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

Chen v. LaRocca, Superior Court of New Jersey, Appellate Division, April 28, 2010

Facts:  Plaintiff was represented by the Defendant attorney in her underlying divorce action.  Prior to trial, Plaintiff and her husband entered into a settlement agreement that was incorporated in their dual final judgment of divorce.

After entering into the settlement, Plaintiff filed suit against her former attorney alleging that he failed to uncover her ex-husband income and pension resulting in a less than favorable settlement. 

The Defendant attorney moved to dismiss for failure to state a claim.  He later supplemented his motion with a letter advising the Court that Plaintiff had failed to submit the required affidavit of merit against him. 

The trial court dismissed Plaintiff's complaint for failure to state a claim and on the additional ground that Plaintiff had not complied with New Jersey's Affidavit of Merit Statute.  Plaintiff appealed. 

Issue:  Can Plaintiff agree to settle her claims and subsequently file suit against her attorney claiming that her settlement was inadequate?  Is her failure to timely submit an affidavit of merit excusable? 

Ruling:  Yes.

The appellate division held that the trial court erred by dismissing this complaint with prejudice for failure to comply with the affidavit of merit statute:

Because LaRocca did not seek dismissal on that ground in his moving papers and raised the issue only by way of letter to the judge submitted after plaintiff filed her opposition to the motion, plaintiff had insufficient notice and no reasonable opportunity to demonstrate either substantial compliance or other circumstances excusing non-compliance. In this circumstance, a dismissal with prejudice for failure to comply with the statute effectively deprived plaintiff of the process due under our Rules of Court.

With regard to whether or not Plaintiff's complaint stated a cause of action against her former attorney, the court noted that Plaintiff's allegation that LaRocca had information about her former husband's income that he did not share with her prior to her acceptance of the settlement agreement, suggests a breach of the attorney's duty.  Surprisingly, the Court's opinion did not address whether Plaintiff had represented, either in the settlement itself or in Court, that she was entering into the settlement knowingly and voluntarily. 

Lesson:  In instances where an attorney does not timely bring critical information to his client's attention, the client may be able to sue for professional negligence even after entering into a settlement of the underlying matter.  The attorney may not be able to dismiss the action for failure to file an affidavit of merit within the statutory time frame without formal motion practice.

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State National Ins. Co. v. The County of Camden, et al., D.N.J., June 25, 2010

Facts:  State National sued its insured, the County of Camden, to determine which entity or person ought to be liable for injuries sustained by a driver who collided with a guardrail owned and maintained by the County.  State National also sued the County's in-house counsel, alleging late notice, errors in investigating and defending the case, and untimely evaluation.  More specifically, State National alleged that counsel's negligence breached the insurance contract's provisions and conditions to coverage.  State National sought attorney's fees and costs incurred in prosecuting its declaratory judgment action against the County from its in-house counsel.

Issue:  Can the insurer successfully seek attorney's fees for alleged professional negligence from an attorney who is its insured's employee? 

Ruling:  No.

The Court held that State National could not maintain a separate cause of action against the County's in-house counsel because "the County and [its in-house counsel] are one and the same."  The Court further noted:

If it is found that the County, by and through its lawyer employee, breached the insurance contract with State National and ICSOP, the insurers will not be required to pay under the policy. Despite any alleged malpractice by [the attorney] that the insurers wish she atone for, it is the County, and not State National or ICSOP, that has to pay for that negligence. The County accepted this potential outcome by conducting its own defense. Conversely, if it is found that the County, by and through its lawyer employee, did not breach the insurance contract, then there cannot be any malpractice upon which State National and ICSOP can base a declination of coverage. . . . Whatever [the attorney's] conduct, that is for the County to bear as her employer...Thus, based on this analysis, even if State National's claim for damages in the form of attorneys' fees and costs was valid, it would lie against the County, and not [its attorney].

 Lesson:  Insurers will not be allowed to obtain attorney's fees under Saffer v. Willoughby in malpractice cases against their insured's in-house attorneys.

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Thakar v. Tan, D.N.J., March 25, 2010

Facts:  Dr. Thakar sued four attorneys for alleged malpractice and conspiracy in representing him in state and federal actions against JFK Medical Group. The attorneys who were timely served with Thakar's summons and complaint eventually moved to dismiss for failure to provide an affidavit under N.J.S.A. 2A:53A-27.  Thakar argued that his claim against at least one of the attorneys, for failure to abide by the applicable statute of limitations, fell under the "common knowledge" exception, and therefore, no affidavit of merit was necessary.

Issue:  Does an attorney's alleged failure to abide by the statute of limitations fall into the common knowledge exception, or is an affidavit of merit necessary? 

Ruling:  An affidavit of merit is required.

The factual predicate for a common knowledge case is one where the carelessness of the defendant is readily apparent to anyone of average intelligence and ordinary experience.  If, however, the claim's underlying factual allegations require proof of a deviation from the professional standard of care applicable to that specific profession, an affidavit of merit is required.

Thakar's claim does not turn on common knowledge. Thakar challenges [the attorney's] alleged delay in filing suit in state court, which he claims resulted in dismissal of the suit as barred by the statute of limitations. As the District Court observed, understanding a lawyer's duties with regard to a statute of limitations depends on an industry standard of care, and is beyond the experience of the ordinary person. Expert testimony would be required to determine the duty of care owed, and whether [the attorney's] actions breached that duty.

