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

Williams v. Bashman, 457 F. Supp. 322 (E.D. Pa. 1978)

 PA: Underlying  tort action.

Student Contributor: Colleen Gaedcke

Facts: The plaintiff retained the defendant, a partner at the defendant law firm, to represent her in her personal injury case against the a homeowner and the city of Philadelphia. A year passed without any communication between the plaintiff and the defendant, until the plaintiff sent the defendant a letter inquiring about the status of her case. The plaintiff received a letter from another attorney at the defendant law firm stating that he was representing her in her case against the City. Plaintiff did have one conversation with the defendant partner where he assured her that the case was in court. Another year passed and the defendant partner left the defendant law firm. The defendant law firm never filed the plaintiff’s case. The plaintiff claimed that the “defendant firm failed to exercise within the scope of their employment reasonable professional care and diligence in their representation of the plaintiff.” As a result of this failure the plaintiff claims that she was unable to recover compensation for her injuries and that her claim was barred by the statute of limitations.

Issue: Whether the plaintiff defendant law firm was liable for legal malpractice?

Ruling:  Yes.

1.) “When a plaintiff alleges that the defendant lawyer negligently provided services to him or her as a plaintiff in the underlying action, he or she must establish by the preponderance of the evidence that he or she would have recovered a judgment in the underlying action in order to be awarded damages in the malpractice action, which are measured by the lost judgment.”

2.) Here, the court found that the defendant law firm was responsible for her case, including conducting discovery to determine the merits of her case and proving the elements if necessary at trial.

3.) The defendant law firm owed the plaintiff a duty to exercise reasonable profession in the prosecution of her claim and they negligently breached that duty which was the proximate cause of the plaintiff’s loss of damages.

Lesson: An attorney who signs a retainer agreement with a client has a duty to exercise reasonable care in representing that client. A breach of this duty may be the proximate cause of the client’s damages and thus the attorney will be liable for legal malpractice.

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Chimento v. Parsons, Powell & Lane, LLC, Superior Court of New Jersey, Appellate Division, January 5, 2010

Facts:  Plaintiff brought suit against a casino after his chair collapsed and, allegedly, caused him to sustain back and shoulder injuries.  Although Plaintiff's attorney in the underlying matter sued the casino for negligent maintenance, he failed to assert a claim against the manufacturer of the chair.  After the statute of limitations expired, Plaintiff's attorney learned of the identity of the manufacturer. 

Eventually, Plaintiff retained another attorney in the underlying matter who successfully filed an amended complaint naming the manufacturer and obtained default judgment for approximately $300,000.  Upon learning of the judgment, Plaintiff's former attorney asserted his right to compensation.  Plaintiff, however, elected to bring the instant action in light of his former attorney's failure to name the chair manufacturer in the initial complaint. 

Plaintiff's former attorney moved to dismiss arguing that the chair manufacturer had ceased to exist as a legal entity before Plaintiff's accident.

Issue:  Can a former client successfully pursue a legal malpractice action based on his attorney's failure to pursue claims against a defunct entity? 

Ruling: No. 

The Court noted that the chair manufacturer and its successor in interest had ceased to exist as financially viable entities before Plaintiff's accident.  The assets of both entities had been sold by a court appointed receiver for the benefit of the manufacturers' creditors. 

[E]ven assuming that [the former attorney] deviated from the standard of professional competence expected of attorneys in this State by failing to name [the manufacturer] as a defendant in Plaintiff's underlying cause of action, such a deviation was legally inconsequential because [the manufacturer] was not a legally or commercially viable entity at the time of Plaintiff's accident.

Lesson: Plaintiff cannot pursue a malpractice action for his attorney's failure to name a defendant, unless he can first prove that he had a possibility of collecting on a recovery against that defendant.  Otherwise, as a matter of law, the attorney's alleged negligence is not a proximate cause of any damages sustained by his client.

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Pechko v. Gendelman,  20 A.D.3d 404; 799 N.Y.S.2d 80 (2nd Dept. 2005)

NY Underlying Medical Malpractice Action

Student Contributor: Natalie Resto

Facts: The plaintiff underwent a mammogram while a patient with Doctor #1, who, she claimed, told her that the mammogram was normal. Later that year she underwent a mammogram with Doctor #2 and was diagnosed with cancer. The surgeon recalled seeing in the first mammogram certain “micro-calcifications” that were “suspicious of cancer.” The plaintiff sued Doctor #1 for medical malpractice. During the course of representation, the attorney who was representing her forwarded the mammogram films to a radiologist for evaluation, who before the evaluation misplaced them. The plaintiff then retained an appellate law firm to represent her in the medical malpractice action. Doctor  #1 moved for summary judgment arguing that the films constituted key evidence, and that the loss of that evidence irreparably prejudiced his ability to defend the action. The lower court granted the doctor’s summary judgment because the plaintiff failed to counter the motion with expert affidavits sufficient to create issues of fact. The plaintiff then brought this action against the law firm to recover damages for legal malpractice for failing to properly defend her against the summary judgment motion in the medical malpractice action.  The law firm argued that because it was not responsible for the loss of the mammogram film, which occurred before it was retained, its negligence was not the proximate cause of the plaintiff’s damages. The law firm moved for a motion to dismiss for failure to state a claim. The lower court denied it and the law firm appealed.

