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

Hutchinson v. Westport Insurance Corporation, 886 So.2d 438 (La. 2004)

LA: Underlying Personal Injury Action

Student Contributor: Laura Stein

Facts: Plaintiffs filed legal malpractice action against defendant law firm and its insurer for failure to timely file an action for damages sustained by the minor child in a car accident. Hutchinson was representing herself and her son pro se. Plaintiffs served interrogatories and requests for production of documents on the plaintiffs seeking discovery for the trial. Plaintiffs failed to comply with the discovery and defendants filed a motion to dismiss. The trial court dismissed the case and on appeal, that judgment was reversed. The LA Supreme Court granted the defendants’ write and reversed.

Issue: Whether the district court abused its discretion in imposing the sanction of dismissal for plaintiffs’ failure to comply with its discovery order.

Ruling: There are four factors to be considered before a court takes the drastic action of dismissal: whether the violation was willful or resulted from inability to comply; whether less drastic sanctions would be effective; whether the violations prejudiced the opposing party’s trial preparation; and whether the client participated in the violation or simply misunderstood a court order or innocently hired a derelict attorney. The Supreme Court found that although dismissal is a harsh remedy, this case was deserving of a harsh remedy as these tactics delay and frustrate the judicial system: the record was fraught with evidence of Hutchinson’s willful disobedience and fault to justify dismissal. Much of the discovery was very simple, e.g. name, date of birth of injured, names of hospitals, copies of medical bills, etc. Her failure to cooperate made it impossible for the defense to proceed and placed them at a disadvantage if they were to proceed without the discovery.

Lesson: Litigants cannot refuse to make a good faith effort to respond to discovery and if they do they “run the risk of incurring sanctions” up to and including dismissal and default.

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Nix v. Verp, NJ App Div 2-18-2011 (Not approved for Publication).

Underlying matter:  NJ Real estate closing; inappropriate title search resulting in legal malpractice action

Ed. Note: We tend to diminish the value of unpublished decisions because of their limited precedential value. But make no mistake. As a means of getting a quick primer on almost any legal subject, they can be invaluable. That is so in this case.

FACTS: Client was offered a chance to buy the property on which his business had been situated for many years. His landlord defaulted on his mortgage and the bank got a foreclosure judgment against him. The Bank then offered to assign its foreclosure judgment to Client  (the tenant) for $5,000, which would enable him to be the sole bidder at the Sheriff’s foreclosure sale. Client hires Lawyer to do the necessary for him to get title. Lawyer fails to do an appropriate title search, attends the Foreclosure sale and secures title in the name of the Client. After closing of title, Client is advised by Tax Collector that there was a $176,000 lien for unpaid back taxes. Had Client known that, he would never have proceeded to purchase the property. To prevent loss of his just acquired title by a pending tax certificate sale, Client had to pay off the lien.  Lawyer had failed to do an appropriate title search before the Foreclosure sale, which would have revealed the unpaid tax lien certificate of $176, 000.

Client then sues the Lawyer for legal malpractice. On motions for summary judgment, the trial court finds Lawyer liable, but limits Clients damages to what he paid for the property plus reasonable fees and costs. Client appealed claiming that Lawyer is liable for the “full amount of the tardily discovered lien.”

On proximate cause the Court ruled that   the closing date was the critical key. The Lawyer should have discovered the lien before the closing and  once the deed was conveyed into the Client’s name, he was not required to “walk away from the transaction”. “[A]bandoning title might have been too much to ask in light of the tangible benefits of ownership.”

ISSUE: How do we calculate the Client’s damages for the Lawyer’s failure to discover the “stealth” tax lien? How does the Court calculate compensatory damages under Saffer v. Willoughby 143 N.J. 256 (1996)?

RULINGS:

A. As to the Measure of the Client’s Damages:

1. Client’s damages are not limited to the purchase price plus counsel fees. Client is entitled to have the benefit of his bargain.
2. Client’s getting the benefit of his bargain, no matter how good a bargain it was, does not amount to a “windfall”, as urged by defendant Lawyer.