Thakar then argued that if an affidavit of merit was necessary, he had "substantially complied."  The Court rejected this argument as well, holding that Thakar's unsatisfactory consultation with several attorneys in an effort to obtain an affidavit of merit did not meet the requirements for substantial compliance:

(1) the lack of prejudice to the defending party;

(2) a series of steps taken to comply with the statute involved;

(3) a general compliance with the purpose of the statute;

(4) a reasonable notice of petitioner's claim; and

(5) a reasonable explanation why there was not strict compliance with the statute.

Lesson:  Plaintiffs are well advised to err on the side of obtaining affidavits of merit in legal malpractice matters.  Failure to obtain an affidavit within the time limits set for by the statute will not be excused in all but the most compelling circumstances.  

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Ricca v. Anastasio, D.N.J., August 2, 2010

Facts:  Plaintiff filed for Chapter 7 bankruptcy in 1988 after having a judgment entered against him.  Defendant represented him in the Chapter 7 proceeding.  The Bankruptcy Court found that the judgment entered against Plaintiff was non-dischargeable, since it had been entered for fraud and defalcation while serving in a fiduciary capacity.

In 1994, Plaintiff filed bankruptcy again stemming from a default judgment that had been entered against him in 1988.  Plaintiff acknowledged that, in 1994, he knew that Defendant had allegedly failed to represent him in a previous adversary proceeding in connection with Plaintiff's 1988 bankruptcy which resulted in the default judgment.

In 2007, nineteen years after the original non-dischargeable judgment had been entered against Plaintiff, the creditor sought to renew and enforce it against Plaintiff.  Plaintiff alleges that it was then that he learned from his new attorney that the judgment could have been discharged had Defendant proceeded for bankruptcy under Chapter 13 instead of Chapter 7. 

Two years later, in 2009, and more than twenty-one years after Defendant had represented Plaintiff, Plaintiff sued him for legal malpractice.

Issue:  Did the six-year statute of limitations for legal malpractice start running in 1994 when Plaintiff discovered Defendant's negligence with regard to another issue (the default judgment), or did it start to run in 2007 when Plaintiff discovered Defendant's negligence with regard to the issue that he complains of in the instant action -- Defendant's failure to file a Chapter 13 bankruptcy? 

Ruling:  1994.

The Court first noted that the statute of limitations does not begin to run until the client suffers actual damage and discovers, through the use of reasonable diligence, the facts essential to the malpractice claim.  Without explaining how Plaintiff should have known of Defendant's negligence before learning of it from his new attorney, the Court stated "In 1994...Plaintiff should have reasonably known that Defendant was allegedly negligent in the course of [his] representation..."  The Court further provided: 

 Even if the Plaintiff was unaware of the attorney's alleged malpractice in 1988 — that a conversion of Plaintiff's prior Chapter 7 bankruptcy proceeding to a Chapter 13 would purportedly have protected him from the non-dischargeable debt — in 1994, approximately six years later, Plaintiff should have reasonably known that Defendant was allegedly negligent in the course of Defendant's representation of Plaintiff in 1988. Indeed, Plaintiff retained new counsel for an adversary proceeding in his 1994 bankruptcy. Importantly, the 1994 adversary proceeding stemmed from a default judgment entered in another adversary proceeding during Plaintiff's 1988 bankruptcy, which, Plaintiff alleges, resulted from Defendant's failure to defend him. Because of Defendant's alleged failure, Plaintiff expressed dissatisfaction with Defendant's legal representation to his then-attorney. While mere expression of dissatisfaction may not trigger the duty of reasonable diligence to discover facts, as Plaintiff argues, Plaintiff was not merely dissatisfied; indeed, Plaintiff knew that Defendant may have committed malpractice for failing to defend him in a separate adverse proceeding in 1988. Clearly, Plaintiff was on notice of Defendant's alleged negligence and had a duty of inquiry as to Defendant's overall representation.

In closing, the Court noted that "a system that would permit a plaintiff to commence a malpractice claim fifteen years after an attorney renders allegedly negligent advice is simply unacceptable."

Lesson:  It is the client's duty to investigate his attorney's representation thoroughly when he first discovers any act of negligence.  Failure to do so may bar a legal malpractice suit at a later date.

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Silberman v. Reisman, Abramson, P.C.  55 A.D.3d 402, 866 N.Y.S.2d 42 (2008)

NY: Underlying Workers Compensation proceeding

Student Contributor: Josh Aronson

Facts: Plaintiff brought a malpractice action against the defendant arising out of the defendant’s representation of the plaintiff in a worker’s compensation proceeding. The plaintiff is claiming that the defendant was negligent in failing to obtain the plaintiffs medical records for an intervening accident that occurred 7 years after the original accident to show that the intervening accident had no effect on her present claim that she was unable to work. Furthermore, the plaintiff claims that because of the defendant’s failure to obtain these medical records, the Worker’s compensation Board rejected a reopening of her original claim.

Issue: Did the plaintiff sufficiently prove that the content of the medical records would have shown that the intervening accident had no effect on her claimed present inability to work?

