Cases & Materials : Legal Malpractice Law Review

Byrd v. Bowie, 992 So.2d 1202 (Miss. Ct. App. 2008)

Facts: The malpractice suit arises from a divorce action. The client hired an attorney to enforce a court order against her husband and enjoin his firm in action. The attorney instead negotiated a settlement agreement, which the client approved. However, before the court rendered the divorce final the client requested that the attorney withdraw her consent to the agreement. The attorney failed to do so and client was bound by her consent. The client hired a new attorney and filed a motion for a new trial, which was denied. The client sued former attorney for legal malpractice for failing to withdraw her consent and precluding her from receiving a just division of the marital estate. The former attorney argued that the client’s claim should have been brought during the new trial stage of the underlying divorce action or were issues already litigated during the motion for a new trial. The court ruled in favor of attorney and client appealed.

Issue: Whether the client’s malpractice claims are barred because they should have been brought in previous suit or were issues previously litigated?

Ruling: No. A party cannot bring a second action based on matters previously litigated and on claims that arise out of the same subject matter that could have been litigated in the first suit. Parties may not re-litigate identical issues already resolved in a prior suit. To prevent suit, a party must establish that the parties were adversaries in the first action. There is no evidence that the parties were adversaries during the new trial stage. The party barring suit must also have been a party or connected to a party in the prior litigation. The attorney was not a party, nor in privy during the hearing on her motion for a new trial and withdrew from representing the client after the court entered the final divorce decree. The mere fact that the client based her motion on the attorney’s negligent conduct did not make the attorney an adversary. The client directs the complaint at the attorney’s negligence in failing to withdraw her consent and not on the fairness of the underlying action. The issues decided in the first action, her consent, are not identical to the issue in the present action, her legal representation. The client’s negligence claims did not need to be asserted in previous litigation. When an attorney is alleged to have committed malpractice during the representation of a matter in litigation, there is no injury to client until the underlying suit becomes final. The client did not appeal the underlying divorce decree and therefore her malpractice suit accrued when the trial court denied her motion for a new trial.

Lesson: A malpractice action will not be precluded where the party was unable to raise claims in previous litigation.

Tags: Texas, 'Joinder, Entire Controversy Doctrine, Family Law, joinder of claims, joinder of issues, of, parties"

MS: Admitting Liability by Default--Not Answering Request to Admit

Posted on November 8, 2011 by Ben Wasserman

MS: Underlying medical malpractice claim

Student Contributor: Laura Stein

Facts: After attorney-Byrd failed to timely designate a medical expert, in the Bowie’s wrongful death/medical malpractice action, the trial court granted summary judgment for the defendants (against his clients). On appeal, Mississippi Supreme Court affirmed. Clients (Bowies) filed a legal malpractice action and also served requests for admission, upon Byrd, that the negligence of Byrd in the action resulted in their sustaining damages in the amount of $2,000,000. Byrd failed to answer the requests within thirty days as required by Mississippi Rules of Civil Procedure and then Bowie filed a motion for partial summary judgment, which was granted as to the issue of negligence. The judge's order granting partial summary judgment as to Byrd's negligence was reviewed by the Mississippi Supreme Court via an interlocutory appeal and they affirmed. Following the supreme court's affirmance on the negligence issue, Bowie filed a motion for summary judgment with the trial court, arguing that they “established their claim of negligence against the Byrd defendants in this case in its entirety, including actual damages proximately caused thereby, in the amount of $2,000,000.” The trial court agreed and entered a final judgment against Byrd for two million dollars.

Issue: Was there proximate cause?

Ruling: The question became whether Bowie's claim of legal malpractice calls for expert testimony in order to establish that the Defendants breached their duty of care. An attorney who fails to designate an expert by a court-mandated deadline and does not provide any reason for doing so, is negligent as a matter of law. Therefore, Bowie was entitled to partial summary judgment as to the Defendants' liability. For the proximate cause of damages, though, the Court has stated that to recover for legal malpractice, the plaintiff must prove by a preponderance of evidence proximate cause of the injury. The plaintiff must show that, but for his attorney's negligence, he would have been successful in the prosecution or defense of the underlying action. The case was proven through Byrd's admittance that his legal error was the proximate cause of Bowie's damages, albeit the admittance of such proximate cause was established by Byrd's failure to answer or deny the requests for admission. Any matter admitted under this rule is conclusively established, unless the court on motion permits withdrawal or amendment of the admission. The admissions served to establish such proximate cause. The Dissent argued that the majority erred in concluding that Byrd's default admissions, regarding the extent of Bowie's damages, eliminates Bowie's obligation to prove Bowie's medical malpractice case within the legal malpractice case that Bowie instituted against Byrd.

Lesson: An attorney who has a legal malpractice action filed against him should take the proper steps, within the required time, to respond, regardless of what merit the attorney believes the plaintiff has or lacks, to avoid any default rulings.

Tags: Defenses, Mississippi, Request to Admit

MD: Discovery Rule and its Limits

Posted on October 18, 2011 by Ben Wasserman

Bank of New York v. Sheff, 382 Md. 235, 854 A.2d 1269

MD: Underlying Bond Issuance

Student Contributor: Vanessa L. Wachira

Facts: In a complex sale of nearly $50 million tax-exempt revenue bonds held by Prince George’s County involving numerous borrowers, Bondholders (represented by The Bank of New York (“Trustee”)), underwriters and attorneys, Piper & Marbury (“Attorneys”) was assigned the duty of drafting several critical documents. Among these, the Loan Agreement and the Trust Indenture each provided that Borrowers—the health care providers receiving the bond proceeds—would be responsible for filing all financing statements. Financing statements were needed to perfect a lien that Bondholders had placed on Borrowers’ assets as part of a security for repayment. Because the Borrowers included health-care providers located in both PG County and DC, filing was required in both locations. However, Attorneys drafted and circulated only the financing statements for filing in Maryland. Prior to the closing, a binder of all documents relating to the transaction was circulated to all parties; the binder did not contain any financing statements for DC. In 1997, Borrowers agreed to sell certain accounts receivables, which should have been subject to Bondholder’s 1993 lien, to Daiwa-Healthco-2 LLC (“Purchaser”). At some point between June and September of 1998, an analyst with one of the municipal bond funds holding the 1993 bonds became aware of and expressed concern to Trustee about Borrowers’ agreement with Purchaser. On November 20, 1998, he discovered that there were no financing statements on file in DC and that, consequently Bondholders did not have a perfected lien on the assets sold to Purchaser. On November 23, 2001, Trustee filed suit against Attorneys in DC. Finding that Maryland had a substantial interest in having the case litigated there, the DC court dismissed the action. Trustee re-filed in PG County on August 28, 2002.

Issue: Whether Bondholder were barred by the statute of limitations from asserting claims against Attorneys for their failure to perfect a lien on Borrower’s assets.

Ruling: Yes. In Maryland, a claim for legal malpractice must be brought within three years of the date upon which it accrues. Under Maryland’s “discovery rule,” an action is held to accrue, and the statute of limitations begins to run, at the moment a “plaintiff has knowledge of circumstances which would cause a reasonable person in the position of plaintiff to undertake an investigation which, if pursued with reasonable diligence, would have led to knowledge of the alleged cause of action.” Here, Attorneys argued that Trustee had knowledge of the alleged cause of action as early as 1993 when it received the binder of documents which lacked the DC paperwork. The Court, however, determined that, although the claim was statutorily barred, the statute of limitations began to run at some point between September and November 20, 1998 when Trustee was explicitly informed of the missed filing.

Lesson: Not all states give plaintiffs the benefit of a "discovery rule" to prolong the time period for bringing claims. Check the applicable jurisdictions' rules and cases carefully to make sure.

Tags: Maryland, Privity, Wills Trusts & Estates

VA: Attorney Not Liable to Adversary Client for Negligence

Posted on October 5, 2011 by Ben Wasserman

Ayyildiz v. Kidd, 220 Va. 1080, 266 S.E.2d 108 (Va. 1980)

VA: Underlying personal injury action

Student Contibutor: Karen Dindayal

Facts: Plaintiff, Ayyildiz is a doctor who was sued for malpractice by his patient, Grubb, and won the suit. Thereafter, Ayyildiz filed a motion for judgment against Grubb’s counsel, Edward S. Kidd, Jr., alleging malicious prosecution, seeking damages by way of money spent to defend the medical malpractice action, loss of present and future earnings and profits in the practice of medicine and injury to Ayyildiz’s professional reputation.

Furthermore, Ayyildiz’s motion contained a second count that alleged that Kidd fell below the legal standards of the community in which he practiced and that Ayyildiz incurred damages due to Kidd’s willful or negligent acts.

The trial court sustained Kidd’s demurrer, holding that an action for malicious prosecution cannot be brought from a civil action unless the plaintiff was arrested, his property was seized or there was a special injury.

Issues:

1. Will an action for malicious prosecution in a civil case be maintained where the plaintiff was not arrested, there has been no seizure of property or special injury?
2. Do allegations of loss of earnings and profits, damage to professional reputation and money spent to defend a maliciously prosecuted medical malpractice action constitute special injury?
3. Is Kidd liable for negligence to Ayyildiz arising out of the medical malpractice case?

Rulings:

1. No. In malicious prosecution actions arising out of civil proceedings, the plaintiff must allege and prove an arrest, seizure of property or special injury incurred to maintain said action.
2. No. Ayyildiz’s allegations do not constitute a special injury to sustain an action for malicious prosecution.
3. No. Kidd was under no legal duty to Ayyildiz and was therefore not liable for negligence to him.

Lesson: A prevailing party has no cause of action against the adverse party's attorney for malicious prosecution. Generally, an attorney’s liability for damages is only to his client, based arising from some duty owed to the client.

Tags: Duty to adverse party, Liability to prevailing party, Standard of Care, Torts/Personal Injury

NC: Attorney Not Liable in Divorce Action

Posted on October 4, 2011 by Ben Wasserman

Summer v. Allran, 100 N.C.App. 182, 394 S.E.2d 689 (N.C.App. 1990)

NC: Underlying separation agreement

Goodstein v. Allen, 222 Va. 1, 278 S.E.2d 787 (Va., 1981)

Facts: Plaintiff, Summer retained defendant William J. Allran to prepare a separation agreement with her ex-husband. Allran prepared three drafts of the agreement, and the parties signed the final draft on February 5, 1982. A few months thereafter, Summer filed suit against her former husband for equitable distribution of marital property, temporary alimony and subsistence, and for the separation agreement to be set aside. The court dismissed the alimony and subsistence claims, and granted the claim for setting aside the separation agreement. In addition, Summer brought an action for legal malpractice against attorney Allran, alleging negligent legal representation, in that Summer lost alimony, reduced child support, and an inadequate share of the couple's marital property.

The trial court granted Allran’s motion for directed verdict and Summer appealed.

Issue: Did the trial court err in granting defendants' motion for directed verdict at the close of all the evidence?

Ruling: No. Allran was entitled to a directed verdict because Summer failed as a matter of law to show actionable negligence.

Lesson: In a legal malpractice action, a plaintiff must show actionable negligence by proving by the greater weight of the evidence that the attorney breached the duties owed his client, and that said negligence proximately caused plaintiff’s damages.

Tags: Family Law, North Carolina, Standard of Care

VA: Res Judicata Effect on Legal Malpractice

Posted on September 23, 2011 by Ben Wasserman

VA: Underlying contract and tort actions

Wood v. Hollingsworth, 166, N.C. App 637, 603 S.E.2d 388 (2004)

Facts: In June 1972, Joseph S. Goodstein and Sheldon Ruben, individually and trading as G & R Associates (G & R) entered into a contract to purchase a tract of land. G & R Associates hired attorneys Allen S. Buffenstein, Jay M. Weinberg and Hirschler & Fleischer to examine the title and to counsel G & R on the purchase of the property.
In 1974, Hirschler & Fleischer filed suit on behalf of G & R against Froehling & Robertson, a survey company, for negligence in its land survey. Then, on June 16, 1975, Hirschler & Fleischer withdrew as counsel for G & R. G & R then mended their motion for judgment and added Hirschler & Fleischer defendant, claiming tort damages against Hirschler and Froehling, and alleged fraud and professional negligence against Hirschler, seeking compensatory and punitive damages.
The trial court found a misjoinder of parties and misjoinder of actions, severed the lawsuits, and required G & R to decide whether to proceed with the action in tort or in contract. G & R opted to proceed in tort, and the contract action was dismissed without prejudice.
G & R then filed another amended motion for judgment against Hirschler based on tort liability, and Hirschler pleaded the statute of limitations. The trial court sustained Hirschler’s plea and G & R appealed.
Thereafter, in August 1977, Hirschler then sued G & R for attorneys' fees for services rendered in the suit against Froehling. G & R filed a counterclaim seeking damages for breach of contract. Hirschler then filed a special plea in bar and plead the statute of limitations.
Meanwhile, the court affirmed the judgment in the tort action. The lower court sustained Hirschler’s two pleas and dismissed G & R’s counterclaim for breach of contract as barred by the doctrine of res judicata.

Issue: Did the trial court err in sustaining the special plea and the plea of the statute of limitations?

Ruling: No. The judgment regarding the tort statute of limitations was res judicata with respect to the contract action because it arose out of the same wrong as the first, tort action.

Lesson: In contract and tort suits for legal malpractice, if the contract remedy arises from the same wrong as the tort remedy, and, if the statute of limitations has not tolled as to one action, then it has is not tolled as to the other.

Tags: Litigation, Real Estate, Statute of Limitations, Torts/Personal Injury, Virginia

NC: No Privity? No problem. Privity Not Required at Time of Injury to Sustain Malpractice Action

Posted on September 21, 2011 by Ben Wasserman

NC: Underlying Personal Injury Claim

Student Contributor: Vanessa L. Wachira

Facts: After sustaining injuries in an automobile accident on March 8, 1997, Client retained the services of Barbara Hollingsworth (Attorney). In December 1999 Client instructed Attorney to file suit against the other driver. In February 2000, Attorney informed Client that her office would be closing and advised her to seek other counsel. Accordingly, Client terminated Attorney’s services. After retaining new counsel on April 4, 2000, Client was informed that no lawsuit had been filed on her behalf. The statute of limitations on Client’s personal injury claim had run on March 8, 2000. Client brought a malpractice action against Attorney, alleging that she failed to exercise reasonable care and diligence, failed to keep her informed as to the status of her case and failed to provide legal services in accordance with the standards of the practice. The trial court dismissed the action, holding that Client failed to state a claim.

Issue: Was Client’s claim for negligence in legal representation properly dismissed for its failure to state a claim because no attorney-client relationship existed at the time of the injury?

Ruling: No. In NC, an attorney will be liable for injuries sustained by her client that are a result of her failure to act with the reasonable care and diligence required by someone of her profession. These acts include a duty to keep her client informed as to the status of her case. Here, because Client’s complaint listed specific actions and inactions of her attorney that revealed Attorney’s failure to comply with the standards of her profession, Client’s complaint sufficiently stated a claim for malpractice. Although the attorney-client relationship ended approximately one month before the statute of limitations ran, privity was still present when the events that gave rise to her injury occurred. The foreseeable of the injury and the inaction of Attorney were sufficient to establish proximate cause.

Lesson: In an action for malpractice predicated upon a former-Attorney’s failure to comply with the statute of limitations, it is important to remember that the acts that give rise to the injury sustained by the Client occur during the period in which the Attorney could have but failed to file the action and not on the date on which the statute of limitations runs.

Tags: North Carolina, Privity, Torts/Personal Injury

NY: Suing the Adversary's Attorney: NO WAY!

Posted on September 7, 2011 by Ben Wasserman

Breen v. Law Office of Bruce A. Barket, P.C., 52 A.D.3d 635, 862 N.Y.S.2d 50 (2nd Dept. 2008)

NY: Underlying Divorce Settlement

Student Contributor: Daniel Schick

Facts: During the course of resolving a divorce action, Eileen (“Plaintiff”), and her former husband, George, executed various stipulations of settlement to resolve their respective equitable distribution claims as to their marital assets. Eileen and George jointly owned two parcels of land in Connecticut, initially conveyed to them by a single deed. In their agreement, George agreed to pay purchase Plaintiff’s interest in one parcel, whereas the second parcel would be sold with the proceeds being divided equally between them. George retained a Connecticut attorney, Hecht, to draft a quitclaim deed which would transfer Plaintiff’s interest in one of the parcels to George. Plaintiff reviewed the proposed deed and noted that it erroneously described both parcels of property. She showed her attorney (“Defendant”) this draft document and discussed the error with him. Nonetheless, Plaintiff signed the quitclaim deed upon her counsel’s advice conveying her interests in both parcels of land to her former husband. Plaintiff sued Defendant and Hecht inter alia for legal malpractice. Defendant in turn filed cross-claims against Hecht for contribution or indemnification. Hecht made a motion for summary judgment dismissing Plaintiff’s complaint as well as Defendants’ cross-claims as a matter of law. The lower court denied Hecht’s motion. On appeal, the Appellate Division reversed the lower court holding that summary judgment should be granted dismissing the complaint and all cross-claims asserted against Hecht.

Issue: Can Plaintiff sue her former husband’s attorney for legal malpractice, especially when she lost a contracted for benefit because of the erroneous property description contained in the quitclaim deed Hecht drafted?

Ruling: No. Absent special circumstances such as fraud, collusion or malicious acts, which are not present here, Hecht will never be liable to third parties such as Plaintiff for the harm caused by his alleged professional negligence, because this attorney was never in privity or near privity with Plaintiff as there was no attorney-client relationship between them.

Lesson: In the absence of an attorney-client relationship or a relationship closely resembling privity between the parties, a third party wronged by an attorney’s professional negligence will only be able to sustain a claim of legal malpractice against that attorney, if facts can be shown that the attorney engaged in common scheme or plan with his client to defraud that third party.

Tags: New York, Family Law, Privity

PA: Legal Malpractice Claim Sounds in Tort, Not Contract

Posted on September 6, 2011 by Krishna Shah

Knopick v. Connelly, U.S.D.C., M.D. Pa., January 25, 2010.

Facts: Knopick retained the services of the Defendant attorney in or about March 2007 order to pursue a claim for legal malpractice against his former attorneys in a divorce proceeding. The Defendant attorney, however, refused to pursue the action and advised that Knopick statute of limitations for the legal malpractice action had expired.

In July, 2009, Knopick sued the Defendant attorney for malpractice, under tort and contract theories of liability, for failing to pursue the malpractice action his former divorce attorney. The Defendant attorney moved for summary judgment.

Issue: Could Knopick establish a prima facie case against the Defendant attorney under either the tort or contract theory of liability?

Ruling: No.

The Court first noted that under a tort theory of liability, Plaintiff must show:

1) The employment of the attorney or other basis for duty;
2) The failure of the attorney to exercise ordinary skill and knowledge; and
3) That such failure was the proximate cause of the damage to the plaintiff.

Here, the Court found that the Defendant attorney's analysis that Knopick was out of time to pursue a malpractice action against his divorce attorney was correct. Knopick should have brought the malpractice action two years from the date he first became aware of the negligence - by August, 2006. However, he had no even retained Defendant's services until March, 2007. Accordingly, there was no failure on Defendant's part to exercise ordinary skill or knowledge.

With regard to Plaintiff's contract theory of liability, the Court noted that "a plaintiff may not couch a tort negligence claim as a contract claim simply to side-step the two-year limitation period." The Court further provided:

Plaintiff discusses the standard of care owed by an attorney, not a breach of specific terms of the contingent fee agreement...Merely reciting the language "specific terms of the contract" without citing which terms the parties breached, is insufficient...In addition, the implied duty of care owed by every attorney to their clients is insufficient to support a breach of contract claim...Further evidence that this is a negligence claim couched as a breach of contract claim, is the fact that the language contained in Count Three directly mirrors the language contained in Count Two-Plaintiff's legal malpractice tort claim.

Accordingly, the Court dismissed Plaintiff's complaint.

Lesson: When an attorney is retained after the applicable statute of limitations has expired, he is not negligent in failing to pursue that action. Moreover, plaintiff cannot pursue a contract theory of liability to avoid the two year statute of limitations applicable in Pennsylvania to legal malpractice actions. To pursue a contract theory of liability, plaintiff must be able to point to a specific provision of the retainer that was violated other than an attorney "implied duty of care."

Tags: Federal, Pennsylvania, Statute of Limitations

PA: No Vicarious Liability if Lawyer Did Not Act in the Scope of His Employment

Posted on August 29, 2011 by Ben Wasserman

Atkinson v. Haug, 622 A.2d 983 (Pa. Super. 1993).

PA: Underlying real estate investment

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

Facts: Atkinson entered into a partnership agreement for an apartment complex with Haug, his friend and business associate. Haug was also a lawyer at Acton & Acton, P.C (“Acton”). The business investment failed, and Atkinson brought a legal malpractice action against Haug for misrepresentation and professional negligence. Atkinson also sued Acton under the theory of vicarious liability, claiming that Haug offered faulty business advice within the scope of his employment at Acton. The trial court entered summary judgment in favor of Acton and Atkinson appealed.

Issue: Did a lawyer-client relationship exist between Atkinson and Haug that would defeat the trial court’s entry of summary judgment?

Ruling: No.

“Absent an express contract, an implied lawyer-client relationship will be found if (1) the purported client sought advice or assistance from the lawyer; (2) the advice sought was within the lawyer’s professional competence; (3) the lawyer expressly or impliedly agreed to give the assistance; and (4) it is reasonable for the client to believe the lawyer was representing him”

Sheinkopf v. Stone, 927 F.2d 1259 (1st Cir. 1991). Here, there was no express legal agreement, no fee arrangement or retainer, no discussion of legal consequences of the deal, and no indication that Atkinson asked Haug for legal advice. Therefore, there was no express or implied lawyer-client relationship. A subjective belief that a lawyer-client relationship exists is an insufficient basis to defeat summary judgment. If there was no lawyer-client relationship, it follows that Acton & Acton could not be held vicariously liable.

Lesson: Acton could only be held liable under the theory of vicarious liability if Haug was shown to be acting within the scope of his employment or with apparent authority from Acton. The mere fact that Haug happens to be a lawyer does not necessarily characterize everything he says as “legal advice.” Since there was no evidence that Haug was acting within the scope of his employment at Acton, vicarious liability does not exist.

Tags: Pennsylvania, Real Estate, Vicarious Liability, scope of engagement

NJ: Emotional Distress Claims Acceptable When There Is Loss of Liberty

Posted on August 26, 2011 by Ben Wasserman

NJ: Underlying criminal conviction matter

McKnight v. Dean, 270 F. 3d 513

Facts: The client was indicted for robbery of a Post Office and hired the lawyer to represent him. The client claims that the lawyer encouraged him to plead guilty to all three counts of the indictment without investigating whether a factual basis existed for the guilty plea. The client was then sentenced to twenty-five years in a maximum-security penitentiary. While in prison, the client hired a new lawyer who successfully made motions to vacate the guilty plea to two aggravated counts of indictment. The client was released after serving five years of his sentence. The client then sued his original lawyer, claiming that but for the lawyer’s negligent representation, the client would have served a maximum of forty months in a correctional facility. The client seeks damages for the emotional distress he suffered during the “extra” twenty months of confinement.

Issue: May a client recover damages for emotional distress when his relationship to the lawyer was based on a liberty, rather than economic interest?

Ruling: Yes.

“A lawyer who commits malpractice is liable to his client for any reasonably foreseeable loss caused by his negligence including emotional distress resulting from the loss of liberty.”

Wagenman v. Adams, 829 F.2d 196, 222 (1st Cir. 1987). The Court reasons that deprivation of his freedom could potentially cause an individual to suffer mental distress. Therefore, the client can go forward with his claim of emotional distress due to the extra twenty months he spent in a maximum-security penitentiary allegedly due to negligent representation.

Lesson: The Court makes a point to distinguish between a loss of liberty and loss of economic interest. Typically, legal malpractice actions revolve around a loss of economic interest. Courts generally do not allow emotional distress claims when it is just loss of economic interest at stake in a legal malpractice case. Guatam v. DeLuca, 215 N.J. Super. 388, 521 A.2d 1343 (App. Div. 1987).

Tags: Federal, New Jersey, Criminal Law, Damages, loss of liberty

IN: Unhappy Ex-Wife Sues Divorce Lawyer

Posted on August 24, 2011 by Ben Wasserman

Gilman v. Hohman, 725 N.E.2d 425 (Ind. Ct. App. 2000)

IN: Underlying divorce action

Student Contributor: Jeff Cain

Facts: Husband and wife divorce. Husband is a doctor who is a staff member at a local clinic. Since the husband has no ownership interest in the clinic, and his employment contract with the clinic had a non-compete clause, the wife’s lawyers conclude that the husband has no goodwill in the clinic. The property settlement agreement that the lawyers prepare for the divorce did not include a valuation for the goodwill of the husband’s medical practice. Two years later, the wife sues her lawyers for malpractice, alleging that they should have valued her husband’s goodwill in his medical practice as part of the property settlement.

Issue: Is a lawyer who does not value a husband’s goodwill in his medical practice as a part of a property settlement negligent if the husband’s goodwill is not divisible?

Ruling: There are two types of goodwill. Enterprise goodwill is the established relations that a business has with employees, customers, and suppliers, and it may be divisible in a divorce. Personal goodwill is a value attached to a business as a result of the continued presence of an individual. Personal goodwill is not divisible in a divorce, since the value only represents future earning capacity.

In this case, the wife could not have received any value from the goodwill of the husband’s medical practice as part of the property settlement. Since the husband had no ownership interest in the clinic, there was no business to which the goodwill could attach.

Lesson: To prevail on a claim of legal malpractice, a client must prove that they would prevail at trial if not for the lawyer’s breach of duty. The lawyers in this case were not negligent for failing to value something that was not divisible. Moreover, the damages claimed by the Ex-wife were not proximately caused by her lawyers since the ex-husband did not own the clinic and thus any of its good will.

Tags: Damages, Family Law, Proximate Cause

IN: Fraudulent concealment does not stop the clock on statute of limitations

Posted on August 22, 2011 by Ben Wasserman

Keesling v. Baker & Daniels, 571 N.E.2d 562 (Ind. Ct. App. 1991)

IN: Underlying bankruptcy action

Student Contributor: Jeff Cain

Facts: Lawyers represented clients in a Chapter 11 bankruptcy case. When the lawyers discovered that they may have a conflict of interest with one of their creditors, they had the clients hire other lawyers to represent them in that matter. After the bankruptcy court approved their reorganization plan, the lawyers withdrew their representation of the clients. Two years and twelve days later, the clients sued the lawyers for malpractice.

Issue: Is the statute of limitation for lawyer malpractice tolled for fraudulent concealment?

Ruling: The statute of limitations for lawyer malpractice is two years in Indiana. But a statute of limitations stops when a lawyer, “by deception or a violation of duty, has concealed material facts from the plaintiff thereby preventing concealment of a wrong.” This doctrine of fraudulent concealment includes instances where lawyers conceal malpractice from their clients, and when lawyers fail to disclose information from their clients. The clients in this case alleged that the lawyers actively concealed their malpractice, but they did not present any evidence to support that allegation.

Even if they did show that the lawyers concealed their malpractice, the doctrine of fraudulent concealment does not reset the statute of limitations on the malpractice action. A client who discovers lawyer malpractice has the responsibility to begin a lawsuit within a reasonable time. Since the clients did not explain why they filed a suit more than two years after their representation ended, their suit was barred by the statute of limitations.

Lesson: When a lawyer conceals his malpractice from a client, a lawyer malpractice lawsuit must be brought within a reasonable time after discovery of the malpractice.

Tags: Commercial, Conflicts of Interest, Fraud, Indiana, Statute of Limitations, conflict of interest, fraudulent concealment

7th Cir. No harm, no malpractice, even if the underlying settlement is "coerced".

Posted on August 17, 2011 by Ben Wasserman

Underlying legal malpractice action

Alford v. Bryant, 137 S.W.3d 916 (Tex. App. 2004)

Facts: A dispute then arose between McKnight and Gingras, the lawyer who had handled the case in the district court, concerning attorneys’ fees. This dispute led Gingras to sue McKnight in a Wisconsin state court. One of McKnight's defenses in that suit was that Gingras had committed malpractice. McKnight's new lawyer, Kenneth Dean, the principal defendant in the present case filed on McKnight's behalf a diversity suit against Gingras in federal court, charging Gingras with malpractice and thus essentially duplicating the defense that McKnight had raised in Gingras's suit. Gingras obtained a judgment against McKnight in Wisconsin— and then pleaded it as res judicata in the federal malpractice suit that McKnight. The district judge held that the res judicata defensewas valid as to any claim pertaining to Gingras's handling of the trial of the underlying discrimination suit (but not the appeal or remand), and thus wiped out any complaint about Gingras's failure at the trial to present evidence in support of reinstatement or his claimed outstanding pay, or to calculate back pay correctly. Gingras had malpractice insurance with a cap of $1 million to cover both
liability and attorneys' fees, and the insurance company had expended $235,000 on the
defense of McKnight's malpractice suit against him. The company offered to settle the case for
the difference between that amount and the $1 million cap, that is, for $765,000 ($475,000 after
Dean deducted his fee). Dean is alleged by McKnight to have told him that this was the most he could expect to obtain, and so he "must" settle for it — concealing from him the fact that any judgment against Gingras could be satisfied out of Gingras's personal assets as well as out of the proceeds of the insurance policy. So McKnight settled, thus setting the stage for this malpractice suit. McKnight claims that Dean committed malpractice in dropping the malpractice defense in the suit that Gingras had brought in the Wisconsin state court and in forcing him to settle for $765,000 rather than holding out for a larger settlement and if necessary proceeding to trial.

Issue: Can there be a malpractice claim for coercing a client to settle when the coercion does not harm the client?

Ruling: No. Although coercing a client to accept a settlement is a violation of a lawyer’s ethical duty to his client, it is sometimes harmless in the context of legal malpractice. McKnight argues that to repel summary judgment all he had to prove was that Dean's malpractice had caused him some injury, however slight — and that would be true if Dean had obtained no money for McKnight. But Dean obtained $765,000, so that his negligence injured McKnight only if, had it not been for that negligence, McKnight could have expected to obtain more than that amount in his suit against Gingras. That he has failed to show.

Lesson: Just because a lawyer’s actions are unethical, does not mean that a malpractice claim will be successful.

Tags: Federal, Damages, Defenses, Ethics violations, Labor & Employent, Litigation, Malpractice, Torts/Personal Injury, Wisconsin

TX: Abandon Confidentiality or Abandon Legal Malpractice Claim: You Can't Have it All

Posted on August 12, 2011 by Ben Wasserman

TX: Underlying mediation

Pelletier v. Galske, 105 Conn. App. 77, 936 A.2d 689 (Conn. App. 2007).

Facts: The client hired attorney to represent her in litigation against a contractor. The suit settled at mediation where the parties entered into a settlement agreement. All claims between client and the contractor were settled with the exception of attorney’s fees and costs in the underlying litigation. Attorney’s fees and costs were left to the trial court to determine. The client sued attorney for malpractice after the court ruled that the parties would be responsible for its own costs and attorney’s fees. The client alleges malpractice for the failure to disclose the risks and benefits of settlement, including that the trial court could deny attorney’s fees. The attorney claims that the client was fully disclosed the risks and benefits of settlement, including the risk that the court could deny attorney’s fees. The attorney claims that the only people privy to the discussion and disclosure were attorney, client and the mediator. The court did not allow the mediator to testify on the basis of the confidentiality provisions contained in the statute governing mediations.

Issue: Whether the mediator should have been allowed to testify to the substance of the disclosure made during mediation between attorney and client?

Ruling: The policy of this state is to encourage peaceful resolution of disputes through mediation and confidentiality is critical to the success of the mediation process. One cannot search relief in court on the basis of privilege and deny a party the benefit of evidence that would materially weaken or defeat claims against her. Before a party may be found to have waived an asserted privilege the court must determine that: the party asserting privilege is seeking relief from the court, the privileged information sought is all likely outcome determinative of the suit, and disclosure of the confidential information is the only means by which the aggrieved party may obtain evidence. The client sought relief in the form of a money judgment from the attorney. The mediator’s testimony in this case would be crucial in establishing the advice rendered, or not rendered, by attorney to client. Finally, due to the fact that only those three were present, the mediator’s testimony is the only means attorney can obtain and present unbiased and critical information to the court. It is only fair to require the client either to abandon her claim of confidentiality or abandon her claim of legal malpractice.

Lesson: The confidentiality privilege in mediation may be waived where the testimony is outcome determinative and the only means opposing party may obtain evidence.

Tags: Texas, Alternate Dispute Resolution, mediation

CT: Client Cannot Seek to Avoid Statute of Limitations by Bringing Her Claim Under Contract Law

Posted on August 10, 2011 by Ben Wasserman

CT: Underlying real estate matter

Shuster v. Buckley, 5 Conn. App. 473, 478, 500 A.2d 240 (1998).

Facts: The client hired the lawyer in 2001 to help her with her purchase of a condominium. In 2006, the client brought a legal malpractice claim against the lawyer. The client claims that the lawyer breached his contractual duties by: failing to advise her that the condominium was classified as an affordable housing unit; failing to tell her that the affordable housing unit would be subject to resale price limitations for twenty years; neglecting to have her sign an acknowledgment that she understood the affordable housing terms; and failing to explain the affordable housing covenant to her. The client claims she was harmed by the lawyer’s actions because she placed large amounts of money into improving the condominium and would not be able to recover that money in a future sale. The client tried to base her claim on contract law, stating that when the lawyer accepted her fee for the purchase of the condominium, a lawyer-client contract formed. The lawyer defended on the grounds that the client’s claim sounded in tort law, and that the client was trying to bring the case under contract law only because she had missed the three-year statute of limitations that is applicable to legal malpractice claims.

Issue: May a client try to avoid the statute of limitations by basing her legal malpractice claim on breach of contract rather than negligence?

Ruling: No. In this case, the client was trying to bring her claim as a breach of contract so that the claim would be subject to a six-year statute of limitations instead of a three-year statute of limitations. However, the Court found that the complaint set forth a legal malpractice claim based on negligence. The client was harmed by the lawyer’s negligent failure to use the requisite standard of care in advising the client about the details pertinent to her condominium purchase. Therefore, the claim is time barred by the three-year statute of limitation because the client waited over four years to file.

Lesson: A client cannot seek to bring a tort claim under contract law theory just by disguising the claim in contractual language. In addition, the client cannot attempt to use the original lawyer-client contract to make this a breach of contract claim. Thus,

“where the client claims the lawyer negligently performed legal services . . . the complaint sounds in negligence, even though the client claims that he retained the lawyer or engaged his services.”

Tags: Connecticut, Real Estate, Statute of Limitations, breach of contract, negligence

IN: No "Accidental" Client-Lawyer Relationships

Posted on August 5, 2011 by Ben Wasserman

Douglas v. Monroe, 743 N.E.2d 1181 (Ind. Ct. App. 2001)

IN: Underlying wrongful death claim

Student Contributor: Jeff Cain

Facts: A college freshman drowns in his school’s pool. His mother is too distraught to seek counsel, but his older brother, who is a bank security guard, sees a lawyer in the lobby of the bank. The brother asks the lawyer if there is a time limit to file a suit. The lawyer said that he had two years to file a suit, but she did not tell him about the 180-day notice to file a tort claim, or that he should not rely on her legal advice. The mother retains a lawyer several months later, and learns that she has just missed the 180-day deadline.

Issue: Did the lawyer have an attorney-client relationship with the mother, even though she never met the lawyer, because the mother relied on the lawyer’s advice?

Ruling: No. An attorney-client relationship can be implied when a client seeks advice from a lawyer, the advice sought is within that lawyer’s professional competence, and the lawyer gives the sought advice. In this case, the mother never met or spoke with the lawyer; did not attempt to contact the lawyer, schedule an appointment with the lawyer, or consent to an attorney-client relationship with the lawyer; never entered into a contract with the lawyer or pay her for legal advice; and the mother never thought that the lawyer was representing her in her son’s death.

Lesson: When giving casual legal advice, a lawyer should always tell the recipient that they must not rely on their advice. Even better, make sure you don't give out casual legal advice. It will come back to haunt you, especially if the recipient relied on the advice and circumstances suggest that the lawyer had reason to believe he or she would so rely.

Tags: Indiana, Prospective Clients, Statute of Limitations, Torts/Personal Injury, accidental client

TX: No Causation in Malpractice Action = Summary Judgment

Posted on August 3, 2011 by Ben Wasserman

Rodgers v. Weatherspoon, 141 SW 3d 342 (Tex. App. 2004)

TX: Underlying criminal defense

Rodgers v. Weatherspoon, 141 SW 3d 342 (Tex. App. 2004)

Facts: The client was charged with aggravated assault and the attorney was appointed to represent him. The client filed motions to act on his own behalf and to dismiss attorney as his counsel. The attorney filed a motion to withdraw. The motion was granted that day. The client personally contacted the court multiple times and on one of his visits the client was arrested because the judge determined his bail was not sufficient. The client claims the clerk told him that if his attorney had been present in court he would have been released to his attorney and would not have to go to jail. The client filed a suit, claiming the attorney committed legal malpractice because he did not communicate with him and did not appear in court in time to allow client to avoid arrest. The client claims damages resulting from spending six days in jail and having to pay additional money for the increased bond. The attorney contends that he had no duty to the client and was not the cause of his arrest and damages. The client appeals attorney’s summary judgment that dismissed his legal malpractice claim.

Issue: Whether attorney’s breach of duty was the proximate cause of the client’s injuries.

Ruling: No. Attorneys have a fiduciary relationship with their clients as a matter of law and summary judgment may be proper if it is shown that the attorney’s act or omission was not the cause of any damages to the client. The two components of proximate cause are cause-in-fact and foreseeability. Cause-in fact is where the defendant’s acts or omissions were a substantial factor in bringing about the injury that would not otherwise have occurred. Foreseeability does not require that the actor anticipate the particular injury that eventually occurs. In a legal malpractice case, where a lay person would ordinarily be competent to make a determination on causation, expert testimony is unnecessary. The attorney offered evidence through the trial judge’s testimony that the attorney had nothing to do with the client’s bond being held insufficient, as it was insufficient on his own. After the attorney presented this evidence, the client then had the burden of introducing his own evidence to raise an issue of material fact about causation. The client failed to meet this burden and offered no evidence that the attorney ever received word that he needed to appear at the court before the client was taken to jail. Only the county clerk said she had called the attorney’s office and left a message, but had not spoken to the attorney. There is no evidence that the client’s claimed harm would have been diminished or would not have occurred if the attorney had acted the way client contends. The attorney disproved the causation element of client’s malpractice claim as a matter of law.

Lesson: In order to win on a malpractice claim the plaintiff must prove that their harm would have been less or would not have occurred at all if defendant acted in accordance with the standards of care.

Tags: Texas, Criminal Law, Fiduciary Duty, Proximate Cause

TX: No Causation in Malpractice Action = Summary Judgment

Posted on August 3, 2011 by Ben Wasserman

TX: Underlying criminal defense

Aubin v. Barton, 123 Wash. App. 592 (2004)

Facts: The client was charged with aggravated assault and the attorney was appointed to represent him. The client filed motions to act on his own behalf and to dismiss attorney as his counsel. The attorney filed a motion to withdraw. The motion was granted that day. The client personally contacted the court multiple times and on one of his visits the client was arrested because the judge determined his bail was not sufficient. The client claims the clerk told him that if his attorney had been present in court he would have been released to his attorney and would not have to go to jail. The client filed a suit, claiming the attorney committed legal malpractice because he did not communicate with him and did not appear in court in time to allow client to avoid arrest. The client claims damages resulting from spending six days in jail and having to pay additional money for the increased bond. The attorney contends that he had no duty to the client and was not the cause of his arrest and damages. The client appeals attorney’s summary judgment that dismissed his legal malpractice claim.

Issue: Whether attorney’s breach of duty was the proximate cause of the client’s injuries.

Ruling: No. Attorneys have a fiduciary relationship with their clients as a matter of law and summary judgment may be proper if it is shown that the attorney’s act or omission was not the cause of any damages to the client. The two components of proximate cause are cause-in-fact and foreseeability. Cause-in fact is where the defendant’s acts or omissions were a substantial factor in bringing about the injury that would not otherwise have occurred. Foreseeability does not require that the actor anticipate the particular injury that eventually occurs. In a legal malpractice case, where a lay person would ordinarily be competent to make a determination on causation, expert testimony is unnecessary. The attorney offered evidence through the trial judge’s testimony that the attorney had nothing to do with the client’s bond being held insufficient, as it was insufficient on his own. After the attorney presented this evidence, the client then had the burden of introducing his own evidence to raise an issue of material fact about causation. The client failed to meet this burden and offered no evidence that the attorney ever received word that he needed to appear at the court before the client was taken to jail. Only the county clerk said she had called the attorney’s office and left a message, but had not spoken to the attorney. There is no evidence that the client’s claimed harm would have been diminished or would not have occurred if the attorney had acted the way client contends. The attorney disproved the causation element of client’s malpractice claim as a matter of law.

Lesson: In order to win on a malpractice claim the plaintiff must prove that their harm would have been less or would not have occurred at all if defendant acted in accordance with the standards of care.

Tags: Texas, Criminal Law, Fiduciary Duty, Proximate Cause

WA: The Expert Must Be Heard!

Posted on August 1, 2011 by Ben Wasserman

WA: Underlying Divorce Action

Student Contributor: Ben Doyle

Facts: Client sued attorney for malpractice following attorney’s representation in the dissolution of marriage. Client claimed that attorney’s conduct at a settlement conference did not meet the standard of care. Client was the grantee of stock options. Attorney failed to give correct advice concerning the separate property character of the stock options. Client claims that without attorney’s mistaken advice, he never would have entered into the settlement agreement that treated the options as community property. In the malpractice action, the court found, during the trial within a trial, that, if the action had gone to court, that court would have found that client owned 60% of the options and the remaining 40% were community property. The court found in favor of client and attorney appealed.

Issue: Whether the trial court erred not permitting expert testimony to reach the conclusion that the stock options were 60% clients separate property.

Ruling: The trial court had excluded expert testimony on the ground that only the attorney can testify at the trial within the trial. That exclusion was improper. The issue was whether the options were given for past services or for present and future services and the attorney’s expert witness, who had evidence contrary to the disposition of the court, should have been heard. The error was not harmless and the decision was reversed.

Lesson: If an attorney is being sued for malpractice, it is important to line up expert witnesses that can testify that the attorney’s conduct was not negligent. The court must determine the validity of the underlying claim and the attorney has every right to present evidence to defend his or her position.

“Where it is alleges that an attorney committed malpractice in the course of litigation, the trial court hearing the malpractice claim retries, or tries for the first time, the client’s cause of action that the client contends was lost or compromised by the attorney’s negligence, and the trier of fact decides whether the client would have fared better but for the alleged mishandling.

Tags: Case Within a Case, Expert Witnesses, Family Law, Litigation, Washington, community property, stock options

WI: Expert Testimony Needed to Prove a Breach of Duty of Care

Posted on July 29, 2011 by Ben Wasserman

Pierce v. Colwell, 563 N.W.2d 166 (Wis. Ct. Apps. 1997)

WI: Underlying criminal matter

Student Contributor: Jeff Cain

Facts: Client was charged with ten counts of sexual assault. He was represented by another lawyer during the arraignment and the jury trial, which found him guilty. Lawyer Colwell represented him during the sentencing, in which he was sentenced to 20 years in prison. The client unsuccessfully appealed his conviction, arguing among other things, that his due process rights were violated because the criminal court did not personally read the information to him at the arraignment. The client then sued the lawyer for not raising this fact at the sentencing.

Issue: How can a client prove that his former lawyer committed malpractice?

Ruling: To show lawyer malpractice in a criminal action, you must show that you would have succeeded in court if it were not for the lawyer’s failure to exercise reasonable care. In this case, the client had to show that he would have won if the lawyer argued that the client was prejudiced by the failure of the court to personally read the information to the client. To show this, the client would have to provide expert testimony to prove this. Since the client did not name an expert within the time limits, the court dismissed his claim.

Lesson: In Wisconsin, to prove a breach of a duty of care, expert testimony is generally required, since duty of care is outside of the area of common knowledge.

Tags: Criminal Law, Expert Witnesses, Wisconsin

WV: No Proximate Cause = No Damages

Posted on July 27, 2011 by Ben Wasserman

Keister v. Talbott, 182 W.Va. 745, 391 S.E.2d 895 (W.Va. 1990)

WV: Underlying real estate conveyance (mineral rights)

Harrison v. Casto, 165 W.Va. 787, 271 S.E.2d 774 (W.Va. 1980)

Facts: Keister retained Webster County attorney, William Talbott, to examine title to two tracts of land, specifically the ownership of the surface and coal and mining rights. Talbot drafted a general warranty deed on June 24, 2986, wherein Mrs. Brown conveyed the two tracts of land, including the coal, oil, gas and minerals, along with the mining rights. Talbott later discovered that a third party claimed mining rights to the coal underlying the property, further discovered that the rights were in fact conveyed in 1946 by the prior owners and notified the Keisters of this fact. Thereafter, in November 1986, the Keisters filed suit against Talbott, as well as Charles Herold, Webster County Clerk for negligence resulting in the deprivation of ownership of the coal underlying the property. The Talbotts sought compensatory damages of $10,000,000.00. The trial court excluded evidence offered by the Keisters regarding the value of the coal under the land and the jury assessed damages in the amount of $0.

Issue: Was Talbott’s negligence a proximate cause of the damages incurred by the Keisters?

Ruling: No. Talbott’s negligence did not cause the loss of mineral rights.

Lesson: In an action for legal malpractice, against an attorney who has overlooked a conveyance of property which leads to the plaintiff receiving less than he contracted to purchase, damages are typically calculated by subtracting the value of the property actually received from the purchase price paid.

Tags: Damages, Mining rights, Proximate Cause, Real Estate, West Virginia

WV: Action in Tort Independent from Action in Contract

Posted on July 26, 2011 by Ben Wasserman

WV: Underlying personal injury and legal malpractice actions

Student: Karen Dindayal

Facts: Plaintiff, Paul H. Harrison hired attorney Don Kingery (#1) to file a personal injury action against Piedmont Airlines for injuries allegedly suffered while a passenger on a Piedmont plane. King failed to file the action within the statutory period. As a result, Harrison hired Carroll W. Casto (#2) to file an action against Kingery (#1) for malpractice. Casto (#2) failed to do so, but instead brought a personal injury suit against Piedmont Airlines and was unsuccessful.

Plaintiff then retained another attorney (#3) to sue Casto (#2) for legal malpractice, claiming (a) that Casto (#2) failed to file the instant action within the applicable statute of limitations and (b) breach of contract between Harrison and Casto.

Casto filed an Answer in which she set forth that Harrison’s Complaint lacks a cause of action since the claims against Kingery (#1) can still be brought in contract, since the applicable statute of limitations for breach of contract was ten years if the contract was in writing.

Issue: Was the trial court’s dismissal of the complaint correct?

Ruling: Yes. A malpractice action “could have been brought in contract” if the plaintiff alleged that defendant breached her contractual employment obligations. Harrison’s action on a breach of contract then survived against Kingery, (#1) although the tort action was barred by the statute of limitations. Therefore, Harrison was not deprived of anything and the Complaint was correctly dismissed.

Lesson: When a malpractice action sounds in tort and contract, statute of limitations barring the filing of the action in tort does not necessarily preclude the filing the action on the contract.

Tags: Legal malpractice on top of legal malpractice, Litigation, Statute of Limitations, Torts/Personal Injury, West Virginia

CT: Lawyer's Negligent Drafting of a Will Opens Door to Third Party Liability

Posted on July 15, 2011 by Ben Wasserman

Licata v. Spector, 26 Conn. Supp. 378, 225 A.2d 278 (1966).

CT: Underlying will matter

Russo v. Griffin, 510 A.2d 436 (Vt. 1986)

Facts: The client hired the lawyer to draft her last will and testament. The lawyer failed to ensure that the will provided the required number of witnesses. As a result, the Probate Court declared the will invalid and assets of the estate were given to persons other than the will’s intended beneficiaries. The intended beneficiaries filed a two count complaint: (1) the client’s estate has suffered damages of $7500, and (2) as a result of the lawyer’s negligence, assets of the client’s estate were diverted to other persons. The lawyer demurred on the basis that certain elements of the alleged damage were improper and that there was no duty owed to the beneficiaries because there was no privity of contract.

Issue: Can a legatee of a will that has been deemed invalid as a result of not meeting statutory requirements, by fault of the lawyer’s negligence, bring an action against the lawyer for the losses sustained by being deprived of his intended rights under the will?

Holding: Yes. The Court held that “liability for negligent performance of a contract, or nonperformance, should be imposed where the injury to a person is foreseeable. . .” The harm that would result from the lawyer’s negligence was well within the realm of reasonable foreseeability. Thus, a liability link is established even in the absence of privity, and the intended legatees had every right to establish their right to redress. Due to the technical nature of drafting a will and the privacy that is often involved in the drafting, it is the duty of the lawyer, not the person making the will or the intended beneficiaries, to ensure that the will is valid.

Lesson: Imposition of a duty to third parties under these circumstances is grounded in public policy. The Court justifies this decision by reasoning that public policy considerations tip in favor of the innocent third party seeking damages that are a result of an error over which they had no control or ability to correct.

Tags: Connecticut, Privity, Wills Trusts & Estates

VT: The Locality Rule: Narrow or Wide?

Posted on June 29, 2011 by Ben Wasserman

VT: Underlying commercial transfer

Student Contributor: Eric B. Kang

Facts: Joseph Russo had a paving business in Rutland, Vermont that he wanted to turn over to his sons, Tony and Frank. Lawyer Griffin was hired to help them with the process of incorporation, and he drew up the corporate charter, filed it with the Secretary of State, and arranged the necessary transfer of assets. Further, the annual meetings were held at Griffin’s office. Then, Frank wanted to purchase a laundromat and spoke to Tony about selling his interest in the corporation. The two, along with the elder Russo, met in Griffin’s office to discuss the arrangements. At the meeting, Tony gave a $6,000 promissory note to Frank in exchange for Frank’s resignation as president and transfer of his stock to the corporation. Three months later, Frank went back into the paving business in direct competition with his brother’s corporation. Tony then sued Griffin, arguing that a properly drafted noncompetition covenant would have prevented this from occurring. At trial, Tony introduced expert witnesses who testified that Griffin’s failure to advise the corporation to draft a covenant not to compete deviated from the standard of care required of attorneys practicing in Vermont at that time. Griffin introduced expert witnesses who testified that his conduct did in fact comport with the standard of care expected of attorneys practicing in Rutland, Vermont at that time. The trial court found for Griffin, holding that “those attorneys whose practice primarily was conducted in the Rutland, VT area prior to and during 1978 are more familiar with the standard of care then required of lawyers"..

Issue: Whether the standard of care is based on the local community, the state or is it a national standard?

Ruling: The Court noted that “the ability of the practitioner and the minimum knowledge required should not vary with geography.” Thus, the Court held that “in selecting a territorial limitation on the standard of care … the most logical is that of the state.” In Vermont, the rules governing the practice of law is consistent throughout the state, and all attorneys must complete the requirements for admission as established by this Court and administered by the Vermont Board of Bar Examiners in order to practice law.

“the appropriate standard of care to which is held in the performance of professional services is ‘that degree of care, skill, diligence and knowledge commonly possessed and exercised by a reasonable, careful and prudent lawyer in the practice of law in this jurisdiction.’”

Id. (quoting Cook, Flanagan & Berst v. Clausing, 438 P.2d 865,867 (Wash. 1968).

Tags: Commercial, Locality Rule, Standard of Care, Vermont

AL: The "Accrual" Approach in Alabama

Posted on June 28, 2011 by Ben Wasserman

Floyd v. Massey & Stotser, P.C., 807 So.2d 508 (2001).

AL: Underlying business transaction

Dennis v. Northcutt, 923 So.2d 275 (2005).

Facts: Client alleged that the firm had breached its duty to Client and had acted negligently in preparing and drawing six checks that were supposed to have been payable to Client. Client also alleged that the firm had failed to discover alterations to the checks in a timely manner and had failed to notify Client of the alternations until one year after the checks had already been issued. In 1997, the firm issued a letter to Client informing Client that the checks had been altered. Client made a written demand for the checks to be reissued. The firm’s reply was made in 1998. Client filed suit in 2000. The firm asserted that Client’s claim was subject to a two-year statute of limitations provision of the Alabama Legal Services Liability Act §6-5-574(a). The firm argued that this provision barred Client’s suit. The trial court ruled in favor of the firm and granted the firm’s motion to dismiss. Client appeals, asserting that his cause of action had accrued in 1998, not 1997.

Issue: Whether the applicable two-year limitations period had expired before Client filed the lawsuit?

Ruling: Yes. Under the accrual approach, the statute begins to run when some injury occurs which gives rise to a maintainable cause of action. The court notes that Client could have sued the firm in 1997 after receipt of the firm’s letter. Client should have known from the firm’s letter that his property rights had been damaged.

Lesson: The time limits imposed by §6-5-574(a) are to be measured from the date of the accrual of a cause of action and not from the date of the occurrence of the act or omission. The cause of action “accrues” and the statute of limitations begins to run when and only when the damages are sustained. This is known as the accrual approach.
In the lead opinion Ex parte Panell, 756 So.2d 862, 865 (1999), Chief Justice Hooper and Justice Maddox advocated the “occurrence” approach. The lead opinion stated that a legal malpractice cause of action accrues and the statute of limitations period begins to run when the act or omission or failure giving rise to the claim occurs, and not when the client first suffers actual damage.

Tags: Alabama, Commercial, Statute of Limitations

AL: Legal Malpractice in a Legal Malpractice Action?

Posted on June 27, 2011 by Ben Wasserman

AL: #1 Underlying employment discrimination action; #2 underlying legal malpractice action regarding #1.

Wright v. Rinaldo, 279 Mich App 526, 533 n 3; 761 NW2d 114 (2008)

Facts: Client retained Attorney #1 to represent him in an employment discrimination action in federal district court, however, that action was dismissed. Client subsequently retained Attorney #2 to pursue a legal malpractice action against Attorney #1 (“the first malpractice action”). Attorney moved to withdraw himself as Client’s counsel in the first malpractice case. Client pursued the malpractice action against Attorney #1 pro se. The first malpractice action was dismissed. Client then filed another malpractice action against Attorney #2. Attorney #2 filed a motion for summary judgment. The trial court granted Attorney #2’s motion for summary judgment. The appellate court reversed, holding that the discovery exception applied and that Client had filed the legal malpractice claim against Attorney #2 within the six-month window provided by that exception. Attorney #2 filed another motion for summary judgment, which was granted.

Issue: Whether the lower court correctly granted Attorney #2’s second motion to dismiss?

Ruling: Yes, because plaintiff was unable to provide sufficient proof to overcome summary judgment. Client had failed to produce substantial evidence indicating that, but for Attorney #2’s alleged breach of the standard of care, he would have prevailed in either his first malpractice action against Attorney #1 or the employment discrimination action itself.

Lesson: In a legal malpractice case, the plaintiff must show that but for the defendant’s negligence he would have recovered on the underlying cause of action. McDuffie v. Brinkley, Ford, Chesnut & Aldridge, 576 So.2d 198, 199 (1991). To overcome a summary judgment motion in a legal services liability action, a plaintiff must introduce evidence that in the absence of the alleged negligence, the outcome for the underlying case would have been different.
If the liability to damages of a legal services provider is dependent upon the resolution of an underlying action, the court shall upon the motion of the legal services provider, order the severance of the underlying action for separate trial. Ala. Code §6-5-579(a).

Tags: Alabama, Case Within a Case, Labor & Employent, Proximate Cause

IL: Net Opinion on Causation Results in Dismissal

Posted on June 23, 2011 by Krishna Shah

Bourke v. Conger, US Ct. of Appels, 7th Circ., April 19, 2011.

Facts: Bourke was convicted of murder in Illinois state court, and after the conviction was turned over on appeal, filed malpractice claims against his defense attorneys. Bourker alleged that defense counsel's voire dire of the jury fell below acceptable standards of care.

Bourke's former attorney's argued that even if they breached their duty to Bourke, he could not establish proximate cause.

Issue: Did Bourke set forth a valid cause of action for legal malpractice?

Ruling: No.

First, the Court stated the elements of a cause of action for legal malpractice:

A plaintiff asserting a legal malpractice claim based on Illinois law must prove: (1) the defendant attorney owed the plaintiff client a duty of due care arising from an attorney-client relationship, (2) the attorney breached that duty, (3) the client suffered an injury in the form of actual damages, and (4) the actual damages resulted as a proximate cause of the breach.

The Court then explained why Bourke failed to establish proximate cause:

Bourke depended exclusively on Thomas's expert report to establish the causation element of his claim. While expert testimony is one of the types of evidence that a plaintiff like Bourke could normally rely on to ward off summary judgment, it is well established that an expert report that lacks foundation and depth will be given little consideration by courts. In order for an expert report to create a genuine issue of fact, it must provide not merely ... conclusions, but the basis for the conclusions. As the district court noted, the Thomas report does not support its conclusion that the Appellees' performance during voir dire caused the jury to find Bourke guilty with analysis, facts or reasoning. While the report discusses various ways in which the Appellees could have better represented Bourke's interests (e.g., by using their peremptory challenges, by questioning jurors for their opinions regarding the use of alcohol), this discussion only goes towards establishing that the Appellees breached their duty to Bourke, not causation. The Thomas report fails to identify facts that support its conclusion that the Appellees' alleged errors had any role in causing the jury to find Bourke guilty. This shortcoming prevents the Thomas report from creating a genuine, disputed issue of fact concerning causation.

Lesson: Plaintiff must establish proximate, in Illinois, by showing that "but for" his attorney's negligence, he would not have sustained the actual damages complained of. One way to do it is by expert opinion. However, the opinion must be supported by the "whys and wherefores" of the causal connection between the attorney's breach and the injury or damage complained of.

Tags: Illinois, But for-Proximate Cause, Expert Witnesses, Net Opinion, Proximate Cause

FL: Examining the Statute of Limitations

Posted on June 22, 2011 by Krishna Shah

McLeod v. Bankier, Fla. Dist. Ct. of App., 4th Dist., 2011

Facts: McLeod hired Attorney Tew to file a claim against Fidelity for allegedly executing a wrong margin call which led to the liquidation of his account. The case settled and McLeod signed a release in favor of Fidelity. His account balance, however, was never restored.

In December, 2002, McLeod hired Attorney Bankier who represented him in an unsuccessful NASD arbitration against FIdelity. In November, 2003, Bankier advised McLeod to pursue a malpractice action against Tew and referred him to another attorney who advised that he had no valid action against Tew.

In 2004, McLeod consulted Attorney Isenberg who again recommended a claim against Tew. McLeod ignored this advice, but ultimately filed a claim against Bankier in 2008 for, allegedly, negligently allowing the two-year statute of limitations for a claim against Tew to expire.

Issues: Was McLeod's claim against Bankier valid?

Ruling: No.

The Florida Supreme Court recognize[s] that "[g]enerally, a cause of action for negligence does not accrue until the existence of a redressable harm or injury has been established and the injured party knows or should know of either the injury or the negligent act.

This case presents three possible scenarios, any one of which results in McLeod's claim for legal malpractice against Elk Bankier being barred. Under the first scenario, if the claim against Tew accrued at the point when he advised McLeod he was no longer going to represent him (March 2000), then McLeod had two years from that date to sue Tew (March 2002). McLeod did not retain Elk Bankier until December 2002, which was beyond the two-year statute of limitations period. Therefore, no malpractice claim against Elk Bankier for failure to file an action against Tew can be shown as a matter of law.

Under the second scenario, the limitations period to file an action against Tew potentially began to run in 2003 when the NASD decision became final. Under this scenario, McLeod would have had until 2005 to sue Tew, and, in fact, he was advised of his potential claim against Tew by at least two attorneys before the expiration of the limitations period in 2005. As such, any action against Elk Bankier based on its failure to commence a proceeding against Tew would have expired in 2007. McLeod did not file his action until 2008.

Finally, even if one assumes that Elk Bankier had an obligation to advise McLeod of his potential malpractice claim against Tew, despite the fact that the firm was retained solely to pursue a claim against Fidelity, McLeod's action against Elk Bankier accrued no later than 2004, which is the latest date that McLeod was definitively advised of the potential claim against Tew. McLeod did not commence his action against Elk Bankier until almost four years later, well beyond the two-year limitations period when he knew or should have known of his claims against his former attorneys.

Lesson: The Florida Statute of Limitations requires that a legal malpractice claim be brought within two years of the time the former client knows or should know of the injury or negligent act on the part of the attorney.

Tags: Florida, Statute of Limitations

CA: Supreme Court Chooses Loyalty Over Freedom of Speech

Posted on June 17, 2011 by Krishna Shah

Oasis West Realty, LLC v. Kenneth A. Goldman, Supreme Court of California, May 16, 2011

Facts: Goldman, and his law firm Reed Smith, represented Plaintiff Oasis in a redevelopment plan involving a nine-acre parcel in Beverly Hills on which Oasis was to build a hotel and luxury condominiums. After two and one-half years, Defendants ended their attorney-client relationship with Oasis, and thereafter, Goldman participated in a referendum that would allow voters to overturn the city council's approval of the project. Oasis asked Goldman to withdraw from this activity, and ultimately sued Goldman and Reed Smith for, allegedly, violating their duties of loyalty and confidentiality.

Issue: Did Goldman violate any duties to his former client by participating in a civic organization to promote his personal beliefs and interests?

Ruling: According to the Supreme Court of California-- Yes.

The Court first explained that an "attorney may not do anything which will injuriously affect the former client in any matter in which the attorney formerly represented the client nor may the attorney at any time use against the former client knowledge or information acquired by virtue of the previous relationship."

The Court held that "a lawyer's right to freedom of expression is modified by the lawyer's duties to clients...The requirement that a lawyer not misuse a client's confidential information [] applies to discussion of public issues."

This, in spite of the California Anti-SLAPP statute which protects attorneys (and others) from "lawsuits against public participation...freedom of speech and petition for the redress of grievances."

In support of its holding, the Court reasoned that Oasis had presented a prima facie case that Goldman did use confidential information. The Court didn't answer how, but presented this analysis:

For example, an attorney may discover, in the course of the representation of a real
estate developer, that city officials are particularly concerned about the parking
and traffic impacts of a proposed development, or that an identifiable population
demographic is especially disposed to oppose the proposed development. Under
the interpretation proposed by defendants and adopted by the Court of Appeal, the
attorney would be free to terminate the representation of the developer and use this
information to campaign (quite effectively, one would imagine) against the precise
project the attorney had previously been paid to promote.

Lesson: Until and unless the United State Supreme Court hears and overturns this case, a California lawyer may be at risk for a malpractice/breach of fiduciary duty suit for exercising his right to freedom of speech in support of his personal civic interests if it is in conflict with the interests of his former client.

Tags: California, Fiduciary Duty, breach of fiduciary duty, confidentiality, freedom of speech, loyalty

MI: SOL Runs on day Power of Atty is Revoked in Malpractice Suit

Posted on June 9, 2011 by Ben Wasserman

MI: Underlying IP

Student Contributor: Matthew Feinbloom

Facts: In August 2000, Mr. Rickie Wright hired Ronildo as his attorney in a patent case against the United States Patent and Trademark Office. Three years after hiring Ronildo, Wright was unsatisfied with her work. Wright met with other patent attorneys and on December 18th, 2003 Wright signed a document that revoked Ronildo’s power of attorney. At this time Wright also signed the power of attorney over to another lawyer who then took over the case. Wright also instructed the Patent Office that all correspondence was to go through his new counsel. After key errors were made in the pursuit of this patent, Wright filed a legal malpractice suit against Ronildo on February 16, 2006. The lower court granted summary judgment for Ronildo holding that the attorney/client relationship ended on December 18th, 2003 thereby barring Wright’s action due to the two-year statute of limitations.

Issue: Does the attorney/client relationship end once the client revokes the power of attorney, hires new counsel and reassigns the power of attorney?

Ruling: Yes. Under Michigan law it does not have to be the court that effectively terminates the attorney/client relationship. If Wright had truly wanted Ronildo to stay on as co-counsel there would be no need to revoke her power of attorney. This revocation, along with the hiring and transfer of power of attorney to a new lawyer affirmatively communicated to Ronildo that she had been replaced and the attorney/client relationship had ended. Under MI law, “The client's action for malpractice is time-barred unless it is brought within two years from the date the claim accrued or arose (i.e., the date that services were discontinued), or within six months of the date that "the plaintiff discovers or should have discovered the existence of the claim, whichever date occurs later.” MCL 600.5805(6); MCL 600.5838(2); Kloian v. Schwartz, 272 Mich. App. 232, 237, 725 N.W.2d 671 (2006). Therefore Ronildo’s motion for summary disposition was properly granted because two years had passed since the claim arose.

Lesson: Revoking the power of attorney, hiring a new lawyer, and giving that new counsel power of attorney is enough to terminate the attorney/client relationship. Once this relationship is over the statute of limitations begins to run on the amount of time the client is permitted to sue for malpractice.

Tags: Intellectual Property, Michigan, Statute of Limitations

CT: Public Policy Interests Bar Liability to Third Parties

Posted on June 8, 2011 by Ben Wasserman

Krawczyk v. Stingle, 208 Conn. 239, 543 A2d 733 (1988).

CT: Underlying estate distribution matter

Mariscotti v. Tinari, 335 Pa. Super. 599, 485 A.2d 56 (1984).

Facts: Prior to his death, the client had hired the lawyer to make arrangements for the distribution of his estate. The client was clear that he wished for his estate not to go through probate, so the lawyer suggested they set up a trust. The lawyer and client had a meeting planned for March 19, 1983 to finish execution of the will. On March 17, the lawyer found out that the client had a heart attack and was in intensive care. The lawyer did not proceed to complete the documents. On March 18, the lawyer was instructed to bring the trust instruments to the hospital. When the lawyer finally arrived at the hospital, she was not permitted to see the client because of his weakening condition. The client died shortly after without signing the trust documents. The intended beneficiaries of the client’s estate sued the lawyer on grounds that she had negligently delayed the completion of the will by either or: (1) not finishing the trust documents and presenting them to the client for signature on March 17, (2) not hastily arriving to the hospital on March 18 with the hand-written documents or a simple will for the client to sign immediately.

