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

Moores v. Greenberg 834 F.2d 1105, (1st Cir. 1987)

Fed'l Underlying Longshoreman's Act 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  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.

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O’Callaghan v. Weitzman, 436 A.2d 212 (Pa. Super. Ct., 1981)

PA Underlying Tort Action.

Student Contributor: Colleen Gaedcke

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.

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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.

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

Student Contributor: Maninder (Meena) Saini

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

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

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

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

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

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

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

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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. 

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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. 

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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. 

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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 under §§21-23.
2. A lawyer must promptly comply with a client's reasonable request for information.
3. A lawyer must notify a client of decisions to be made by the client under §§21-23 and must explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.

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