The measure of…loss or the amount of damages recoverable against an attorney for…malpractice necessarily depends upon the nature of [the attorney’s] undertaking for the client…In fixing damages in actions based on professional negligence, the measure is the amount that will put the ‘plaintiff in as good a position as he or she would have been had the professional not breached. The value the client lost or the amount the client had to pay is an acceptable measure of damages for professional negligence

In addition…another measure of damages is acceptable: an amount that would place [the Client] in the position he would have occupied but fro the negligence. That measure is the cost of replacing what was expected to be received when the reliance was had on [the Lawyer’s] incomplete advice. The damages are the difference between the result sought and the actual result…(“[T]he measure of damages is ordinarily the amount that the client would have received but for attorney’s negligence.”)]

B. As to the Client's Duty to Mitigate  Damges, the court ruled:

[The Client] was not required to give up the property he desired and paid for “in order to absolve defendant from damages.” 

C. As to Calculation of Attorney’s Fees as Damages Under Saffer v. Willoughby: 

1. The contingent fee agreement between the malpractice plaintiff and his malpractice attorney does not apply to applications for attorneys fees under Saffer. “The reasonable counsel fees payable to the prevailing party under fee-shifting statute is determined independently of the provisions of the fee agreement between the party and his or her counsel.”

2. Trial Courts may employ the lodestar method in calculating counsel fee awards in legal malpractice actions. Packard-Bamberger, supra 167 N.J. at 444-446. “The lodestar calculation is defined as the nuber of hours reasonably expended by the attorney, multiplied by a reasonable hourly rate… Determining the lodestar is not a mechanical function. A trial court must “evaluate carefully and critically the aggregate hours and specific hourly rates advanced by counsel for the prevailing party to support the fee application.”

3. No compensation is due for non-productive time…A trial court ‘should exclude hours that are not reasonably expended. Hours are not reasonably expended if they are excessive, redundant, or otherwise unnecessary. Further, the court can reduce the hours claimed by the number of hours spent litigating claims on which the party did not succeed. Moreover, the court ‘can deduct hours when the fee petition inadequately documents the hours claimed. While the use of contemporaneously recorded time records is the preferred practice to verify hours expended by counsel in connection with a counsel-fee application, ’a court may award counsel fees based on reconstructed records. However where the record consists of reconstructed records, the trial court must scrutinize the records with ‘meticulous care.’

4. As to the reasonableness of hourly rates, the determination ‘need not be unnecessarily complex or protracted, but the trial court should satisfy itself that the assigned hourly rates are fair, realistic, and accurate, or should make appropriate adjustments.’ Moreover, ‘[t]o take into account delay in payment, the hourly rate at which compensation is to be awarded should be based on current rates rather than those in effect when services were performed. 

LESSONS: Save this decision as a handy guide for future reference. One comment we would offer, however, refers to  the Court's  erroneous assumption that Saffer v. Willoughby is a "fee shifting" scheme. It is not. It is a method by which the NJ Supreme Court permits an award of  compensatory damages to the injured victim of legal malpractice. If the damages, in the form of attorneys fees and costs,  that the client is required to pay the malpractice attorney are calculated, indeed defined, by the contingent fee rule, and the client actually has to pay that amount, we are at a loss to understand why the trial court must go through a "lodestar" analysis which typically is applied to hourly fee cases and quantum meruit considerations.  What if a "lodestar" analysis would award more than the contingent fee? Would the Court rule otherwise? Would the Court rule that the lawyer can collect only the amount of the contingent fee?  This dilemma can be resolved if the Court had  not mixed apples and oranges by confusing fee-shifting modalities as provided in various statutes and rules with an award of compensatory damages. Saffer v. Willoughby is NOT a fee shifting modality. 

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Cruciata v. Mainiero, Supreme Court, New York County, January 14, 2011.

Facts:  Plaintiff contended that she did not owe Defendant attorney, her former counsel, the legal fees he collected from her in the underlying divorce action since he, allegedly, never provided her with a statutorily compliant retainer agreement.  

