer”. He sought legal advice from an attorney and his firm (“Defendants”). Plaintiff maintained that he specifically advised Defendants that he was having marital problems and that he wanted to complete the transaction without his wife’s knowledge. Defendants, Pennsylvania attorneys, allegedly assured Plaintiff that the transaction could proceed without his wife’s knowledge.

The closing did not occur because Plaintiff could not deliver good title. Plaintiff was referred by Defendants to another attorney and both attorneys advised Plaintiff to sue the Developer to recover his security deposit. A third subsequent attorney filed suit on his behalf. Plaintiff sued the Developer for breach of contract on October 7, 2004. The Developer filed an Answer on November 3, 2004 and a third party complaint against Defendants, maintaining that they breached the duty of good faith by withholding material information related to the Plaintiff’s marital status. By order dated March 21, 2006, the trial court granted summary judgment in favor of Defendants, finding a lack of reliance and that they could not be found liable for fraud on the available facts. The Appellate Division subsequently affirmed the decision on July 16, 2008. Plaintiff and the Developer settled their claims on June 13, 2007.

The stipulation provided that Plaintiff would provide the Developer with all funds that he recovered from a legal malpractice action he intended to file against Defendants in the event of default or nonpayment. On October 22, 2007, Plaintiff filed suit against Defendants in connection with the advice they rendered and also alleging that his first attorney practiced law in New Jersey without a license. The second suit was dismissed on May 10, 2008 for failure to prosecute. Plaintiff’s second attorney then filed suit against Plaintiff in federal district court in Pennsylvania. On September 2, 2008, Plaintiff filed a third-party complaint against Defendants alleging legal malpractice. On May 22, 2009, the federal district court granted Defendants’ unopposed motion to dismiss the third party complaint without prejudice.

On November 4, 2009, the Plaintiff filed another suit for malpractice against Defendants based upon their legal advice and conduct connected to the real estate transaction. Defendants moved to dismiss based upon New Jersey’s Entire Controversy Doctrine and Pennsylvania’s statute of limitations.

Issue: Does Olds v. Donnelly, 150 N.J. 424 (1997) exempt all legal malpractice claimants from the application of the Entire Controversy Doctrine defense?

Ruling: Olds does not exempt all legal malpractice actions from the application of the Entire Controversy Doctrine. This is especially the case where: 1) there existed a previous suit concerning the same core set of related facts; 2) the attorney was a party to the original action; and 3) considerations of equity, namely to avoid piecemeal decisions, fairness to the parties, and judicial efficiency, required application of the doctrine.

Lesson: Olds continues to exempt legal malpractice actions from the Entire Controversy Doctrine, principally from the requirement that a plaintiff join the attorney in an underlying suit. But, Olds may not apply in a case where the allegedly negligent attorney is already joined in the action. The plaintiff  is still required to assert all known claims against the attorney or risk later being barred by the Entire Controversy Doctrine.
 

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Gautum v. Conte, 239 N.J. Super.362 (App. Div. 1990)

Student Contributor: Daniel Schick

NJ Underlying Medical Malpractice Action

Facts: Plaintiffs retained Conte to represent them in a medical malpractice claim. Conte then joined the law firm of De Luca and filed the medical malpractice action. Plaintiffs' complaint was dismissed for failure to answer interrogatories and comply with a court order. Despite plaintiffs' numerous requests for information, Conte never apprised them of the dismissal and in October, 1980 they learned of it from the trial court.

In 1983, Plaintiffs filed a legal malpractice action against Conte and De Luca seeking compensatory and punitive damages. Plaintiffs alleged that their suit was dismissed as a result of the attorneys’ malpractice, and that they had acted deliberately in failing to advise them of the dismissal of their personal injury action.

A jury awarded Plaintiffs both compensatory and punitive damages. De Luca appealed and Conte improperly filed a Notice of Joining Appeal which failed to transform De Luca's appeal into a joint appeal. The Appellate Division reversed the judgment against De Luca alone on the ground that the jury instructions were erroneous. The Law Division subsequently held that the earlier reversal also applied to Conte, and therefore, vacated the judgment against him. The Gautams appealed the Law Division’s decision to vacate the judgment as to Conte.

Issue: Is Conte entitled to the benefit of the judgment entered in favor of his codefendant De Luca even though he was not a party to the appeal?

Ruling: Although Conte had ignored well-settled and fundamentally sound procedural rules of appellate procedure, it would be manifestly unjust to deny him the benefit of the Appellate Division’s judgment in favor of De Luca on the basis of a jury charge which was materially deficient. Accordingly, the Appellate Division affirmed the Law Division’s decision to vacate the judgment against Conte and remanded the matter to the trial court for a new trial as to Conte alone.

Lesson: The trial court has the inherent power to vacate or set aside a judgment against a non-appealing party to avoid unjust results.