Issue: Was the law firm negligent in its representation of the plaintiffs in a medical malpractice action?

Ruling: Yes. The court found that the motion was properly denied because the absence of the mammogram films did not require the conclusion that the plaintiff would be unable to establish the law firm’s negligence. Here the firm did not rebut the plaintiff’s claim that they were negligent in failing to obtain secondary evidence concerning the films.

Lesson: Even when a court’s determination in an underlying medical malpractice action may be read as holding that the plaintiff will be unable to establish the merits of the medical malpractice action, that determination should not be given collateral estoppel effect against the plaintiff when he or she has alleged that the determination in the underlying action was the result of his or her attorney’s negligence.

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Boone v. Bender, Supreme Court of New York, Appellate Division, June 22, 2010

Facts:  Defendant attorneys represented the plaintiff in a matrimonial action which ended in a settlement.  Subsequently, the plaintiff commenced this malpractice action alleging that defendants compromised their level of advocacy and coerced her into entering into the settlement.  The defendants moved for summary judgment dismissing the complaint, and the Supreme Court denied the motion.  Defendants appealed.

Issue:  Can Plaintiff pursue a malpractice action after consenting to a settlement in the underlying matter? 

Ruling:  No. 

A claim for legal malpractice is viable, despite settlement of the underlying action, if it is alleged that settlement of the action was effectively compelled by the mistakes of counsel. 

Applying that standard to the instant case, however, the Court found that:

[T]he plaintiff was satisfied with the defendants' representation of her, that she had discussed the terms of the settlement with the defendants, that she understood that she would have the right to a trial if she did not wish to enter into the stipulation, that she had not been threatened or forced into entering into the stipulation, that she was entering into the stipulation voluntarily and of her own free will, that she had not taken any medications that would hamper her ability to understand the court proceedings, and that she had no additional questions for the defendants.

Accordingly, the Court concluded that plaintiff's subsequent "unhappiness" with the settlement did not rise to the level of legal malpractice.  Further, the Court found that the attorneys' reasonable exercise of judgment in pursuing settlement did not constitute malpractice, and the plaintiff's allegation that defendants did not pursue her claims "zealously" was mere speculation.

Lesson:  Conjecture, conclusory allegations of malpractice, and mere dissatisfaction concerning a settlement that was entered into voluntarily, do not constitute the necessary factual or legal basis upon which to pursue a subsequent action for professional negligence.

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Hall v. Cohen, Michigan Court of Appeals, February 18, 2010

Facts:  The defendant attorney represented plaintiff in a matrimonial matter, and after settlement of the matrimonial action, plaintiff brought suit against her attorney for malpractice.  The trial court granted summary judgment in favor of the defendant attorney, and granted the attorney's counterclaim for unpaid legal fees.  Plaintiff appeals.

Issue:  Can Plaintiff sue for malpractice after consenting to a settlement in the underlying matrimonial action? 

Ruling:  No.  The Court first set forth the standard for pursuing a malpractice action after settlement in the underlying matter:

When a settlement is compelled by the mistakes of the plaintiff's attorney, the attorney may be held liable for causing the client to settle for less than a properly represented client would have accepted...Additionally, a cause of action for legal malpractice may be raised when it can be shown that the client's consent to the settlement was compelled because prior misfeasance or nonfeasance by the attorney left no other recourse.

In applying that standard to the facts of this case, the Court noted that Plaintiff's statements under oath at the settlement hearing indicate that she "knowingly and voluntarily" entered into the agreement.  Further, Plaintiff was unable to demonstrate that her attorney's alleged failure to enforce prejudgment orders, or her alleged threat to withdraw from the action, caused her to settle.  Accordingly, the Appellate Division affirmed the trial court's decision to dismiss Plaintiff's complaint and award payment of outstanding legal fees.

Lesson:  Where Plaintiff knowingly and voluntarily settles her action, and cannot present any factual basis upon which the Court can conclude that her decision to settle was the result of her attorney's professional negligence, Plaintiff may not "settle and sue."