Ruling: No. The plaintiff failed to demonstrate an issue of fact as to proximate cause of the Worker’s Compensation Board failing to reopen the original case. The plaintiffs claim is dismissed due to her failure to show that “but for” the defendants negligence, the original Worker’s Compensation claim would have been reopened.

Lesson: Failure to demonstrate an issue of fact as to proximate cause requires dismissal of a legal malpractice action regardless of whether the attorney was negligent.
 

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Kituskie v. Corbman, 452 Pa.Super. 467, 682 A.2d 378 (Pa. Super. Ct. 1996)

PA Underlying Representation: Personal Injury Lawsuit

Student Contributor: John Anzalone

Facts: Plaintiff sued Defendant Attorney and his law firm for failing to file a personal injury action within the statute of limitations. Plaintiff prevailed below after the judge excluded evidence of the potential collectibility of the underlying judgment.

Issues: 1) May Attorneys raise collectibility as a defense in a legal malpractice case?
2) Whose burden is it to prove that the collectibility of the underlying judgment?

Ruling: In reversing the lower court's ruling, the Superior Court held that it's the Defendant's Burden to raise and prove the collectibility of the underlying judgment, based on the following considerations:
1) Attorneys may invoke "collectibility" as a defense in a legal malpractice case.
2) Here, the jury was not allowed to hear evidence that the underlying judgment would be uncollectible, so its decision must be vacated.
3) This limitation was permitted because the court held that legal malpractice Plaintiffs should only be able to recover against the Attorney for the actual damages they suffered from the Attorney's malpractice.
4) It was the defendant's burden to prove because the plaintiff should not have an additional burden added because the plaintiff was allegedly wronged by the attorney as well as the underlying defendant.

Lesson: In Pennsylvania, the defendant attorney has the burden of raising and proving the defense of the lack of "collectibility" of the underlying judgment.

Editor's Note: The case was affirmed by the PA Supreme Court,  Kitsuskie v. Corbman, 552 Pa. 275 (1998). 

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Gregg v. Lindsay, 437 Pa. Super. 206 (Pa. Super. Ct. 1994)

PA: Underlying Wills Transaction

Student Contributor: Melissa Goldberg

Facts: Defendant drafted a will for Blain, which was duly executed. Blain was admitted to the hospital where he was confined to the Intensive Care Unit. While there, Blain was visited by his longtime friend, Plaintiff. According to Plaintiff's subsequent testimony, he raised with Blain the matter of a will; and after some discussion, Blain directed him to contact Defendant and have him draft a new will making a substantial bequest to Plaintiff and also naming Plaintiff as executor. Thereafter, Plaintiff called Defendant and told him that Blain was in the Intensive Care Unit, was in serious condition, and desired a new will, which was to be drafted and executed the same day. To emphasize the need for haste, but without any authority from Blain, Plaintiff told Defendant that if a new will could not be drafted and executed the same day, he, Plaintiff, would find another lawyer to do the job. A new will was unable to be drafted and executed WW before Blain died.

Issue: Should standing be expanded to allow recovery where, as here, (1) the new will was never executed by the testator, and (2) the facts send a mixed signal regarding the person to whom the lawyer owed a primary duty of loyalty?

Result:  The executed will must firmly have evidence of the existence of the third party beneficiary contract intended to benefit the legatee. Here, however, there was no executed will that could clearly establish intent by the testator to benefit a third person.
1) there was no breach of contract between the decedent and his lawyer.
2) It was Plaintiff and not Blain who had called Lindsay and who had directed him regarding the preparation of a will.
3) Lindsay's first direct contact with Blain came later the same day when Lindsay took the will, which he had prepared to Blain's hospital room.

Lesson: To permit a third person to call a lawyer and dictate the terms of a will to be drafted for a hospitalized client of the lawyer and to find therein a contract intended to benefit the third person caller, even though the will was never executed, would severely undermine the duty of loyalty owed by a lawyer to the client and would encourage fraudulent claims.  

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U.S. v. Costanzo, 625 F.2d 465 (D.N.J., 1980)

3d Cir.  Underlying Criminal Defense (Attorney-Client Relationship and Duty of Confidentiality) 

Student Contributor: Maninder (Meena) Saini

Facts: Defendant (Costanzo), a government informant, was convicted of conspiracy to possess and possession of stolen checks. In the past, the defendant was represented by attorney (Frank Paglianite) on various civil and criminal matters. Additionally, the defendant consulted Paglianite on numerous illegal activities. Paglianite even arranged for the defendant’s bail after his arrest on the instant matter. The defendant retained another attorney to represent him with the conspiracy charge because Paglianite had a conflict of interest in this matter. The defendant alleged that he discussed trial strategies and tactics with Paglianite during the trial proceeding in which Paglianite relayed that information to F.B.I. agents. The defendant claimed that Paglianite was an informant of the F.B.I during the course of their relationship. Defendant appealed from an order of the district court denying both his motions for a new trial and to vacate the sentence he was then-currently serving. The Appeals Court remanded for an evidentiary hearing as to defendant’s claim of a Sixth Amendment violation.

Issue: Did the defendant make disclosures to Paglianite in his capacity as attorney-adviser with the expectation that it was confidential?

Ruling: The  court held that the fact the attorney was not representing defendant in the instant action does not preclude a finding that an attorney-client relationship existed. A relationship between an attorney and client does not need a payment of fee or a formal contract to be formed. The relationship can be formed implicitly, and any communications are privileged when they concern legal advice of any kind sought from an attorney in such capacity.