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Doe v. Kohn Nast & Graf, P.C., 866 F.Supp. 190 (1994)

Student Contributor: Justin Lieberman

Underlying Employment Matter

Facts: Plaintiff attorney who was infected with Human Immunodeficiency Virus brought an action against his former law firm for, amongst other claims, defamation. Plaintiff alleged that his employment was terminated because he was HIV positive, and that the firm had made certain defamatory statements to the press with respect to plaintiff’s dismissal sometime after he filed his complaint against the firm. The allegedly defamatory comments were made before defendants submitted their answer to plaintiff’s complaint, however, the firm argued they had been made in response to plaintiff’s complaint and, therefore, were conditionally privileged against a defamation suit.

Issue: Are out-of-court statements made to the press during the pendency of the litigation covered under the “fair report privilege”?

Holding: Under Pennsylvania Law, in the course of a judicial proceeding, statements made by the parties or attorneys are granted an “absolute privilege” against a suit for defamation. That protection, however, is not afforded to statements made outside of the courtroom in a press release or news conference that does not further the purpose of the litigation. However, individuals may still invoke a qualified, conditional privilege when they make out of court statements, if those statements fairly and accurately report statements made or pleadings filed in a judicial proceeding.

Here, the Court went one step further and held that Pennsylvania’s “fair report privilege” would apply even to those statements that the party intends to make during the course of judicial proceedings. If it were otherwise, the plaintiff would be permitted to report his own allegations to the press because he had filed his pleadings, while the defendants would be subject to a defamation suit if they attempted to respond simply because they had not yet had the opportunity to file a formal response with the Court.

Lesson: Parties do not have to wait until a formal pleading is filed with the court to make a fair comment to the press concerning the legal proceeding, so long as they believe, in good faith, that the comments accurately set forth the representations to be made in the party’s forthcoming pleading.

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McMahon v. Shea, 547 Pa. 124 (1997)

Student Contributor: Justin Lieberman

Underlying Divorce Matter

Facts: The husband in an underlying divorce action brought a professional malpractice suit against his attorneys, claiming that they had failed to properly advise him in his divorce settlement. More specifically, the husband claimed that his attorneys had failed to advise him as to the length of his duty to pay alimony and to generally read and review the alimony agreement in its entirety.

The wife remarried two months after the divorce was finalized, and husband moved to terminate his alimony payments. The court denied the termination of alimony payments, holding that the alimony agreement survived the divorce since it was not merged with the divorce decree. The court ordered continued payment of alimony until the parties’ youngest child turned twenty-one. Consequently, husband further alleged that his attorneys had been negligent in advising him to stipulate that the alimony agreement be incorporated but not merged with the divorce decree.

The attorneys argued that husband’s action had to be dismissed, since a dissatisfied plaintiff may not file a malpractice suit following a settlement to which he agreed, unless he could show he was fraudulently induced into settling the action.

Issue: Can an attorney be held liable for advice rendered to a client in a settlement to which the client subsequently agreed?

Holding: The Court rejected the attorneys’ argument and held that an attorney’s use of ordinary skill and knowledge extends to the conduct of settlement negotiations:

The fact that the legal document at issue had the effect of settling a case should not exempt his attorneys from liability…An attorney may not shield himself from liability in failing to exercise the requisite degree of professional skill in settling the case by asserting that he was merely following a certain strategy or exercising professional judgment.

Lesson: Negligence in failing to advise a client as to the controlling law applicable to a contract is actionable as malpractice, even if the contract serves to settle the underlying dispute.

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Coregis Insurance Co. v. Law Offices of Carole F. Kafrissen, 186 F. Supp.2d 567 (3d Cir. 2002)

Underlying Legal Malpractice Action

Student Contributor:  Justin Lieberman

Facts: An attorney was sued for professional malpractice and his carrier agreed to settle the claim with his consent. The attorney then filed a compliant against his carrier for bad faith in settling with his former client, as well as denial of benefits under the policy. The attorney, while in the discovery stage of the bad faith litigation, requested amongst other things, six documents from the carrier's claims file that the carrier alleged were attorney-client privileged.

The District Court found that four of the documents were not protected by the privilege, and while the remaining two could have appeared to be protected, Pennsylvania law offered limited protection for communications from lawyers to their clients. The insurer had to submit redacted versions of the four documents to the attorney, and provide the remaining two documents to the Court for in camera review.

The carrier appealed to the Third Circuit. The attorney moved the Court to declare the appeal frivolous, require immediate production and proceed to trial, or in the alternative, stay the proceeding until the Third Circuit made a ruling on the appeal. The insurer opposed the motion, arguing that the Court’s decision was incorrect, and no in camera review of the documents was necessary since all of the communications contained in them were privileged.

Issue: Whether, under Pennsylvania law, the attorney-client privilege protects communications from the client to the lawyer only, or whether it extends also to communications from the lawyer to the client, even though this disclosure will not reveal the client's communications to the lawyer?

Ruling: Pennsylvania law cloaks with privilege communications from the client to the attorney, but does not extend an equal and full protection to those communications flowing from the lawyer to the client. Rather, it enjoins the attorney only from subsequent unauthorized disclosures of communications made to him in confidence by the client, and does not shield other information imparted by the attorney to the client, i.e. counsel’s advice to the client. Accordingly, in camera production of the carrier’s claims file was required in order to ascertain which certain documents would be protected from production.