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Middleton v. Kenny,286 A.D.2d 957;731 N.Y.S.2d 425 (4th Dept.2001)

NY:Underlying Personal Injury Action

Student Contributor: Natalie Resto

Facts: The plaintiff in the underlying action sued the architects, engineers and HVAC contractors for the alleged exposure to fumes and chemicals at their workplace. The appellate division dismissed the underlying action holding that the lower court abused its discretion in granting the plaintiff’s motion for an extension of time to file a note of issue after having been served with a 90-day demand pursuant to CPLR 3216. The defendant attorneys argued that the court erred in denying their cross motion seeking summary judgment because the plaintiff’s employer, not them, was the one responsible for the ventilation problem.

Issue: Did the attorneys submit evidence establishing as a matter of law that plaintiff would have been successful in the underlying action?

Ruling: No. The court found that the conflicting opinions of the experts presented issues of credibility to be determined by a trier of fact. The court held that the defendants were negligent in failing to respond to the 90-day demand and ordered a trial on the issues of proximate cause and damages.

Lesson: Even if the attorney can substantiate that someone else, here the employer, was liable for the plaintiff’s injuries, the attorneys still need to establish as a matter of law that the plaintiff would have been unsuccessful in the underlying action. 

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Primis Corp. v. Milledge, Court of Appeals of Texas, Fourteenth District, Houston, May 27, 2010

Facts:  Defendants agreed to represent the plaintiffs in a certain lawsuit and plaintiffs paid the defendants a $5,000 retainer.  Plaintiffs contend the retainer was a "general retainer", while Defendants contend the retainer was specifically for the work to be performed on the particular lawsuit. 

Several weeks after plaintiffs paid the retainer, they were served with another suit wherein plaintiff sought confirmation of an arbitration award rendered against Primis Corporation.  Plaintiffs delivered the citation to the Milledge law office when no attorneys were present.  Soon thereafter, Samuel Milledge sent plaintiffs a letter noting the deadline to file an answer and requesting a retainer.  Plaintiffs never furnished the retainer and, eventually, a default judgment was entered. 

Primis then filed suit against Milledge asserting claims for negligence, breach of contract, and violations of the Texas Deceptive Practices Act.  The trial court found that Milledge owed Primis a duty to clearly and unambiguously advise Primis that Milledge would not be filing an answer for Primis.  Although the court noted that Milledge failed to give advice when legally obligated to do so and delayed handling a matter entrusted to his care, no damages were assessed against Milledge since Primis did not present expert testimony to establish that Milledge's negligence was the proximate cause of its injuries. 

Issue:  Whether expert testimony was necessary to establish proximate cause? 

Ruling:  Yes.

In a legal malpractice case predicated on professional negligence during litigation, expert testimony generally is required to determine whether the result of the underlying litigation would have been different but for the attorney's alleged negligence.

***

[Here] the trier of fact would have to assess whether, with reasonably prudent counsel, the trial court would have vacated or modified the arbitration award against Primis Corporation...The causation inquiry was beyond the trier of fact's common understanding, therefore, expert testimony was necessary for Primis to prove causation.

Lesson: To prevail in a legal malpractice action, Plaintiff must present expert testimony to establish that "but for" his attorney's negligence he would have prevailed in the underlying litigation. 

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Erdman v. Dell 50 A.D.3d 627, 854 N.Y.S.2d 755 N.Y.A.D. 2 Dept., 2008.

NY Undelrying personal injury; worksite accident; scaffolding

Student Contributor: Ryan O'Donnell

Facts: Client filed a legal malpractice suit against attorney arising out of the attorney’s representation of client in an underlying NY Labor Law  § 240 (1) action. Plaintiff was injured while working on a scaffold doing pipe work in a building at 100 Broadway. Defendant’s mistaken brought an action against the owners of the building at 100 Pine street. By the time the mistake was realized, the statute of limitations had already expired. There was some questions as to whether the plaintiff had followed certain safety precautions that may have helped avoid the accident, and whether plaintiff had secured safety locks on the wheels of the scaffolding that may have prevented the accident.

Issue: Is an attorney liable for malpractice if he is not the proximate cause of the plaintiff’s damages, even if the attorney negligently allowed for the statute of limitations to expire?

Ruling: No. "In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney 'failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession' and that the attorney's breach of this duty proximately caused the plaintiff to sustain actual and ascertainable damages" An attorney is not liable for damages to his client if he was not the proximate cause of those damages. Since there were questionable issues of fact as to what the proximate cause of the accident was, the defendant’s conduct was not a proximate cause of plaintiff’s damages.

Lesson: Summary judgment for legal malpractice liability is precluded if there is a genuine issue of material facts of proximate cause in the underlying action. But  even if an attorney fails to name a proper party as a defendant and the  statute of limitations expires, the  attorney is not liable for malpractice if a plaintiff can not prove that but for the attorney’s failure to file a timely suit the client would have succeeded in the underlying cause of action.