Issue: Is a lawyer liable to the intended beneficiaries of a will for negligent delay in completing and delivering estate planning documents for signing by the a client?

Ruling: No. “Imposing liability to the intended beneficiaries does not comport with the lawyer’s duty of undivided loyalty to the client.” The lawyer’s devotion remains entirely with the interests of the client, not any other third parties with whom the lawyer is not in privity. The lawyer’s obligation to the client would be undermined if the lawyer had to be concerned that whatever actions he or she took in the interest of their client might lead to a legal malpractice suit from a third party.

Lesson: Determination of a lawyer’s liability to those they are not in privity with is a question of public policy. The Court is concerned that imposition of liability to third parties could create a conflict of interest that would disrupt the lawyer’s duty of loyalty to the client. In specific, the Court reasoned “these potential conflicts of interest are especially significant in the context of the final disposition of a client’s estate, where the testator’s testamentary capacity and the absence of undue influence are often central issues.”

Tags: Connecticut, Privity, Wills Trusts & Estates

IN: Cops in Criminal Case Enjoy Joint Counsel

Posted on May 31, 2011 by Ben Wasserman

Hanna v. State, 714 N.E.2d 1162 (Ind. Ct. App. 1999)

IN: Underlying criminal case

Student Contributor: Jeff Cain

Facts: Six police officers were indicted in a criminal case. One officer was indicted for pointing a firearm, operating a motor vehicle while intoxicated causing bodily injury, and criminal recklessness, among other crimes. The other five officers were indicted for obstruction of justice and/or official misconduct. All officers hired the same lawyer to represent them.

Lawyers must provide their clients with zealous representation. But when a lawyer represents multiple clients in the same matter, there may be potential conflicts of interest. The lawyer informed each officer of the potential conflicts that joint counsel may create. Then a magistrate informed each officer how a conflict may arise and how that conflict will affect their case. Then another lawyer met with each officer to make sure that each officer’s waiver was knowing and intelligent.

The prosecution argued that joint counsel would impair the ability of the prosecution to make a deal with one of the officers in exchange of a deal for a reduced or dropped charge, and that the lawyer wouldn’t be able to cross-examine any of the officers if they became a witness against the other officers. The court ordered each officer to hire their own attorney, despite the waiver.

Issue: Can a trial court disqualify a lawyer on the ground that joint counsel may create a conflict of interest?

Ruling: The right to counsel of choice is protected by the Sixth Amendment to the Constitution of the United States. A trial court cannot disqualify a lawyer when there is no actual conflict of interest.

Lesson: The late Supreme Court Justice Felix Frankfurter said

“Joint representation is a means of insuring against reciprocal recrimination. A common defense often gives strength against a common attack.”

Tags: Conflicts of Interest, Criminal Law, Indiana, Joint Defense Agreements

PA: Summary Judgment Appropriate When Claims Are Too Speculative

Posted on May 26, 2011 by Ben Wasserman

PA: Underlying divorce case

Williams v. Joynes, 278 Va. 57, 677 S.E.2d 261 (2009)

Facts: The client hired a lawyer to handle her divorce. The lawyer gave the client an incorrect evaluation of the stock owned by her husband. The lawyer told the client that the stock was worthless when in fact it was valuable. The client admits that she knew her husband’s stock holdings were in his name and she did not have title to them. She claims that she would have been in a better bargaining position if she had known the value of the stock. The client claims that the lawyer’s mistake damaged her ability to receive the best possible property settlement after the divorce. The lawyer made a motion for summary judgment. The court granted summary judgment to the lawyer on the ground that the client’s loss, if any, was too speculative to allow recovery.

Issue: Was summary judgment appropriate because the client’s complaint of loss was too speculative?

Ruling: Yes. Summary judgment is appropriate when there is no genuine issue of material fact. A genuine issue of material fact did not arise in this case because the client’s claim was based purely on speculation. No one knows whether she would have achieved a better result if she had known the value of the stock. Exactly how much better the result would have been is even more speculative. Thus, dismissal of her case through summary judgment was appropriate because a jury could not have appropriately decided the issue of whether the client would have obtained a better result.

Lesson: When a client claims that a lawyer has breached his professional obligations, an essential element of the client’s claim is a showing of actual loss. If the client cannot prove actual loss, the claim may be too speculative or remote to survive.

The test of whether damages are remote or speculative has nothing to do with the difficulty in calculating the amount, but deals with the more basic question of whether there are identifiable damages…thus damages are speculative only if the uncertainty concerns the fact of damages rather than the amount. Pashak v. Barish, 303 Pa. Super. 559, 561-562, 450 A.2d 67, 69

Tags: Pennsylvania, Damages, Family Law

VA: Client's Failure to Timely File Won't Sever Proximate Cause

Posted on May 24, 2011 by Ben Wasserman

VA: Underlying Personal Injury Claim

Student Contributor: Vanessa L. Wachira

Facts: In 2003, Leo Williams (Client) retained Louis Joynes, II and David Dildy (Attorneys) to represent him in a personal injury claim that stemmed from an automobile accident involving two other vehicles—one driven and owned by a Virginia resident (Brown) and one driven by a Maryland resident (Kiker) and owned by a Maryland corporation (Millstone Enterprises, Inc. (Millstone)). On June 1, 2005, Attorneys filed a motion for judgment against Kiker, Millstone, and Brown; the motion was denied for failure to comply with the state’s two-year statute of limitations. Attorneys advised Client that he might maintain an action against Kiker and Millstone under Maryland’s three-year statutory period, but that the action would not apply to Brown. Attorneys suggested Client hire a Maryland attorney. After allegedly receiving advice from numerous Maryland attorneys that litigating the case in Maryland posed “too many problems,” Client decided not to file the action in Maryland. In January 2006, Client brought a malpractice action against Attorneys in Virginia based upon their failure to timely file the initial personal injury action. Client alleged that “but for” Attorneys’ negligence, he would have been able to recover damages against Kiker, Millstone and Brown. In their motion for summary judgment, Attorneys denied that they were the proximate cause of Client’s lost personal injury action and asserted that Client’s own failure to file in Maryland was a superseding event, which severed their liability.

Issue: Is a client’s failure to file a personal injury action in a foreign jurisdiction a superseding event, which severs the link of proximate causation between the attorney’s failure to timely file the initial action and the client’s loss of his personal injury claim?

Ruling: No. In Virginia, a superseding act that severs causation arises only when that act “entirely supplants the operation of the initial tortfeasor's negligence [so that] that the intervening act alone, without any contributing negligence by the initial tortfeasor… causes the injury.” An intervening act will not be deemed “superseding” when it is “set in motion by the initial tortfeasor’s negligence.” Here, Attorneys’ failure to file the Virginia action set in motion the need for Client to consider filing a Maryland lawsuit. As a matter of law, Client’s failure to file the action in Maryland could not be deemed “superseding.” Moreover, since Brown was not subject to Maryland’s jurisdiction, Attorneys’ failure to file the Virginia action provided sole cause for the permanent exclusion of Brown from the suit. Client’s decision not to file suit in Maryland had no bearing on the loss of personal injury claim against Brown and thus, could not have severed the link of proximate causation between Attorneys' negligence and his loss of claim.

Lesson: Lawyers cannot circumvent liability by claiming that clients have a duty to correct their mistakes.

Tags: Proximate Cause, Statute of Limitations, Virginia

NJ: Malpractice Court can Dismiss on Grounds Not Dismissed by Underlying Court

Posted on May 23, 2011 by Ben Wasserman

Beese-Munoz v. Barbone, Esq., N.J. App. Div. (per curiam) Decided May 20, 2011).

NJ Underlying Work Place Discrimination Claim

Facts: In this legal malpractice case, plaintiff appeals from the order granting defendant's summary judgment motion and dismissing her case. Plaintiff retained defendant to pursue her discrimination claims against the Lakehurst Naval Station and others. Her lawyer drafted and filed a complaint on plaintiff's behalf. The Department of the Navy moved to dismiss on three grounds; two procedural--failure to effect proper service of process and one substantive--failure to state a cause of action. The Judge granted the motion to dismiss without prejudice on the basis of improper service of process. Defendant lawyer forgot to notify his client of the dismissal for 13 months. Plaintiff alleges defendant's failure to notify her of the Court's decision in a timely fashion deprived her of the opportunity to cure the procedural deficiency, and thus precluded her from prosecuting her cause of action against the Navy. Now, the defendant lawyer moves for summary judgment dismissing the malpractice complaint for claiming that the client would have been unable to establish proximate cause--that she had no meritorious underlying claim.

Issue: If the client's underlying claim was dismissed without prejudice because of the lawyer's negligence, can the lawyer move to dismiss the malpractice complaint on other grounds?

Ruling: Yes

Notwithstanding the negligent failure to notify plaintiff of the dismissal, plaintiff cannot prevail in this legal malpractice case because her complaint against the Navy was substantively without merit and procedurally barred by her failure to exhaust administrative remedies in that she failed to cooperate with the administrative processing of her discrimination claim.

Lesson:

The trial court correctly found that defendant's negligence was not a proximate cause of plaintiff's inability to successfully prosecute [the underlying case]. Rather, it was plaintiff's failure to cooperate...This lack of cooperation amounted to failure to exhaust administrative remedies, thus creating an independent procedural bar to the prosecution of her [underlying] claim. The fact that [the Judge in the underlying action] based his decision on a different discrete issue does not preclude the trial court [in the malpractice action] from determining a different and independent basis for dismissing plaintiff's case [in the underlying action].

Tags: New Jersey, Case Within a Case, Labor & Employent, Proximate Cause, causes of action, failure to exhaust administrative remedies, underlying case

MD: Choose Your Words Wisely: Retainer Agreements Create Contractual Obligations

Posted on May 19, 2011 by Ben Wasserman

Abramson v. Wildman, 184 Md.App.189, 964 A.2d 703 (2009)

MD: Underlying Custody Dispute

Student Contributor: Vanessa L. Wachira

Facts: Ronald Wildman (Client) retained Joel Abramson (Attorney) to advise and represent him in a custody dispute. The retainer agreement informed Client that he could “expect [Attorney’s] firm to be both sensitive and professionally responsive to [his] situation.” Attorney filed a breach of contract action against Client seeking recovery of $13,000 in unpaid legal fees. Client counterclaimed for $24,525 alleging breach of contract for Attorney’s failure to represent him in a professionally responsive manner. Specifically, Client alleged Attorney a) prepared and presented a false financial statement to the court; b) failed to timely advise him of a subpoena requesting certain documents; c) failed to present competent evidence and testimony of his financial circumstances; d) failed to properly advise him of the merits of his case and his settlement options; and e) charged him for unnecessary and duplicative work. At trial, the jury found in Client’s favor and awarded him $24,525—the total fee Client had paid to Attorney.

Issue: Does an attorney’s written promise to be “professionally responsive” create an express contractual obligation to provide competent legal advice and representation, such that a client alleging breach of that duty may assert his claim as an action in contract?

Ruling: Yes. When an attorney makes an express promise of professional responsibility, he creates a contractual obligation to provide his client with legal services that reflect the standard of competence required by his profession. Under Maryland case law, an attorney is required to exercise reasonable “care and diligence” as well as certain “degree of professional skill and knowledge.” Cochrane v. Little, 71 Md. 323, 331-32, 18 A. 698 (1889).
Here, the retainer agreement contained a specific promise that Attorney would “be professionally responsive,” thus creating an express contractual obligation. Consequently, Attorney’s failure to conform to accepted professional standards was enforceable as a breach of express contract. Moreover, even in the absence of the written promise of professional responsibility, under the “law of the place” doctrine, existing laws (including that cited above) “enter into and form part of a contract as if ‘expressly’ referred to or incorporated in its terms.” As the court so aptly concluded, although “‘[f]ew modern actions against attorneys are for breach of a written or express contract,’ this is one of them.”

Lesson: Whether or not a retainer agreement contains an express promise of professional responsibility, a lawyer will be contractually obligated to provide competent legal advice and representation. Also, if a lawyer plans to sue a client for unpaid fees, he should first make sure he’s earned them.

Tags: Engagement, Family Law, Maryland, custody

AR: No Liability for Errors in Judgment or Unsettled Questions of Law

Posted on May 13, 2011 by Krishna Shah

Evans v. Hamby, 2011 Ark. 69 (February 17, 2011)

Facts: Evans sued his former attorneys alleging that they failed to raise the defense of usury and failed to advise him to reinstate a corporate charter. Defendants argued that they committed no malpractice, since the defense of usury-- according to their understanding of the law, was not applicable and, under the statutory scheme at the time, reinstating the corporate charter would have been fruitless.

Issue: Could Evans pursue his claims for malpractice?

Ruling: No.

An attorney is not liable to a client when, acting in good faith, that attorney makes mere errors of judgment. Moreover, an attorney is not, as a matter of law, liable for a mistaken opinion on a point of law that has not been settled by the highest court of jurisdiction and on which reasonable attorneys may differ.

The Court held that the attorneys' conclusion that the defense of usury was not applicable was reasonable, since Evans himself selected the interest rate at issue.

With regard to reinstatement of the corporate charter, the Court noted that the statute allowing corporations to reinstate their charter would have been applicable until July 30, 1999-- several months after plaintiff's corporation lost its authority to do business in Arkansas.

The Court explained that Evans' argument that the statute might have had retroactive effect was not enough to avoid summary judgment in favor of Defendants:

An attorney is not, as a matter of law, liable for a mistaken opinion on a point of law that has not been settled by a court of the highest jurisdiction and on which reasonable attorneys may have different opinions. This court has never settled the issue of the retroactive application of Act 522 before its effective date. For that reason alone, it is clear to this court that Jerry Evans cannot prove that Hamby's conduct fell below the generally accepted standard of practice and proximately caused his damages. While Hamby could have advised Jerry Evans that the option to reinstate the charter may be available to him, this fact alone is too tenuous to support proximate cause for legal malpractice.

***

Retroactivity is a matter of legislative intent. Unless it expressly states otherwise, we presume the legislature intends for its laws to apply only prospectively.

Lesson: An attorney will not be liable for strategic decisions made with reasonable professional judgement and analysis, unsettled questions of law, or laws that went into effect after the alleged negligence.

Tags: Arkansas, Standard of Care

Aggregate Settlements: A Lawyer's Duty under R.P.C. 1.8(g)

Posted on May 11, 2011 by Krishna Shah

The Tax Authority, Inc. v. Jackson Hewitt, Inc., 187 N.J. 4 (2006)

NJ Underlying Commercial Action

Student Contributor: Melissa Goldberg

Facts: This is an appeal from the decision of the N.J. Superior Court enforcing a settlement agreement. Franchisees sued Jackson Hewiit for improperly retaining funds in a loan risk pool after delinquent loans had been paid. A settlement agreement was reached between the attorneys for the franchisees and Jackson Hewitt, but certain of the franchisees refused to sign, and brought suit against their attorney for conducting an improper "aggregate settlement" by allocating settlement awards without prior settlement authority from each individual plaintiff for his or her award in violation of R.P.C. 1.8(g) which provides:

A lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients, or in a criminal case an aggregated agreement as to guilty or no contest pleas, unless each client gives informed consent after a consultation that shall include disclosure of the existence and nature of all the claims or pleas involved and of the participation of each person in the settlement.

Issue: Did the attorney's decision to allocate a lump sum settlement offer amongst his clients, without previously obtaining a release from each individual client, constitute an aggregate settlement in violation of R.P.C. 1.8(g)?

Ruling: Yes, however, the Court held that its ruling would be applied prospectively. The Supreme Court of New Jersey defined an aggregate settlement as one where an attorney negotiates a settlement for a group of claimants directly with the defendants and then allocates individual awards to each claimant. The Court held that no claimant should be bound without full disclosure and specific agreement. As such, where an attorney does wish to settle a multi-claimant matter in the aggregate, he must advise each claimant of the proposed settlement with the defendant, his proposed division of the proceeds, and obtain each claimant’s consent.

Given that this was the Supreme Court’s first opportunity to interpret R.P.C. 1.8(g), and that the franchisee’s counsel made a plausible, although incorrect, effort to have all franchisees agree to be bound by a majority vote, the Court deemed it fair to enforce the aggregate settlement against the franchisees and apply its holding prospectively.

Lesson: R.P.C 1.8(g) requires that an attorney entering into an "aggregate settlement" on behalf of his clients first advise each of his clients of (1) the lump sum offer by the defendant; (2) explain the allocation of that lump sum offer to the individual plaintiffs in the class action; and (3) obtain independent consent from each plaintiff for the aggregate settlement prior to finalizing the settlement and distributing the awards.

Tags: New Jersey, Commercial, R.P.C. 1.8(g), Rules of Professional Conduct (RPCs), aggregate settlement

NJ: Is it Safe to Exit?

Posted on May 9, 2011 by Krishna Shah

Fraser v. Bovino, 317 N.J.Super. 23 (App. Div. 1998).

Student Contributor: Lisa Larato

NJ Underlying Real Estate/Land Use Transaction

Facts: A deal for the sale of land fell through due to delays caused by challenges to the municipal approval of a condominium project. The real estate agent (Fraser) and the landowners (Genlaws) brought an action against the adjoining landowner (Defendant Bovino) who objected to the condominium project, his attorney, and others involved in ruining the deal. Fraser asserts that Bovino’s attorney (Allen) committed malpractice and acted unethically. The Genlaws also filed a claim against their attorneys Martini and Blessing who had been retained to prosecute their action against Bovino and his attorney.

The only claims still viable for the Genlaws were those which fell under the six year statute of limitations. It was undisputed that the attorneys returned the Genlaws’ file to them a few weeks before this statute of limitations expired, on January 28, 1997. The complaint, however, was not filed until April 25, 1997.

The Superior Court, Law Division, granted summary judgment to certain defendants in both actions. Appeals were filed and consolidated.

Issues: (1) Is Bovino’s attorney liable to the real estate agent, Fraser, for legal malpractice? (2) Are Martini and Blessing liable to the Genlaws for failure to file a timely complaint?

Ruling: (1) Bovino’s attorney (Allen), representing an individual who contested the proposed land use application, did not owe Fraser, the broker, even a limited duty of care. (2) Since Martini and Blessing returned the Genlaws’ file to them several weeks before the statute of limitations on their claims expired, their withdrawal from representation did not adversely affect the clients’ interests so as to warrant liability.

Lesson: Allen, who was not Fraser’s attorney, but the attorney of his adversary, did not owe Fraser any level of a duty of care so as to make him liable to Fraser under a professional malpractice claim.
Under New Jersey Rule of Professional Conduct 1.16, Martini and Blessing did not commit malpractice because they (1) did not wait for the statute of limitations to run before withdrawing, and (2) left enough time for the Genlaws to file their complaint within the statute of limitations. That the Genlaws failed to timely file their complaint, was entirely their own negligence, and bore no relation to the decision of Martini and Blessing to withdraw as counsel in a timely manner.
Editor's Note: In all cases, make sure that before withdrawing, there is a reasonable amount of time left for the client to get substitue counsel to file a complaint before the statute of limitations runs. If it's getting close, consider a pro se complaint for the client thus giving the client even more time to get new counsel and thereby preventing the client's claim from becoming time barred. Do what is reasonable to help the client preserve their cause of action if you're not going to continue with representation, at least until they get new counsel.

Tags: New Jersey, Disengagement

NJ: No Privity, No Problem

Posted on May 5, 2011 by Krishna Shah

Rathblott v. Levin, 697 F. Supp. 817 (D.C. N.J. 1988)

NJ Underlying Probate Action

Student Contributor: Christopher S. Henn

Facts: The decedent, an attorney, suffered esophageal cancer for ten years until his passing. During his final days he executed several wills with the aid of the defendant, a partner in the decedent’s law firm. The last will was unsuccessfully challenged by the decedent’s children from his former marriage against his wife.

The wife, who had been successful in the underlying probate action, alleged that the defendant had been negligent in preparing the wills by (1) failing to establish testamentary capacity, and (2) by choosing Florida as decedent’s domicile instead of New Jersey. Due to this alleged negligence, the plaintiff averred that she suffered expenses in defending the will contest that effectively nullified her husband’s estate.

On plaintiff's motion for summary judgment, the defendant’s primary defense was that he owed no duty to the plaintiff, since she had no attorney-client relationship with him.

Issue: Whether the lack of privity is a defense to a legal malpractice action?

Ruling: The United States District Court, District of New Jersey recognized that:

[a] defendant owes a duty of care to take reasonable measures to avoid the risk of causing economic damages…to particular plaintiffs…comprising an identifiable class with respect to whom defendant knows or has reason to know are likely to suffer such damages from its conduct.

***

[There is no] valid legal difference between a plaintiff who loses the right to one-half of an estate and a plaintiff who loses one-half of an estate in protecting her rights. If either was caused by an attorney's negligence in drafting, that attorney should be liable.

The Court qualified its holding to the facts of this particular case and provided:

The extent to which this opinion represents an expansion of the exception to the privity requirement stems wholly from the unusual facts in this case…

Lesson: If an attorney knows or should know that individuals other than his client will suffer damages as a result of his negligence on a particular matter, he may be held responsible for their losses despite the lack of an attorney-client relationship.

Tags: Federal, New Jersey, Attorney-client relationship, Privity, Wills Trusts & Estates, duties to third parties, liability to non-clients, third party liabililty

MS: When Does the Clock Start to Tick?

Posted on May 4, 2011 by Krishna Shah

Bennett v. Hill-Boren, P.C., 52 So. 3d 364 (Miss. 2011).

Facts: Plaintiff sued former attorney for malpractice. Attorney argued that the statute of limitations had expired and plaintiffs' claim should be dismissed. Plaintiff argued that the statute of limitations doesn't begin to run until the attorney's representation ends.

Issue: When did the statute of limitations begin to run?

Ruling: Mississippi does not follow the "continuous representation doctrine." Consequently, the statute of limitations begins to run on the date that the plaintiff learns, or through reasonable diligence, should have learned, of the negligence of the lawyer:

The discovery rule will toll the statute of limitations until a plaintiff should have reasonably known of some negligent conduct, even if the plaintiff does not know with absolute certainty that the conduct was legally negligent.

Lesson: In Mississippi, the three year statute of limitations will begin to run on the date the client reasonably should have known that the lawyer was negligent.

Tags: Discovery Rule, Mississippi, Statute of Limitations

RLGL §122 Client Consent to a Conflict of Interest

Posted on April 29, 2011 by Ben Wasserman

Restatement of the Law Governing Lawyers (ALI, 2000)

§ 122. Client Consent to a Conflict of Interest

(1) A lawyer may represent a client notwithstanding a conflict of interest prohibited by §121 if each affected client or former client gives informed consent to the lawyer’s representation. Informed consent requires that the client or former client have reasonably adequate information about the material risks of such representation to that client or former client.
(2) Notwithstanding the informed consent of each affected client or former client, a lawyer may not represent a client if:
(a) the representation is prohibited by law;
(b) one client will assert a claim against the other in the same litigation; or
(c) in the circumstances, it is not reasonably likely that the lawyer will be able to provide adequate representation to one or more of the clients.

Tags: Conflicts of Interest, Restatement of the Law Governing Lawyers

RLGL §§ 123-124 Imputation of Conflicts and Removing Imputations

Posted on April 28, 2011 by Ben Wasserman

Restatement of the Law Governing Lawyers (ALI, 2000)

§ 123. Imputation of a Conflict of Interest to an Affiliated Lawyer

Unless all affected clients consent to the representation under the limitations and conditions provided in § 122 or unless imputation hereunder is removed as provided in § 124, the restrictions upon a lawyer imposed by §§ 125-135 also restrict other affiliated lawyers who:
(1) are associated with that lawyer in rendering legal services to others through a law partnership, professional corporation, sole proprietorship, or similar association;
(2) are employed with that lawyer by an organization to render legal services either to that organization or to others to advance the interests or objectives of the organization; or
(3) share office facilities without reasonably adequate measures to protect confidential client information so that it will not be available to other lawyers in the shard office.

§ 124. Removing Imputation

(1) Imputation specified in § 123 does not restrict an affiliated lawyer when the affiliation between the affiliated lawyer and the personally prohibited lawyer that required the information has been terminated, and no material confidential information of the client, relevant to the matter, has been communicated by the personally prohibited lawyer to the affiliated lawyer or that lawyer’s firm.
(2) Imputation specified in § 123 does not restrict an affiliated lawyer with respect to a former-client confidential information of the former client will be used with material adverse effect on the former client because:
(a) any confidential client information communicated to the personally prohibited lawyer is unlikely to be significant in the subsequent matter;
(b) the personally prohibited lawyer is subject to screening measures adequate to eliminate participation by that lawyer in the representation; and
(c) timely and adequate notice of the screening has been provided to all affected clients.
(3) Imputation specified in § 123 does not restrict a lawyer affiliated with a former government lawyer with respect to a conflict under § 133 if:
(a) the personally prohibited lawyer is subject to screening measures adequate to eliminate involvement by that lawyer in the representation; and
(b) timely and adequate notice of the screening has been provided to the appropriate government agency to affected clients.

Tags: Conflicts of Interest, Restatement of the Law Governing Lawyers

RLGL §§44-46 Client Property: Safeguarding, Segregating and Surrendering

Posted on April 27, 2011 by Ben Wasserman

Restatement of the Law Governing Lawyers (ALI, 2000)

§ 44. Safeguarding and Segregating Property

(1) A lawyer holding funds or other property of a client in connection with a representation, or such funds or other property in which a client claims an interest, must take reasonable steps to safeguard the funds or property. A similar obligation may be imposed by law on funds or other property so held and owned or claimed by a third person. In particular, the lawyer must hold such property separate from the lawyer’s property, keep records of it, deposit funds in an account separate from the lawyer’s own funds, identify tangible objects, and comply with related requirements imposed by regulatory authorities.
(2) Upon receiving funds or other property in a professional capacity and in which a client or third person owns or claims an interest, a lawyer must promptly notify the client or third person. The lawyer must promptly render a full accounting regarding such property upon request by the client or third person.

§ 45. Surrendering Possession of Property

(1) Except as provided in Subsection (2), a lawyer must promptly deliver, to the client or nonclient so entitled, funds or other property in the lawyer’s possession belonging to a client or nonclient.
(2) A lawyer may retain possession of funds or other property of a client or nonclient if:
(a) the client or nonclient consents;
(b) the lawyer’s client is entitled to the property, the lawyer appropriately possesses the property for purposes of the representation, and the client has not asked for delivery of the property;
(c) the lawyer has a valid lien on the property (see § 43);
(d) there are substantial grounds for dispute as to the person entitled to the property; or
(e)delivering the property to the client or nonclient would violate a court order or other legal obligation of the lawyer.

§ 46. Documents Relating to a Representation

(1) A lawyer must take reasonable steps to safeguard documents in the lawyer’s possession relating to the representation of a client or former client.
(2) On request, a lawyer must allow a client or former client to inspect and copy any document possessed by the lawyer relating to the representation, unless substantial grounds exist to refuse.
(3) Unless a client or former client consents to nondelivery or substantial grounds exist for refusing to make delivery, a lawyer must deliver to the client or former client, at an appropriate time and in any event promptly after the representation ends, such originals and copies of other documents possessed by the lawyer relating to the representation as the client or former client reasonably needs.
(4) Notwithstanding Subsections (2) and (3), a lawyer may decline to deliver to a client or former client an original or copy of any document under circumstances permitted by § 43(1).

Tags: Restatement of the Law Governing Lawyers

RLGL §§61-67: Using or Disclosing Confidential Information from Prospective Clients

Posted on April 26, 2011 by Ben Wasserman

Restatement of the Law Governing Lawyers (ALI, 2000)

§ 61. Using of Disclosing Information to Advance Client Interests

A lawyer may use or disclose confidential client information when the lawyer reasonably believes that doing so will advance the interests of the client in the representation.

§ 62. Using or Disclosing Information with Client Consent

A lawyer may use or disclose confidential client information when the client consents after being adequately informed concerning the use or disclosure.

§ 63. Using or Disclosing Information When Required by Law

A lawyer may use or disclose confidential client information when required by law, after the lawyer takes reasonably appropriate steps to assert that the information is privileged or otherwise protected against disclosure.

§ 64. Using or Disclosing Information in a Lawyer’s Self-Defense

A lawyer may use or disclose confidential client information when and to the extent that the lawyer reasonably believes necessary to defend the lawyer or the lawyer’s associate or agent against a charge or threatened charge by any person that the lawyer or such associate or agent acted wrongfully in the course of representing a client.

§ 65. Using or disclosing Information in a Compensation Dispute

A lawyer may use or disclose confidential client information when and to the extent that the lawyer reasonably believes necessary to permit the lawyer to resolve a dispute with the client concerning compensation or reimbursement that the lawyer reasonably claims the client owes the lawyer.

§ 66. Using or Disclosing Information to Prevent Death or Serious Bodily Harm

            (1) A lawyer may use or disclose confidential client information when the lawyer reasonably believes that its use or disclosure is necessary to prevent reasonably certain death or serious bodily harm to a person.

            (2) Before using or disclosing information under this Section, the lawyer must, if feasible, make a good-faith effort to persuade the client not to act. If the client or another person has already acted, the lawyer must, if feasible, advise the client to warn the victim or to take other action to prevent the harm and advise the client of the lawyer’s ability to use or disclose information as provided in this Section and the consequences thereof.

            (3) A lawyer who takes action or decides not to take action permitted under this Section is not, solely by reason of such action or inaction, subject to professional discipline, liable for damages to the lawyer’s client or any third person, or barred from recovery against a client or third person.

§ 67. Using or Disclosing Information to Prevent, Rectify, or Mitigate Substantial Financial Loss

            (1) A lawyer may use or disclose confidential client information when the lawyer reasonably believes that its use or disclosure is necessary to prevent a crime or fraud, and:

                        (a) the crime or fraud threatens substantial financial loss;

                        (b) the loss has not yet occurred.

                        (c) the lawyer’s client intends to commit the crime or fraud either personally or through a third person; and

            (d) the client has employed or is employing the lawyer’s services in the matter in which the crime or fraud is committed.

(2) If a crime or fraud described in Subsection (1) has already occurred, a lawyer may use or disclose confidential client information when the lawyer reasonably believes its use or disclosure is necessary to prevent, rectify, or mitigate the loss.

(3) Before using or disclosing information under this Section, the lawyer must, if feasible, make a good-faith effort to persuade the client not to act. If the client or another person has already acted, the lawyer must, if feasible, advise the client to warn the victim or to take other action to prevent, rectify, or mitigate the loss. The lawyer must, if feasible, also advise the client of the lawyer’s ability to use or disclose information as provided in this Section and the consequences thereof.

(4) A lawyer who takes action or decides not to take action permitted under this Section is not, solely by reason of such action or inaction, subject to professional discipline, liable for damages to the lawyer’s client or any third person, or barred from recovery against a client or third person.

Tags: Duties: Confidentiality, Restatement of the Law Governing Lawyers

RLGL §15 A Lawyer's Duties to Prospective Client

Posted on April 25, 2011 by Ben Wasserman

Restatement of the Law Governing Lawyers (ALI, 2000)

§ 15. A Lawyer’s Duties to a Prospective Client

(1) When a person discusses with a lawyer the possibility of their forming a client-lawyer relationship for a matter and no such relationship ensues, the lawyer must:

(a) Not subsequently use or disclose confidential information learned in the consultation, except to the extent permitted with respect to confidential information of a client or former client as stated in §§ 61-67;

(b) Protect the person’s property in the lawyer’s custody as stated in §§ 44-46; and

(c) Use reasonable care to the extent the lawyer provides the person legal services.

(2) A lawyer subject to Subsection (1) may not represent a client whose interests are materially adverse to those of a former prospective client in the
same or a substantially related matter when the lawyer or another lawyer whose disqualification is imputed to the lawyer under §§ 123 and 124 has received from the prospective client confidential information that could be significantly harmful to the prospective client in the matter, except that such a representation is permissible if:

(a) (i) any personally prohibited lawyer takes reasonable steps to avoid exposure to confidential information other than information appropriate to determine whether to represent the prospective client, and (ii) such lawyer is screened as stated in § 124(2)(b) and (c); or

(b) both the affected client and the prospective client give informed consent to the representation under the limitations and conditions provided under § 122.

Editors Note: To see each of the RLGL sections mentioned here, just scroll up to the next days.

Tags: Prospective Clients, Restatement of the Law Governing Lawyers

IL: Suicide as a Proximate Cause of Lawyer Malpractice? No Way!

Posted on April 22, 2011 by Ben Wasserman

Cleveland v. Rotman, 297 F. 3d 569 (7th Cir. 2002)

IL: Underlying tax advice

Greycas, Inc. v. Proud, 826 F. 2d 1560 (7th Cir. 1987)

Facts: In 1996 Cleveland retained Rotman for advice in resolving the tax dispute. At the time, Cleveland's therapist informed Rotman of Cleveland's poor financial status, his severe depression, and his suicidal tendencies. Rotman advised Cleveland that he needed to file tax returns for a 10-year period, but Cleveland claimed that he was unable to calculate his income and expenses for this period because his financial records had been lost during office moves and discarded by others during divorce proceedings. As a result, it is alleged that Rotman told Cleveland to estimate his income and expenses for the relevant years. Apparently, Cleveland's estimates did not agree with IRS figures and the IRS decided to audit him again. On January 26, 1998, shortly before the audit was scheduled to take place, Cleveland shot himself in the head. Cleveland's estate alleges that Rotman committed malpractice, which triggered the IRS's proposed 1998 audit, which in turn triggered Cleveland's suicide. The estate argues that the district court erred in ruling that, as a matter of law, a plaintiff's allegations were insufficient under Rule 12(b)(6).

Issue: Whether under Illinois law a plaintiff may recover for a decedent's suicide following a breach of contract?

Ruling: No. It is well-established under Illinois law that a plaintiff may not recover for a decedent's suicide following a tortious act because suicide is an independent intervening event that the tortfeasor cannot be expected to foresee. The 7th circuit agreed with the district court and found this rationale equally applicable in the contract context and therefore dismissed the estate's claims arising from Cleveland's suicide. Cleveland's suicide was an independent intervening event that broke the chain of causation from Rotman's alleged malpractice to Cleveland's death. Cleveland was an adult, and the estate has not alleged that he was mentally unstable. Essentially, Cleveland's estate seeks to impose on Rotman a duty to foresee and avoid a client's suicide. Although an Illinois court imposed such a duty on a psychiatrist who knew of his patient's history of suicidal depression and yet failed to protect the patient from self-harm, the estate here points to no case law extending such a duty to the attorney-client context. Because of the differences between the psychiatrist-patient relationship and the attorney-client relationship, we see no justification for extending such a duty to attorneys. Psychiatrists are health care professionals trained to care for their patients' mental and emotional health. By contrast, attorneys are medical laypeople who cannot be reasonably expected to anticipate the mental health consequences of their legal advice.

Lesson: Lawyer’s cannot be liable for a client’s suicide as a result of their giving of poor legal advice. A client’s suicide is unforeseeable because attorneys are not trained medical practitioners; and therefore, should not be responsible for foreseeing a client’s likelihood of committing suicide.

Tags: Federal, Illinois, Proximate Cause, forseeability, suicide, tax advice

IL: Lawyer Duty of Care to Adversaries--Privity No Bar to Liability

Posted on April 21, 2011 by Ben Wasserman

Underlying loan transaction--duty to adversary

Aaron v. Mansell, 854 So.2d.96 (2003).

Facts: Theodore S. Proud, Jr., a member of the Illinois bar who practices law in a suburb of Chicago, appeals from a judgment against him for $833,760, entered after a bench trial. The original plaintiff, Wayne Crawford, like Proud was a lawyer but devoted most of his attention to a large farm that he owned in downstate Illinois. The farm fell on hard times and by 1981, Crawford was in dire financial straits. He had pledged most of his farm machinery to lenders, yet now desperately needed more money. He approached Greycas, Inc., the plaintiff in this case, a large financial company headquartered in Arizona, seeking a large loan that he offered to secure with the farm machinery. He did not tell Greycas about his financial difficulties or that he had pledged the machinery to other lenders, but he did make clear that he needed the loan in a hurry. Greycas obtained several appraisals of Crawford's farm machinery but did not investigate Crawford's financial position or discover that he had pledged the collateral to other lenders, who had perfected their liens in the collateral. Greycas agreed to lend Crawford $1,367,966.50, which was less than the appraised value of the machinery. Crawford was required to submit a letter to Greycas, from counsel whom he would retain, assuring Greycas that there were no prior liens on the machinery that was to secure the loan. Crawford asked Proud to prepare the letter, and he did so, and mailed it to Greycas, and within 20 days of the first contact between Crawford and Greycas the loan closed and the money was disbursed. A year later Crawford defaulted on the loan; shortly afterward he committed suicide. Greycas then learned that most of the farm machinery that Crawford had pledged to it had previously been pledged to other lenders.

Issues: Does a lawyer have a duty of care to an adversary’s client when the primary purpose and intent of the attorney-client relationship itself was to benefit or influence the third party?

Ruling: Yes. By addressing a letter to Greycas intended to induce reliance on the statements in it, Proud made himself prima facie liable for any material misrepresentations, careless or deliberate, in the letter, whether or not Proud was Crawford's lawyer or for that matter anyone's lawyer. Knowing that Greycas was relying on him to determine whether the collateral for the loan was encumbered and to advise Greycas of the results of his determination, Proud negligently misrepresented the situation, to Greycas's detriment. Crawford hired Proud not only for the primary purpose, but for the sole purpose, of influencing Greycas to make Crawford a loan; and therefore, is liable under Illinois law for legal malpractice.

Lesson: Privity, normally required as a pre-requisite to attorney liability, is not a bar where the adverse party relied on the lawyer's representations to its detriment. The duty of care and candor extends even to adverse parties where the lawyer knows that the adversary will rely on his/her representations to its determiment.

Tags: Federal, Illinois, Commercial, Duties: Investigate, Duty of Candor, Duty to adversary, Duty to adverse party, Standard of Care, duty, duty of diligence, of

AL: Timely filing for prison inmates

Posted on April 20, 2011 by Ben Wasserman

AL: Underlying criminal case

Hasty Hills Stables, Inc. v. Dorfman, Lynch, Knoebel & Conway, LLP, 52 A.D.3d 566, 860 N.Y.S.2d 182 (App. Div. 1st Dep’t 2008).

Facts: Client hired Attorney. Client, now acting pro se, sues Attorney for legal malpractice and slander. Attorney filed an answer and denied both of Client’s allegations. Attorney cross-filed for summary judgment. Client filed a request for oral argument for evidentiary hearing, a motion for declaratory judgment or in the alternative a trial by jury. Court denies client's cross-motion for summary judgment. Client did not file an appeal; instead he filed a “motion/request to file out-of-time appeal.” He asserted that the clerk’s office did not mail his copy of the entry of judgment. The court entered summary judgment in favor of Attorney. Client now appeals.

Issue: Whether the trial court correctly entered summary judgment against Client?

Ruling: Yes. The court dismissed Client’s appeal because Client did not provide an affidavit or other notarized statement that shows the date he sent his notice of appeal in the mail. The certificate of service for the notice of appeal is not dated. It is referenced to “this day.” Therefore the court cannot determine which date he deposited his notice of appeal.

Lesson: If a prison inmate is confined in an institution and is acting pro se and files either a civil or criminal appeal, the notice will be considered as filed timely if it is placed in the institution’s internal mail system on or before the, last day for filing. If an institution processes its legal mail through USPS, then the inmate must use that system to receive the rule’s benefit. A notarized statement setting forth the date of filing can prove a timely filing. Rule 4(c), Ala. R. App. P.

Tags: Alabama, Criminal Law, Defenses, Litigation, pro se

NY: Continuous Representation in Unrelated Matters Will Not Toll Statute of Limitations

Posted on April 19, 2011 by Ben Wasserman

NY: Underlying real estate matter

Student contributor: Nicole Milone

Facts: Hasty Hills Stables, Inc. (Hasty Hills) obtained Dorfman, Lynch, Knoebel & Conway, LLP (law firm) to represent them in the purchase of real estate in 1996. Hasty Hills sought to obtain a 50-year lease on the land, and believed the law firm drafted the contract to their desires. However, in July 2001, the lessor sold the land to a new owner. The new owner then utilized a defeasance clause in the contract which allowed them to terminate the lease. Hasty Hills was evicted in May 2003. They brought this action for malpractice in January 2005.

Issue: Whether the three-year statute of limitations on a legal malpractice claim should be tolled for continuous representation of the client by the attorney?

Ruling: No. The continuous representation of Hasty Hills by the law firm was unrelated to the issue that gave rise to a malpractice claim. The statute of limitations for this legal malpractice claim expired in 1999, three years after the law firm represented Hasty Hills in connection with the sale of real estate. The subsequent representation was unrelated to this sale.

Lesson: The three-year statute of limitation on a legal malpractice claim can be tolled under the doctrine of “continuous representation” only if the attorney continues to represent the client in the same matter that the alleged malpractice occurred.

Tags: New York, Commercial, Real Estate, Statute of Limitations, continuous representation doctrine

NY: Hearst Heir in Legal Malpractice Claim Alleges Undue Influence

Posted on April 18, 2011 by Ben Wasserman

Hearst v. Hearst, 50 A.D.3d 959, 857 N.Y.S.2d 596 (App. Div. 2d Dep’t 2008).

NY: Underlying divorce case and undue influence claim

Student Contributor: Nicole Milone

Facts: John Randolph Hearst, Jr. (John) suffered a stroke in 1989. He was married to Barbara in 1990. When Barbara filed for divorce in 2004, John discovered that she and their attorney, Leonard Ackerman, allegedly defrauded him of over $20 million in investments. John claimed his wife and lawyer asserted undue influence on him, which he was susceptible to due to his stroke.

Issue: Is there a triable issue of fact as to whether Barbara asserted undue influence over John with respect to their investments? Did John state a prima facie case of legal malpractice against Ackerman such that summary judgment dismissing the claim was improper?

Ruling: Yes and yes. John raised a triable issue of fact as to Barbara’s undue influence with evidence that she transferred finances from joint accounts to accounts under her control only. The court found that there is an issue here as to whether Barbara was acting within John’s best interests. The court also found that there is sufficient to support a legal malpractice claim against Ackerman. John introduced evidence that Ackerman aided Barbara in the misuse of John’s assets.

Lesson: A client can survive a summary judgment claim if they raise a triable issue of fact with respect to the legal malpractice cause of action.

Tags: New York, Conflicts of Interest, Family Law, Wills Trusts & Estates, conspiracy, undue influence

UT: Retainers & Disengagement Letters, Key to Avoiding Malpractice Suits

Posted on April 15, 2011 by Krishna Shah

Lundberg v. Backman, 11 Utah 2d 330 (1961).

Student Contributor: Manju Sunny

Facts: Plaintiff alleges that her former attorney was negligent by failing to file a motion for a new trial within the time prescribed by law. She further alleges that she relied upon her attorney to do this and his failure to do so caused her to lose her opportunity to have the trial court reverse its prior decision. Defendant responds that the parties never entered into an agreement with regard to appeals. To the contrary, he states that he advised his former client that he would not represent her on any appeal. This, despite the fact that he did not formally withdraw as her attorney until after the time for appeal had run.

Issue: What, if anything, did the attorney do wrong?

Ruling: Nothing.

As a general rule, implied authority of an attorney ends with the entry of a final judgment in the trial court. While there are some exceptions to this rule, it has been held that an attorney will not be held liable for failure to take proceedings for the review of a case unless he has been directed to do so, and he has agreed to and accepted that duty.

In this case, there was no agreement by the attorney to represent the client on an appeal of her case. Consequently, the fact that the attorney did not formally withdraw until after the time to file an appeal had run was of no significance. In fact, the relationship between the attorney and the client terminated upon entry of the final judgment.

Lesson: In Utah, attorneys appear to be under no obligation to bring an appeal on behalf of a client unless there is an agreement that they have agreed to and accepted such a duty. Nevertheless, the safest option would be to spell out in the retainer agreement and/or a timely disengagement letter that the attorney client relationship will end upon entry of a final judgment to avoid the possibility of confusion.

Tags: Disengagement, Engagement, Utah

OH: Promises Don't Lead to Privity

Posted on April 13, 2011 by Krishna Shah

Kathy Lynn Darrow v. Steven E. Zigan, Esq., et al., 2009 Ohio 2205

Student Contributor: Shiv Vydyula

Facts: Plaintiff contends that she was a third party beneficiary in the underlying divorce action, and therefore, in privity with the defendant attorney. By way of explanation, she provided that the attorney for her ex-husband told her he would draft the necessary documents to quit-claim the husband’s interest in their marital residence and prevent her from exposure to the home equity loan the ex-husband took before their marriage.

Ultimately, a collector placed a lien on the property. Plaintiff then filed suit claiming she was a third party beneficiary because she relied on opposing counsel’s promise to draft documents that would release her from liability on the loan.

Issue: Does opposing counsel’s promise to complete a quit-claim deed create a privity sufficient to pursue a claim for legal malpractice?

Ruling: No.

In Ohio, attorneys have qualified immunity against the claims of third parties which arise from actions taken while representing their clients...Unless a third party can establish that it is in privity with the client, or that the attorney acted with malice, the attorney is not liable to the third party.

In line with precedent, the controlling factor here was that there was no attorney-client relationship between the attorney and the plaintiff. Nor was there any privity because their interests were clearly at odds.

Lesson: A promise made by opposing counsel is not sufficient to satisfy the burden of privity in an Ohio legal malpractice action.

Tags: Ohio, Privity, duties to third parties

CT: Client Can't Avoid SOL by Disguising Tort As Breach of Contract

Posted on April 8, 2011 by Ben Wasserman

Caffery v. Stillman, 79 Conn. App. 192, 829 A.2d 881 (Conn. App. 2003)

CT: Underlying workers’ compensation action

Pashak v. Barish, 303 Pa. Super. 559, 450 A.2d 67 (1982).

Facts: On April 16, 1992, the client sustained injuries while working in the course of his employment for the city of New Britain. The client hired the lawyer to represent him in his workers’ compensation case in 1994. The case settled for $95,000. In 1997, the client sued the lawyer for legal malpractice for failing to adequately represent his case because the client felt he was entitled to more money. The court dismissed the case because the client had not first sought to re-open the workers’ compensation claim. The client then re-opened the workers’ compensation case and the court affirmed the original settlement amount. In 1999, the client again sued the lawyer for legal malpractice for negligence and breach of contract.

Issues: (1) Can the client’s claim be saved by the accidental failure of suit statute? (2) Do the allegations set forth a claim in contract or in tort?

Ruling: (1) No. §52-592, the accidental failure statute, provides that “a plaintiff must file an action for the same cause at any time within one year after the determination of the original action . . .” In this case, more than one year had passed between the date the court dismissed the client’s original action in 1997 and the date when this action was brought in 1999.

(2) The second claim was no more than a tort disguised in contract language. A client may not bring an action in both negligence and contract simply by saying that a lawyer breached the standard of care in the language of his employment contract. In this case, the client alleged that the lawyer had promised to bring a liability action against the city, and that the promise to bring such an action was premised on an inaccurate understanding of the law. The client claims that this incorrect understanding of the law caused him to suffer damages. Thus, the client’s allegation that the lawyer breached his contract by failing to meet the standard of care is in reality a negligence claim.

Lesson: The tort statute of limitations is three years, while a breach of contract statute of limitations does not run for six years. In this case, the client sought to avoid the statute of limitations by sounding his claim in contract rather than tort. This does not often work because the courts are very careful to delineate between tort and contract claims.

Tags: Connecticut, Statute of Limitations, Torts/Personal Injury

PA: Speculative and Remote Claims Do Not Amount to a Cause of Action for Legal Malpractice

Posted on April 6, 2011 by Ben Wasserman

PA: Underlying negligence action

Oliver v. Towns, 738 So.2d 798 (1999).

Facts: Mr. Pashak was injured working as a longshoreman. He sued the ship’s owner for negligence, claiming that the ship was unseaworthy. Mr. Pashak hired some lawyers who recommended that he settle the case out of court for $100,000. Mr. Pashak agreed to settle the case. He was later notified that contrary to his lawyers’ advice, his statutory compensation benefits would be ended because of the settlement. When Mr. Pashak’s wife found out that she also would not be able to collect statutory compensation benefits as a result of the settlement, she sued the lawyers for legal malpractice. The lawyers defended themselves on the basis that Mrs. Pashak’s loss was too speculative and remote to justify her winning her case against the lawyers. The trial court agreed with the lawyers and dismissed Mrs. Pashak’s complaint with prejudice.

Issue: Was Mrs. Pashak’s loss too speculative and remote to justify her winning a legal malpractice case against her husband’s lawyers?

Ruling: Yes. The court reasoned that a mere breach of professional duty, causing only speculative damage or the threat of future damage is not enough to create a feasible cause of action of legal malpractice. In this case, Mrs. Pashak’s right to compensation would not become available until Mr. Pashak died. Thus, Mrs. Pashak’s right to the benefit was dependent upon her surviving him, and the amount of money she would receive was also dependent on whether the couple had children. Since there were so many conditions placed upon her receipt of the benefits, the court held that Mrs. Pashak’s claim was did not rise to the level of harm necessary in a legal malpractice lawsuit.

Lesson: To give rise to a legal malpractice claim, identifiable harm must exist. “The mere possibility or even probability that the plaintiff will sustain an injury at some future time does not alter the speculative nature of the damage claim or support a cause of action for legal malpractice…damages are speculative only if the uncertainty concerns the fact of damages rather than the amount.” R. Mallen & V. Levitt, Legal Malpractice § 302 (2d ed. 1981).

Tags: Pennsylvania, Damages, Torts/Personal Injury, speculative damages

Title: AL: Punitive Damages in a Legal Malpractice Case

Posted on March 29, 2011 by Ben Wasserman

AL: Underlying personal injury action

Kopulos v. Scott, Court of Appeals of Michigan, February 2011

Facts: Client hired Attorney to represent her in a personal injury action after being involved in an automobile accident. She signed a contingency fee contract that provided for the Attorney to receive 40% of any settlement, in return for Attorney’s legal services. Attorney settled the case for $12,000. Client filed a legal malpractice action against Attorney alleging breach of contract, fraud, deceit, and misrepresentation. Attorney allegedly failed to inform Client of the settlement, cashed the settlement check without Client’s consent, and failed to transfer any of the settlement proceeds to Client. The trial court awarded Client $500,000 in compensatory damages and $1 million in punitive damages. Attorney made a motion that the judge recuse himself from the case and another motion for a thorough review of the damages and award for excessiveness. The trial court denied both motions. Attorney appeals.

Issue: Whether the trial court erred in refusing to review the question of excessiveness of the damages?

Ruling: Yes. Attorney properly challenged the amounts of compensatory and punitive damages. Under Ala. Code 1975 § 6-11-20, the court must address whether evidence supporting the punitive award is “clear and convincing.” The court has the duty “to require the trial courts to reflect in the record” the reasons for interfering with an award of damage, on the grounds of excessiveness, or refusing to do so. Hammond v. City of Gadsden, 492 So.2d 374 (Ala. 1986).

Lesson: The trial court must hold a hearing to determine whether a damages award is excessive, upon a timely motion including a request for a hearing on a claim that damages awards are excessive. On remand, the trial court will hold a hearing to consider whether the compensatory award is excessive, whether clear and convincing evidence supports a punitive award, and if so whether the punitive award is excessive.

Tags: Alabama, Damages, Torts/Personal Injury

NY: Selection of Expert Protected by Professional Judgment Defense

Posted on March 24, 2011 by Krishna Shah

Healy v. Finz & Finz PC, 2011 NY Slip Op 1616, App. Div. 2nd Dept., 2011.

Facts: The plaintiffs retained the defendant law firm to represent them in the underlying medical malpractice action, in which they alleged that the doctors should have delivered plaintiffs' surviving babies immediately after learning that one of the three fetuses had died, and that the delay caused injury to one surviving child.

The plaintiffs' expert medical witnesses were unable to testify as to when the injury occurred, however, and the trial court held that the plaintiffs could not establish the proximate cause element of medical malpractice. The appellate court affirmed. Shortly thereafter, plaintiffs filed suit against their former attorneys.

Issues: Were plaintiffs' former attorneys liable for the consequences of the experts' inability to testify to key information?

Ruling: No.

The defendant attorneys presented affidavits from medical experts in the legal malpractice action alleging that the injury would have occurred immediately upon the death of one fetus in any event - a position directly adverse to that of their former client in the medical malpractice action. The Court allowed this, and in support of its decision to grant summary judgment to the defendants, provided:

Attorneys are free to select among reasonable courses of action in prosecuting clients' cases without thereby exposing themselves to liability for malpractice...[T]he firm demonstrated that it could not have proven proximate cause in the underlying medical malpractice action, and [] the plaintiffs failed to raise a triable issue of fact in opposition...

Lesson: In New York, the professional judgment rule can serve as a defense to a claim for legal malpractice alleging negligent selection of experts. Further, the Courts will allow the defendant attorneys to submit expert testimony in the legal malpractice action that is directly at odds with the position they advanced on behalf of their client in the underlying action.

Tags: New York, Defenses, Expert Witnesses, professional judgment rule

OH: Expert Necessary to Contest Reasonableness of Attorney's Fees

Posted on March 23, 2011 by Krishna Shah

Fincher v. Phillips, 2011 Ohio 968, Court of Appeals of Ohio, March 4, 2011.

Facts: Phillips represented Fincher in the negotiation of a plea in the underlying criminal matter. Phillips charged Fincher $15,000. After the plea was entered into and Fincher was sentenced to eight years in prison, he sued Phillips for legal malpractice and alleged that his fee was unreasonable.

In an affidavit, Phillips provided an expert opinion that his representation had not breached the standard of care, and that the $15,000 retainer was a reasonable fee that was based on his specialized knowledge, professional skill and judgment. Fincher filed a brief in opposition to the motion, but failed to furnish any contrary expert testimony in support of his claim of unreasonable legal fees.

The trial court ruled in favor of Phillips in light of FIncher's failure to produce an expert report.

Issues: Was expert opinion necessary to contest the reasonableness of Phillips' attorney's fees.

Ruling: Yes.

The Court of Appelas ruled:

The determination of legal fees involves several factors including the time and labor required, the difficulty of the issues involved, and the requisite skill needed to provide the legal service. Prof.Cond.R. 1.5. This is not within the ordinary knowledge of laymen. Establishing malpractice for charging excessive fees clearly necessitates expert testimony.

In his motion for summary judgment, appellee provided expert testimony that the $15,000 retainer was reasonable. Appellant's brief in opposition provided no expert testimony or other evidence refuting this claim. Unopposed expert testimony is sufficient to determine that there is no genuine issue of material fact.

Lesson: In Ohio, the former client will not be able to successfully contest the reasonableness of a claim for unpaid attorney's fees without expert testimony.

Tags: Attorneys Fees, Ohio

NY: Client's Duty to Timely Object to Unreasonable Fees

Posted on March 22, 2011 by Krishna Shah

Morrison Cohen LLP v. Parrish, Supreme Court, New York County, February 9, 2011.

Facts: The Plaintiff law firm filed an action to recover unpaid fees for legal services allegedly performed for the benefit of Defendant Parrish. Parrish argued that plaintiff seeks fees that were not authorized, fees that were excluded from plaintiffs proposed "litigation plan," fees "for activities not required nor requested," and that plaintiff engaged in unnecessary discovery which "generated well over half of what Plaintiff has billed." Defendant argues that the "activities covered by the fees sought by Morrison Cohen constitute negligence," and that he is entitled to a hearing to determine whether the fees "constitute fraud."

Issues: Did the Defendant have any valid affirmative defenses to Plaintiff's claim for unpaid legal fees?

Ruling: No.

First, the Court held that Parrish did not have a bona fide defense or counterclaim for legal malpractice, since New York's three year statute of limitations for that claim had run. The Court further provided:

The law is well settled that to defeat a motion for summary judgment on an account stated cause of action for legal fees, defendant client must make a sufficient evidentiary showing that he objected within a reasonable time to the invoices he received from plaintiff, and self-serving, bald, conclusory and unsubstantiated allegations of oral protests or objections do not satisfy this standard...As the court previously determined, defendant's conclusory and unsubstantiated allegations that he objected to and complained about plaintiffs services and fees, are insufficient to raise a triable issue as to whether he in fact disputed plaintiffs statement of account.

Lesson: Failure to timely raise a malpractice claim or object to an attorney's billing practices, preferably in writing, may bar the client's right to defend against a later action for unpaid legal fees in New York.

Tags: New York, Attorneys Fees

MI: Defining the Attorney Client Relationship

Posted on March 21, 2011 by Krishna Shah

MI: Underlying consultation for Personal Injury Claim; declined representation

Facts: In October or November 2003, Kopulos contacted the defendants attorneys about a potential claim against her landlord for carbon monoxide poisoning. During the consultation, plaintiff referred to a December 2002 motor vehicle accident in which she was involved. After investigating the potential carbon monoxide claim, defendants ultimately declined to represent plaintiff. In September 2008, plaintiffs filed this action for legal malpractice, alleging that defendants failed to advise plaintiff, during the discussions concerning the potential carbon monoxide claim, of her right to pursue, and the time limit for seeking, no-fault benefits for injuries she sustained in the earlier motor vehicle accident. The trial court concluded that plaintiff could not pursue the malpractice action on the ground there was no attorney-client relationship between plaintiff and defendants. Accordingly, the court granted defendants' motion for summary disposition.

Kopulos appealed.

Issue: Did the Defendant attorneys enter into an attorney-client relationship with Kopulos? Did the Defendant attorneys have a duty to provide any advice with regard to the motor vehicle accident?

Ruling: No.

[The Defendant attorney's] recommendation that plaintiff obtain a medical evaluation to differentiate the causes of her ailments was not a "rendering of legal advice" from which this Court can conclude that an attorney-client relationship existed. The parties' conduct in this case was consistent only with a consultation and investigation, not an agreement that defendants would represent plaintiff. Moreover, to the extent that the evidence supports the existence of an attorney-client relationship, it establishes that the scope of that relationship was limited to a potential claim against plaintiff's landlord for carbon monoxide poisoning, not any claims arising from a motor vehicle accident. Although plaintiffs emphasize that defendants were aware of the accident, defining the scope of an attorney's representation and duty by the attorney's mere knowledge of facts that may give rise to a claim is both unworkable and contrary to the contractual nature of the attorney-client relationship.

Lesson: While an attorney-client relationship is not always dependent on a formal contract, the relationship will not be created merely by way of an informal discussion concerning a potential claim regarding which no legal advice/services are ever provided.

Tags: Engagement, Michigan

NJ: Supreme Court Reinstates Malpractice Case Against a Sitting Judge

Posted on March 18, 2011 by Ben Wasserman

Higgins v. Mary Thurber NJ Supreme Court (Mar. 16, 2011)

affirming 413 N.J. Super. 1 (App Div. 2010)

NJ: Underlying estate accounting

FACTS: The underlying matter was a probate proceeding where the beneficiaries challenged an accounting filed by the Executor. The challenge sought to contest the Executor’s sale of 2 New York Mercantile Exchange seats in order to pay attorneys fees, which were also contested. During the underlying proceeding there were allegations that the sale of the seats came about as a result of the bad advice of the Executor’s lawyer, Mary F. Thurber, who was primarily interested in seeking to have her fees paid notwithstanding that the value of the seats were experiencing rapid appreciation of value. Their sale to pay her fees, when other arrangements for payment could have been made, was allegedly malpractice and caused enormous financial damage to the beneficiaries. On the eve of trial in the estate matter, the Executor’s attorney moved to intervene in the proceeding to defend herself against the malpractice claim, believing she could prevail. (At the time she was being considered for appointment to the judiciary, which, though delayed, ultimately came about.). The beneficiaries withdrew their malpractice claims and the accounting proceeding was settled. Then, the beneficiaries filed this legal malpractice action. Thurber moved to dismiss the malpractice action on the grounds that the entire controversy doctrine would bar the re-litigation of the claims. The trial court granted Thurber’s motion to dismiss. The Appellate Division reversed. The Supreme Court affirmed the reinstatement of the malpractice claims against Thurber, who is now a sitting Superior Court Judge.

ISSUE: Does the entire controversy doctrine bar the re-filing of a subsequent legal malpractice action where the malpractice claims had been asserted in an underlying probate accounting action, which then gets settled?

RULING: No. The underlying accounting proceeding addressed the conduct of the executor, not the conduct of the Executor’s attorney. Here, the claims actually pled and prepared for the probate proceedings did not encompass a legal malpractice claim. No affidavit of merit was submitted in support of such a claim. The expert reports that were submitted in the accounting action were framed to address the Executor’s actions, not to support a malpractice claim against the Estate’s attorney. Plaintiffs did not have a “full and fair opportunity to litigate those claims .” Therefore, it would not be equitable to bar the subsequent malpractice action against the Executor's attorney.

LESSON: The entire controversy doctrine requires the joinder of all claims and parties in a single lawsuit at the pain of any claim not brought being barred in a subsequent action. Legal malpractice claims, however, are an exception to the doctrine. See, Olds v. Donnelly, 150 NJ 424 (1997). This malpractice case clarifies that the exception applies to underlying accounting claims in probate proceedings.

Tags: New Jersey, Entire Controversy Doctrine, Mary Thurber, Wills Trusts & Estates

AR: Carrier Malpractice Suit Against Designated Defense Counsel Requires Privity

Posted on March 15, 2011 by Ben Wasserman

Great Am. Ins. Co. v. Dover, 456 F.3d 909 (8th Cir. Ark. 2006)

AR: Underlying wrongful death

Student Contributor: Meghan Jean

Facts: Darren O’Quinn and David Couch represented Advocat Inc. in the wrongful death of Margaretha Sauer at Rich Mountain Nursing and Rehabilitation Center. Great American Insurance Company insured Advocat. Although O’Quinn and Couch had estimated a potential verdict of $400,000 and $600,000 in compensatory damages and $1.8 million in punitive damages, the trial court awarded the plaintiffs of the suit a total of $26 million in both compensatory. Great American sued the attorneys for inadequate representation.

Issue: Whether a third party, in the state of Arkansas, may bring a malpractice suit against an attorney with whom he or she does not share a privity relationship.

Ruling: No. Under Arkansas law §16-22-310, only those with direct privity with attorneys may file legal malpractice actions. However, there are two exceptions in which case a third party might bring a suit against an attorney:

1. If the attorney’s conduct is fraudulent and intentional; or
2. If the third party is a beneficiary of the attorney’s services.

In asserting the above exceptions, it is imperative that in order for the third-party to recover from a malpractice suit against an attorney with whom he does not have a privity relationship, the attorney must identify him or her either personally, to the client, or in writing, that the third party was entitled to rely on his or her professional services. There was no such intention shown in this case.
In addition, while “equitable subrogation works to prevent the unjust enrichment of parties, including cases such as these where one becomes liable for the debt of another,” it is inapplicable in this case. Because public policy shields attorneys from legal malpractice suits from third parties, the allowance of an equitable subrogation claim for one with whom the attorney owed no privity would undermine the law.

Lesson: Under Arkansas law, an attorney must make clear and certain to whom his or her privity relationship lies. The merging of the lines between a client and third-party and the duty owed to one over the other, may in fact lead to a heightened duty of care to those whom the attorney might not otherwise have a privity relationship. Here, the insurance carrier sued its designated defense counsel who allegedly defended the carrier's insured inadequately.

Tags: Arkansas, Privity, Torts/Personal Injury, carrier counsel, defense counsel, designated defense counsel

NJ: Personal Opinion is a Net Opinion

Posted on March 14, 2011 by Krishna Shah

Hedinger & Lawless, LLC v. Betal Enterprises, Inc., Superior Court of New Jersey, App. Div., March 10, 2011.

Facts: Defendants sued Hedinger & Lawless for legal malpractice for, among other things, failing to file an answer and third-party complaint. Defendants claimed that as a result of this alleged failure, a default judgment was entered against them which prohibited them from obtaining loans for new business ventures.

In support of their theory against their former attorneys, Defendants submitted an expert report of William H. Micheslon, Esq. The expert opined, in part, that Plaintiff attorneys "should have filed an answer, and on the eve of expiration of the ninety day period, file[d] the third-party complaint...to slow [the adversary's] case down and to [] improve bargaining power." The expert conceded, however, that had Defendants' former attorneys followed this course of action, the adversary in the underlying action would have eventually succeeded on a motion for summary judgment.

The trial court rejected the opinion as a net opinion because it was based solely on "personal opinion of strategy."

Issues: Was the trial court correct in excluding the expert report as a net opinion? What must an expert rely upon in opining on a claim for legal malpractice?

Ruling: The Appellate Division agreed with the trial court. First, it explained the need for an expert report in certain legal malpractice cases:

Expert testimony is required in cases of profesional malpractice where the matter to be addressed is so esoteric that the average juror could not form a valid judgment as to whether the conduct of the professional was reasonable.

***

Strategic decisions tend to be an area where expert testimony is required.

With regard to the inadequacy of the report proffered by Defendants' expert, the Court noted:

The burden of proving the causal relationship rests with the client and cannot be satisfied by mere conjecture, surmise or suspicion.

***

An expert's opinion must be based on facts, data, or another expert's opinion, either perceived by or made known to the expert, at or before trial...An expert is required by this rule to give the why and wherefore of his or her opinion, rather than a mere conclusion.

***

Not only was [the expert's] opinion not based on standards accepted by the legal community, but his strategy of delay for the sake of delay is diametrically opposed to the duties of an attorney set forth in Rule 1:4-8 and thus cannot support a claim of breach."

Consequently, the Appellate Division affirmed the trial court's Order barring Defendants' expert report as net opinion.