Lesson: Under Pennsylvania law, all communications from an attorney are not automatically afforded attorney-client privilege. Rather, the communication flowing from an attorney to his client is only protected to the extent the disclosure would infringe upon client confidences.

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Smith v. Spisak, 130 S.Ct. 676 (Jan. 12, 2010).

Underlying Criminal Matter

Facts:  Frank G. Spisak, Jr. was convicted in an Ohio trial court of three murders and two attempted murders. He was sentenced to death. He filed a habeas corpus petition in federal court alleging constitutional errors at trial. Spisak claimed that he suffered significant harm, in part, as a result of his counsel’s inadequate closing argument at the penalty phase of the proceeding. The Federal Court of Appeals accepted Spisak’s argument and ordered habeas relief. The State of Ohio sought certiorari and the United States Supreme Court granted the petition.

Spisak claimed that his counsel’s closing argument at the sentencing phase of his trial was so inadequate as to violate the Sixth Amendment. In his closing argument at the penalty phase, Spisak’s counsel allegedly portrayed him as “sick, twisted and demented…[that he] was never going to be any different”, and that even if Spisak was not legally insane so as to warrant a verdict of not guilty by reason of insanity, he nonetheless was sufficiently mentally ill to lessen his culpability to the point where he should not be executed. Counsel further argued that “humanity” required the jury to weigh the evidence “fairly”.

Spisak claimed the closing argument was constitutionally inadequate because it (1) emphasized the gruesome nature of the killings and Spisak’s threats to continue his crimes, (2) understated the facts that demonstrated Spisak’s mental illness; (3) said nothing about mitigating circumstances; and (4) made no explicit request for a verdict against death.

Issue:  Did the flaws in counsel's oral argument constitute valid grounds for Spisak's claim for ineffective assistance of counsel? 

Ruling:  The Supreme Court found that there was no reasonable probability that a better closing argument would have made a significant difference, given counsel’s concerted effort to bring Spisak’s mental illness to the forefront by producing three experts who testified at length with respect to the connections between Spisak’s crimes and his mental illness. More importantly, the Court found that Spisak’s own damning testimony that Adolf Hitler was his “spiritual leader in a war for survival…[and] his duty [was] to inflict the maximum amount of casualties on the enemies…again and again and again and again” left no doubt that counsel’s closing argument did not make any significant difference in the jury’s decision to sentence Spisak to death. Furthermore, the Court noted that Spisak could point to no mitigating circumstances, and counsel’s references to “humane people” and “humane society” were sufficient appeals for mercy.

Lesson:  Any inadequacies in counsel's arguments at trial may be rendered moot if the client's admissions leave no reasonable probability that a more adequate performance by counsel would have changed the jury’s verdict.  

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West Vil. Assoc. LP v. Balber Pickard et al.,  PC, 854 N.Y.S.2d 340 (App. Div. 1st Dep't 2008)

NY Underlying Real Estate Action

Student Contributor: Melissa Goldberg

Facts: Plaintiff alleged that Defendant failed to take appropriate steps to assure property would be free from rent regulation. Plaintiff claims that she received ongoing advice regarding rent regulation from the Defendant.

Issue: Was the Plaintiff barred by the statute of limitations?

Ruling:  No.  Under the "continuous representation" doctrine, a client cannot reasonably be expected to assess the quality of the professional service while it is still in progress. The continuous representation doctrine is "generally limited to the course of representation concerning a specific legal matter," Here,
1. The Plaintiff’s complaint went beyond mere allegations that Defendants continuously represented Plaintiffs in a general professional relationship after the specific act of malpractice occurred.
2. The Plaintiff specifically alleged the continued advice they received from Defendants regarding rent regulation.

Lesson: A legal malpractice claim accrues when the malpractice is committed, not when the client discovers it. To fall under the continuous representation doctrine, the pleading must assert more than simply an extended general relationship between the professional and client, and the facts are required to demonstrate continued representation in the specific matter directly under dispute.

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Rosemary E. Smith v. Jerome R. Lewis,  12 Cal. 3d 349 (Cal. 1975)

CA Underlying divorce action

Student Contributor: Evan Michael Hess

Facts:  Defendant attorney was retained to represent Plaintiff in a divorce proceeding. The Plaintiff brought the malpractice action asserting Defendant negligently failed to assert Plaintiffs community interest in the retirement benefits of her husband. Defendant alleges that the law with regard to retirement benefits was unclear at the time of representation, thus insulating him from liability for failing to assert said claim.

Issue: How much research is enough for an attorney to avail oneself from malpractice?

Ruling: The Supreme Court of California held:

I.

 “The law is now settled in California that "retirement benefits which flow from the employment relationship, to the extent they have vested, are community property subject to equal division between the spouses in the event the marriage is dissolved." (In re Marriage of Fithian, 10 Cal.3d 592, 596, (1974) citing Waite v. Waite, 6 Cal.3d 461 (1972));

II.

“In determining whether defendant exhibited the requisite degree of competence in his handling of plaintiff's divorce action, the crucial inquiry is whether his advice was so legally deficient when it was given that he may be found to have failed to use "such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake." (Lucas v. Hamm, 56 Cal.2d 583, 591 (1961))”;

III.