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Ryan v. Powers & Santola, LLP, 2010 NY Slip Op 03827 (3^rd Dept. May 6, 2010)

Underlying Personal Injury Action

Facts:  Plaintiff Ryan was struck on the head by highchair while dining at a restaurant.  He then retained Powers & Santola to represent him in a negligence action against the restaurant. 

In response to the defendants’ motion to compel production of a verified bill of particulars and responses to outstanding discovery demands, the trial court issued an order in the underlying action providing that the matter would be dismissed if Ryan failed to provide the outstanding discovery.  Although Ryan eventually served discovery responses, a number of responses required more specific answers.  The trial court, thereafter, extended the discovery schedule twice with a conditional order that the action would be dismissed if plaintiff continued to fail to provide responses.  Ryan failed to comply and the matter was in fact dismissed. 

Subsequently, Ryan commenced a legal malpractice action against Powers & Santola for “failing to follow court orders…consenting to conditional orders…and failing to move to vacate the dismissal order”.  Ryan moved for partial summary judgment on the issue of liability. 

Issue:  Is Ryan’s alleged failure to cooperate with counsel in preparing discovery responses a viable defense to his action for legal malpractice?

Ruling:  Yes.  The Court held that:

A claim of legal malpractice will be sustained if the plaintiff establishes…that [he] would have succeeded on the merits of the underlying action but for the attorney’s negligence…We agree…that the plaintiff’s conclusory assertions – that ‘but for’ defendants’ alleged negligence, they ‘would have been able to prosecute all causes of action to a successful outcome’ – failed to establish their prima facie entitlement to summary judgment…There are questions of fact as to whether plaintiff failed to cooperate with defendants in providing them with information and documents necessary for motion practice after the underlying action was dismissed.

Lesson: A former client’s failure to cooperate is a question of fact in assessing the liability of the attorney in a malpractice action.  Failure to cooperate, more likely than not, would prevent plaintiff from establishing that “but for” his former counsel’s malpractice, he would have prevailed in the underlying action.   

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 In re Segerstrom 247 F. 3d 218 (5th Cir. 2001)

TX: Underlying personal injury then bankruptcy, post judgment

Student Contributor: Brad Kvinta (J.D. (2010), Texas Tech University School of Law, B.S. (2006)Texas A & M University)

FACTS: In 1995, a vehicle driven by Kayla Segerstrom (Segerstrom) was involved in a collision with a vehicle driven by the Colvins. The collision caused one death and other serious injuries. The Colvins sued Segerstrom, her parents, and her parents’ sole proprietorship (“defendants”). The defendants’ insurance company hired Touchstone as defense counsel. A judgment was then entered solely against Segerstrom. Shortly thereafter, “the Colvins filed an involuntary bankruptcy petition against Segerstrom.” The bankruptcy estate (“estate”) then filed a complaint against Touchstone and the insurance company. “The complaint alleged that Touchstone had an inherent conflict of interest in representing Segerstrom, her parents, and her parents’ sole proprietorship as defendants in the same litigation.” “In October 1998, Segerstrom’s personal liability to the Colvins was discharged.” Summary judgment was entered against the estate, and the trustee appealed.

ISSUE: Whether Segerstrom’s bankruptcy estate included a legal malpractice claim against Touchstone and, if so, whether Touchstone, and the insurance company, are liable under that claim?

RULING: On appeal, the court indicated that Segerstrom’s bankruptcy estate included a legal malpractice claim against Touchstone. “As of the commencement of Segerstrom’s bankruptcy case, a legal malpractice claim against Touchstone had accrued to Segerstrom according to Texas law.” See In re Swift, 129 F.3d 792, 795-96 (5th Cir. 1997). “Segerstrom never denied or waived that malpractice action prior to the commencement of her bankruptcy.” Thus, the court indicated that the estate could maintain a legal malpractice claim against Touchstone.

Although the court indicated that a legal malpractice action could be filed on behalf of the estate, the estate did not prove that “but for the manner in which Touchstone conducted her defense, Segerstrom would have obtained a better result in the prior litigation.” In other words, the estate failed to prove the Segerstrom suffered any injury as a result of the alleged malpractice.

The court based this conclusion on Segerstrom’s post-petition affidavit, which denied the existence of a legal malpractice claim. The court noted that although this affidavit is irrelevant to the existence of a legal malpractice claim, it “carries considerable weight in determining whether the estate has met its burden of establishing injury and causation in accordance with Texas law.” Therefore, summary judgment in favor of Touchstone was proper.

Further, “Texas requires that insurance companies act with reasonable care in fulfilling their duty to defend under insurance contracts.” See Meridian Oil Production, Inc. v. Hartford Accident, 27 F.3d 150, 153 (5th Cir. 1994). The court indicated that the estate pointed to no authority in Texas that shows this duty requires the insurance company to identify conflicts and take steps to address them prior to hiring legal counsel for its insured. The court also indicated that even if this duty existed, there is insufficient evidence presented to support a breach of that duty. Therefore, summary judgment in favor of the insurance company was proper.