Lesson:  The question of whether a person is a client or not is crucial to the issue of what duties the lawyer owes to that person. A relationship can form when the clients seeks legal advice from a lawyer in a professional capacity. Attorneys have an ethical duty of confidentiality not to disclose information received from clients.  The rule of confidentiality is to encourage clients to fully and truthfully disclose information relevant to their case. Attorneys cannot take that information and relay it to others for their disadvantage without impeding their role and the administration of justice.

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In re Dorfman,  304 A.D.2d 273; 760 N.Y.S. 2d 413 (2003)

NY Underlying Tort Action

Student Contributor: Natalie Resto

Facts: A client hired the attorney to bring an action against the New York City Department of Health for emotional distress arising from its testing error that resulted in a report incorrectly indicating that he was HIV positive. The attorney filed a notice of claim but he was mistaken as to the filing deadline, and failed to seek leave to file a late notice of claim, which resulted in the dismissal of the action. The client brought a legal malpractice and fraud action against the attorney. The court found that the attorney had convinced his client to retain him by providing a resume that was “filled with patent falsehoods and misrepresentations designed to portray him as an experienced litigator,” and further found that the dismissal of the client’s state court action resulted solely from the attorney’s negligence. The jury found for the client. The disciplinary committee brought a proceeding against the attorney, seeking an order finding him guilty of professional misconduct. The issue of sanctions was referred to a referee, who recommended public censure.

Issue: Is public censure an appropriate sanction when an attorney has made misrepresentations in his resume to induce a client to hire him and has negligently filed a notice of claim for the client’s case?

Ruling: Yes, given the totality of the circumstances, a public censure sufficed to demonstrate to the legal profession to take the lawyer's misconduct seriously.

Lesson: The court takes into account the nature of the misconduct, and the various mitigating factors when sanctioning attorneys who are guilty of professional misconduct.  Here, the duty of candor that a lawyer owes to a prospective client was surely at issue. 

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Ramirez v. 164 W 146 Street, LLC et al., 2010 NY Slip Op 32323, Supreme Court, New York County, August 27, 2010.

Facts:  A temporary receiver commenced a nonpayment proceeding against Plaintiff, a rent-stabilized tenant.  After the temporary receiver obtained a money judgment against Plaintiff and executed its eviction warrant, Plaintiff brought an action to invalidate the warrant on the basis that it was not in the name of the new owner of the apartment building.  The Court agreed and held that the warrant was invalid because the new owner's attorney, Cornicello, had failed to seek a new warrant in his client's name or substitute his client 's name in place of the temporary receiver.

Plaintiff subsequently commenced an action against the new owner's attorney seeking damages associated with her illegal lockout. 

Issue:  Was Cornicello liable for damages sustained by his client's adversary as a result of his alleged negligence? 

Ruling:  No. 

In this State, the general rule is that absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties, not in privity, for harm caused by professional negligence.  In order to state a valid cause of action for legal malpractice with an attorney or law firm one is not in privity with, one must allege that the attorney committed more than a mistake; an allegation of bad faith is necessary in that situation.  Ramirez was never a client of or in privity with Cornicello.  Thus, In order to survive the instant motion to dismiss, Ramirez's complaint must have alleged that Cornicello acted in bad faith or acted fraudulently.  Plaintiffs' complaint only alleges that Cornicello helped procure the eviction and that Cornicello is liable for [the] illegal lockout.  Plaintiffs' complaint does not allege that Cornicello acted in bad faith.

Note, however, that the showing of "bad-faith" has not been difficult to fulfill in similar matters.  In another case, Mayes v. UVI Holding, Inc., the Court found bad faith where the law firm admitted to a "major screw-up" in handling an eviction proceeding.  Since Cornicello "believed" he was executing a valid warrant, the Court did not label his actions as tortious or malicious.  The Court indicated that the result would have been different had he known the warrant was invalid before the eviction took place.

Lesson:  Attorneys will not be liable to non-clients in New York for alleged professional negligence absent knowing misconduct, fraud, bad faith, collusion, or other malicious act.

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Taylor v. UAW-GM Legal Services Plan, et al., United States District Court, N.D. Ohio, August 13, 2010.

Facts: Plaintiff, a participant in the UAW-GM Legal Services Plan, filed the instant action for legal malpractice, breach of contract, and quantum meruit against the Plan after requesting and, allegedly, receiving negligent legal services from a Plan attorney.

In bringing the three causes of action, Plaintiff alleged that she was improperly denied benefits, i.e. competent legal services,  under the Plan.  The lower court dismissed her cause of action, in part, because the her state law claims were preempted by the federal statute governing the Plan, the Employee Retirement and Income Security Act ("ERISA").

Issue:  Is a claim for legal malpractice preempted where it arises from an attorney's negligence to provide services that are governed by a federal statute? 

Ruling:  Yes, if the Plaintiff's allegations rely upon the attorney's failure to provide services governed by the federal statute.

Despite their different captions, all three claims allege that Defendants denied Plaintiff the legal services she was entitled to under the Plan...It is not the label placed on a state law claim that determines whether it is preempted, but whether in essence such a claim is for recovery of an ERISA plan benefit...This is not to say that all common law legal malpractice or quantum meruit claims against plan attorneys would be preempted by ERISA.  But the thrust of Plaintiff's allegations in this case is that she was improperly denied benefits under the Plan.