“an attorney does not ordinarily guarantee the soundness of his opinion . . . he is expected, however, to possess knowledge of those plain and elementary principles of law which are commonly known by well informed attorneys, and to discover those additional rules of law which, although not commonly known, may readily be found by standard research techniques.”

Lesson: Regardless of the state of the law, an attorney must, at the very least conduct due diligence to assure that the advice he gives his client is legally sound. If an attorney conducts a reasonable assessment of the state of the law, an attorney will not be held liable for failing to anticipate how that unsettled point of law will be resolved.

Note: Smith v. Lewis was overturned on other grounds in In re Marriage of Brown, 15 Cal. 3d 838, 851 (Cal. 1976).

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Martos v. Concilio, 427 Pa. Super. 612; 629 A.2d 1037 (1993)

Student Contributor: Christopher Henn

PA Underlying divorce- property settlement agreements

Facts: The plaintiff retained defendant to represent him in his divorce. Plaintiff and his former spouse agreed to a property settlement. The parties then executed a new property settlement agreement that modified the first. The second settlement resolved property distribution and custody of their children. Alimony, debt repayment and other obligations were submitted for judicial determination. The trial court appointed a master to make recommendations after the property settlement agreement was incorporated by court order. Following the master’s recommendations, plaintiffs financial burden exceeded $250,000. Dissatisfied, the Plaintiff brought a malpractice suit against defendant attorney alleging inadequate representation. The Plaintiff was especially displeased that the terms reached by the first settlement agreement had been renegotiated in the second settlement agreement.

Issue: Whether the plaintiff was required to allege fraud in the inducement of the property settlement agreement.

Ruling: The court distinguished its prior holding in Collas v. Garnick, 425 Pa. Super. 8 (1993) by noting that there were two separate and distinct actions in that case; “[t]he prior action in which they signed the release had been completely settled; the action which they planned to bring against the seatbelt manufacturer was a separate and distinct action.” Id. at 615.

After recognizing the judicial preference for settlement, the court recited its holding in Miller v. Berschler, 423 Pa. Super. 405 (1993) as dispositive of the issue;

a party dissatisfied with the settlement agreement can only seek redress if it can establish that it was fraudulently induced into agreeing to settle, and it is incumbent on the client to plead with specificity fraud in the inducement.

The Lesson: Once a client expressly agrees to settle a dispute he will not be permitted to recover against his attorney on a malpractice claim absent fraudulent conduct by the attorney. However, if the settlement of one dispute serves to prevent subsequent actions against third parties, without the client’s knowledge, the client may be permitted to recover on a malpractice theory.

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Heartbreak Cabaret Corp. v. Cruz & Toledo Restaurant Corp., 699 F.Supp. 1066 (S.D.N.Y. 1988)

Underlying Action: Purchase of Real Property

Student Contributor: Candice L. Deaner

Facts: Attorney represented a corporation in negotiations for a nightclub. In the course of negotiations, the attorney also began to represent defendants who were the owner’s of the lease where the club was intended to be. The venture between the parties quickly became bitter and resulted in litigation. Soon after, the corporation brought suit against the attorney for breach of fiduciary duty; however, when the corporation brought this claim against the attorney, they immediately moved to disqualify any testimony that attorney may proffer in his own defense, using the protection of the attorney client privilege.

Issue: Whether an attorney may be excused from the duty of confidentiality when using the communications to defend against a legal malpractice claim

Ruling: The District Court used the following factors to dismiss the corporation’s claim:
1) Disciplinary Rule 4-101(c) provides:

“A lawyer may reveal … Confidences or secrets necessary … to defend himself or his employees or associates against an accusation of wrongful conduct.”

2) The court reasoned that “as a matter of common sense, when a former client sues his former attorney, the client places the attorney in a position where previously confidential communications must be revealed to trial counsel defending the attorney in the suit.” The court held that this is necessary to provide an attorney a reasonable opportunity to defend against such a professional criticism.

Lesson: An attorney defending against a claim of legal malpractice is relieved of  the duty of confidentiality for the purposes of defending himself. This exclusion does not render an attorney immune from his duty to his former client with regard to disclosures to third parties. In such an instance, the attorney may still barred from disclosing client confidences to a third party.

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Rogers v Williams,  420 Pa. Super. 396; 616 A.2d 1031 (Super 1992)

PA Underlying criminal defense

Student Contributor: Candice L. Deaner

Facts: Plaintiff attorneys brought suit against Defendant to collect balance of attorneys fees owed to them, and Defendant filed a counterclaim. Defendant was represented by Plaintiff attorneys, where client plead guilty to mail fraud. Defendant alleges she is innocent, that she pleaded guilty only because counsel advised her to. She asserts that she was never advised by counsel that she might be deported if she pleaded guilty. Summary judgment was granted dismissing her complaint, for failure to establish the necessary elements for a professional negligence cause of action. 

Issue: Whether an attorney is required to advise a criminal defendant of the collateral consequences of a guilty plea.

Ruling: The Court held that in criminal matters, ordinary skill and professional competence do not require an attorney to advise a client of the collateral consequences of a guilty plea, including the possibility of deportation. 