LESSON: Lawyers may be liable for legal malpractice to a plaintiff’s successor in interest. A successor in interest is a person entitled to the same legal rights as the plaintiff. In other words, a successor in interest is free to pursue any claim that the plaintiff was entitled to pursue. Thus, a lawyer must defend a legal malpractice claim against a successor in interest so long as the successor in interest is legally entitled to pursue such a claim and meets all requirements to successfully prosecute the claim.

In this case, legal malpractice claims survive the initiation of bankruptcy proceedings, even if personal liability in the underlying lawsuit has been discharged. Trustees (the successor in interest in this case) are free to pursue any claims which the debtor could have pursued prior to the initiation of a bankruptcy proceeding. Further, there is no duty under Texas law for an insurance company to identify conflicts and take steps to rectify said conflicts prior to the commencement of any legal proceeding.

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Boyer v. Walker, 714 A.2d 458 (Pa. Super. Ct. 1998)

PA Underlying Commercial Action

Student Contributor: John Anzalone

Facts: Plaintiffs became junior lien holders when they issued a mortgage to property owners who had outstanding prior mortgages, including two held by a bank. Upon default by the property owners, the bank foreclosed on its mortgages. Plaintiffs were aware of the foreclosure. Notice of judgment for the bank, and of the attendant sheriff's sale of the property, was sent to the defendant attorney who represented the plaintiffs when they issued the mortgage. Plaintiffs discovered this after the sale occurred, and subsequently sued the attorney for professional negligence as a result of his failure to forward the notice of the sheriff's sale. More specifically, plaintiffs alleged that had they received notice of the foreclosure sale, they would have appeared at the sale and would have attempted to purchase the property, inasmuch as they believed that the property was worth far in excess of the bank’s liens.

Issue: Was the attorney liable for plaintiffs’ damages as a result of his failure to forward the notice of the sheriff's sale?

Ruling: The Court ruled that the attorney was not liable based on the following considerations:
1) Attorneys can only be held liable for professional malpractice where (1) an attorney-client relationship is established between the plaintiffs and the defendant attorney; (2) the attorney failed to exercise ordinary knowledge and skill; and (3) that failure proximately caused the plaintiffs’ damages.
2) As junior lien holders, plaintiffs lost all interest in the property when it was sold at the sheriff's sale, but plaintiffs failed to show that this harm would have been prevented if the attorney had forwarded them notice of the sale, since they failed to present evidence concerning the purchase price at the sheriff's sale, the bids made at the sheriff's sale, the amount of money they were prepared to bid at the sheriff's sale, and whether other bidders were ready and able to bid.
3) Thus, plaintiffs failed to establish that they suffered damages proximately caused by the attorney’s alleged negligence.

Lesson: Proximate cause requires establishing the identity of the damages suffered with reasonable certainty.

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Johnson v. Schragger, Lavine, Nagy & Krasny, 340 N.J. Super. 84 (App. Div. 2001)

NJ Underlying Commercial Action

Student Contributor:  Natalie Resto

Facts: Johnson hired the Defendant law firm to represent him in a dispute concerning the sale of a horse. The matter was settled, but the buyer refused to comply with the settlement. Shortly thereafter, the attorney handling the case left the Defendant law firm, but continued to represent the client in a motion to enforce the settlement. His motion was granted and an “Order Enforcing Terms of Settlement” was signed entering judgment in favor of the client against the buyer. Months later, the buyer sold a condominium and the judgment was deducted from the gross amount of the sale. One year later, the buyer filed for bankruptcy and the client’s judgment against him was discharged and the judgment was never actually satisfied from the proceeds of the sale.

The client sued the Defendant law firm and the attorney who was handling the case for malpractice, alleging that they were negligent in the conduct of the litigation between him and the buyer. More specifically, the client alleged that the attorney and the firm had failed to properly and promptly obtain and docket the judgment against the buyer. The client’s claim against the law firm was dismissed on summary judgment, and the client subsequently appealed on the grounds that the firm’s conduct was the proximate cause of his loss.

Issue: Was the law firm’s negligence the proximate cause of the damages sustained by the client?

Ruling: The Appellate Division affirmed the summary judgment and held that the law firm’s failure in obtaining the judgment earlier was not a substantial factor in the discharge of the judgment against the buyer, and therefore, was not the proximate cause of the client’s damages. The Court found that, because the law firm had only represented the client for 83 days before the attorney left the firm and continued to represent the client long after he left, nothing the firm did was a substantial factor in bringing about the loss to the client, and therefore, the firm was not a proximate cause of any damages sustained by the client.