Lesson:  Plaintiffs must be careful in how they frame their claim of legal malpractice.  Alleging denial of benefit under a particular plan governed by ERISA may void the state law negligence claim, whereas an allegation of breach of the standard of care applicable to attorneys, independent of plan benefits, may preserve the malpractice claim.

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Bagan v. Karl Hays, et al., Court of Appeals of Texas, Third District, August 12, 2010. 

Facts:  The Defendant attorney served as Plaintiff's divorce attorney in the underlying matrimonial action.  As part of his representation, he drafted a settlement agreement providing that a number of business entities would remain in the wife's name until Plaintiff paid her a sum certain over a period of time.  Plaintiff, however, sold the business entities prior to completing his payment obligations to his former wife.  

After his former wife sued him for breach of contract, Plaintiff brought the instant action alleging legal malpractice and breach of fiduciary duty.  Specifically, Plaintiff alleged, among other things, that but for his former attorney's negligent drafting, his wife would not have sued him for breach of contract. 

Plaintiff failed to timely produce an expert report.  In opposition to the Defendant attorney's motion for summary judgment, Plaintiff argued that "negligent drafting" falls within the "common knowledge" exception, and therefore, the trier of fact did not need the assistance of an expert witness in determining how his former attorney violated the applicable standard of care. 

Issue:  Is expert opinion necessary to determine whether an attorney's drafting of a provision in an agreement fell outside the applicable standard of care? 

Ruling:  Yes.  

[T]he issue of whether a provision in a divorce decree demonstrates a breach of the applicable standard of care is not an issue that any layperson can understand.  

The Court distinguished the attorney's alleged negligence here from classic examples of common knowledge, i.e. missing the statute of limitations, and affirmed the trial court's decision granting Defendants' motion for summary judgment. 

Lesson:  Expert testimony will be necessary where the fact finder needs to make a decision with regard to whether an attorney breached the standard of care applicable to negotiating and drafting the terms of an agreement.  

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Wechter v. Schroeder, Comis, Nelson & Kahn, LLP, Court of Appeals of California, Second Circuit, May 3, 2010 (Unpublished).

Facts:  Decedent died shortly before the division of marital property and entry of the final judgment of divorce.  His surviving spouse then asserted claims to his share of the marital estate.  Plaintiffs, the surviving children and heirs of the decedent, brought suit against the decedent's former matrimonial attorneys for their alleged failure to abide by decedent's instructions and act in the best interests of his beneficiaries.

Plaintiffs allege that the attorneys failed to prepare an estate and trust plan removing decedent's former spouse as beneficiary of his will, trust, life insurance, and retirement plan.  They allege that the attorneys directed decedent to prepare a holographic will that became the subject of litigation in probate court, and that they failed to promptly deliver a revocation of trust to decedent's former spouse.  Finally, Plaintiffs' alleged the attorneys were negligent in not referring decedent to an estate planning attorney.

The attorneys argued that the complaint ought to dismissed because they owed no duty to the decedent's beneficiaries. 

Issue:  Did the decedent's former matrimonial attorneys owe a duty to the beneficiaries of his estate? 

Ruling:  No.  The Court initially noted that a determination of whether an attorney is liable to third-parties not in privity is a policy question: 

The question involves balancing various factors, including the extent to which the transaction was intended to affect plaintiff; the forseeability of harm to him; the degree of certainty that he suffered injury; the closeness of the connection between the defendant's conduct and the injury suffered; the moral blame attached to a defendant's conduct; and the policy of preventing future harm.

The Court concluded that decedent's matrimonial attorney owed no duty to his beneficiaries for a number of reasons.  First, the Court noted that the attorneys had no knowledge that the Plaintiffs were decedent's only heirs or intended beneficiaries.  Nor did they agree to perform legal services intended directly to benefit them.  Moreover, the attorneys could not, in violation of the California Family Code, unilaterally dispose of marital property during dissolution proceedings without a court order or consent of decedent's former spouse.

Lesson:  The question of whether an attorney owes a duty to a third-party is a fact sensitive one.  The biggest factor appears to be whether the attorney knew or could have reasonably expected his actions to negatively affect the interests of a third-party.  

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 Ambra v. Awad, 2010 NY Slip Op, Supreme Court of New York, Nassau County, April 13, 2010.

Facts:  Plaintiff filed suit against the defendant attorneys after entering into a settlement in the underlying personal injury action.  In the course of discovery in the underlying matter, defendant disclosed that it had liability insurance of $1 million, but did not disclose its' excess policy limit of $5 million.  The jury awarded damages in the sum of of $2,020,000.  Defendant's excess carrier, however, disclaimed coverage on the basis of late notice.  Plaintiff eventually agreed to settle for $1,000,000 and then brought the instant action against his former attorneys.

Specifically, plaintiff argued that his attorneys committed malpractice by (1) incorrectly advising that the defendant's resources were insufficient to cover the jury verdict in the underlying matter; and (2) coercing him into accepting an inadequate settlement.