Issues: Is an attorney entitled to legal fees if he fails to provide the required retainer agreement under 22 NYCRR 1400.3 - the statute applicable to New York family and divorce lawyers?  What qualifies as a "statutorily compliant" retainer agreement? 

Ruling: As to the first question, no.  As the Court observed, pursuant to the governing case law in New York, simple non-compliance is sufficient to preclude an attorney from recovering any fees.

Here, however, the Court found that Mainiero had served a conforming retainer.  The Court based its holding on the following factors:  (a) the retainer was signed by Mainiero and Cruciata; (b) it specified the work to be completed by Mainiero and the amounts to be charged for the work.

The Court found that such an agreement clearly sets forth the intention of the parties, and therefore, extrinsic circumstances and varying interpretations would not be considered.  Accordingly, the Court denied Plaintiff's motion to recoup her legal fees from Mainiero.

Lesson: In New York written, signed retainers are a must.  The agreement should spell out the scope of the attorney's duties, along with the fees to be charged.  Note that this particular statute contains a requirement not discussed in this case:  "In actions in Supreme Court, a copy of the signed agreement shall be filed with the court with the statement of net worth."

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Masten v. MIller, King & James, LLP, California Court of Appeals, Fourth District, January 21, 2011

Facts: Plaintiff sued Defendant attorneys for malpractice in connection with an underlying medical malpractice matter.  Defendants, in turn, filed a crossclaim against Plaintiff for alleged negligence and intentional misrepresentation during the course of the underlying action which led to many months of work on a "meritless case, to their economic detriment."  Plaintiff filed an "anti-SLAPP [Strategic Lawsuit Against Public Participation]" motion under California statute 425.16 for summary judgment as to Defendants' crossclaim.

The anti-Slapp staute authorizes a motion to strike a cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United State or California Constitution.

The trial court denied Plaintiff's motion, and he appealed.

Issues: Is the anti-SLAPP statute applicable in legal malpractice actions? 

Ruling: Generally, No. 

It is the moving party's burden to establish that the act(s) complained of were taken in furtherance of the party's "right of petition" or free speech "in connection with a public issue."  Here, Plaintiff alleged that the statute applied because Defendants' crossclaim was based entirely on attorney-client communications made in the context of a judicial proceeding.  

The Court disagreed: 

Noting that other courts had refused to apply section 425.16 to a client's claim against a former attorney for breach of fiduciary duty [] and for legal malpractice [], despite the fact the claims against those attorneys followed or was associated with petitioning activity on the clients' behalf, we reasoned [i]t is `the principal thrust or gravamen of the plaintiff's cause of action that determines whether the anti-SLAPP statute applies, and when the allegations referring to arguably protected activity are only incidental to a cause of action based essentially on nonprotected activity, collateral allusions to protected activity should not subject the cause of action to the anti-SLAPP statute.

***

Although respondents' claims in their cross-complaint stem from their representation of appellant in a judicial proceeding and thus are related to litigation activities, we conclude the principal thrust or gravamen of the acts complained of in the cross-complaint derive from the parties' private dealings with each other as attorney and client, devolve out of that contractual relationship and are based on the duties and responsibilities of the parties in carrying out that relationship.

Lesson: The protection afforded by California's anti-SLAPP statute generally does not extend to claims arising out of the attorney-client relationship. 

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Bush v. Goren, Michigan Court of Appeals, February 1, 2011. 

Facts: In 2005, Plaintiffs consulted the defendant attorneys with respect to a medical malpractice claim related to a cardiac surgery completed on August 24, 2004 to evaluate the safety of a new vascular closure device.  After obtaining opinions of various cardiologists and vascular surgeons, the Defendant attorneys opted not to pursue the matter. On June 5, 2006, advised Plaintiff that the statute of limitations for her claim may expire within the next two months.  

Plaintiff was not successful in locating another attorney, allegedly because of the two-month time frame remaining for her medical malpractice claim.  She subsequently filed a malpractice action against the Defendants alleging that they were negligent in not advising her that the products liability statute of limitations did not expire for another year, until August, 2007.