1) The three elements of a cause of action for legal malpractice are: (1) the employment of the attorney or other basis for his duty to act as an attorney; (2) the failure of the attorney to exercise ordinary skill and knowledge; and (3) that such negligence was the proximate cause of damage to the plaintiff

Counsel’s failure to advise the defendant of the collateral consequences of a guilty plea cannot rise to the level of constitutionally ineffective assistance.

The court held that a defendant's incomplete awareness of collateral consequences of a guilty plea does not render that plea involuntary.

Lesson: In PA, An attorney does not have a duty to advise a criminal defendant of collateral consequences of a guilty plea, even if those consequences are as harsh as deportation. There are many collateral consequences of a guilty plea, such as loss of the right to vote, loss of employment etc. and it would not be practical to require an attorney to disclose all the possible effects of the guilty plea. An attorney is only required to advise their client of the direct consequences of their guilty plea.

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Ponden v. Ponden,  374 N.J. Super. 1 (App. Div. 2004)

Student Contributor: Maninder (Meena) Saini

NJ Underlying Matrimonial Action

Facts: Plaintiff (client) sued defendant (attorney) who represented her in a divorce action. The defendant committed an error that gave the plaintiff’s ex-husband an opportunity to empty the accounts and depart the country. The defendant failed to submit particular letters that would have placed a restraining order on two different accounts and prevented the plaintiff’s ex-husband from obtaining the funds. Plaintiff then filed a lawsuit, claiming defendant negligently failed to pursue proper and effective means to protect her interests against her ex-husband’s anticipated unlawful behavior. At the end of the discovery period, plaintiff switched attorneys. The defendant submitted his expert report the very last day of the discovery period. Plaintiff’s new counsel sought permission to serve a new expert report after the discovery period ended because the former expert report was inadequate. The trial court held that under the “Best Practices” rule, its discretion was narrowed and it did not have the authority to grant relief from the discovery cut-off date.

Issue: Was it fair to reject the plaintiff’s request to present a new expert report when the defendant submitted his report on the last day of discovery? Did the plaintiff deserve some leeway since the defendant’s negligence adversely affected the plaintiff?

Ruling: The plaintiff raised valid reasons for the need to extend discovery. Therefore, the trial judge mistakenly exercised its discretion by denying a brief extension of discovery to allow an essential piece of evidence.

Even though the “best practices” rule amendments were intended to improve efficiency and expedition of civil proceedings, the rule amendments “were not designed to do away with substantial justice on the merits or to preclude rule relaxation when necessary to secure a just determination”.

Lesson: As seen in this case, an attorney will not necessarily overcome a well-founded claim of negligence by “playing the game according to the rules”. The lawyer submitted his expert report on the very last day of discovery that caused a disadvantage to the plaintiff. A court should allow an extension for discovery when it is necessary to one’s case. Court rules are only a framework for obtaining fair and just results.

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Brizak v. Needle  239 N.J. Super. 415 (App. Div. 1990)

Student Contributor: Maninder (Meena) Saini

NJ Underlying  Medical Malpractice Action

Facts: Plaintiff-client commenced a malpractice lawsuit against defendant-attorney, alleging the defendant was negligent by failing to file a medical malpractice claim before the expiration of the statute of limitations (“SOL”). The defendant argued that the SOL did not start until there was expert opinion recognizing that medical malpractice had occurred. The facts are as followed: In 1981, plaintiff sustained an arm injury and was treated by Dr. Shafi. Instead of conducting surgery, the doctor simply placed her arm in a hanging cast. On December 5, 1983, plaintiff retained defendant to pursue an action against Dr. Shafi because she was still suffering from the affects of her arm injury. In May 1984, the defendant requested a copy of the hospital records. Next, in March 1985, the defendant obtained an opinion from a radiologist who advised defendant that no malpractice transpired. In June 1987, defendant obtained another medical expert opinion that found that malpractice had occurred.

Issue: When does the “discovery” rule apply in any given case?

Rule: The “discovery rule” tolls the statute of limitations when one “is either unaware that he has sustained an injury, or although aware that an injury has occurred, he does not know that it is, or may be, attributable to the fault of another.” When one knows or has reason to know of the injury, the statute of limitations starts to run.

Issue: Whether an attorney has the duty to investigate the basis of their client’s claim?

Rule: An attorney must undertake a reasonable diligent investigation to determine if there is a reasonable basis for commencing an action.

D]efendant’s clearly erroneous advice to plaintiff that she need not be concerned about the time limitations until she found a physician to support her claim was itself a sufficient basis for linking his negligence to her failure to commence a timely action against the doctor.

The SOL started in December 1983 when the plaintiff had suspicion of the malpractice and retained a lawyer.

Lesson: The defendant was not diligent in his investigation of medical malpractice. An attorney has a duty to take any steps reasonably necessary to properly handle the case, which includes the duty to investigate and to file any action necessary for recovery within the applicable time period.

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Conklin v. Hannoch Weisman,  281 N.J.Super. 448 (App. Div. 1995)

Student Contributor: Maninder (Meena) Saini

NJ Underlying failure to explain contract terms leading to loss of equity in realty.