Lesson: In New Jersey, an expert report must rely upon facts in the record, reference case law, treatises, and/or rules of professional conduct, and identify particular departures in the former attorneys' conduct as compared to the acceptable standards of practice.

Tags: New Jersey, Expert Witnesses

NJ: Lawyers' Duty to Third Parties (circa 1988)

Posted on March 11, 2011 by Ben Wasserman

Rathblott v. Levin, 697 F. Supp. 817 (D.N.J. 1988)

NJ: Underlying dispute over a will

Alvarez v. Casita Maria Inc., 269 F. Supp. 2d 834 (N.D. Tex. 2003)

Facts: Albert Rathblott (the client) died on October 19, 1979. He was survived by his two adult children and his third wife, Elizabeth. Rathblott created his first will in 1963, and in 1973 added a bequest of $10,000 to Elizabeth. In the last week of his life, Rathblott made several changes to his will with the help of his lawyer, Jay Levin. Mr. Rathblott’s final will (executed two days before his death) was challenged by his children on the grounds that Rathblott lacked testamentary capacity and free will in the last days of his life when the will was executed. His wife Elizabeth, the beneficiary of the will, now sues Mr. Levin for negligence. Elizabeth asserts that although she was successfully granted the $10,000 bequeath, she has lost significant amounts of money defending the contest of the will. In response, the lawyer moved for the case to be dismissed, saying that he owed no duty to the Elizabeth because there was no privity between them.

Issue: Should a lawyer be able to use a lack of privity defense when a beneficiary who did not lose her rights under the will but did lose money defending the will sues him for negligence in the drafting of the will?

Ruling: No. Under New Jersey law, a lawyer may be held liable to the beneficiary of a will (even when there is a lack of privity between the two) for negligent drafting when it caused the beneficiary to spend considerable money defending the contest of the will. The Court recognized that in this case, there was a possibility of privity through reliance, which would need to be determined in a trial. As a result, the lawyer’s motion for summary judgment was denied.

Lesson: There is no real difference between a person who loses her rights to half of her estate and a person who loses half her estate defending her rights. A lawyer must take all reasonable measures to avoid the risk of causing economic harm to any person he has a reason to know may suffer as a result of his actions.

Tags: New Jersey, Privity, Wills Trusts & Estates, third parties, third party liabililty, wills

TX: If Conviction Not Overturned-No Malpractice Claim

Posted on March 4, 2011 by Ben Wasserman

TX: Underlying conviction for illegal reentry into the U.S.

Facts: The clients, illegal aliens, contacted Casita Maria, Inc. to arrange for immigration counseling services. In the course of that counseling, the clients met with multiple Casita employees, who counseled them to file certain forms and fees with the Immigration and Naturalization Service (INS). An employee of Casita filled out these forms for the clients and afterward an attorney reviewed the forms and opined that they were complete and ready to be filed. Upon advice of another Casita employee, the clients mailed the documents to their local district’s INS. Once the INS became aware of the client’s whereabouts, the INS scheduled an interview with them, which a Casita employee attended. At the interview, the clients were notified that his application to register for permanent residence would likely be denied. The client was later arrested, charged with illegally reentering the U.S., and sentenced to prison. The client alleged that the attorney is liable for legal malpractice in failing to counsel him to submit the correct INS forms and but for this negligence he would not have been imprisoned.

Issue: Whether claims of legal malpractice may be brought where the conviction has not been overturned?

Ruling: No Under Texas law, claims of malpractice and negligence based on a criminal conviction may not be brought unless that conviction has been overturned. Peeler v. Huges & Luce, 909 S.W.2d 494 (Tex. 1995). In Peeler, the Court held that “as a matter of law, it is the illegal conduct rather than the negligence of a convict’s counsel that is the cause in fact of any injuries flowing from the conviction, unless the conviction has been overturned.” Id. at 498. Although the client’s claims of negligence and malpractice arise from representation in an administrative law setting rather than criminal, the harm to him is the same. Client seeks damages for his incarceration. Convicts may not shift the consequences of their crime to a third party. The client was incarcerated here because he plead guilty to a charge of illegal re-entry, not because of any action or inaction on part of attorney. Attorney’s motion to dismiss granted.

Lesson: Claims of legal malpractice seeking damages due to incarceration, including administrative law settings, may not be brought unless the conviction has been overturned.

Editors Note: See our post on Padilla v. Kentucky for an update on the US Supreme Court's view of ineffective assistance of counsel.

Tags: Texas, Criminal Law, Proximate Cause, ineffective assistance of counsel, post-conviction relief

KS: Written Retainer Constitutes Conclusive Proof of Attorney's Fees

Posted on March 3, 2011 by Krishna Shah

Levy & Craig v. D.S. Sifers Corp., 147 P.3d 163, Kan. App. Div., Dec. 8, 2006

Facts: Defendants brought suit against their former clients for unpaid legal fees. Defendants served their former clients with a set of requests for admissions, which were deemed admitted after plaintiffs failed to answer. Defendants then proceeded to file a motion for summary judgment. The trial court granted the motion, and Plaintiffs appealed.

On appeal, Plaintiffs argued that the admissions did not establish "that Levy and Craig provided competent legal services and that the fees charged by Levy and Craig were reasonable:

[Plaintiffs argue] that since the contract was for professional services, the element of performance must incorporate [Defendants'] ethical obligations. Therefore...if [Defendants'] failed to present any evidence that [they] performed the contract competently and charged a reasonable fee, [they] did not establish a prima facie case for breach of contract.

Issue: Does an attorney have an affirmative burden to establish that services were competently performed for a reasonable fee prior to seeking a judgment awarding unpaid legal fees?

Ruing: No.

The contract between [the parties] set forth hourly fees that would be charged...for [the] legal services. [Defendants] provided those legal services to Plaintiffs and billed accordingly for the services provided. [It is not necessary] that in an action to recover for attorney fees under a written agreement, the attorney must establish that the fees were reasonable...[W]hen there exists an express fee agreement for legal services and such legal services have been rendered, the contract establishes the amount of compensation owed to the attorney. An express contract fixing the compensation for an attorney's service is usually conclusive, even if the contract did not bring the results the client had anticipated.

The Opinion acknowledged that a while a claim for negligence or legal malpractice would impact the Court's determination, it had not been timely raised by Plaintiffs.

Finally, the Court noted that in an instance where no written retainer existed between attorney and client, the attorney would still be entitled to a "reasonable" fee for services rendered.

Lesson: In Kansas, a plaintiff would be hard pressed to argue about the "reasonableness" of a fee where a written retainer exists, unless there is a claim for negligence and it is timely raised.

Draper v. Brennan, 142 N.H. 780 (1998)

N.H. Times Up--Statute of Limitations

Posted on March 2, 2011 by Ben Wasserman

N.H.: Underlying Employment Litigation

Student Contributor: Jason W. Hake

Facts: A former client commenced a legal malpractice action against the law firm that had previously represented him against a bank. Although the law firm had facilitated a settlement agreement in the underlying litigation, the former client alleged that the loss of his health insurance coverage under the settlement agreement was due to the law firm’s negligence in negotiating and attempting to have the settlement agreement enforced. In particular, the former client had expressed concerns over certain language and ambiguities in the agreement and believed that he and his family would be provided with free medical insurance until he reached the age of sixty-five (65) under the same. However, when the law firm had attempted to enforce the settlement agreement, the Court held that the bank could require the former client to pay a portion of his own medical insurance premiums. Although the client was notified in 1991 that he would be required to pay a portion of his own medical insurance premiums, he waited until 1994 to commence a legal malpractice action against his former attorneys. The trial court determined that the former client’s claims were barred by the applicable statute of limitations and the former client appealed.

Issue: Was the former client’s legal malpractice claims barred by the applicable statute of limitations?

Ruling: Yes. The former client’s claims that arose from the date of the settlement in 1998 were barred by the applicable six-year statute of limitations found in the pre-1986 New Hampshire statute. The latest possible date for the accrual of the former client’s claims was when he was advised that he would have to pay a portion of his medical insurance premiums. However, this claim was barred by the amended three-year statute of limitations found in the applicable amended New Hampshire statute. As a result, the determination of the trial court was affirmed.

Lesson: This is a basic statute of limitations scenario. Do not rely upon ambiguities in the law to bolster your time to commence an action. Seek legal assistance as soon as you feel you have been wronged.

Tags: Labor & Employent, New Hampshire, Statute of Limitations, settlement agreement

MI:Emotional Distress In Legal Malpractice Claim Usually Not Allowed, But then again...

Posted on March 1, 2011 by Ben Wasserman

Lickteig v Alderson, Ondov, Leonard, & Sween, P.A. 556 N.W.2d 557

MI: Underlying damages for emotional distress in a claim for legal malpractice

Student Contributor: Meghan Jean

Facts: Attorneys were admittedly negligent in the handling of the client, Lickteig’s case. At arbitration, Lickteig was awarded $45,000 in general damages, and $45,000 in emotional distress damages. The attorneys appealed the arbitrators judgment on the award of emotional distress.

Issue: Whether in a legal malpractice suit, a judgment for emotional distress is proper.

Ruling: Not generally. The award for emotional distress is narrow. In order to be awarded under this complaint, it must be shown that the attorney acted negligently or in breach of contract. Extra-contractual damages, including those for emotional distress, are not recoverable for breach of contract except in those rare cases where the breach is accompanied by an independent tort. Where the crux of the complaint is the breaching of a contract or the negligent representation of a client, unless some willful malicious act is done against the client, an award for emotional distress is not justified. Because the client, Lickteig, did not allege any willful or wanton act against her by the attorneys, the trial court’s award of emotional distress damages was improper.

Lesson: Willfully harming your client will not only create a claim for legal malpractice, but will also give rise to damages for emotional distress.

Tags: Damages, Michigan, Torts/Personal Injury

N.J. An "Unpublished" Primer on Damages and Attorney Fees in Legal Malpractice Actions

Posted on February 22, 2011 by Ben Wasserman

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.

Tags: New Jersey, Attorneys Fees, Damages, Real Estate, Saffer v. Willoughby, foreclosure

NY: No Retainer, No Fees?

Posted on February 21, 2011 by Krishna Shah

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."

Tags: New York, Attorneys Fees, Disgorgement of Fees, Engagement, Family Law

CA: "Anti-SLAPP" Statute No Defense in Legal Malpractice Actions

Posted on February 18, 2011 by Krishna Shah

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.

Tags: California, Defenses, anti-slapp statute

MI: Limits of the Attorney Judgment Rule

Posted on February 17, 2011 by Krishna Shah

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.

Tags: Defenses, Disengagement, Michigan, Standard of Care, attorney judgment rule, professional judgment rule

TX: Collectibility, An Essential Element of Legal Malpractice Actions

Posted on February 15, 2011 by Krishna Shah

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.

Tags: Texas, Damages, collectibility

NY: The Professional Judgment Rule

Posted on February 14, 2011 by Krishna Shah

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.

Tags: New York, Standard of Care, professional judgment rule

NY: Termination of Representation, An Issue of Credibility?

Posted on February 14, 2011 by Krishna Shah

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.

Tags: New York, Disengagement, Statute of Limitations

GA: Active Practice of Law is a Prerequisite for Expert Witnesses

Posted on February 9, 2011 by Krishna Shah

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:

Represent entities or individuals in court;
Draft or file pleadings in judicial proceedings; or
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.

Tags: Expert Witnesses, Georgia

NJ: Mandatory Hearing for Ineffective Assistance of Counsel in Deportable Crimes

Posted on February 8, 2011 by Krishna Shah

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)

Tags: New Jersey, Criminal Law, Padila v. Kentucky, Standard of Care, criminal defense, deportable offenses, ineffective assistance of counsel

NJ: Waiver of Attorneys' Fees Must Be Clear and Unambiguous in Settlement Agreements

Posted on February 7, 2011 by Iram P. Valentin

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.

Tags: New Jersey, Attorneys Fees, agreement", attorney's , fund in court, settlement

DC: Brand New Claim Against Lawyers? "Tortious Involvement in Litigation"

Posted on February 4, 2011 by Krishna Shah

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.

Tags: Federal, District of Columbia, Privity, duties to third parties

NJ: Olds v. Donnelly Alive and Well, Entire Controversy Doctrine No Bar to Legal Malpractice Actions

Posted on February 3, 2011 by Krishna Shah

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.

Tags: New Jersey, Entire Controversy Doctrine

PA: Circuit Court Comments on the Need for a Certificate of Merit

Posted on February 1, 2011 by Krishna Shah

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.

Tags: Federal, Pennsylvania, Affidavit/Certificate of Merit

WY: Establishing Proximate Cause

Posted on January 31, 2011 by Krishna Shah

Rivers v. Moore, Myers & Garland, LLC, Supreme Court of Wyoming, Appellate Division, July 28, 2010.

Facts: Rivers alleged that the Defendants committed malpractice by failing to adequately warn him of the subject property's development restrictions, and by delaying in taking action on his behalf to address those development issues.

The trial court granted summary judgment due to RIvers' inability to establish that his alleged damages were proximately caused by the Firm's negligence. Rivers appealed.

Issue: How does a plaintiff successfully bear its burden of establishing causation between his damages and his former attorney's negligent conduct?

Ruling:

With regard to proximate cause, the Appellate Division noted:

As observed by both Rivers' own expert and the real estate attorney from which Rivers sought a second opinion, the restrictive covenants governing Lot 7 limit the size of any building on Lot 7 to 4,200 square feet. There is simply no indication in the record that if the Firm had performed its duties differently or more expeditiously that Smith's would have agreed to construction of a building that is over twice the size of the building permitted by the covenants.

Moreover, the Appellate Division noted that Rivers' expert's opinion lacked foundation, and therefore, was not admissible:

It would be helpful to the trier of fact if the expert opinion could explain how the Defendant's breach of the standard of care caused the Plaintiff to not be able to build a larger building. The regulations prohibiting a 10,000 square foot building were a known limitation when the Plaintiff purchased the lot...The expert has not explained how the Defendants' efforts would have made the desired change of heart happen. As a result, his bald assertion that the Defendants' negligence caused the Plaintiff's damages is a conclusion unsupported by foundational facts and is inadmissible...Further [] Rivers has not designated an expert to testify as to the basis for quantifying the percentage chance that may have been lost by the Firm's alleged malpractice.

Accordingly, the Appellate Division affirmed the trial court's summary judgment.

Lesson: It is a plaintiff's burden to establish proximate cause by way of credible evidence, through pleadings, depositions, answers to interrogatories, affidavits, and/or expert opinion based upon admissible facts.

Tags: But for-Proximate Cause, Proximate Cause, Substantial Factor-Proximate Cause, Wyoming

NJ: Standard of Care in Drafting Settlement Agreements

Posted on January 28, 2011 by Krishna Shah

Porreca v. City of Millville, N.J. App. Div., January 24, 2011.

Facts: Porreca sued the City of Millville and demanded counsel fees in his pleading. Eventually, the parties decided to settle the matter and, allegedly, entered into "detailed negotiations." In the final version of the settlement agreement, the release provided as follows:

The City and Porreca do hereby remise and release the other, its or his respective agents, servants, employees, attorneys, heirs, administrators, successors or assigns of all claims for damages that were or could have been advanced by Porreca or the City against the other...

After entering into this agreement, Plaintiff contended he was also entitled to counsel fees as a prevailing party who obtained a prospective financial benefit for all taxpayers in the City.

Issue: Did the language of the settlement agreement allow Plaintiff to pursue a subsequent claim for counsel fees?

Ruling: Undecided. The Appellate Division provided guidance and remanded the matter for further proceedings.

First, the Appellate Division examined federal law involving claims for statutory attorney's fees. In that context, Third Circuit case law was clear: a general release in a settlement agreement does not preclude an award of attorney's fees, unless specifically and expressly waived.

However, the Court noted that:

The parties have not cited and we have not located any case in this State applying the federal bright-line rule to a counsel fee request not premised on a fee-shifting statute. As the law on this issue is far from settled, and is essentially non-existent, the parties would not have had an expectation that plaintif's attorney fee claim would survive unless expressly and specifically waived...

The Court then commented that "by releasing all claims related to either action, plaintiff was presumably releasing any claims to counsel fees." Moreover, the Court noted that, since there were no other monetary "damages" at issue, "[i]t is arguable that the parties' release of their respective 'claims for damages' was meaningless if it were not intended to apply to attorney's fees."

Towards the end, the Appellate Division provided guidance as to what the attorneys' standard of care might be in drafting a more thorough settlement agreement:

In hindsight it would have been preferable for the City to have acted defensively and made clear during negotiations that it was entering into a global settlement with no loose ends. Plaintiff, however, was in a better position to be up front about his intention to pursue a discretionary attorney fee claim. We are troubled by the strategy employed by plaintiff's attorney. He was intentionally silent about the counsel fee issue, holding back a material term for a substantial claim, apparently lying in wait for the City to sign the agreement, and springing the claim after the fact. Plaintiff's attorney's behavior, certainly calculated to work an advantage . . . based on information that was uniquely his . . . [is] a course of conduct that we neither applaud nor encourage. This apparent lack of candor is particularly troubling in a suit where the counsel fee is to be borne by taxpayers.

Lesson: Counsel would be well advised to clearly state in the settlement agreement whether counsel fees have been waived as a result of the settlement. If fees are not waived, the settlement agreement should specify that the amount of money being paid thereunder is in satisfaction of all of plaintiff's claims, including counsel fees.

Tags: New Jersey, Attorneys Fees, Standard of Care

NJ: Standing, Statute of Limitations and the Relation Back Doctrine

Posted on January 27, 2011 by Krishna Shah

Siete Urban Associates, LLC v. Pitney, Hardin, Kipp & Szuch, N.J. App. Div., October 25, 2010.

Facts: Siete's claim against its' predecessor's (OWPURA) former attorneys allegedly arose from defendants' representation of OWPURA during the refinancing of a Newark property in or about August 1996.

Although one of the partners of OWPURA had commenced suit against defendants within the statute of limitations, the action was dismissed without prejudice because OWPURA was in receivership and the receiver alone had the authority to institute a legal action.

Eventually, the receiver expressed his intention to abandon the claims in favor of Mr. Geyer, who would then be free, to proceed to litigate it as successor to OWPURA. An order memorializing that abandonment was entered on May 22, 1999.

Geyer then filed a legal malpractice action in July, 1999. That action was dismissed in July, 2002 as a result of Geyer's attorney's incapacity. Defendants agreed not to raise the statute of limitations as a bar when Geyer refiled his action.

As permitted by the consent order, Geyer filed a new legal malpractice action against defendants on July 15, 2003. In again seeking dismissal based on standing grounds, defendants argued that the receiver's abandonment of the claim constituted an impermissible assignment of a tort claim and that ownership of the claim devolved to the entity that obtained OWPURA's assets. That successor was Siete. The trial court granted summary judgment, and the Appellate DIvision affirmed.

Following these decisions, Siete successfully moved to file an Amended Complaint and substituted itself as Plaintiff in place of Geyer in March, 2009. Defendants then moved to dismiss on the basis that the claim was barred by the statute of limitations. The trial Court granted defendants' motion and Siete appealed.

Issue: Is the statute of limitations tolled for a successor in interest? Under these circumstances can the successor in interest take advantage of the relation back doctrine as set out in New Jersey Court Rule 4:9-3?

Ruling: No.

Although OWPURA's malpractice claim may have been transformed — from its own hands to its receiver and, ultimately, to Siete — the limitations period did not reset with each exchange. Each new owner received the chose in action with whatever time was left in the six-year limitations period. Here, Siete assumed ownership of the claim in 1998; at that time, it had ample time to commence suit and yet deliberately delayed until Geyer's prosecution of the identical claim was precluded by his lack of standing.

***

We agree with the motion judge that Rule 4:9-3 does not apply in the absence of a mistake on the pleader's part in naming an adverse party or in the pleader's justifiable misunderstanding of the need for the joinder of the new party...We find no mistake of the type contemplated by the Rule to have occurred here. Indeed, it is doubtful that the Rule has application when a plaintiff misnames the entity he controls in his complaint. A plaintiff should know or be able to readily ascertain the correct name or correct entity in whose name suit should be commenced; Rule 4:9-3 presupposes that uncertainty may exist only with regard to the naming of an adverse party.

Lesson: A successor in interest must move expeditiously to discover and file a malpractice action within the original statute of limitations.

Tags: New Jersey, Standing, Statute of Limitations, predecessor, relation back doctrine, successor in interest

NJ: Court Refuses to Apply Common Knowledge Exception, Dismisses Claim for Failure to Provide Affidavit of Merit

Posted on January 25, 2011 by Krishna Shah

Prosser v. Zeldin, NJ App. Div., December 30, 2010.

Facts: Plaintiff filed suit against his attorney in the underlying divorce action. Plaintiff alleged he was "coerced into agreeing" to the divorce settlement and that "[d]uring the entire divorce process [he told Zeldin] that there was nothing in [a] public record that served as a legal document to confirm that there was a legal marriage."

Issue: Was an Affidavit of Merit necessary to proceed with the legal malpractice claim?

Ruling: Yes. The Appellate Division first explained:

A condition precedent to maintaining a claim for legal malpractice against an attorney licensed to practice law in this state is the requirement that a plaintiff file an affidavit of merit in accordance with N.J.S.A. 2A:53A-27, which provides in pertinent part:

In any action for damages for personal injuries . . . resulting from an alleged act of malpractice or negligence by a licensed person in his profession or occupation, the plaintiff shall . . . provide each defendant with an affidavit of an appropriate licensed person that there exists a reasonable probability that the care, skill, or knowledge exercised or exhibited in the treatment, practice, or work that is the subject of the complaint, fell outside acceptable professional or occupational standards or treatment practices.

The Court then held that in the context of a divorce proceeding, the fact of a marriage between parties may be established by testimony of the parties or other extrinsic evidence. Further, knowledge and understanding of the proofs necessary to substantiate allegations in a divorce complaint is not a matter of common knowledge to the average juror. Accordingly, it affirmed the trial court's decision to dismiss with prejudice.

Lesson: Err on the side of obtaining an Affidavit of Merit, or risk dismissal with prejudice.

Tags: New Jersey, Affidavit/Certificate of Merit, Family Law

AL: Lawyers' "unsubstantiated and incomplete arguments"

Posted on January 24, 2011 by Ben Wasserman

Taylor v. Stevenson, 820 So.2d.810 (2001)

AL: Underlying action for battery and invasion of privacy

Caffery v. Stillman, 79 Conn. App. 192, 829 A.2d 881 (Conn. App. 2003)

Facts: Client hired Attorneys to represent her in a suit for battery and invasion of privacy against her employers. Client considered herself a victim of sexual harassment. The court entered judgment against one employer, but not the other. Attorneys filed a motion for judgment notwithstanding the verdict on three different grounds, but the court denied this motion. Attorneys failed to file a motion for a new trial and failed to file a motion to set aside the verdict on the ground that the verdict in favor of one of the employers was inconsistent with the verdict against the other employer. After the losing employer moved to set aside the verdict against him, the court rendered final judgment in favor of this employer. This left the client with no recourse against either employer. Client sued Attorneys alleging acts of legal malpractice. Attorneys moved for dismissal of, or summary judgment claiming that legal malpractice claims were barred by the statute of limitations. The court ruled against the Attorneys, and Attorneys now appeal.

Issue: Whether the trial court correctly denied Attorneys’ motion to dismiss or for summary judgment in the malpractice action?

Ruling: Yes. The lawyers failed to establish that their not filing a motion for directed verdict on Client’s battery and invasion of privacy claims constituted any malpractice at all. Attorneys also failed to argue that Clients lacked evidence to prove malpractice claim. The court rules that in the absence of malpractice, the statute of limitations could not have begun running.

Lesson: Without malpractice or any act of malpractice, “a client’s two-year time limit for suing the lawyers for the malpractice could not have begun running under any theory of accrual of the cause of action.” Ex parte Panell, 756 So.2d 862 (Ala. 1999).

Tags: Alabama, Litigation, Statute of Limitations, Torts/Personal Injury

CT: Client Can't Dodge SOL by Disguising Tort As Breach of Contract

Posted on January 21, 2011 by Ben Wasserman

CT: Underlying workers’ compensation action

Atkinson v. Haug, 622 A.2d 983 (Pa. Super. 1993).

Facts: On April 16, 1992, the client sustained injuries while working in the course of his employment for the city of New Britain. The client hired the lawyer to represent him in his workers’ compensation case in 1994. The case settled for $95,000. In 1997, the client sued the lawyer for legal malpractice for failing to adequately represent his case because the client felt he was entitled to more money. The court dismissed the case because the client had not first sought to re-open the workers’ compensation claim. The client then re-opened the workers’ compensation case and the court affirmed the original settlement amount. In 1999, the client again sued the lawyer for legal malpractice for negligence and breach of contract.

Issues: (1) Can the client’s claim be saved by the accidental failure of suit statute? (2) Do the allegations set forth a claim in contract or in tort?

Ruling: (1) No. §52-592, the accidental failure statute, provides that “a plaintiff must file an action for the same cause at any time within one year after the determination of the original action . . .” In this case, more than one year had passed between the date the court dismissed the client’s original action in 1997 and the date when this action was brought in 1999.

(2) The second claim was no more than a tort disguised in contract language. A client may not bring an action in both negligence and contract simply by saying that a lawyer breached the standard of care in the language of his employment contract. In this case, the client alleged that the lawyer had promised to bring a liability action against the city, and that the promise to bring such an action was premised on an inaccurate understanding of the law. The client claims that this incorrect understanding of the law caused him to suffer damages. Thus, the client’s allegation that the lawyer breached his contract by failing to meet the standard of care is in reality a negligence claim.

Lesson: The tort statute of limitations is three years, while a breach of contract statute of limitations does not run for six years. In this case, the client sought to avoid the statute of limitations by sounding his claim in contract rather than tort. This does not often work because the courts are very careful to delineate between tort and contract claims.

Tags: Connecticut, Statute of Limitations, Torts/Personal Injury

PA: No Vicarious Liability if Lawyer Did Not Act in the Scope of His Employment

Posted on January 20, 2011 by Ben Wasserman

PA: Underlying real estate investment

Levine v. Television Cablecasting, Inc., 581 S.E.2d 734 (2003)

Facts: Atkinson entered into a partnership agreement for an apartment complex with Haug, his friend and business associate. Haug was also a lawyer at Acton & Acton, P.C (“Acton”). The business investment failed, and Atkinson brought a legal malpractice action against Haug for misrepresentation and professional negligence. Atkinson also sued Acton under the theory of vicarious liability, claiming that Haug offered faulty business advice within the scope of his employment at Acton. The trial court entered summary judgment in favor of Acton and Atkinson appealed.

Issue: Did a lawyer-client relationship exist between Atkinson and Haug that would defeat the trial court’s entry of summary judgment?

Ruling: No. “Absent an express contract, an implied lawyer-client relationship will be found if (1) the purported client sought advice or assistance from the lawyer; (2) the advice sought was within the lawyer’s professional competence; (3) the lawyer expressly or impliedly agreed to give the assistance; and (4) it is reasonable for the client to believe the lawyer was representing him” Sheinkopf v. Stone, 927 F.2d 1259 (1st Cir. 1991). Here, there was no express legal agreement, no fee arrangement or retainer, no discussion of legal consequences of the deal, and no indication that Atkinson asked Haug for legal advice. Therefore, there was no express or implied lawyer-client relationship. A subjective belief that a lawyer-client relationship exists is an insufficient basis to defeat summary judgment. If there was no lawyer-client relationship, it follows that Acton & Acton could not be held vicariously liable.

Lesson: Acton could only be held liable under the theory of vicarious liability if Haug was shown to be acting within the scope of his employment or with apparent authority from Acton. The mere fact that Haug happens to be a lawyer does not necessarily characterize everything he says as “legal advice.” Since there was no evidence that Haug was acting within the scope of his employment at Acton, vicarious liability does not exist.

Tags: Pennsylvania, Scope of Representation, Vicarious Liability

GA: Suing for fees: A New Twist?

Posted on January 19, 2011 by Ben Wasserman

GA: Underlying divorce action

Rathblott v. Levin, 697 F. Supp. 817 (D.N.J. 1988)

Facts: Wife inherited title to a farm. She later transferred title to Television Cablecasting (TCI), a company wholly owned by her husband. Wife sues husband for divorce, seeking title to the farm. Husband asked his longtime friend, Attorney to represent TCI in the divorce proceeding. The court dismissed TCI from the case. Husband asked Attorney to represent him personally in the divorce. Attorney filed a lien against the farm for TCI’s attorney’s fees. Wife was awarded all of TCI’s stock, including the farm as part of her alimony. Attorney billed TCI for $42,765.35 for his legal services. Attorney drafted a backdated letter that forced TCI to pay his attorney’s fees. Attorney had not tried to collect any fee from his client for his work in the divorce case. Wife transferred her interest in the farm to Suncoast, a company owned by her new husband. Suncoast sued Attorney, seeking removal of the lien he had placed on the farm and for damages for slander of title to the farm. Attorney lost and was ordered to pay $33,929.60. Attorney then sued TCI for breach of contract for failing to pay his legal fees in the divorce case. TCI counterclaimed for legal malpractice and breach of fiduciary duty and alleged that Attorney had operated under a conflict of interest while representing it. Attorney moved for summary judgment on TCI’s counterclaims. TCI sought summary judgment on Attorney’s claims. The trial court granted TCI’s motion, concluding that Attorney was bound by the divorce decree, stating that husband was liable for his attorney fees. Attorney now argues that the decree does not bind him because he was not a party to the action.

Issue: Whether Attorney is entitled to summary judgment on TCI’s counterclaims for legal malpractice and breach of fiduciary duty when it was found that TCI was not liable for Attorney’s legal fees?

Ruling: Yes. TCI is not liable for Attorney’s fees because Attorney was hired by husband to act in the husband’s best interest. Attorney worked to preserve the farm for husband, not TCI. Attorney must look to husband for payment of legal fees. Attorney is entitled to summary judgment on TCI’s counterclaims for legal malpractice and breach of fiduciary duty because TCI has no such alleged damages.

Lesson: Attorneys must look to whoever hired them to act in their own best interest for payment of his legal fees. If it is found that a company or person is not liable for Attorney’s fees, then that company or person has no such alleged damages and Attorney will be entitled to summary judgment on that company or person’s counterclaims.

Tags: Attorneys Fees, Conflicts of Interest, Duties: Conflict Avoidance, Family Law, Georgia

NJ: Lawyers' Duty to Third Parties

Posted on January 18, 2011 by Ben Wasserman

NJ: Underlying dispute over a will

Rydde v. Morris, 381 S.C. 643 (S.C. 2009)

Facts: Albert Rathblott (the client) died from cancer on October 19, 1979. Mr. Rathblott was survived by his two adult children and his third wife, Elizabeth. Rathblott created his first will in 1963, and in 1973 added a bequest of $10,000 to Elizabeth. In the last week of his life, Rathblott made several changes to his will with the help of his lawyer, Jay Levin. Mr. Rathblott’s final will (executed two days before his death) was challenged by his children in New Jersey state court on the grounds that Rathblott lacked testamentary capacity and free will in the last days of his life when the will was executed. His wife Elizabeth, the beneficiary of the will, now sues Mr. Levin for negligence. Elizabeth asserts that although she was successfully granted the $10,000 bequeath, she has lost significant amounts of money defending the contest of the will. In response, the lawyer moved for the case to be dismissed, saying that he owed no duty to the Elizabeth because there was no privity between them.

Issue: Should a lawyer be able to use a lack of privity defense when a beneficiary who did not lose her rights under the will but did lose money defending the will sues him for negligence in the drafting of the will?

Ruling: No. Under New Jersey law, a lawyer may be held liable to the beneficiary of a will (even when there is a lack of privity between the two) for negligent drafting when it caused the beneficiary to spend considerable money defending the contest of the will. The Court recognized that in this case, there was a possibility of privity through reliance, which would need to be determined in a trial. As a result, the lawyer’s motion for summary judgment was denied.

Lesson: There is no real difference between a person who loses her rights to half of her estate and a person who loses half her estate defending her rights. A lawyer must take all reasonable measures to avoid the risk of causing economic harm to any person he has a reason to know may suffer as a result of his actions.

Tags: Federal, Privity, Wills Trusts & Estates, beneficiaries, duties to third-parties, wills

SC: Nonexistent Will Equals Nonexistent Duty

Posted on January 17, 2011 by Ben Wasserman

SC: Underlying estate matter

Gorjuice Wrap, Inc. v. Okin, Hollander & De Luca, LLP, N.J. App. Div., January 12, 2011 (Unpub.)

Facts: Johanna W. Knight was an elderly person, who retained Morris to handle her estate planning matters. In the estate planning questionnaire provided by Morris, Knight named Rydde and Konij as her prospective will beneficiaries on September 22, 2005. Before her actual will was even prepared, Knight became incapacitated on September 28, 2005 and died on October 3, 2005 causing her estate to pass through intestacy. The prospective beneficiaries Rydde and Konij filed suit against Morris for legal malpractice on the theory that Morriss had a duty to these two individuals to draft Knights’ will between September 22nd and September 27th, before Knight become unresponsive. Morris then filed a motion to dismiss for failure to state a cause of action, which was granted, and Rydde and Konij appealed.

Issue: Did the circuit court correctly grant Morris’ motion to dismiss Rydde’s and Konif’s suit for Morris’ alleged negligent failure to timely draft a will?

Ruling: Yes. An attorney owes no duty to a prospective beneficiary of a nonexistent will.

Lesson: There must be an attorney-client relationship before a party may make a claim for legal malpractice and there exists no privity between an attorney and the prospective beneficiaries of a will.

Tags: Privity, South Carolina, Wills Trusts & Estates, beneficiaries, prospective beneficiaries, wills

NJ: Settle and Sue Continued, Puder Rejected

Posted on January 14, 2011 by Krishna Shah

Facts: Kang retained Attorney Watkins to assist her in negotiating a commercial lease with the Talmos. Unbeknownst to Kang, Watkins had been a longtime attorney for the Talmos. In fact, he had represented them in their purchase of the property Kang now wanted to lease. Kang relied on Watkins' advice that the property was suitable for her business purposes. Further, Kang asked Watkins to petition the Planning Board to allow Plaintiff to commence its business operations. Watkins, however, failed to take action and Kang retained another attorney.

Several months later, the Talmos, with the assistance of Watkins, sold a contiguous parking lot to another business. As a result of this sale, the Planning Board determined that the available parking was insufficient to support Plaintiff's business.

Moreover, Plaintiff learned of leaks and structural issues which the Talmos never fixed. Apparently, Watkins had been aware of these concerns but never brought them to Kang's attention.

After serious flooding damaged Plaintiff's property, Kang filed a claim with the insurance carrier for loss of business revenue and property damage. Indeed, Kang later testified that the day of the flood was the last day Plaintiff was in business.

In the meantime, Plaintiff had defaulted on its rent obligation and was locked out of the premises. Kang alleged that she was never provided the opportunity to remove valuable computer equipment, disks, books, and records. At that point, Kang retained De Luca to secure the return of the personal property, and another firm to commence a malpractice action against Watkins.

According to De Luca, the Talmos notified him that they would allow Kang to enter the premises and gather her belongings in or around June 13, 2001. Kang disputes that De Luca ever forwarded the message to her. According to Kang, the new owners of the building allowed her to enter in or around November, 2001. By that time, however, all of her property had allegedly been removed.

In the meantime, Kang settled with the insurance carrier for $152,000 for "the whole loss and damage" caused by the flood. She acknowledged that a portion of the payment was for "business loss."

Plaintiff's action against Watkins alleged conflict of interest, failure to file an appropriate and timely site plan approval, failure to advise Plaintiff of its right and remedies against the Talmos, and other violations of the Rules of Professional Conduct. Watkins' carrier settled the matter for $250,000.

Plaintiff then filed suit against De Luca for his failure to secure the removal of its property after the lockout. In this regard, Plaintiff served damage reports claiming lost profits of approximately $8,000,000.

The trial court granted De Luca's motion for summary judgment and Plaintiff appealed.

Issue: Did De Luca violate the applicable standard of care. If so, could Plaintiff establish proximate cause and damages?

Ruling: De Luca violated the standard of care, but Plaintiff could not establish proximate cause and damages for lost profits.

In granting De Luca's motion for summary judgment, the trial court relied on Puder v. Buechel for the proposition that Plaintiff could not settle its case and then sue its attorney for an additional recovery. The Appellate Division held that the trial court's application of Puder was erroneous. First, the Appellate Division noted that Plaintiff had not indicated that the settlements in the underlying matters were "fair" or "acceptable." Moreover, De Luca was not involved in the underlying settlements. The Appellate Division noted that "[n]othing in Puder prevents [Plaintiff] from asserting a malpractice action against De Luca that does not arise out of legal services provided in connection with the settlement of those prior matters."

The trial court also relied on "judicial estoppel" in granting De Luca's motion for summary judgment. The Appellate Division held that to be erroneous as well:

[T]he doctrine of judicial estoppel only applies when a court has accepted a party's position, a party ordinarily is not barred from taking an inconsistent position in successive litigation if the first action was concluded by a settlement.

Nevertheless, the Appellate Division granted De Luca's motion in part because Plaintiff could not establish proximate cause and damages. The Appellate Division found that De Luca's failure to secure the return of the property had nothing to do with Plaintiffs' lost profits, since the business had been shut down even before the lockout. Moreover, lost profits were not available as "damages" under the new business rule:

[A]lleged lost profits that are dependent on entry into unknown markets, or the success of a new and unproved enterprise, cannot be recovered because the business venture is so risky as to preclude recovery of lost profits in retrospect.

The Appellate Division reversed the trial court in part to allow a jury to determine when De Luca advised Kang that she could reenter the premises to retrieve any property left behind, and if he did not timely advise her, for a determination as to the value of the property lost.

Lesson: Puder's holding is not applicable to a malpractice suit commenced against an attorney where the attorney did not provide legal advise in related underlying settlements. Further, showing a violation of the standard of care is not enough to win in a legal malpractice action. Establishing proximate cause and damages are essential to recovery.

Tags: New Jersey, But for-Proximate Cause, Conflicts of Interest, Damages, Proximate Cause, Rules of Professional Conduct (RPCs), Standard of Care, Substantial Factor-Proximate Cause, settle and sue

SC: Plaintiff Loses Out on Potential Recovery for Sitting on Her Rights

Posted on January 13, 2011 by Ben Wasserman

Kelly v. Logan, Jolley, & Smith, L.L.P., 383 S.C. 626 (S.C. App. 2009)

SC: Underlying medical malpractice action

Ex parte Gregory, 378 S.C. 430 (S.C. 2008)

Facts: Kelly gave birth to her son, Watavious Barker who was born with irreversible brain damage and other permanent injuries. After spending the first two years after birth in the hospital, Watavious was then placed into foster care. When the child was about two-years old, Kelly retained Georgia counsel who got Logan, Jolley, & Smith, L.L.P. to file suit against the hospital, the delivering doctors, for medical malpractice. Counsel sued on behalf of the infant’s father, Barker, in his individual capacity and in his capacity as natural father and guardian ad litem for Watavious. Mother, Kelly, signed a letter indicating that she did not want to participate in the lawsuit as an individual party-plaintiff to the action.

The court later granted Counsel’s motion to substitute Kelly as guardian ad litem in the action, but denied its part of the motion to amend the Complaint to name Kelly as an individual party-plaintiff. By this time, the statute of limitations had run on any of Kelly’s possible medical malpractice claims . After the claims against the hospital were settled, Counsel moved to be relieved in the remaining claims against the doctors and practice, to which Kelly agreed.

After the hospital settlement, Watavious’ foster parents moved to and were successful in terminating Kelly as gardian ad litem and naming themselves instead. Soon after, the claims against the doctors were also settled. Close to three years later, Kelly sued her former Counsel, Logan, Jolley, & Smith, L.L.P., alleging that they failed to represent her individual interests and sue for personal injuries suffered during the birth of the infant. Logan responded with a motion for summary judgment on the grounds that the statute of limitations had expired on Kelly’s legal malpractice claim. After the circuit court granted Counsels’ motion, Kelly appealed.

Issue: Did the circuit court correctly grant Logan, Jolley, & Smith, L.L.P’s motion for summary judgment due to expiration of the statute of limitations?

Ruling: Yes. The statute of limitations is triggered by “diligently acquired” facts that are enough to put give an injured party notice of a cause of action for legal malpractice. Epstein v. Brown, 363 S.C. 372, 376, 610 S.E.2d 816, 818 (2005).

Lesson: In SC, there is a three (3) year statute of limitations for actions for legal malpractice, that courts will adhere to in the interests of stimulating action on the part of the plaintiff and in reducing burden on the courts of trying “stale” cases when a plaintiff has sat on her rights. McKinney v. CSX Transp., Inc., 298 S.C. 47, 49-50, 378 S.E.2d 69, 70 (Ct.App.1989). Therefore, a plaintff should be mindful of any facts that could give rise to a legal malpractice claim, as they become ripe, to protect their rights.

Tags: Litigation, South Carolina, Statute of Limitations, Torts/Personal Injury, statute of limitations SC

SC: Filing Frivolous Action Results in Attorney Sanctions

Posted on January 12, 2011 by Ben Wasserman

SC: Underlying tort action-settlement

Vang Lee v Mansour, 104 Ark. App. 91 (2008)

Facts: Jerry Bittle sustained brain injuries from an automobile accident, rendering him mentally incompetent. Bittle’s mother, Melton, retained Malloy to represent Bittle for his injuries. Melton and Bittle reached a settlement with the insurance company for the claims made, and made several attempts to contact Malloy regarding receiving the settlement funds, but could not reach him. As a result, Melton terminated Malloy’s services for failing to account for the settlement money. Melton then retained Gregory to represent her and Bittle in recovering the settlement funds from Malloy. Fearing that the statute of limitations would soon run, Gregory filed the instant action against Malloy alleging causes of action for negligence, conversion, breach of contract, breach of contract accompanied by a fraudulent act, and constructive trust.

After the action was commenced, Malloy transferred the funds in dispute to Gregory, and filed a motion for Rule 11 Sanctions and counsel fees and expenses against Gregory, claiming specifically that the allegations of conversion were frivolous. Malloy reasoned that Sanctions were appropriate since Gregory relied soley upon Melton’s statements that she did not know where the settlement funds were, instead of conducting a thorough and independent investigation himself to determine the status of the funds.

Issues:

Did the circuit court correctly find that the suit against Malloy was frivolous because Gregory failed to conduct a proper investigation?

Did the circuit court properly award Malloy attorney fees and expenses?

Ruling: Yes. An attorney may be sanctioned and subject to counsel fees and expenses for bringing a frivolous claim due to that attorney’s failure to first conduct a proper and reasonable investigation into the facts.

Lesson: Before commencing an action, it is important to first always conduct a thorough and reasonable investigation to ensure a sufficient basis for the action(s) being brought.

Tags: Duties: Investigate, Litigation, South Carolina, Standard of Care, Torts/Personal Injury, frivolous litigation, sanctions

AR: Court Denies Withdrawal when Foreseeable Prejudice to Client

Posted on January 10, 2011 by Ben Wasserman

AR: Underlying litigation

Student Contributor: Meghan Jean

Facts: Mansour was one of two attorneys client Vang Lee hired to represent him in a lawsuit. When Attorney #2 (also named Lee) left for a month-long vacation, he left instruction for Mansour to schedule a pretrial conference between the parties of the suit. Soon afterwards, Attorney #2 became unresponsive to any attempts Mansour made at communication. After several failed attempts, Mansour sent two letters to Attorney #2 informing him that if he did not hear from him, he would have no choice but to request withdrawal from the case. Mansour did not copy Client Lee either letter. When Attorney #2 failed to respond, Mansour requested withdrawal indicating that he and Client Lee did not communicate, that Client Lee would not be prejudiced by his removal because Attorney #2 spoke Client Lee’s native language, and that Attorney #2 was in possession of all necessary paperwork for the case. The court granted the withdrawal. Unfortunately, because Mansour did not inform Client Lee of the withdrawal or Attorney #2's lack of communication, Client Lee failed to appear at the pretrial conference and a judgment was entered against him.

Issue: Whether a court’s granting of an attorney’s request for withdrawal from a case precludes the attorney from a malpractice suit on that basis.

Ruling: No. Arkansas Rule of Civil Procedure 64 provides that an attorney, in his desire to withdraw from a case, must take steps to avoid any foreseeable prejudice to his client, including giving due notice to his client, allowing time for employment of other counsel, and has tendered or stands ready to tender any client papers and unearned fees. Mansour’s failure to communicate the date of the pre-trial conference, and his knowledge that Attorney Lee had become unresponsive to any communication was a foreseeable prejudice to Client Lee. Mansour took no steps to avoid such prejudice.

Lesson: In choosing to withdraw from a case, an attorney must be certain to provide to the client all proof of notification and communicate all issues that might impede or prejudice his case, including that of an unresponsive co-counsel, thereby allowing the client a chance to mitigate his or her damage caused by Attorney #2.

Tags: Arkansas, Duties: Communicate, Litigation, Local & Co-Counsel, Standard of Care, withdrawal

CT: Disclosure of Experts: Don't Wait till its too Late!

Posted on January 4, 2011 by Ben Wasserman

Beecher v. Greaves, 73 Conn. App. 561, 808 A.2d 1143 (Conn. App. 2002)

CT: Underlying foreclosure action

Viola v. O’Dell, 108 Conn. App. 760, 950 A.2d 539 (Conn. App. 2008)

Facts: The lawyer represented the client in two foreclosure actions in 1996. In 1997 and 1998, the client brought a legal malpractice action grounded in professional negligence against the lawyer. The client claims that the lawyer was negligent in allowing the foreclosure sale to be significantly lower than the property appraisal. The client intended to call Mr. Heberger as an expert witness on the issue of causation, and Mr. Weinstein as an expert witness on the issue of liability. However, the client did not disclose her intention to call Mr. Heberger until shortly before trial. As a result, the court precluded Mr. Heberger’s testimony and directed verdict for the defendant. The client now appeals the rulings of the trial court.

Issue: Did the trial court improperly exclude the testimony of the client’s expert witness and improperly direct verdict in favor of the lawyer?

Ruling: No. “Any party expecting to call an expert witness at trial must disclose the name of the expert, subject matter on which the expert will testify, and summary of the facts and opinions about which the expert will testify to all other parties within a reasonable time prior to trial.” In this case, the client should have provided notice much earlier that she intended to call Mr. Heberger as an expert on causation issues. The late notification might unduly prejudice the defendant and interfere with the orderly progress of the trial.

“A trial court must direct a verdict for the defendant if a jury could not reasonably and legally reach any other conclusion than that the defendant is entitled to prevail.” Here, the client’s expert Mr. Weinstein only discussed issues of liability. Causation is a requisite element in legal malpractice cases. The client’s failure to provide an expert on the issue of causation was fatal to her legal malpractice claim, so the trial court was correct to direct verdict in favor of the defendant.

Lesson: This case serves as a reminder for clients to be prompt in choosing and disclosing their expert witnesses. In this case, the client filed the legal malpractice actions in 1997 and 1998. However, she waited until just a few weeks before her trial in 2001 to disclose her intention to call Mr. Heberger to testify about causation. As a result, the expert was not permitted to testify, and the client lost her entire case.

Tags: Disclosure, Discovery, Expert Witness, Expert Witnesses, Real Estate

CT: Substantial Evidence Gets Lawyer Off the Hook

Posted on January 3, 2011 by Ben Wasserman

CT: Underlying zoning action

Elkind v. Bennett, 958 So.2d 1088 (2007).

Facts: The client operated a landscaping business in the downtown business district zone. The client’s business involved the sale of landscaping equipment, but no retail sales occurred on site. Instead, customers would place orders over the phone and the equipment would be delivered directly to the customer. Zoning enforcement officials ordered the client to cease and desist the business. The client then hired the lawyer to represent him in challenging the zoning order. The zoning board held a meeting and denied the clients appeal of the zoning order. The client then filed in Superior Court to appeal the board’s decision. However, the lawyer failed to timely file the appellate brief and the client’s appeal was dismissed. The client then filed a legal malpractice action. The court granted summary judgment in favor of the lawyer on the basis that there was no genuine issue that the lawyer’s negligence had caused any harm to the plaintiffs.

Issue: Was there a genuine issue that the lawyer’s negligence had caused harm to the clients?

Ruling: No. To prevail in this case, the clients would need to show that there was no substantial evidence to support the zoning board’s determination. Analysis of the zoning regulation indicated that the client’s business was similar to that of a greenhouse or nursery, both of which are prohibited in a downtown business area. In addition, the business did not meet the downtown business district purpose to “encourage high density, pedestrian-oriented commercial development” because all sales were conducted by telephone. Thus, substantial evidence existed to support the board’s determination that the client’s business was engaging in non-permitted use. The case would have lost on the merits, so the lawyer’s failure to file a timely appeal does not amount to causation of the harm.

Lesson: Evidence that the client would have won their underlying case is required in legal malpractice actions. In order for the client to show that the trial court improperly decided that there was no genuine issue of fact as to the element of causation, he needed to persuade the court that he could have likely prevailed in their underlying appeal. Since the client would have lost the underlying case, the lawyer’s negligence in timely filing the appeal does not amount to a genuine issue on causation.

Tags: Case Within a Case, Connecticut, Land Use, Zoning, Proximate Cause, Real Estate

FL: Privity, a Continuing Relationship?

Posted on December 20, 2010 by Ben Wasserman

FL: Underlying labor dispute

Student Contributor: Farah Shahidpour

Facts: Client hired Attorney to represent himself, his business venture, and his business partner in a labor dispute brought against the business. The suit was one for harassment. The matters were settled, and Attorney signed the settlement on behalf of Client. Six months later, Attorney wrote a latter to the trustees of the business, revealing confidential information he learned from his prior representation of Client. The company used this information to have Client fired and removed from the venture, causing him damage. Client sued Attorney, alleging legal malpractice. The trial court dismissed the complaint because Client had not stated a cause of action for legal malpractice. The court noted that Attorney had disclosed the confidential information obtained from Client after his representation of Client, and thus was not in privity with Client at the time of disclosure. The trial court reasoned that the complaint should be dismissed for failure to allege privity. Client now appeals.

Issue: Whether the trial court properly dismissed Client’s action for legal malpractice for failing to allege privity?

Ruling: No, the trial court improperly dismissed Client’s action for legal malpractice because Attorney had a continuing duty to his Client not to disclose confidences. This duty continued even past the termination of the matter for which representation was sought.

Lesson: Florida recognizes a cause of action for disclosure of confidential information. In a legal malpractice action, a plaintiff must prove three elements: the attorney’s employment, the attorney’s neglect of a reasonable duty and that such negligence resulted in and was the proximate cause of loss to the plaintiff. Brennan v. Ruffner, 640 So.2d 143, 145 (1994). A plaintiff must allege what confidence was breached and how its disclosure damaged the Plaintiff.

Tags: Florida, Labor & Employent, Privity

TX: Duty Imposed on an Attorney to a Non-Client is Limited

Posted on December 17, 2010 by Ben Wasserman

Kastner v. Jenkens & Gilchrist, P.C., 231 S.W.3d 571 Tex. App. 2007

TX: Underlying Commercial Real Estate Action

Cadle Co. v. Sweet & Brousseau, PC, (US Dist. Court, ND Texal, Dallas Div. 2006)

Facts: The non-client, as owner of one of fifteen limited partnership interests in a partnership, asserted claims against counsel for the partnership based on his participation in the purchase of the partnership’s sole asset. The partnership was created between two businessmen in the interest of acquiring real estate. The partnership was to be the purchase entity acquiring an apartment complex. These men hired said attorney to prepare necessary documents. In order to raise funds for the purchase they solicited participation in the real estate investment through the sale of limited partnership interests in the partnership. The attorney prepared the partnership agreement in accordance with the information provided by the clients. The attorney provided the fully executed copy of the purchase agreement to all partners. The real estate investment began to experience financial difficulties and this suit ensued.

Issue: Whether attorney negligently misrepresented information knowing a non-client would rely upon

Ruling: Negligent misrepresentation liability is based from the attorney’s manifest awareness of the non-client’s reliance on the misrepresentation and the attorney’s intention that the non-client rely on that misrepresentation. The duty imposed on an attorney to a non-client is limited and a non-client cannot rely on an attorney’s representation unless it is invited. The reliance element is absent in this case as there is no evidence attorney invited or was aware of non-client’s reliance. Here, the only communication attorney had with non-client was in the form of a cover letter attached to the purchase agreement. The cover letter contained no legal opinions. The attorney represented the partnership and it is well established that an attorney’s representation of a partnership does not extend to each of the individual partners.

Lesson: Attorney’s dealing with legal issues involving the formation of partnerships should warn all parties involved of who they represent and that each should seek their own individual attorney.

Tags: Texas, Privity, Real Estate

TX: Years of Legal Practice and Judicial Experience Does Not an Expert Make

Posted on December 16, 2010 by Ben Wasserman

TX: Underlying litigation

David J. Sacks, P.C. v. Haden 266 S.W.3d 447 (TX Supreme Ct. 2008)

Facts: The client brought this action against former attorney and designated a former Texas Supreme Court Justice as an expert witness concerning legal malpractice issues in this case. Former Justice issued an expert report stating that the firm and their employee lawyer was negligent and guilty of malpractice in their conduct. The Justice opined that if an opposing lawyer asks the court to take judicial notice of the court’s file, the other lawyer’s duty is to either know exactly what is in file or call for a recess to determine what’s in there before he can agree that the judge take judicial notice of it. The attorney filed a motion to exclude this expert testimony.

Issue: Can client qualify a former Justice as an expert witness offering testimony on legal malpractice under the Federal Rules of Evidence.

Ruling: No. In evaluating whether expert testimony may be admitted the key factors are reliability and relevance. The client did not produce sufficient evidence to qualify witness as an expert because of the failure to produce evidence hat Justice has sufficient specialized knowledge to assist the trier of fact in deciding the malpractice issues in this case. The client only provided evidence that when the Justice has conducted expert work it was primarily in legal malpractice cases. The particular issues the Justice addressed in such cases is unknown. A person who may be licensed attorney or Judge, who holds years of experience in the practice of law will not qualify him/her to give an expert opinion on every legal question. The client and expert did not demonstrate the facts or data relied upon in reaching opinion and therefore not the product of reliable principles and methods.

Lesson: Lifetime experience as a lawyer or Judge does not qualify one as an expert in all areas of law-specialized knowledge in particular area is necessary.

Tags: Texas, Expert Witness, Expert Witnesses, Litigation

TX: Verbal Fee Cap Agreement not Allowed without Ambiguity

Posted on December 15, 2010 by Ben Wasserman

TX: Underlying Fee Agreement Dispute

Hoagland v. Sandberg, Phoenix & Von Gontard, 385 F. 3d 737 (2004)

Facts: The client hired the attorney on behalf of himself and company owner as his appellate counselor. The parties signed a written engagement letter prepared by the attorney that included a description of the services to be provided as well as the rate for this particular matter. The agreement stated that the normal rate charged by the attorney is $300 per hour but in this matter will be $200 per hour. The attorney’s signature appears at the end of the letter and below the signature is the statement, “ Your signature below indicates acceptance of the terms of this fee agreement.” The parties later agreed to change the amount of the retainer from $10,000 to $5,000. The engagement letter shows that the client signed the agreement, making that change by crossing out the original retainer amount and writing in the new amount above the original typewritten numbers in handwriting, adding his initials beside the change. After filing the brief on behalf of the client the attorney sent the client an invoice and stated that in order to provide excellent service the cost is often times more expensive then anticipated. The attorney then sent a second invoice for the services he provided in preparing and filing the reply brief. The client only paid an additional $5,000 and contested the remaining fees owed. The client stated that the attorney was only to review the brief already drafted by his trial counsel and that it was made clear that $5,000 was all he could afford to spend.

Issue: Whether a written attorney fee agreement can be modified by presenting proof of an oral fee capping agreement?

Ruling: No. Evidence of an oral agreement capping attorney’s fees is not valid because parol evidence cannot modify a written agreement unless there is ambiguity in the agreement. The contract was explicit as to the services to be provided and the manner that would be used in determining the price.

Lesson: Attorney should be clear and forthright explaining the possibility of fees exceeding what was originally expected in order to avoid fee disputes.

Tags: Texas, Attorneys Fees

IN: Court Upholds "Limited Representation" Agreement

Posted on December 10, 2010 by Krishna Shah

Flatow v. Ingalls, Court of Appeals of Indiana, August 16, 2010 (Unpublished).

Facts: Ingalls sued the Flatow Defendants for legal malpractice, alleging that defendants were negligent in failing to respond to a cross-motion for summary judgment. Defendants argued that they had no duty to do so under the parties' Retainer Agreement, which provided that the defendants would represent the Ingalls only as to one particular count in the underlying action by drafting a motion for summary judgment and a reply brief.

Issue: Under these circumstances, was it appropriate for the defendants to not oppose a cross-motion filed against their clients?

Ruling: Yes.

Indiana Professional Conduct Rule 1.2(c) allows 'the scope and objectives of the representation' to be limited 'if the limitation is reasonable under the circumstances and the client gives informed consent.' It is appropriate where:

1. [T]he client has limited objectives; and

2. [T]he terms upon which the representation is undertaken may exclude specific means that might otherwise be used to accomplish the client's objectives.

In light of the specific language of the parties' Retainer, the Court held that a response to a cross-motion against Ingalls was not part of the limited representation to which the parties had agreed. The fact that the cross-motion was related to the particular count for which defendants sought summary judgment was not enough to sway the Court's decision. Rather, the Court relied on the language of the retainer itself: "Defendants agreed to file only a motion for summary judgment and reply in [this] matter...[I]t was incumbent upon [Ingalls] to seek any further representation he needed as to the [cross-motion]."

Lesson: A very specific and unambiguous retainer is key where an attorney agrees to limited representation. The agreement should spell out the means by which the client's limited objectives will be accomplished. At least in Indiana, it appears that the agreement will be upheld even where there is an omission by the attorney as to directly related issues. The attorney would be wise to, as the Flatow Defendants did here, provide prompt notice of all issues that are not within the scope of the agreement, and allow the client to timely seek additional representation.

Tags: Indiana, Scope of Representation

FL: Claim for Legal Malpractice Accrues After Appellate Review

Posted on December 9, 2010 by Krishna Shah

Diaz v. Maney, District Court of Appeal of Florida, Second District, August 11, 2010 (Unpublished).

Facts: Diaz retained Attorney Maney's services with regard to her acrimonious relationship with her husband, Rood. During a counseling session, as a gesture of his sincerity in desiring reconciliation, Rood offered Diaz one-half of the inheritance he would receive upon the death of his father. Diaz asked Maney to draft an agreement memorializing Rood's offer. The executed assignment prepared by Maney referenced "good and valuable consideration," but did not identify the nature of the consideration.

Approximately seven weeks later, Diaz filed for divorce which was finalized in April, 1996. Upon the death of Rood's father in April, 2000, Diaz filed a claim with the estate based upon Rood's assignment. Rood defended the action successfully based upon a lack of consideration. After an appeal and evidentiary hearing, this decision was affirmed by the appellate court.

Diaz then filed a legal malpractice action against Maney. Maney contended that the two year statute of limitations, which began to run in April, 1996, barred Diaz' malpractice claim. More specifically, Maney argued that the marital settlement agreement stated that it superseded all other agreements, and should have put Diaz on notice of the unenforceability of Rood's assignment.

Diaz argued that the malpractice claim did not accrue until the appellate division made a final determination that Rood's assignment was not valid for lack of consideration.

Issue: Does an action for legal malpractice accrue only after a final determination of the pertinent issue by an appellate court?

Ruling: Yes.

[A] cause of action for legal malpractice does not accrue until the underlying proceeding has been completed on appellate review because, until that time, one cannot determine if there was any actionable error by the attorney...In the instant case, had this court reversed the trial court's determination in Diaz's civil suit that Rood's assignment was unenforceable, Diaz would not have had a cause of action against Maney or his firm. However, when the determination that the assignment was unenforceable was affirmed by this court, a cause of action against Maney for negligent representation accrued. Then, and only then, did the statute of limitations begin to run.

Lesson: In Florida, the statute of limitations will not begin to run on a legal malpractice case until appellate review of the underlying action is complete. It would also appear, then, that it is incumbent on plaintiff to seek appellate review of the trial court's decision in the underlying action before proceeding with an action for legal malpractice.

Tags: Florida, Statute of Limitations

AR: The Critical Role of the Expert Witness

Posted on December 8, 2010 by Krishna Shah

Grassi v. Hyden, 2010 Ark. App. 203 (March 3, 2010).

Facts: Grassi retained Hyden with regard to the disposition of his majority interest in a lumber company. Ultimately, upon Hyden's advice, Grassi proceeded with an Employee Stock Retirement Plan ("ESOP"). The lumber company, however, was unable to make payments to the ESOP after several years and, as a result, Grassi lost hundreds of thousands of dollars. He subsequently sued Hyden for legal malpractice.

At trial, Grassi presented the testimony of an attorney, Wyck Nisbet. Nisbet testified about the general process of creating an ESOP, and stated that a feasibility study is a critical part of deciding whether to form one. He did not, however, specifically say that Hyden's representation fell below the standard of care, or that in this particular instance, the ESOP was not a reasonable recommendation in light of the lumber company's profitability.

Hyden moved for summary judgment in the malpractice suit, alleging that Grassi's did not present expert testimony as to the applicable standard of care, breach, and proximate cause.

Issue: What elements of the legal malpractice action must an "expert" witness address?

Ruling: Expert testimony must establish that the allegedly negligent attorney departed from the applicable standard of care, and that this caused the plaintiff to sustain the damages of which he complains.

Recognizing that feasibility of an ESOP is a complex subject that is not within the province of a jury, the Court first held that the issue presented by this case was not one of "common knowledge," and that an expert was certainly necessary.

Interestingly, the Court did not view Nisbet as Grassi's expert. Instead, it ruled that Nisbet's testimony demonstrated a need for an expert to opine on whether or not, based upon the then existing conditions, it was a reasonable for Hyden to advise Grassi to proceed with an ESOP. In other words, Nisbet's general statements as to when and how an ESOP should be created were not enough - Grassi needed an expert to opine as to the specific standard of care applicable to Hyden and how he breached that standard.

Accordingly, the Court granted Hyden's motion for summary judgment.

Lesson: In a legal malpractice case where the issues are not subject to the rare "common-knowledge exception," it is essential for plaintiff to present expert testimony on (1) the applicable standard of care; (2) the breach of that standard; and (3) how the breach proximately caused the plaintiff's damages.

Tags: Arkansas, Expert Witnesses

7th Cir: A Claim, By Any Other Name...

Posted on December 6, 2010 by Ben Wasserman

7th Cir.: Underlying legal malpractice claim

Tolliver v. McDonnell, 155 Ohio App.3d 10 (2003).

Facts: The district court determined after a bench trial that Hoagland's suit failed as a suit for legal malpractice. Hoagland doesn't disagree. His grievance is that he should have been allowed either to amend his complaint to make clear that his claim, which he believes the district judge misunderstood, is not malpractice but is rather breach of contract or alternatively breach of fiduciary duty, or allowed to dismiss his suit without prejudice and start over. The claim, in substance and without regard to how it might be characterized, is that the Sandberg law firm represented the adversaries — a corporation (Midwest) and its swindling president — in a derivative action and used its dual representation to prevent the corporation from recovering assets of which the president had wrongfully deprived the corporation; that the law firm had wrongfully accepted payment of its fees from the corporation (the client whose interests the firm had sacrificed); and that it should therefore be required to rebate ("disgorge") the fees to Hoagland for the benefit of the corporation.

Issue: Is it proper to dismiss a claim as duplicative, when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury?

Ruling: Yes. Hoagland cannot be permitted, by recharacterizing the claim — whether by calling the conflict of interest a breach of fiduciary obligation or by contending that his contract with the law firm contained an implied promise not to commit such conflicts — to get around the requirement of presenting expert testimony. That is the kind of formalist move that courts rightly reject. Illinois courts hold that "when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury, the later claim should be dismissed as duplicative." The fact that restitution was sought instead of conventional damages also does not alter the nature of the suit. Restitution is a remedy, at least when sought as here as reparations for a tort. Asking for restitution doesn't change the cause of action.

Lesson: Make sure all claims are included in the initial complaint, because if a new theory of recovery is brought too late, it may be deemed duplicative.

Tags: Federal, Commercial, Conflicts of Interest, Corporate Law, Expert Witnesses, Fiduciary Duty, Legal Ethics, Litigation, diversity of citizenship, duplicative claims, federal jurisdiction, jurisdiction

OH: Tick Tock: The Importance of Recognizing Cognizable Events Before Filing Your Malpractice Claim

Posted on December 2, 2010 by Ben Wasserman

OH: Underlying criminal defense; ineffective assistance of counsel.

Student Contributor: Shiv Vydyula

Facts: Because appellant Tolliver was indigent, the court overseeing his indictment for conspiracy and for murder appointed McDonnell as his attorney. A jury acquitted Tolliver of murder but found him guilty of conspiracy to commit aggravated murder. The court sentenced Tolliver to a term of incarceration. A few months after, McDonnell withdrew as Tolliver’s counsel. The court appointed new counsel for purposes of appeal. Tolliver instructed his new counsel to file a claim for ineffective assistance of counsel alleging that McDonnell had failed to assert a defense for the conspiracy charge where the statute of limitations had run on that charge. The trial court dismissed Tolliver’s legal malpractice claim against McDonnell as untimely. Tolliver claims though that the statute of limitations tolled until the court rendered the opinion in the appeal of the criminal action.

Issue: Did the statute of limitations on the legal malpractice claim effectively toll until the court ruled on the appeal in the criminal matter?

Ruling: The court ruled that the claim was untimely. The court leaned on case law that supported that cognizable events begin the statute of limitations focus on what the client is aware of and not on extrinsic judicial determinations. The court ruled that the cognizable event here was when Tolliver instructed his new counsel to file the appeal.