Defendants argued that their decision not to mention the products liability claim, or the applicable statute of limitations, was protected by the "attorney judgment rule."  In other words, they believed "in good faith" that plaintiff would advise any subsequent attorney about the use of the medical device, and that attorney would know the statute of limitations.

Issue: Did Defendants commit malpractice by not addressing each of Plaintiffs' potential claims and applicable statute of limitations in their disengagement letter? 

Ruling: Maybe. 

In drafting his closing letter to his clients, defendant was not making a tactical decision in which he had to choose between courses of action in an adversarial situation whose viability turned on many factors beyond his control such as the actions of an opposing counsel or the unknown views of a judge or jury. Rather, defendant, in the controlled environment of his own office was advising plaintiffs, whose case he had declined, what options they retained and what they had to do to exercise those options. We reject the argument that giving only partial advice about a matter as fundamental as the applicable statute of limitations when sending a closing letter to a client can be viewed as a matter of tactics. An attorney and his or her advice certainly need not be perfect or infallible. However [] all attorneys have a duty to behave as would an attorney of ordinary learning, judgment or skill under the same or similar circumstances.

While the failure to include the information in the disengagement letter was not protected by the "attorney judgment rule," it may or may not have been "malpractice":

Plaintiffs presented the trial court with affidavits from two attorneys. One stated that, in his professional opinion, the standard of practice for a lawyer in defendant's position required him to tell plaintiff of both statutes of limitations applicable to her claims and that the failure to do so constituted a breach. The other relied on Michigan Rule of Professional Conduct (MRPC) 1.4(b) and a Michigan Ethics Opinion discussing that rule to state that he concluded that defendant's action violated that rule. Based on the rule and the opinion, he also opined that plaintiff could not make an informed decision about how to pursue her products liability claim when she was not informed of the applicable statute of limitations; and that defendant's position that he was justified in withholding information from plaintiff on the ground that he believed it to be in her best interest was without merit.

The Court held that whether or not Defendants exercised reasonable care, skill and diligence under the circumstances would be a fact question to be ultimately resolved by a jury. 

Lesson: The attorney judgment rule does not automatically shield an attorney who provides an allegedly incomplete legal analysis to his or her client.  To err on the safe side, a disengagement letter might lay out the facts presented by the client to the attorney, each of the potential causes of action, and the amount of time within which the client must act to preserve each potential claim.

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Webb v. Brad Stockford, Texas Court of Appeals, January 10, 2011. 

Facts: Plaintiffs filed an action for malpractice against the Defendant attorney for allegedly mishandling their suit against a seller and his real estate agent in connection with plaintiffs' purchase of their house. 

The Defendant attorney contended, among other things, that the malpractice suit ought to be dismissed because plaintiffs could not establish collectibility of any judgment they might have received in the underlying suit, and therefore, could not establish any damages in the malpractice action. 

Issue: Were plaintiffs required to establish collectibility of any underlying judgment to proceed with their malpractice suit against their former counsel? 

Ruling: Yes.

The plaintiff must prove the final judgment in the underlying case would have been collectible on or after the date it was first signed. Additionally, if the evidence concerning collectibility relates to a date prior to the final judgment in the underlying case, the evidence must also show a reasonable probability that the defendant's financial condition did not change during the time before a judgment was signed in a manner that would have adversely affected collectibility.

Here, the Court ruled that plaintiffs had failed to show "collectibility" because they failed to show seller still had the sales proceeds, or any other evidence of seller's solvency, i.e. "current income, profits, or access to finances."  

Lesson: In Texas, plaintiff must go one step further after showing that he or she would have prevailed in the underlying action but for the negligence of the attorney.  Plaintiff must then establish damages by showing that any judgment obtained in the underlying action was, in fact, collectible from one or more of the underlying defendants.

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DePouli v. Barasch, McGarry, Salzman & Penson, New York Supreme, New York County, January 24, 2011.

Facts: Defendant law firm participated in an information session given by the New York City Bar Association for victims of a crane collapse.  At that session, Defendants provided a letter, along with a notice of claim, to prospective claimants.