The defendant attorneys argued that (1) plaintiff was barred from pursuing his suit because he implicitly ratified the underlying settlement by waiting over two years to challenge it; (2) was not coerced to accept the settlement; (3) was provided with correct information with regard to defendant's ability to pay in the underlying action; and (4) the recommendation to settle represented one of several reasonable courses of action.  

The defendant attorneys filed a motion for summary judgment, and plaintiff argued that it must be denied because the attorneys' contentions were not supported by expert opinion. 

Issue:   Can plaintiff enter into a settlement in the underlying action and then sue his former attorneys for malpractice? 

Ruling:  Yes.  Initially, the Court noted that the absence of expert opinion does not preclude summary judgment for the defendant attorneys.  With respect to the issue of whether plaintiffs' decision to settle the underlying matter bars the present action, the Court reasoned: 

To the extent that [plaintiff's] implicit ratification of the settlement, if any, is inconsistent with his present position that the settlement was detrimental to him, that inconsistency is not a bar to the present action, but rather a factor to be considered in connection with the other evidence. Insofar as this action was timely commenced in accordance with the applicable statute of limitations...any purported delay in seeking relief on the part of plaintiff is not a basis for dismissal.

The Court then noted that the defendant attorneys' advice could only be considered to be "reasonable" if it was based on sufficient and accurate information, and if plaintiff was afforded the opportunity to choose among fairly presented alternatives.  In that regard, the Court took into account one of the attorney's affidavits to the effect that plaintiff was advised of all potential options including post-trial motions, excess coverage litigation, and collection of the judgment.

In rendering its decision, the Court further noted that plaintiff had been under no time pressure to accept the settlement in the underlying litigation, and that plaintiff's prior refusal of a $750,000 settlement offer recommended by his attorneys suggested generally that he was not unduly influenced by counsel.  

Nevertheless, the Court allowed the action to proceed and ordered an evidentiary hearing to determine exactly what information was known or communicated to plaintiff to warrant settlement on the basis that the defendant in the underlying action was a collection risk.  The Court specifically noted plaintiff's right to recover from his former attorneys in the event their failure to investigate or communicate material information with regard to collecting on the underlying judgment influenced plaintiff's decision to enter into the settlement.

Lesson:  A settlement in the underlying action is not necessarily a bar to a subsequent professional negligence suit in New York. 

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Ammon v. McClosky 440 Pa.Super. 251, 655 A.2d 549 Pa.Super (1995)

PA: Underlying personal injury action

Student Contributor: Ryan O'Donnell

Facts: Ammon was injured in an automobile accident and sued the driver of the car, Schussler. They settled for $14,000, and executed a release which discharged Schussler of liability. In another action against the owner of the other vehicle in the accident, Schussler was subsequently joined as a defendant. At that trial, Schussler’s attorney did not introduce evidence of the release of liability reached in the previous settlement until after a judgment was reached in favor of Ammon for $220,000. In response to a post-trial motion to introduce the release, the trial court deemed that the release had been negligently waived. Schussler then hired new counsel who negotiated a deal with Ammon to assign Schussler’s malpractice claim in return for a covenant not to enforce the judgment against Schussler. Ammon then commenced a legal malpractice action against Schussler’s former attorney and was awarded the $220,000 in damages that had previously been entered against Schussler. The former attorney appealed on the grounds that the plaintiff-assignee had failed to prove that the assignor had suffered any economic loss as a result of the attorney’s alleged negligence.

Issue: Is a claim for damages based on legal malpractice assignable?

Ruling: Yes. The Court follows the precedent set by Hedlund Mfg. Co., Inc v. Weiser, Stapler & Spivak, 517 Pa. 522, 539 A.2d 357 (1988), that a claim for damages based on legal malpractice is assignable. The elements of the malpractice action still need to be proven however and defendant’s claim that there were no actual damages proven was rejected by the court. They reasoned that the judgment against Schussler constituted the actual damages necessary to maintain a malpractice action, and no further proof of damages was necessary. The court considers the right to assign a malpractice claim akin to a transferrable property right

Lesson: A judgment against a client-assignor constitutes actual damages. No further proof than the entry of judgment against a client-assignor is necessary to prove actual harm when an assignee prosecutes an assigned malpractice claim. When prosecuting an assigned malpractice claim, the assignee stands in the shoes of the assignor, so it is only necessary to prove that the assignor suffered actual damages 

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Duncan v. Lord, 409 F.Supp. 687 (E.D. Pa, 1976)

Underlying action: legal malpractice money damages

Student Contributor: Ryan O'Donnell

Facts: Attorney was found liable for malpractice. In a post trial brief, he asserted that the amount plaintiff would have recovered should be reduced in the malpractice action by the amount of what the attorney’s fee he would have collected.

Issue: Should an award of damages in a malpractice action be reduced by the amount of attorney’s fees the attorney would have collected?

Ruling: No. A deduction of a hypothetical contingent fee fails to compensate a plaintiff fully for a loss of settlement or jury verdict. Any fee which a plaintiff in a malpractice action might have had to pay had the attorney successfully prosecuted the underlying matter or transaction is cancelled out by the attorney’s fees the plaintiff incurred in retaining counsel to establish that the defendant committed malpractice.

Lesson: Courts will not deduct a hypothetical contingent fee from an award because the plaintiff has to incur those expenses and possibly more to prosecute the malpractice action. To take away that hypothetical fee from the award would not fully compensate a plaintiff to “make them whole” again.
 