Lesson: The Court held that the traditional jury charge on proximate cause as a continuous sequence is not appropriate for legal malpractice cases in which there are concurrent independent causes of action. In such cases, a jury must be instructed to determine whether the negligence was a substantial factor in bringing about the ultimate harm. In making that determination, the duration of the representation is a valid consideration.

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Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537 (2nd Cir. 1994)

NY Underlying Representation: Prospective Purchase of Bankrupt Company's Assets

Student Contributor: John Anzalone

Facts: Defendant Law firm represented Plaintiff through an agent in her attempt to purchase the assets of a bankrupt company. Problems occurred with the deal and the Agent was dismissed by the Plaintiff. Agent then told Firm that he wanted to buy the assets of the bankrupt company. Despite knowing that Plaintiff still sought to purchase the assets, Firm told Plaintiff that it would represent Agent in his attempt to purchase the assets. Plaintiff objected to this subsequent representation of Agent. Agent outbid Plaintiff with Firm's assistance. The jury found that Firm's representation of Plaintiff's Agent breached its fiduciary duties to her and was a "substantial factor in preventing her from obtaining assets she sought in the transaction."

Issue: Was the determination that Firm breached its duty to its former client by representing Plaintiff's agent in the same transaction incorrect?

Ruling: In affirming the lower court, the Second Circuit held that the Firm breached its fiduciary duty to Plaintiff, based on the following considerations:
1) Firm committed a serious breach of its fiduciary duties to Plaintiff as a former client by representing a party with interests adverse to the Plaintiff in the same transaction.
2) The nature of this breach triggers the prophylactic rule so plaintiff has to prove that Firms' actions were a substantial factor in its damages instead of the normal requirement of proximate cause.
3) The jury could have found that Firm's action were a substantial factor in Agent purchasing the assets rather than Plaintiff because their presence could have given Agent more credibility. The jury could have found that the deal moved forward because Agent and Firm agreed to use Plaintiff's money in an escrow account for Agent's purchase too. This potential usage also could have been held as interfering with Plaintiff's negotiations because she had to take action to protect her funds from usage by her former agent.
4) There was factual evidence supporting that Firm used confidential information gained from Plaintiff in its representation of Agent because it knew that Plaintiff was not willing to bid higher than she had previously stated to them. 

Lesson: If an attorney or a law firm is alleged to have breached their fiduciary duty to the client they are subject to the prophylactic rule that will make it easier for a plaintiff to prove the proximate cause element of the legal malpractice cause of action. The burden will be reduced from “but for” to “substantial factor”.

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Contel Global Marketing, Inc. v. Dreifuss, 2010 WL 374946 (App. Div. Feb. 4, 2010)
 

NJ Underlying Commercial Action

Facts: Contel, a New Jersey business venture that imported fruit from Chile, believed that participants in its joint venture in Chile were overcharging it by $10 million. Contel, therefore, hired counsel to bring an action in federal court against Aldo Cotera, Clear River Corporation, Nova Agencia DeCarga, and Agricola Punta Arenas Lida. The Complaint was filed on January 17, 2001 and defendants were to be served pursuant to the Inter-American Convention of Letters Rogatory.

DeCarga and Agricola were served in July and September 2002, respectively. Neither submitted responsive pleadings.  In December 2002, the magistrate judge directed Contel to move for entry of default. Two days later, however, counsel for the Cotera defendants entered an appearance and filed a Motion to Dismiss. Contel filed a Cross-Motion for Entry of Default. In denying both motions, the judge remarked that, had Contel filed its motion in a timely fashion, and had the Court granted it, Contel could have carried a federal court judgment to Chile for enforcement. Contel, thereafter, retained new counsel and brought a suit for professional malpractice against its former counsel, Dreifuss & Nagel.

Issue: Can the possibility of a default judgment establish the requisite proximate cause to sustain an action for legal malpractice?

Ruling: No. Contel could not sustain the proximate cause element of a cause of action for legal malpractice, since it could plead no facts to establish how defendant’s failure to seek default directly resulted in additional damages and attorney’s fees:

 How can any Court really assume that if default has been enetered and even assuming arguendo that a default judgment had been entered, which I think is another leap that the Court would have to take in order to accept plaintiff’s damage argument in this case, that the outcome would have been any different. I just can’t believe that…the Chilean defendants…who ultimately did defend the case vigorously would have just rolled over and accepted a default judgment against them.

 

Furthermore, the Court noted, Contel could point to nothing that discovery might offer, other than further speculation, to maintain the “necessary causal nexus element” of its legal malpractice claim. The Appellate Division, thus, affirmed the lower court and dismissed Contel’s claims against defendant law firm.

Lesson:  Courts will not assume facts on the part of the plaintiff in a professional malpractice suit where he or she cannot show, that more likley than not, a favorable result would have been achieved but for the negligence of the attorney.