Lesson: Cognizable events and their analysis seem to lean towards prevention. Here, it prevents the attorney being sued for malpractice from being exposed to suits with overly broad statutes of limitations for bringing claims. Clearly the outcome in the criminal case suggests there was something that McDonnell could have seen, but ultimately, the statute of limitations saved him.

Tags: Criminal Law, Ohio, Statute of Limitations, ineffective assistance of counsel

NJ: Time Limits That Can Bite You, When You Least Expect it

Posted on December 1, 2010 by Melissa J. Kanbayashi

Barry v. Barry, App. Div. of N.J., October 29, 2010 (Unreported)

NJ: Underlying Matrimonial Case

Facts: The Plaintiff’s former law firm appeals an order denying its motion to intervene in a matrimonial case, contending that Plaintiff’s current counsel mishandled the case. The former firm obtained a final judgment of divorce, entitling Plaintiff to half of defendant’s pension benefits. Subsequently, Plaintiff learned that Defendant/Spouse had been receiving pension benefits for 10 years without her knowledge. Plaintiff questioned the former firm as to why she hadn’t received her share of defendant’s pension to which it admitted that it did not timely serve a qualified domestic relations order with the State Division of Pensions.

After it conceded this failure to file and fault for consequential non payment, the former firm attempted to correct its mistake. It filed an amended supplemental order to the final judgment of divorce. The Division informed Plaintiff she would receive a check monthly going forward and former firm took no further action. Plaintiff’s present attorney sought payment of ten years of pension benefits from defendant that plaintiff had not received. The Court denied the application. Plaintiff neither moved to reconsider nor filed an appeal from the denial. The former firm took no action until it filed a motion to intervene, stating that plaintiff’s counsel failed to argue that defendant was unjustly enriched and that the motion judge erred by not establishing a constructive trust. And although the former firm failed to serve the qualified domestic relations order for 10 years, the divorce decree entitled plaintiff to half of defendant’s pension.

Issue: Whether Plaintiff’s former firm may intervene to mitigate its damages in a potential legal malpractice lawsuit?

Ruling: The Court, treating this as a motion for reconsideration since the former firm is rearguing the fact that the motion judge erred by not granting plaintiff reimbursement for 10 years of pension benefits, affirmed the motion judge’s holding. Intervention was not warranted because the application was untimely, primarily because the time to reconsider the prior order expired and may not be enlarged. The former firm waited months before it filed its motion to intervene, which proved fatal.

While R. 4:50-1 allows for relief from an order to a party or party’s legal representative, the former firm was neither a party nor counsel for Plaintiff. It filed the motion to limit its potential exposure in an expected legal malpractice lawsuit, not because plaintiff rehired the firm to pursue the unpaid benefits. If plaintiff were granted the benefits, any damages resulting from the former firm’s negligence would be reduced. Although plaintiff would benefit from a ruling amending the order, the former firm does not represent plaintiff and, therefore, the R 4:50-1 is inapplicable.

Lesson: When an attorney is faced with a possible malpractice claim, and has the opportunity to correct the mistake in the underlying case, it should do so quickly as the time limitations for reconsideration/intervention are strict and short.

Tags: New Jersey, Mitigation of Damages, Motion for reconsideration, R.4:50-1

NV: Dismissal for Double Recovery

Posted on November 30, 2010 by Krishna Shah

Elyousef v. O'Reilly & Ferrario, LLC, Supreme Court of Nevada, November 18, 2010

Facts: Homayouni entered into a transaction with his law firm's client, Elyousef, to acquire interest in Nevada Oil and Land Development ("NOLD"). Perceiving this as a conflict of interest, Homayouni's firm opposed the transaction. Homayouni left the firm to complete the transaction.

When the business relationship soured, however, Homayouni sued Elyousef. Elyousef counterclaimed and was awarded upwards of $375,000. Eventually, however, he settled for $50,000, plus the return of his interest in NOLD. After settling with Homayouni, Elyousef brought a number of claims against Homayouni's former firm, including legal malpractice and breach of fiduciary duty. The trial court held that Elyousef's claims were barred by the doctrine of double recovery and issue preclusion.

Issue: Was Elyousef barred from pursuing claims against the law firm after entering into a settlement with Homayouni?

Ruling: Yes.

The Court first noted that "under the double recovery doctrine, "there can be only one recovery of damages for one wrong or injury...Thus, [a] plaintiff may not recover damages twice for the same injury simply because he or she has two legal theories."

Valuing Elyousef's interest in NOLD at $2 million, the Court held that Elyousef had fully satisfied his judgment against Homayouni and could not now proceed for a double recovery against the O'Reilly firm. The Court noted that "settlement prevents further recovery from another party for the same injury when the total amount of damages is established before settlement and the settlement fully satisfies those damages." The Court did not address application of the doctrine where a party chooses to, voluntarily and knowingly, enter into a settlement for less than the value of his judgment.

The Court further ruled that Elyousef was barred from re-litigating his damages as a result of Homayouni's conduct in a new suit against the O'Reilly firm, since the issue had been fully litigated and decided on the merits in the first litigation.

Lesson: The double recovery doctrine will be applied where a party seeks recovery under a legal malpractice theory after entering into a settlement that fully satisfies damages awarded in a separate litigation for the same injury.

Tags: Damages, Defenses, Nevada, double recovery doctrine, issue preclusion

MD: "Case within a Case," the Golden Test for Proximate Cause

Posted on November 24, 2010 by Krishna Shah

Suder v. Whiteford, Taylor & Peston, LLP, Court of Appeals of Maryland, April 9, 2010.

Facts: Suder filed an action for legal malpractice against her former attorneys, alleging failure to timely file a request for a fifth extension which, ostensibly, caused her to receive approximately $270,000 less under a will than she otherwise would have. The defendant attorneys admitted that they failed to timely request an extension, but argued that that omission was not the cause of Suder's alleged damages.

The defendant attorneys argued that even if they had timely filed a request for a fifth extension, Suder would not have collected her statutory share because of the invalidity of her original request for extension at which time she was not represented by the defendant attorneys. Accordingly, the attorneys contended that their "mistake" did not place Suder in a worse position, and that Suder could not prove proximate cause under the "case within a case" doctrine.

Suder argued that the "case within a case" doctrine constitutes a "hypothetical...rewrite of history," and even if it is to be used, the defendant attorneys must be limited by the underlying defendants' waiver of their right to challenge a previous extension.

Issue: Must Plaintiff establish proximate cause by proving the underlying case in the malpractice case? If so, are the former attorneys limited to only those defenses previously raised by the underlying adversary?

Ruling: Suder must show proximate cause under the "case within a case" doctrine. The defendant attorneys were not limited to only those defenses raised previously by Suder's adversary in the underlying action.

The trial-within-a-trial doctrine is "the accepted and traditional means of resolving issues involved in the underlying proceeding in a legal malpractice action. It should be applied where there is no bright line malpractice... The trial-within-a-trial doctrine exposes "what the result `should have been' or what the result `would have been'" had the lawyer's negligence not occurred.

Accordingly, the Court held that the "case within a case" method was the appropriate way to determine whether Suder's adversary in the underlying litigation would have successfully challenged her requests for extensions, had the defendant attorney timely requested a fifth extension. In that regard, the Court noted that Suder's adversary in the underlying litigation was permitted to challenge the validity of any extension throughout the appellate process, up until close of the estate administration.

Moreover, the Court noted that the defendant attorneys were limited to those defenses Suder's adversary "would have" raised in the underlying action upon the filing of a fifth extension, rather than only those defense that had been raised previously:

Here, [the defendant attorneys are] given the chance to present the defense as merely the knife that severs the causal link between its own negligence and Suder's damages in this malpractice action. Relitigating the underlying action for the purposes of a malpractice suit is simply a tool by which the litigants are able to wind back the clock to determine whether the attorney proximately caused the injury.

To ascertain what defenses Suder's adversary would have raised with regard to a fifth extension, "the trier of fact should examine the record of the underlying controversy and hear testimony from the parties and counsel."

Lesson: The "case within a case" method continues to be the golden test for proximate cause in legal malpractice matters. In defending against malpractice actions, attorneys will be limited to those defenses the underlying adversary "would have" raised -- a fact sensitive determination.

Tags: But for-Proximate Cause, Case Within a Case, Maryland, Proximate Cause, Substantial Factor-Proximate Cause

NJ's Petrillo v. Bachenberg, Kentucky Style: Attorney's Duties to Third-Parties

Posted on November 23, 2010 by Krishna Shah

Tipton v. Porter, Court of Appeals of Kentucky, September 17, 2010

Facts: The Tiptons purchased a home from the Lucases. The Lucases engaged the services of Porter & Associates, Attorneys at Law. The Tiptons never met any member of Porter & Associates, but were charged a portion of the overall closing fee associated with the transaction.

The Tiptons' purchase was owner financed. Some point after the transaction was completed, the Tiptons failed to pay the Lucases. As a result, the Lucases failed to make payment on a pre-existing mortgage -- that the Tiptons were unaware of -- with Community First Bank ("CFB"). CFB eventually filed a foreclosure action and the property was sold at a judicial sale.

The Tiptons, thereafter, sued Porter & Associates for legal malpractice.

Issue: Does an attorney owe a duty of care to third-parties?

Ruling: Yes.

The Kentucky Court of Appeals noted that the State has no privity requirements for legal malpractice actions:

Rather, an attorney may be held liable for damage caused by his negligence to a person intended to be benefited by his performance irrespective of any lack of privity.

The Court further noted that an attorney may be liable to a third-party who reasonably relies on him even where he did not supply any false information.

Here, the Court found that Porter & Associates could be liable if, in breach of the applicable standard of care, they never undertook to complete a title exam to discover and disclose the existence of the CFB mortgage. The Court held that "[e]xpert testimony would be required to answer this question as this is not the sort of question that would be within the common knowledge of a layperson." The Appellate Division remanded the matter with instructions to allow the Tiptons time to retain an expert and conduct depositions.

Lesson: In Kentucky, attorneys owe a duty of care to third-parties where the third-party reasonably relies on the attorney's performance to his or detriment. The fact that the attorney did not give out false information is not dispositive -- the attorney may still be liable for malpractice for omissions under the applicable standard of care.

Tags: Kentucky, Privity, Privity

AL: "Blatant Error" Excused in Absence of Causation and Damages

Posted on November 22, 2010 by Krishna Shah

Guyton v. Hunt, Court of Civil Appeals of Alabama, July 23, 2010.

Facts: Guyton was convicted of sexually abusing a minor. After his conviction, he retained Hunt to prepare and file a motion for new trial, and if that was denied, file an appeal. Hunt's motion for a new trial was denied, but he never advised Guyton or Guyton's family members. Shortly thereafter, Guyton filed an action against Hunt alleging fraud and legal malpractice, arguing that the delay in learning his motion had been denied caused a delay in filing his notice of appeal. Guyton further argued that he incurred damages by paying another attorney to handle his appeal even though Hunt had already been paid to do so.

The lower court dismissed the complaint against Hunt for failure to produce an expert report. Guyton appealed.

Issue:

Could Hunt pursue a fraud claim separate and apart from a legal malpractice claim against Guyton?
Was Hunt's negligence a blatant error, or was expert testimony necessary to establish a breach of the duty of care?
Was Hunt's negligence the proximate cause of any damage sustained by Guyton?

Ruling:

Alabama's Legal Services Liability Act provides, in pertinent part, as follows:

(1) Legal service liability action. Any action against a legal service provider in which it is alleged that some injury or damage was caused in whole or in part by the legal service provider's violation of the standard of care applicable to a legal service provider. A legal service liability action embraces all claims for injuries or damages or wrongful death whether in contract or in tort and whether based on an intentional or unintentional act or omission. A legal services liability action embraces any form of action in which a litigant may seek legal redress for a wrong or an injury and every legal theory of recovery, whether common law or statutory, available to a litigant in a court in the State of Alabama now or in the future.

Accordingly, Guyton's claim for fraud was subsumed by his claim for legal malpractice.

The Appellate Court, however, disagreed with the lower court and held that "failure to notify a client of a ruling on a motion in time for the client to timely file an appeal constitutes a breach of the standard of care that is so apparent that expert testimony is not required for a layperson to understand that breach." Nevertheless, the Appellate Court affirmed the lower court's dismissal of the malpractice action, since:

Any delay, if indeed there was a delay, in filing Guyton's notice of appeal that may have been caused by Hunt's failure to "timely" notify Guyton of the denial of his postjudgment motion obviously did not preclude Guyton from timely filing his notice of appeal or prevent the Court of Criminal Appeals from considering his appeal. Guyton has not demonstrated that Hunt's delay, if any, caused Guyton harm. Furthermore, we conclude that based upon the record before us, Guyton failed to demonstrate that the outcome of his criminal case, i.e., his conviction and sentence, would have been any different had Hunt notified him of the denial of his postjudgment motion.

Moreover, with regard to damages, the Appellate Court noted that there was no evidence "Guyton himself contributed to [attorneys' fees]. Because Guyton did not pay any portion of the attorneys' fees in the underlying criminal action, he cannot claim he was damaged as a result of any allegedly unnecessary payments incurred because of Hunt's conduct."

Lesson: In Alabama, multiple claims against a legal services provider will be subsumed under the "legal malpractice" umbrella. Even where an attorney commits blatant negligence, the claim will be dismissed unless the former client is able to establish that he sustained damages as a result of the attorney's errors and omissions.

Tags: Affidavit/Certificate of Merit, Alabama, Alabama Legal Services Liability Act, But for-Proximate Cause, Case Within a Case, Damages, Duties: Communicate, Expert Witnesses, Substantial Factor-Proximate Cause

NY: No Damage? No Recovery.

Posted on November 19, 2010 by Ben Wasserman

Vlahakis v.Mendelson & Associates, 54 A.D.3d 670, 863 N.Y.S.2d 479 (App. Div. 2d Dep’t 2008).

NY: Underlying bankruptcy proceeding

Student contributor: Nicole Milone

Facts: John Vlahakis retained Mendelson & Associates to advise him in his bankruptcy proceeding. The attorneys assured their client that he would not have to pay the arrears he owed on his home mortgage. Based upon this advice from counsel, Vlahakis did not pay. He then continued to live in his home for seven years without paying mortgage, taxes, and insurance.. Eventually, Vlahakis was required to pay the bank what he owed on his home mortgage. However, he did not provide any evidence to support his claim that this amount was more than the money he saved by living in his home for seven years without paying mortgage, taxes, and insurance.

Issue: Whether summary judgment dismissing a malpractice case was proper when the lawyer in the underlying matter gave a client inaccurate advice?

Ruling: Yes. Summary judgment was properly dismissed because the lawyer demonstrated the client did not sustain any damages due to the inaccurate advice.

Lesson: Even when an attorney makes a clear error and the client relies on that advice to his detriment, if the client cannot prove damages related to the mistake, there will not be an actionable claim for legal malpractice.

Tags: New York, But for-Proximate Cause, Damages, Defenses, Real Estate, Underlying bankruptcy

MI: Statutes of Limitations in underlying IP cases

Posted on November 17, 2010 by Ben Wasserman

Wright v. Rinaldo, 279 Mich App 526; 761 NW2d 114 (2008)

Underlying patent prosecution USPTO

Student Contributor: Matthew Feinbloom

Facts: In August 2000, Wright hired Ronildo as his attorney in a patent case before the United States Patent and Trademark Office. Three years after hiring Ronildo, Wright was dissatisfied with her work. Wright met with other patent attorneys and on December 18th, 2003 Wright signed a document that revoked Ronildo’s power of attorney before the USPTO. At this time Wright also signed the power of attorney over to another lawyer who then took over the case. Wright also instructed the Patient Office that all correspondence was to go through his new counsel. After key errors were made in the pursuit of this patent, Wright filed a legal malpractice suit against Ronildo on February 16, 2006. The lower court granted summary disposition for Ronildo holding that the attorney/client relationship ended on December 18th, 2003 thereby barring Wright’s action due to the two-year statute of limitations.

Issue: Does the attorney/client relationship end once the client revokes the power of attorney, hires new counsel and reassigns the power of attorney?

Ruling: Yes. Under Michigan law it does not have to be the court that effectively terminates the attorney/client relationship. If Wright had truly wanted Ronildo to stay on as co-counsel there would be no need to revoke her power of attorney. This revocation, along with the hiring and transfer of power of attorney to a new lawyer affirmatively communicated to Ronildo that she had been replaced and the attorney/client relationship had ended. Under MI law, “The client's action for malpractice is time-barred unless it is brought within two years from the date the claim accrued or arose (i.e., the date that services were discontinued), or within six months of the date that "the plaintiff discovers or should have discovered the existence of the claim, whichever date occurs later.” MCL 600.5805(6); MCL 600.5838(2); Kloian v. Schwartz, 272 Mich. App. 232, 237, 725 N.W.2d 671 (2006). Therefore Ronildo’s motion for summary disposition was properly granted because two years had passed since the claim arose.

Lesson: Revoking the power of attorney, hiring a new lawyer, and giving that new counsel power of attorney is enough to terminate the attorney/client relationship. Once this relationship is over the statute of limitations begins to run on the amount of time the client is permitted to sue for malpractice.

Tags: Intellectual Property, Michigan, Statute of Limitations, calculating statutes of limitations

AL: Alabama Legal Services Liability Act

Posted on November 16, 2010 by Ben Wasserman

Smith v. Math, 984 So.2d 1179 (2007)

AL: Underlying collection action

Ex parte Gregory, 378 S.C. 430 (S.C. 2008)

Facts: Attorney, Math, practices law in Alabama. He filed a collection action against Smith in Montgomery District Court on behalf of his client, Max Federal Credit Union, Attorney obtained a default judgment against Smith in the amount of $2,767.71. Smith moved to set aside the judgment due to ineffective service of process. The district court granted the motion, set aside the judgment and scheduled the case for a later date. Even though the judgment was set aside, Attorney recorded the default judgment anyway. When the district court later heard the merits of the case, it entered a final judgment against Smith. This created two identical judgments against Smith. Attorney made no attempts to correct this error. Smith claims that Attorney’s recording of the judgment that had been set aside was fraudulent and had an adverse effect on him and sought damages in the amount of $25,000. Attorney argued that Smith had claims of legal malpractice and that the ALSLA required Smith to support his claims with expert testimony. Attorney argues that because claims arose from his rendition of legal services, the ALSLA is the exclusive remedy. Attorney further contends that because Smith was never his client and he never provided legal services to him, he owed no duty to Smith.

Issue: Whether a nonclient, who has never received legal services from an attorney, but who has alleged injury resulting from an attorney’s performance of legal services to a third party is entitled to a remedy?

Ruling: Yes. The ALSLA creates only one form and cause of action against legal service providers in the state of Alabama: the legal-service-liability action. However, the court ruled that if a party is not a client, and no privity exists, the ALSLA does not apply and is not the exclusive remedy.

Lesson: A third party who has not received legal services but was adversely affected by the attorney’s providing legal services can still recover under common-law negligence or fraud. The ALSLA is not an exclusive remedy nor is it a bar against non-client claims against lawyers.

Tags: Alabama, Alabama Legal Services Liability Act, Privity, third party liabililty

SC: Filing Frivolous Actions Result in Attorney Sactions

Posted on November 16, 2010 by Ben Wasserman

SC: Underlying tort action

Schorsch v. Moses & Singer LLP, 60 A.D.3D 557, 876 N.Y.S.2d 367 App. Div. 1st Dep’t 2009).

Facts: Jerry Bittle sustained brain injuries from an automobile accident, rendering him mentally incompetent. Bittle’s mother, Melton, retained Gerald Malloy to represent Bittle in recovering for his injuries. Melton and Bittle reached a settlement with the insurance company for the claims made, and made several attempts to contact Malloy regarding receiving the settlement funds, but could not reach him. As a result, Melton terminated Malloy’s services for failing to account for the settlement money. Melton then retained George W. Gregory to represent her and Bittle in recovering the settlement funds from Malloy. Fearing that the statute of limitations would soon run, Gregory filed the instant action against Malloy alleging causes of action for negligence, conversion, breach of contract, breach of contract accompanied by a fraudulent act, and constructive trust.

After the action was commenced, Malloy transferred the funds in dispute to Gregory, and filed a motion for Rule 11 Sanctions and counsel fees and expenses against Gregory, claiming specifically that the allegations of conversion were frivolous. Malloy reasoned that Sanctions were appropriate since Gregory relied soley upon Melton’s statements that she did not know where the settlement funds were, instead of conducting a thorough and independent investigation himself to determine the status of the funds.

Issue: Did the circuit court correctly find that the suit against Malloy was frivolous because Gregory failed to conduct a proper investigation?

Did the circuit court properly award Malloy attorney fees and expenses?

Ruling Yes. An attorney may be sanctioned and subject to counsel fees and expenses pursuant to the Frivolous Proceedings Act for bringing a frivolous claim due to that attorney’s failure to first conduct a proper and reasonable investigation into the facts.

Lesson: Before commencing an action, it is important to first always conduct a thorough and reasonable investigation to ensure a sufficient basis for the action(s) being brought.

Tags: Duties: Investigate, Rule 11, South Carolina, reasonable investigation, sanctions

ME: Effect of Factual Determinations by Fee Arb Panel

Posted on November 12, 2010 by Krishna Shah

Perry v. Emerson, Supreme Judicial Court of Maine, October 26, 2010.

Facts: Emerson initiated a fee arbitration proceeding against her former attorneys, alleging that she never agreed to be responsible for the legal fees incurred in her divorce action and she was led to believe her husband would be responsible for the fees.

The arbitration panel determined that:

Emerson routinely asked Perry and K&P about her obligation to pay fees billed to her, indicating that she doubted that her husband would actually pay her fees, and that she "was fully cognizant of" the possibility that a provision requiring her then-husband to pay her attorney fees "might not be a part of the ultimate judgment or settlement agreement." The panel also found that Emerson was aware that the final divorce agreement did not require her husband to pay her legal fees.

Based on this determination, Emerson's attorneys moved for summary judgment in a pending malpractice action. The lower court concluded that Emerson's prior litigation of factual issues concerning her obligation to pay her own attorney's fees before the arbitration panel precluded re-litigation in the form of a malpractice complaint. Emerson appealed.

Issues: Can the factual determinations of a fee arbitration committee preclude litigation of a pending malpractice action?

Ruling: Perhaps.

The findings made by a Fee Arbitration Panel, to the extent necessary to its determination, have preclusive effect for purposes of collateral estoppel. A valid and final award by arbitration has the same effect under the rules of res judicata as a judgment of a court, so long as the process contains the essential elements of "adjudication":

(1) adequate notice, (2) the right to present evidence and legal argument and to rebut opposing evidence and argument, (3) a formulation of issues of law or fact to apply rules to specified parties concerning a specified transaction, (4) the rendition of a final decision, and (5) any other procedural elements as may be necessary to constitute the proceeding a sufficient means of conclusively determining the matter in question.

The lack of de novo review of the panel's decision is not a factor that is considered in determining the decision's preclusive effect.

Based on this analysis, the Court held that Emerson's claim of an oral agreement/contract with her former attorneys that she would not pay her own attorney's fees was necessarily barred.

The Court also barred, for different reasons, Emerson's claim of negligence against her former attorneys for their failure to include a provision in the settlement agreement providing that her husband would pay her attorney's fees. The Court noted that the arbitration panel's determinations would have no bearing on this issue, since it was not necessary to the resolution of the fee dispute. Rather, Emerson was estopped from pursuing her negligence claim because she failed to present necessary expert testimony:

The appropriate standard of care, and whether [the attorneys] breached a duty of zealous representation to Emerson by negotiating a divorce settlement that did not include a requirement that Emerson's ex-husband pay all of her attorney fees, is not obvious or within a layman's common knowledge and would have required expert testimony.

Lesson: A fee arbitration panel's determinations will have preclusive effect on a pending or subsequent malpractice litigation, so long as those factual determinations were necessary to a resolution of the fee dispute. Expert opinion is necessary to contest whether or not an attorney adequately drafted a settlement agreement.

Tags: Attorneys Fees, Expert Witnesses, Maine, collateral estoppel, expert testimony, fee arbitration panel, issue preclusion, res judicata

GA: No Affidavit of Merit for Fraud, Breach of Fiduciary Duty Claims

Posted on November 11, 2010 by Krishna Shah

Crosby v. Pittman, Court of Appeals of Georgia, August 20, 2010.

Facts: Crosby retained Pittman to represent him with respect to a traffic citation. Pittman advised Crosby that he would need to pay $350 to resolve the citation. Crosby gave Pittman $350, only to learn that the citation was for $300 and it had never actually been paid.

Crosby then sued Pittman for fraud and breach of fiduciary duty. The lower court dismissed Crosby's complaint for failure to file an affidavit of merit pursuant to OCGA Section 9-11-9.1. Crosby appealed.

Issue: Is an affidavit of merit necessary for claims against an attorney other than legal malpractice, ie. fraud and breach of fiduciary duty?

Ruling: No.

The applicable Georgia statute requires that any complaint alleging professional malpractice against an attorney be accompanied by an expert affidavit setting forth at least one negligent act or omission claimed to exist and the factual basis for each such claim. The appellate court, therefore, held that by its very language, the statute was only applicable to professional malpractice actions. The Court further noted:

Additionally, claims for breach of fiduciary duty do not require an expert affidavit as they are not based on negligence involving the performance of the professional's services.

Accordingly, the appellate court reversed the dismissal of Crosby's complaint.

Lesson: In Georgia, plaintiffs need not obtain an affidavit of merit to pursue claims of fraud or breach of fiduciary duty against their former attorney.

Tags: Affidavit/Certificate of Merit, Fraud, Georgia, breach of fiduciary duty

OH: Failure to Name Individual Attorney Results in Dismissal of Malpractice Action

Posted on November 10, 2010 by Krishna Shah

Bohan v. Jackson, Court of Appeals of Ohio, July 22, 2010.

Facts: Shortly prior to his death, Bohan's father indicated his desire to his attorney, Kennedy, to amend a revocable trust to make Bohan the sole beneficiary. The father executed a handwritten statement, in Kennedy's presence, directing his firm to amend the trust agreement accordingly. The father died two days later, and Kennedy's firm had not amended the trust agreement. Kennedy thereafter advised Bohan that the handwritten note was not a legal document that could alter the terms of his late father's trust.

Bohan then brought a malpractice action against Kennedy's firm. The lower court dismissed the action for failure to name a party against whom relief could be granted and Bohan appealed.

Issue: Is it necessary to name an individual attorney, or can relief for legal malpractice be awarded only against a law firm?

Ruling: The Court of Appeals held that "a law firm does not engage in the practice of law, and therefore, cannot directly commit legal malpractice." Accordingly, by naming only the firm as a defendant, Bohan failed to name a party against whom relief could be granted.

The Court further noted that Bohan's action would have been dismissed for lack of privity, even if he had named Kennedy individually. Here, the trust at issue was revocable. Accordingly, Bohan's interest did not vest until his father's death. Without a vested interest in the trust, Bohan was not in privity with the firm, and therefore, could not prove an essential element of a legal malpractice action -- that Kennedy, or his firm, owed Bohan a duty of care.

Lesson: Under Ohio law, an action for legal malpractice against a law firm alone is not viable. Further, plaintiff must be able to establish an attorney-client relationship or privity with the defendants.

Tags: Ohio, Privity, pleading legal malpractice

WA: Attorneys May Not Subtract Contingency Fee From Legal Malpractice Damage Award

Posted on November 8, 2010 by Krishna Shah

Shoemake v. Ferrer, 225 P.3d 990 (WA Feb. 4, 2010).

Facts: After attorney Ferrer mishandled Plaintiffs' personal injury case and failed to advise them of a $100,000 settlement offer, Plaintiffs sued for legal malpractice and asked for the full amount they would have received in settlement, without subtracting Ferrer's contingency fee, plus interest.

The trial court held that Ferrer ought to be allowed to subtract his contingency fee. The appellate court reversed and Ferrer appealed to the Supreme Court of Washington.

Issue: Is an attorney allowed to subtract his hypothetical fees in the underlying action from an award for damages in a legal malpractice action?

Ruling: No.

Washington followed the approach taken by the majority of the jurisdictions and held:

[C]alculating damages without deducting a negligent attorney's hypothetical contingency fee is an appropriate measure of damages. The Shoemakes had to expend fees on a second lawyer in order to finish the job the first lawyer neglected to do. The majority approach makes the plaintiffs whole without conferring a windfall.

Additionally, the Court held that the Shoemakes were entitled to prejudgment interest on the full amount of their damages in the legal malpractice action, including the portion that Ferrer would have been entitled to as his contingency fee had he properly litigated the underlying matter.

Lesson: In a majority of the jurisdictions, including Washington, attorneys will not be allowed to deduct their hypothetical fees in the underlying matter from the damages awarded to their former clients in a subsequent legal malpractice action.

Tags: Damages, Washington

PA: No Privity, No Certificate of Merit

Posted on November 5, 2010 by Krishna Shah

Sabella v. Estate of Milides, 992 A.2d 180 (Pa. Superior March 25, 2010).

Facts: The representatives of the Estate of Milides commenced an action arguing that Sabella participated in a fraudulent transfer of property to avoid satisfaction of a substantial judgment. Sabella filed preliminary objections. Shortly thereafter, the Estate, through its attorney, filed a praecipe (writ) for satisfaction and termination of the civil suit, indicating it was "settled, discontinued, ended with prejudice and costs paid". Sabella then filed the instant action for abuse of process against the Estate and its attorney, alleging wrongful use of civil proceedings.

The Estate's attorney argued that the instant action ought to be dismissed because of Sabella's failure to file a certificate of merit in a "professional liability" matter. Sabella disagreed since he had no attorney-client relationship with the Estate's attorney, and characterized the matter as an "abuse of process" case, rather than professional malpractice. Sabella appealed after the lower court dismissed his action for failure to file a certificate of merit against the Estate's attorney.

Issue: Does Pennsylvania require a Certificate of Merit in a civil action against an attorney for abuse of process by a third-party?

Ruling: No.

The Court noted that two factors determine whether a claim alleges ordinary negligence as opposed to professional negligence:

Whether the claim pertains to an action that has occurred within the course of a professional relationship; and
Whether the claim raises questions of professional judgment beyond the realm of common knowledge and experience.

The Court further provided:

Our Supreme Court retained privity (an attorney-client or analogous professional relationship, or a specific undertaking) as an element of proof necessary to maintain an action in negligence for professional malpractice. The only exception being a narrow class of third party beneficiaries under Restatement (Second) of Contracts § 302 where the intent to benefit is clear and the promisee (testator) is unable to enforce the contract.

***

If a complaint does not set forth a cause of action for legal malpractice, a certificate of merit is not required.

The Court held that Sabella's cause of action did not arise from within the course of a professional relationship with the Estate's attorney, nor was Sabella a third-party beneficiary. Consequently, the lower court erred in designating Sabella's case as one of professional liability and dismissing it for failure to file a certificate of merit.

Lesson: In Pennsylvania, a third-party need not file a certificate of merit in an action against an attorney. By definition, given the lack of privity between the attorney and the third-party plaintiff, the action cannot be one for "professional malpractice."

Tags: Pennsylvania, Affidavit/Certificate of Merit, Privity

First Circuit: Emotional Distress Damages in Legal Malpractice

Posted on November 4, 2010 by Krishna Shah

Wagenmann v. Adams, 829 F.2d 196 (1st Cir. September 9, 1987).

Facts: After what appeared to be a series of misunderstandings between Wagenmann and his family members, Wagenmann was searched and arrested without a warrant, brought to a holding cell, and ultimately, involuntarily admitted to a mental hospital. His court-appointed attorney, Healy, entered a general appearance on Wagenmann's behalf in connection with the commitment proceedings, bail and criminal charges.

Allegedly, Healy never inquired as to what had happened, but did say that he was a friend and fellow parishioner of one of the individuals who had been responsible for reporting Healy to the police. When Wagenmann asked Healy to withdraw and get him another lawyer, Healy apparently refused. Healy also refused Wagenmann's requests to be brought before a judge.

Instead, Healy proposed that Wagenmann immediately leave town or agree to be committed to a mental hospital. Wagenmann refused and a psychiatrist present at the time saw no grounds upon which Wagenmann could be admitted. Healy then commented "maybe in New York you're something, but [in Massachusetts], you're nothing," and left.

Wagenmann was later informed that he had in fact been committed to a mental hospital for a twenty day observation period. After some time, Wagenmann was visited by a psychiatrist who saw no basis to justify his admission and arranged for his immediate release.

Wagenmann subsequently sued Healy for legal malpractice, requesting damages for emotional distress. Wagenmann was awarded damages against Healy and Healy appealed.

Issue: Is a Plaintiff in a legal malpractice suit entitled to damages for emotional distress?

Ruling: Yes, if it is foreseeable from the attorney-client relationship that a breach of the applicable standard of care will cause the client to suffer a loss of liberty or social stigma.

The Court noted that "an attorney who commits malpractice is liable to client for any reasonably foreseeable loss caused by his negligence." If it were otherwise, especially in situations where the attorney-client relationship was based on something other than the client's economic concerns, the attorney would effectively be immunized from liability even though he exposed his client to a "parade of horribles."

Here, Wagenmann was entitled to damages for emotional distress -- He had been involuntarily confined to a mental hospital as a result of his attorney's negligence and alleged misconduct. This, in turn, caused Wagenmann continuing anguish and fear that others, including prospective employers, would learn of it and question his sanity. Consequently, the Court concluded:

That Healy was guilty of malpractice in the defense of commitment proceedings, rather than in the prosecution of a civil claim for damages, is no reason artificially to shield him from the condign consequences of his carelessness.

Lesson: Emotional damages are recoverable in legal malpractice action where the client's damages include something other than a purely economic loss, i.e. incarceration, false imprisonment, or significant injury to reputation.

Tags: Federal, Damages, Massachusetts, emotional distress, loss of liberty, stigma

Third Circuit: Violation of RPC 1.7 Does Not Require Automatic Disqualification

Posted on November 2, 2010 by Krishna Shah

Wyeth v. Abbott Laboratories, 692 F.Supp.2d 453 (D.N.J. 2010)

Facts: Wyeth brought a motion to disqualify Howrey LLP from representing Boston Scientific Scimed, Inc. ("BSC") in an underlying patent infringement action. Wyeth alleged that it was a conflict of interest for Howrey to represent BSC against Wyeth in the underlying action, while representing Wyeth in a separate, ongoing patent matter in Europe. More specifically, Wyeth contended that Howrey's conduct was in violation of RPC 1.7(a)(1).

The Court held that Howrey's conduct was in violation of RPC 1.7 and disqualified Howrey, interpreting applicable case law as requiring mandatory disqualification for a violation of RPC 1.7. Howrey appealed.

Issue: Can a law firm represent an adversary of a current client in another, unrelated matter?

Ruling: Perhaps.

The Court first determined that BSC, a defendant in the underlying patent litigation, and Wyeth, a plaintiff in that litigation, were adversaries, and that Howrey was representing Wyeth in the separate European patent matter, thus creating a current attorney-client relationship between Wyeth and Howrey.

RPC 1.7(a)(1) provides that a concurrent conflict of interest exists if the representation of one client will be directly adverse to another client. Accordingly, the Court then moved on to the question of whether a violation of RPC 1.7 requires disqualification. In making this determination, the Court stated:

The Court of Appeals for the Third Circuit has noted that "[a]lthough disqualification ordinarily is the result of a finding that a disciplinary rule prohibits an attorney's appearance in a case, disqualification never is automatic." U.S. v. Miller, 624 F.2d 1198, 1201 (3d Cir.1980). The question of whether disqualification is appropriate is committed to the sound discretion of the district court, which "means that the court should disqualify an attorney only when it determines, on the facts of the particular case, that disqualification is an appropriate means of enforcing the applicable disciplinary rule." Id.

The Court then set forth twelve factors to be considered in determining whether disqualification was warranted:

(1) prejudice to Wyeth; (2) prejudice to BSC; (3) whether's Howrey's representation of Wyeth in the [European] matter allowed BSC access to any confidential information relevant to this case; (4) the cost—in terms of both time and money—for BSC to retain new counsel; (5) the complexity of the issues in the case and the time it would take new counsel to acquaint themselves with the facts and issues; (6) which party, if either, was responsible for creating the conflict; [7] whether the two matters at issue are related in substance; [8] whether both matters are presently active; [9] whether any attorneys from the firm have been involved in both matters; [10] whether the matters are each being handled from offices in different geographic locations; [11] whether the attorneys from the law firm work with different client representative[s] for each matter; and [12] the relative time billed by the law firm to each matter.

Ultimately, the Court found that there was no evidence that Howrey's independent professional judgment would be impaired if it was permitted to continue as counsel for BSC, since the matters were completely unrelated and no Howrey attorneys overlapped on the two matters. Additionally, Howrey had put up an "ethical wall" with regard to the attorneys working on the matters, as well as the confidential information with regard to each matter. With regard to prejudice to each party, the Court noted:

Given Howrey's historical representation and the complex technologies at issue in this case, depriving BSC of its counsel of choice deprives BSC of Howrey's depth of experience and expertise. Additionally, if BSC were required to obtain new counsel, there would likely be some delay in this litigation as well as certain additional costs incurred by BSC while new counsel familiarized itself with this case. In contrast, Wyeth has not identified any prejudice that it will suffer if Howrey is not disqualified from this matter.

Consequently, the Court allowed Howrey to continue as counsel for BSC in the underlying patent litigation.

Lesson: Whether or not a law firm will be disqualified for a concurrent conflict of interest under RPC 1.7 is a fact sensitive determination. It will depend on, among other factors, the remoteness of the two matters at issue, the existence of an ethical wall, the historical relationship between the law firm and the two clients, and potential prejudice to either party.

Tags: Federal, New Jersey, Conflicts of Interest, Disqualification, Intellectual Property, RPC 1.7, Third Circuit

CA: Statute of Limitations for Legal Malpractice Tolled in Attorney's Absence

Posted on November 1, 2010 by Krishna Shah

Jocer Enterprises, Inc. v. Ernest Price at al., Court of Appeals of California, Second District, Division Four, 183 Cal. App. 4th 559 (April 5, 2010).

Facts: Allegedly, the defendant attorney provided negligent legal representation in trade secret and malicious prosecution actions and plaintiffs suffered damages as a result. The defendant attorney was absent from California during the year preceding the filing date of the plaintiffs' malpractice action. The defendant attorney argued that plaintiffs' action was time-barred under California's one-year statute of limitations for legal malpractice actions. Plaintiffs' contended the applicable statute of limitations was tolled during defendant's absence from California.

Issue: Does an attorney's absence from the state toll the statute of limitations for legal malpractice actions in California?

Ruling: Yes.

California's statute of limitations for legal malpractice actions provides:

An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.

The limitations period contains certain tolling provisions which provide:

[I]n no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist:

(1) The plaintiff has not sustained actual injury;

(2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred;

(3) The attorney willfully conceals the facts constituting the wrongful act or omission when such facts are known to the attorney, except that this subdivision shall toll only the four-year limitation; or

(4) The plaintiff is under a legal or physical disability which restricts the plaintiff's ability to commence legal action.

With the exception of provision (3) each tolling provision applies to both the one-year and four-year limitations periods for legal malpractice actions.

In making a determination as to whether plaintiffs' action was tolled during the time the defendant attorney was absent from California, the Court relied on Bledstein v. Superior Court. In Bledstein, the Court tolled plaintiff's time to file a legal malpractice action for four years while plaintiff was incarcerated on criminal charges. The Court drew a parallell in the instant action and held that an attorney's absence qualifies as a "legal disability" which, essentially, restricts plaintiff's ability to pursue his malpractice action against his former attorney.

Lesson: In California, the limitations period for legal malpractice actions will be tolled during the time the defendant attorney is out of the state.

Tags: California, Statute of Limitations, tolling

NY: Proximate Cause? Does the Attorney's Negligence Make a Difference in the Underlying Case?

Posted on October 28, 2010 by Ben Wasserman

NY: Underlying insurance claim

Student Contributor: Nicole Milone

Facts: M.R.S. Antiques was a family-owned business that sold art and antiques. The business was run by Margaret Schorsch, her brother David Schorsch, their mother Marjorie Schorsch, and two other unrelated employees. M.R.S. Antiques had an insurance policy through Utica Mutual Insurance Company (Utica). On September 23, 1995, M.R.S. Antiques was robbed. Their inventory, valued at roughly $2 million dollars, was missing. M.R.S. Antiques reported the theft to the police and filed a claim of loss with Utica. Margaret Schorsch believed that her brother David had committed the theft. Based on this belief, she retained Moses and Singer, LLP (Moses) to represent her and the company in an action against her brother. Moses also came to represent M.R.S. Antiques in the Utica insurance claim regarding the theft. In 1997, Utica denied M.R.S. Antiques’ claim due to the “dishonest acts exclusion” of their policy. The policy denies coverage for a loss caused by dishonest acts committed by anyone with an interest in the property. Utica mistakenly quoted the wrong policy in their letter informing M.R.S. Antiques that they were denying the claim. However, the policy quoted in the letter is materially the same as the policy that covers M.R.S. Antiques in this claim.

Issue: Whether the lower court erred in dismissing the client’s case where the attorney did not pursue a legal action against an insurance company who mistakenly cited an incorrect policy when denying client’s insurance claim?

Ruling: No. The error made by the insurance company and the lawyer’s failure to pursue a cause of action against them for their mistake would not have changed the outcome of the underlying matter. The policy incorrectly cited by the insurance company was only slightly different than the policy that actually covered M.R.S. Antiques. The “dishonest acts exclusion” still applies because Margaret Schorsch claimed David Schorsch, an employee with an interest in the company, committed the theft. This clearly applies as an exclusion under the insurance policy, proving that coverage was properly denied.

Lesson: Even if an error was committed in the underlying matter by opposing counsel which goes unnoticed by their adversary, that does not guarantee a legal malpractice claim. A client must prove their attorney’s negligence was the proximate cause of their damages.

Tags: New York, But for-Proximate Cause, Case Within a Case, Insurance, Litigation, insurance claim, insurance coverage

PA: Negligence, She Wrote...(but couldn't prove)

Posted on October 25, 2010 by Ben Wasserman

Brock v. Owens, 532 A2d 1168 ( PA. 1987).

PA: Underlying employment discrimination case

Diaz v. Paul Kennedy Law Firm, 289 F.3d 671 (10th Cir. 2002).

Facts: Brock (client) was a professor at Lincoln University. She believed she was the victim of race and gender discrimination, so she hired a lawyer. She first hired Kalemjian, but he withdrew from the case. Next, the client hired Wusinich. She replaced Wusinich with Owens. The client sued all three of the lawyers for legal malpractice after the court dismissed her case for lack of subject matter jurisdiction. The client represented herself in the lawsuit against the lawyers, and asserted that all three handled her case negligently. At a jury trial, the lawyers filed a motion for non-suit. The motion was granted and the client now appeals.

Issue: Did the trial court properly grant the motion for non-suit in favor of the lawyers?

Ruling: Yes. To avoid non-suit in the case, the client had to show (1) the employment of the lawyers as a basis for their duty to her, (2) the lawyer’s failure to exercise ordinary skill and knowledge in handling the case, and (3) that the lawyer’s failure to handle the case diligently was a cause of the damage to the client. Here, the client presented no evidence to show that the lawyers failed to exercise ordinary skill or knowledge in handling the case, or that she would likely have prevailed in her suit against Lincoln, or that the lawyers handling of her case was a proximate cause of her failure to win the lawsuit against Lincoln. Thus, the client did not meet the requirements to establish her malpractice claim.

Lesson: The client here failed to prove malpractice because she did not show that the lawyers handled her case with less than the requisite ordinary skill and care or that their handling of the case was a proximate cause of her failed claim against Lincoln. She also did not present any evidence to show that it is more likely than not that she would have won her underlying lawsuit if not for the lawyers’ negligence. If the client does not present any evidence that the lawyers failed to exercise ordinary skill and knowledge or evidence that she would likely have won her case against Lincoln University, the client cannot prevail in the legal malpractice claim.

Tags: Pennsylvania, Case Within a Case, Labor & Employent, Proximate Cause

NM: Court Won't re-Write the Terms of Retainer Agreement

Posted on October 22, 2010 by Ben Wasserman

N.M.: Underlying criminal matter

Student Contributor: Manju Sunny

Facts: Plaintiffs, clients in the matter, brought suit against defendants, their attorneys. Plaintiffs retained defendants to represent them in criminal cases filed in the New Mexico state court. Defendants charged plaintiffs a flat fee of $15,000. There was no written fee agreement. Clients became unhappy with attorneys’ representation especially with regards to clients accepting a plea offer that attorneys believed to be highly favorable. As a result, plaintiffs rejected the plea offer, discharged the attorneys, and demanded the retainer fee back claiming ineffective representation.

Issue: Does a court have the power to reduce the amount fixed by a contract between a client and attorney, if there is no showing of misconduct or neglect on the part of the lawyer?

Ruling: No. Under New Mexico law, if the parties have reached a contract of retainer that fixes the amount of the attorney’s compensation, and the attorney has not offended it , either through misconduct or neglect in providing professional services, the court does not have the power to reduce the amount fixed by the contract.

Lesson: Although the laws vary state to state, in New Mexico, where the attorney has not committed misconduct or neglect, a client cannot simply change the retainer fee agreement, and only pay the attorney for services rendered up to the discharge. If this were allowed, there would be no purpose in a client and attorney contracting, and would thus put the attorney at an unfair disadvantage.

Editor's Note: Interestingly, the Court must have felt that the flat fee charged for the underlying defense services was reasonable under the circumstances, since it did not mention that all attorneys fees are required to be reasonable, under RPC 1.5.

Tags: Attorneys Fees, Criminal Law, New Mexico, Retainer Agreement, reasonable fees

FL: OK to Assign Legal Mal Cause of Action for the Benefit of Creditors

Posted on October 21, 2010 by Ben Wasserman

Kaplan v. Cowan Liebowitz & Latman, P.C., 832 So.2d 138 (Fla. App. 2002)

FL: Underlying private placement securities offering

Roni LLC, et al. v. Afra et al., 2010 WL 3703047, September 16, 2010

Facts: Medical Research Industries, Inc. (MRI) was a Florida corporation in the business of marketing medical products. William Tishman, was the majority shareholder, CEO, Chairman, secretary, treasurer, and director of MRI. MRI wanted to raise money to expand their business by selling shares through private placement memoranda (PPM) which is a non-public offering. The Attorneys counseled MRI on securities issues and prepared the PPM. As a result, MRI raised $50,000,000 over two and a half years. MRI became insolvent after Tishman borrowed $18,000,000 from the money raised through the private placements. MRI appointed Donald Kaplan as assignee for the benefit of MRI’s creditors. Kaplan brought a legal malpractice suit against Attorneys alleging that they knew or should have known that the PPM were false and misleading because they did not disclose that the money raised was not used to expand business but for loans to Tishman.

Issue: Whether an assignee for the benefit of creditors, acting as a fiduciary for a corporation has standing to bring a legal malpractice against the corporation’s attorneys in an action on behalf of the now-insolvent corporation?

Ruling: Yes. Under Florida law, legal malpractice claims are not assignable because of the “highly personal nature of legal representation and confidentiality.” However, an exception to this rule applies to claims that, “involve reliance on the allegedly confidential information by interests other than the entity for whom the information was prepared.” KPMG Peat Marwich v. National Union Fire Ins. Co., 765 So.2d 36, 38-39 (Fla.2000). Kaplan has standing to bring the malpractice claims against the Attorneys because their legal services involved the publication of incomplete information to the investors.

Lesson: When attorneys provide legal services that involve the publication of corporate information to third parties (investors), they, “owe ultimate allegiance to the corporation’s creditors and stockholders, as well as to the investing public.” KPMG at 38. Therefore, an assignee has standing to bring legal malpractice claims against the corporation’s securities attorney who made the incomplete disclosures.

Tags: Florida, Assignment of Legal Malpractice cause of action, Commercial, Privity, Securities, private placement memorandum

NY: On Defining the Elements of a Fiduciary Duty

Posted on October 20, 2010 by Melissa J. Kanbayashi

NY: Underlying real estate investments

Facts: This action arose from a series of business transactions in which investors acquired membership interests in limited liability companies that purchased and managed multi-family residential buildings in NY. The Defendants, either directly or through their wholly owned companies, located the properties, arranged financing, organized the limited liability companies, and managed the properties. Plaintiffs alleged, amongst other things, that Defendants made a secret profit at the expense of Plaintiffs’ and their LLCs. While Defendants allegedly disclosed some of the profits made from the business venture, they allegedly concealed that property sellers and mortgage brokers directly or indirectly paid them commissions of up to 15% of the purchase price of the property.

Plaintiffs asserted claims of breach of fiduciary duty, fraud (both actual and constructive) and waste. Defendants filed a motion to dismiss for, among other things, failure to state a cause of action and failure to plead actual fraud and breach of fiduciary duty with specificity.

Issue: Whether a fiduciary duty claim had been sufficiently pled based on both the parties’ relationship and on the defendants’ status as the organizers of the business venture?

Ruling: The parties business or personal relationship is not sufficient to establish a fiduciary relationship. A conventional business relationship between parties dealing at arms length does not give rise to fiduciary duties, unless the plaintiff shows the defendant “had superior expertise or knowledge about some subject and misled the plaintiff by false representations concerning that subject”. While Defendants held themselves out to be experts, Plaintiffs did not allege that Defendants misled them in any way that would affect the transactions.

It is well settled that before and after a corporation comes into existence, a promoter, much like Defendants’ role in this case, acts as the fiduciary to the corporation and its present and anticipated shareholder. By extension, the organizer of an LLC is a fiduciary of the investors it solicits to become members. Therefore, Plaintiffs’ allegations that the Defendants planned the business venture, solicited plaintiffs to invest and organized the LLC are sufficient to establish a fiduciary relationship.

The fiduciary duty includes the obligation to fully disclose any interests of the promoter that might affect the company and its members, including profits. Therefore, Plaintiffs’ allegations that the Defendants: failed to reveal that they would receive commissions from sellers and mortgage brokers in addition to their other, disclosed profit from the venture was sufficient to establish a cause of action for breach of fiduciary.

Lesson: In order to establish a breach of fiduciary duty claim between promoters and investors, there must be sufficient facts alleged to establish the fiduciary relationship as well as the duties owed within that relationship.

Tags: New York, Commercial, Fiduciary Duty, Fiduciary relationship, Real Estate

NJ: Privity in an anti-Privity State?

Posted on October 18, 2010 by Melissa J. Kanbayashi

Holvenstot v. Nusbaum, et al., N.J. App. Div., September 21, 2010 (Unpublished)

NJ: Underlying probate action

Facts: This action sought an appeal from an order granting Defendants’ motion for summary judgment and, thereby, dismissing Plaintiff’s complaint that sought damages from legal malpractice and misrepresentation. A malpractice claim was brought by Plaintiff based on services rendered by Nusbaum to Plaintiff’s mother prior to her death. Plaintiff claims that Nusbaum breached his duties to Plaintiff’s mother that, in turn, caused Plaintiff damages. A misrepresentation claim was based on an allegation that Nusbaum provided false information in opposition to a guardianship action that Plaintiff previously filed. Nusbaum provided a certification in opposition to the guardianship action that included a representation that Plaintiff’s mother executed a new will that disinherited him, which Plaintiff claimed was false.

Issue: Whether Plaintiff’s claims against Defendant for malpractice survive summary judgment?

Ruling: The Appellate Court held that Defendants were entitled to judgment as a matter of law on plaintiff’s legal malpractice claim, since there is no evidence that there was an attorney-client relationship or some independent basis for concluding that Nusbaum and his firm owed a duty to Plaintiff. The only facts relevant to Plaintiff’s relationship with Nusbaum and the firm are that Nusbaum represented Plaintiff in a municipal court matter previously, Plaintiff accompanied his mother when she sought advice from Nusbaum about property she owned, and that he was the intended beneficiary of her will.

However, by assuming responsibility for representing Plaintiff in municipal court, Nusbaum did not undertake a broader and ongoing duty to his former client in unrelated matters. Moreover, when an attorney undertakes preparation of a will, the attorney’s professional and fiduciary duties are owed to the testator and not the testator’s potential beneficiaries. Even when an attorney undertakes to represent the executor of a will, the attorney may not act in furtherance of the interests of the testator’s beneficiaries when those interests are inconsistent with the testator’s interest as expressed in the will.

Lesson: In order for a legal malpractice claim to survive summary judgment, there must be evidence of an attorney client relationship or some independent basis to show that a duty was owed.

Tags: New Jersey, Attorney-client relationship, Privity, probate

NJ: RPC 1.16: The Duty to Protect Prior Client's Interests

Posted on October 15, 2010 by Ben Wasserman

Strauss v. Fost, 209 N.J. Super. 490, 507 A.2d 1189 (App. Div. 1986)

NJ Underlying Personal Injury Suit

DeAngelis v. Rose, 320 N.J. Super. 263, 727 A.2d 61 (App. Div. 1999)

Facts: Client’s insurance company retained Attorney to defend Client in a personal injury suit arising from a car accident. Attorney informed Client that if he wished to make a cross-claim for property damages, he must do so in this action. Client responded that he wanted Attorney to represent him for the cross-claim. Attorney then wrote to Client twice in order to discuss his fees. Client did not respond until after the second letter, stating that he had made other arrangements in order to collect property damages. However, Attorney had already filed the cross-claim. Although Client informed Attorney of his decision to pursue other methods of collecting his property damages, Attorney did not inform the court or opposing counsel that he no longer represented Client in the cross-claim. More importantly, he did not inform Client of the pending motion that he had filed, did not send him the relevant papers, and did not inform Client of the court’s dismissal of the cross-claim. Attorney only explained to Client the entire situation after he later found out that Client had not yet collected property damages and was waiting until after the trial to file a claim.

Issue: Does an attorney who is representing a client for one matter owe any duty to the client regarding another claim after the client rejects representation for that claim?

Ruling: An attorney must protect a client’s interests even after the client has rejected representation for a certain claim. See N.J. R.P.C. 1.16(d). Thus, an attorney is negligent as a matter of law when he

1) fails to inform a client who has rejected his representation of the dismissal of the client’s claim; and

2) fails to inform the court and opposing counsel that he longer represents a client in a matter.

Lesson:

1) An attorney who has already initiated a claim on behalf of a client may not abandon that client when he rejects the attorney’s representation. The attorney must notify the client, the court and opposing counsel, in order to protect the client’s interests. See N.J. R.P.C. 1.16(d).

2) As the court here noted, an attorney can avoid these problems if he meets with the client in person from the outset!

NOTE: The court modified this case with regard to the amount of damages. Strauss v. Fost, 213 N.J. Super. 239, 517 A.2d 143 (App. Div. 1986).

Tags: New Jersey, "RPC, 1.16, Litigation, Rules of Professional Conduct (RPCs), withdrawal

NJ: No Duty to the Guarantor Who Pays Client Legal Fees

Posted on October 14, 2010 by Ben Wasserman

NJ Underlying Divorce Action

Community Capital Bank v. Fischer & Yanowitz 47 A.D.3d 667, 850 N.Y.S.2d 508
N.Y.A.D. 2 Dept., 2008

Facts: A father guaranteed in writing his daughter’s fees for her divorce attorney. He was not a party to the agreement between his daughter and the attorney. When the legal fees exceeded more than double the expected amount, and his daughter defaulted on the fees, the father sued the attorney and his firm for legal malpractice. The daughter did not join as a plaintiff, and the court noted that there was no evidence of her dissatisfaction with the attorney’s services.

Issue: Does an attorney have any duty towards a guarantor of his client’s legal fees?

Ruling:

1) There is generally no attorney-client relationship between an attorney and a guarantor of legal fees, and thus, there can be no claim of legal malpractice.

2) However, an attorney may owe a duty to a non-client when the attorney knows, or should know, that a non-client will rely on the attorney’s representations, and the connection between the attorney and the non-client is not too remote.

Here, the father did not rely on any communication of the attorney, and thus he had no claim of legal malpractice.

Lesson: An attorney generally has no duty to non-clients, including guarantors of legal fees. However, a duty may arise when an attorney knows, or should know, that a third party is relying on a representation of the attorney.

Tags: New Jersey, Attorneys Fees, Family Law

NJ: When is an Attorney a Joint Tortfeasor?

Posted on October 13, 2010 by Krishna Shah

Cameron & Mittleman v. Chapman, N.J. App. Div., March 17, 2010 (Unpublished).

Facts: Plaintiff sued his former attorneys ("Firm A") for professional negligence, alleging that it lost royalty income for which it had bargained in the sale of certain assets. Plaintiff claimed that the loss was caused by Firm A's failure to disclose to Plaintiff the negotiation of a further transfer of the assets by the acquiring company. Plaintiff alleged that this failure deprived it of the ability to take certain preventive measures.

Firm A filed a third-party complaint against "Firm B", the attorneys who represented Plaintiffs in a later transaction wherein they structured the agreement governing the sale of the Plaintiffs' assets to the acquiring company. Firm A alleged that the loss of the royalties would have been avoided had Firm B structured the agreement to prohibit any further transfer of the assets, or otherwise protected Plaintiffs' interests with respect to the royalty payments in the event of such transfer.

Firm B filed a motion to dismiss and argued that it was not a "Joint Tortfeasor" under N.J.S.A. 2A:53A-1 et seq., given that the two firms represented Plaintiffs in "two separate and distinct corporate transactions, that happened at separate points in time."

Issue: Can attorneys be liable as joint tortfeasors where they represent the client in separate matters at separate times?

Ruling: Yes. In deciding the issue, the Court first noted that the purpose of the Joint Tortfeasor Contribution Law ("JTCL") is "to promote the fair sharing of the burden of judgment by joint tortfeasors and to prevent a plaintiff from arbitrarily selecting his or her victim."

The Court then determined that Firm A and Firm B were responsible for the "same injury," i.e. loss of royalty income. Moreover, the Court noted that Plaintiffs' claims against Firm A and Firm B arose at essentially the same time:

[W]e have concluded that, for the purposes of the JTCL, [Plaintiffs'] putative cause of action against both [Firm A and Firm B] arose at essentially the same time, i.e., the finalization of the transaction...When that transaction was finalized without [Firm B] having structured the agreement to protect against further transfer of the assets and without [Firm A] having disclosed...the negotiations concerning the planned, subsequent sale...the alleged wrongs by the parties to this action that are said to have caused the loss of the royalty income were essentially complete.

Accordingly, the Court held that Firm A could in fact pursue a claim for contribution against Firm B under the Joint Tortfeasor Contribution Law.

Lesson: In order to show that multiple attorneys are responsible for Plaintiff's damages under the Joint Tortfeasor Contribution Law, it is necessary to establish that each attorney's negligence contributed to the "same injury", and that Plaintiff's cause of action against each of the attorneys arose at the same time.

Tags: New Jersey, Joint & Several Liability

NJ: Establishing the Attorney-Client Relationship

Posted on October 12, 2010 by Krishna Shah

Connelly v. Frohling, Hudak & McCarthy, P.C., N.J. App. Div., September 9, 2010 (Unpublished).

Facts: After Plaintiffs' house sustained extensive damage, including destruction of the roof and resulting mold infestation, as a result of several storms, Plaintiffs sued their homeowners' insurer pro se. After their complaint was dismissed, Plaintiffs consulted defendants with regard to reinstatement within the one year time frame. Despite Plaintiffs' claim that the defendants had agreed to take their case on contingency, more than a year went by without an executed retainer agreement or reinstatement of Plaintiffs' complaint. Plaintiffs then pursued this malpractice action.

Issue: Can Plaintiffs establish an attorney-client relationship in the absence of an executed retainer agreement?

Ruling: Yes. The Court considered, in detail, all of the factual circumstances by which Plaintiffs came to believe the defendants would handle their claims against the insurer. The Court noted that Plaintiffs met with the defendant attorneys at their offices on multiple occasions, the attorneys comments to the effect that Plaintiffs had a "very strong case against [the insurer]," and that they "would be willing to help with the matter."

The Court further noted the firm's alleged willingness to accept the case "on a contingency fee basis" after reviewing documents related to Plaintiffs' claims against their insurer, including their insurance policy, proofs of payment, medical records, and maps of their property.

When a retainer agreement finally was presented to Plaintiffs, it required them to pay a $10,000 retainer fee for "services rendered" to be "credit against" the "final bill." Although these terms were allegedly different from what Plaintiffs had originally agreed to, at least one of the Plaintiffs signed the agreement given the impending deadlines.

Subsequently, defendants prepared a certification for Plaintiffs to sign in support of their motion to reinstate which, allegedly, contained materially inaccurate statements pertaining to the delay in retaining counsel and Plaintiff's medical condition. Shortly after Plaintiffs refused to sign this certification, defendants asked Plaintiffs to pick up their documents and "withdrew" their letter of engagement.

Despite defendants' position that they did not represent Plaintiffs in their claims against the insurer, the Court found that Plaintiffs had presented "more than adequate evidence to demonstrate defendants' negligence in not moving to vacate the dismissal in a timely manner and in failing to advise plaintiffs that the firm would not represent them."

Accordingly, the Court held that the first prong of a legal malpractice action - the existence of an attorney-client relationship - had been satisfied. Upon finding that the Plaintiffs had presented at least some evidence of damages as a result of the defendants' alleged negligence, the Court reversed the dismissal of the malpractice action.

Lesson: An attorney cannot rely on the absence of a fully executed retainer agreement to argue that an attorney-client relationship does not exist. Courts will conduct a fact intensive analysis and consider (1) whether the attorney discussed the matter in any amount of detail with the prospective client; (2) whether the issue of attorney's fees was discussed or agreed upon; and (3) whether the attorney reviewed documents or performed any other investigation or work in connection with the prospective matter. The decision suggests that this list is not exhaustive, and that each relationship will entail a different fact sensitive analysis. The language used by the Court in coming to its determination demonstrates the need for attorneys to provide timely notice in all prospective cases they decide not to pursue.

Editor's Note: As a side note, this matter also presents an interesting issue about whether a judge ought to recuse himself in legal malpractice matters where he fails to disclose the existence of prior malpractice claims filed against him in unrelated matters. The Appellate Division noted:

We know of no obligations of a trial judge to provide a list of malpractice claims filed against him or the firm with whom he practiced merely because it is requested without any additional contention or assertion warranting such a disclosure.

Tags: New Jersey, Engagement

NJ Statute of Limitations: When Does it Begin to Run?

Posted on October 11, 2010 by Krishna Shah

Pasqua v. Masone, N.J. App. Div., August 19, 2010 (Unpublished).

Facts: Plaintiff, the administrator of his mother's estate, appeals from the dismissal of the estate's complaint against the defendant attorney. In May, 1992 Plaintiff's mother had suffered traumatic injuries which left her with severely diminished cognitive functions. Thereafter, Plaintiff's brother hired an attorney who prepared a will, power of attorney, and trust agreements naming him trustee. The will resulted in the brother and his lineal descendants receiving a greater portion of the mother's estate.

in January, 1999 suit was brought on the mother's behalf alleging breach of fiduciary duty and conversion against the brother and his family. In or around that time, other family members had begun to question certain disbursement from the mother's estate. Soon after the mother's death, there was a will contest in probate court. The court found in favor of Plaintiff and noted that the mother's signature on the new will appeared on a page by itself, that her relationship with the brother was "very sketchy," and that, to a reasonable degree of medical certainty, the mother had no ability to truly understand the attorney's advice regarding the new will. As a result of its decision, the probate court appointed Plaintiff administrator of his mother's estate.

Several days later, on February 9, 2006, Plaintiff commenced an action against the attorney who had drafted and obtained the mother's signature on the new estate documents rejected by the probate court. The defendant attorney argued that Plaintiff's action was time-barred under New Jersey's six-year statute of limitations for legal malpractice actions. Plaintiff argued that his action was timely, since (1) there was no ascertainable loss until the probate court awarded attorney's fees; and (2) he could not maintain an action on behalf of the estate until the probate court appointed him as administrator of the estate.

Issue: Was Plaintiff's time to file a legal malpractice action tolled until he could identify an "ascertainable loss"? Could Plaintiff maintain a legal malpractice action on behalf of the estate without first being appointed administrator?

Ruling: The Court rejected Plaintiff's position that no damages had occured until the probate court rendered its decision. The Court noted that Plaintiff and his family members had begun questioning disbursements as early as 1999.

To trigger the statute of limitations, only the fact, not the amount of damages need be certain.

The Court further rejected Plaintiff's argument that the statute of limitations ought to be tolled until he had been appointed administrator by the probate court. The Court noted that there was no authority to support such an argument, and that in fact, Plaintiff had pursued ongoing litigation in probate court while his brother was still trustee. Accordingly, the Court held that Plaintiff's malpractice claim was barred by the applicable statute of limitations.

Lesson: The six year statue of limitations for legal malpractice begins to run as soon as Plaintiff learns of the attorney's negligence and that the negligence will result in some injury or damage, even though the extent of the damage may not yet be known. The statute of limitations will not be tolled for a beneficiary until he is appointed administrator.

Tags: New Jersey, Standing, Statute of Limitations, Wills Trusts & Estates

NY: Vicarious Liability: Partnership By Estoppel

Posted on October 8, 2010 by Ben Wasserman

NY: Underlying Commercial Transaction

Allbritton v. Gillespie, Rozen, Tanner & Watsky, P.C.180 S.W.3d 889 (Tex. App. 2005)

Facts: Plaintiff filed a legal malpractice action against Fischer & Yanowitz, and Jeffery Yanowitz. Plaintiff filed a motion to join Patricia Fischer and Jeffery Yanowitz as partners based upon partnership law and the doctrine of partnership by estoppel. The Supreme Court, Kings County granted plaintiff’s motion to consolidate, and denied a motion by Yanowitz for summary judgment dismissing the complaint insofar as asserted against him.

Issue: Does a partnership exist between parties who do not agree to share in the profits or losses of a business?