After the session, DePouli, one of the attendees, retained the law firm.  The firm, however, upon further review of the matter, decided that it would not represent DePouli.  In the meantime, DePouli's time to file his notice of claim had expired.

DePouli, thereafter, sued the firm for malpractice, and the firm presented several defenses, including (1) plaintiff had adequate time and information to file the notice of claim himself; and (2) the firm's decision not to file a notice of claim was protected by the "Professional Judgment Rue."

Issue: Did the firm commit malpractice by failing to timely file a notice of claim on behalf of DePouli?

Ruling: No.

The Court held that it was sufficient for the firm to have notified DePouli that a notice of claim must be filed by a certain date, provided him with a form notice of claim and attachments.  Indeed, the firm had even advised DePouli where the notice must be mailed.  

Furthermore, the Court held that the firm's decision not to pursue suit against the City for plaintiff's injuries was covered by the "Professional Judgment Rule" in any event.  

BMS&P's choice to not pursue claims against the City, but rather to recover solely from the construction companies, does not support a claim for malpractice. Selection of one among several reasonable courses of action does not constitute malpractice...Neither an error in judgment, nor in choosing a reasonable course of action constitutes malpractice...In order to state a claim for malpractice, plaintiff must allege that the chosen course is bereft of legal authority.

Lesson: The decision would appear to support the notion that counsel are not liable for missing deadlines that a plaintiff could have observed, provided the attorney put them on notice of the deadline and gave them the information necessary to comply with the deadline.  Furthermore, an attorney's decision not to sue every potential defendant is not malpractice, so long as the decision is well-reasoned and can find support in prevailing legal authority.

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McCann v. Manheimer,  New York Supreme, Nassau County, January 10, 2011.

Facts: Plaintiff filed suit for legal malpractice against her former attorneys.  Defendant attorneys moved for summary judgment on the basis that the suit was barred by the applicable statute of limitations because it had been filed more than three years after the termination of the attorney-client relationship.

Defendants alleged that the attorney-client relationship ended on October 28, 2005, at or around the time when they mailed a letter to plaintiff terminating the attorney-client relationship.  Plaintiff, however, alleged that she never received the letter, and that she understood the attorney-client relationship continued through March, 2007.

Issue: Was Defendants' disengagement letter enough to establish the termination of the attorney-client relationship? 

Ruling: Not necessarily.

Defendants presented evidence from their paralegal who testified that she had mailed the disengagement letter out in or about October, 2005, and the testimony of a representative of the Defendants' case management software program who stated that the letter had been created, modified, and printed in or around that time period.

Plaintiff testified that she never received the letter, and had her mother testify that the letter never came to the address to which it was sent.  She also produced an affidavit from a "certified Microsoft Windows IT specialist" who opined that document properties could be manipulated to create the appearance that the document was drafted on an earlier date.

Despite New York law providing that a letter that has been mailed is presumed to have been received, the Court held that plaintiff had raised a triable issue of fact, since "the credibility of the parties [was] central to the determination of the [issue]."

Lesson: The decision alerts attorneys to the importance of disengagement letters, and quite possibly, the need to deliver them by courier who can confirm delivery and signature.

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Laethem Equipment Co. v. Currie Kendall, P.L.C., Court of Appeals of Michigan, January 13, 2011. 

Facts: Plaintiffs settled an underlying family dispute and then sued Currie Kendall for legal malpractice and breach of fiduciary duty.  Defendant moved for dismissal claiming the lawsuit was barred by the settlement agreement and release that resolved the underlying litigation.

The trial court agreed with Currie Kendall and Plaintiffs appealed.

Issue: Did a settlement in the underlying action bar Plaintiffs from bringing a suit for legal malpractice?

Ruling: No - at least, the terms of this settlement/release did not.