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Milbank, Tweed, Hadley & McCloy v. Boon, 13 F.3d 537 (2nd Cir. 1994)

NY Underlying Commercial Action/Conflict of Interest

Student Contributor: John Anzalone

Facts: Defendant law firm represented Plaintiff, through an agent, in her attempt to purchase the assets of a bankrupt company. Eventually, however, Plaintiff dismissed the agent. The agent, thereafter, advised Defendant law firm of his interest in purchasing the assets of the same bankrupt company.

Despite being fully aware that Plaintiff still sought to purchase the assets, Defendant law firm informed the Plaintiff that it would represent the agent in his attempt to purchase the assets, and despite Plaintiff’s objections, proceeded with the representation. Ultimately, the agent outbid Plaintiff with the firm's assistance.

The jury found that the firm's representation of Plaintiff's agent breached its fiduciary duties to her and was a "substantial factor in preventing her from obtaining assets she sought in the transaction."

Issue: Did the firm breach its duty to Plaintiff by representing her former agent in the same transaction?

Ruling: In affirming the lower court, the Second Circuit held that the firm had breached its fiduciary duty to Plaintiff, and reasoned as follows:

1. The firm committed a serious breach of its fiduciary duties to Plaintiff by representing a party with interests adverse to the Plaintiff in the same transaction.
2. The nature of this breach triggers the prophylactic rule so that, instead of establishing proximate cause, plaintiff has to prove only that the firm’s actions were a substantial factor in the resulting damages.
3. Here, the substantial factor test was satisfied given the likelihood that (a) the agent and the firm conspired to use Plaintiff’s escrow funds for the agent’s purchase of the bankrupt entity’s assets; (b) this conspiracy interfered with Plaintiff’s negotiations to purchase the same assets; and (c) the firm and the agent conspired to use confidential information regarding Plaintiff’s bid.

Lesson: If an attorney or a law firm terminates its relationship with one client and commences an engagement with another party with directly adverse interests in the same transaction, they will be subject to the “prophylactic rule” which makes it easier for a plaintiff to prove malpractice by substituting the usual "but for" causation in fact  requirement with the “substantial factor” test.

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Katz v. Herzfeld & Rubin, P.C., 853 N.Y.S.2d 104 (2 Dept. 2008)

NY Underlying Personal Injury Action

Student Contributor:  Jason Klein

Facts: Plaintiffs retained Defendant attorneys as counsel for a personal injury action which was eventually settled. Subsequently, Plaintiffs commenced an action for legal malpractice alleging that Defendants refused to pursue a claim for loss of income, and as a result, Plaintiffs were forced to settle their personal injury action for an amount far below what they could have recovered. Defendants filed a motion to dismiss arguing that because Plaintiffs dismissed Defendants and hired new counsel five months prior to settling, the Defendants’ actions did not proximately cause the alleged damages. The trial court granted the Defendants’ motion to dismiss and Plaintiffs appealed

Issue: Did the trial court properly grant Defendants’ Motion to Dismiss in light of Plaintiff’s decision to terminate their representation five months in advance of the settlement of which they now complained?

Ruling: Yes. Successor counsel had been retained in a timely fashion and had every opportunity to protect the Plaintiff’s rights in advance of the time of their decision to enter into a settlement.

Lesson: Plaintiffs had sufficient time in which to pursue its claims with successor counsel, and therefore, could not establish that any alleged damages resulting from their decision to settle were proximately caused by the acts or omissions of their former counsel.

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Schenkel v. Monheit, 226 Pa. Super. 396 (Pa. Super. Ct. 1979)

Student Contributor: Melissa Goldberg

PA Underlying personal injury action.

Facts: Plaintiff was injured in an automobile accident when his vehicle was struck from behind by a car driven by Charles Salem. Plaintiff thereafter retained Defendant as his attorney to prosecute Plaintiff's civil action against Salem. When Defendant filed this action, he did not join Salem's employer, as Defendants in the underlying action. Plaintiff claims that at the time of the accident, Salem was "on the job" and was within the scope of his employment and that the employer should have been joined as Defendants. Plaintiff’s dissatisfaction with Defendant handling of the personal injury action led appellant to dismiss Defendant before trial and retain other counsel to complete the case. Plaintiff was awarded 10,000 dollars in the personal injury case, which he collected in full. Plaintiffs alleged that the jury would have awarded him a larger verdict in the personal injury action if the corporate employer had been joined as a Defendant.

Issue: Was Defendant’s alleged negligence the proximate cause of damages to Plaintiff? 

The Result:  The failure to join the corporate employer should not have affected appellant's damages. The tort was the same in this case, whether or not the corporate employer was a party to the action.

1) The actual tortfeasor, was made a Defendant; the corporate employer would only arguably be liable under agency principles, not as an independent tortfeasor.

2) Joinder of the corporate employer would simply have increased the number of parties against whom Plaintiff could enforce any judgment he received.