Facts: A New Jersey partnership, Conklin Farms (plaintiff), was represented by Kemph and his law firm, Hannoch Weisman, P.C. (defendants) in the sale of undeveloped land. Initially, plaintiff used that land for mining, but due to rezoning laws, the plaintiff sold the land to a developer because the value of their land increased significantly. Through advice from the defendants, the plaintiff agreed to subordinate the mortgage to institutional construction-money mortgages. The sale closed and the development project failed. The property was foreclosed by the mortgage lenders and left no equity for the plaintiff. In addition, the plaintiff’s buyers and guarantors all filed for bankruptcy, leaving the plaintiff with a substantial loss. The plaintiff then filed a lawyer malpractice lawsuit claiming that the defendants’ explanations to plaintiff of the meaning and risks of the subordination agreement were inadequate and inaccurate.

Issue: Did the defendants adequately inform the plaintiff of the meaning and risks of the subordination agreement?

Ruling: The appellate court held that the defendant was negligent in representing the plaintiffs in connection with explaining subordination and the risks associated with it.

An attorney has a legal duty to explain to their clients the meaning of an agreement and to further warn them of its risks, even if the risks are not reasonably foreseeable. The duty to advise the client fully and truthfully is inherent in the attorney-client relationship.

Lesson: An attorney must always fully and truthfully explain any agreements into which its client is entering. Further, the attorney must alert its clients of all risks so they can make an informed decision. This rule is even more important whenever the client raises any doubt as to the agreement because the court may instruct the jury to apply a “subjective standard” in deciding the negligence claim; that is, would the plaintiff, not the objective  "prudent person", have declined to enter into the agreement knowing all the risks? This subjective standard is easier to overcome and may be damaging to the attorney’s case.

Note: Make sure to see the NJ Supreme Court decision in this case which held that to prove proximate cause in a legal malpractice case, the negligence of the attorney need be a "substantial factor" in causing the damages. 145 N.J.395 (1996)

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Commonwealth Land Title. & Citicorp Mortgage. v. Kurnos 340 N.J.Super. 25 (App. Div. 2001)

NJ Underlying mortgage refinance

Student Contributor: Maninder (Meena) Saini 

Facts: New Jersey property owners (the borrowers) wanted to refinance their home mortgage and retained attorney/defendant (Kurnos). The plaintiffs to this action are Citicorp Mortgage (the bank) and Title Insurance Company (the title company). The defendant was to refinance the property by discharging the existing liens on the property. The title company was to provide title insurance certifying that the bank’s mortgage was the first lien on the property. One of the existing liens on the home was held by Midlantic National Bank (Midlantic). Midlantic issued a letter to the defendant indicating that a written statement instructing Midlantic to close the account was required. However, no letter was sent and Midlantic’s mortgage became the first lien on the property. So, the bank’s mortgage was actually the second lien instead of the first. In June 1991, within nine months of the error, the title company knew of the defendant’s error. The borrowers then withdrew money on their available line of credit from Midlantic. In 1996, the borrowers defaulted on the loan, forcing a foreclosure. The bank paid Midlantic the outstanding balance in order to protect their interest and then filed a malpractice lawsuit against the defendant in 1998, alleging that he failed to secure the bank’s first lien position.

Issue: When did the six-year statute of limitation for the attorney’s malpractice start to run?

Ruling: The six-year statute of limitation commenced at the time the negligent conduct was discovered by plaintiffs even though monetary damages were not readily ascertainable at the moment of discovery. The appellate court held that the statute began running in June 1991 when the title company first became aware of the attorney’s error.

The cause of action accrues when the mortgagee knows or has reason to know that its lien has been impaired or endangered by the defendant’s negligence. At that time of negligent discovery, the mortgagee has suffered a legal injury.

Lesson: The lawyer committed malpractice by failing to secure the plaintiff’s first lien on the property. At the moment an individual discovers an error, a legal injury had occurred even though monetary damages are not present. According to N.J.S.A. 2A:14-1, after six years of discovery, the client is barred from collecting damages.

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Schenck v. K.E David, Ltd.  446 Pa.Super. 94, 666 A.2d 327 (1995)

PA Underlying Settlement paid by lawyer on behalf of client

Student Contributor: Maninder (Meena) Saini 

Facts: Plaintiff/attorney, Schenk claimed that defendant/client, K.E. David, Ltd. was unjustly enriched when he refused to reimburse the plaintiff with $32,000 that the defendant owed to satisfy a settlement agreement between the defendant and the Commonwealth. Plaintiff represented defendant and negotiated a settlement amounting to $82,000. In the agreement, the Commonwealth was to collect $32,000 from another settling defendant, who owed the defendant that amount. Unfortunately, the settling defendant died before paying the debt. So, the law firm advanced the outstanding amount to the Commonwealth on behalf of the client. The client/defendant then refused to reimburse the law firm. So, the law firm sued for reimbursement. The defendant counterclaimed for legal malpractice because the plaintiff failed to explain that the defendant would have to pay the $32,000 if the other defendant was unable to pay. The jury found that plaintiff did not commit malpractice and held the client/defendant had been unjustly enriched. The defendant then appealed.

