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

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

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

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

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

Ruling: 

With regard to proximate cause, the Appellate Division noted: 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Issue:  

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

Ruling: 

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

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

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

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

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

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

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

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Albee Associates v. Orloff, Lowenbach, Stifelman and Siegel, P.A., 317 N.J.Super. 211 (App. Div. 1999)

NJ Underlying Civil Litigation

Student Contributor:  Joshua D. Aronson

Facts: Defendant attorneys were hired by the plaintiffs to represent them in a civil fraud action. An entry of default was granted in favor of the plaintiffs. Following the entry of default, one of the defendants in the underlying action filed for Chapter 7 Bankruptcy. The defendant attorneys failed to list the plaintiffs as creditors in the bankruptcy petition and, subsequently, failed to file an adversary proceeding for non-dischargeability of the debt before the passing of the bar date. This prevented plaintiffs from collecting any money from the debtors due to the discharge in bankruptcy, and thereafter, plaintiffs pursued an action for legal malpractice against their former attorneys. The defendant attorneys submitted a motion for summary judgment under the theory that even if the plaintiffs were successful in a non-dischargeability complaint, they would still not have been able to collect due to the financial status of the debtors. The trial court granted the defendants’ motion for summary judgment, holding that even if the plaintiffs’ judgment had not been discharged, the debtor would not have had the assets to be able to satisfy plaintiffs’ judgment. Plaintiffs appealed the trial court’s decision.

Issue: Did the trial court improperly grant the attorneys’ motion for summary judgment in the legal malpractice action based upon the plaintiff’s inability to collect on their judgment against the debtors?

Ruling: The Appellate Division reversed and held that collectibility is ultimately a question of proximate cause. It remanded for a fuller factual record. The evidence submitted to the motion court  did not clearly establish that a reasonable juror could conclude that the debtor would have been unable to satisfy plaintiffs’ judgment.

By virtue of the "no-asset" Chapter 7 bankruptcy proceeding, [the debtor] may, at the time of the asset searches at least, have had no assets. But he was, as far as the record reveals, at one point capable of maintaining an income and acquiring assets.   To the extent a substantial portion of his prior debts have been extinguished, he has benefited from the bankruptcy and there is nothing in the record that would suggest that his "no-assets" status is anything but temporary or that he does not now have viable income.

Lesson: It would seem that in order to prevail in a legal malpractice case, the burden of proving a former client's inability to collect an underlying debt, might well have shifted in some cases to the malpractice defendant. Of interest, see also Hoppe v. Ranzini,  (PDF) with permission of Thomson/Reuters, Westlaw.

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