Ruling: A partnership did not exist between Fischer and Yanowitz, as there was no mutual promise or undertaking to share in the profits in the business or to submit to the burden of making good the losses. The doctrine of partnership by estoppel was inapplicable because Yanowitz never represented that him and Fischer were partners, there was no evidence that he consented to Fischer representing him as a partner, nor was there any indication that plaintiff relied on Fischer and Yanowitz being partners in retaining Fischer as counsel.

Lesson: If there is no written agreement between the parties, a court will look to the conduct, intention, and relationship of the parties to determine if a partnership exists. A partnership does not exist if there is no “mutual promise or undertaking of the parties to share in the profits of the business and submit to the burden of making good the losses.”

A court will impose a partnership under the doctrine of partnership by estoppel, Partnership Law §27, when

“a person, by words spoken or written or by conduct, represents himself, or consents to another representing him to any one, as a partner in an existing partnership or with one or more persons not actual partners, he is liable to any such person to whom such representation has been made, who has, on the faith of such representation, given credit to the actual or apparent partnership, and if he has made such representation or consented to its being made in a public manner he is liable to such person, whether the representation has or has not been made or communicated to such person so giving credit by or with the knowledge of the apparent partner making the representation or consenting to its being made.”

Tags: New York, Vicarious Liability, partnership by estoppel, partnerships

TX: Lawyer and Non-Lawyer Experts in Legal Mal Litigiation

Posted on October 7, 2010 by Ben Wasserman

TX: Underlying Contract Litigation

Facts: Attorneys represented Client 1 and Client 2 in a breach of contract suit against their employer. Attorneys told the two clients to calculate their own damages for presentation at the trial. Client 2 had a financial background; Client 1 did not. Both clients testified at trial regarding their damages. The jury found for both clients on the breach of contract claim. However, while it awarded Client 2 $4,000,000, it awarded nothing to Client 1.

In Client 1’s subsequent malpractice suit against Attorneys, he alleged that Attorneys were negligent because they failed to hire a damages expert, because Client 1 had no financial background. In response to Attorneys’ summary judgment motion, Client 1 filed two affidavits: one from Expert Attorney, and the other from Expert Accountant.

Issue: Can a non-lawyer provide expert testimony in a legal malpractice case?

Ruling: Yes. A non-lawyer expert may testify to an issue in controversy that is within his expertise. Furthermore, sometimes an expert attorney’s testimony is insufficient to establish causation, and a non-legal expert would be required. See Rangel v. Lapin, 177 S.W.3d 17 (Tex. App. 2005) (accident reconstruction expert needed in addition to attorney expert).

Lesson: A non-lawyer expert can testify in a legal malpractice case to matters within his expertise.

Tags: Texas, Accountant, Expert Witness, Expert Witnesses, Litigation, lawyer as expert, non-lawyer as expert

PA: Certificate of Merit Required for Malpractice Claim Characterized as "Breach of Contract"

Posted on October 1, 2010 by Krishna Shah

Donnelly v. O'Malley & Langan, P.C., et al., United States Court of Appeals, Third Circuit, March 16, 2010

Facts: Plaintiff, proceeding pro se, filed suit against his former attorneys who had represented him in his underlying workers compensation claim. He alleged that his attorney has failed to adequately investigate his claim prior to negotiating a settlement, and tendered his letter of resignation to his employer before settlement. Plaintiff raised breach of contract and legal malpractice amongst other claims.

The attorneys moved to dismiss based, in part, on Plaintiff's failure to produce a Certificate of Merit. The District Court granted the attorneys' motion as to both the breach of contract and legal malpractice claims for failure to produce a Certificate of Merit. It held that Plaintiff provided no reasonable explanation for failing to file the certificate, and his promise to produce a legal expert in the future did not satisfy the requirement.

Plaintiff appealed and argued that no certificate of merit was necessary as to his breach of contract claims, since that claim did "not call for expert testimony to explain the [attorney's] lapses in judgment or failures in performance."

Issue: Can Plaintiff proceed with a breach of contract claim against his former attorney without an affidavit/certificate of merit?

Ruling: No.

Regardless of how [Plaintiff] chooses to characterize his claim...[his] allegations pertain to the quality of [his former attorney's] professional representation of him, and thus a [Certificate of Merit] is required.

Since Plaintiff could offer no reasonable explanation or legitimate excuse for his failure to furnish the certificate of merit, the Court dismissed Plaintiff's claim without prejudice. Unlike New Jersey, the Pennsylvania statute does not require dismissal with prejudice for failure to file the required certificate of merit.

Lesson: A certificate of merit must be filed in Pennsylvania with regard to any claim that requires the analysis of whether or not an attorney breached the applicable standard of care. Whether the claim is characterized as beach of contract or legal malpractice is of no consequence.

Tags: Federal, Pennsylvania, Affidavit/Certificate of Merit

NJ: Settle and Sue - Without an Affidavit of Merit

Posted on September 30, 2010 by Krishna Shah

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.

Tags: Affidavit/Certificate of Merit, settle and sue

NJ: No Attorney's Fees Against In-House Counsel

Posted on September 29, 2010 by Krishna Shah

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.

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

Third Circuit: Violation of Statute Limitations is Not a Common Knowledge Exception

Posted on September 28, 2010 by Krishna Shah

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.

Tags: Affidavit/Certificate of Merit, Statute of Limitations

NJ Statute of Limitations: When Does it Begin to Run?

Posted on September 27, 2010 by Krishna Shah

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.

Tags: Discovery Rule, Statute of Limitations

PA: Collectibility of Damages: Defendant's Burden

Posted on September 23, 2010 by Ben Wasserman

PA Underlying Representation: Personal Injury Lawsuit

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

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).

Tags: Pennsylvania, Damages, Defenses, Proximate Cause, Torts/Personal Injury, collectibility

Attorney-Client Relationships When You Don't Represent a Client

Posted on September 21, 2010 by Ben Wasserman

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.

Tags: Federal, Attorney-client relationship, Duties: Confidentiality, Scope of Representation, confidentiality

NY: No Liability to Third-Parties Absent Bad Faith

Posted on September 17, 2010 by Krishna Shah

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.

Tags: New York, Privity, bad faith, non clients, third parties

TX: The Need for Expert Testimony

Posted on September 15, 2010 by Krishna Shah

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.

Tags: Texas, Expert Witnesses, common knowledge exception

CA: Duties to Third-Parties

Posted on September 14, 2010 by Krishna Shah

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.

Tags: California, Privity, non-client, third party

E.D.Pa. Attorneys Fees a Damages Offset in Legal Malpractice Actions?

Posted on September 9, 2010 by Ben Wasserman

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

Underlying action: legal malpractice money damages

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

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.

Tags: Federal, Attorneys Fees, Legal malpractice, Litigation, Mitigation of Damages, legal fees, offset

NJ: Expert Testimony on Settlement Value

Posted on September 8, 2010 by Ben Wasserman

NJ: Underlying personal injury action; statute of limitations

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

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.

Tags: New Jersey, Expert Witnesses, Litigation, Statute of Limitations, Torts/Personal Injury

GA: Underlying Employment Discrimination: Case Within a Case

Posted on September 7, 2010 by Ben Wasserman

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.

Tags: Case Within a Case, Georgia, Labor & Employent

Law of the Case Doctrine: Not Always a Viable Defense

Posted on September 1, 2010 by Krishna Shah

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.

Tags: Federal, Defenses, law of the case doctrine

CA: Public Interest Firms Not Immune From Suit

Posted on August 31, 2010 by Krishna Shah

Black v. California Appellate Project, Court of Appeals of California, Second District, Division Four, June 4, 2010 (Unpublished).

Facts: Plaintiff was convicted of first degree burglary, and based on his prior criminal history, was sentenced to 38 years to life. Plaintiff appealed and the appellate court affirmed his conviction. Shortly thereafter, Black filed an action for negligence against the California Appellate Project, the organization that had appointed his defense counsel. The trial court dismissed Black's negligence action and Black appealed.

Issue: Is a public interest organization liable for the quality of legal services rendered by an attorney that it selects and appoints to handle pro bono matters?

Ruling: Yes.

CAP argued that, based upon prior California decisions, Plaintiff first needed to establish a duty on the part of a government entity that could lead to potential tort liability for professional malpractice. It argued that under the California Tort Claims Act, government tort liability depends on the existence of a statute, and Plaintiff failed to cite any statute guaranteeing that CAP would provide him with legal representation free of attorney neglect or fault.

The Court, however, looked to CAP's website which provided that its duty included not only the appointment of counsel on behalf of indigent criminal defendants, but also the evaluation of "appointed counsel's performance in order to match attorney skill and experience with the complexity level of each particular case," "review appointed counsel's work," and "provide a quality control function, helping to ensure that panel attorneys have available the resources necessary to provide effective representation..."

The Court further noted that CAP was not a "governmental entity" and, moreover, its work did not involve the type of "policy decisions" that are insulated from liability under the Tort Claims Act.

Finally, the Court rejected CAP's argument that it was entitled to quasi-judicial immunity:

[T]he availability of the immunity turns on whether the person is functioning as an advocate or a nonadvocate...[T]he acts performed by [CAP was] not judicial in nature...[The acts] involved selecting defense counsel; they may also have involved substantive review of appointed counsel's appellate representation. [CAP's] role n no way involved fact-finding or other quasi-judicial functions.

Lesson: Public interest organizations that engage in something more than the mechanical process of appointing counsel do not appear to be protected from professional negligence actions in California.

Tags: California, California Tort Claims Act, Criminal Law, Defenses, Quasi-Judicial Immunity, public-interest

NY: Disciplinary Violations Without More Don't Add up to "But For" Causation

Posted on August 27, 2010 by Ben Wasserman

Nason v. Fisher, 36 A.D.3d 486; 828 N.Y.S.2d 51 (2007)

NY: Underlying Commercial Transaction

Williams v. Bashman, 457 F. Supp. 322 (E.D. Pa. 1978)

Facts: The plaintiff retained the defendant attorneys based on one of the defendant attorneys representation that he was experienced in handling commercial partnership cases. The plaintiff brought a cause of action against the defendant for false representation in violation of NY Judiciary Law section 487, but the court dismissed the action for the plaintiff’s failure to establish the statutory requirement of “chronic and extreme pattern of legal delinquency.” Additionally, the plaintiff also brought a legal malpractice claim against the defendants. The plaintiff’s claimed that the defendant’s alleged violation of Disciplinary Rules are evidence of malpractice.

Issue: Whether the court properly granted the defendant’s motion for summary judgment, dismissing the legal malpractice claim?

Ruling: Yes.

Lesson: Allegations of violations of Disciplinary Rules may be evidence of malpractice, however such a violation alone will not establish that the attorney’s conduct was the “but for” cause of the plaintiff’s loss.

Tags: New York, But for-Proximate Cause, Commercial, Ethics violations, NY Judiciary Law §487, Rules of Professional Conduct (RPCs)

PA: Proximate Cause = Case Within a Case

Posted on August 26, 2010 by Ben Wasserman

PA: Underlying tort action.

Gamer v. Ross, 2008 NY Slip Op. 2107 (App Div. 2d Dept)

Facts: The plaintiff retained the defendant, a partner at the defendant law firm, to represent her in her personal injury case against the a homeowner and the city of Philadelphia. A year passed without any communication between the plaintiff and the defendant, until the plaintiff sent the defendant a letter inquiring about the status of her case. The plaintiff received a letter from another attorney at the defendant law firm stating that he was representing her in her case against the City. Plaintiff did have one conversation with the defendant partner where he assured her that the case was in court. Another year passed and the defendant partner left the defendant law firm. The defendant law firm never filed the plaintiff’s case. The plaintiff claimed that the “defendant firm failed to exercise within the scope of their employment reasonable professional care and diligence in their representation of the plaintiff.” As a result of this failure the plaintiff claims that she was unable to recover compensation for her injuries and that her claim was barred by the statute of limitations.

Issue: Whether the plaintiff defendant law firm was liable for legal malpractice?

Ruling: Yes.

1.) “When a plaintiff alleges that the defendant lawyer negligently provided services to him or her as a plaintiff in the underlying action, he or she must establish by the preponderance of the evidence that he or she would have recovered a judgment in the underlying action in order to be awarded damages in the malpractice action, which are measured by the lost judgment.”

2.) Here, the court found that the defendant law firm was responsible for her case, including conducting discovery to determine the merits of her case and proving the elements if necessary at trial.

3.) The defendant law firm owed the plaintiff a duty to exercise reasonable profession in the prosecution of her claim and they negligently breached that duty which was the proximate cause of the plaintiff’s loss of damages.

Lesson: An attorney who signs a retainer agreement with a client has a duty to exercise reasonable care in representing that client. A breach of this duty may be the proximate cause of the client’s damages and thus the attorney will be liable for legal malpractice.

Tags: Pennsylvania, Case Within a Case, Proximate Cause, Torts/Personal Injury, underlying case

NY But for: Shifting the Burden to Defendant

Posted on August 25, 2010 by Ben Wasserman

NY: Underlying personal injury action; missing discovery causes summary judgment dismissing complain

Student Contributor: Josh Aronson

Facts: In the underlying case, the plaintiff was injured when he tripped and fell over wires and debris while roller skating on a public sidewalk adjacent to a construction site. The plaintiffs retained the defendants to commence a negligence action against the owner of the construction site as well as a contractor who had performed construction work on the site. Both of the plaintiff’s complaints were dismissed on summary judgment and motion to dismiss respectively. The plaintiff then brought action against the defendant to recover damages for legal malpractice, alleging that the defendants were negligent in their handling of the two underlying actions by failing to conduct proper discover that would have enabled them to successfully oppose the summary judgment and motion to dismiss. The defendant claims that the plaintiffs could not have succeeded in the underlying actions because the wires and construction debris over which the plaintiff tripped were open and obvious conditions that were not inherently dangerous. Furthermore, the defendant contends that the plaintiffs could not have succeeded in the underlying actions because they failed to adduce any evidence showing that the landowner of the construction site or its contractor caused or created the alleged dangerous condition.

Issue: Must the defendant in a legal malpractice action establish that their negligence would not have prevented the dismissal of the plaintiffs underlying actions?

Ruling: Yes. The court found that the landowner and its contractor would have had sufficient notice of the dangerous condition and therefore would have been liable for injuries resulting from its failure to correct the danger. As a result, the Court found that the burden was on the defendants in the malpractice action to establish that the missing discovery—which they failed to do, would not have prevented the dismissal of underlying actions.

Lesson: The defendant in a legal malpractice action must establish that “but for” the negligence claimed by the plaintiff, the outcome of the underlying action would not have changed.

Tags: New York, But for-Proximate Cause, Litigation, Torts/Personal Injury, burden shifting, summary judgment

Duty to Communicate Settlement Offers

Posted on August 24, 2010 by Ben Wasserman

Moores v. Greenberg 834 F.2d 1105, (1st Cir. 1987)

Fed'l Underlying Longshoreman's Act personal injury

Teamsters Chauffeurs, Warehousemen and Helpers, Local 764 v. Greenawalt, 919 F. Supp. 774 (M.D. Pa. 1996)

Facts: Longshoreman was injured during the course of his employment and was able to collect compensation benefits through his employer. He then retained an attorney to bring a liability claim against the ship owners. The ship owners allegedly made two settlement offers of $70,000 and $90,000, which the attorney did not communicate to the client. The third party liability claim was subsequently lost, and the client brought this malpractice claim against the attorney claiming that he would have accepted the settlement offer had he been informed of it. The attorney was found to be liable for $12,000, and he appealed the verdict claiming that the settlement offers were too meager to be relayed.

Issue: Is a lawyer required to communicate all reasonable settlement offers?

Ruling: Yes. A lawyer has a duty to use a degree of skill, diligence, and judgment necessary to the practice of his profession and which others who are similarly situated ordinarily possess. “As part and parcel of this duty, a lawyer must keep his client seasonably appraised of relevant developments, including opportunities for settlement.” The court implies that an attorney might not have a duty to communicate offers only when they are “so divorced from a realistic appraisal of the merits,” and unresponsive to the upside and downside of the litigation.

Lesson: A lawyer has a duty to keep his client informed of relevant developments, including opportunities for settlement. Lawyers are obliged to promptly communicate to the client settlement offers and all matters that may be relevant to the client’s appreciation and understanding of the matter.

Tags: Federal, Duties: Communicate, Longshoreman's Act, Torts/Personal Injury, duty to communicate

PA: Statute of Limitations 2 years.

Posted on August 23, 2010 by Ben Wasserman

PA Underlying labor dispute.

Chatterjee v. Due, 511 F. Supp. 183, 1982 A.M.C. 2970 (E.D. Pa. 1981)

Facts: The plaintiff, a union, sued the defendant, former union counsel, for legal malpractice for allegedly improperly advising the former union president and co-defendant to collect a severance pay. According to union by-laws, union officers are not supposed to get severance, however the plaintiffs argue that the defendant got a severance pay in the form of a car. The defendant used the car during his assignment as union president, but when he left the defendants allegedly made an arrangement that transferred the car to the defendant in exchange for the car’s fair market fault payable to the union.

Issue: Whether the plaintiff’s suit was timely filed?

Ruling: No. The plaintiff’s cause of action accrued more than two years prior to them filing the action therefore their action is time-barred.
1.) Pennsylvania’s statute of limitations for a legal malpractice claim is two years.

2.) “A cause of action accrues under Pennsylvania law and the limitations period begins to run when ‘the plaintiff knows, or reasonably should know, 1) that he has been injured, and 2) that his injury has been caused by another party’s conduct.’”

3.) Here, the plaintiffs were aware of some potential wrong doing as early as September of 1991 however they failed this action in December of 1993. Thus, the “plaintiff unreasonably and unjustifiably waited too long to file this action.”

Lesson: In Pennsylvania, an attorney cannot be sued for legal malpractice where the alleged malpractice occurred more than two years prior to the date the action was filed.

Tags: Pennsylvania, Statute of Limitations, statute of limitations, PA

Collectability: An Essential Element of Proximate Cause

Posted on August 20, 2010 by Krishna Shah

Chimento v. Parsons, Powell & Lane, LLC, Superior Court of New Jersey, Appellate Division, January 5, 2010

Facts: Plaintiff brought suit against a casino after his chair collapsed and, allegedly, caused him to sustain back and shoulder injuries. Although Plaintiff's attorney in the underlying matter sued the casino for negligent maintenance, he failed to assert a claim against the manufacturer of the chair. After the statute of limitations expired, Plaintiff's attorney learned of the identity of the manufacturer.

Eventually, Plaintiff retained another attorney in the underlying matter who successfully filed an amended complaint naming the manufacturer and obtained default judgment for approximately $300,000. Upon learning of the judgment, Plaintiff's former attorney asserted his right to compensation. Plaintiff, however, elected to bring the instant action in light of his former attorney's failure to name the chair manufacturer in the initial complaint.

Plaintiff's former attorney moved to dismiss arguing that the chair manufacturer had ceased to exist as a legal entity before Plaintiff's accident.

Issue: Can a former client successfully pursue a legal malpractice action based on his attorney's failure to pursue claims against a defunct entity?

Ruling: No.

The Court noted that the chair manufacturer and its successor in interest had ceased to exist as financially viable entities before Plaintiff's accident. The assets of both entities had been sold by a court appointed receiver for the benefit of the manufacturers' creditors.

[E]ven assuming that [the former attorney] deviated from the standard of professional competence expected of attorneys in this State by failing to name [the manufacturer] as a defendant in Plaintiff's underlying cause of action, such a deviation was legally inconsequential because [the manufacturer] was not a legally or commercially viable entity at the time of Plaintiff's accident.

Lesson: Plaintiff cannot pursue a malpractice action for his attorney's failure to name a defendant, unless he can first prove that he had a possibility of collecting on a recovery against that defendant. Otherwise, as a matter of law, the attorney's alleged negligence is not a proximate cause of any damages sustained by his client.

Tags: New Jersey, Proximate Cause, collectability

Tolling the Statute of Limitations: Continuous Representation Doctrine

Posted on August 18, 2010 by Krishna Shah

730 J&J, LLC v. Polizzotto & Polizzotto, Esqs., Supreme Court of New York, Appellate Division, Second Department, January 12, 2010

Facts: Plaintiff commenced a legal malpractice action to recover damages for the defendant attorneys' alleged failure to secure a deficiency judgment. Defendants argued the action was time barred under New York's three year statute of limitations. Plaintiff argued that the statute of limitations was tolled during the time Defendants continued to represent them in the underlying matter.

Issue: Is the statute of limitations for legal malpractice matters tolled during the time the allegedly negligent attorney continues his representation?

Ruling: Yes. A cause of action for legal malpractice accrues on the date the malpractice was committed. Nevertheless, under the doctrine of "continuous representation," the statute of limitations is tolled while the attorney continues to represent the client in the same matter in which the malpractice allegedly occurred:

The parties have a mutual understanding that further representation is needed with respect to the matter underlying the malpractice claim.

Lesson: In New York, the three year statute of limitations in legal malpractice actions will be tolled where the purportedly negligent attorney continued his representation in the underlying matter after the malpractice was committed.

Tags: New York, Statute of Limitations, continuous representation doctrine, toll

NJ: Expert Opinion Necessary to Dispute Reasonableness of Attorney's Fees

Posted on August 17, 2010 by Krishna Shah

Szaferman, Lakind, Blumstein, Blader & Lehman v. Parise, Superior Court of New Jersey, Appellate Division, February 24, 2010

Facts: Defendants retained Plaintiff attorneys in an underlying residential construction matter. Upon the submission of summary judgment motions in the underlying matter, defendants instructed their attorneys to cease all legal work. The attorneys advised of the need to prepare for upcoming court events and trial.

Prior to trial, however, the underlying litigation was dismissed upon entry of a mutual release, which included the parties' agreement to satisfy their respective counsel fees and costs. Despite this agreement, defendants paid only half of the outstanding legal fees and costs. In response to Plaintiff's efforts to collect the remainder of their fees, Defendants filed an action for malpractice. Specifically, Defendants disputed the reasonableness of certain time entries, cited to alleged billing irregularities, and asserted that the fees charged were excessive for the work performed.

The lower court dismissed the malpractice claim for failure to obtain an expert report. Defendants appealed.

Issue: Is the reasonableness of attorney's fees an issue of "common knowledge," or is an expert opinion necessary?

Ruling: An expert opinion is necessary:

Expert testimony is required in cases of professional malpractice where the matter to be addressed is so esoteric that the average juror could not form a valid judgment as to whether the conduct of the professional was reasonable. This is because the duties a lawyer owes to his client are not known by the average juror.

The Court concluded that Defendants' alleged dissatisfaction with the amount of legal fees charged, supported only by their personal experience in paying other attorneys was not a sufficient factual basis for their malpractice claim. The Court also rejected Defendants' argument that the jury ought to disallow all contested charges, unless Plaintiff provides sufficient justification.

Lesson: An expert opinion is necessary to successfully dispute the reasonableness of attorney's fees.

Tags: New Jersey, Attorneys Fees, Expert Witnesses

Third Circuit: Applies Baxt and Distinguishes Petrillo

Posted on August 16, 2010 by Krishna Shah

Flaherty-Wiebel v. Morris, Downing & Sherred, Court of Appeals, Third Circuit, June 10, 2010

Facts: At the request of their client, Wiebel (Plaintiff's former husband), the Defendant attorneys drafted a pre-nuptial agreement. Plaintiff was advised that Defendant attorneys had drafted the agreement on behalf of Wiebel. Plaintiff was represented by separate counsel during the negotiation of the agreement.

The agreement provided that Plaintiff owned 49% of a certain entity ("Entity") and Wiebel owned 51%. In actuality, Wiebel owned 99% and his son owned the remaining 1%. Upon the execution of the pre-nuptial agreement, Plaintiff married Wiebel.

Approximately four years later, Wiebel filed for divorce. Plaintiff subsequently brought this litigation, alleging (1) that the Defendant attorneys' misrepresentations in the pre-nuptial agreement concerning her ownership interest in the Entity disadvantaged her in the negotiation of her property settlement agreement, and (2) that the attorneys' allegedly breached certain Rules of Professional Conduct.

Issue: Does a violation of the Rules of Professional Conduct constitute legal malpractice? What is the extent of an attorney's duty to a non-client?

Ruling: The Court affirmed the New Jersey Supreme Court's holding in Baxt v. Liloia, 714 A.2d 271 (1998), and held that a violation of the Rules of Professional Conduct cannot sustain a cause of action for legal malpractice:

New Jersey does not recognize an independent cause of action for the violation of the Rules of Professional Conduct, but violations of these rules may be used to support a claim of legal malpractice. New Jersey courts have defined legal malpractice as negligence relating to an attorney's representation of a client.

Accordingly, the Court held that it was necessary for Plaintiff to establish that she was the Defendant attorneys' client. Plaintiff could not do so and argued that Defendants owed her a limited duty under Petrillo v. Bachenberg, 655 A.2d 1354 (N.J. 1995).

In Petrillo, the Court held that an attorney representing the seller of property had a duty not to provide misleading information regarding the property to potential buyers who the attorney knew, or should have known, would rely on the information. In order to determine whether the duty applied here, the Court first ascertained the purpose of the document. The Court concluded that the attorneys had drafted the pre-nuptial agreement to memorialize the parties' agreement, not to induce either party to enter into the agreement. Accordingly, the Court held that Petrillo did not apply:

[A]n attorney who puts into writing an agreement between two parties does not vouch for the representations either party has made to the other. The attorney only puts into writing the representations that the parties intend to make to each other. The act of drafting does not make the attorney responsible for the accuracy of the statements placed on paper.

Lesson: A violation of the Rules of Professional Conduct, in and of itself, cannot serve as a basis for a malpractice action. An attorney, by undertaking the task of setting forth the understanding of two individuals in a writing, does not owe non-clients the duty to verify the accuracy of a party's representations therein.

Tags: Federal, New Jersey, Family Law, Non-clients, Privity, Rules of Professional Conduct (RPCs), duties to third-parties

Privity in Admiralty Botched Wrongful Death Settlement

Posted on August 13, 2010 by Ben Wasserman

Admiralty Law: Wrongful Death Settlement

Sitar v. Sitar, 50 A.D.3d 667, 854 N.Y.S.2d 536 (2008)

Facts: Decedent was killed in a maritime ship collision in Pennsylvanian waters. Plaintiff, mother of the deceased, sues Defendant Law Firm that negotiated on behalf of one ship owner with her son-in-law in his suit to collect damages for her son's death. Plaintiff claims no settlement regarding son's death occurred because her son-in-law was not authorized to represent her interest as her son's sole heir. Defendant entered into the settlement without her consent and her son-in-law received the proceeds of the settlement based on his forgeries.

Issue: Did Defendant-Lawyers owe the non-client Plaintiff any legal duty?

Ruling: The court granted Defendant's motion to dismiss, holding that Defendant owed the plaintiff no legal duty of representation, based on the following considerations:
1) The theory allowing beneficiaries to sue a testator's attorneys despite a lack of privity is not applicable here because the protection of a beneficiary's interest and the testator's intent only occurs if a will is validly drawn. Further, in a will, an attorney is on notice that the testator's intent depends on their services. Will beneficiaries are allowed to sue because they are intended successors to a continuing attorney-client relationship between the attorney and the testator
2) Here, there is no will involved that would become defective through the acts of Defendant
3) Additionally, a reasonable attorney would have no reason to question his opponent's authority to enter into a settlement.
4) Furthermore, Plaintiff's claim fails because she cannot show that she was damaged by Defendant's negligence unless she was foreclosed from some right or property because the settlement was valid and not effected by fraud. Her allegations against her son-in-law undermine this because if they were true, the settlement would be invalid and not binding upon her.
5) Even if there was a valid settlement binding upon her, there is no duty running between Defendant and Plaintiff.

Lesson: A plaintiff has to be actually damaged before they can sue a lawyer for malpractice. Additionally, attorneys can agree to make payments from their client to their adversary if a reasonable lawyer would conclude that there was no reason to doubt their adversary's authority to agree to the settlement.

Tags: Federal, Privity, Torts/Personal Injury

NY: Intra-Family Business Transactions:The Perils of Multiple Representation

Posted on August 9, 2010 by Ben Wasserman

NY Underlying Commercial Transaction: Conflicts of Interest

Student Contributor: Maninder (Meena) Saini

Facts: Client (plaintiff) brought an action against attorney and attorney's law firm (defendants), alleging legal malpractice. This action arose out of attorneys' representation of plaintiff in the sale of the plaintiff’s business to his son and daughter-in law. The attorney was a member of the plaintiff’s board of directors and acted as an attorney for both the plaintiff and his son in the transaction. The purchase price of the business was to be determined according to the profits made while under the control of the plaintiff’s son and daughter-in-law. The complaint alleged that the attorney was aware and did not disclose to the plaintiff that the new owners had engaged in unauthorized behavior that lowered the value of the business. The court granted the defendant’s motion to dismiss complaint for failure to state cause of action insofar as asserted against him and his law firm. The plaintiff then appealed.

Issue: Were the plaintiff’s allegations sufficient to state a cause of action to recover damages for legal malpractice?

Ruling: The appellate court held that the complaint asserted valid causes of actions for legal malpractice and breach of fiduciary duty because there was a conflict of interest since the attorney represented both sides of the underlying transaction and he was aware of important information that should have been disclosed to his client-plaintiff. A legal malpractice action requires proof that the attorney “failed to exercise the ordinary and reasonable skill and knowledge commonly possessed by a member of the legal profession.”

Lesson: It is commonly known within the legal profession that a lawyer is considered to be a fiduciary to each client. A lawyer must consider carefully whether it is appropriate to represent parties on both sides of a single transaction since potential conflict of interests may materialize. Unless the conflict is knowingly an voluntarily waived by all sides, it may be impossible for the attorney to proceed with representation. In this case, the attorney had a duty to communicate to the plaintiff the information that adversely affected the plaintiff’s business.

Tags: New York, Commercial, Conflicts of Interest, Corporate Law, close corporation

NY: The Delicate Balance Between Proximate Cause and Collateral Estoppel

Posted on August 9, 2010 by Ben Wasserman

Pechko v. Gendelman, 20 A.D.3d 404; 799 N.Y.S.2d 80 (2nd Dept. 2005)

NY Underlying Medical Malpractice Action

Kahn v. Hart, 270 A.D.2d 231 (N.Y. App. Div. 2d Dep't 2000)

Facts: The plaintiff underwent a mammogram while a patient with Doctor #1, who, she claimed, told her that the mammogram was normal. Later that year she underwent a mammogram with Doctor #2 and was diagnosed with cancer. The surgeon recalled seeing in the first mammogram certain “micro-calcifications” that were “suspicious of cancer.” The plaintiff sued Doctor #1 for medical malpractice. During the course of representation, the attorney who was representing her forwarded the mammogram films to a radiologist for evaluation, who before the evaluation misplaced them. The plaintiff then retained an appellate law firm to represent her in the medical malpractice action. Doctor #1 moved for summary judgment arguing that the films constituted key evidence, and that the loss of that evidence irreparably prejudiced his ability to defend the action. The lower court granted the doctor’s summary judgment because the plaintiff failed to counter the motion with expert affidavits sufficient to create issues of fact. The plaintiff then brought this action against the law firm to recover damages for legal malpractice for failing to properly defend her against the summary judgment motion in the medical malpractice action. The law firm argued that because it was not responsible for the loss of the mammogram film, which occurred before it was retained, its negligence was not the proximate cause of the plaintiff’s damages. The law firm moved for a motion to dismiss for failure to state a claim. The lower court denied it and the law firm appealed.

Issue: Was the law firm negligent in its representation of the plaintiffs in a medical malpractice action?

Ruling: Yes. The court found that the motion was properly denied because the absence of the mammogram films did not require the conclusion that the plaintiff would be unable to establish the law firm’s negligence. Here the firm did not rebut the plaintiff’s claim that they were negligent in failing to obtain secondary evidence concerning the films.

Lesson: Even when a court’s determination in an underlying medical malpractice action may be read as holding that the plaintiff will be unable to establish the merits of the medical malpractice action, that determination should not be given collateral estoppel effect against the plaintiff when he or she has alleged that the determination in the underlying action was the result of his or her attorney’s negligence.

Tags: New York, But for-Proximate Cause, Proximate Cause, Torts/Personal Injury, collateral estoppel, summary judgment

NJ Affidavit of Merit: Who Can Sign It?

Posted on August 6, 2010 by Krishna Shah

Scott v. Calpin, U.S. District Court, New Jersey, March 2, 2010

Facts: The Defendant attorney moved to dismiss a professional negligence action against him for failure to submit an Affidavit of Merit pursuant to N.J.S.A. 2A:53A-27. The New Jersey Affidavit of Merit Statute requires "an affidavit of appropriate licensed person stating that there exists a reasonable probability that the care, skill, or knowledge exercised or exhibited in the treatment, practice or work that is the subject of the complaint, fell outside acceptable professional or occupational standards or treatment practices". Plaintiff, thereafter, submitted an Affidavit from an attorney licensed in Pennsylvania.

The Defendant attorney objected to the Affidavit, arguing that "pursuant to [the New Jersey Affidavit of Merit Statute] such an Affidavit for a legal malpractice matter must be from an attorney licensed to practice law in the State of New Jersey," since the New Jersey Affidavit of Merit statute defines "licensed persons" as "attorney[s] admitted to practice law in New Jersey".

Plaintiff, however, pointed to the portion of the Statute which provides that "the person executing the Affidavit shall be licensed in this or any other State; have particular expertise in the general area of specialty involved in the action...for a period of at least five years".

Issue: Can an attorney licensed in another state provide a valid New Jersey Affidavit of Merit?

Ruling: Yes. The Court recognized that "the overall purpose of the [Affidavit of Merit] statute is `to require plaintiffs in malpractice cases to make a threshold showing that their claim is meritorious, in order that meritless lawsuits readily could be identified at an early stage of litigation." The Court further noted that the Statute's definition of "licensed person" applies to the class of persons for whom an Affidavit is required.

Accordingly, it ruled:

Plaintiff produced an affidavit from an appropriately licensed attorney with over thirty years of experience in the areas of family law and divorce proceedings and who has attested to the "reasonable probability" that Defendant's representation of the Plaintiff fell below "the acceptable standard of care" required of attorneys in divorce proceedings.

Lesson: An experienced attorney licensed in a state other than New Jersey can provide the affidavit required by N.J.S.A. 2A:53A-27 in legal malpractice actions.

Tags: Affidavit/Certificate of Merit

NY: Change of Heart Is Not Enough To Settle and Sue

Posted on August 5, 2010 by Krishna Shah

Boone v. Bender, Supreme Court of New York, Appellate Division, June 22, 2010

Facts: Defendant attorneys represented the plaintiff in a matrimonial action which ended in a settlement. Subsequently, the plaintiff commenced this malpractice action alleging that defendants compromised their level of advocacy and coerced her into entering into the settlement. The defendants moved for summary judgment dismissing the complaint, and the Supreme Court denied the motion. Defendants appealed.

Issue: Can Plaintiff pursue a malpractice action after consenting to a settlement in the underlying matter?

Ruling: No.

A claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel.

Applying that standard to the instant case, however, the Court found that:

[T]he plaintiff was satisfied with the defendants' representation of her, that she had discussed the terms of the settlement with the defendants, that she understood that she would have the right to a trial if she did not wish to enter into the stipulation, that she had not been threatened or forced into entering into the stipulation, that she was entering into the stipulation voluntarily and of her own free will, that she had not taken any medications that would hamper her ability to understand the court proceedings, and that she had no additional questions for the defendants.

Accordingly, the Court concluded that plaintiff's subsequent "unhappiness" with the settlement did not rise to the level of legal malpractice. Further, the Court found that the attorneys' reasonable exercise of judgment in pursuing settlement did not constitute malpractice, and the plaintiff's allegation that defendants did not pursue her claims "zealously" was mere speculation.

Lesson: Conjecture, conclusory allegations of malpractice, and mere dissatisfaction concerning a settlement that was entered into voluntarily, do not constitute the necessary factual or legal basis upon which to pursue a subsequent action for professional negligence.

Tags: New York, Proximate Cause, settle and sue

MI: Appellate Division Rejects Attempt to Settle and Sue

Posted on August 4, 2010 by Krishna Shah

Hall v. Cohen, Michigan Court of Appeals, February 18, 2010

Facts: The defendant attorney represented plaintiff in a matrimonial matter, and after settlement of the matrimonial action, plaintiff brought suit against her attorney for malpractice. The trial court granted summary judgment in favor of the defendant attorney, and granted the attorney's counterclaim for unpaid legal fees. Plaintiff appeals.

Issue: Can Plaintiff sue for malpractice after consenting to a settlement in the underlying matrimonial action?

Ruling: No. The Court first set forth the standard for pursuing a malpractice action after settlement in the underlying matter:

When a settlement is compelled by the mistakes of the plaintiff's attorney, the attorney may be held liable for causing the client to settle for less than a properly represented client would have accepted...Additionally, a cause of action for legal malpractice may be raised when it can be shown that the client's consent to the settlement was compelled because prior misfeasance or nonfeasance by the attorney left no other recourse.

In applying that standard to the facts of this case, the Court noted that Plaintiff's statements under oath at the settlement hearing indicate that she "knowingly and voluntarily" entered into the agreement. Further, Plaintiff was unable to demonstrate that her attorney's alleged failure to enforce prejudgment orders, or her alleged threat to withdraw from the action, caused her to settle. Accordingly, the Appellate Division affirmed the trial court's decision to dismiss Plaintiff's complaint and award payment of outstanding legal fees.

Lesson: Where Plaintiff knowingly and voluntarily settles her action, and cannot present any factual basis upon which the Court can conclude that her decision to settle was the result of her attorney's professional negligence, Plaintiff may not "settle and sue."

Tags: Michigan, Proximate Cause, settle and sue

NJ: Attorney's Liens Enforced Prior to Resolution of Malpractice Action

Posted on August 3, 2010 by Krishna Shah

Cole v. Cole, N.J. App. Div. February 8, 2010

Facts: Defendant allegedly failed to pay his attorneys for services rendered, and the attorneys sought to impose a lien under N.J.S.A. which attaches to a verdict, report, decision, award, judgment, or final order in the client's favor. The trial court made a determination as to the proper amount of the lien and ordered its judgment to be paid. Defendant argued that the trial court should not have decided the issue while a malpractice action was pending.

Issue: Can the Court enter and enforce an attorney's lien while a separately filed legal malpractice action is pending?

Ruling: Yes. Holding a plenary hearing to determine the amount of the attorney's lien within the underlying action is in accordance with the generally accepted procedure regarding attorney's liens in the absence of a motion to stay:

While arguably a client may be entitled to a stay of the adjudication of any attorney's lien issue pending the outcome of a legal malpractice case, the record does not indicate that defendant sought such a stay.

***

Ordinarily, an attorney will not be able to collect fees for services that were negligently performed. As a result, a fee arbitration award will be stayed pending the outcome of a related legal malpractice case provided the court finds a 'substantial basis' for the legal malpractice action.

While defendant sought to vacate the judgment in his motion for reconsideration, he did not, in the alternative, seek a stay of its enforcement. Under these circumstances, we find no error in the trial court's action determining the amount of the attorney's lien, and entering and enforcing a judgment for the attorney fees owed.

Lesson: In the absence of a motion to stay pending resolution of a separately pending legal malpractice action, courts may properly determine and enforce attorney's liens in the underlying matter.

Tags: New Jersey, Attorneys Fees, attorney, lien', s

NY: Statute of Limitations CPLR 214 (6) 3 years!

Posted on July 30, 2010 by Ben Wasserman

NY: Underlying loan transaction

Student Contributor: Melissa Goldberg

Facts: The Plaintiff commenced this action against Defendants alleging legal malpractice arising from representation on two loan transactions. The Plaintiff alleged that he did not learn until ten years later, after defaults on the loans, that Defendants failed to record two mortgages executed to secure the loans.

Issue: Was this action barred by the statute of limitations?

Result: the Plaintiff's claims of legal malpractice should have been dismissed as time-barred.
1) Pursuant to CPLR 214 (6), an action to recover damages for legal malpractice must be commenced within three years of the accrual of the claim;
2) A claim to recover damages for legal malpractice accrues when the malpractice is committed, not when it is discovered;
3) The legal malpractice complained of occurred more than three years before the commencement of this action, and the Statute of Limitations.

Lesson: This is a harsh rule for Plaintiffs. It does not matter when a Plaintiff learns of a potential legal malpractice action. It only matters when the malpractice occurs.

Tags: New York, Commercial, Statute of Limitations

NY: Summary Judgment and the Underlying Case

Posted on July 29, 2010 by Ben Wasserman

Middleton v. Kenny,286 A.D.2d 957;731 N.Y.S.2d 425 (4th Dept.2001)

NY:Underlying Personal Injury Action

Pollicino v. Roemer & Featherstonhaugh, 277 A.D.2d 666; 716 N.Y.S.2d 416 (3rd Dept. 2000)

Facts: The plaintiff in the underlying action sued the architects, engineers and HVAC contractors for the alleged exposure to fumes and chemicals at their workplace. The appellate division dismissed the underlying action holding that the lower court abused its discretion in granting the plaintiff’s motion for an extension of time to file a note of issue after having been served with a 90-day demand pursuant to CPLR 3216. The defendant attorneys argued that the court erred in denying their cross motion seeking summary judgment because the plaintiff’s employer, not them, was the one responsible for the ventilation problem.

Issue: Did the attorneys submit evidence establishing as a matter of law that plaintiff would have been successful in the underlying action?

Ruling: No. The court found that the conflicting opinions of the experts presented issues of credibility to be determined by a trier of fact. The court held that the defendants were negligent in failing to respond to the 90-day demand and ordered a trial on the issues of proximate cause and damages.

Lesson: Even if the attorney can substantiate that someone else, here the employer, was liable for the plaintiff’s injuries, the attorneys still need to establish as a matter of law that the plaintiff would have been unsuccessful in the underlying action.

Tags: New York, Litigation, Proximate Cause

NY: Collateral Estoppel in Legal Malpractice Suit

Posted on July 28, 2010 by Ben Wasserman

NY Underlying Personal Injury Action; Notice of Claim vs. municipality

Estate of Nevelson v. Carro, Spanbock, Kaster et al. 259 A.D.2d 282; 686 N.Y.S.2d 404 (1st Dept.1999)

Facts: Plaintiff retained defendant law firm to represent him in a personal injury action against the New York City Transit Authority when he lost sight in his eye after a bus ran over a glass bottle causing a shard of glass to strike him in the eye. The notice of claim that the law firm actually served incorrectly listed the date of the accident, which was also repeated in the summons and complaint. About a month later the law firm amended the pleadings correcting the accident date but it made no motion to similarly amend the notice of claim until some three years after service of the erroneous notice of claim. The Transit Authority cross-moved to dismiss the complaint on the ground that the plaintiff’s notice of claim was defective and the action should be dismissed. The lower court denied the law firm’s motion to amend the notice of claim on the ground that the 4 ½-year delay in seeking to amend the notice of claim was prejudicial to the Transit Authority.
The plaintiff then commenced this malpractice suit against the law firm. The lower court granted the defendant law firm’s motion for summary judgment on the ground that the underlying decision holding that the plaintiff’s negligence action would have been dismissed regardless of the alleged malpractice, was entitled to preclusive effect. The plaintiff appealed.

Issue: Does collateral estoppel preclude the malpractice action?

Ruling: Here the court found that the lower court’s comment that the plaintiff’s action would have been dismissed was not entitled to preclusive effect because it was dicta and not necessary to resolve the issue. The court found that the law firm’s failure to serve a proper notice of claim was the error that required dismissal, and that the complaint was dismissed on that ground.

Lesson: To invoke the doctrine of collateral estoppel it must be shown that there is an identity of issue that has necessarily been decided in the prior litigation and which is decisive of the present action, and that the party sought to be estopped had a full and fair opportunity to contest the decision that is now claimed to be controlling.

Tags: New York, Defenses, Litigation, Torts/Personal Injury

PA: Multiple doctors, multiple lawyers....

Posted on July 27, 2010 by Ben Wasserman

Rudd v. Timm, 1995 WL 298950 (E.D. Pa. 1995).

Pa. underlying medical and legal malpractice

Student contributor: Cheryl Neuman

Facts: Plaintiff fell in a motel bathtub and sustained injuries. She visited various doctors over the next number of years and eventually developed a pseudomeningocele on her back. Doctor 1 stated that the medical condition was caused by Doctor 2’s injection. After hearing this information, plaintiff retained Law firm 1 to bring a medical malpractice claim against Doctor 2. Law firm 1 failed to identify any expert witnesses and Doctor 1 refused to testify as to the appropriate standard of care that Doctor 2 should have complied with. Law firm 1 eventually did get an expert report which stated that the medical condition was not necessarily caused by the injection and was therefore not negligence, but rather it was negligence for Doctor 3, plaintiff’s treating physician, not to have diagnosed the medical condition. The expert opinion further stated that it could have been caused by other surgeries as well. The lawsuit against Doctor 2 was therefore dismissed. Plaintiff then hired lawyer 2 to file a malpractice case against law firm 1. Lawyer 2, however, failed to answer the pleadings properly and then plaintiff filed a legal malpractice action against lawyer 2.

Issue: Should the claim against lawyer 2 be viable?

Ruling: Yes. The lawsuit is viable. In order for the plaintiff to recover against lawyer 2, she must establish she would have prevailed in the underlying suit against law firm 1, assuming that law firm 1 conducted proper research and sued the proper parties.

Lesson: The plaintiff wasn't barred by the statute of limitations in this case because the underlying medical malpractice case was brought against the wrong doctor as a result of law firm 1’s negligence. Therefore, if the plaintiff could show that she would have prevailed against the appropriate doctor, then the malpractice case against the first lawyer and second lawyer is still available to the plaintiff.

Tags: Pennsylvania, Statute of Limitations

Lawyer Malpractice Class #1

Posted on July 27, 2010 by Ben Wasserman

Welcome to Hofstra Law School’s course on “Lawyer Malpractice”

This is the first installment of what will be an effort to make available to all law students and lawyers the contents of the course materials which I use in teaching this course at Hofstra University Law School. I have had the privilege and pleasure of teaching this course since 1990. In the process, I've learned a lot about this fascinating and relatively new area of law. I've even gained a few insights into what it's all about. In addition to academics, I've also been professionally involved as an advocate and expert in over a thousand of these cases. Now, it's time to share whatever I may have learned in the process with a larger "classroom". Why?

The aim of this course is simple: to teach law students and lawyers how NOT to practice law. Now with the technology of this blog, and the consequential morphing of the classroom into an online lecture hall with no borders or time limits, my hope remains humble: to do something meaningful that will help make us all better lawyers, if for no other reason than to help restore the faith of too many disappointed clients in our legal and judicial system. Learning about how we commit malpractice and how to avoid it is not limited to a course in law school. Nor should it be left behind once new lawyers go out into the real world. That's why we've gone to the internet. It's here. Whenever you want and wherever you are.

Legal malpractice lawsuits have proliferated in the past couple of decades to the point where it has been called “the tort of the new millennium.” That may well be why it makes sense to learn from the mistakes of others. And that is what we plan to do here. We are going to be studying court decisions which read like short stories of what, why and how not to practice law. But we're going to learn more. For those litigators among us, we are going to learn how to prosecute legal malpractice actions where that's warranted and necessary and how to defend against legal malpractice actions that should not have been brought.

Actually, legal malpractice is a hybrid type of claim that mixes elements of contract law and tort law with an abundant serving of fiduciary duty law. It also throws in to the mix elements of consumer protection law and legal ethics. It has clearly become one of the prominent subdivisions of one of the newest areas of substantive law called “the law governing lawyers”.

Different states have developed their own unique approach to lawyer malpractice. Some states might be characterized as pro-lawyer others pro-client. Still others seem pro-plaintiff (whether one is a client or some third party who is outside of the traditional client-lawyer relationship) or pro- defense. Liability insurance is an important driving force in legal malpractice litigation. But the insurance industry is, and should be, essential in helping lawyers learn which professional standards are acceptable and which are not.

There is much debate about many topics in the area of lawyer malpractice. But one thing on which most agree is defining the constituent elements of a legal malpractice claim. In general, here are the elements of the cause of action:

1. An attorney–client relationship (or some other relationship wherein a non-client relies on an attorney and the attorney is aware of that reliance);
2. The relationship gives rise to a duty of care on the part of the attorney which the attorney fails to comply with;
3. That breach of duty is the proximate cause of
4. Actual damages suffered by the plaintiff.

Short of these 4 constituent elements of the cause of action for legal malpractice, the debate rages:

What is an attorney-client relationship? What is the scope of the relationship? Who is entitled to rely on an attorney even though they are outside of the relationship? How to define the duty? Does the duty fall within the scope of the relationship? Can a duty that is provided in, say, the Rules of Professional Conduct be enforced in the setting of a legal malpractice law suit? Does the contract statute of limitations apply or the tort statute? Is the fiduciary duty statute of limitations any different? Does that apply in all legal malpractice cases? How do we define proximate cause? Is it “but for” or is it “substantial factors” or something else”? How do you prove or disprove proximate cause? What’s a “case within a case” anyway”? How do you prove what would have happened in the case out of which the legal malpractice arises? How do you prove what would have happened in a non-litigation (transactional) matter if the lawyer wasn’t professionally negligent?

And these are just some of the questions, for starters. So, where to start is the question. If you choose to read only one case throughout this entire course, here’s where you should begin: Probably one of the oldest and one of the few legal malpractice cases decided by the United States Supreme Court.

Savings Bank v. Ward, 100 US 195 (1880).

Student feed back is important. That's why we have the ability to post comments to this lesson. Please feel free to do so. In that way, we can have discussions on what I hope will be helpful to you.

Welcome aboard!

Prof. W.

PS If you prefer not to post publicly, feel free to contact us. There's a "Contact Us" box for your convenience, on the margin to your left.

Tags: CLE & Law School Course, CLE, Privity, law school

NY: The Essential Defense Expert

Posted on July 26, 2010 by Ben Wasserman

NY Underlying Estate Tax Matter

Alaimo v. McGeorge, 893 N.Y.S.2d 331 (3rd Dept. 2010)

Facts: Plaintiff corporation was created upon the advice of defendant law firm for the purpose of organizing the financial affairs of Louise Nevelson, a deceased sculptor, and in an attempt to cause her artwork and the income from it to pass outside of her taxable estate. Nevelson’s son, who was also the executor of her estate, owned the corporation. This malpractice action arose after the IRS assessed millions of dollars in estate taxes against Nevelson’s estate and gift taxes against her son. After Nevelson’s death, the IRS determined that the corporation was a sham used to gift the decedent’s income and assets to her son, and that all the assets of the corporation should have been included in the sculptor’s gross estate. The plaintiffs claimed that the law firm never advised them of any risks of potential gift or estate tax liability that could arise based on the level of compensation that the corporation paid Nevelson.

Issue: Did the law firm depart from the requisite standard of care when they failed to adequately advise the plaintiffs that their failure to substantially compensate the decedent could result in adverse tax consequences under the plan that they recommended?

Ruling: Yes. The court found that here the defendants offered only conclusory, self-serving statements with no expert or other evidence that would establish that they did not depart from the requisite standard of care. The defendants had an obligation to do so.

Lesson: The requirement that a plaintiff come forward with expert evidence on the professional’s duty of care may be dispensed with where ordinary experience of the fact finder provides sufficient basis for judging the adequacy of the professional service. Id. at 283; Kulak v. Nationwide Mut. Ins. Co., 40 NY2d 140, 148.

Tags: New York, Expert Witnesses, Wills Trusts & Estates

CA: Malpractice Action Stayed Pending Postconviction Relief

Posted on July 23, 2010 by Krishna Shah

Black v. White, Court of Appeals of California, Second District, Division Four, April 27, 2010

Facts: Plaintiff filed this malpractice action against his criminal attorney after his conviction for first degree burglary was affirmed. The trial court sustained the attorney's demurrer to Plaintiff's complaint on the basis that actual innocence is a prerequisite to filing a malpractice action in California. Plaintiff appealed and argued that his petition for writ of habeas corpus had not yet been decided. Accordingly, he alleged that the trial court was required to stay the action pending resolution of the underlying matter.

Issue: In the event plaintiff pursues a malpractice action in California prior to obtaining the necessary postconviction relief, should the court stay the action or dismiss it for failure to establish one of the necessary "elements" of a legal malpractice action?

Ruling: The action ought to be stayed until the underlying matter is resolved. In California, actual innocence is a necessary element of plaintiff's malpractice action:

[P]ermitting a convicted criminal to pursue a legal malpractice claim without requiring proof of innocence would allow the criminal to profit by his own fraud, or to take advantage of his own wrong, or to found [a] claim upon his iniquity, or to acquire property by his own crime. As such, it is against public policy for the suit to continue in that it would indeed shock the public conscience, engender disrespect for courts and generally discredit the administration of justice.

The Court further discussed that this policy promoted judicial economy, since issues litigated to obtain postconviction relief, including ineffective assistance of counsel, would be duplicated in a malpractice action.

This requirement of exoneration, however, poses a statute of limitations dilemma for the criminal defendant. In California, a legal malpractice action must be filed within one year of the client's discovery of the malpractice, or four years from the date of actionable malpractice, but in no event can the time to commence the action exceed four years. In matters involving postconviction proceedings, however, the statute of limitations would run long before the individual established his "actual innocence".

Accordingly, the Court applied the "two-track approach": Although plaintiff must file the malpractice action within the applicable limitations period, the court should stay the action during the period in which plaintiff "timely and diligently" pursues postconviction remedies.

Lesson: A criminal defendant may pursue his action for legal malpractice within the statute of limitations. In the event he is not able to establish "actual innocence" because the criminal matter is not yet concluded, the malpractice action will be stayed pending a decision in the underlying action.

Tags: California, Criminal Law, Statute of Limitations, actual innocence, postconviction relief

MI: Counsel's Trial Strategy Not Actionable as Malpractice

Posted on July 22, 2010 by Krishna Shah

Harris v. Farmer, Court of Appeals of Michigan, February 4, 2010

Facts: Defendant served as Plaintiff's court-appointed attorney in a criminal proceeding in which plaintiff was charged with identity theft. The prosecution alleged that plaintiff attempted to use another individuals social security number to obtain employment. Plaintiff was convicted and his claim for ineffective assistance of counsel was rejected.

Plaintiff subsequently filed an action for legal malpractice against his court-appointed attorney, alleging that he had failed to properly cross-examine a witness, failed to object to evidence offered by the prosecution, and failed to present necessary evidence. The attorney moved for summary judgment, and the lower court granted his motion. Plaintiff appealed.

Issue: Are counsel's alleged shortcomings at trial actionable as professional negligence?

Ruling: No.

Although an attorney has the duty to fashion a strategy so that it is consistent with prevailing Michigan law, he does not have a duty to ensure or guarantee the most favorable outcome possible

***

[M]ere errors in judgment by a lawyer are generally not grounds for a malpractice action where the attorney acts in good faith and exercises reasonable care, skill, and diligence.

The Court further noted that even if the attorney had done everything Plaintiff complained he did not do, the result of the proceeding would not have been different. Accordingly, the Court affirmed the dismissal of the malpractice action.

Lesson: Decisions involving trial tactics or litigation strategy are not subject to attack in an action for legal malpractice pursuant to Michigan law. This is especially so where counsel's professional judgment was not the cause in fact of his former client's alleged injuries.

Tags: Criminal Law, Michigan, Standard of Care, litigation strategy, professional judgment, trial strategy

NY: In House Counsel is Fiduciary First, Employee Later

Posted on July 21, 2010 by Krishna Shah

Keller v. Loews Corp., 895 NYS 2d 376 (2nd Dept. 2010)

Facts: In house counsel sued for religious discrimination after the termination of his employment. The defendant counterclaimed for breach of fiduciary duty. More specifically, the defendant alleged that counsel disclosed confidential information in his discrimination complaint. The trial court dismissed the counterclaim on the ground that there is no fiduciary relationship between an employer and an at-will employee.

Issue: Does in house counsel owe any fiduciary upon the termination of his at-will employment?

Ruling: Yes.

[A] lawyer, as one in a confidential relationship and as any fiduciary, is charged with a high degree of undivided loyalty to his client. Indeed, the duty to preserve client confidences and secrets continues even after representation ends. Thus, we conclude that an in-house attorney, his status as an at-will employee notwithstanding, owes his employer client a fiduciary duty.

Lesson: In house counsel owes his client a fiduciary duty irrespective of his status as an "at-will employee". The fiduciary duty continues even after termination of counsel's employment.

Tags: New York, Fiduciary Duty, at-will employee, in house counsel, termination

NY: Fee Dispute, Malpractice, and Res Judicata

Posted on July 20, 2010 by Krishna Shah

Liberty Associates v. Etkin, 2010 NY Slip Op 225 (2nd Dept. Jan. 10, 2010)

Facts: In March, 2002, the plaintiff, Liberty Associates, commenced an action to recover damages for legal malpractice against their former attorney. In January, 2003, the attorney's firm commenced an action against Liberty Associates in the Superior Court of New Jersey to recover fees for the legal services rendered. In 2004, during the pendency of the malpractice action, Liberty Associates and the attorney's firm settled the New Jersey fee dispute action, which was dismissed with prejudice. Upon learning of the settlement, the attorney moved for summary judgment dismissing the complaint in the malpractice action. The Supreme Court granted the attorney's motion.

Issue: Was Liberty Associates' pending malpractice claim against its former attorney barred by the doctrine of res judicata because of the dismissal of a separate action by the former attorney's firm to collect attorney's fees?

Ruling: Yes.

[T]he plaintiff's claim is barred by the doctrine of res judicata, which "precludes a party from litigating a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. A valid final judgment bars future actions between the same parties on the same cause of action, which includes "all other claims arising out of the same transaction or series of transactions . . . even if based upon different theories or if seeking a different remedy."

The Court further noted that a stipulation of discontinuance with prejudice without reservation of right or limitation of the claims disposed of is entitled to preclusive effect under the doctrine of res judicata.

Lesson: Dismissal of one action involving the underlying matter, without an adequate reservation of rights, will preclude the client from pursing malpractice claims as to the same matter in a separately filed action.

Tags: New York, Entire Controversy Doctrine, res judicata

NY: Collateral Estoppel No Defense to Legal Malpractice Action

Posted on July 19, 2010 by Krishna Shah

Underlying Personal Injury Action

Facts: Plaintiffs initiated a pro-se personal injury action in 1999. In May, 2004, Plaintiffs retained the defendant attorneys to prosecute their claims. Approximately one month later, Plaintiffs' action was struck for failure to present a medical expert. Plaintiffs were given one year to restore the case, but failed to timely comply. Defendants subsequently refunded the retainer and terminated representation.

Shortly thereafter, Plaintiffs moved to restore their complaint pro-se. The Supreme Court denied the motion and dismissed the case with prejudice for failure to present a reasonable excuse for not refiling the personal injury action within the one year time limit. The Court further noted that the reports from Plaintiffs' medical providers with the motion to reinstate "failed to establish any causal connection between any allegedly improper conduct [and the injuries complained of]."

Plaintiffs subsequently sued the defendant attorneys for legal malpractice.

Issue: Is Plaintiffs' legal malpractice action barred by the doctrine of collateral estoppel, since the Court had already made a determination as to the Plaintiffs' inability to succeed in the underlying personal injury matter? Did Plaintiffs state a cause of action for legal malpractice in light of the Supreme Court's finding that they failed to establish proximate cause?

Ruling: Plaintiffs stated a cause of action for legal malpractice and the doctrine of collateral estoppel did not apply.

The Appellate Division explained the elements of collateral estoppel:

An identical issue decided in the prior action that is decisive of the instant action; and
The party to be precluded from relitigating the issue had a full and fair opportunity to contest the prior determination.

The Court ruled that collateral estoppel did not apply, since Plaintiffs' motion to reinstate the case required a showing of merit sufficient to establish a triable issue of fact, and that in that setting conclusory allegations are insufficient. In contrast, on defendants' motion to dismiss, even conclusory allegations with respect to the medical evidence are deemed to be true. Accordingly, defendants failed to establish that the showing of proximate cause as to Plaintiffs' alleged injuries was identical in the underlying action and the malpractice action.

Similarly, although the medical evidence may not have been sufficient for purposes of the motion to reinstate the underlying matter, it was entitled to the benefit of every reasonable inference on a motion to dismiss for failure to state a claim.

Lesson: Where the plaintiff's burden of proof is heavier in the underlying action than in a preliminary motion in the malpractice action, plaintiff's claims will not be barred based upon its failure to meet a heavier burden in the underlying matter.

Tags: New York, Entire Controversy Doctrine, Torts/Personal Injury, burden of proof, collateral estoppel, failure to state a claim, motion to dismiss

NY: Labor Union or Union Member--Who Is My Client?

Posted on July 16, 2010 by Ben Wasserman

Mamorella v. Derkasch, 716 N.Y.S.2d 211(2000).

NY: Underlying employment law

Student Contributor: Jason Zemsky

Facts: Plaintiff Mamorella was appointed to a three-year probationary appointment as principal of the Auburn West Middle School. One year into her employment the Superintendent of Schools sent plaintiff a letter notifying her of his intention to terminate her probationary appointment. Plaintiff contacted Empire State Supervisors and Administrators Association (ESSAA), an association of local bargaining units of public school administrators and supervisors across the State, which represents the bargaining unit to which plaintiff belonged to represent her. Derkasch was assigned to her case and filed a grievance against the school, which was denied. The plaintiff commenced the instant action against Derkasch for legal malpractice and against ESSAA for the negligence of Derkasch under the doctrine of respondeat superior, based upon the alleged status of Derkasch as an employee of ESSAA. The court dismissed the plaintiff’s claims finding that Derkasch was an independent contractor and that ESSAA cannot be held liable for negligent acts of an independent contractor. The plaintiff appealed.

Issue: Can an attorney who performs services on behalf of a union be held liable to individual members of the union where the services at issue constitute a part of the collective bargaining process?

Ruling: No. the plaintiff's legal malpractice claim is preempted by Federal labor law, and that attorneys who perform services for and on behalf of a union may not be held liable for malpractice to individuals where the services performed constitute part of the collective bargaining process.

Lesson: An attorney who is handling a labor grievance on behalf of a union as part of the collective bargaining process has not entered into an ‘attorney-client’ relationship in the ordinary sense with the particular union member who is asserting the underlying grievance.

Tags: New York, Engagement, Privity, collective bargaining agreement, employment law, labor union

IL: Statute of Limitations: Cause of Acton Accrues on Discovery

Posted on July 15, 2010 by Ben Wasserman

Kohler v. Hawkins, 15 Ill.App.3d 455, 304 N.E.2d 677(App. Ct. 1973)

IL. underlying tort action

Student contributor: Cheryl Neuman

Facts: Two men were killed a car accident. Their estates hired defendant attorney in an action against the driver of the car in which the two men were killed. The defendants filed demands for arbitration and the arbitration hearings were held and damages were awarded. The award was subsequently vacated because the demand for arbitration was not filed within two years of the death of the decedents as required by the Injuries Act (Ill.Rev.Stat. 1965, ch. 70, pars. 1 and 2.). After the denial of a petition for leave to appeal, the defendants told the administrators of the estates that there would not be any recovery. The administrators then filed a complaint against the defendants alleging that the defendants were negligent and carelessly filed the demand for arbitration after the two year statutory allowance, thereby causing the administrators and heirs of the decedents the lost value of the arbitrator’s award. The defendants contend, however, that the statute of limitations has run and the plaintiffs can no longer sue them for a legal malpractice action.

Issue: Whether the statute of limitations for legal malpractice commences at the time of the negligent act or when the client discovers or should discover the facts establishing the elements of his cause of action?

Ruling: The cause of action for legal malpractice does not accrue until the client discovers or should have discovered the facts establishing the elements of his cause of action. Therefore, the complaint for legal malpractice was timely filed in this case. The statute of limitations did not begin to run until the administrators of the estates were advised by the defendant that they wouldn’t be able to recover in the underlying suit. Complaints filed within 5 years from that date were considered proper and timely filed.

Lesson: It is unrealistic and unfair to bar a negligently injured party’s cause of action before he had an opportunity to discover that it exists. The court reasoned that a client may not realize the negligence of an attorney when it occurs and to require a professional to check the work of the attorney would be impractical and would destroy the confidential relationship between attorney and client.

Tags: Illinois, Discovery, Statute of Limitations, Torts/Personal Injury, accrual of cause of action

PA: Privity Prevails

Posted on July 14, 2010 by Ben Wasserman

Mentzer & Rhey, Inc. v. Ferrari, 367 Pa. Super. 123 (Pa. Super. Ct. 1987)

PA. Underlying Real Estate Transaction

Student Contributor: Melissa Goldberg

Facts: Bruno Ferrari, the original Defendant, sold a parcel of land located in Westmoreland County to Mentzer and Rhey, Inc., the Plaintiff. A portion of the land located on Mentzer & Rhey's used car lot collapsed, creating a dangerous hole. Mentzer & Rhey filed an action for damages alleging the cause of the collapse to be a defective culvert constructed by Ferrari and fraudulently concealed by him during the sales transaction. Ferrari filed a complaint to join Fisher, Long and Rigone, the law firm representing Mentzer & Rhey in the property sale. The complaint alleged that Mentzer & Rhey's lack of knowledge of the existence of the culvert was due to the attorneys' negligence in performing the title search and that therefore the proposed third-party attorneys should be solely liable to Mentzer & Rhey for damages or in the alternative should be jointly liable with original Defendant.

Issue: Were the attorneys who performed a title search for buyers of property properly joined as third-party Defendants under Pa.R.C.P. 2252(a) where the buyers sue the seller for damages resulting from an allegedly fraudulently concealed and defective culvert and the attorneys failed to discover the existence of the culvert in their title search?

Result: A party must show an attorney-client relationship or a specific undertaking by the attorney furnishing professional services as a necessary prerequisite for maintaining a suit.
• Ferrari is not in privity with Plaintiff's attorneys, he has no cause of action against them and thus may not, under Pa.R.C.P. 2252(a), join the attorneys as third-party Defendants

Lesson: The general rule in Pennsylvania is that an attorney will be held liable for negligence only to his client. In the absence of special circumstances, he will not be held liable to anyone else.

