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

Reilly, Supple & Wischusen, LLP v. Malcolm Blum v. Michael P. Ambrosio (NJ App. Div. March 9, 2011 UNPUBLISHED)

NJ: Underlying legal malpractice action

FACTS:  Attorney Blum was sued by a former client   in an underlying legal malpractice action,   which was dismissed on summary judgment eventhough plaintiff had a legal malpractice expert report.  Blum was represented by the Reilly Supple law firm, which now  sues him for unpaid legal fees.  Apparently seeking contribution from another source to help pay those outstanding legal fees in his successful defense,   Blum filed a third party complaint alleging legal malpractice  against the plaintiff’s legal malpractice expert in the unsuccessful  underlying malpractice case-- Michael P. Ambrosio, a law professor, who had issued the report which could not pass the muster of the summary judgment motion.

ISSUE: 1)  Does the successful defendant in a legal malpractice case have a  right to sue the opposing expert  for legal malpractice where the  opinions expressed by the expert   were rejected by the Court?

RULING: NO.

1. Under NJ law, for a non-client to sue a lawyer, even when that lawyer is on the opposing side, there must be "an invitation to rely and reliance,  [which] are the linchpins of attorney liability to third parties." Petrillo v. Bachenberg, 139 N.J.472, 483-4 (1995); Banco Popular, N.A. v. Gandi, 184 N.J. 161,181 (2005). 

"Far from relying on Ambrosio, Blum successfully opposed Ambrosio's opinion in the underlying malpractice case."

2.  In NJ, the expert witness is protected by the absolute litigation privilege and cannot be sued for the opinions expressed in his expert report.

The court based its decision on  Hawkins v. Harris,  141 N.J. 207 (1995), which adopted California’s  formulation of the litigation privilege, where "the undelrying principles are substantially the same as those underlying the New Jersey privilege":

 The absolute privilege applies to "any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action." Id. at 369. Whether a defendant is entitled to the privilege is a question of law.  

LESSON:  The absolute privilege now applies to the expert witness in legal malpractice cases. Although there are a few cases in other states that appear to offer a different view, the Court  pointed out that there are controls that justify granting the expert witness the absolute privilege which are germane to the legal malpractice expert. Here’s what the Hawkins decision also said: 

Because of their extraordinary scope, absolute privileges "have been limited to situations in which authorities have the power both to discipline persons whose statements exceed the bounds of permissible conduct and to strike such statements from... the record." ... The absolute privilege "does not extend to statements made in situations for which there are no safeguards against abuse." ... ("[I]n strictly judicial proceedings the potential harm which may result from the absolute privilege is somewhat mitigated by the formal requirements such as notice and hearing, the comprehensive control exercised by the trial judge whose action is reviewable on appeal, and the availability of retarding influences such as false swearing and perjury prosecutions * * *.");  

Editor's Note: For examples of where the Court remedied the  broad scope of the absolute privilege of a legal malpractice expert by striking the expert's report or testimony as a "net opinion" see:  Celucci v. Bronstein, 277 NJ Super 506 (1994) and Kaplan v. Skoloff  & Wolfe, 339 N.J. Super. 97 (2001).  

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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. 
 

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

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.  

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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.
 

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

CT: Underlying will matter

Student Contributor: Laura Binski

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. 

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

CT: Underlying estate distribution matter

Student Contributor: Laura Binski

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.” 

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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.

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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.

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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.  

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

NJ: Underlying dispute over a will

 Student Contributor: Laura Binski

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.

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

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

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

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

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

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

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

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

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

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

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

NJ: Underlying dispute over a will

Student Contributor: Laura Binski

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.  

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

SC: Underlying estate matter

Student Contributor: Karen Dindayal

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.

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

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.
 

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

TX: Underlying Commercial Real Estate Action

Student Contributor: Megan Diodato

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.

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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.

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

AL: Underlying collection action

Student Contributor: Farah Shahidpour

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.  

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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.

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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."

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Kaplan v. Cowan Liebowitz & Latman, P.C., 832 So.2d 138 (Fla. App. 2002)

FL: Underlying private placement securities offering

Student Contributor: Farah Shahidpour

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. 

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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. 

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

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

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

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

Ruling:  No. 

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

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

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

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

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

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

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

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

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

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

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

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

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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.

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Chatterjee v. Due, 511 F. Supp. 183, 1982 A.M.C. 2970 (E.D. Pa. 1981)

Admiralty Law: Wrongful Death Settlement

Student Contributor: John Anzalone

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. 

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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. 

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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.
 

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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.

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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.

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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.

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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.

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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.

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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.

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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.  

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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.

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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.

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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.

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 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.  

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Hedlund Mfg. Co., Inc. v. Weiser, Stapler & Spivak, et ano.
517 Pa. 522, 539 A.2d 357 (1988)

Facts: Martin hired attorney Spivak to apply for a patent for a machine that Martin had invented and manufactured. Spivak prepared the application but he did not timely file it. Hedlund Manufacturing purchased Martin's business, including the rights to all pending patents. When Hedlund learned that Spivak had filed the patent application late, they had Martin assign to them all rights and causes of actions arising out of the lawyer's malpractice. Hedlund then sued Martin's lawyer for legal malpractice alleging negligence and breach of contract.

Issue: Can Hedlund (the assingee) sue the assignor's lawyer based on the assignment of the legal malpractice claim, even though there is no attorney-client relationship between the assignor and the lawyer?

Ruling: The PennsylvaniaSupreme Court said yes, reversing the lower court that had held that lack of privity barred the malpractice suit. The Court held legal malpractice claims can effectively be assigned and that "privity is not an issue involving an assigned claim because the assignee stands in the shoes of the assignor and does not pursue the cause of action in the assignee's own right." Thus, the assignment of a cause of action for legal malpractice is valid and can be used by the assignor to circumvent the privity defense. It might also be viewed as a "hidden" asset in the sale of a business.

New York: Assignment of legal malpractice claims are permitted. See, Tawil v. Finkelstein, et al 646 NYS2d 691 (App Div. 1st Dept, 1996). But they probably have to be explicit and unambiguous CALPERS v. Shearman & Steling, 95 N.Y. 2d 427 (2000).

New Jersey: Assignment of legal malpractice are not permitted for public policy reasons. Alcman Services Corp. v. Bullock 925 F. Supp. 252 (DNJ 1996).

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