The Michigan Court of Appeals analyzed the issue solely from the perspective of contract law: 

The 'parties' to the settlement agreement and release are clearly set forth in the opening paragraph and defendant, Currie Kendall, P.L.C., is not a named party. Defendant represented parties in the settled litigation, but was not itself a party in that underlying litigation.  Defendant was not included by name in the excluded release and did not itself execute the release.  Nevertheless, defendant claims a right to benefit from and enforce the terms of the release.

The Court went on to explain that the release's reference to "claims by or against any persons in their individual or representative capacities " did not refer to a law firm that represented various parties in the settled litigation.  This language, the court held, had to be read in the context of the remainder of the agreement.  In other words, it was merely further describing the types of claims being released by the individuals named therein.  It was not adding a different category of individuals being released, i.e. the attorneys involved in negotiating and drafting the settlement.

The Court distinguished this language from a release in a different matter wherein the language might bar subsequent suits against attorneys: "[that release] specifically included as being released [a police officer], [a municipal organization], [an insurer], together with all other persons, firms and corporations, from any and all claims...".

Lesson:  In Michigan, an attorney should not have an expectation that he cannot be sued for malpractice after a settlement in the underlying litigation, unless the release specifically mentions third-parties, including attorneys, involved in a representative capacity.

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Wilson v. McNeely, Court of Appeals of Georgia, January 24, 2011.

Facts: McNeely represented Wilson in the purchase of a parcel of real property.  Shortly thereafter, Wlson brought a malpractice action against McNeely and presented his brother as an expert witness with regard to an attorney's standard of care in a real estate closing.  McNeely moved to bar this testimony on the basis that Wilson's brother was not a practicing lawyer during the relevant time period.

The trial court granted McNeely's motion and Wilson appealed.

Issue: Must an expert witness in a legal malpractice action be a practicing attorney?  

Ruling: Yes.  

Here, the Appellate Division excluded Wilson's brother even though he contended that he was actively engaged in the practice of law as "corporate counsel" for a family owned business.  The Court found that, although an attorney may practice law while representing the interests of a single client, as many in-house corporate attorneys do, the record in this case did not support the purported expert's contention that he was actively engaged in the practice of law because he did not: 

1. Represent entities or individuals in court; 
2. Draft or file pleadings in judicial proceedings; or 
3. Prepare the type of documents or perform the legal tasks at issue in the litigation.

Accordingly, the Appellate Division affirmed the lower court's directed verdict in favor of McNeely.

Lesson: In Georgia, an expert witness in a legal malpractice action must be actively engaged in the practice of that area of the law in which he purports to give an opinion.

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State of New Jersey v. Frensel Gaitan, Appellate Division, February 7, 2011.

Underlying case: Ineffective Assistance of Counsel, Criminal Defense

Facts: Defendant pled guilty to third-degree distribution of a controlled substance within 1000 feet of a school, and was sentenced to 5 years probation.  Approximately three years later, defendant filed suit against his former attorney alleging ineffective assistance of counsel.  More specifically, he alleged that his attorney failed to discuss with him the deportation consequences of his guilty plea.  

The lower court denied defendant's petition for ineffective assistance of counsel and he appealed.

Issue: Does the failure to provide any advice with regard to deportation consequences of a guilty plea constitute ineffective assistance of counsel?

Ruling: Yes.  The Appellate Division granted defendant an evidentiary hearing as to the content and scope of his former attorney's advice, if any, regarding his potential removal from the country upon entering a guilty plea and noted: 

Silence under these circumstances would be fundamentally at odds with the critical obligation of counsel to advise the client of the advantages and disadvantages of a plea agreement...When attorneys know that their clients face possible exile from this country and separation from their families, they should not be encouraged to say nothing at all.

Lesson: Attorneys have an affirmative obligation to discuss the possibility of deportation when providing advice about the pros and cons of entering a guilty plea. Going forward, before a non-citizen defendant pleads guilty to a deportable offense, the Court must hold a hearing as to whether the defendant in a criminal case received the effective assistance of counsel. 