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Fuschetti v. Berman 128 N.J. Super. 290, 319 A.2d 781 (Law Dvi. 1974)

NJ: Underlying personal injury action; statute of limitations

Student Contributor: Ryan O'Donnell

Facts: Plaintiff slipped and fell as she was leaving the General Motors exhibit at the World’s Fair. She consulted defendant who was then an attorney at law in New Jersey to help her make a personal injury claim. Plaintiff claims that for the next 6 years she phoned defendant 2 to 3 times a year to inquire about the case, and was told that it was moving slowly. After consulting with another attorney she found out that no personal injury suit had been instituted on her behalf, and that the New York statute of limitations barred her personal injury claim after 3 years. In the ensuing malpractice trial the plaintiff contended that since she lost the potential for settlement, expert testimony as to what a reasonable settlement would have been should be admitted.

Issue: In a malpractice action, can an expert testify as to what a reasonable settlement value for a settlement that was never reached would have been?

Ruling: No. Expert testimony as to the reasonable value of a would be settlement is inadmissible because it is questionable whether or not a settlement would have been able to have been reached.

“Because no expert can suppose with any degree of reasonable certainty the private blends of hopes and fears that might have come together to produce a settlement before or during trial, expert testimony as to reasonable settlement value will be excluded as irrelevant.”

The court found that the probative value of such testimony would be outweighed by the risk that it will confuse the issue and necessitate an undue consumption of time.

Lesson: Expert testimony will not be allowed to determine what a reasonable settlement would have been in the underlying case of a malpractice action. An expert can testify as to whether a previously reached settlement agreement was reasonable, but if no settlement was ever reached he can not testify as to the speculative value of a settlement that would have occurred. 

Editor's Note: For a different and more current view, see Kelly v. Berlin, 300 N.J. Super 256 (App. Div. 1997), which allowed expert testimony on settlement value. 

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Walker v. Burnett,  241 Ga. App. 105,526 S.E.2d 109 (1999)

Underlying Action: Discrimination Action (Georgia)

Student Contributor: Candice L. Deaner

Facts:  Legal malpractice action against attorney who represented Plaintiff in federal employment discrimination action, in which summary judgment was entered in favor of Plaintiff's employer. The Superior Court, granted summary judgment for Defendant attorney. Client appealed.

Issue: Whether an Attorney is permitted to pursue a claim of malicious prosecution against a former client who brought a legal malpractice case against them?

Ruling: The Court of Appeals held that client failed to present any evidence to raise jury issue on element of proximate causation.
1) Plaintiff failed to show that he would have prevailed in underlying racial discrimination action against his employer but for Defendant's alleged negligence.
2) The order granting summary judgment for employer was based not on counsel's legal representation or alleged lack thereof, but rather, on client's failure to show that any discrimination had occurred.
3) Plaintiff failed to present any specific evidence to rebut Defendant attorney's assertion that there was no deposition testimony that court could consider due to attorney's failure to ensure that such depositions had been filed in record; plaintiff's few references to allegedly favorable evidence were vague and unsupported by specific evidence in record.

Lesson: When clients sue their attorneys for legal malpractice, courts require them to prove that, but for their attorneys’ negligence, their claims would have been resolved more favorably. This standard has come to be known as the 'case within a case.' When a showing cannot be made that the client’s attorney ruined an otherwise successful claim, the courts will grant summary judgment on the issue of causation. If a Plaintiff had lost their case due to the merits (or lack thereof) of the cause of action and not due to the actions of the attorney, then a subsequent legal malpractice action will be dismissed. Only if the Plaintiff lost their case based on the attorney’s actions would the Plaintiff have been successful.

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Halley v. Myatt, Superior Court of New Jersey, Appellate Division, May 3, 2010

Facts:  Plaintiffs retained a New York attorney, not licensed in New Jersey, to represent them in negotiating a remedy with their lenders to avoid foreclosure proceedings.  Although the attorney negotiated a settlement agreement, Plaintiffs learned shortly thereafter that she had failed to investigate and discover a $12,000 tax lien which had accumulated on their primary residence during the time the lender held title to the property.  Plaintiffs were eventually forced to file a Chapter 13 bankruptcy to avoid a tax foreclosure on their home and sued their former attorney for malpractice.

Issue: Can a New York attorney be sued for professional negligence in New Jersey even though she was never required to appear in New Jersey to handle the matter? 

Ruling: Yes.  If the defendant attorney is able to show they she had no territorial presence in New Jersey, plaintiff is then required to demonstrate the necessary "minimum contacts" to exercise in personam jurisdiction:

So long as a commercial actor's efforts are purposefully directed towards residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.

In this regard, the Court noted that the defendant attorney commenced negotiations in New Jersey, communicated regularly with Plaintiffs in New Jersey, and the final settlement agreement was executed in New Jersey: 

Most significantly, defendant's activities were purposefully directed at New Jersey residents and directly impacted New Jersey real property, which was the subject of litigation in New Jersey courts.

The Court further noted that the exercise of in personam jurisdiction in New Jersey would place no special burden on a New York attorney since the two states are contiguous.  Moreover, the exercise of long arm jurisdiction was necessary to shield New Jersey citizens from unauthorized practice of law within its borders.  See R.P.C. 5.5(b)(3)(iii):  Non New Jersey lawyers may participate in mediation in New Jersey only for existing clients and only if the dispute originates in or is otherwise related to a jurisdiction in which the lawyer is admitted to practice.