Tags: Pennsylvania, Privity, Real Estate

PA: Standard of Care

Posted on July 13, 2010 by Ben Wasserman

McHugh v. Litvin, Blumberg, Matusow & Young, 525 Pa. 1, 574 A.2d 1040 (Pa. 1990)

PA Underlying Representation: Personal Injury

Storm v. Golden, 371 Pa. Super. 368, 538 A.2d 61 (1988)

Facts: Plaintiffs retained Attorney 1 to sue Plaintiff Husband's employer for injuries suffered while working. Attorney 1 later referred Plaintiffs' case to Defendant Attorneys. Defendant Attorneys also were retained by Plaintiff Wife in her action for loss of consortium. The suits were dismissed for improper service. Plaintiffs brought a malpractice suit.

Issue: Was the Plaintiffs' malpractice suit for the loss of the wife's consortium action prohibited because the cause of action only applied to the loss of a wife's consortium when Plaintiff Husband was injured?

Ruling: In reversing the lower court's dismissal of the lost consortium claim, the court held that the wife's consortium claim was valid, based on the following considerations:
1) In Pennsylvania, court decisions changing the law are to be applied retroactively unless the court holds that it's not to be applied retroactively.
2) Since the Plaintiffs had already filed an action when the law was changed, Plaintiffs were entitled to rely on the change of the law.
3) Since the Plaintiffs' claims were pending when the change of law happened, they could rely on the new law.
4) Defendants additionally filed for the loss of consortium claim for the Plaintiffs after the change in the law. The court inferred from this that Defendants believed that the change was applicable to the Plaintiffs. The court held that after filing the claim, the Defendants can not claim that they had no duty to not file it negligently.

Lesson: Attorneys are responsible for complying with changes in the law that effect the standards of care that occur while cases they are representing clients in are pending. Attorneys especially can not claim that they did not believe that the change in law applied to a case they were representing a client when they made a claim based on that change of law.

Tags: Pennsylvania, Litigation, Standard of Care, Torts/Personal Injury

PA: The Need for Legal Malpractice Expert--the First Word

Posted on July 12, 2010 by Ben Wasserman

Student Contributor: Christopher Henn

PA Underlying real estate transaction

Facts: Storm (the Client) retained Golden (attorney) in connection with the sale of her residence after an agreement was reached with a buyer. From the record, it appears that the client had “irrational trust in [a third party that] was founded in Christian faith and fueled by his representation of faith and Biblical interest” and “she couldn’t think for herself.” At the closing, a check for the proceeds was made to the order of the client and that third party. Thereupon the client endorsed the check to the third party and delivered it to him. He has not been seen or heard from since receiving the nearly $25,000 check. After suing the attorney for alleged malpractice, the trial court dismissed the suit at the end of client’s case for a failure to present expert testimony.

Issue: A question of first impression at the time, the court considered whether expert testimony was required to establish an attorney’s breach of his duty of care.

Ruling: The Superior Court held that;
“As a general rule, our Supreme Court has held that “expert testimony is necessary to establish negligent practice in any profession.” Id. at 375 citing Powell v. Risser, 375 Pa. 60, 65, 99 A.2d 454, 456 (1953);
And that “[b]y its very nature, the specific standard of care attributed to legal practioners necessitates an expert witness' explanation where a jury sits as the fact finder.” Id. at 375-76.
Finally, “[w]hether an attorney failed to exercise a reasonable degree of care and skill related to common professional practice in handling a real estate transaction is a question of fact outside the normal range of the ordinary experience of laypersons.” Id. at 377.

Lesson: This case is the beginning in a long line of decisions in Pennsylvania that recognizes the importance of expert testimony in legal malpractice cases. While the court noted there would be many times in which layperson jurors can decide for themselves, at least in a real-estate transaction such is not the case.

The State Supreme Court denied an appeal. 524 Pa. 630, 574 A.2d 71 (Pa. Nov 03, 1989).

Tags: Pennsylvania, Expert Witnesses

PA: Delay Damages

Posted on July 9, 2010 by Ben Wasserman

Wagner v. Orie & Zivic, 431 Pa. Super. 337 (Pa. Super. Ct. 1994)

PA Underlying Tort action

Student Contributor: Melissa Goldberg

Facts: Plaintiff suffered physical injuries resulting from a work-related accident. Plaintiff retained Defendant for the purpose of representing him in a personal injury action against the manufacturer, distributor, and/or shipper of the product alleged to cause the injury. Defendant never filed the complaint and the statute of limitations expired. A jury found for the Plaintiff in the legal malpractice suit. The Plaintiff requested that the trial court mold the verdict to award damages for delay pursuant to Rule 238 of the Pennsylvania Rules of Civil Procedure.

Issue: Whether Rule 238 of the Pennsylvania Rules of Civil Procedure provide for delay damages to be awarded in a legal malpractice action where the underlying claim resulted from improper handling of a personal injury claim.

Result: Rule 238 provides for an award of damages "in an action seeking monetary relief for bodily injury, death or property damage . . . ."
1) While the underlying cases which precipitated the instant action were both personal injury cases, the instant case was an action for legal malpractice.
2) The rule is explicitly limited by its own language, and it is not applicable to a legal malpractice action. "

Lesson: Rule 238 of the Pennsylvania Rules of Civil Procedure, in determining whether delay damages are available, will only look at the case at bar, and not the underlying action. Thus, it does not extend to Legal Malpractice cases.

Tags: Pennsylvania, Damages

NY: Statute of Limitations--3 years or 6 years?

Posted on July 8, 2010 by Ben Wasserman

Proskauer Rose Goetz & Mendelsohn LLP v. Munao, 270 A.D.2d 150 (N.Y. App. Div. 1st Dep't 2000)

NY Underlying business transaction

Student Contributor: Melissa Goldberg

Facts: In April 1991, Plaintiff allegedly gave Defendants negligent advice that they could shelter income through a certain joint venture. Plaintiff filed a summons with notice in October 1996, and served a complaint in December 1996, to which Defendants responded, in January 1997, with an answer containing counterclaims alleging the negligent advice. October 8, 1996 therefore marks the timeliness of the claims.

Issue: Which Statute of Limitations applied to this cause of action?

Result: Claims subject to six-year statute of limitations. The newly enacted three years statute does not bar it.

“While amended CPLR 214 (6), which reduced what would have been a six-year Statute of Limitations in this case to three years, applies to claims, such as these, interposed after its effective date of September 4, 1996, due process requires that such claims be entertained if brought within a reasonable time after September 4, 1996--clearly the case here, where the claims were presumably interposed only one month, and actually interposed only four months, after September 4, 1996.”

Lesson: The Statute of Limitations in New York is now three years.

Tags: New York, NY CPLR 214 (6), Statute of Limitations

NY: NJ Law Firm Gets Snagged as "Aiding and Abetting" a Ponzi Scheme

Posted on July 7, 2010 by Ben Wasserman

Oster v. Kirschner, et al 2010 NY Slip Op. 05981 (App Div, 1st Dept. 7-6-2010)

NY: Underlying Private investment

FACTS: A NJ law firm, Lum, Danzis, Drasco & Positan,LLC lost its bid to stay out of a NY law suit brought by investors in a private investment plan named Cobalt, which turned out to be a Ponzi scheme operated by a convicted felon with the help of an admitted criminal with numerous convictions for securities violations and who was banned from the securities industry. Investors lost over $22 million. As Cobalt's attorneys, the law firm is accused of preparing the private placement memorandum (PPM) which failed to disclose the criminal histories of the investment's managers, although the Firm's attorneys were aware of it. Also, the PPM allegedly contained other affirmative misrepresentations to which plaintiffs pointed in their "aiding and abetting" , fraud and breach of fiduciary duty Complaint. The Law Firm also served as the escrow agent for the investment transactions. The Law Firm "did not seriously dispute that they had knowledge of [their clients'] criminal backgrounds." It just claimed that knowledge and the knowledge of misrepresentations in the PPMs--"the admitted vehicle by which investment in the Ponzi scheme was carried out--does not sufficiently allege actual knowledge..."

ISSUE: Does the Complaint adequately plead fraud, or should the trial court's dismissal of the Complaint be reversed?

HELD: Order dismissing Complaint reversed. Complaint re-instsated.

1. A plaintiff alleging an aiding and abetting fraud claim must allege the existence of he underlying fraud, actual knowledge and substantial assistance. Actual knowledge of fraud can be "discerned from surrounding circumstances."

2. The Law Firm's preparation of the PPM, including, significantly, a backdated amendment to it that showed the investment managers criminal past which it had not previously disclosed, constitutes "substantial assistance."

The PPMs authored by defendant attorneys were the means by which the Cobalt...entities were able to solicit funds for ...[the] Ponzi scheme. The PPM is the very mechanism by which investments such as Cobalt are placed in the marketplace, and the admitted "but for" cause of plaintiff's investment losses. Yet defendants assert that "loss causation" is lacking because it has not been adequately pleaded that defendant attorneys had actual knowledge that their clients--whom they admittedly knew to be criminals, banned from the securities industry for engaging in fraudulent investment schemes--would operate...Cobalt...as a Ponzi scheme. If the facts and circumstances herein do not support an inference of actual knowledge, then it is doubtful that any action for aiding-and-abetting fraud could be sustained against any attorney, who, like defendant attorneys, consciously chose to look the other way when their clients asked them to prepare the PPM...To say that defendant attorneys merely furnished legal services to help solicit investments in...Cobalt..., and did not have knowledge of the fraud they helped perpetrate...[is] simply not tenable. The Court cannot and will not endorse what is essentially a "see no evil, hear no evil" approach.

LESSON: Is the NY Court expanding the duty of vigilance of the lawyer regarding disclosure of information that non-clients should be entitled to know? Will there be an appeal from this ruling? Let's wait and see.

For an interesting NJ case involving a different NJ law firm also involved in composing a "defective" PPM, see Profit Sharing Trust v. Lampf Lipkind, 630 A.2d 1191 (1993).

Tags: New York, Commercial, Fiduciary Duty, Fraud, PPM, Ponzi scheme, actual knowledge, private placement memorandum

TX: Expert Testimony Necessary to Establish Proximate Cause

Posted on July 1, 2010 by Krishna Shah

Primis Corp. v. Milledge, Court of Appeals of Texas, Fourteenth District, Houston, May 27, 2010

Facts: Defendants agreed to represent the plaintiffs in a certain lawsuit and plaintiffs paid the defendants a $5,000 retainer. Plaintiffs contend the retainer was a "general retainer", while Defendants contend the retainer was specifically for the work to be performed on the particular lawsuit.

Several weeks after plaintiffs paid the retainer, they were served with another suit wherein plaintiff sought confirmation of an arbitration award rendered against Primis Corporation. Plaintiffs delivered the citation to the Milledge law office when no attorneys were present. Soon thereafter, Samuel Milledge sent plaintiffs a letter noting the deadline to file an answer and requesting a retainer. Plaintiffs never furnished the retainer and, eventually, a default judgment was entered.

Primis then filed suit against Milledge asserting claims for negligence, breach of contract, and violations of the Texas Deceptive Practices Act. The trial court found that Milledge owed Primis a duty to clearly and unambiguously advise Primis that Milledge would not be filing an answer for Primis. Although the court noted that Milledge failed to give advice when legally obligated to do so and delayed handling a matter entrusted to his care, no damages were assessed against Milledge since Primis did not present expert testimony to establish that Milledge's negligence was the proximate cause of its injuries.

Issue: Whether expert testimony was necessary to establish proximate cause?

Ruling: Yes.

In a legal malpractice case predicated on professional negligence during litigation, expert testimony generally is required to determine whether the result of the underlying litigation would have been different but for the attorney's alleged negligence.

***

[Here] the trier of fact would have to assess whether, with reasonably prudent counsel, the trial court would have vacated or modified the arbitration award against Primis Corporation...The causation inquiry was beyond the trier of fact's common understanding, therefore, expert testimony was necessary for Primis to prove causation.

Lesson: To prevail in a legal malpractice action, Plaintiff must present expert testimony to establish that "but for" his attorney's negligence he would have prevailed in the underlying litigation.

Tags: Texas, But for-Proximate Cause, Commercial, Expert Witnesses, Proximate Cause

NY: Increased Liability for Estate Planning Attorneys

Posted on June 30, 2010 by Krishna Shah

Estate of Schneider v. Finmann, Court of Appeals of New York, June 17, 2010

Facts: The defendant attorney represented decedent Saul Schneider from April 2000 to his death in October 2006. In April 2000, the decedent purchased a $1 million life insurance policy. Over several years, he transferred ownership of that property from himself to an entity of which he was principal owner, then to another entity of which he was principal owner and then, in 2005, back to himself. At his death in October 2006, the proceeds of the insurance policy were included as part of his gross taxable estate.

The decedent's estate commenced this malpractice action in 2007, alleging that defendant negligently advised the decedent to transfer, or failed to advise the decedent not to transfer, the policy which resulted in an increased estate tax liability.

The New York Supreme Court granted defendant's motion to dismiss the complaint for failure to state a cause of action. The Appellate Division affirmed, holding that, in the absence of privity, an estate may not maintain an action for legal malpractice. The estate appealed.

Issue: Whether the estate can hold the decedent's estate planning attorney liable for damages resulting from negligent representation that causes enhanced estate tax liability?

Ruling: Yes.

Privity, or a relationship sufficiently approaching privity, exists between the personal representative of an estate and the estate planning attorney. We agree with the Texas Supreme Court that the estate essentially stands in the shoes of a decedent and, therefore, has the capacity to maintain the malpractice claim on the estate's behalf. The personal representative of an estate should not be prevented from raising a negligent estate planning claim against the attorney who caused harm to the estate. The attorney estate planner surely knows that minimizing the tax burden of the estate is one of the central tasks entrusted to the professional.

The Court did note, however, that strict privity remains a bar against beneficiaries' and other third-party individuals' estate planning malpractice claims absent fraud or other circumstances, since such claims would lead to "uncertainty and limitless liability".

Lesson: Privity is not a bar to an estate's legal malpractice lawsuit against the decedent's purportedly negligent attorney.

Tags: New York, Privity, Wills Trusts & Estates

NJ Supreme Court: Ferreira Conference is Not a Tolling Device

Posted on June 29, 2010 by Krishna Shah

Paragon Contractors, Inc. v. Peachtree Condominium Association et al., New Jersey Supreme Court, June 28, 2010

Facts: Plaintiff Paragon Contractors, Inc. sued defendant Peachtree Condominium Association for payment for construction work it performed on Peachtree's premises. Peachtree answered and counterclaimed for damages for Paragon's failure to properly complete drainage work at the site. Peachtree also filed a third-party complaint against Key Engineers, Inc., an entity that was hired to inspect and supervise Paragon's performance. With its third-party complaint, Peachtree filed a Case Information Statement which identified the matter as a construction case and did not respond to the question: "Is this a professional malpractice case?"

In its answer, Key raised the Affidavit of Merit statute as a separate defense. Further, in its Case Information Statement, Key characterized the case as one involving professional malpractice. Nevertheless, because the case originally was filed as a breach of contract action, the matter remained categorized by the civil case management staff as a construction case and was assigned to that track.

More than 120 days after Key filed its answer to Peachtree's third-party complaint and before Peachtree filed an affidavit of merit or a case management conference had been scheduled — Key filed a motion to dismiss the third-party action on the basis that Peachtree had failed to provide a timely affidavit of merit. In defense, Peachtree argued that the failure to schedule a Ferreira conference tolled the time frames in the Affidavit of Merit statute.

The trial judge rejected that argument and dismissed Peachtree's third-party complaint and all cross-claims against Key. The Appellate Division affirmed and Peachtree appealed to the New Jersey Supreme Court.

Issue: Whether the failure to hold a conference pursuant to Ferreira v. Rancocas Orthopedic Associates, tolls the filing period provided in the Affidavit of Merit statute?

Ruling: No. The Supreme Court held that the lack of a Ferreira conference would have no effect on plaintiff's responsibility to file an Affidavit of Merit within 120 days of the date of defendant's answer in a professional negligence action:

[P]arties are presumed to know the law and are obliged to follow it...Further, our creation of a tickler system to remind attorneys and their clients about critical filing dates plainly cannot trump the [Affidavit of Merit Statute].

The Court recognized the "confusion" over the issue and afforded relief to Peachtree. It warned, however, that "lawyers and litigants should understand that, going forward, reliance on the scheduling of a Ferreira conference to avoid the strictures of the Affidavit of Merit statute is entirely unwarranted and will not serve to toll the statutory time frames".

Lesson: The lack of a Ferreira conference will no longer be a successful defense to the failure to timely comply with NJ's Affidavit of Merit statute.

Tags: New Jersey, Affidavit/Certificate of Merit

NY: Illusion of "Factual Issues" No Bar to Summary Judgment

Posted on June 28, 2010 by Krishna Shah

Benaquista v. Burke, Supreme Court of New York, Appellate Division, Third Department, June 10, 2010

Facts: Plaintiff and his mother co-owned various corporations and the Defendant attorney represented the corporation in various matters. In December 2002, Plaintiff's mother and corporate entities commenced a suit against Plaintiff for misappropriation of corporate funds. Defendant represented the mother and corporate entities against the Plaintiff in this underlying litigation. Plaintiff subsequently commenced this legal malpractice action alleging that he had utilized the Defendant's services concerning business issues with his mother, and in doing so, had revealed confidential information. Plaintiff further alleged that he had suffered damages as a result of the Defendant's decision to utilize the confidential information to institute the underlying lawsuit.
Defendant moved for summary judgment prior to the end of discovery, and argued that Plaintiff's complaint failed to state a cause of action for legal malpractice.

Issue: Is summary judgment for failure to state a claim appropriate in legal malpractice actions prior to the close of discovery?

Ruling: Yes. Defendant met this burden by proffering a sworn affidavit, alleging that his firm had represented plaintiff's mother and the corporations prior to his representation of plaintiff — which consisted only of the incorporation of a business owned by plaintiff — and that no conflict of interest existed. In addition, the plaintiff's bill of particulars failed to specifically identify any personal or confidential information used by the defendant against plaintiff or any damages suffered by plaintiff. Plaintiff's only opposition to defendant's cross motion was an attorney affirmation and various documents which consisted primarily of billing records:

Inasmuch as plaintiff failed to proffer any sworn allegations of an individual with personal knowledge of the relevant facts and the documents submitted were not in admissible form, his opposition was insufficient to sustain his burden of raising a triable issue of fact to defeat defendant's entitlement to judgment as a matter of law.

Accordingly, Supreme Court of New York, Appellate Division, affirmed the trial court's summary judgment dismissing Plaintiff's legal malpractice complaint.

Lesson: In New York, a plaintiff will not be able to defeat a motion for summary judgment, or obtain discovery on a claim for legal malpractice, without pointing to a concrete issue of fact that remains undecided after consideration of the parties' affidavits and other documentary evidence.

Tags: New York, Conflicts of Interest, Corporate Law, judgment, summary

Lawyer Malpractice Class #5: The Lawyer's Fiduciary Duties

Posted on June 27, 2010 by Ben Wasserman

Hofstra Law School Class #5

Read: Fortney & Johnson, Legal Malpractice Law, Ch. 4, pp. 101-116; 421-424.

Restatement of Law Governing Lawyers

§49. Breach of Fiduciary Duty--Generally

In addition to the other possible bases of civil liability described in §§48 [professional negligence] 55[breach of contract and equitable relief] and 56 [liability to a non-client], a lawyer is civilly liable to a client if the lawyer breaches a fiduciary duty to the client set forth in §16(3) and if that failure is a legal cause of injury with the meaning of §53, unless the lawyer has a defense within the meaning of §54.

§16 Lawyer's Duties to a Client--Generally

To the extent consistent with the lawyer's other legal duties and subject to other provisions of this Restatement, a lawyer must, in matters within the scope of the representation:

(1) proceed in a manner reasonably calculated to advance a client's lawful objectives, as defined by the client after consultation;

(2) act with reasonable competence and diligence;

(3) comply with obligations concerning the client's confidences and property, avoid impermissible conflicting interests, deal honestly with the client, and not employ advantages arising from the client-lawyer relationship in a manner adverse to the client;

(4) fulfill valid contractual obligations to the client.

The Lawyer's Fiduciary Duties: "The 4 C's":

1. Communicate

RLGL §20 A Lawyer's Duty to Inform and Consult with a Client

(1) A lawyer must keep a client reasonably informed about the matter and must consult with a client to a reasonable extent concerning decisions to be made by the lawyer...

(2) A lawyer must promptly comply with a client's reasonable requests for information.

(3) A lawyer must notify a client of decisions to be made by the client...and must explain a matter to the extent reasonably necessary to permit the client to make informed decision regarding the representation.

* * *

RPC 1.4 Communication

(b) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.

(c) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decision regarding the representattion.

Rizzo v. Haines, 555 A.2d 58 (Pa. 1989). (duty to disclose settlement offers to client)

FDIC v. Clark, 978 F.2d 1541 (10th Cir.1992) (duty to inform board of directors of a corporate officer's fraud).

2. Conflict Avoidance (duty of loyalty)

Maritrans v. Pepper Hamilton & Scheetz, 529 Pa. 241, 602 A.2d 1277 (1992)

Matter of Silverman, 113 NJ 198 (1988) (doing business with clients)

3. Confidentiality

Profit Sharing Trust v. Lampf Lipkind, 267 NJ Super 174 (Law Div. 1993)

4. Competence

Starron v. Weinstein, 305 N.J.Super. 263, 701 A.2d 1325

Various courts have used other terms synonymous or encompassed by the "4 C's" to describe the fiduciary duty, or at least, the context within which various allegations of the breach of fiduciary duty has arisen. You should be familiar with these terms and recognize them as examples of breaches of the fiduciary duty: "self-dealing"; "failure to exercise independent professional judgment"; "duty of loyalty"; "duty of candor"; "abuse of a position of trust"; "putting the interests of the lawyer ahead of the clients"; "misuse or abuse of client's confidential information".

Here's a question to consider: If a lawyer overcharges a client, are there any circumstances where could be considered a breach of fiduciary duty? I'd like to hear your thoughts on this.

Share your comments, questions and input. Just click the "Comment" button.

Prof. W.

Tags: CLE & Law School Course, Fiduciary Duty, fiduciary, fiduciary duties

NJ Affidavit of Merit: Now Required in Legal Malpractice Claims Against a Law Firm

Posted on June 24, 2010 by Ben Wasserman

Sharmrock Lacrosse, Inc. v. Klehr Harrison Harvey Bransburg & Ellers, et al (NJ App Div. 6-14-2010)

NJ underlying loss of patent due to alleged attorney negligence.

The Appellate Division has now ruled, in a case of first impression, that although New Jersey's Affidavit of Merit Statute does not list a Law Firm as a "licensed person" against whom an Affidavit of Merit is required in a legal malpractice suit, the law firm entity is to be considered a "licensed person" within the meaning of the statute.

The facts are complex, the Judges tried to limit their holding to the unique facts of the case, but the Court's message--or at least the lesson for the practitioner seems clear:

1) Get an Affidavit of Merit for all defendants in a legal malpractice action in New Jersey, regardless of whether the defendant is admitted in NJ or not.

2) Include in the Affidavit of Merit the law firm, as an entity, even though the law firm is a non-New Jersey based law firm.

The entire decision is worth reading. Just click the case name above.

Tags: New Jersey, Affidavit of Merit, Affidavit/Certificate of Merit

PA: Lawyer's Fraud as Basis for Malpractice

Posted on June 23, 2010 by Ben Wasserman

O’Callaghan v. Weitzman, 436 A.2d 212 (Pa. Super. Ct., 1981)

PA Underlying Tort Action.

Yousian v. Eisenberg, 34 A.D.3d 228 (2006)

Facts: The plaintiffs, husband, wife and daughter, brought a fraud and legal malpractice action against the defendant resulting from the defendant’s representation of in a vehicular negligence accident. The defendant hired a colleague to handle the plaintiff’s case who in turn hired another attorney to institute the suit on the plaintiff’s behalf. By the time the attorney attempted to commence the action, the statute of limitations had run as for the two adult plaintiffs. The attorney alerted the defendant and his malpractice insurer as to his error. Without any authority to do so, the defendant negotiated with the attorney’s insurer and obtained a $9,000 settlement offer for the plaintiffs. The plaintiffs accepted the offer under the impression that the settlement was for the original automobile accident. The defendant deducted 40% contingent fee from the $9,000 and gave the plaintiffs a personal check for the remainder of the balance. When the plaintiffs learned the truth behind the settlement they brought this action against the defendant for fraud and legal malpractice.

Issue: Whether the lower court erred in granting the plaintiffs motion for a new trial on the issue of fraud?

Ruling: No. The plaintiff’s evidence was sufficient to warrant submission of the issues of fraud and damages to the jury.
1. “Fraud is composed of a misrepresentation fraudulently uttered with the intent to induce the action undertaken in reliance upon it to the damage of its victim..[and] the evidence must be sufficient to ‘enable the jury to come to a clear conviction, without hesitating, of the truth of the precise facts in issue’.”
2. The jury could come to a clear conclusion that the defendant defrauded the plaintiffs because the defendant failed to truthfully inform the plaintiff about the nature of the settlement in an effort to avoid being sued for malpractice.
3. Furthermore, as a result of the defendant’s actions the plaintiff was denied the opportunity to have a disinterested advocate pursue a malpractice claim against the attorney for missing the statute of limitations.

Lesson: A deliberate nondisclosure by a lawyer of a material will amount to fraud and legal malpractice for which the client can sue the lawyer.

Tags: Pennsylvania, Duties: Communicate, Fraud, Misrepresentation, Nondisclosure, Torts/Personal Injury, settlement

NY: Case Within the Case: The Great Excuser for Lawyer Carelessness?

Posted on June 21, 2010 by Ben Wasserman

NY Underlying Medical Malpractice Action

Student Contributor: Ally Shuster

Facts: Plaintiff went to hospital complaining of gastrointestinal pain. Over the next few months, Plaintiff underwent a series of tests in order to diagnose his condition. He underwent a sonogram, the results of which showed that he had stones in his gallbladder. Subsequently, he underwent surgery and was left with debilitating pain that he alleges to be a result of the surgery. Plaintiff retained Defendants and sued for medical malpractice. The Defendant attorneys failed to timely re-calendar the case, which is the basis for this legal malpractice claim.

Issue: Is there a valid legal malpractice claim?

Ruling: No. There is no issue of fact as to whether the treatment Plaintiff received at the Hospital constituted medical malpractice.

Lesson: In order to win a legal malpractice claim, a Plaintiff MUST prove that he could win the underlying case. Although it was troubling that Defendant attorneys failed to timely re-calendar the case, Plaintiff did not prove that he would have been successful in the underlying case but for the Defendant attorneys’ negligence.

“In order to prevail in a legal malpractice suit, the clients must prove that their former attorneys were negligent and that they could have prevailed and recovered a judgment but for that negligence.” Tanel v. Kreitzer & Vogelman, 293 A.D.2d 420

Tags: New York, But for-Proximate Cause, Case Within a Case, Torts/Personal Injury

NY Duty to Investigate

Posted on June 17, 2010 by Ben Wasserman

Thompson v. Seligman 53 A.D.3d 1019, 863 N.Y.S.2d 285 (A.D. 3 Dept., 2008).

NY: Litigation, Duty to Investigate

Erdman v. Dell 50 A.D.3d 627, 854 N.Y.S.2d 755 N.Y.A.D. 2 Dept., 2008.

Facts: Plaintiff was employed by AMFAC Recreational Services, Inc. AMFAC regularly provided cleaning services to the Gideon Putnam Hotel. While performing her duties cleaning at the Gideon, plaintiff suffered injuries and retained defendant attorney to represent her in a workman’s compensation claim. When plaintiff inquired about a possible claim for pain and suffering against the Gideon, defendant advised her that she could not pursue a claim, based on his mistaken belief that plaintiff was employed by the hotel. Plaintiff then consulted with a different attorney who advised her that she did have a claim against the Gideon, except for that the statute of limitations had expired.

Issue: Can a mistaken assumption by an attorney give rise to a legal malpractice claim?

Ruling: Yes.

“An attorney has the responsibility to investigate and prepare every phase of his or her client’s case.”

There was sufficient documentation that stated plaintiff’s employer was AMFAC, not the Gideon. Had defendant made the appropriate inquiry he would have known that plaintiff was not employed by the Gideon, and that plaintiff could have a third party claim against the Gideon for pain and suffering. The defendant’s failure to investigate the availability of a third party claim by plaintiff raises a question of fact whether the defendant exercised an appropriate duty of care to the client.

The Lesson: As an attorney, you have the responsibility to investigate and prepare every phase of your client’s case. If there is information that will further the interests of your client that is easily ascertainable, and you fail to use such information, you have breached your duty of care to your client. Unless the client actively misrepresents information to you, you can be liable for malpractice if your mistaken assumption would have been corrected by further inquiry.

Tags: New York, Duties: Investigate

NY: Blown Statute? No prob. Argue No Proximate Cause!

Posted on June 16, 2010 by Ben Wasserman

NY Undelrying personal injury; worksite accident; scaffolding

Dessel v. Dessel and Donohue,431 N.W.2d 359 (Sup. Ct. 1988).

Facts: Client filed a legal malpractice suit against attorney arising out of the attorney’s representation of client in an underlying NY Labor Law § 240 (1) action. Plaintiff was injured while working on a scaffold doing pipe work in a building at 100 Broadway. Defendant’s mistaken brought an action against the owners of the building at 100 Pine street. By the time the mistake was realized, the statute of limitations had already expired. There was some questions as to whether the plaintiff had followed certain safety precautions that may have helped avoid the accident, and whether plaintiff had secured safety locks on the wheels of the scaffolding that may have prevented the accident.

Issue: Is an attorney liable for malpractice if he is not the proximate cause of the plaintiff’s damages, even if the attorney negligently allowed for the statute of limitations to expire?

Ruling: No. "In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney 'failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession' and that the attorney's breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages" An attorney is not liable for damages to his client if he was not the proximate cause of those damages. Since there were questionable issues of fact as to what the proximate cause of the accident was, the defendant’s conduct was not a proximate cause of plaintiff’s damages.

Lesson: Summary judgment for legal malpractice liability is precluded if there is a genuine issue of material facts of proximate cause in the underlying action. But even if an attorney fails to name a proper party as a defendant and the statute of limitations expires, the attorney is not liable for malpractice if a plaintiff can not prove that but for the attorney’s failure to file a timely suit the client would have succeeded in the underlying cause of action.

Tags: New York, Defenses, NY Labor Law §240, Proximate Cause

Conflicts of Interest in Commercial Transactions: Representing Multiple Parties

Posted on June 15, 2010 by Ben Wasserman

Iowa underlying partnership dissolution

Student contributor: Cheryl Neuman

Facts: Two brothers, James and George, were partners in a business and wanted to dissolve the partnership. Both brothers retained one lawyer, the defendant in the present action. The agreement stated that James’ share of the partnership would be sold to George and the accounts receivable would be divided equally between the two brothers. After the partnership was dissolved, James died. James’ wife was appointed executor of the estate and she also retained defendant attorney as her attorney. James’ wife and George got into an argument regarding the division of the accounts receivable. Defendant counseled both George and James’ wife during the dispute. After the dispute could not be resolved, defendant, acting for the estate, sued George, claiming he breached his fiduciary duties in collecting the accounts receivable. George retained separate counsel and filed a legal malpractice case against defendant.

Issue 1: Was defendant liable for inserting a “hold harmless clause” in the dissolution agreement, as it was the sole basis for James’ wife’s suit against George?

Ruling 1: Yes, because this specific provision was inserted by mistake and in direct violation of the brother’s wishes and instructions. Defendant was therefore negligent.

Issue 2: Did defendant attorney have a conflict of interest in representing both George and James’ wife?

Ruling 2: Yes, because George stopped taking the 6% fee that James and George had orally agreed upon as a result of defendant’s advice. Defendant would not have given this advice had he not been retained to represent James’ wife. Furthermore, defendant’s negligence in inserting this clause, proximately caused George to pay legal expenses to defend the estate’s suit against him. Defendant’s advice to George was clearly the reason George surrendered the commission he had earned.

Lesson: A lawyer should not represent two parties in a matter when there is a clear conflict. There was information in this case that defendant questioned George about his activities and then used that information as the basis for the lawsuit against George; a clear violation of the professional rules of conduct. Rather than trying to retain the most amount of clients for the most amount of profit, it is wise to only represent those parties that are proper to represent and steer clear of malpractice litigation.

Tags: Commercial, Conflicts of Interest, Duties: Conflict Avoidance, Iowa, conflict of interest, partnerships

Disengaging from Long-Standing Clients

Posted on June 14, 2010 by Ben Wasserman

Rice v. Forestier, 414 S.W.2d 711 (Civ. App. 1967)

TX. underlying bankruptcy proceeding

Student contributor: Cheryl Neuman

Facts: Plaintiff retained defendant attorney for various matters, both in business and personally. Plaintiff suffered damages as a result of a default judgment filed against him in a bankruptcy proceeding. The plaintiff was served with citations. There is conflicting testimony regarding whether plaintiff delivered the citations (from the underlying cause of action) to the defendant’s office. Nevertheless, defendant was aware that the citations were in his office and defendant’s secretary actually prepared answers to the citations but was told not to file them because the business was in bankruptcy. The secretary placed the documents in a file and stored them away. These documents were then given to another attorney hired by plaintiff, in another matter. The new attorney testified that he received two citations from defendant’s file.

Issue: Whether defendant had a duty to inform plaintiff that he was not going to file an answer on plaintiff’s behalf?

Ruling: Yes. Since defendant knew that the citations were in his possession, he was obligated to inform plaintiff that he decided not to answer the citations. Defendant did, however, have the right to decline representation in this matter, but should have told plaintiff of his decision. The failure of the defendant to file the answer on plaintiff’s behalf and notify plaintiff that he would not be representing him was the proximate cause of the monetary loss as a result of the default judgment taken against him.

Lesson: A lawyer is free to choose his clients, but if the lawyer decides not to represent a longstanding client in a subsequent matter, it is prudent to inform the longstanding client of this decision. This is especially true, because, as seen in this case, a lawyer can be held liable to a client who he doesn’t inform that he will not be representing him.

Tags: Texas, Commercial, Disengagement, Duties: Communicate, Litigation, bankrupt estate, bankruptcy

Ohio on Vicarious Liability of the Law Firm

Posted on June 10, 2010 by Ben Wasserman

Natl. Union Fire Ins. Co. of Pittsburgh, PA v. Wuerth, 122 Ohio St.3d 594, 2009-Ohio-3601

Underlying Action: Insurance (Ohio)

Student Contributor: Candice L. Deaner

Facts: The plaintiff retained a law firm’s partner, Wuerth, to defend them against a lawsuit. During the trial, Wuerth informed partners and the trial judge that he was sick and subsequently was taken to the hospital. His doctor advised the court that Wuerth was not capable of continuing with the trial. His firm filed an unsuccessful motion for a mistrial, then assigned attorneys to complete the trial. Plaintiff lost the trial and filed suit claiming that Wuerth had committed legal malpractice, that his firm was vicariously liable for Wuerth’s malpractice, and that the firm itself committed malpractice. While Plaintiff alleged wrongful acts by the firm, Wuerth was the only individual named as a defendant in the complaint. On a motion for summary judgment, the district court dismissed Wuerth from the action because Plaintiff had filed its complaint after the expiration of the one-year statute of limitations under Ohio law. Because the statute barred them against Wuerth, the district court also dismissed claims for vicarious liability against firm. Finally, the district court determined that the firm cannot be held directly liable for legal malpractice because it is not an attorney and does not practice law and Plaintiff appealed.

Issue: Can a legal malpractice claim be maintained directly against a law firm when all of the relevant employees have either been dismissed from the lawsuit or were never sued in the first instance?

The Ruling: The Supreme Court of Ohio held a law firm is vicariously liable only when one or more of its principals or associates are liable for legal malpractice:

“Although a party injured by an agent may sue the principal, the agent, or both, a principal is vicariously liable only when an agent could be held directly liable the liability for the tortuous conduct flows through the agent by virtue of the agency relationship to the principal. If there is no liability assigned to the agent, it logically follows that there can be no liability imposed upon the principal for the agent’s actions.”

The Lesson: A law firm as an entity does not engage in the practice of law and therefore cannot commit legal malpractice directly. A law firm cannot be vicariously liable for legal malpractice unless one of its principals or associate attorneys is found liable for malpractice.

Tags: Ohio, Vicarious Liability

NY The Continuous Representation Doctrine

Posted on June 9, 2010 by Ben Wasserman

Montes v. Rosenzweig, 21 A.D.3d 460, 800 N.Y.S.2d 444 (N.Y. App. Div. 2005)

NY Underlying Litigation: Wrongful Death and Negligence

Robert A. Borissoff v. Taylor & Faust et al., 33 Cal. 4th 523 (Cal. 2004)

Facts: Decedent retained Defendant Attorney to represent her in her claim against a building owner after she was injured by a faulty elevator. Decedent shortly thereafter died from complications from her injuries before an action was commenced against the building owner. Defendant brought suit on her estate's behalf, but failed to get letters of administration. Consequently, the suit was dismissed for lack of standing. After failing in his attempts to obtain letters of administration, Defendant told Plaintiffs that he was withdrawing and that the action had been dismissed. However, Defendant continued to represent the Plaintiffs in their attempts to get letters of administration so that they could sue the building owner. Defendant later told Plaintiffs that a suit against the building owner had become practically impossible to maintain because the statute of limitations that had run several years earlier. Plaintiffs sued Defendant Attorney. The case was dismissed based on time bar and failure to state a cause of action.

Issue: Was the statute of limitations tolled by the "continuous representation doctrine?"

The Ruling: In reversing the lower court, the Appellate Division held that the "continuous representation doctrine" tolled the statute of limitations, based on the following considerations:
1) The "continuous representation doctrine" tolls the three year statue of limitations doctrine period in the matter in which the alleged malpractice occurred.
2) The doctrine is triggered when there is a "continuing attorney-client relationship" after the malpractice occurs.
3) Here, the defendant continued to represent the Plaintiffs after first failing to obtains letters of administration to bring the negligence and wrongful death suits,
4) The alleged malpractice occurred because Defendant failed to obtain letters of administration before both statue of limitations expired.
5) After the malpractice occurred, Defendant allegedly led the plaintiffs to believe that a suit could still be filed against building owner if the letters of administration were obtained.
6) The Defendant did not inform the plaintiffs until well after the statute of limitations against the attorney had run that it was practically impossible from the Plaintiffs to sue the building owner.

The Lesson: Although the statute of limitations may have run for a malpractice claim against an attorney, that period may be tolled if the Attorney continually represents the plaintiff during the period after the cause of action accrues.

Tags: New York, Statute of Limitations, Torts/Personal Injury

NY: The Continuous Representation Doctrine

Posted on June 7, 2010 by Krishna Shah

Waggoner v. Caruso, 2009 NY Slip Op 6739 (1st Dept. Sep. 29, 2009)

Underlying Commerical Matter

Facts: Plaintiff Waggoner retained Attorney Caruso to trace and attach the assets of Suisse Security Bank and Trust ("SSBT") and British Trade and Commerce Bank ("BTBC") in an effort to recover $10 million. Caruso attached SSBT's property to the extent of $3 million. He asked Waggoner, however, to sign an affidavit stating that he had recovered approximately $7.7 million. In the meantime, BTBC's chairman, Rodolfo Requena, pleaded guilty to federal money laundering charges and Caruso, allegedly, agreed to represent Requena without disclosure to Waggoner. Waggoner subsequently filed a suit for legal malpractice, fraud, breach of fiduciary duty, fraud, and conspiracy to commit fraud against Caruso, his firm, and his previous employer, Pillsbury Winthrop ("Pillsbury").

Pillsbury argued that Waggoner's claim for legal malpractice was time-barred, since their representation had terminated more than three years prior to the date the malpractice suit was instituted.

Issue: Can a former client bring a suit for malpractice against a firm more than three years after the firm's representation has been terminated, in the event the client continues to be represented in the same matter by an attorney previously employed at the firm?

Ruling: Yes. In New York, a legal malpractice action must be commenced within three years of accrual. Accrual occurs when the malpractice is committed. A client, however, "cannot be expected to jeopardize a pending case or relationship with an attorney during the period that the attorney continues to handle the case". Since "an attorney-client relationship would certainly be jeopardized by a client's allegation that his or her attorney committed malpractice", the statute is tolled as to a malpractice claim against a law firm where the attorney who handled the case continues to represent the client in the same matter.

Lesson: Under the "doctrine of continuous representation", the statute of limitations is tolled while representation on the same matter is ongoing by the same attorney at a new law firm.

Tags: New York, Commercial, Statute of Limitations, continuous representation doctrine

The Co-Counsel Relationship: Friend or Foe?

Posted on June 3, 2010 by Krishna Shah

Steinberg v. Schnapp, 2010 NY Slip Op 02991 (1st Dept. April 13, 2010)

Underlying Probate Matter

Facts: Steinberg and Schnapp, both attorneys practicing independently, undertook the representation of another attorney, Borstein. Borstein had retained Steinberg and Schnapp to represent him with respect to “all legal proceedings and asset administration concerning the wills, assets and estate of the late Isi Fischzang”. More specifically, Borstein’s retainer agreement provided that Steinberg was “the general counsel…with respect to all litigation proceedings concerning the wills, assets, and estate”.

Soon after the commencement of the representation, however, Steinberg instituted an action against Schnapp for quantum meruit and interference with an advantageous economic relationship. Essentially, Steinberg alleged that Schnapp fired him to shift the blame for delays in the probate action that upset Borstein.

Issue: Where two attorneys are retained by an executor, one as trial counsel and the other as “Of Counsel”, should “Of Counsel” be permitted to seek his fees from trial counsel?

Ruling: No. The Court resorted to principles of contract law to resolve Steinberg’s claim, and held that the written documents evidenced that Steinberg’s client was the estate, not Schnapp:

In this case Steinberg has sought to recover compensation for his services from a party who did not have any obligation to compensate him – his co-counsel – with whom he was clearly not in privity. There is not even a suggestion that the estate is an undisclosed principal, in which case liability might attach to Schnapp, under time-honored principles.

The Court further held that Steinberg’s claims would fail in any event, since “[a]s a general rule, where there is a contractual relationship between a lawyer and client, the client has the right to terminate the attorney-client relationship at any time with or without cause”:

At best, Steinberg is suggesting that Schnapp made an inaccurate statement about the quality of Steinberg’s work, which statement led Borstein to terminate the attorney relation, a relationship that is terminable at will, in any event. Such statements would be neither tortious nor criminal.

Lesson: An attorney cannot seek compensation for services rendered from co-counsel, even where co-counsel’s representations allegedly led the client to terminate the representation. A client can terminate the attorney-client relationship at will. The attorney can seek to recover compensation for his services only from his former client.

Tags: New York, Local & Co-Counsel, Wills Trusts & Estates, attorney, co-counsel, fees', s

NY: No Privity, No Liability

Posted on June 2, 2010 by Krishna Shah

Sayeh v. 66 Madison Ave. Apt. Corp., 2010 NY Slip Op 03844 (1st Dept. May 6, 2010)

Underlying Commercial Transaction

Facts: Plaintiff, an owner of seven apartments in a coop, sought to purchase an eighth unit. Plaintiff’s application to purchase the eight unit was disapproved by the coop board members, despite an exclusion in the proprietary lease for a stockholder-to-stockholder exemption from the requirements of board approval for assignment of shares. Plaintiff, subsequently, commenced an action for legal malpractice and intentional tort against the coop’s attorney, Silberman.

Issue: Was Silberman liable to Sayeh for alleged damages sustained by the coop’s wrongful disapproval of his application to purchase an additional unit?

Ruling: No. The Court dismissed Sayeh’s claim for legal malpractice against Silberman, since “there [was] no evidence of privity or near privity to support the imposition of [such] a claim”. The Court also dismissed the claim for intentional tort, since there was no evidence of “collusion, malice, or fraud to warrant the imposition of liability”.

Lesson: An attorney will not be held liable to a third-party with whom he has no attorney-client relationship, nor any reason to suspect that the third-party is relying on him for advice.

Tags: New York, Commercial, Privity, third-party

Defenses: The Uncooperative Client

Posted on June 1, 2010 by Krishna Shah

Ryan v. Powers & Santola, LLP, 2010 NY Slip Op 03827 (3^rd Dept. May 6, 2010)

Underlying Personal Injury Action

Facts: Plaintiff Ryan was struck on the head by highchair while dining at a restaurant. He then retained Powers & Santola to represent him in a negligence action against the restaurant.

In response to the defendants’ motion to compel production of a verified bill of particulars and responses to outstanding discovery demands, the trial court issued an order in the underlying action providing that the matter would be dismissed if Ryan failed to provide the outstanding discovery. Although Ryan eventually served discovery responses, a number of responses required more specific answers. The trial court, thereafter, extended the discovery schedule twice with a conditional order that the action would be dismissed if plaintiff continued to fail to provide responses. Ryan failed to comply and the matter was in fact dismissed.

Subsequently, Ryan commenced a legal malpractice action against Powers & Santola for “failing to follow court orders…consenting to conditional orders…and failing to move to vacate the dismissal order”. Ryan moved for partial summary judgment on the issue of liability.

Issue: Is Ryan’s alleged failure to cooperate with counsel in preparing discovery responses a viable defense to his action for legal malpractice?

Ruling: Yes. The Court held that:

A claim of legal malpractice will be sustained if the plaintiff establishes…that [he] would have succeeded on the merits of the underlying action but for the attorney’s negligence…We agree…that the plaintiff’s conclusory assertions – that ‘but for’ defendants’ alleged negligence, they ‘would have been able to prosecute all causes of action to a successful outcome’ – failed to establish their prima facie entitlement to summary judgment…There are questions of fact as to whether plaintiff failed to cooperate with defendants in providing them with information and documents necessary for motion practice after the underlying action was dismissed.

Lesson: A former client’s failure to cooperate is a question of fact in assessing the liability of the attorney in a malpractice action. Failure to cooperate, more likely than not, would prevent plaintiff from establishing that “but for” his former counsel’s malpractice, he would have prevailed in the underlying action.

Tags: New York, But for-Proximate Cause, Proximate Cause, Torts/Personal Injury, defense, failure to cooperate

Breach of Fiduciary Duty: The Enduring Duty

Posted on May 28, 2010 by Ben Wasserman

CA Underlying probate matters

Student Contributor: Evan Michael Hess

Facts: A special administrator in probate court retained the Defendants Taylor and Faust to provide assistance in tax matters relating to the execution of a will. Without authorization, the administrator borrowed approximately $115,000 from the estate for personal reasons. After some time, the administrator sought assistance from Defendant Faust. Faust later informed the administrator that he could no longer provide representation. Representation was then assumed by attorney McGovern. An IRS form was not filed by McGovern, which would have extended for three years the estate’s rights to claim a tax refund for administrative expenses related to the will contest. A malpractice action was initiated against Faust and McGovern, to which both Defendants asserted affirmative defenses that that they owed no duty as attorneys to plaintiff, with whom they did not stand in privity of contract, and that the statute of limitations barred plaintiff's claims. The Court of Appeals agreed, as did the trial court, that the Plaintiffs lacked standing to sue the defendants.

Issue: May the successor fiduciary of an estate in probate assert a professional negligence claim against attorneys retained by a predecessor fiduciary to provide tax assistance for the benefit of the estate?

Ruling: Yes. The Supreme Court held that:

1) “[the probate] code's relevant provisions strongly support the inference that a successor fiduciary does have standing to sue an attorney retained by a predecessor fiduciary to give tax advice for the benefit of the estate”;
2) “While privity of contract may not exist, the successor has the same powers and duties as the predecessor, including the power to sue”; and
3) the successor’s fiduciary must have standing to sue the predecessor’s attorney for malpractice if the successor is to have standing to sue for the same.

Lesson: Even if privity of contract does not exist, if an attorney breaches a duty to a predecessor, a successor fiduciary may sue the attorney for malpractice.

Tags: California, Conflicts of Interest, Wills Trusts & Estates, fiduciary, probate, successor liability, wills

But For: Same in Transactional and Litigation Malpractice

Posted on May 27, 2010 by Ben Wasserman

Michael Viner et al. v. Charles A. Sweet et al. 30 Cal. 4th 1232 (Cal. 2003)

CA Underlying corporate transaction

Student Contributor: Evan Michael Hess

Facts: Plaintiffs retained Defendant and his law firm for a corporate transaction. After negotiating an employment termination agreement, the Plaintiffs brought a legal malpractice suit alleging seven claims, encompassing and array of agreements stemming from negligent representation / misrepresentations by the Defendants to the Plaintiffs. A jury awarded the Plaintiffs damages on all seven claims, with the Court of Appeals reducing the damages award. On appeal, the Defendants contend that in a transactional
malpractice action, the plaintiff must show that but for the alleged malpractice, a more favorable result would have been obtained, and that the Plaintiffs would not have entered into the transaction (a “no deal” scenario).

Issue: Must the plaintiff in a transactional legal malpractice action prove that a more favorable result would have been obtained but for the alleged negligence?

Ruling: Yes. The Supreme Court of California held that:

1) there is “nothing distinctive about transactional malpractice that would justify a relaxation of, or departure from, the well-established requirement in negligence cases that the plaintiff establish causation by showing either (1) but for the negligence, the harm would not have occurred, or (2) the negligence was a concurrent independent cause of the harm”;
2) “Determining causation always requires evaluation of hypothetical situations concerning what might have happened, but did not. In both litigation and transactional malpractice cases, the crucial causation inquiry is what would have happened if the defendant attorney had not been negligent”;
3) There must be investigation into what would have happened but for the lawyer’s alleged negligence.

Lesson: Plaintiffs seeking damages in an action for legal malpractice stemming from an underlying transaction must show both but for causation, just as in litigation malpractice actions. A malpractice case will not be successful if the Plaintiff does not prove that the underlying case had merit.

Tags: California, But for-Proximate Cause, Case Within a Case, Commercial

Mobile Non-Lawyer Employees: Conflict considerations

Posted on May 19, 2010 by Susan Fortney

Phoenix Founders, Inc. v. Marshall, 887 S.W.2d 831 (1994)

TX: Conflict of interest; disqualification

Student Contributor: Amber R. Gilchrest*

Facts: A paralegal working at the law firm of Thompson & Knight quit her job to work for David & Goodman, where she spends 6/10th of an hour on a collection suit by Phoenix Founders against Ronald and Jane Beneke. The Benekes were represented by David & Goodman while Phoenix Founders was represented by Thompson & Knight. The paralegal later quit David & Goodman and returned to Thompson & Knight while the litigation against the Benekes continued. The paralegal was not questioned by Thompson & Knight about any potential conflicts of interest and was not screened from the case. Counsel for the Benekes sent a letter demanding that Thompson & Knight withdraw from representing Phoenix Founders; Thompson & Knight refused, at which point counsel for the Benekes filed a motion to disqualify. After initially overruling the motion, the trial court granted the motion because the confidential information known by an employee is imputed to the employer; in this case the paralegal imputed the confidential information to Thompson & Knight.

Issue: Whether a law firm must be disqualified from representation after employing a non-lawyer formerly employed by opposing counsel even though the law firm takes sufficient precautions to reduce the risk of the disclosure of confidential information?

Ruling: No, a law firm is not required to be disqualified from representation by employing a non-lawyer former employer of opposing counsel if the law firm takes sufficient precautions to reduce the risk of disclosure of confidential information to an acceptable level. In a case of first impression, the court looked to the Coker rule which states that lawyers are disqualified when they represent a client in pending suit that is “substantially related” and adverse to the interests of a former client. NCNB Texas Nat’l Bank v. Coker, 765 S.W.2d 398 (Tex. 1989). Furthermore, the court discussed the Petroleum Wholesale rule which states that any confidential information known by a lawyer is presumed to be shared with other members of the firm because of the nature of the relationship among firm members. Petroleum Wholesale, Inc. v. Marshall, 751 S.W.2d 295 (Tex. App. –Dallas 1988). The court agreed that the Coker rule applies to non-lawyers as well as lawyers, but refused to extend Petroleum Wholesale to non-lawyers provided that law firm can prove it took formal screening measures sufficient to protect confidential information. The nature of the involvement, time spent on the case, and the substantiality or the relation between the current and former case are all factors. The case was remanded for determination of whether the law firm took sufficient precautions to screen the paralegal.

Lesson: Lawyers and law firms should always ask every new employee or rehired employee about previous employment or other experience that may create conflicts of interest. Furthermore, law firms should have screening procedures and policies in place to ensure that confidential information is protected and not disclosed.

* Amber R. Gilchrest is in her final year at Texas Tech University School of Law. She earned her B.A. with a double major in Government and Psychology from the University of Texas at Austin and wants to pursue a career in public service.

Tags: Texas, Conflicts of Interest, conflict of interest, paralegal, screening

TX: Malpractice Statute of Limitations Tolls While Appeals for Underlying Case Continue

Posted on May 18, 2010 by Susan Fortney

Aduddell v. Parkhill, 821 S.W.2d 158 (Tex. 1991)

TX: Underlying asbestosis personal injury clam; statute of limitations

Student Contributor: Jean Moss Sullivan*

Facts: Plaintiff was diagnosed on April 24, 1983 with asbetosis and retained the defendant lawyers to sue asbestos manufacturers for plaintiff’s injuries. The plaintiff’s statute of limitations for the asbestos injuries expired on April 24, 1985. Lawyers did not file the suit until May 20, 1985. The federal district court entered judgment for the asbestos manufacturers because the plaintiff’s claim was filed after the 2-year statute of limitations.
Plaintiff sued Lawyers for breaches of express and implied warranties under the Deceptive Trade Practices Act and for negligence. Lawyers moved for summary judgment because the plaintiff’s suit was filed after the two-year statute of limitations for his legal malpractice claim. The plaintiff then pled the discovery rule but the trial court granted Lawyers’ motion to strike the amended petition as untimely. The trial court granted summary judgment in favor of Lawyers. The court of appeals affirmed the summary judgment, holding that when the plaintiff fails to timely plead the discovery rule, the legal injury rule applies in determining when a negligence cause of action accrues and when the statute of limitations begins to run. The plaintiff’s legal injury by the defendants occurred on April 24, 1985, the date the statute of limitations ran in the underlying case.

Issue: Whether the plaintiff’s claims against the defendants begin to toll before all of the appeals for the underlying claim are exhausted.

Ruling: When an attorney allegedly commits litigation malpractice, the court held that the statute of limitations does not begin tolling until all appeals of the underlying claim are exhausted.

Lesson: A plaintiff may wait to file suit for a legal malpractice claim until all appeals for the underlying claim have been exhausted. A plaintiff is able to consider the final outcome of the underlying claim before filing suit for legal practice. If the discovery rule applies, it is necessary to plead it in a timely fashion. Malpractice litigators should be aware of the burdens in asserting limitations defenses and relying on discovery and other tolling rules.

Jean Moss Sullivan is a third year student at Texas Tech University Law School and is a J.D. Candidate for May 2010. She received her B.A. in Religion from Southwestern University in 2007.

Tags: Texas, Deceptive Trade Practices Act, Litigation, Statute of Limitations, Torts/Personal Injury, tolling

TX: More Erosion of the Privity Doctrine

Posted on May 16, 2010 by Susan Fortney

O'Donnell v. Smith, 52 Tex. Sup. Ct. J. 52 (Tex. 2009).

TX: Underlying decedent's estate claims

Student Contributor: Aaron Moncibiaz*

FACTS: Executor Thomas O’Donnell sued Decedent’s former attorneys, Cox & Smith, for legal malpractice, breach of fiduciary duty, and gross negligence/malice. The claims are based on Cox & Smith’s advice to Decedent when Decedent served as executor of his wife’s estate. The Decedent retained Cox & Smith to advise him in the independent administration of his wife’s estate, and consulted the law firm regarding the separate vs. community classification of the couple’s shares of stock. Cox & Smith prepared an estate tax return that omitted certain shares of stock from a list of the wife’s assets.

The Decedent died twenty-nine years later, leaving the bulk of his estate to charity and not his children. Approximately one month after the Decedent’s death, his children sued the Decedent’s estate alleging that the Decedent has misclassified certain shares of stock as separate property, and as a result underfunded their mother’s trust. O’Donnell settled the children’s claims for just under $13 million, less than half of their estimated value. O’Donnell then sued Cox & Smith, alleging that the attorneys failed to properly advise the Decedent about the serious consequences of mischaracterizing assets, and that the firm’s negligence caused damage to the Decedent’s estate.

PROCEDURAL HISTORY: At trial, Cox & Smith won summary judgment on all claims, but the court gave no basis for its decision. The court of appeals ruled in favor of Cox & Smith, basing its judgment on the fact that O’Donnell, as executor of the estate, lacked privity of contract with the attorneys. The Supreme Court of Texas vacated the lower court’s judgment and remanded for reconsideration in light of its decision in Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., 192 S.W.3d 780 (Tex. 2006). In Belt, the Supreme Court of Texas held that an estate’s personal representative may bring the decedent’s survivable claims on behalf of the estate. The court further held that legal malpractice claims for pure economic loss survive, and an estate’s personal representative may bring survivable claims on behalf of the estate.

On remand, the court of appeals held that Belt was not limited to estate planning malpractice suits. The court explained that O’Donnell, as executor, stepped into Decedent’s shoes and could bring whatever malpractice action Decedent could have brought while still alive. The court then reviewed the record and found that although no evidence supported O’Donnell’s malice or breach of fiduciary duty claims, a triable issue of fact existed as to what damages were attributable to Cox & Smith’s actions. The court remanded the case to the trial court to determine if Cox & Smith’s actions constituted legal malpractice. Cox & Smith appeal this decision.

ISSUE: The court considered whether an executor may bring suit against a decedent’s attorney for malpractice committed outside the estate-planning process.

RULING: The Supreme Court of Texas agreed with the court of appeals’ interpretation of Belt and held that an executor should not be prevented from bringing the decedent’s survivable claims on behalf of the estate. The court does not, however, address whether Cox & Smith’s actions constituted legal malpractice.

A dissent supported by two justices of the court argued that the majority applied the wrong case in forming its opinion. The justices contend that Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996) should control. Under the Barcelo privity barrier, a non-client is precluded from bringing a malpractice suit against the decedent’s attorneys because of lack of privity.

LESSON: A decedent’s legal malpractice claim does not terminate with the death of the decedent. Regardless of whether the claim involves an estate planning matter or some other legal caveat, the claim survives and may be brought by the decedent’s personal representative.

*Aaron Moncibaiz, a third year law student at Texas Tech University School of Law, will be receiving his J.D. degree in May 2010. A member of the Board of Barristers and a competitor in the American Association of Justice National Trial Advocacy Competition, Aaron has focused his studies to trial and appellate practice. Aaron served as a legal intern for the American Legislative Exchange Council in Washington, D.C. and is currently employed as a law clerk with the Lubbock County District Attorney’s Office. Aaron received his B.S. in Architecture from Texas Tech University in 2007.

Tags: Texas, Privity, Wills Trusts & Estates

NJ: Duties to Third-Parties

Posted on May 13, 2010 by Krishna Shah

O’Brien v. Cleveland, 2010 Bankr. LEXIS 171 (Bankr. D.N.J. Jan. 22, 2010).

Underlying commercial action

Facts: Debtors filed a chapter 13 bankruptcy after falling behind on their mortgage payments. Even after the Chapter 13 filing, however, the debtors were unable to keep up with their payments under the the court ordered plan. Eventually, the first mortgage holder commenced a mortgage foreclosure on the debtors’ home. To avoid a sheriff’s sale of their property, the debtors entered into a mortgage rescue arrangement with Cleveland.

The rescue plan was a scam by Cleveland to defraud the debtors. It required the debtors to transfer title in their property, worth over $800,000, to Cleveland, with an option to buy it back at $650,000. Cleveland was to take out a new mortgage on the property, pay off the debtors’ old mortgage and some other outstanding debts in bankruptcy, and permit the debtors to continue to occupy the house in exchange for a payment of $5,000 per month to be used to service the new mortgage.

Cleveland’s attorney, William E. Gahwyler, Jr., prepared all of the closing documents for this transaction, including the HUD-1 statement. The statement contained a number of misrepresentations, including an incorrect sale price, a misrepresentation of Cleveland’s investment in purchasing the property, and a misrepresentation of the debtors’ proceeds from the sale. Moreover, the transaction was never reported by Gahwyler to the bankruptcy court for approval.

The debtors subsequently learned that Cleveland had mortgaged their property for over $100,000 in excess of the outstanding mortgages for its personal benefit. Likewise, the debtors’ $5,000 monthly payments were not being used to satisfy the debt on the property. Eventually, the lender moved to foreclose on the property, and the debtors filed an adversary complaint against Cleveland and its attorney, Gahwyler, alleging fraud, legal malpractice, conspiracy, and violation of a number of statutes.

Issue: Did Gahwyler owe a duty to the debtors in his capacity as attorney for Cleveland?

Holding: The court held that the debtors were entitled to a judgment against Cleveland based on causes of action arising in fraud, violation of the New Jersey Consumer Fraud Act, Truth in Lending Act, Home Ownership and Equity Protection Act, and New Jersey Home Ownership Security Act of 2002.

The court further held that the lack of an attorney-client relationship between the debtors and Gahwyler was no bar to obtaining relief against him:

Mr. Gahwyler should have withdrawn from representing Mr. Cleveland as soon as the nature of the transaction became known to him…[a]s an attorney, Mr. Gahwyler had an ethical obligation to prepare an accurate closing statement and should have withdrawn from representing Cleveland rather than create an inaccurate closing statement . . . had Gahwyler fulfilled his ethical responsibilities, Cleveland could not have carried out his plot. Gahwyler’s failure to perform his ethical obligations proximately caused damages to the debtors in the amount of the increased debt encumbering this house.

Lesson: An attorney who knowingly participates in the fraudulent scheme of his client will be held responsible for damages proximately sustained by a third-party as a result of the deceptive conduct.

Tags: Federal, New Jersey, Commercial, Standard of Care, third-parties

NJ: No "JNOVs" in Legal Malpractice Claims

Posted on May 12, 2010 by Krishna Shah

Olds v. Donnelly, 291 N.J.Super. 222 (App. Div. 1996).

Underlying Personal Injury Claim

Student Contributor: Jason Klien

Facts: On June 27, 1985 Robert Olds underwent hernia surgery and sustained significant injuries. Two months later Plaintiff consulted with an attorney, Donnelly, about bringing a medical malpractice claim against his surgeon, Dr. Donahue. Plaintiff signed a retainer agreement with Donnelly on or about August 27, 1985. On June 25, 1987, two days before the statute of limitations was to expire, Donnelly advised Olds that he could no longer represent him. Plaintiff’s case against Dr. Donahue was, therefore, barred by the applicable statute of limitations.

Plaintiff subsequently brought this action against Donnelly for legal malpractice, alleging that the Defendant deprived him of the opportunity to seek compensation for his post-surgical injuries. The jury returned a verdict of $500,000 in Plaintiff’s favor, and Donnelly moved for a judgment notwithstanding the verdict. The court granted the motion on the grounds that there was nothing within the record to support a finding of legal malpractice against Dr. Donahue. Plaintiff appealed.

Issue: Can the trial court grant a judgment notwithstanding the verdict on the basis of a lack of “credible” evidence?

Ruling: No. In deciding whether such a motion should be granted, the court must accept as true all the evidence which supports the position of the party defending against the motion, and must afford that party all legitimate inferences which could be deduced therefrom. If at that point the court could sustain a judgment in Plaintiff’s favor, the motion must be denied.

Lesson: The Court may not weigh the credibility of the evidence presented by the defendant attorney against the evidence presented by the Plaintiff in support of his claims and allegations. This is within the sole province of the jury, and therefore, cannot be the basis of a judgment notwithstanding the verdict:

[T]he trial court presented with such a motion is not concerned with the worth, nature or extent (beyond a scintilla) of the evidence, but only with its existence, viewed most favorably to the party opposing the motion.

Tags: New Jersey, Damages, JNOV, Torts/Personal Injury, judgment notwithstanding the verdict

US Supreme Court: FDCPA: No Bona Fide Error Defense for Mistakes of Law

Posted on May 11, 2010 by Krishna Shah

Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA et al., 2010 WL 1558977 (U.S. April 21, 2010).

Facts: Jerman sued Carlisle, McNellie, Rini, Kramer & Ulrich (the “Defendant law firm”) for, allegedly, violating the Federal Debt Collection Practices Act (“FDCPA”) by representing to Jerman that her debt would be assumed valid unless she disputed the debt “in writing” even though the FDCPA does not require a written dispute.

The Defendant law firm argued that their mistake was excused under the FDCPA’s bona fide error defense:

A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

Issue: Can attorneys avoid liability for a mistake of law under the FDCPA's bona error defense?

Ruling: The Supreme Court reversed the Appellate Division and held that the bona fide error defense does not apply to a violation resulting from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA. The Court declined to adopt an expansive reading of the defense and relied upon the “common maxim” that “ignorance of the law will not excuse any person, either civilly or criminally”.

The Court reasoned that the bona fide error defense’s requirement of maintaining “procedures reasonably adapted to avoid any such error…naturally evokes procedures to avoid mistakes like clerical or factual errors”:

The dictionary defines procedure as a series of steps followed in a regular orderly definite way…In that light, the statutory phrase is more naturally read to apply to processes that have mechanical or other such regular orderly steps to avoid mistakes…But legal reasoning is not a mechanical or strictly linear process.

The Court next considered the Defendant law firm’s argument that Congress’ decision to amend only the bona fide error defense in the Truth in Lending Act to specifically exclude “errors of legal judgment” evidenced its intent to include mistakes of law in the FDCPA’s bona fide error defense. The Court disagreed:

[I]t is not obvious that the amendment changed the scope of TILA’s bona fide error defense in a way material to our analysis, given the uniform interpretations of three Courts of Appeal holding that the TILA defense does not extend to mistakes of law.