Other Cases: Padilla v. Kentucky, (US Sup. Ct. 2010);  State of NJ v. Nunez-Valdez (NJ Sup. Ct. 2009)

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Iram P. Valentin and Edward Patrick Abbott

NJ: Settlement Agreements; Attorneys Fees

The New Jersey Appellate Division reiterated the need for care in addressing the issue of attorney’s fees in settlement agreements in a recent opinion approved for publication. It is customarily assumed by attorneys that unless specifically provided by statute, rule or case law, litigants bear their own attorney’s fees under the “American Rule.” Nonetheless, attorneys routinely provide for a release of claims for attorney’s fees in settlement agreements that resolve litigation. However, Porreca v. City of Millville suggests that this should be standard practice, and a failure to clearly and unambiguously waive such fees may lead to exposure for the client.

The plaintiff In Porreca, a resident and taxpayer of the defendant's municipality, brought two separate actions "in lieu of prerogative writs,” alleging violations of the municipality’s tax abatement program and a failure to collect “review and inspection fees” from developers in violation of the municipal code. The parties subsequently executed a settlement agreement addressing the claims in both matters. The settlement agreement was silent on the issue of attorney’s fees, although it stated that the parties released “all claims for damages.” Further, the settlement agreement indicated that the municipality had taken action on the plaintiff’s complaints both prior and subsequent to the litigation.

In overruling the trial court, the Appellate Division determined that R. 4:42-9(a)(2), the so-called "fund in court" exception, could apply in this instance. The "fund in court" exception can apply when a litigant does more than merely advance his or her own interests, which results in a benefit to a class of persons of which the litigant is a member. If this is the case, then the court has discretion to award the amount of attorney’s fees, if any, which are reasonable in light of the facts of the case. There does not need to be an actual fund or amount of money in the court’s possession for this to apply and the litigant does not need to obtain all the relief sought as a result of the lawsuit. In applying these principles to Porreca, the Appellate Division found that the plaintiff could be entitled to attorney’s fees under R. 4:42-9(a)(2), as he obtained relief for taxpayers in the defendant municipality by increasing revenue for the municipality as a result of cell towers being placed on the tax rolls and the return of fees to the municipality.

The Appellate Division then looked to the settlement agreement to determine if the plaintiff had waived the claim for attorney’s fees. Again, the settlement agreement did not reference attorney’s fees. The Appellate Division specifically rejected a bright-line rule that the claim for attorney’s fees would survive the settlement agreement unless it was expressly and specifically waived. The Court then looked to basic contract principals and found that the terms of the settlement agreement were ambiguous as only “all claims for damages” were released and the claims asserted by the plaintiff did not involve claims in which attorney’s fees were a traditional element of damages. The Appellate Division therefore remanded the matter to the trial court to address the issue of whether the plaintiff had waived his claim for attorney’s fees in the settlement agreement.

A Costly Lesson Learned

This case demonstrates the need for specificity in the drafting of all settlement agreements. In negotiating a settlement, the issue of attorney’s fees must be addressed and resolved with clear and unambiguous language in the settlement agreement. Failure to do so may result in the imposition of attorney’s fees against a client. 

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Perry v. Scholar, U.S.D.C., District of Columbia, March 19, 2010.

Facts: From 1985-2005, Perry, an accountant, served as a paid plan administrator for a pension plan.  At the same time, Scholar served as the plan's attorney.  In or about 2006, the plan filed suit against Perry, Scholar and other defendants for breach of fiduciary duty and other claims.  

Subsequently, Perry filed a claim against Scholar alleging that he had been forced to spend over $150,000 defending himself in the litigation commenced by the plan due to Scholar's legal malpractice.

Scholar moved to dismiss on the basis of a lack of privity.

Issue: Was Perry required to establish an attorney-client relationship to proceed with his claim against Scholar? 

Ruling: No.  The Court held that Perry's claim sounded in "tortious involvement in litigation":

[T]he essential elements that must be established for this claim are: (1) the plaintiff must have incurred the fees in the course of prior litigation, (2) ordinarily that litigation must have occurred between the plaintiff and the third party who is not the defendant in the present action, and (3) the plaintiff must have become involved in the underlying litigation as a consequence of the defendant's tortious act.