Lesson: Non New Jersey lawyers are subject to professional negligence suits in New Jersey in the event the matter substantially relates to a New Jersey resident or New Jersey property and plaintiff is able to establish minimum contacts.  Lack of territorial presence is not a determinative factor.

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Heathcote v. Gidding, Superior Court of New Jersey, Appellate Division, August 11, 2010 

Facts:  After the conclusion of the underlying matrimonial action, Plaintiff asserted a variety of instances in which his former attorney deviated from the standards of professional representation.

The trial judge, relying on Puder, granted the attorney's motion for summary judgment based on Plaintiffs' representations in the underlying action that he understood the terms of his settlement, had entered into it freely and voluntarily, and believed it to be fair.  The judge further noted that certain of the negligence claims advanced by Plaintiff were not supported by expert opinion. 

Issue: Can a plaintiff voluntarily settle his claims and sue his former attorney without expert opinion to support his professional negligence action? 

Ruling: No.  Once a client asserts that he entered into an agreement without the benefit of competent advice, he must support it with specific facts and, unless the issue is one of common knowledge, with expert opinion.  Here, the Plaintiff provided no expert opinion to identify his attorney's obligations, the manner in which he departed from those obligations, and the consequences to plaintiff.  After a detailed review of the factual circumstances, the Court further concluded that it would not be equitable to allow Plaintiff to pursue his claims against his former attorney: 

Summary judgment requires more than a statement that plaintiff was not aware of the ramifications of his status as the parent of alternative residence.

Related to the child support calculation claims is a claim that plaintiff did not know of a "secret" account into which his former wife placed child care reimbursements from her employer. The record demonstrates, however, that plaintiff's wife agreed to provide a credit to plaintiff from this reimbursement for any child care costs owed by him to her. Assuming plaintiff did not know that his former wife had established a separate account into which she deposited the reimbursement funds, he does not offer any evidence to establish that any omission by defendant caused him any damage.

Plaintiff also argues that defendant never ascertained that his former wife received a $7000 bonus that should have been available for equitable distribution. This record clearly demonstrates that plaintiff knew that his wife received an annual bonus and that it was usually payable in March of the following year. This is a far cry from Ziegelheim in which the wife entered a matrimonial settlement without the benefit of full and complete disclosure of marital assets because her attorney may not have conducted a diligent investigation. Here, the record reveals that plaintiff was well informed of the parties' assets and all sources of income.

Under these circumstances, the Court affirmed dismissal of Plaintiff's malpractice claim as an "equitable exception" under Puder.

Lesson:  Although Ziegelheim and Guido allow an allegedly wronged client to settle his claims and then sue his former attorney for negotiating a less than favorable settlement, the Court appears to have retained the discretion to examine the factual circumstances surrounding the settlement and dismiss Plaintiff's negligence action as "inequitable."

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Speeney v. Powers, et al., United States Court of Appeals, Third Circuit, March 11, 2010

Facts: Appellants were alleged victims of harassment by a university professor. The university retained a law firm to represent it in connection with the professor's de-tenure hearing and to defend the university in a lawsuit instituted by the professor. Appellants believed they had an attorney-client relationship with the law firm. Eventually, the university settled with the professor, but appellants were not consulted during the settlement negotiations.

Appellants thereafter filed suit against the law firm, the professor, and the university. As against the law firm, appellants alleged that the firm violated the attorney-client relationship and breached its fiduciary duty and ethical obligations. Appellants also moved to disqualify the law firm as counsel to the university based on a conflict of interest between appellants and the firm.

The court held an evidentiary hearing to make a determination on the motion to disqualify. The Court found that there was no attorney-client relationship between appellants and the law firm. The firm then moved for summary judgment with respect to appellants' malpractice claims based on the "law of the case" doctrine.

Issue: Can a factual determination made to determine one issue in a case also decide another claim in the same matter that has not otherwise been fully litigated?

Ruling: No. The "law of the case" doctrine limits relitigation of an issue once it has been decided in an earlier stage of the same litigation in order to promote finality, consistency, and judicial economy. The doctrine, however, is discretionary rather than a restriction on the Court's power. It only precludes relitigation of issues that the parties had a full and fair opportunity to litigate.

Here, the Court had made it clear that the evidentiary hearing was not a trial of the merits of appellants' claims and was limited to the issue of disqualification. Moreover, appellants' lawyer had stated that if he had been trying to prove his malpractice case, he would have pursued more discovery.

Appellants further argued that there is an exception to the "law of the case" doctrine when new evidence is presented. The Court agreed:

Reconsideration of a previously decided issue may, however, be appropriate in certain circumstances, including when the record contains new evidence...This exception to the law of the case doctrine makes sense because when the record contains new evidence, the question has not really been decided earlier and is posed for the first time...But this is only if the new evidence differs materially from the evidence of record when the issue was first decided and if it provides less support for that decision.

Lesson: A factual determination during one phase of a matter will not necessarily be determinative of a professional negligence claim where the claim has not otherwise been fully litigated, or new evidence has since been uncovered to support the claim.

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