Furthermore, the Court stated that Congress likely did not intend the defense to apply to mistakes of law, since Congress did not expressly include mistakes of law in any of the parallel bona fide error defenses elsewhere in the U.S. Code.

In response to the argument that the threat of liability under the FDCPA might create an irreconcilable conflict between an attorney’s personal financial interest and her ethical obligation of zealous advocacy on behalf of a client, the Court noted that “an attorney’s ethical duty to advance the interests of his client is limited by an equally solemn duty to comply with the law and standards of professional conduct”.

Finally, the Court noted that the FDCPA contains a safe harbor defense for “any act done or omitted in good faith in conformity with any [Federal Trade Commission] advisory opinion” that is more tailored to address the mistake at issue than the bona fide error defense. Although the Court recognized that the Federal Trade Commission has issued only four opinions in the past decade, and has an average processing time in excess of three months, the Court concluded that the existence of this separate, more apposite provision weighs against “stretching” the bona fide error defense to provide protection for mistakes of law.

Lesson: An attorney cannot rely upon the FDCPA's bona fide error defense for misinterpretations of the statute's legal requirements.

Editor's Note: Jerman involves only a mistake of law under the FDCPA. Accordingly, it is not clear whether Jerman is applicable to mistakes of state law or federal law on issues other than the FDCPA. The Courts of Appeal have expressed different views on this issue.

Tags: Federal, Commercial, FDCPA, Standard of Care, bona fide error defense, mistake of law

A New Trial Begins When Another Trial Ends

Posted on May 10, 2010 by Susan Fortney

Sanchez v. Hastings, 898 S.W.2d 287 (Tex. 1995).

TX: Underlying personal injury and wrongful death action; conflicts of interest; statute of limitations

Student Contributor: Rudolfo Santos, Jr.*

FACTS: On June 8, 1984, Carlos Sanchez, husband of Graciela Sanchez, was killed on the job, when a portable crane mounted on his employer’s, Cedar Creek Fabrications, Inc., truck came into contact with electrical wires.
Soon thereafter, Steve Hastings, on behalf of the law firm Allison & Huerta, P.C., (the Firm), contacted Mrs. Sanchez and offered to represent her as well as the Estate of Carlos Sanchez, and their minor child Gina Sanchez, in a wrongful death and survival action stemming from the job accident. Mrs. Sanchez agreed to allow the firm to handle the matter, but unbeknownst to her the firm also represented Reliance Insurance Company, Cedar Creek Fabrications, Inc.’s workers compensation insurance carrier, in its subrogation action against the defendants for reimbursement of the death benefits paid to Carlos Sanchez’s family.
The Firm filed a wrongful death and survival suit naming various parties as defendants, but the suit did not include any action against Cedar Creek Fabrications, Inc. When the case proceeded to trial the court appointed an ad litem to represent Gina Sanchez. The ad litem had filed a claim against Cedar Creek Fabricators, Inc., alleging gross negligence, but by that time Graciela Sanchez was barred from bringing a similar claim due to expiration of the limitations period. The trial court rendered a final judgment against the defendants on August 29, 1990.
Approximately two months after final judgment was entered, Graciela Sanchez contacted the ad litem; it was at that time the ad litem informed Mrs. Sanchez about prospective malpractice claims against the Firm. On August 29, 1990, Graciela Sanchez filed a malpractice claim against the Firm and three of its attorneys individually. The defendants moved for summary judgment on the ground that Sanchez’s claim was barred by statute of limitations. The trial court granted defendants’ summary judgment on the ground that the two-year statute of limitations precluded the suit. The court of appeals affirmed.

ISSUE: Whether the running of the statute limitations is tolled in a legal malpractice case where the underlying litigation has not concluded?

RULING: The court held that the limitations period was tolled until the conclusion of the underlying litigation. The court considered its previous decision in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991), where it held :

“when an attorney commits malpractice in prosecution or defense of a claim that results in litigation, the statute of limitations on the malpractice claim against the attorney is tolled until all appeals on the underlying claims are exhausted.” Id. at 157.

The Court determined that Hughes necessarily extended to trial court proceedings. Therefore, limitations, on malpractice claims, are tolled until a final judgment is entered on all underlying claims.

LESSON: 1) Attorneys should avoid fundamental conflicts of interest, or at the very least be candid to clients by disclosing all potential conflicts of interest. 2) In Texas, the statute of limitations does not begin to run until a final judgment has been entered on all claims stemming from the underlying litigation.

*Rodolfo “Rudy” Santos, Jr. is a third year law student at the Texas Tech School of Law, and will be receiving his J.D. in May 2010. His main area of study has been devoted to trial and appellate practice. He will be joining the litigation department of Person, Whitworth, Borchers & Morales, LLP in August 2010.

Tags: Texas, Conflicts of Interest, Statute of Limitations, tolling

NY: Privity. Alive and Well (Investment Losses)

Posted on May 5, 2010 by Claudia A. Costa

Rechberger v. Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 A.D.3d 1453, 848 N.Y.S.2d 459 (2007)

NY: Business losses allegedly attributed to malpractice.

Student Contributor: Michael Park

Facts: Plaintiff was a shareholder in a corporation represented by an attorney. Through the course of business, the plaintiff lost money in his investment in the corporation. The plaintiff then brought a legal malpractice suit against attorney alleging that the attorney's conduct was the cause of the investment loss. The attorney moved to dismiss the complaint on the grounds of no attorney-client relationship and the trial court denied the motion. The attorney then appealed.

Issue: Did the trial court err in denying the motion to dismiss for lack of attorney-client relationship?

Ruling: Yes. In reversing the ruling by the Supreme Court, Wyoming County, the Appellate Division, Fourth Department held for the attorney for the following reasons:
1) An individual’s belief that he had an attorney-client relationship with a lawyer does not necessarily “confer upon him the status of a client”. In a legal malpractice action, an attorney-client relationship must be established.
2) Furthermore, while the plaintiff was a shareholder in the corporation represented by attorney this does not necessarily mean they had an attorney-client relationship. The plaintiff failed to produce documentary evidence that the relationship with the attorney rose to the level of an attorney-client relationship.

Lesson: A shareholder in a corporation does not necessarily enjoy an attorney-client relationship with a lawyer who represents that corporation because that person is a shareholder. Furthermore, more than a mere belief by the client that they have an attorney-client relationship with a lawyer is needed to prove the existence of that relationship.

Tags: New York, Commercial, Investment losses, Privity, entity representation

Privity in NY: Alive and Well (with Certain Exceptions)

Posted on May 4, 2010 by Claudia A. Costa

Nelson v. Kalathara, 48 A.D.3d 528, 853 N.Y.S.2d 89 (2008)

NY: Underlying litigation, privity.

Student Contributor: Michael Park

Facts: An incapacitated person had a guardian assigned to them and their property. The plaintiff, who happened to be the previous guardian’s brother, eventually replaced the guardian. However, the previous guardian entered into a contract to sell property belonging to the incapacitated person and retained an attorney to represent him. The purchaser also retained an attorney and the sale went through successfully. However, the plaintiff discovered the sale and brought an action against the purchaser's attorney alleging that he committed legal malpractice in handling the real estate sale. The purchaser's attorney then made a motion to dismiss for lack of privity, which was denied by the trial court. The attorney then appealed.

Issue: Did the trial court properly rule that privity was not required between the purchaser's attorney and the plaintiff in the legal malpractice action?

Ruling: No. In reversing the ruling of the Supreme Court, Westchester County, the Appellate Division, Second Department held that the purchaser's attorney's motion was improperly denied for the following reason:

There is an exception to the privity rule required in legal malpractice actions. This exception states that if an attorney's behavior could be categorized as fraud, collusion, malicious acts, or other special circumstances, then no privity is required or simply a showing of near-privity is all that is required to link the attorney to the damaged party.

Lesson: A third party to an attorney's alleged legal malpractice does not need to establish privity if it can be established that the attorney's conduct constituted fraud, collusion, malicious acts, or other special circumstances. In the absence of those conditions, the third party must establish privity with the attorney to be able to bring a legal malpractice claim.

Tags: New York, Privity

"Settle and Sue" --Texas Style

Posted on April 30, 2010 by Susan Fortney

Douglas v. Delp, 987 S.W.2d 879 (Tex. 1999)

TX: Underlying commercial transaction; litigation; bankruptcy

Student Contributor: Chelsea Tucker*

Facts: Billy Delp, his wife Gertrude Delp, and John Harvison were business partners who had formed various companies. Billy believed Harvison was attempting to buy businesses outside of the companies’ core business activities. Billy and Gertrude removed Harvison as an officer of two of the companies, Nu-Way and Economy Oil. Harvison filed suit against Billy and Gertrude. Billy and Gertrude were represented by Douglas and Douglas, Kressler & Wuester, P.C. (collectively DKW). Two days into a temporary injunction hearing in which Gertrude was the primary witness, the two sides began settlement negotiations. After a short meeting with DKW, Billy and Gertrude signed a compromise settlement agreement (finalized by Harvison’s attorneys) in which Gertrude was required to resign from the boards of Nu-Way and Economy Oil. The Delps soon lost all assets held through Nu-Way. Billy and Gertrude Delp brought a legal malpractice suit against DKW over its handling of the settlement agreement and for failing to adequately prepare Gertrude for her testimony in the temporary injunction hearing. Soon after, Billy filed for bankruptcy. Billy listed the malpractice claims against DKW as an asset. The bankruptcy trustee sold the claims to Philip Treacy & Associates, which was acting on behalf of DKW’s malpractice carrier. Treacy filed a trial court motion to dismiss Billy’s malpractice claims. This motion was granted. Following trial on Gertrude’s claims, the trial court granted a directed verdict for DKW. Gertrude and Billy appealed the directed verdict and the dismissal of Billy’s claims. The court of appeals reversed and remanded both Gertrude’s and Billy’s interest in the malpractice claims and part of Gertrude’s DTPA claims.

Issues:

1) Whether Billy and/or Gertrude had standing to pursue their claims.
2) Whether a plaintiff may recover damages for mental anguish in a legal malpractice suit.
3) Whether DKW’s representation that the agreement would protect the Delps’ interests supports DTPA liability.

Ruling:

The Supreme Court held that:

1. Billy lacked standing to pursue claims in state court because the claims swept into his bankruptcy estate and Gertrude lacked standing because her claims for economic loss related to jointly managed business were part of her husband’s bankruptcy estate.

2. Mental anguish damages are not recoverable when the mental anguish is a consequence of economic losses caused by an attorney’s negligence; and (3) DKW’s representation that the agreement would protect the Delps’ interests was too vague to be actionable under DTPA.

Lesson:
1. A claim of mental anguish damages in a legal malpractice suit will generally not prevail.
2. Give your client enough information so that she is capable of making an informed decision before signing a settlement agreement.
3. Counsel clients on all legal aspects of documents they sign, especially those that may have a detrimental effect on the client.
4. Have the client sign a document saying that she has read and understands the agreement in its entirety, and acknowledges the possible negative results of signing the agreement.

*Chelsea Tucker is in her second year at Texas Tech School of Law and is a candidate for her Juris Doctor in May 2011. She is currently employed as a law clerk for a personal injury attorney and drafts petitions, motions, and appeals, consults with clients, and files documents at the courthouse. Chelsea has also interned with the District Attorney’s Office in Kerrville, Texas. During her first year at Texas Tech School of Law, Chelsea was awarded the Jurisprudence Award for Superior Academic Achievement in Legal Practice.

Tags: Texas, Commercial, DTPA, Damages, Deceptive Trade Practices Act, Litigation

Improper "Fracturing" of Legal Malpractice Claims

Posted on April 29, 2010 by Susan Fortney

Aiken v. Hancock, 115 S.W.3d 26 (Tex. App.—San Antonio 2003, pet. denied).

TX: Underlying civil litigation "catastrophe".

Student Contributor: Courtney E. Hamilton*

Facts: Douglas Aiken brought action against his former attorneys Patrick Hancock and Mark Ferguson, and their firm, Deadman and Ferguson, alleging violations of the Deceptive Trade Practices Act (DTPA), breach of fiduciary duty, negligence, gross negligence and breach of contract. The trial court partially granted Ferguson’s motion for summary judgment and dismissed Aiken’s breach of contract claims. The trial court also granted Ferguson’s first amended motion for summary judgment. Aiken appealed the decision of the trial court and neither the law firm of Deadman and Ferguson or Deadman were parties to the appeal. Aiken’s arguments to support his claim of breach of fiduciary duty were that Ferguson (1) falsely represented to Aiken his readiness to go forward and try Aiken’s case, and (2) failed to disclose that he was not ready to try Aiken’s case. Aiken also alleged that Ferguson falsely represented to him that the expert witness was ready to testify about a full audit and failed to disclose that the expert witness was not ready to testify about a full audit.
On appeal, Ferguson argued that Aiken’s claims are actually a single legal malpractice claim, and violating the Texas law that prohibits a plaintiff from fracturing legal malpractice claims.

Issue: Whether Aiken improperly "fractured" his legal malpractice claims against Ferguson.

Ruling: The San Antonio Court of Appeals held that Aiken improperly fractured his legal malpractice claim against Ferguson. The court found that Aiken’s classification of his claim as breach of fiduciary duty was improper because allegations did not consist of “self dealing, deception, or express misrepresentations in Ferguson’s legal misrepresentations in Ferguson’s legal representation.” The proper classification of these allegations would be a legal malpractice claim.
The court also held that Aiken’s assertion that Ferguson’s DTPA allegations based on alleged express misrepresentations did not state a cause of action independent from the malpractice claim.
After the court found that there was only one cause of action for legal malpractice the court applied the summary judgment standard of review. In doing so, the court held that summary judgment was proper because Aiken failed to prove causation and damages, two necessary elements for a legal malpractice claim.

Lesson: A breach of fiduciary duty involves issues of loyalty, confidentiality, and candor while a legal malpractice claim involves negligence and the lawyer’s alleged failure to exercise ordinary care. A plaintiff cannot fracture their malpractice claim when they cannot meet the elements of the additional malpractice claims. The court will view this as one malpractice claim and the plaintiff must establish by a preponderance of the evidence all the elements of a malpractice claim (duty, breach, causation, and damages).

*Courtney E. Hamilton is a third year law student at Texas Tech School of Law, and a candidate for her J.D. in May 2010. She currently serves as Articles Editor for the Texas Tech Administrative Law Journal. She has served as a law clerk for the U.S. Attorneys’ Office for the Northern District of Texas, the Texas State Board of Pharmacy, and the Texas Commission on Environmental Quality. Courtney received her B.S. in Chemistry from Sam Houston State University.

Tags: Texas, DTPA, Deceptive Trade Practices Act, Fiduciary Duty

Beyond Duties to Clients: Associates' Duties to their Law Firms

Posted on April 28, 2010 by Susan Fortney

Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193 (Tex. 2002)

TX: Underlying referral of a personal injury case to another law firm

Student Contributor: Anna Ford (J.D. ( 2011) Texas Tech University School of Law; B.B.A. (2008) Emory University)

FACTS: After a helicopter crash, James Chang, an associate with the firm of Brewer & Pritchard, recommended that the firm take the personal injury cases for the victims of the crash. Chang personally knew one of the victims, Herbert King, because he was Chang’s close friend’s father. After a partner at the firm recommended that the case be referred to another firm, Chang scheduled a meeting for King with Nick Johnson, a personal injury lawyer and close friend of Chang’s. Johnson referred the case to the firm of Jamail & Kolius, who made an agreement to pay Johnson a referral fee. A year after the case settled, Chang and Johnson formed a partnership together. Chang never told his employer about the referral but defendants’ facts support their contention that Chang did not receive any compensation as a result of the King suit or Johnson’s referral to Jamail & Kolius. Thereafter, the firm sued its former associate, Chang, and Johnson, alleging breach of fiduciary duty, actual and constructive fraud, conversion, and negligence.
The district court entered summary judgment for defendants on all causes of action. The appellate court reversed and remanded the breach of fiduciary duty and constructive fraud causes of action against both defendants and affirmed the remaining causes of action. The Supreme Court affirmed the appellate court’s holding, disagreeing with its reasoning.
On appeal, the firm asserts that Chang had breached a fiduciary duty that he owed to the firm and that Johnson had knowingly assisted Chang in committing that breach. The firm contends that Chang violated the policies in place forbidding associates to refer cases without securing a referral fee for Brewer & Pritchard.
Defendants argue that as a matter of law Chang owed no fiduciary duty to plaintiff, mainly because there was no employment agreement to that effect.

ISSUE: Does an associate of a law firm breach a fiduciary duty to his employer when gainfully referring a matter to another firm or lawyer without the employer’s permission?

RULING: Yes. The associate owes a fiduciary duty to his employer not to personally profit or realize any gain or advantage from referring a matter to another law firm or lawyer, absent the employer’s agreement otherwise. However,

“an associate may participate in referring a client or potential client to a lawyer or firm other than his … employer without violating a fiduciary duty to that employer as long as the associate receives no benefit, compensation, or other gain as a result of the referral.”

LESSON: The employee of a law firm should not profit from a referral to another firm or lawyer without the consent of his employer. The employee should disclose to his employer when he has referred a case to another lawyer or firm. A lawyer should not share a fee with a lawyer who is not in the same firm without permission of his client.

Tags: Texas, Attorneys Fees, Fiduciary Duty, farming out, referral fees

Getting Snagged for Legal Malpractice by Plaintiff's Successor in Interest

Posted on April 27, 2010 by Susan Fortney

In re Segerstrom 247 F. 3d 218 (5th Cir. 2001)

TX: Underlying personal injury then bankruptcy, post judgment

Student Contributor: Brad Kvinta (J.D. (2010), Texas Tech University School of Law, B.S. (2006)Texas A & M University)

FACTS: In 1995, a vehicle driven by Kayla Segerstrom (Segerstrom) was involved in a collision with a vehicle driven by the Colvins. The collision caused one death and other serious injuries. The Colvins sued Segerstrom, her parents, and her parents’ sole proprietorship (“defendants”). The defendants’ insurance company hired Touchstone as defense counsel. A judgment was then entered solely against Segerstrom. Shortly thereafter, “the Colvins filed an involuntary bankruptcy petition against Segerstrom.” The bankruptcy estate (“estate”) then filed a complaint against Touchstone and the insurance company. “The complaint alleged that Touchstone had an inherent conflict of interest in representing Segerstrom, her parents, and her parents’ sole proprietorship as defendants in the same litigation.” “In October 1998, Segerstrom’s personal liability to the Colvins was discharged.” Summary judgment was entered against the estate, and the trustee appealed.

ISSUE: Whether Segerstrom’s bankruptcy estate included a legal malpractice claim against Touchstone and, if so, whether Touchstone, and the insurance company, are liable under that claim?

RULING: On appeal, the court indicated that Segerstrom’s bankruptcy estate included a legal malpractice claim against Touchstone. “As of the commencement of Segerstrom’s bankruptcy case, a legal malpractice claim against Touchstone had accrued to Segerstrom according to Texas law.” See In re Swift, 129 F.3d 792, 795-96 (5th Cir. 1997). “Segerstrom never denied or waived that malpractice action prior to the commencement of her bankruptcy.” Thus, the court indicated that the estate could maintain a legal malpractice claim against Touchstone.

Although the court indicated that a legal malpractice action could be filed on behalf of the estate, the estate did not prove that “but for the manner in which Touchstone conducted her defense, Segerstrom would have obtained a better result in the prior litigation.” In other words, the estate failed to prove the Segerstrom suffered any injury as a result of the alleged malpractice.

The court based this conclusion on Segerstrom’s post-petition affidavit, which denied the existence of a legal malpractice claim. The court noted that although this affidavit is irrelevant to the existence of a legal malpractice claim, it “carries considerable weight in determining whether the estate has met its burden of establishing injury and causation in accordance with Texas law.” Therefore, summary judgment in favor of Touchstone was proper.

Further, “Texas requires that insurance companies act with reasonable care in fulfilling their duty to defend under insurance contracts.” See Meridian Oil Production, Inc. v. Hartford Accident, 27 F.3d 150, 153 (5th Cir. 1994). The court indicated that the estate pointed to no authority in Texas that shows this duty requires the insurance company to identify conflicts and take steps to address them prior to hiring legal counsel for its insured. The court also indicated that even if this duty existed, there is insufficient evidence presented to support a breach of that duty. Therefore, summary judgment in favor of the insurance company was proper.

LESSON: Lawyers may be liable for legal malpractice to a plaintiff’s successor in interest. A successor in interest is a person entitled to the same legal rights as the plaintiff. In other words, a successor in interest is free to pursue any claim that the plaintiff was entitled to pursue. Thus, a lawyer must defend a legal malpractice claim against a successor in interest so long as the successor in interest is legally entitled to pursue such a claim and meets all requirements to successfully prosecute the claim.

In this case, legal malpractice claims survive the initiation of bankruptcy proceedings, even if personal liability in the underlying lawsuit has been discharged. Trustees (the successor in interest in this case) are free to pursue any claims which the debtor could have pursued prior to the initiation of a bankruptcy proceeding. Further, there is no duty under Texas law for an insurance company to identify conflicts and take steps to rectify said conflicts prior to the commencement of any legal proceeding.

Tags: Federal, Texas, Proximate Cause, bankrupt estate, bankruptcy, successor liability

NJ: Entire Controversy Doctrine No Bar to Legal Malpractice Claim

Posted on April 23, 2010 by Krishna Shah

Higgins v. Thurber (N.J. App. Div. April 21, 2010)

NJ Underlying will contest

Facts: At the time Salvatore Calcaterra died, he had been married to his second wife, Donna. Prior to his death, Sal executed a Will disinheriting Donna. Prior to his death, Donna transferred four New York Mercantile Exchange seats to herself using Sal’s Power of Attorney.

The executor of Sal’s estate, his son Michael, commenced an action against Donna. Approximately two years later, the estate experienced difficulty with payment of its legal fees. Accordingly, the beneficiaries of the estate, including Michael and his two sisters, agreed that the attorneys would be entitled to a portion of the estate’s gross recovery from the litigation against Donna.

Subsequently, the trial court held that Donna was entitled to only two of the four NYMEX seats. Donna appealed and the estate cross-appealed. In the meantime, Donna commenced a suit against Michael and his sister, Robyn. Donna alleged that Michael had engaged in misconduct as executor and Robyn, guardian ad litem to Donna’s daughter, Jenna, had not acted in Jenna’s best interests. Donna’s complaint was dismissed with prejudice.

Donna then commenced yet another action seeking an accounting from Michael. Jenna, thereafter, commenced an action against Michael, Robyn, and their attorneys alleging breach of fiduciary duty and legal malpractice. Robyn sought contribution and indemnification from the attorneys and Michael.

Although Jenna’s legal malpractice action was dismissed, Robyn, and her sister Laura, also filed exceptions in the accounting action brought by Donna questioning the propriety of the fee agreement they had entered into with the attorneys. Robyn and Laura’s claims against the estate’s attorneys were limited to issues “related to legal fees and costs charged to the estates and the trust as reflected in the accountings submitted for approval”.

The entire accounting action was, however, eventually resolved and the pertinent order provided that Robyn and Laura’s claims against the estate’s attorneys were:

[V]oluntarily dismissed, without prejudice…for repayment of fees paid to her by the Estate and Trust;

[M]emorialized defendant attorneys’ waiver of the defense of the bar of the entire controversy doctrine and the defense of Laura and Robyn’s lack of standing to sue defendant attorneys in a separate action seeking disgorgement of a portion of the attorney fees charged to the estate…but did not constitute a waiver of any other claim;

[D]eclared that with respect to any claim in a separate action by Laura and Robyn against defendant-attorneys for disgorgement of their proportionate share of the interest component of the hourly portion of the contingent fee, defendant attorneys will not raise or have the benefit of any statute of limitations defense not now available to Michael…

Soon thereafter, Robyn and Laura filed an action for malpractice, breach of contract, breach of the covenant of good faith and fair dealing, and excessive and unreasonable fees against the defendant attorneys. The attorneys moved to dismiss under the entire controversy doctrine and on the basis that the action was barred by the statute of limitations.

Issue: Whether a legal malpractice action commenced by plaintiffs against the attorneys for the estate of their father was properly precluded by the disposition of earlier lawsuits or barred by the statute of limitations?

Ruling: The Appellate Division held that the entire controversy doctrine did not bar Robyn and Laura’s malpractice claim because it was “either unknown or unaccrued” during the earlier probate proceedings. Moreover, the assertion of a legal malpractice claim would have been “inconsistent with the nature of those particular proceedings”.

The Appellate Division did note, however, that:

[T]he exceptions filed…in the formal accounting action were chiefly directed at the services directed by defendant attorneys and the propriety of the 1998 contingency fee agreement…

Nevertheless, the Court held that the entire controversy doctrine could not bar the action, since “the action on an accounting in probate is a vehicle for addressing the conduct of the executor, not the conduct of others”. Furthermore, the Court noted that the “summary nature of the accounting action would prevent a person interested in an estate from filing an affirmative pleading other than exceptions to the accounting and, thus, eliminate any opportunity to join new parties”. The Court also noted that the plaintiffs’ previous action against the attorneys’ had been dismissed with specific reference to the potential for subsequent proceedings between them.

The Court held that application of the entire controversy doctrine in such circumstances would be inequitable, since:

[The previous proceedings] did not provide the concomitant right to a full and fair exploration or development of those issues prior to a trial date that loomed a mere two months after expansion of the accounting action’s scope.

The Appellate Division also declined to bar Laura and Robyn’s claim for fee disgorgement on the basis of the expiration of the six year statute of limitations:

Although Laura and Robyn were parties to the 1998 fee modification agreement – an event that demonstrably occurred more than six years before the commencement of this action – there is nothing about the agreement that would necessarily provide Laura and Robyn with an inkling of the ultimate counsel fee burden to the extent required by our summary judgment standards.

Consequently, the Court held that the defendant attorneys could again move for summary judgment on statute of limitation grounds after a more “fully developed exposition of the issues”.

Lesson: The entire controversy doctrine will not bar legal malpractice claims where plaintiff has not previously been afforded “a full and fair opportunity to prosecute that claim”. A claim for fee disgorgement will not always be barred six years from the date of the signing of the retainer agreement. The determinative date appears to be when the client “understood the overall quantum of fees” to be charged, and that “a failure to object would later preclude their assertion of the excessiveness” of the fee.

Tags: New Jersey, Entire Controversy Doctrine, Statute of Limitations, Wills Trusts & Estates

FDCPA: The Bona Fide Error Defense

Posted on April 21, 2010 by Krishna Shah

Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, 538 F.3d 469 (6th Cir. 2008)

Facts: Plaintiff alleged that the Defendant law firm violated the Federal Debt Collection Practices Act (“FDCPA”) by representing to her that her debt would be assumed valid unless she disputed the debt “in writing” even though the FDCPA does not require a written dispute. Defendants filed a motion for summary judgment on the basis that that they qualified for the FDCPA bona fide error defense. The district court granted the motion and Jerman appealed on two grounds: (1) the district court erred in concluding that the FDCPA’s bona fide error defense may apply to mistakes of law, and (2) even if the defense does apply to mistakes of law, a question of fact remains as to whether defendants maintained procedures reasonably calculated to avoid the violation.

Issue: Was the Defendant law firm's mistake a bona fide error under the FDCPA?

Ruling: Yes.

The FDCPA bona fide error defense (15 U.S.C. § 1692k(c)) provides:

A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

Whether the bona fide error defense applies to mistakes of law or procedural/clerical error was an issue of first impression for the Court. The Court reviewed the case law from the Sixth Circuit as well as other jurisdictions, and ultimately rejected Jerman’s argument that the FDCPA bona fide error defense should apply only to clerical mistakes because the Truth In Lending Act (“TILA”) bona fide error defense applies only to clerical errors, since the TILA, unlike the FDCPA, is explicitly limited to “clerical, calculation, computer malfunction and programming, and printing errors, except that an error of legal judgment with respect to a person's obligations under this subchapter is not a bona fide error.” The FDCPA, on the other hand, has no such provision.

The Court also rejected Jerman’s argument that the phrase “maintenance of procedures reasonably adapted to avoid any such error” references clerical errors because “ it makes no sense that a collector can maintain procedures reasonably adapted to avoid mistakes of law”. The Court stated:

[T]here is nothing unusual about attorney collectors maintaining procedures, such as frequent education and review of the FDCPA.

After concluding that mistakes of law may be considered bona fide errors, the Court held that defendants had , in fact, set up satisfactory procedures in an effort to avoid such errors by:

Designating a principal of the firm for handling compliance issues;
Regularly attending seminars on FDCPA issues;
Subscribing to relevant publications; and
Counseling attorneys and other employees on the firm’s obligations under the FDCPA and providing them with a procedures manual;

Finally, the Court rejected Jerman’s argument that adoption of the model language contained in the International Guide to the FDCPA of the American Collector’s Association is the only acceptable procedure to avoid the legal error at issue.

Lesson: Attorneys may be able to rely on the bona error defense to avoid liability under the FDCPA for mistakes of law by incorporating compliance mechanisms into their practice, keeping abreast of pertinent developments, and educating support staff of the firm's obligations under the FDCPA.

Note: The US Supreme Court has granted cert. See 129 S.Ct. 2863 (2009), as there is conflict among the circuits with the 2d, 8th and 9th circuits holding that the bona fide error defense does not apply to violations resulting from legal mistakes. Stay tuned. We will keep you posted as soon as the Court rules.

Tags: Federal, Commercial, FDCPA, Standard of Care, bona fide error, mistakes of law

Vicarious Liability: The "Of Counsel" Relationship

Posted on April 20, 2010 by Krishna Shah

Staron v. Weinstein, 305 N.J. Super. 236 (App. Div. 1997).

Student Contributor: Daniel Schick

NJ Underlying Personal Injury Action

Facts: Staron was allegedly injured in an auto accident in October, 1985 and retained Weinstein to represent her in the pursuit of her personal injury claims. The parties signed an "An Agreement to Provide Legal Services", the first page of which referred to "Sheldon G. Weinstein, Esq." as the "law firm" being retained. The next page of the Agreement, however, listed "Robert C. Thelander, Esq.". Weinstein further submitted a request for Personal Injury Protection benefits on Thelander's stationery with Weinstein listed as "Of Counsel". Thelander disassociated himself from Weinstein's practice in September, 1986. Weinstein continued to represent Staron through 1989, but never timely filed a Complaint with regard to her personal injury claims.

Several years later, Plaintiff bought a suit for legal malpractice against Weinstein and Thelander.

Issue: Did Thelander owe any duty to Staron?

Ruling: Yes.

In the context of a motion for summary judgment, plaintiffs made a sufficient showing that Thelander's firm became counsel for plaintiffs by virtue of both the retainer agreement and the fact that defendant had at least apparent authority to enter into such agreements on behalf of the firm...Having become counsel for plaintiffs, it was the responsibility of the Thelander firm to either terminate the representation or give notice that it was terminated by virtue of Weinstein's departure.

In reaching its holding, the Court further noted that Thelander's role in Weinstein's cases and his entitlement to a share of the proceeds of any recovery obtained by Weinstein was not clear. Moreover, it was not know what, if any, control mechanisms Thelander had in place to determine in what matters Weinstein had been retained in his capacity as "Of Counsel" to his firm.

Lesson: A law firm and its principals are ordinarily liable for wrongful acts and omissions of lawyers who have an "Of Counsel" relationship with the firm. The scope of liability for acts of an "Of Counsel" lawyer may be affected by the terms of the Of Counsel relationship and the extent of the lawyer's affiliation to the firm apparent to the lawyer's clients.

Tags: New Jersey, Disengagement, Engagement, Of Counsel, Vicarious Liability

Legal Malpractice Law Review on Show at ABA National Legal Mal Conference in DC

Posted on April 15, 2010 by Ben Wasserman

The American Bar Association's Lawyers' Professional Liability Committee's National Legal Malpractice Conference in Washington DC has been a smash hit, with 500+ lawyers in attendance.

The Legal Malpractice Law Review was showcased at a well-attended roundtable discussion called "Teaching Tomorrow's Lawyers to Avoid Legal Malpractice". It demonstrated this blog as the latest cutting edge internet based method for teaching law students --and practicing lawyers, about how malpractice occurs and how to avoid those risks. Pointing out that a mere 10 per cent of the 193 ABA approved law schools in the US offer their students a full semester course on legal malpractice, panelists Ben Wasserman, Susan Fortney, Mitch Simon and Jett Hanna, sought to enlist the professional liability insurance industry in a pro-active drive to encourage more law schools to offer such a course to their law students. Ron Mallen, co-author of the leading treatise, Legal Malpractice, has long called for legal malpractice to be taught as a required course in law school and he was there to join in the discussion.

The two and a half day conference started off with a wonderful presentation by Associate Supreme Court Justice Antonin Scalia, who spoke with Bryan A. Garner of Law Prose, Inc. about the basics contained in their new book, Making Your Case: The Art of Persuading Judges. (very worthwhile reading)

A central theme of the Conference focused on how emerging legal technology is reshaping the lawyer's standards of care in the 21st century and how this brings new malpractice risks to practicing lawyers.

And as the lawyers at the Conference saw this web-based cost-free educational blog and heard from Hofstra Law students who helped to create it, the Legal Malpractice Law Review welcomed the 30,000th "visitor" to its pages in the less than 6 months since it went live. "A great blog" , one lawyer in attendance at the Conference immediately "tweeted".

Kudos to the Committee for a job well done!

Tags: Standard of Care, law school, legal education, technology

Retainer Agreements: The Importance of Clarity

Posted on April 15, 2010 by Ben Wasserman

Shaw v. Manufacturers Hanover Trust Co., 68 N.Y.2d 172, 499 N.E.2d 864(App. Div.1986)

NY: Underlying Personal Injury Action--Fee Dispute

Student Contributor: Candice L. Deaner

Facts: The Plaintiff brought a personal injury claim and retained the law firm on a contingent fee basis. The agreement did not mention appeals. After the trial ended in a verdict for the defendant, the Plaintiff wanted to appeal. The law firm agreed, on the condition that Plaintiff advance the litigation expenses. Plaintiff refused and retained new counsel and eventually obtained an award of $1.5 million in the retrial. The original law firm then sought to collect on the award and the client objected.

Issue: Whether an attorney can collect on a contingency fee agreement when the terms of representation were not clearly stated?

Ruling: The New York State Court of Appeals denied the fee request.

1) Retainer agreements should be clear on the scope of representation. The Court said,

"The importance of an attorney's clear agreement with a client as to the essential terms of representation cannot be overstated. The client should be fully informed of all relevant facts and the basis of the fee charges, especially in contingent fee arrangements.”

2) The contract should be viewed in a light most favorable to the client. The court held “Had the client maintained that the retainer agreement required respondent's representation through conclusion of the matter, that would have been the mandated interpretation. But here, the client has asserted that the contract terminated upon entry of an adverse judgment. We hold that the agreement must be construed so to provide."

3) The court found that the agreement only spoke of adjudicating the claim. Even if the contract applied to an appeal, the law firm breached the contract by insisting on an additional term for handling the appeal; namely, advancing expenses. The retainer agreement only addressed the computation of the ultimate fee, it made no provision for expenses.

The Lesson: Retainer agreements should contain clear language stating the legal services to be provided. The attorney should be sure that the client understands the scope of the attorney’s representation.. Attorney’s can safeguard themselves by including any and all limitations in writing, so that there is no question as to what the scope of employment was from the beginning of the attorney/client relationship.

Note: From a malpractice viewpoint, a clear "scope of the engagement" clause is critical to protecting the lawyer from liability for services that are beyond the scope of the engagement.

Tags: New York, Attorneys Fees, Litigation, Torts/Personal Injury, retainer, scope of engagement

Disqualification for Conflicts of Interest

Posted on April 12, 2010 by Ben Wasserman

Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241 (Pa. 1992)

Student Contributor: Melissa Goldberg

Underlying: Motion to disqualify for Conflict of Interest

Facts: Defendant represented Plaintiff in broad range of labor matters for well over a decade. During the course of their labor representation of Plaintiff, Defendant became familiar with Plaintiff’s operations and "gained detailed financial and business information. The Court of Common Pleas of Philadelphia County entered an order preliminarily enjoining Pepper and Messina from continuing to act as labor counsel for seven of Plaintiff’s New York-based competitors. The trial court ruled that preliminary injunctive relief was necessary given the existence of a substantial relationship between Defendant’s current representation of the New York companies, whose interests were adverse to the interests of Plaintiff, and their former longstanding representation of Plaintiff.

Issue: Is the conduct of Defendant Attorney’s is actionable independent of any violation of the Code of Professional Responsibility?

Result: Violations of the Code do not per se give rise to legal actions that may be brought by clients or other private parties; however, the record supports a finding that Defendant’s conduct here constituted a breach of common law fiduciary duty owed to Plaintiffs.
1) there is a well-entrenched body of substantive law prohibiting fiduciaries from engaging in conflicts of interest, and that there is no law excepting attorneys from that prohibition.
2) the trial court improperly relied upon the Rules of Professional Conduct without any independent finding that Pepper and Messina's conduct was "actionable." Just as there would be an independent cause of action available to a client whose attorney has misappropriated his funds, so too there is an independent cause of action available to a client whose attorney engaged in impermissible conflicts of interest vis a vis that client.

Lesson: The public's trust in the legal profession undoubtedly would be undermined if the Court did not recognize the common law foundation for the principle that an attorney's representation of a subsequent client whose interests are materially adverse to a former client in a matter substantially related to matters in which he represented the former client constitutes an impermissible conflict of interest actionable at law.

Tags: Pennsylvania, Conflicts of Interest, Fiduciary Duty, Legal Ethics

Privity and Entity Representation

Posted on April 9, 2010 by Ben Wasserman

Rechberger v. Scolaro, Shulman, Cohen, Fetter & Burstein, P.C., 45 A.D.3d 1453, 848 N.Y.S.2d 459 (2007)

NY Underlying Commercial Transactions

Student Contributor: Maninder (Meena) Saini

Facts: Plaintiff (Rechberger) filed a lawsuit against defendant (law firm), alleging legal malpractice. Plaintiff was seeking damages for investment losses arising from the defendant’s malpractice. The plaintiff contended that defendant's representation of a corporation of which plaintiff was a shareholder establishes that defendant had an attorney-client relationship with plaintiff.

Issue: Does an attorney’s representation of a corporation establish an attorney-client relationship with its investors/shareholders?

Holding: The Appellate court held that the defendant lacked an attorney-client relationship with plaintiff. A “unilateral belief by parties that they had an attorney-client relationship with an attorney does not by itself confer upon them the status of clients,” for purpose of a legal malpractice action. The plaintiff’s complaint was dismissed.

Rule: A unilateral belief by one party that an attorney-client relationship exits is not dispositive of the actual existence of such a relationship. To succeed on an action for legal malpractice, a plaintiff must prove, among other things, the existence of an attorney-client relationship.

Lesson: This case illustrates the principal of privity between individuals, corporations and attorneys. An attorney is not liable to plaintiff for damages in a legal malpractice action unless the attorney and the plaintiff had a direct attorney-client relationship. In this case, the defendants met its burden by establishing that it had no attorney-client relationship with plaintiffs.

NOTE: See also, RPC 1.13 Organization as the Client, where the representation by a lawyer of an entity is separate and distinct from its members. That Rule applies, with few exceptions, to business entities and shareholders, partners or members.

Tags: New York, Organization as Client, Privity, RPC 1.13

Attorney-Client Privilege when Malpractice is Threatened

Posted on April 5, 2010 by Claudia A. Costa

Koen Book Distributors v. Powell, Trachtman, Logan, Carril, Bowman & Lombardo, P.C.,
212 F.R.D. 283 (E.D. Pa. 2002).

PA. underlying bankruptcy proceeding

Student contributor: Cheryl Neuman

Facts: Plaintiffs retained Defendants for advice concerning a security interest from one of its customers. After the customer filed for bankruptcy, defendants continued to represent plaintiffs as creditors in the bankruptcy proceeding. Plaintiffs eventually informed defendants that they would be initiating a malpractice action against them due to their dissatisfaction with the defendants’ services. The attorney client relationship was terminated 3 months later. During the time when the defendants were first put on notice about the pending the lawsuit and the time when the attorney-client relationship was actually terminated, defendants consulted with other lawyers in their firm concerning ethical and legal issues regarding the upcoming malpractice action. The plaintiffs wanted access to the documents that were produced as a result of the inquiry within defendants’ law practice.

Issue: Does the attorney-client privilege apply to documents that a lawyer prepared in response to an ethical inquiry concerning the client, who has threatened to initiate a malpractice action against the firm?

Ruling: No. The attorney client privilege does not apply in this situation. The defendants also relied on the work-product doctrine, but this doctrine does not apply where a client, as opposed to another party, seeks discovery of the lawyer’s mental impressions. The documents are therefore discoverable.

Lesson: The purpose of the attorney client privilege is to promote full disclosure and communication between attorneys and their clients, thereby encouraging broader public interests. In this case, had the defendants realized the predicament involved in this situation, they should have either
a) Withdrawn from representing the plaintiff, or
b) They could have requested consent from the plaintiff and continued representation after full disclosure and consultation.

Tags: Attorney-client Privilege, Commercial, Scope of Representation, work product

PA: Breach of Fiduciary Duty: Where Attorneys Serve as Executors

Posted on April 2, 2010 by Ben Wasserman

In re Estate of Westin, 874 A.2d 139, 2005 PA Super 158 (Pa. Super. Ct. 2005)

PA Underlying Will Probate

Student Contributor: John Anzalone

Facts: Creditors of an estate bring suit to remove Attorney as the executor of the estate because of the embezzlement of the estate's funds by an employee of the law firm. The lower court held that the request to remove Executor Attorney was moot since he voluntarily agreed to withdraw.

Issue: Did the Orphan's Court err in refusing the creditor's request to remove the Executor Attorney as executor of the estate?

Ruling: In reversing the lower court, the Superior Court held that the lower court should have dismissed the Executor Attorney and appointed a new executor, based on the following considerations:
1) The court can remove an executor of an estate when that executor's personal interests conflict with the estates and "cannot be served simultaneously."
2) Here, the estate has an action against the executor for the embezzlement from the account maintained by the executor for the estate. There is a conflict of interest here because the Executor Attorney would have to sue himself and his law firm on behalf of the estate to protect the estate's interests.

Lesson: Even where an attorney-executor recognizes his conflict of interest and resigns, the court can still officially remove him and appoint another in his place. Here is another example of the sometimes troubling issues raised when an attorney who prepares a will, names himself as Executor and serves in that role.

Tags: Pennsylvania, Pennsylvania, Fiduciary Duty, Wills Trusts & Estates, executor, fiduciary, probate

The Damage of "Justice Delayed" is not "Actual Damage"

Posted on March 30, 2010 by Ben Wasserman

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

PA: Underlying mortgage foreclosure

Student Contributor: Joshua D. Aronson

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

Issues:

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

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

Ruling:

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

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

Lesson:

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

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

Tags: Federal, Pennsylvania, Damages, Real Estate, actual damage

NJ: Something New About "Olds": Legal Mal Suit Barred by Entire Controversy Doctrine

Posted on March 29, 2010 by Iram P. Valentin

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

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

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

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

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

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

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

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

Tags: Entire Controversy Doctrine

PA: Settlement Not Always a Bar to Malpractice Action

Posted on March 24, 2010 by Krishna Shah

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

Student Contributor: Justin Lieberman

Underlying Divorce Matter

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

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

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

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

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

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

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

Tags: Pennsylvania, Duties: Competence, Family Law, Standard of Care, settlement

Smith v. Spisak: Supreme Court Bars Ineffective Assistance of Counsel Claim Based On Client's Admissions

Posted on March 22, 2010 by Krishna Shah

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

Underlying Criminal Matter

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

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

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

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

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

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

Tags: Federal, Criminal Law, Duties: Competence, Standard of Care, ineffective assistance of counsel

The Continuous Representation Rule

Posted on March 19, 2010 by Ben Wasserman

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

NY Underlying Real Estate Action

Student Contributor: Melissa Goldberg

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

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

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

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

Tags: New York, Real Estate, Statute of Limitations

Legal Research and Due Diligence: Hand in Hand in Divorce Cases

Posted on March 18, 2010 by Ben Wasserman

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

CA Underlying divorce action

Student Contributor: Evan Michael Hess

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

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

Ruling: The Supreme Court of California held:

I.

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

II.

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

III.

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

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

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

Tags: California, Duties: Investigate, Family Law, Standard of Care

Malpractice Suit Waives Attorney Client Confidences

Posted on March 16, 2010 by Ben Wasserman

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

Underlying Action: Purchase of Real Property

Student Contributor: Candice L. Deaner

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

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

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

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

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

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

Tags: New York, Duties: Confidentiality, confidentiality

Duty to Investigate and the Statute of Limitations Discovery Rule

Posted on March 11, 2010 by Claudia A. Costa

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

Student Contributor: Maninder (Meena) Saini

NJ Underlying Medical Malpractice Action

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

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

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

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

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

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

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

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

Tags: New Jersey, Discovery Rule, Duties: Investigate, Statute of Limitations, Torts/Personal Injury

Duty to Communicate and Explain Significance of Contract Terms

Posted on March 10, 2010 by Claudia A. Costa

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

Student Contributor: Maninder (Meena) Saini

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

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

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

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

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

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

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

Tags: New Jersey, Duties: Communicate, Real Estate, duty to communicate, subordination agreement

Malpractice Trap: First Mortgage Liens

Posted on March 9, 2010 by Claudia A. Costa

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

NJ Underlying mortgage refinance

Student Contributor: Maninder (Meena) Saini

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

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

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

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

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

Tags: New Jersey, Real Estate, Statute of Limitations, mortgage, mortgage refinance

Emotional Distress Damages: Tied to the Interest Protected by the Attorney-Client Relationship

Posted on March 5, 2010 by Krishna Shah

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

NJ Underlying Adoption Action

Student Contributor: Daniel Schick

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

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

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

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

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

Tags: New Jersey, Damages, emotional distress

Establishing Damages with Reasonable Certainty: An Element of Proximate Cause

Posted on March 4, 2010 by Krishna Shah

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

PA Underlying Commercial Action

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

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

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

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

Tags: Pennsylvania, Commercial, Damages, Proximate Cause, reasonable certainty

NJ: Limitations on Duties to Third-Parties

Posted on March 3, 2010 by Krishna Shah

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

NJ Underlying Probate Matter

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

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

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

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

Tags: New Jersey, Fiduciary Duty, Wills Trusts & Estates, beneficiaries, retainer, third-parties

Duration of the Representation: An Element of the Substantial Factor Test

Posted on March 1, 2010 by Krishna Shah

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

NJ Underlying Commercial Action

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

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

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

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

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

Tags: New Jersey, Commercial, Proximate Cause, duration of representation, substantial factor

Intended Beneficiaries as Exceptions to the Rule of Privity

Posted on February 25, 2010 by Ben Wasserman

Guy v. Liederbach, 501 Pa. 47 (Pa. 1983)

PA. Underlying Will Action

Student Contributor: Melissa Goldberg

Facts: Kent, then a resident of Pennsylvania, retained Defendant to draft a one-page "Last Will and Testament," which Defendant did on the same day. The will provided that Plaintiff was to be the beneficiary of the residuary estate. Guy was also named executrix of the estate. The will was signed by Kent and, allegedly at Defendant's direction, was witnessed by Plaintiff and Defendant. Kent died. After offering the will for probate, the court invalidated the gift to Plaintiff because Plaintiff was a subscribing witness to will. Plaintiff argued Defendant was negligent in advising the Plaintiff to become an attesting witness to the will. Also, Plaintiff argued the action and conduct of the Defendant in directing and advising the Plaintiff to become an attesting witness to the will amounted to a breach of the contract between Kent and Defendant to which contract the Plaintiff was a third party beneficiary.

Issue: Does a named beneficiary of a will who is also named executrix have a cause of action against the attorney who drafted the will and directed her to witness it where the fact that she witnessed the will voided her entire legacy and her appointment as executrix?

Result: In a wills action, a properly restricted cause of action for third party beneficiaries in accord with the principles of Restatement (Second) of Contracts § 302 is available to named legatees, who would otherwise have no recourse for failed legacies, which result from attorney malpractice.

1) The will, providing for one or more named beneficiaries, clearly manifests the intent of the testator to benefit the legatee
2) The grant of standing to a narrow class of third party beneficiaries is "appropriate" under Restatement (Second) of Contracts § 302 where the intent to benefit is clear and the promisee (testator) is unable to enforce the contract.

Lesson: Important policy concerns require privity to maintain an action in negligence for professional malpractice. However, a named legatee of a will may sue as an intended third party beneficiary of the contract between the attorney and the testator for the drafting of a will which specifically names the legatee as a recipient of all or part of the estate because named beneficiary has no other discourse.

Tags: Pennsylvania, Privity, Wills Trusts & Estates

Breach of Fiduciary Duty and a Lighter Burden of Proof: The Prophylactic Rule

Posted on February 22, 2010 by Ben Wasserman

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

NY Underlying Representation: Prospective Purchase of Bankrupt Company's Assets

Student Contributor: John Anzalone

Facts: Defendant Law firm represented Plaintiff through an agent in her attempt to purchase the assets of a bankrupt company. Problems occurred with the deal and the Agent was dismissed by the Plaintiff. Agent then told Firm that he wanted to buy the assets of the bankrupt company. Despite knowing that Plaintiff still sought to purchase the assets, Firm told Plaintiff that it would represent Agent in his attempt to purchase the assets. Plaintiff objected to this subsequent representation of Agent. Agent outbid Plaintiff with Firm's assistance. The jury found that Firm's representation of Plaintiff's Agent breached its fiduciary duties to her and was a "substantial factor in preventing her from obtaining assets she sought in the transaction."

Issue: Was the determination that Firm breached its duty to its former client by representing Plaintiff's agent in the same transaction incorrect?

Ruling: In affirming the lower court, the Second Circuit held that the Firm breached its fiduciary duty to Plaintiff, based on the following considerations:
1) Firm committed a serious breach of its fiduciary duties to Plaintiff as a former client by representing a party with interests adverse to the Plaintiff in the same transaction.
2) The nature of this breach triggers the prophylactic rule so plaintiff has to prove that Firms' actions were a substantial factor in its damages instead of the normal requirement of proximate cause.
3) The jury could have found that Firm's action were a substantial factor in Agent purchasing the assets rather than Plaintiff because their presence could have given Agent more credibility. The jury could have found that the deal moved forward because Agent and Firm agreed to use Plaintiff's money in an escrow account for Agent's purchase too. This potential usage also could have been held as interfering with Plaintiff's negotiations because she had to take action to protect her funds from usage by her former agent.
4) There was factual evidence supporting that Firm used confidential information gained from Plaintiff in its representation of Agent because it knew that Plaintiff was not willing to bid higher than she had previously stated to them.

Lesson: If an attorney or a law firm is alleged to have breached their fiduciary duty to the client they are subject to the prophylactic rule that will make it easier for a plaintiff to prove the proximate cause element of the legal malpractice cause of action. The burden will be reduced from “but for” to “substantial factor”.

Tags: Federal, New York, But for-Proximate Cause, Commercial, Fiduciary Duty, Prophylactic Rule, Proximate Cause

Defenses: Collateral Estoppel on Ineffective Assistance of Counsel

Posted on February 19, 2010 by Claudia A. Costa

Alevras v. Tacopina, 399 F.Supp.2d 567, (N.J. 2005);

NJ Underlying criminal action.

Student Contributor: Colleen Gaedcke

Facts: The plaintiff was prosecuted and indicted on various counts of criminal violations in federal criminal court. He was appointed counsel but later retained the defendants to represent him. With the advice of his attorneys the plaintiff accepted an unfavorable plea agreement and began serving his sentence. After the plaintiff entered his guilty plea, he brought a 20 U.S.C. β 2255 motion, pro se, alleging ineffective assistance of counsel. His motion was denied by the District Court and the plaintiff appealed to the Third Circuit. The District Court held four evidentiary hearings on remand regarding the plaintiff’s motion, but the plaintiff’s petition was denied for a second time and affirmed by the Third Circuit. Then the plaintiff filed a seven count civil complaint against the defendant alleging legal malpractice. The defendant moved to dismiss the complaint and made a motion for summary judgment.

Issue: Whether the doctrine of collateral estoppel bars a criminal defendant from making civil legal malpractice claims for criminal malpractice where claims for ineffective assistance of counsel have been adjudicated, decided and rejected in a 20 U.S.C. β 2255 criminal proceeding?

Ruling: Yes. In granting the defendants’ motion for summary judgment and dismissing the plaintiff’s complaint with prejudice, the District Court held that the doctrine of collateral estoppel bars a legal malpractice claim against a criminal defense attorney based on the following reasoning:
1) The doctrine of collateral estoppel prevents a party from re-litigating issues that have previously been adjudicated and decided previously by another court of competent jurisdiction. Thus, where the issue of ineffective assistance of counsel has been fully litigated in the post-conviction proceeding, it may not be considered again in a civil proceeding.
2) As a matter of public policy, we cannot allow criminal defendants to re-litigate issues in civil court where the same issue was litigated by a court of competent jurisdiction. To allow otherwise would undermine the effective administration of the judicial system.

Lesson: A criminal defendant cannot bring a legal malpractice case concerning the quality of his criminal defense counsel when he raised or had a full and fair opportunity to raise the issue of ineffective assistance of counsel and he knew the facts regarding the attorneys alleged malpractice during the criminal proceedings.

Tags: Federal, New Jersey, Criminal Law, Defenses, collateral estoppel, ineffective assistance of counsel, post-conviction relief

Damages for Loss of Liberty for Legal Malpractice

Posted on February 18, 2010 by Claudia A. Costa

Lawson v. Nugent, 702 F. Supp. 91, (N.J. 1988); 1988 U.S. Dist. LEXIS 14576

NJ Underlying criminal action.

Student Contributor: Coleen Gaedcke

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

Issue: Whether a criminal defendant can recover damages for emotional distress from his attorney in a legal malpractice action based on the attorney’s representation in a criminal proceeding?

Ruling: Yes. The District Court held that the plaintiff may present evidence of emotional distress damages in a legal malpractice action.
1) Generally, damages in a legal malpractice claim are limited to economic loss and damages for emotional distress are not recoverable in a legal malpractice action absent some egregious or extraordinary circumstances.
2) In New Jersey, the courts have increasingly allowed for emotional damages in an increasing number of cases and a plaintiff may prove such damages attributable to an extra 20 months of confinement in prison.

“an attorney who commits malpractice is liable to his client for any reasonably foreseeable loss caused by his negligence including emotional distress resulting from the loss of liberty.”

Lesson: When representing a client in a civil case, the court is unlikely to award damages for emotional distress absent extraordinary circumstances because the nature of the attorney client relationship is primarily based on economic interest. However, the attorney client relationship in a criminal proceeding is predicated upon a defendant’s liberty interest.

Tags: Federal, New Jersey, Criminal Law, Damages, loss of liberty

NY: Lawyer Liability Beyond the Scope of the Engagement

Posted on February 17, 2010 by Claudia A. Costa

Thompson v. Seligman 53 A.D.3d 1019, 863 N.Y.S.2d 285 (N.Y.A.D. 3 Dept., 2008)

NY: Underlying personal injury; workers compensation

Student Contributor: Ryan M. O'Donnell

Facts: Plaintiff was employed by AMFAC Recreational Services, Inc. AMFAC regularly provided cleaning services to the Gideon Putnam Hotel. While performing her duties cleaning at the Gideon, plaintiff suffered injuries and retained defendant attorney to represent her in a workman’s compensation claim. When plaintiff inquired about a possible claim for pain and suffering against the Gideon, defendant advised her that she could not pursue a claim, based on his mistaken belief that plaintiff was employed by the hotel. Plaintiff then consulted with a different attorney who advised her that she did have a claim against the Gideon, except for that the statute of limitations had expired.

Issue: Can a mistaken assumption by an attorney give rise to a legal malpractice claim?

Ruling: Yes.

“An attorney has the responsibility to investigate and prepare every phase of his or her client’s case.”

There was sufficient documentation that stated plaintiff’s employer was AMFAC, not the Gideon. Had defendant made the appropriate inquiry he would have known that plaintiff was not employed by the Gideon, and that plaintiff could have a third party claim against the Gideon for pain and suffering. The defendant’s failure to investigate the availability of a third party claim by plaintiff raises a question of fact whether the defendant exercised an appropriate duty of care to the client.

Lesson: As an attorney, you have the responsibility to investigate and prepare every phase of your client’s case. If there is information that will further the interests of your client that is easily ascertainable, and you fail to use such information, you have breached your duty of care to your client. Unless the client actively misrepresents information to you, you can be liable for malpractice if your mistaken assumption would have been corrected by further inquiry.

Tags: New York, Duties: Investigate, Litigation, Torts/Personal Injury, workers compensation

NY: But For my Lawyer's Negligence at Trial, I Would Have Settled...

Posted on February 15, 2010 by Claudia A. Costa

Leder v. Spiegel 9 N.Y.3d 836, 872 N.E.2d 1194 (2007)

NY: Underlying Will Contest

Student Contributor: Ryan O'Donnell

Facts: Defendant represented plaintiff in an underlying probate matter. Rather than accept a settlement offer, plaintiff decided to continue to trial, where they were unsuccessful in challenging the will. The plaintiff bases his malpractice claim on defendant’s advice on the prospect of success in the underlying case, and that he would have accepted the settlement were it not for his attorney’s advice. There was no documentary evidence showing that plaintiff refused to settle strictly based on defendant’s advice.

Issue: Is an attorney liable for legal malpractice if he was not the proximate cause of the client’s damages, even if he negligently represented his client?

Ruling: No.

"In order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence"

The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent. Since there was no evidence that the defendant’s advice was the sole basis for refusing the settlement, the defendant was not the proximate cause of the plaintiff’s loss, the defendant attorney was not liable for malpractice.

Lesson: Even an attorney who negligently represents his client will not be liable for malpractice if he is not the “but for” cause of the client’s damages. To establish liability based on the loss of a settlement opportunity, the plaintiff must prove that but for the attorney’s negligence he would have accepted the settlement offer. A court will not rely on bare allegations of fact by a plaintiff without documentary evidence to prove proximate cause.

Tags: New York, But for-Proximate Cause, Litigation, Wills Trusts & Estates

Fiduciary Duties to Third-Parties: No Affirmative Misrepresentations

Posted on February 12, 2010 by Krishna Shah

Petrillo v. Bachenberg, 139 N.J. 472 (1995)

NJ Underlying Real Estate Transaction

Facts: A purchaser of real estate sued the seller and the seller’s attorney. The seller’s attorney had forwarded to the seller an incomplete copy of the results of percolation tests conducted by a previous owner to determine the subject property’s ability to hold a septic tank. During negotiations, the seller gave the incomplete copy of the test results to the purchaser. When the purchaser performed her own tests after the contract had been signed, she became aware of the actual quality of the land and told the seller that the contract was null and void. The seller refused to return the purchaser’s deposit. The purchaser subsequently brought suit against the seller’s attorney for, among other claims, breach of fiduciary duty.

Issue: Does an attorney who represents a seller in a real estate transaction owe any duty to the purchaser of the subject property?

Ruling: The court applied a “relaxed” privity rule, holding that an attorney for a real estate seller who makes affirmative misrepresentations by providing misleading information concerning the subject of the transaction, violates a fiduciary duty to a purchaser who will rely on the material misrepresentations to his detriment.

Lesson: A seller’s attorney has a fiduciary duty of care to the buyer and this duty exists when the attorney knows, or should know, that non-client will rely on the attorney’s affirmative misrepresentations.

Tags: New Jersey, Fiduciary Duty, Real Estate, affirmative misrepresentation, non-client, third-party

Ineffective Assistance of Counsel: Bar to Civil Action for Legal Malpractice

Posted on February 11, 2010 by Krishna Shah

Alevras v. Tacopina, 399 F.Supp.2d 567 (D.N.J. 2005)

NJ Underlying criminal action

Facts: The plaintiff was indicted and prosecuted on various counts of criminal violations in federal court. He was appointed counsel, but later retained the defendants to represent him. Upon advice of the defendant attorneys, plaintiff accepted an unfavorable plea agreement and began serving his sentence. At some point thereafter, the plaintiff brought a 20 U.S.C. 2255 motion, pro se, alleging ineffective assistance of counsel. His motion was denied by the United States District Court, District of New Jersey, and the plaintiff appealed to the Third Circuit. The Court held four evidentiary hearings regarding the plaintiff’s motion, but the plaintiff’s petition was denied. The Court of Appeals, Third Circuit, affirmed the denial. Plaintiff subsequently filed a civil complaint against the defendants alleging legal malpractice. The defendants argued that the legal malpractice claim was barred by the doctrine of collateral estoppel, given the adjudication of plaintiff’s claim for ineffective assistance of counsel.

Issue: Whether the doctrine of collateral estoppel bars a criminal defendant from bringing a civil legal malpractice claim after the adjudication of a claim for ineffective assistance of counsel?

Ruling: Yes. The doctrine of collateral estoppel prevents a party from re-litigating issues that have previously been decided by another court of competent jurisdiction. Thus, where the issue of ineffective assistance of counsel has been fully litigated in the underlying criminal proceeding, it may not be considered again in a civil proceeding under the cloak of a professional negligence claim.

Lesson: New Jersey courts will not allow criminal defendants a second bite at the apple with a civil malpractice complaint after an adjudication on the very same issues in an ineffective assistance of counsel proceeding in the underlying criminal action.

Tags: Federal, New Jersey, Criminal Law, Entire Controversy Doctrine, collateral estoppel, ineffective assistance of counsel

What Might Have Happened: Hypotheticals Don't Establish Proximate Cause

Posted on February 9, 2010 by Krishna Shah

Contel Global Marketing, Inc. v. Dreifuss, 2010 WL 374946 (App. Div. Feb. 4, 2010)

NJ Underlying Commercial Action

Facts: Contel, a New Jersey business venture that imported fruit from Chile, believed that participants in its joint venture in Chile were overcharging it by $10 million. Contel, therefore, hired counsel to bring an action in federal court against Aldo Cotera, Clear River Corporation, Nova Agencia DeCarga, and Agricola Punta Arenas Lida. The Complaint was filed on January 17, 2001 and defendants were to be served pursuant to the Inter-American Convention of Letters Rogatory.

DeCarga and Agricola were served in July and September 2002, respectively. Neither submitted responsive pleadings. In December 2002, the magistrate judge directed Contel to move for entry of default. Two days later, however, counsel for the Cotera defendants entered an appearance and filed a Motion to Dismiss. Contel filed a Cross-Motion for Entry of Default. In denying both motions, the judge remarked that, had Contel filed its motion in a timely fashion, and had the Court granted it, Contel could have carried a federal court judgment to Chile for enforcement. Contel, thereafter, retained new counsel and brought a suit for professional malpractice against its former counsel, Dreifuss & Nagel.

Issue: Can the possibility of a default judgment establish the requisite proximate cause to sustain an action for legal malpractice?

Ruling: No. Contel could not sustain the proximate cause element of a cause of action for legal malpractice, since it could plead no facts to establish how defendant’s failure to seek default directly resulted in additional damages and attorney’s fees:

How can any Court really assume that if default has been enetered and even assuming arguendo that a default judgment had been entered, which I think is another leap that the Court would have to take in order to accept plaintiff’s damage argument in this case, that the outcome would have been any different. I just can’t believe that…the Chilean defendants…who ultimately did defend the case vigorously would have just rolled over and accepted a default judgment against them.

Furthermore, the Court noted, Contel could point to nothing that discovery might offer, other than further speculation, to maintain the “necessary causal nexus element” of its legal malpractice claim. The Appellate Division, thus, affirmed the lower court and dismissed Contel’s claims against defendant law firm.

Lesson: Courts will not assume facts on the part of the plaintiff in a professional malpractice suit where he or she cannot show, that more likley than not, a favorable result would have been achieved but for the negligence of the attorney.

Tags: New Jersey, Commercial, Proximate Cause

Insurers Beware: Disingenuous Disclaimers Result in Award of Attorney's Fees

Posted on February 8, 2010 by Krishna Shah

Guarantee Insurance Co. v. Saltman, 217 N.J. Super. 604 (App. Div. 1987)

NJ Underlying Insurance Action

Student Contributor: Christopher S. Henn

Facts: A few months after obtaining professional malpractice coverage from the plaintiff, one of the partners at the defendant law firm was served with a legal malpractice complaint. The defendant submitted the complaint to the plaintiff who provided a defense under a reservation of rights to disclaim, pending an investigation of any misrepresentation by the law firm on its application for coverage. This investigation ultimately revealed that the defendant law firm did not have knowledge of the malpractice claim at the time it submitted its application.

Despite the results of its own investigation, however, plaintiff moved to disclaim its duty to defend and indemnify the firm for alleged fraudulent misrepresentations and intentionally withholding information concerning the malpractice action. Additionally, plaintiff sought reimbursement for all defense costs.

The law firm, in turn, filed a counterclaim against the plaintiff arguing that it owed a defense and indemnity for the pending malpractice claim, and furthermore, sought indemnification for all legal fees incurred in defending the plaintiff’s declaratory judgment action. The court found that the plaintiff’s policy with the defendant was valid and required plaintiff to provide a defense and indemnity in the malpractice action. Moreover, under Court Rule 4:42-9(a)(6), the law firm was awarded a significant portion of the legal fees it incurred in defending the declaratory judgment action.

Issue: Can an insured recover counsel fees from an insurer for costs and expenditures incurred in defending an insurer’s disclaimer of coverage?

Ruling: Under the American Rule, a prevailing party cannot collect attorney’s fees from the losing party. The New Jersey Supreme Court has, however, carved out an exception to this Rule in R. 4:42-9(a)(6) for an insured who is forced to litigate for its policy benefits against an insurer who erroneously disclaims coverage under a liability or indemnity policy of insurance.

Lesson: New Jersey Courts recognize that counsel fees must be awarded to insureds in order to make certain that they are receiving the full value of the coverage afforded by liability and indemnity policies in instances where an insurer’s disclaimer is not supported by the policy’s exclusions, conditions, or limitations on coverage.