An attorney-client relationship is unnecessary.  The Court noted, however, that "a plaintiff can have no claim against a defendant for wrongful involvement in litigation if the plaintiff is found liable for any portion of the underlying litigation."  

Significantly, even though an attorney-client relationship is not required, plaintiff must establish that the attorney owed him a duty and that the breach of that duty was the proximate cause of his alleged damages.  

Lesson: In DC, third parties may proceed against attorneys whose negligent conduct resulted in their involvement in litigation if they can establish a duty on the part of the attorney and damages resulting from a violation of that duty.

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Sklodowsky v. Lushis, N.J. App. Div., February 2, 2011. 

Facts: After a real estate deal went sour, plaintiff filed suit against the prospective buyer and sought a judgment permitting him to retain the deposit as liquidated damages.  Allegedly, plaintiff instituted that lawsuit on the advise of Defendants, his counsel in the real estate transaction.  

Eventually, one of the Defendants sued plaintiff for legal fees and plaintiff counterclaimed for professional negligence.  More specifically, Plaintiff alleged that Defendants were engaged in the practice of law in New Jersey without a license; erroneously advised him to commence a lawsuit against the prospective buyer; did not adequately represent him in the sale of his real property; and billed him for unnecessary legal fees.  

Defendants filed for summary judgment and argued that plaintiffs' claim was barred by New Jersey's entire controversy doctrine.

Issue: Was plaintiff required to bring their legal malpractice claim against Defendants in the suit against the prospective buyer? 

Ruling: No. 

The Appellate Division cited Olds v. Donnelly, 150 N.J. 424 (1997): 

[The] risk of the disclosure of privileged information and the generally adverse effects on attorney-client relationships outweigh any benefit from requiring a client to assert a malpractice claim in the pending lawsuit...[the entire controversy] doctrine no longer compels the assertion of a legal malpractice claim in an underlying action that gives rise to the claim.

[The application of the entire controversy doctrine in this context] can chill attorney-client relations.  The attorney, formerly the client's advocate, is made the adversary.  The client is forced to expend time and money to engage a second attorney to pursue the attorney-malpractice claim.  Because the first attorney is now a potential witness, that attorney's own interests are no longer aligned with those of the client...Thus, clients are put in the untenable position of either pursuing a claim against their attorney, whose negligence may never result in an unfavorable outcome, or forever forgoing a legal malpractice action...That result does not provide the fairness that the entire controversy doctrine is designed to encourage.

Lesson:  In New Jersey, legal malpractice claims are exempted from the requirement of the entire controversy doctrine that a party litigate all claims arising from the same occurrence in one suit. 

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Donnelly v. O'Malley & Langan. P.C., U.S. Court of Appeals, Third Circuit (March 16, 2010).

Facts: Donnelly filed an action for legal malpractice against his former attorneys who had represented him in a workers' compensation matter. He raised claims of invasion of privacy under state law, breach of contract, legal malpractice, and violation of his state and federal constitutional rights.

On Defendants' motion, the District Court dismissed Donnelly's breach of contract/legal malpractice claim, holding that he failed to submit a Certificate of Merit, which is required under Rule 1042.3(a) of the Pennsylvania Rules of Civil Procedure, absent a reasonable explanation or legitimate excuse.

Donnelly filed an appeal arguing that he did not need a Certificate of Merit, since his claim sounded in breach of contract.  Further, he argued, the allegation that employment law was beyond the expertise of the Defendants was easy for an ordinary person to understand.

Issues: Did Donnelly need to submit a Certificate of Merit to continue with his legal malpractice action? 

Ruling: Yes.

Regardless of how he chooses to characterize his claim, however, Donnelly's allegations pertain to the quality of the O'Malley defendants' professional representation of him, and thus a [Certificate of Merit] is required.

The Court noted, however, that involuntary dismissal under Pennsylvania's Certificate of Merit Rule is not dismissal with prejudice.

Lesson: Err on the side of obtaining a Certificate of Merit in Pennsylvania for any claim which sounds in legal malpractice, no matter how it is characterized, or risk dismissal.

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