Issue: Was the lawyer entitled to get back what he paid on behalf of the client in view of the clients not understanding the ramifications of the settlement agreement?

Ruling: The appellate court found that it was unjust for the defendant to retain the benefits of the law firm’s payment to the Commonwealth, especially after the plaintiff/lawyer obtained successful results for the defendant. 

The law will find that a quasi-contract exists when unjust enrichment is found. The beneficiary will be required to pay the plaintiff the value of the benefit conferred.
The elements of unjust enrichment are:
• Benefits conferred on defendant;
• Appreciation of such benefits by defendant; and
• Acceptance and retention of such benefits under circumstances that make it inequitable for defendant to retain the benefit without payment of value.

Lesson: The lawyer’s work was successful for the client. What if the underlying matters were not successful because the lawyer was negligent? Would the lawyer be entitled to reimbursement of the monies he advanced? In applying the “unjust enrichment” doctrine, one must focus on whether the enrichment of the defendant is unjust and not on the intention of the parties. Accordingly, an attorney should consider using the theory of “unjust enrichments” to seek full compensation for work performed. 

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                       The Legal Malpractice Law Review is pleased to announce that:  

1. Professor Susan Saab Fortney of Texas Tech University School of Law has joined our Editorial Board. Professor Fortney is co-author of LEGAL MALPRACTICE LAW: Problems and Prevention (Thomson/West, 2008), the first law school level casebook in its field.

2. Law Students in Texas Tech Law School’s legal malpractice course have joined with Hofstra Law School students to help build our archive of case summaries so as to provide an ongoing supply of content for readers of the Legal Malpractice Law Review.

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Kohn v. Schiappa, 281 N.J. Super. 235 (1995)

NJ Underlying Adoption Action

Student Contributor: Daniel Schick

Facts: Plaintiffs retained counsel to assist them in adopting a child. Defendant's alleged malpractice arose from serving the adoption complaint on the birth parents, thereby erroneously disclosing to them privileged information, including the name and address of the adoptive parents and the adoptee. This breach of confidentiality allegedly caused the plaintiffs to suffer severe emotional distress.

The defendant attorney moved for summary judgment urging that under New Jersey law, recovery for emotional distress is precluded in actions for legal malpractice. Plaintiffs, however, argued that they were entitled to damages for emotional distress, since the attorney-client relationship was never predicated upon the protection of any economic interest.

Issue: Are damages for emotional distress recoverable where an attorney is retained to pursue non-economic claims?

Ruling: Yes. Plaintiffs retained the defendant attorney to handle an adoption, not to seek recovery for an economic loss. If plaintiffs are precluded from asserting and proving the mental anguish and distress purportedly caused by counsel's wrongful disclosure of confidential information, then they are, for all intents and purposes, left without any remedy for counsel’s negligence. Accordingly, affording virtual immunity to negligent attorneys who are retained for non-economic purposes is contrary to the public interest.

Lesson: Damages for emotional distress will be allowed in an action for legal malpractice where the foundation of the attorney-client relationship is something other than the protection of the client’s economic interests.

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Boyer v. Walker, 714 A.2d 458 (Pa. Super. Ct. 1998)

PA Underlying Commercial Action

Student Contributor: John Anzalone

Facts: Plaintiffs became junior lien holders when they issued a mortgage to property owners who had outstanding prior mortgages, including two held by a bank. Upon default by the property owners, the bank foreclosed on its mortgages. Plaintiffs were aware of the foreclosure. Notice of judgment for the bank, and of the attendant sheriff's sale of the property, was sent to the defendant attorney who represented the plaintiffs when they issued the mortgage. Plaintiffs discovered this after the sale occurred, and subsequently sued the attorney for professional negligence as a result of his failure to forward the notice of the sheriff's sale. More specifically, plaintiffs alleged that had they received notice of the foreclosure sale, they would have appeared at the sale and would have attempted to purchase the property, inasmuch as they believed that the property was worth far in excess of the bank’s liens.

Issue: Was the attorney liable for plaintiffs’ damages as a result of his failure to forward the notice of the sheriff's sale?

Ruling: The Court ruled that the attorney was not liable based on the following considerations:
1) Attorneys can only be held liable for professional malpractice where (1) an attorney-client relationship is established between the plaintiffs and the defendant attorney; (2) the attorney failed to exercise ordinary knowledge and skill; and (3) that failure proximately caused the plaintiffs’ damages.
2) As junior lien holders, plaintiffs lost all interest in the property when it was sold at the sheriff's sale, but plaintiffs failed to show that this harm would have been prevented if the attorney had forwarded them notice of the sale, since they failed to present evidence concerning the purchase price at the sheriff's sale, the bids made at the sheriff's sale, the amount of money they were prepared to bid at the sheriff's sale, and whether other bidders were ready and able to bid.
3) Thus, plaintiffs failed to establish that they suffered damages proximately caused by the attorney’s alleged negligence.

Lesson: Proximate cause requires establishing the identity of the damages suffered with reasonable certainty.

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Estate of Albanese v. Lolio, 393 N.J. Super. 355 (App. Div. 2007).