3) He received the full judgment.

Lesson: Failure to name a necessary party, when full recovery from the main tortfeasor was had,  did not proximately cause any injury to the plaintiff. If, on the other hand, the named tortfeasor did not have adequate insurance coverage to pay the judgment and if the unnamed party would have been vicariously liable, the result would have been different since then part of the judgment would remain unsatisfied. 

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Garcia v. Kozlov, Seaton, Romanini & Brooks, P.C., 179 N.J. 343 (2004)

Student Contributor:  Melissa Goldberg

NJ Underlying  Litigation (Personal Injury Action)

Facts: In this case, Plaintiff settled an underlying action involving a car crash and later alleged that her lawyer had negligently failed to include a responsible party in the underlying lawsuit. Plaintiff attempted to include this necessary, responsible party as a defendant in the underlying suit, but summary judgment was granted in favor of the new defendant under the statute of limitations. In the malpractice action, Plaintiff argued that failure to include the responsible party lessened her po-tential recovery. The attorney argued that (1) Plaintiff’s settlement barred any recovery in the mal-practice action; and (2) the value of her claim would have been no different with or without the new defendant. Plaintiff, however, proceeded to prove her case using expert testimony regarding the settlement and other evidence regarding her case. The defendant objected to the expert testimony and argued that the “suit within a suit” method, where Plaintiff presents evidence that would have been presented at trial in the underlying action had the malpractice not occurred, was the only way the Plaintiff should be allowed to prove her case.

Issue: Is the “suit within a suit” method the only way to prove proximate cause in a  legal malpractice case based on underlying litigation?

Ruling: No.

The proper approach in trying a legal malpractice action will depend on the facts, the legal theories, the impediments to one or more modes of trial, and, where two or more approaches are legitimate, on Plaintiff’s preference.

Lesson: Alternative approaches to the “suit within a suit” method are permitted to prove  the causation element  in legal malpractice, so long as the jury is provided with an independent basis to determine the effect of the alleged malpractice and the value of plaintiff’s losses.

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Fishman v. Brooks, 396 Mass. 643; 487 N.E.2d 1377 (1986) (PDF)

MA Underlying Personal Injury Action

Student Contributor: Natalie Resto

Facts: Brooks hired Fishman to represent him in an action for personal injuries he sustained when a negligently operated motor vehicle collided with the bicycle Fishman was riding. Fishman did not commence the personal injury suit until 16 months after the accident, and did not obtain service on the driver defendant for more than 10 months after filing the complaint. He also made a settlement demand of $250,000 on the driver’s insurer when the insurance coverage was $1 million. Shortly before trial, after Fishman told Brooks that he could not win if he went to trial, Brooks agreed to settle his personal injury claim for $160,000. The client sued the attorney for malpractice. The jury found for clients and the attorney appealed.
     
Issue: Whether the trial court properly admitted the testimony of an adjuster and tort lawyer as to liability and causation?

Ruling: The court affirmed the lower court’s holding. It found that expert testimony from an experienced tort lawyer and an experienced claims adjuster as to reasonable settlement value of underlying claim was properly admitted, and that

evidence of the fair settlement value of the underlying claim was admissible to prove not only Fishman’s negligence but also that his negligence caused a loss to Brooks. Id. at 648.

Lesson: An attorney is liable when he causes a client to settle a claim for an amount below what a properly represented client would have accepted. The court states that the typical case of malpractice liability for an inadequate settlement involves an attorney who, having failed to prepare his case properly or lacking the ability to handle the case through trial (or both), causes his client to accept an unreasonable settlement.

EDITOR'S NOTE: With our thanks to Westlaw, Thomson Reuters for permitting the case hyperlink.

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Daly v. Peace,54 A.D.3d 801, 863 N.Y.S.2d 770, 2008 N.Y. Slip Op. 06955

NY Underlying defense of criminal  action

Student Contributor: Angela M. Ignelzi

Facts: Plaintiff-Client brought an action against his Attorney who had represented him in defending a prior criminal action where he was convicted. Client sought to recover damages for legal malpractice. Attorney made a motion to dismiss the complaint on the grounds that the client could not prove he was innocent. Client appealed the dismissal of his Complaint.

Issue: Was the motion Court correct in dismissing the Client’s malpractice complaint?

Ruling: The Appellate Division (2nd Department), held that:

•  Client could not establish his innocence of the underlying criminal charge
•  Client has no cause of action for legal malpractice against his criminal defense attorney, unless he was ultimately successful in his attempts to have the underlying conviction reversed and he proves his innocence.

Lesson: To prove that his lawyer's allegedly negligent conduct in defending him in an underlying criminal case was the proximate cause of his damage, i.e., his wrongful conviction, the client must have his conviction reversed and he must prove his innocence of the underlying criminal charges. 

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