Tags: New Jersey, Attorneys Fees, Disclaimer, Insurance, Professional malpractice insurance, declaratory judgment, duty to defend, reservation of rights

PA: Settlement Offers: Investigate, Communicate, Negotiate; so you Won't Have to Compensate...

Posted on February 4, 2010 by Ben Wasserman

Rizzo v. Haines, 520 Pa. 484, 555 A.2d 58 (Penn. 1989)

PA Underlying med mal and personal injury cases

Student Contributor: Evan Michael Hess

Facts: The clients retained the attorney in a case arising from a medical malpractice against a physician and hospital and a personal injury suit against the city of Philadelphia. The attorney did not seek to have the two suits joined, and reassured the clients that the medical malpractice case was still viable. The jury in the personal injury lawsuit returned a verdict for the clients. The medical malpractice case was dismissed soon thereafter based upon a lack of evidence and that the personal injury suit had fully compensated the clients for the injuries sustained. The clients initiated the legal malpractice action alleging the attorney negligently settled the personal injury case, breached his fiduciary duties, and improperly accounted for costs and expenses. A bench trial was conducted, and the clients were awarded damages.

Issue: Was the trial court correct in finding in favor of the client that the attorney breached his professional duties, and were the damages awarded reasonable?

Ruling: The Supreme Court of Pennsylvania held that:

1) An attorney's must communicate all settlement offers to clients;

2) Failure to investigate offers that were proposed constituted malpractice;

3) Aggrieved clients are entitled to recover as damages the difference between actual recovery and the amount they would have recovered if the attorney was not negligent; and

“The necessity of an attorney’s use of ordinary skill and knowledge extends to the conduct of settlement negotiations.”

Lesson: The attorney must fully communicate to his client all proposed settlement offers in addition to completing due diligence in investigations on the client’s behalf. If an attorney fails to perform her/his duties in accordance with the standard of professional care, they must make the client whole by paying the difference between what the client did receive and should have received in a settlement.

Tags: Pennsylvania, Duties: Communicate, Litigation, Torts/Personal Injury

NJ: Criminal Defense Conflicts

Posted on February 3, 2010 by Ben Wasserman

State of New Jersey v. Dennis Copling, 326 N.J. Super. 417, 741 A.2d 624 (1999)

NJ: Underlying criminal defense

Student Contributor: Evan Michael Hess

Facts: Appellant was convicted of first degree conspiracy to commit murder, first degree murder, manslaughter, possession of a weapon for an unlawful purpose and third degree unlawful possession of a handgun. Represented by the Public Defender’s Office, the Appellant alleged, among other things, that his counsel of record was a personal friend of the chief investigator assigned to the case, and a witness for the State at trial, and that, therefore, possessed a conflict of interest in representation. The Defendant notified his defense counsel that he was concerned with counsel’s ability to perform a competent cross examination of the investigator. Counsel then notified the court of the defendant’s concerns, noting that he did not believe there to exist any conflict of interest. The Court denied the Defense motion to continue. The Court later learned that the Defendant knew of his defense counsel’s preexisting friendship with the chief investigator, but chose not to raise the issue until roughly one year later, shortly before trial.

Issue: Does an attorney’s conflict of interest stemming from a pre-existing friendship, or the appearance of impropriety render a criminal trial fundamentally unfair?

Ruling: Relying on the Rules of Professional Conduct in New Jersey, Section 1.7(b), the Court held:

1) Legal counsel in criminal matters must have undivided loyalty to their clients and have representation that is "untrammeled and unimpaired" by conflicting interests. See State v. Bellucci, 81 N.J. 531, 538 (1980);
2) Friendship alone, without more, should not preclude effective representation;

Lesson: While the appearance of impropriety may exist, a conflict of interest does not exist unless counsel is prevented from serving as a "vigorous partisan" of the client's interest. Furthermore, in accordance with the Rules of Professional Conduct, legal counsel cannot represent a client if the attorney is limited by his/her responsibilities to a third person or limited by the attorney's own interests.

Note: New Jersey's Rules of Professional Conduct no longer recognizes the appearance of impropriety as prohibited conduct for lawyers.

Tags: New Jersey, Conflicts of Interest, Criminal Law

NJ Defenses to Legal Malpractice: Statute of Limitations

Posted on February 2, 2010 by Ben Wasserman

Ellison v. Schenck, Price, Smith & King, 654 A.2d 1024 (N.J.Super.A.D. 1995)

NJ: Underlying Real Estate and Litigation

Student Contributor: John J. Anzalone

Facts: Plaintiff's entered into a lease for developing cemetery grounds. Defendant represented both Plaintiff and the Cemetery. The Defendant also represented the plaintiff in negotiating the terms of the sublease of leased land. After the lease had become unprofitable for Plaintiff, Plaintiff sued Defendant. Plaintiff asserted that they relied on defendant's advice to enter into the contract because they were wrongly led to believe there was nothing preventing the lawful lease of the land. Plaintiff also claimed they suffered loses because the defendant failed to put an escalation clause in the contract with the person they sublet to.

Issue: Could the statute of limitations only have started to run when Plaintiff's income from the property decreased and thus entitle defendant to dismissal of the case?

Ruling: In affirming the lower court's decision on other grounds, the Appellate Division held that the lower court erred in dismissing the case based on the statute of limitations because there was a question of fact regarding when the actual damages occurred, based on the following consideration:
1) The cause of action arises when the plaintiff knows or should have known that they were actually damaged by the attorney's negligence.
2) The actual damage did not necessarily occur when Plaintiff's profits were lessened by the increased rent, they could have also occurred when the rate increase made the sublease unprofitable.

Lesson: Statute of limitations for legal malpractice start to run once the Plaintiff knew or should have known that they were actually damaged by the attorney's negligence. This determination is fact sensitive. Thus, in practice a lawyer bringing a suit against the other lawyer for malpractice should not assume that the actual damage that the plaintiff knew or should have known about occurred when it seems the Plaintiff was first injured by the alleged negligence.

Tags: New Jersey, Defenses, Litigation, Real Estate, Statute of Limitations

NJ: Defense to Legal Malpractice: The Entire Controversy Doctrine

Posted on February 1, 2010 by Ben Wasserman

Ellison v. Schenck, Price, Smith & King, 654 A.2d 1024 (N.J.Super.A.D. 1995)

NJ Underlying Real Estate and Litigation

Student Contributor: John J. Anzalone

Facts: Plaintiff's entered into a lease for developing cemetery grounds. Defendant represented both Plaintiff and the Cemetery. The Defendant also represented the plaintiff in negotiating the terms of the sublease of leased land. After the lease had become unprofitable for Plaintiff, Plaintiff sued Defendant. Plaintiff asserted that they relied on defendant's advice to enter into the contract because they were wrongly led to believe there was nothing preventing the lawful lease of the land. Plaintiff also claimed they suffered loses because the defendant failed to put an escalation clause in the contract with the person they sublet to.

Issue: Did plaintiff's failure to sue the attorney in the suit against the cemetery preclude them from later suing the attorney?

Ruling: The court affirmed the dismissal of the suit by holding that Plaintiff was barred from suing he should have sued the attorney as well in an earlier suit against the cemetery, based on the following considerations:
1) Under New Jersey's "Entire Controversy Doctrine", any suit against an indispensable party that should have been added to a prior suit, results in the inability to bring a suit against that party that is part of the same dispute.
2) Parties are indispensable when the case cannot be decided between the parties present in the suit without judging or affecting the interest of the party that should have been added.
3) Had the plaintiffs won, the Defendant would have been hampered by the decision in protecting itself from being found liable for substantial damages.

Lesson: New Jersey's "Entire Controversy Doctrine" provides an effective shield from suits by client-plaintiffs who fail to add a claim against an allegedly negligent lawyer to a suit that is ongoing and in which the lawyer's alleged negligence took place.

NOTE: In response to an uproar from its decision in Circle Chevrolet v.Giordanno Halleran & Ciesla, 142 N.J. 280 (1995) which held that the entire controversy doctrine bars subsequent legal malpractice claims, the Supreme Court of New Jersey reversed that holding in Olds v. Donnelly, 150 N.J. 424 (1997) and held that legal malpractice cases are exempt from the entire controversy doctrine. Thus, this case is no longer good law on the issue of the entire controversy's applicability to legal malpractice actions.

Tags: New Jersey, Entire Controversy Doctrine, Litigation, Real Estate

PA: Duty to Communicate Settlement Offers

Posted on January 28, 2010 by Claudia A. Costa

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

PA. underlying products liability suit

Student contributor: Cheryl Neuman

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

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

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

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

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

Tags: Federal, Pennsylvania, Duties: Communicate, Litigation, Torts/Personal Injury

NY: Reasonable Fees, Big Time

Posted on January 27, 2010 by Claudia A. Costa

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

Student Contributor: Maninder (Meena) Saini

NY Underlying Estate Litigation-Attorney fees

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

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

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

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

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

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

Tags: New York, Attorneys Fees, Fiduciary Duty, Wills Trusts & Estates

NJ: More on Duties to Third Parties...

Posted on January 26, 2010 by Claudia A. Costa

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

NJ: Underlying real estate transaction

Student Contributor: Michael H. Park

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

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

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

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

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

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

Tags: New Jersey, Privity, Real Estate

NY: But For my Lawyer's Negligence at Trial, I Would Have Settled Before...

Posted on January 25, 2010 by Claudia A. Costa

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

Student Contributor: Maninder (Meena) Saini

NY Underlying will contest

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

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

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

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

Tags: New York, But for-Proximate Cause, Wills Trusts & Estates

"Loss of Liberty": Damages for Negligent Infliction of Emotional Distress in Legal Malpractice

Posted on January 22, 2010 by Krishna Shah

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

NJ Underlying Criminal Action

Student Contributor: Colleen Gaedcke

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

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

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

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

Tags: Federal, New Jersey, Criminal Law, Damages, criminal defense, emotional distress, loss of liberty

PA: Multiple Defendants, Single Certificate of Merit

Posted on January 20, 2010 by Krishna Shah

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

PA Underlying personal injury claim

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

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

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

Ruling: The Court held:

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

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

Tags: Pennsylvania, Affidavit/Certificate of Merit, Torts/Personal Injury

NY: Goodbye "But For" Hello "Substantial Factor" Causation Rule for Breach of Fiduciary Duty

Posted on January 19, 2010 by Krishna Shah

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

NY Underlying Commercial Action/Conflict of Interest

Student Contributor: John Anzalone

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

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

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

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

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

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

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

Tags: New York, Commercial, Fiduciary Duty, Prophylactic Rule, Proximate Cause

PA: Unintended Consequences of Relying on Your Lawyer's Advice

Posted on January 14, 2010 by Ben Wasserman

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

Underlying PA Tort Action

Student Contributor: Colleen Gaedcke

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

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

Ruling: No.

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

2) Here,

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

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

Tags: Pennsylvania, Litigation, Release, Standard of Care, Torts/Personal Injury

NJ: Mandatory Legal Malpractice Insurance: The Time Has Come.

Posted on January 13, 2010 by Ben Wasserman

Insight and Commentary from Ben Wasserman and Krishna Shah

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

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

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

Is New Jersey destined for universal mandatory legal malpractice insurance?

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

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

Tags: Insight & Commentary, New Jersey, Fiduciary Duty, Insurance, mandatory legal malpractice insurance

NJ: Double Whammy or Making the Victim Whole? No Fees for Underlying Negligent Representation + Malpractice Attorney's Fees as Consequential Damages.

Posted on January 11, 2010 by Ben Wasserman

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

NJ Underlying personal injury action; statute of limitations

Student Contributor: Evan Hess

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

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

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

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

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

Tags: New Jersey, Attorneys Fees, Damages

NY: Is a Reasonable Fee Evidence of Reasonable Care?

Posted on January 8, 2010 by Claudia A. Costa

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

NY Underlying Fee Arbitration

Student Contributor: Maninder (Meena) Saini

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

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

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

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

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

Tags: New York, Alternate Dispute Resolution, Attorneys Fees, Family Law

NY: Novel Theories, Out-of-State Law and the Standard of Care

Posted on January 7, 2010 by Claudia A. Costa

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

NY Underlying insurance coverage

Student Contributor: Maninder (Meena) Saini

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

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

Ruling:

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

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

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

Tags: New York, Insurance, Intellectual Property, Litigation, Standard of Care

NJ Affidavit of Merit: Sometimes Yes, Sometimes No

Posted on January 6, 2010 by Claudia A. Costa

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

NJ Underlying personal injury action

Student Contributor: Michael Park

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

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

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

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

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

Tags: New Jersey, Affidavit/Certificate of Merit, Litigation, Standard of Care, Torts/Personal Injury

NY: Does the "But For" Burden Reward Negligent Lawyering?

Posted on January 5, 2010 by Claudia A. Costa

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

Student Contributor: Maninder (Meena) Saini

NY Underlying personal injury action

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

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

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

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

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

Tags: But for-Proximate Cause

Fiduciary Duty to Non-Clients

Posted on January 4, 2010 by Claudia A. Costa

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

NJ: Attorney Trust Account Funds

Student Contributor: Michael Park

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

Issue: Was the motion to vacate properly granted?

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

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

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

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

Tags: New Jersey, Commercial, Fiduciary Duty

PA: No Duty to Non-Clients

Posted on January 1, 2010 by Krishna Shah

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

PA Underlying Commercial Action

Student Contributor: Rachel Morris

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

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

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

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

Tags: Pennsylvania, Commercial, Non-clients, Privity, Privity

PA: Injunctive Relief Available for Breach of the Rules of Professional Conduct

Posted on December 31, 2009 by Krishna Shah

Maritrans GP, Inc. v. Pepper, Hamilton & Scheetz, 529 Pa. 241; 602 A.2d 1277 (Pa., 1992)

PA Underlying Legal Ethics Matter

Student Contributor: Lisa Larato

Facts: This legal malpractice action was commenced by the Plaintiff, Maritrans GP, Inc., former clients of the Defendant law firm, due to the law firm’s representation of the Plaintiffs’ competitors, entities whose interests were found to be adverse to the interests of Plaintiffs, in matters substantially related to matters in which they had represented Plaintiffs. The Court of Common Pleas granted the Plaintiffs injunctive relief and enjoined the Defendants from representing the Plaintiffs’ competitors. The Superior Court reversed the injunction order, given that it was based on nothing more than the Defendants’ alleged violation of Pennsylvania’s Rules of Professional Conduct (1.7, 1.9) which, in and of itself, cannot be the basis for a cause of action in legal malpractice. Plaintiffs’ appealed the Superior Court’s reversal.

Issue: Did the Defendants’ conduct give rise to a claim for legal malpractice?

Ruling:

1) [Defendant] attorneys’ representation of subsequent clients whose interests were materially adverse to former client in matter substantially related to matters in which [they] represented the former client was an impermissible conflict of interest actionable at law, independent of any violation of the code of professional responsibility; (2) injunctive relief would lie to prevent [the] attorneys from breaching fiduciary duties toward [their] former client by representing its competitors; and (3) grant of preliminary injunction was not an abuse of discretion, given law firm's extensive involvement in its former client's affairs and its extensive knowledge of sensitive client information.

Lesson: The Court will intervene to prevent imminent harm to a former client by an attorney’s breach of his or her fiduciary duty, irrespective of the fact that the breach may constitute a violation of nothing more than state professional ethics guidelines.

Tags: Pennsylvania, Conflicts of Interest, Legal Ethics, Rules of Professional Conduct (RPCs)

NY: Tolling the Statute of Limitations for Legal Malpractice Actions

Posted on December 30, 2009 by Krishna Shah

Leffler v. Mills, 285 A.D.2d 774 (3 Dept. 2001)

Underlying NY Probate Action

Student Contributor: Marina Kritikos

Facts: Plaintiffs were beneficiaries of a will. They had hired the defendant attorney to probate the will. As part of his duties, the attorney paid state estate taxes due by the beneficiaries, but failed to timely pay the federal taxes due. Although the attorney then secured an extension to pay the federal taxes by January 1, 1995, he failed to actually make the payment until November 6, 1995. As a result, the Internal Revenue Services charged penalties and interest in the amount of $158,853.33 to the estate. Plaintiffs subsequently discharged the attorney, and in December 1998, brought an action for legal malpractice. Both Plaintiffs and the defendant attorney filed motions for summary judgment. The trial court ruled in favor of the Plaintiffs, and the attorney appealed that ruling.

Issue: Did the lower court correctly grant Plaintiffs’ motion for summary judgment in light of New York’s three-year statute of limitation for the filing of legal malpractice actions?

Ruling: The lower court erred in granting Plaintiffs’ motion for summary judgment. There is a three-year statute of limitations for legal malpractice actions which may be tolled if there is “ clear indicia of an ongoing continuous, developing, and dependent relationship between the client and the attorney.” The Supreme Court of New York, Appellate Division, Third Department, found the evidence to be insufficient to establish a continuing relationship as a matter of law, despite the fact that the attorney was listed as “attorney of record” for the estate on an accounting dated January,1996 and federal and state estate income tax returns dated April, 1996.

Lesson: Although the court will toll the three-year statute of limitations for legal malpractice actions, the extension will only be granted where there exists clear, unequivocal evidence of an ongoing attorney-client relationship and continued dependence and reliance on the attorney with regard to the matter that was, purportedly, negligently handled.

Tags: New York, Statute of Limitations, Wills Trusts & Estates, tolling

NY: No Liability for Predecessor Counsel

Posted on December 29, 2009 by Krishna Shah

Katz v. Herzfeld & Rubin, P.C., 853 N.Y.S.2d 104 (2 Dept. 2008)

NY Underlying Personal Injury Action

Student Contributor: Jason Klein

Facts: Plaintiffs retained Defendant attorneys as counsel for a personal injury action which was eventually settled. Subsequently, Plaintiffs commenced an action for legal malpractice alleging that Defendants refused to pursue a claim for loss of income, and as a result, Plaintiffs were forced to settle their personal injury action for an amount far below what they could have recovered. Defendants filed a motion to dismiss arguing that because Plaintiffs dismissed Defendants and hired new counsel five months prior to settling, the Defendants’ actions did not proximately cause the alleged damages. The trial court granted the Defendants’ motion to dismiss and Plaintiffs appealed

Issue: Did the trial court properly grant Defendants’ Motion to Dismiss in light of Plaintiff’s decision to terminate their representation five months in advance of the settlement of which they now complained?

Ruling: Yes. Successor counsel had been retained in a timely fashion and had every opportunity to protect the Plaintiff’s rights in advance of the time of their decision to enter into a settlement.

Lesson: Plaintiffs had sufficient time in which to pursue its claims with successor counsel, and therefore, could not establish that any alleged damages resulting from their decision to settle were proximately caused by the acts or omissions of their former counsel.

Tags: New York, Former counsel, Proximate Cause, Successor counsel, Torts/Personal Injury, settlement

Guilty Until Proven Innocent? The Suit Within a Suit Method in the Criminal Context

Posted on December 28, 2009 by Krishna Shah

Daly v. Peace, 863 N.Y.S.2d 770, 2008 N.Y. Slip Op. 06955 (2 Dept.)

NY Underlying criminal action

Student Contributor: Angela Ignelzi

Facts: Plaintiff brought an action against his former defense attorney for legal malpractice after, allegedly, being wrongfully convicted. The attorney made a motion to dismiss plaintiff’s complaint on the grounds that the client could not prove he was innocent of the charges brought against him in the underlying action. The trial court granted the attorney’s complaint and plaintiff appealed the dismissal.

Issue: Did the trial court correctly dismiss plaintiff’s malpractice complaint because of his inability to prove his innocence with regard to the claims asserted against him in the underlying action?

Ruling: The Supreme Court of New York, Appellate Division, Second Department, held that:

(1) The trial court has correctly assessed that the plaintiff could not establish his innocence with regard to the charges made against him in the underlying action, and, therefore

(2) The Plaintiff had no cause of action for legal malpractice against his criminal defense attorney, unless and until he ultimately succeeded in his attempts to have the underlying conviction reversed.

Lesson: A former client, even in an underlying criminal action, can only prevail on a claim for legal malpractice by successfully applying the “suit within a suit” method: No presumption of innocence is available to those convicted in the first place, purportedly, as a result of negligent representation.

Tags: New York, Case Within a Case, Case Within a Case, Criminal Law, suit within a suit

NJ: Mandatory Affidavit of Merit Not Always Mandatory...

Posted on December 24, 2009 by Ben Wasserman

Joyce A. Popwell v Law Offices of Broome and Horn, 363 N.J. Super. 404 (App. Div. 2002)

NJ: Underlying Negligence Action for a Slip and Fall

Student Contributor: Candice L. Deaner

Facts: Plaintiff’s attorney failed to file for a trial de novo in the time frame set out by R. 4:21A-6(b)(1), after the court appointed arbitrator found that plaintiff had no cause of action for negligence against the underlying defendant. A trial de novo filing would have preserved plaintiff’s claim and would not have subjected it to dismissal. Defendants made a cross motion to dismiss, alleging that Plaintiff’s failure to submit an affidavit of merit as required by statute is enough to grant summary judgment and dismiss the complaint

Issue: Whether the Plaintiff’s failure to submit an affidavit of merit is enough to grant summary judgment in favor of the Defendants and dismiss the complaint, or if the failure to submit the application for a trial de novo within the statutory time limit is per se legal malpractice, and thus requires no affidavit of merit.

Ruling: . The requirement of the filing of an affidavit of merit is not applicable in this matter because the malpractice plaintiff's allegations do not require the testimony of an expert to determine the issue of negligence. The jury can exercise its own “common knowledge” is such cases.

Lesson: In some very clear cases, such as here with the violation of a statutory time limit, the lawyer's failure constitutes per se legal malpractice and no expert’s affidavit of merit is necessary. An affidavit of merit is not required from an expert for this case because the jury can determine whether the Defendants should be held liable for the late filing of the application for a trial de novo by using common knowledge without the need for expert testimony.

Tags: New Jersey, Affidavit/Certificate of Merit, Torts/Personal Injury

NJ:Local Counsel's Duty to Litigants

Posted on December 23, 2009 by Ben Wasserman

Ingemi v Pelino & Lentz 866 F. Supp. 156 (D.N.J. 1994)

NJ Underlying Action-Claim for pension benefits

Student Contributor: Candice L. Deaner

Facts: Plaintiff instituted a malpractice suit against related New Jersey and Pennsylvania law firms due to their mishandling of the underlying litigation. Plaintiff specified her desire to have a New Jersey attorney and the New Jersey law firm was retained as local counsel. They then petitioned the court to admit pro hac vice two lawyers from the Pennsylvania firm. The New Jersey firm argued that one of the Pennsylvania lawyers was the only one to give advice and act “on the judgmental and strategic issues,” and contended that the New Jersey firm served “merely” as local counsel, performed ministerial tasks, and undertook “discovery and motion practice in a manner that did not require making judgments or giving advice regarding prejudgment remedies or settlements,” and therefore was not liable in this action.

Issue: What is the role of local counsel when pro hac attorneys are admitted to handle the case?

Ruling: The Court found that the New Jersey firm “underestimated the role of local counsel” and stated that “by virtue of submitting the pro hac vice application, the New Jersey firm was responsible for the ‘conduct of the cause.’” Local court rules “require local counsel to take more than a de minimis role in the representation,” and clearly indicate “that local counsel is the counsel of record with attendant responsibilities, not out-of-state counsel admitted pro hac vice.”

The Court held that

“Local counsel must also supervise the conduct of pro hac vice attorneys and must appear before the court in all proceedings. Even if pro hac vice attorneys attempt to delegate solely routine or ministerial tasks to local counsel, local counsel remains counsel of record and wittingly or unwittingly exposes itself to liability for penalties such as sanctions.”

Lesson: A law firm retained as local counsel has equal responsibility even though other counsel is actually handling the prosecution of the case. , Liability is not delegated to the pro hac vice attorneys. Local counsel must continue to supervise the pro hac vice attorneys and appear in court. A law firm cannot avoid liability by claiming that other counsel was primary. The responsibility still lies with the local counsel to supervise and handle the case.

Editor's Note: For other cases holding local counsel potentially liable for malpractice to client, see also:. Ortiz v. Barrett, 278 S.E.2d 833, 838 (Va. 1981); Gould, Inc. v. Mitsui Mining & Smelting Co., 738 F. Supp. 1121 (N.D. Ohio 1990); Neel v. Magana, Olney et al., 98 Cal. Rptr. 837, 491 P.2d 421 (1971); Wildermann v. Wachtell, 267 N.Y.S. 840, 841 (1933), affirmed, 271 N.Y.S. 954 (1934).

Tags: Federal, New Jersey, Litigation, Local & Co-Counsel, Torts/Personal Injury

US: Back to Basics: Privity

Posted on December 17, 2009 by Ben Wasserman

Ward v. National Savings Bank, 100 U.S. 195 (1880)

US: Underlying mortgage and title transaction.

Student Contributor: Ally Shuster

Facts: Bank loans money to a borrower who owned a parcel of land and proposed to use it as collateral for the loan. He retains a lawyer to furnish a title report for the bank to rely upon in granting the loan and taking back a mortgage. The Lawyer, who had been hired by the borrower had no contact with the bank but dealt through a mortgage broker. The Lawyer provided a certificate of title stating that the land was “good, and the property is unencumbered.” Before the closing, however, the borrower transferred the lot in fee through a properly recorded conveyance. The borrower defaulted and because the lot was transferred out his name, a foreclosure action would fail. The bank instituted this n action against Mr. Ward, who, admittedly was not its lawyer.

Issue: Even though there was no privity between the Bank and the Lawyer who furnished the title report, could the Bank prevail?

Ruling: In those days--1880, using contract law, the majority found no duty owed because there was no privity between the bank and the borrower's lawyers.

Lesson: While times and the law have surely changed since the Ward case, privity of contract is still an important defense in many states. Today, however, tort concepts such as duty, reliance and other exceptions to the privity rule abound. This case is posted here purely for historical and educational purposes.

Tags: Federal, Federal, Commercial, Privity, Real Estate

PA: Duty to Communicate Settlement Offers to Client

Posted on December 16, 2009 by Ben Wasserman

Moores v. Greenberg 834 F.2d 1105, 9 Fed.R.Serv.3d 1314 (1987)

PA: Underlying personal injury

Student Contributor: Ryan O'Donnell

Facts: Longshoreman was injured during the course of his employment and was able to collect compensation benefits through his employer. He then retained an attorney to bring a third party liability claim against the ship owners. The ship owners allegedly made two settlement offers of $70,000 and $90,000, which the attorney did not communicate to the client. The third party liability claim was subsequently lost, and the client brought this malpractice claim against the attorney claiming that he would have accepted the settlement offer had he been informed of it. The attorney was found to be liable for $12,000, and he appealed the verdict claiming that the settlement offers were too meager to be relayed.

Issue: Is a lawyer required to communicate all reasonable settlement offers?

Ruling: Yes. A lawyer has a duty to use a degree of skill, diligence, and judgment necessary to the practice of his profession and which others who are similarly situated ordinarily possess. “As part and parcel of this duty, a lawyer must keep his client seasonably appraised of relevant developments, including opportunities for settlement.” The court implies that an attorney might not have a duty to communicate offers only when they are “so divorced from a realistic appraisal of the merits,” and unresponsive to the upside and downside of the litigation.

Lesson: A lawyer has a duty to keep his client informed of relevant developments, including opportunities for settlement. Lawyers are obliged to promptly communicate to the client settlement offers and all matters that may be relevant to the client’s appreciation and understanding of the matter.

Tags: Federal, Pennsylvania, Duties: Communicate, Litigation, Torts/Personal Injury

CA: The Absolute Attorney Client Privilege

Posted on December 7, 2009 by Ellen A. Pansky

Costco Warehouse v. Greg Randall (2009 CAL LEXIS 12375) (pdf)

Decided Nov. 30, 2009.

CA: Attorney Client Privilege

FACTS: In June of 2000, Costco retained Sheppard, Mullin, Richter & Hampton to provide legal advice regarding whether certain warehouse managers in California were exempt from California wage and overtime laws. One of Sheppard’s wage and hour law attorneys interviewed warehouse managers and produced a 22-page opinion letter on the issue. Costco, the interviewed managers and the lawyer all testified that they understood the communications between the managers and Hensley were, and would remain, confidential.
Several years later, a group of Costco employees filed a class-action suit against Costco alleging that between 1999 and 2001, Costco had misclassified some of its managers as ‘exempt’ and had therefore failed to pay overtime wages. In the course of the litigation, Costco employees sought to compel discovery of the lawyer’s opinion letter. Costco objected on grounds that the letter was subject to the attorney-client privilege and the attorney work product doctrine. Plaintiffs argued that the letter contained unprivileged information and that Costco had waived the privilege by placing the contents of the letter in issue.

RULING: Overruling the intermediate appellate court, the California Supreme Court reiterated California’s strong policy in favor of maintaining client confidences and secrets.

1. In Costco, after finding that an attorney-client privilege existed by virtue of an opinion letter written by independent counsel who had interviewed and taken witness statements from company employees, the Supreme Court found the entire letter, including the witness statement summaries, to be privileged.

2. Additionally, the majority ruled that, while the court can require an in camera hearing to determine whether the relationship constituted an attorney-client relationship, there is no authority for allowing the court to require in camera disclosure of the communications themselves. Those communications are privileged from disclosure, even in camera. If “ the dominant purpose” of the relationship was to provide legal advice from lawyer to client, no disclosure of communications is permitted.

3. Additionally, the Supreme Court held that it was not necessary to demonstrate any harm resulting from the disclosure; the intrusion into the attorney-client relationship was deemed to be harm in itself.

'[T]he privilege is absolute and disclosure may not be ordered, without regard to relevance, necessity or pany particular circumstance peculiar to the case.'

LESSON: From a legal malpractice point of view, it is crucially important to maintain client confidences, even in the face of a judicial order to reveal confidential material in camera. At least in California, it has long been held that a lawyer has a duty to preserve client secrets and confidences, even in the face of a contempt citation. See, In Re Navarro, 93 Cal. App. 3d 325,330 (pdf).

Tags: California, Duties: Confidentiality, Fiduciary Duty, Litigation

PA: Not Naming A Necessary Party: Not Always Necessary!

Posted on December 2, 2009 by Ben Wasserman

Schenkel v. Monheit, 226 Pa. Super. 396 (Pa. Super. Ct. 1979)

Student Contributor: Melissa Goldberg

PA Underlying personal injury action.

Facts: Plaintiff was injured in an automobile accident when his vehicle was struck from behind by a car driven by Charles Salem. Plaintiff thereafter retained Defendant as his attorney to prosecute Plaintiff's civil action against Salem. When Defendant filed this action, he did not join Salem's employer, as Defendants in the underlying action. Plaintiff claims that at the time of the accident, Salem was "on the job" and was within the scope of his employment and that the employer should have been joined as Defendants. Plaintiff’s dissatisfaction with Defendant handling of the personal injury action led appellant to dismiss Defendant before trial and retain other counsel to complete the case. Plaintiff was awarded 10,000 dollars in the personal injury case, which he collected in full. Plaintiffs alleged that the jury would have awarded him a larger verdict in the personal injury action if the corporate employer had been joined as a Defendant.

Issue: Was Defendant’s alleged negligence the proximate cause of damages to Plaintiff?

The Result: The failure to join the corporate employer should not have affected appellant's damages. The tort was the same in this case, whether or not the corporate employer was a party to the action.

1) The actual tortfeasor, was made a Defendant; the corporate employer would only arguably be liable under agency principles, not as an independent tortfeasor.

2) Joinder of the corporate employer would simply have increased the number of parties against whom Plaintiff could enforce any judgment he received.

3) He received the full judgment.

Lesson: Failure to name a necessary party, when full recovery from the main tortfeasor was had, did not proximately cause any injury to the plaintiff. If, on the other hand, the named tortfeasor did not have adequate insurance coverage to pay the judgment and if the unnamed party would have been vicariously liable, the result would have been different since then part of the judgment would remain unsatisfied.

Tags: Pennsylvania, Litigation, Proximate Cause, Torts/Personal Injury

PA: Conflicts and Malpractice in Commercial Transactions

Posted on December 1, 2009 by Ben Wasserman

Fiorentino v. Rapoport, 693 A.2d 208 (Pa. Super. 1997).

PA underlying sale of business interest : conflict of interest

Student contributor: Cheryl Neuman

Facts: Plaintiff and his business partner had established a restaurant servicing business. Ten years later, plaintiff and his partner decided to end their business relationship. They hired defendant lawyer to draft the terms of their mutual agreement. The defendant, however, failed to discuss the possibility of a default by one of the partners, conflict of interest, or the possibility of hiring independent counsel by each of the business partners. Subsequent to signing the termination agreement, one business partner could not pay plaintiff the money that he owed the other under the agreement. Furthermore, the business partner transferred the business’s assets to other companies—owned by his family, that competed in the restaurant servicing business. The defaulting partner filed for bankruptcy. Plaintiff then sued defendant for 1) breach of contract, 2) legal malpractice, and 3) breach of fiduciary duty.

Issue: Was it the inadequate quality of defendant’s legal services that allowed the defaulting partner to strip the business of all assets, rendering it judgment proof, so that he could not pay what was owed to plaintiff?

Ruling: Yes, it was the negligence of defendant’s legal services that allowed the defaulting partner to liquidate his business so that he could declare bankruptcy and subsequently fail to pay the money owed to plaintiff. Plaintiff’s expert (the Editor here) testified that it is a universal practice for lawyers to consult form books when drafting agreements for the sale of a business. Common protection used in these agreements include clauses that require corporate stock to be transferred through third-party escrow accounts, prohibit the transfer of corporate assets to other entities for less than the full market value, and prevent the buyer from setting up businesses that compete with the business providing the payment source for the seller, which is what happened in this case. None of those common safety clauses were used in the termination agreement and that benefitted one partner over the other. The conflict of interest should have been obvious to the defendant lawyer.

Lesson: The crux of the matter is that the default could have been avoided if the agreement had been properly drafted to prevent the transfer of assets away from the servicing business into other businesses that actively competed with the original business. That happened becuase, the defendant lawyer had a conflict of interest, since he could not concurrently represent both the separating partners whose interests were adverse to one another. It was therefore inevitable that one side of the transaction was going to benefit at the cost of the other. The Court relied heavily on the plaintiff's expert and permitted the suit to proceed under both tort and contract theories.

Tags: Pennsylvania, Commercial, Conflicts of Interest, Duties: Conflict Avoidance, Fiduciary Duty

NY: Negligent Representation? No Fee.

Posted on November 30, 2009 by Ben Wasserman

Campagnola v. Mulholland, Minion & Roe, (pdf)
76 N.Y.2d 38 (N.Y. 1990); 555 N.E.2d 611

N.Y. Underlying personal injury action

Student Contributor: Jason Klein

Facts: Plaintiff was struck by a car while working as a crossing guard and was permanently disabled. Plaintiff retained Defendant to pursue a claim for personal injuries and agreed to a contingency fee of one third for any money recovered. The owner of the car that struck Plaintiff was insured for only $10,000. Plaintiff herself was insured under a Government issued policy for underinsured benefits for $100,000. The Government policy required consent prior to the settlement of any claim against the person deemed responsible for the insured’s injuries. Defendant failed to notify the Government insurance company before settling with the car owner for $10,000, of which $3,150 was deducted as a fee and $550 for expenses. When Plaintiff submitted a claim under the Government issued policy, her claim was denied because the settlement with the car owner was made without consent. Plaintiff commenced this action against Defendant seeking $100,000 in damages for malpractice and Defendant asserted an affirmative defense to reduce any recovered damages by the amount Defendant would have received as attorneys’ fees and expenses in the personal injury action.

Issue: In a malpractice action against an attorney, can the attorney deduct the “hypothetical” fee that would have been payable to the attorney in the underlying action?

Ruling: No. An attorneys’ malpractice constitutes a failure to honor faithfully the loyalty owed to a client. Thus, the plaintiff’s recoverable damages are not limited by a deduction for the fee that she would have paid the defendant had the defendant properly performed the contract of representation.

The Lesson: A reduction in the plaintiff’s recovery equal to what the attorney would have earned but for his negligence, is impermissible because a negligent attorney is precluded from collecting a fee.

Tags: New York, Attorneys Fees, Litigation, Torts/Personal Injury

NJ: Doing Business With Your Clients: DON'T!

Posted on November 27, 2009 by Ben Wasserman

Profit Sharing Trust for Marprowear Corporation v. Lampf, Lipkind, Prupis, Petigrow & Labue
267 N.J. Super. 174, 630 A.2d 1191 (1993)

NJ Underlying Investment Transaction

Student Contributor: Natalie Resto

Facts: A law firm asked a long term client if it would be interested in investing money in an insurance group. Without advice from independent legal counsel, the client invested $449,600 in the insurance group relying on the assurance of the firm's attonreys. The law firm, however, did not reveal either in writing or verbally the fact that attorneys of the law firm were directors of the insurance group or that the law firm also represented the insurance group. The insurance group eventually filed for bankruptcy.
Later, the law firm sued the client for unpaid legal fees. Client counterclaimed for legal malpractice claiming that it would not have made the investment if they had been provided the notices that were required under R.P.C. 1.8, and advised that the losses were foreseeable at the time of investment. The law firm argued that it did not proximately cause the damages sought.

Issue: Was the law firm’s negligence the proximate cause of the plaintiff’s damages?

Ruling: The court found that the law firm’s failure to inform Marprowear and the Trust of its relationship with the insurance group directly caused Manprowear and the Trust to invest. The court held that a reasonable jury could find, as the jury did, that the law firm’s failure to disclose its relationship was the legal and proximate cause of the injury.

Lesson: R.P.C 1.8(a) states that a lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms in which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing to the client in a manner that can be understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel of the client’s choice concerning the transaction; and
(3) the client gives signed by the client, to the essential terms of the transaction and the lawyer’s role in the transaction, including whether the lawyer is representing the client in the transaction.

Editor's Note: Here the Court was particularly upset that the law firm used the confidential information of the client's financial well being to target it as a potential investor.

If proximate cause is ultimately a question of fairness and policy, imposing liability on these facts is both fair and good policy. Lawyers who fail to inform clients of their own interests, fail to advise clients to seek other counsel, unabashedly sell their clients the notion that an investment with them or their colleagues is a good and safe one, and use their clients as sources of investment funds, must accept responsibility for the outcome. Lawyers may not burrow their way into their clients' confidences and then exploit those confidences for their own ends. This is the law in New Jersey.

Tags: New Jersey, Fiduciary Duty, Rules of Professional Conduct (RPCs)

PA: Fraud Claim will Not be Barred by Failure to Produce Affidavit of Merit

Posted on November 24, 2009 by Krishna Shah

Jackson v. Gary L. Sweitzer Enterprises, Inc., 67 Pa. D. & C.4th 239 (York County 2004)

Student contributor: Justin Lieberman

PA: Underlying Real Estate Matter

Facts: Plaintiffs filed a complaint against multiple Defendants, including Attorney Sedor, in December 2003 for professional negligence, fraud, and violation of Pennsylvania’s Consumer Protection Law. The complaint alleged that their attorney was aware, or should have been aware, that appraisals of Plaintiffs’ properties were inflated. Plaintiffs were allegedly damaged as a result of this negligence in that they were unable to obtain mortgages due to these inaccurate appraisals.

Counsel for the Plaintiffs failed to file a certificate of merit against the defendnant attorney, within 60 days of filing the complaint, as required under Pennsylvania Law (Pa.R.C.P. 1042.3) in cases alleging a professional liability claim. Defendant Sedor, therefore, moved for judgment non pros. The trial court entered judgment in favor of Defendant Sedor.

Issue: Will the failure to file a certificate of merit bar all causes of action against an attorney?

Ruling: The Court denied Plaintiffs’ petition with respect to their claim of professional negligence against the attorney, but granted it on the remaining fraud and consumer protection law violation claims. The Court reasoned that the certificate of merit requirement was created to prevent frivolous professional negligence claims, not to bar all other causes of action a plaintiff may have against his attorney.

Lesson: The failure to file the required certificate of merit in a professional negligence claim will not preclude plaintiff’s other causes of action which are not based on professional negligence, against the defendant-attorney:

When a plaintiff fails to file a certificate of merit in an action alleging professional negligence, only those claims based on professional negligence should be dismissed.

Tags: Pennsylvania, Affidavit/Certificate of Merit, Fraud, Judgment Non Pros, PA Consumer Protection Law, Pa. R.C.P. 1042.3, Real Estate

NJ: Bright Line Rule: Unwaivable Conflicts for Dual Representation in Complex Real Estate Deals

Posted on November 19, 2009 by Krishna Shah

Baldasarre v. Butler, 132 N.J. 278 (N.J. 1993)

Student Contributor: Jason Klein

NJ Underlying Real Estate Transaction

Facts: Plaintiffs inherited undeveloped land from their father and retained Defendant to act as attorney for the estate. The will directed the property to be sold and the proceeds divided between the Plaintiffs. Plaintiffs told Defendant that they wanted a price of $110,000 per lot. Defendant discussed the property with another client, DiFrancesco.

DiFrancesco wanted Defendant to represent him in the purchase of the property, despite the fact that Defendant had alerted him to the potential conflict of interest that could arise from his dual representation. After obtaining signed conflict of interest letters from both Plaintiffs (sellers) and DiFrancesco (buyer), the contract for sale was executed.

Pursuant to the contract, closing was subject to subdivision approval. During the subdivision approval process, DiFrancesco, represented by Defendant, entered into contract to sell the subject property to Messano Construction for $200,000 per lot, subject to DiFrancesco obtaining title to the property.

Defendant did not inform Plaintiffs of the Messano Construction contract, and when Plaintiffs were later informed, they brought a legal malpractice action against Defendant, and sued DiFrancesco, alleging legal and equitable fraud. They sought a rescission of their contract of sale with DiFrancesco, and compensatory and punitive damages. DiFrancesco counterclaimed, alleging tortious interference with his prospective economic advantage.

Issue: Can an attorney represent both buyer and seller in a real estate transaction?

Ruling: No. The potential for conflict in a real estate transaction is too great to permit even consensual dual representation of buyer and seller.

Lesson: The court adopted a new bright-line rule as a result of this case, prohibiting dual representation in real estate transactions because of the risk of disastrous consequences, given the inherent conflict of interest between a buyer and seller of real estate, the number of contingencies and options involved, and the large sums of money at stake.

Tags: New Jersey, Conflicts of Interest, Real Estate, dual representation

NJ: Lawyer's Vicarious Liability for Independent Contractors?

Posted on November 15, 2009 by Krishna Shah

Toth v. Vazquez, 3 N.J. Super. 379 (Ch. Div. 1949) (PDF with permission of Thomson West)

Student Contributor: Anthony J. Forzano

NJ Underlying Real Estate Transaction

Facts: Plaintiff, a potential land buyer, brought an action for legal malpractice against the defendant-attorney, Arthur A. Wolpin, who had been engaged by the plaintiff to examine the title and procure a survey of the premises prior to closing. Plaintiff alleged that Wolpin failed and neglected to obtain an accurate survey.

Issue: Can an attorney be held liable for malpractice for failing to find a deficiency in the work of another professional, even though he acted in a prudent manner in selecting that professional on behalf of his client?

Ruling: No. Although it is the duty of an attorney who is retained to examine the title to real estate to make a reasonably diligent and zealous investigation of the public records, and to impart to his client all of the observable defects, deficiencies, and imperfections of the title, he is required only to exercise ordinary care, skill and diligence.

Given that Wolpin inspected all pertinent records and rendered an accurate report of record title, he had satisfied the standard of “ordinary care, skill, and knowledge”. The Court further noted:

“Nor is it evident that this defendant in acting for the plaintiffs failed to exercise reasonable care and precaution in the selection of a competent surveyor, even assuming a duty so to do. Assuredly, this defendant did not expressly agree to warrant the precision and accuracy of the survey”.

Lesson: An attorney must act in a reasonably diligent fashion in terms of his investigation of the pertinent issues and retention of other professionals, and cannot be held liable for malpractice as a result of damage incurred by his client owing to the negligence of others involved in the transaction.

Editor's Note: What if the attorney had engaged a process server who negligently failed to properly serve a complaint and the statute of limitations ran? The lawyer's immunity for the negligence of an independent contractor hired to aid in the representation of a client is not so clear. See, e.g., Kleeman v. Rheingold, 81 N.Y.2d 270 (1993):

As plaintiff's attorneys, defendants had a non-delegable duty to her and, accordingly, they cannot evade legal responsibility for the negligent performance of that duty by assigning the task of serving process to an "independent contractor."

Tags: New Jersey, Diligence, Duties: Competence, Duties: Investigate, Ordinary care, skill and knowledge, Real Estate, Standard of Care, Vicarious Liability, independent contractor, liability for independent contractors, non-delegable duty

NJ: "Safe" Withdrawal: 90 days before the Statute of Limitations Runs

Posted on November 14, 2009 by Krishna Shah

Fraser v. Bovino, 317 N.J.Super. 23 (App. Div. 1998)

Student Contributor: Lisa Larato

NJ Underlying Real Estate/Land Use Transaction

Facts: A deal for the sale of land fell through due to delays caused by challenges to the municipal approval of a condominium project. The real estate agent (Fraser) and the landowners (Genlaws) brought an action against the adjoining landowner (Defendant Bovino) who objected to the condominium project, his attorney, and others involved in ruining the deal. Fraser asserts that Bovino’s attorney (Allen) committed malpractice and acted unethically. The Genlaws also filed a claim against their attorneys Martini and Blessing who had been retained to prosecute their action against Bovino and his attorney.

The only claims still viable for the Genlaws were those which fell under the six year statute of limitations. It was undisputed that the attorneys returned the Genlaws’ file to them a few weeks before this statute of limitations expired, on January 28, 1997. The complaint, however, was not filed until April 25, 1997.

The Superior Court, Law Division, granted summary judgment to certain defendants in both actions. Appeals were filed and consolidated.

Issues: (1) Is Bovino’s attorney liable to the real estate agent, Fraser, for legal malpractice? (2) Are Martini and Blessing liable to the Genlaws for failure to file a timely complaint?

Ruling: (1) Bovino’s attorney (Allen), representing an individual who contested the proposed land use application, did not owe Fraser, the broker, even a limited duty of care. (2) Since Martini and Blessing returned the Genlaws’ file to them several weeks before the statute of limitations on their claims expired, their withdrawal from representation did not adversely affect the clients’ interests so as to warrant liability.

Lesson:

Allen, who was not Fraser’s attorney, but the attorney of his adversary, did not owe Fraser any level of a duty of care so as to make him liable to Fraser under a professional malpractice claim.
Under New Jersey Rule of Professional Conduct 1.16, Martini and Blessing did not commit malpractice because they (1) did not wait for the statute of limitations to run before withdrawing, and (2) left enough time for the Genlaws to file their complaint within the statute of limitations. That the Genlaws failed to timely file their complaint, was entirely their own negligence, and bore no relation to the decision of Martini and Blessing to withdraw as counsel in a timely manner.

Editor's Note: In all cases, make sure that before withdrawing, there is a reasonable amount of time left for the client to get substitue counsel to file a complaint before the statute of limitations runs. If it's getting close, consider a pro se complaint for the client thus giving the client even more time to get new counsel and thereby preventing the client's claim from becoming time barred. Do what is reasonable to help the client preserve their cause of action if you're not going to continue with representation, at least until they get new counsel.

Tags: New Jersey, Disengagement, Land Use, Zoning, R.P.C. 1.16, Rules of Professional Conduct (RPCs), Standard of Care, Statute of Limitations, terminating representation, withdrawal

NJ When Does Legal Malpractice "Occur" under the Affidavit of Merit Statute?

Posted on November 13, 2009 by Krishna Shah

Christie v. Jeney, 167 N.J. 509 (2001)

Student Contributor: Daniel Schick

NJ Underlying Civil/Commercial Litigation

Facts: Christie retained Jeney to pursue three claims on his behalf. Christie then alleged that in the course of the representation, Jeney failed to answer discovery requests in a contract claim, failed to properly serve and plead a civil-rights claim, and negligently allowed the statute of limitations to run on a defamation claim.

Plaintiff subsequently retained new counsel (Lucas) and filed a three-count malpractice complaint against Jeney. Jeney answered the complaint and demanded that Christie serve an affidavit of merit pursuant to the New Jersey Affidavit of Merit statute (“AMS”). Upon Plaintiff’s failure to do so, Jeney moved to dismiss the action for failing to satisfy the AMS. Christie then submitted the requisite Affidavit of Merit. Since dimissals under the AMS were without prejudice, and Christie could simply re-file the malpractice action, the Law Division denied Jeney's motion to dismiss, despite the fact that Christie’s Affidavit of Merit had not been submitted within the time limits set forth under the AMS.

Thereafter, the Supreme Court of New Jersey affirmed a portion of Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218 (1998), an earlier case, holding that dismissals under the AMS were to be with prejudice. In light of this decision, Jeney moved for reconsideration. The Law Division concluded that Christie's claims against Jeney accrued after the effective date of the AMS, and therefore, Christie's failure to provide a timely affidavit of merit required dismissal of the claims with prejudice.

Christie then filed a second amended complaint adding Lucas as a defendant, alleging that Lucas negligently failed to provide an affidavit of merit, leading to the dismissal of the action against Jeney. Lucas challenged the Law Division order dismissing Christie's complaint against Jeney. The Law Division denied the motion and the Appellate Division denied leave to appeal. The Supreme Court granted Certification.

Issue: How do you determine whether a legal malpractice action is or is not subject to the requirements of the AMS?

Ruling: The critical inquiry under the AMS is whether the actual conduct underlying the legal malpractice claim took place before the effective date of the statute (June 29, 1995). As the Law Division recognized, the allegations of malpractice against Jeney almost entirely referenced his conduct prior to June 29, 1995. Therefore, the AMS did not apply to Christie's claims against Jeney. The lower court’s holding was reversed and the action was remanded for further proceedings.

Lesson: The AMS became effective June 29, 1995, and explicitly states that it would apply to causes of action which “occur” on or after that date. Accordingly, the statute applies only to cases where the acts constituting the alleged malpractice took place on or after the effective date of the statute. The “filing” date of the malpractice action is irrelevant.

Tags: New Jersey, Affidavit of Merit, Affidavit/Certificate of Merit, Commercial, Litigation

NJ: Restoring "Wholeness" to Victims of Legal Malpractice

Posted on November 12, 2009 by Ben Wasserman

Bailey v. Pocaro & Pocaro, 305 N.J.Super. 1, 701 A.2d 916 (App. Div.1997).

Student Contributor: Todd Feinstein

NJ: Underlying Litigation

Facts:   This case found its way back to court after it was initially dismissed under the “entire controversy” doctrine which required plaintiffs to "present all claims, even those against different parties, that stem from the same transactionally related facts in one controversy before one court." A later NJ Supreme Court decision, Olds v. Donnelly,150 N.J. 424 (1997) held that the entire controversy doctrine does not compel joinder of legal malpractice claims in underlying actions.

This court was called on to address Plaintiffs argument, that they were entitled to be reimbursed for their legal expenses, which included costs and attorneys' fees incurred in pursuing the legal malpractice action against defendant, and the trial Judge erred by not including these expenses as an element of consequential damages. Plaintiffs also contend that prejudgment interest was not properly calculated.

Issues: (1) In determining damages, is it proper to include legal fees that were incurred in pursuing the legal malpractice action against the defendant?
   (2) What is the correct way to peg prejudgment interest in a legal malpractice claim?

Ruling:   (1) Under Saffer v. Willoughby, 143 N.J. 256 (1996), a client may recover for all losses which are proximately caused by the attorney's negligence or malpractice, including the legal fees and expenses incurred in successfully prosecuting a legal malpractice action.

The purpose of a legal malpractice claim is 'to put a plaintiff in as good a position as he or she would have been had the attorney kept his or her contract.

(2) In awarding prejudgment interest, such an award, represents payment for use of money, and in another sense is compensatory, to indemnify claimant for loss of what moneys due him would presumably have earned if payment had not been delayed.

The award of prejudgment interest in a legal malpractice action should not be limited to the tort recovery rule, but should be guided by equitable principles with the concept of making the victim whole of paramount significance.

Editor's Note: New Jersey is purported to have been the only state that recognizes the primacy of making the victim whole in legal malpractice cases, by treating legal fees and costs of the legal malpractice action as being consequential damages. The Texas Supreme Court has recently similarly so held. See our blog posts from Paul M.Koning of November 2, 2009 regarding Akin Gump v. NDR.

Student Contributor: Melissa Goldberg

Non-Collectibility of Judgment: Affirmative Defense to Legal Malpractice Action

Posted on November 11, 2009 by Krishna Shah

Albee Associates v. Orloff, Lowenbach, Stifelman and Siegel, P.A., 317 N.J.Super. 211 (App. Div. 1999)

NJ Underlying Civil Litigation

Student Contributor: Joshua D. Aronson

Facts: Defendant attorneys were hired by the plaintiffs to represent them in a civil fraud action. An entry of default was granted in favor of the plaintiffs. Following the entry of default, one of the defendants in the underlying action filed for Chapter 7 Bankruptcy. The defendant attorneys failed to list the plaintiffs as creditors in the bankruptcy petition and, subsequently, failed to file an adversary proceeding for non-dischargeability of the debt before the passing of the bar date. This prevented plaintiffs from collecting any money from the debtors due to the discharge in bankruptcy, and thereafter, plaintiffs pursued an action for legal malpractice against their former attorneys. The defendant attorneys submitted a motion for summary judgment under the theory that even if the plaintiffs were successful in a non-dischargeability complaint, they would still not have been able to collect due to the financial status of the debtors. The trial court granted the defendants’ motion for summary judgment, holding that even if the plaintiffs’ judgment had not been discharged, the debtor would not have had the assets to be able to satisfy plaintiffs’ judgment. Plaintiffs appealed the trial court’s decision.

Issue: Did the trial court improperly grant the attorneys’ motion for summary judgment in the legal malpractice action based upon the plaintiff’s inability to collect on their judgment against the debtors?

Ruling: The Appellate Division reversed and held that collectibility is ultimately a question of proximate cause. It remanded for a fuller factual record. The evidence submitted to the motion court did not clearly establish that a reasonable juror could conclude that the debtor would have been unable to satisfy plaintiffs’ judgment.

By virtue of the "no-asset" Chapter 7 bankruptcy proceeding, [the debtor] may, at the time of the asset searches at least, have had no assets. But he was, as far as the record reveals, at one point capable of maintaining an income and acquiring assets. To the extent a substantial portion of his prior debts have been extinguished, he has benefited from the bankruptcy and there is nothing in the record that would suggest that his "no-assets" status is anything but temporary or that he does not now have viable income.

Lesson: It would seem that in order to prevail in a legal malpractice case, the burden of proving a former client's inability to collect an underlying debt, might well have shifted in some cases to the malpractice defendant. Of interest, see also Hoppe v. Ranzini, (PDF) with permission of Thomson/Reuters, Westlaw.

Tags: New Jersey, Defenses, Litigation, Statute of Limitations, Substantial Factor-Proximate Cause, affirmative defense, collectability, judgment

Suit Within a Suit: Plaintiff's Only Option?

Posted on November 10, 2009 by Krishna Shah

Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 179 N.J. 343 (2004)

NJ Underlying Litigation (Personal Injury Action)

Facts: In this case, Plaintiff settled an underlying action involving a car crash and later alleged that her lawyer had negligently failed to include a responsible party in the underlying lawsuit. Plaintiff attempted to include this necessary, responsible party as a defendant in the underlying suit, but summary judgment was granted in favor of the new defendant under the statute of limitations. In the malpractice action, Plaintiff argued that failure to include the responsible party lessened her po-tential recovery. The attorney argued that (1) Plaintiff’s settlement barred any recovery in the mal-practice action; and (2) the value of her claim would have been no different with or without the new defendant. Plaintiff, however, proceeded to prove her case using expert testimony regarding the settlement and other evidence regarding her case. The defendant objected to the expert testimony and argued that the “suit within a suit” method, where Plaintiff presents evidence that would have been presented at trial in the underlying action had the malpractice not occurred, was the only way the Plaintiff should be allowed to prove her case.

Issue: Is the “suit within a suit” method the only way to prove proximate cause in a legal malpractice case based on underlying litigation?

Ruling: No.

The proper approach in trying a legal malpractice action will depend on the facts, the legal theories, the impediments to one or more modes of trial, and, where two or more approaches are legitimate, on Plaintiff’s preference.

Lesson: Alternative approaches to the “suit within a suit” method are permitted to prove the causation element in legal malpractice, so long as the jury is provided with an independent basis to determine the effect of the alleged malpractice and the value of plaintiff’s losses.

Tags: New Jersey, Case Within a Case, Proximate Cause, Torts/Personal Injury, causation, suit within a suit, underlying, underlying case

PA: No Need for Expert Witness where the Lawyer's Malpractice is Obvious

Posted on November 9, 2009 by Ben Wasserman

Antonis v. Liberati 821 A.2d 666 (Pa. Cmwlth. 2003)

Student Contributor: Evan Kusnitz

PA Underlying Mortgage Transaction

Facts: Plaintiff hired Attorney to prepare a mortgage and note as a security on a loan to Borrower. Attorney delivered the documents to the Recorder of Deeds. Plaintiff called Attorney several times to ask if the mortgage was recorded correctly, and Attorney repeatedly assured him that it was. However, due to a clerical error, the mortgage was in fact not recorded correctly. As a result, Borrower was able to sell the land subject to the mortgage without disclosing the existence of the mortgage, and without paying anything to Plaintiff. Plaintiff successfully sued Attorney. On appeal, Attorney argued that the trial court erred by not requiring expert testimony to show that he had a duty to Plaintiff to ensure that the mortgage was recorded correctly. Attorney also argued that Borrower’s fraud was an intervening cause of Attorney’s harm.

Issue:

Is expert testimony required to show that an attorney has a duty to a client to ensure that a mortgage is recorded correctly?
Is a borrower’s fraud––selling mortgaged land without disclosing the incorrectly recorded mortgage––an intervening cause of any harm caused by an attorney’s failure to ensure the mortgage was correctly recorded?

Ruling: In affirming the decision of the trial court, the appellate court ruled:

1. Expert evidence . . . is not required when the issue of negligence is clear enough to be concluded as a matter of law.

Since it is the responsibility of the mortgagee to ensure that the mortgage has been properly recorded, that duty undoubtedly falls upon his attorney, who represents him in the matter.

2. A borrower’s fraud is not an intervening cause of the harm caused by an attorney who failed to ensure that a mortgage was correctly recorded. If the attorney did not breach his duty to his client, the fraud could have never happened.

Lesson:

1. A mortgagee’s attorney has a duty to ensure that the mortgage is recorded correctly.

2. When an attorney’s negligence is obvious, expert evidence may not be required.

Tags: Pennsylvania, Antonis v. Liberati 821 A.2d 666 (Pa. Cmwlth. 2003), Expert Witness, Expert Witnesses, Real Estate, common knowledge, mortgages

Legal Malpractice Experts to Prove a Reasonable Settlement Value in the Underlying Case

Posted on November 6, 2009 by Ben Wasserman

Fishman v. Brooks, 396 Mass. 643; 487 N.E.2d 1377 (1986) (PDF)

MA Underlying Personal Injury Action

Student Contributor: Natalie Resto

Facts: Brooks hired Fishman to represent him in an action for personal injuries he sustained when a negligently operated motor vehicle collided with the bicycle Fishman was riding. Fishman did not commence the personal injury suit until 16 months after the accident, and did not obtain service on the driver defendant for more than 10 months after filing the complaint. He also made a settlement demand of $250,000 on the driver’s insurer when the insurance coverage was $1 million. Shortly before trial, after Fishman told Brooks that he could not win if he went to trial, Brooks agreed to settle his personal injury claim for $160,000. The client sued the attorney for malpractice. The jury found for clients and the attorney appealed.

Issue: Whether the trial court properly admitted the testimony of an adjuster and tort lawyer as to liability and causation?

Ruling: The court affirmed the lower court’s holding. It found that expert testimony from an experienced tort lawyer and an experienced claims adjuster as to reasonable settlement value of underlying claim was properly admitted, and that

evidence of the fair settlement value of the underlying claim was admissible to prove not only Fishman’s negligence but also that his negligence caused a loss to Brooks. Id. at 648.

Lesson: An attorney is liable when he causes a client to settle a claim for an amount below what a properly represented client would have accepted. The court states that the typical case of malpractice liability for an inadequate settlement involves an attorney who, having failed to prepare his case properly or lacking the ability to handle the case through trial (or both), causes his client to accept an unreasonable settlement.

EDITOR'S NOTE: With our thanks to Westlaw, Thomson Reuters for permitting the case hyperlink.

Tags: Expert Witnesses, Massachusetts, Proximate Cause

NJ: No Legal Malpractice Cause of Action for Violation of an R.P.C.

Posted on November 5, 2009 by Krishna Shah

Baxt v. Liloia, 155 N.J.190 (1998)

Student Contributor: Ryan O’Donnell

NJ Underlying Commercial Action

Facts: Plaintiffs, who were previously defendants in a foreclosure action, filed a complaint against the attorneys who represented the mortgage bank. Plaintiffs sought damages for a breach of the Rules of Professional Conduct, alleging that the bank’s attorneys actively mislead plaintiffs during the pendency of the foreclosure proceedings.

Issue: Can a violation of the Rules of Professional Conduct alone serve as the basis for a cause of action in legal malpractice?

Ruling: No.

Violation of a Rule should not give rise to a cause of action nor should it create any presumption that a legal duty has been breached…Consonant with the intent of the ABA, no New Jersey case has allowed a cause of action based solely on a violation of the RPCs….Moreover, our research has found no case in any other jurisdiction permitting the RPCs to be used in this manner…[S]tate disciplinary codes are not designed to establish standards for civil liability but, rather, to provide standards of professional conduct by which lawyers may be disciplined…[Various rules] are framed as precatory guidelines…Many of the disciplinary rules are aspirational in nature and therefore, particularly unsuitable for use outside of the disciplinary system.

* * *
While violations of ethical standards do not per se give rise to tortious claims, the standards set the minimum level of competency which must be displayed by all attorneys. Where an attorney fails to meet the minimum standard of competence governing the profession, such failure can be considered evidence of malpractice.

Lesson: A cause of action for legal malpractice cannot be premised solely on an attorney’s alleged breach of a Rule of Professional Conduct. But violation of an RPC can nonetheless be some evidence of a departure from the applicable standard of care.

Tags: New Jersey, Commercial, RPCs, Rules of Professional Conduct (RPCs), evidence of malpractice

NJ Legal Malpractice Per Se: No Expert's Affidavit Required

Posted on November 3, 2009 by Ben Wasserman

Joyce A. Popwell v Law Offices of Broome and Horn, 363 N.J. Super. 404 (App. Div. 2002)

NJ Underlying Personal Injury action

Student Contributor: Candice Deaner

Facts: After the court appointed arbitrator found that plaintiff had no cause of action for negligence against the underlying defendant plaintiff’s attorney failed to file for a trial de novo within the time limits set out by R. 4:21A-6(b)(1), A trial de novo filing would have preserved plaintiff’s claim for trial and would not have subjected it to dismissal. Defendants made a cross motion to dismiss, alleging that Plaintiff’s failure to submit an affidavit of merit in the legal malpractice action, as required by statute, required the grant of summary judgment dismissing the malpractice complaint.

Issue: Does the Plaintiff’s failure to submit an expert's affidavit of merit to support its allegation of legal malpractice when it was common knowledge that failure to file a timely application for a trial de novo amounts to negligence per se for which no expert affidavit or testimony would be necessary.

Ruling: The requirement of the filing of an affidavit of merit is not applicable in this matter because Plaintiff's allegations do not require the testimony of an expert in order to permit the jury to determine the issue of negligence. Affidavits of merit are not required where, as here, it was “common knowledge” that the defendant attorney was negligent in blowing a time limit the consequences of which included the dismissal with prejudice of plaintiff's causes of action.

Lesson: In clear cases of attorney negligence, where it is common knowledge that the attorney was negligent by violating a statutory time limit that caused plaintiff to forefeit her claim, no expert's affidavit is required, because the jury can determine whether the Defendants is negligent based on "common knowledge" and without the need for expert testimony.

Tags: New Jersey, Affidavit/Certificate of Merit, Expert Witnesses, Litigation, Standard of Care, Torts/Personal Injury

Legal Malpractice Attorney's Fees: Fee Shifting? or the Client's Right to be Made Whole?

Posted on November 2, 2009 by Ben Wasserman

The Editorial Board of the

Legal Malpractice Law Review

is pleased to invite you to an online discussion starting on

Monday morning November 2, 2009

led by:

Paul M. Koning of K & L Gates, LLP

on the Texas Supreme Court's new decision awarding Attorney's Fees as compensable damages in a legal malpractice action:

Akin, Gump, Strauss , Hauer & Feld, LLP vs. National Development and Research Corp. decided October 30, 2009:

"The Hidden Issue in Akin Gump v. NDR"

and

"Akin Gump v. NDR:

Practicial Consequences of Allowing Attorney's Fees as Damages"

With this new decision in Akin Gump, has Texas joined New Jersey, (with its Saffer v. Willoughby,) in recognizing the prevailing malpractice plaintiffs' right to be made whole again with an award of attorney's fees when they prove that they have been damaged by their lawyer's malpractice? What implications does this have for the practicing lawyer? Does this signal a trend that we might see in yet other states?

Paul is the Texas Law Contributor to the Legal Malpractice Law Review and is a renowned expert in the field. He has served as:

Co-Chair of the American Bar Association's Professional Liability Litigation Committee (2006-2009)
Designer and Project Coordinator of its "50 State Survey of Legal Malpractice Law"
Co-Chair, Attorneys' Liability Subcommittee (2005).

We look forward to your joining us in what will prove to be a lively and timely discussion. Visitors are encouraged to post their Comments to both of Paul's blog posts.

Just scroll down to Paul's 2 blog posts immediately below.