NJ Underlying Probate Matter

Student Contributor: Natalie Resto

Facts: The decedent was survived by three daughters, all beneficiaries under the decedent’s will. One of the beneficiaries, the executrix, retained the defendant attorney for the probate of the decedent’s estate. The executrix, allegedly upon the advice of the attorney and a financial planner, withdrew funds from the IRA and made equal distributions to the beneficiaries, resulting in a personal income tax burden on the beneficiaries of approximately $298,000 each. All the beneficiaries, including the testatrix, sued the attorney for malpractice claiming that the attorney never outlined options by which the testatrix could pay the estate taxes. The attorney, however, claimed that he advised the testatrix of other options for paying the taxes aside from using funds from the IRA. These conversation, however, were never documented in writing.

Issue: Does an attorney owe a duty to the individual beneficiaries to inform them of the personal tax implications of his advice?

Ruling: The court held that under the retainer agreement, the attorney represented the estate and its executrix, and was obligated to advise her with regard to post-mortem planning, including calculating tax needs. This requirement, however, did not apply to the remainder of the beneficiaries who likely had different, and possibly adverse, interests. As a result, the Court declined to extend the duty an attorney owes to third parties who are beneficiaries of an estate the lawyer represents, or to hold that the attorney has an obligation to consider and advise third-party beneficiaries of the tax consequences of a bequest or legacy.

Lesson: Attorneys have an obligation to define the scope of their representation clearly and unambiguously. Restatement of the Law Governing Lawyers §14 comment f states that “[i]n trusts and estates practice a lawyer may have to clarify with those involved whether a trust, a trustee, its beneficiaries or groupings of some or all of them are clients and similarly whether the client is an executor, an estate, or its beneficiaries.” The attorney will bear liability for the beneficiaries that fall under the scope of his representation as it is set forth in his retainer agreement.

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Boyson v. Archer & Greiner, P.C., 308 N.J. Super. 287 (App. Div. 1998)

NJ Underlying Products Liability Action

Student Contributor: Natalie Resto

Facts: The Defendant law firm was hired by the client to represent it as a defendant in a products liability action. The case was ultimately settled, and the client subsequently brought a malpractice action against the law firm to recover damages and defense costs. The client alleged that the law firm had negligently failed to provide notice to the client’s liability carrier which would have paid for the defense and provided indemnity for damages.
The law firm moved for summary judgment claiming that there was no coverage under the client’s comprehensive general liability policy under New Jersey law, and therefore, they were not negligent in failing to notify the carrier of the claim against the client. The client, however, alleged that Pennsylvania law governed the dispute, and that under Pennsylvania law, the insurance policy would have provided coverage to them in the underlying action despite a products hazard exclusion.

Issue: Did the law firm commit malpractice by failing to pursue a defense from the client’s liability carrier?

Ruling: The Appellate Division held that since the underlying action involved an injury that took place in Pennsylvania to a resident of Pennsylvania, New Jersey choice-of-law principles would require application of Pennsylvania law in deciding whether the law firm proceeded competently in defending the action.

Lesson: In a legal malpractice case, the choice of law to be applied is the law that would have governed in the underlying action.

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Johnson v. Schragger, Lavine, Nagy & Krasny, 340 N.J. Super. 84 (App. Div. 2001)

NJ Underlying Commercial Action

Student Contributor:  Natalie Resto

Facts: Johnson hired the Defendant law firm to represent him in a dispute concerning the sale of a horse. The matter was settled, but the buyer refused to comply with the settlement. Shortly thereafter, the attorney handling the case left the Defendant law firm, but continued to represent the client in a motion to enforce the settlement. His motion was granted and an “Order Enforcing Terms of Settlement” was signed entering judgment in favor of the client against the buyer. Months later, the buyer sold a condominium and the judgment was deducted from the gross amount of the sale. One year later, the buyer filed for bankruptcy and the client’s judgment against him was discharged and the judgment was never actually satisfied from the proceeds of the sale.

The client sued the Defendant law firm and the attorney who was handling the case for malpractice, alleging that they were negligent in the conduct of the litigation between him and the buyer. More specifically, the client alleged that the attorney and the firm had failed to properly and promptly obtain and docket the judgment against the buyer. The client’s claim against the law firm was dismissed on summary judgment, and the client subsequently appealed on the grounds that the firm’s conduct was the proximate cause of his loss.

Issue: Was the law firm’s negligence the proximate cause of the damages sustained by the client?

Ruling: The Appellate Division affirmed the summary judgment and held that the law firm’s failure in obtaining the judgment earlier was not a substantial factor in the discharge of the judgment against the buyer, and therefore, was not the proximate cause of the client’s damages. The Court found that, because the law firm had only represented the client for 83 days before the attorney left the firm and continued to represent the client long after he left, nothing the firm did was a substantial factor in bringing about the loss to the client, and therefore, the firm was not a proximate cause of any damages sustained by the client.

Lesson: The Court held that the traditional jury charge on proximate cause as a continuous sequence is not appropriate for legal malpractice cases in which there are concurrent independent causes of action. In such cases, a jury must be instructed to determine whether the negligence was a substantial factor in bringing about the ultimate harm. In making that determination, the duration of the representation is a valid consideration.

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