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

Aykan v. Goldzweig, 238 N.J. Super. 389, 569 A.2d 905 (N.J. Super. L. 1989).

NJ: Underlying matrimonial action

Student Contributor: Laura Binski

Facts: The client hired the lawyer to represent her in a matrimonial action, specifically a property distribution agreement and divorce by reason of extreme cruelty and battery. Two weeks after the property settlement agreement was signed in 1981, the client attended a divorce law seminar and learned that other effective dates could have been used on the equitable distribution. She told the lawyer about this and he told her not to worry. On August 13, 1982, the client hired a new lawyer who suggested that the first lawyer may have committed malpractice in (1) handling the equitable distribution agreement; and (2) not filing a separate tort claim for battery. Without extension, the statute of limitations would have run on August 2, 1982 for the equitable distribution claim and April 26, 1982 for the marital tort claim.

Issue: At what date should the statute of limitations begin to run on each of the client’s malpractice claims against the lawyer?

Ruling: The court must use the discovery principle to determine the statute of limitations period.

“The discovery principle modifies the conventional limitations rule only to the extent of postponing accrual of the cause of action until client learns, or reasonably should learn, the existence of a state of facts which may equate in law with a cause of action. Accrual will not further be delayed until client learns from a lawyer the legal effect of those facts.”

Burd v. New Jersey Telephone Company, 76 N.J. 284, 291, 386 A.2d 1310 (1978).

As to her first claim, the client was aware in 1981 of all facts relevant to the effective date of equitable distribution. Thus, “discovery” occurred when she attended the divorce law seminar in 1981, not in 1982 when she met her new lawyer. As to her second claim, she may proceed because she had not “discovered” the claim until 1982.

Lesson: The court reasoned that the two claims were not “single and continuous,” but rather “plural and discrete.” The information regarding equitable distribution was of no use to the client in her separate claim for marital tort. Thus, the statute of limitations on the other claim does not attach and the client may use her August 13, 1982 meeting with her new lawyer as the “date of discovery.” 

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Ayre v. JD Bucky Allshouse, PC, 942 S.W.2d 24 (Tex. App. Houston 14th Dist. 1996)

TX: Underlying divorce action

Student Contributor: Megan Diodato

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

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

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

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

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

NC: Underlying separation agreement

Student Contributor: Karen Dindayal

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

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

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

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

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

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

IN: Underlying divorce action

Student Contributor: Jeff Cain

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

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

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

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

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

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

WA: Underlying Divorce Action

Student Contributor: Ben Doyle

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

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

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

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

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

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Fox v. Willis, 390 Md. 620, 890 A.2d 726 (2006)

MD: Underlying Divorce Proceeding

Student Contributor: Vanessa L. Wachira

Facts: Katherine Fox (“Client”) is a minor child whose parents were divorced pursuant to a judgment entered by the Circuit Court for Montgomery County. In the subsequent proceedings to determine custody and visitation, the court appointed Vincent Wills (“Attorney”) as Client’s guardian (in accordance with Maryland Code § 9-109 of the Courts and Judicial Proceedings Article) and counsel (in accordance with § 1-202 of the Family Law Article). On behalf of Client, Client’s mother brought action for legal malpractice against Attorney in the Circuit Court alleging that Attorney negligently represented Client, abdicated his responsibilities as counsel for the child, was in fact an advocate for the child’s father who was suspected of sexually abusing Client, and breached his duties as counsel by improperly allowing his friendship with the child’s father to influence his judgment regarding the child’s best interest. At trial, Attorney argued that, because of his position as counsel for the child under § 1-202, he was entitled to “judicial immunity” and that he was functioning on behalf of and for the benefit of the court.

Issue: Whether a minor’s statutorily appointed attorney is entitled to immunity from tort liability while acting in his capacity under the statute?

Ruling: An attorney appointed under § 1-202 of the Family Law Article has no immunity from tort liability with respect to legal malpractice suit filed against him by a third party on behalf of a minor child. Although an attorney appointed under the statute is appointed by the court, “neither language nor history of [the] statute” suggests that he owes his principal duty of allegiance to court rather than the minor child. To rely, as the lower courts did in this case, “on the notion that an appointed guardian functions ‘as an agent or arm of the court, to which it owes its principal duty of allegiance, and not strictly as legal counsel to a child client’” is to ignore the fact that the sole function of counsel appointed under Section 1-202 is “to represent the minor child.”
Furthermore, under common law, “[a] guardian is “liable to his ward for such damages as may result from any culpable omission or neglect on his part.” Speck v. Speck, 42 Ga.App. 517, 156 S.E. 706, 707 (1931). Inhabitants of Maryland are entitled to the Common Law under Article 5 of the Maryland Declaration of Rights. Although common law can be altered by statute or decision of Maryland’s highest court, no statute or decision have granted tort-immunity to attorneys appointed pursuant to § 1-202 of the Family Law Article. Accordingly, attorneys appointed under the statute have no immunity from malpractice suits

Lesson: Like retained counsel, guardians appointed by the court have legal responsibilities to their clients. Violations of these duties amount to malpractice for which the Court will not grant immunity. 

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Goggins v. Grimes, 969 S.W.2d 135 (Tex. App. 1998).

TX: Underlying action for award of attorney fees

Student Contributor: Megan Diodato

Facts:  The client hired the attorney to represent her in a divorce. The attorney withdrew and filed a petition for her attorney’s fees in the client’s divorce case. The client contested the attorney’s right to recover fees and also made a claim for attorney fees for her newly retained attorney in the divorce case. A year later, the client sued the attorney for legal malpractice in the handling of her divorce case. The attorney argued that the client’s malpractice claim was barred from suit for failure to raise it as a counter-claim in the underlying attorney fees action. The trial court ruled in favor of attorney and client the appealed.

Issue: Whether the client’s malpractice claims are barred and judgment proper?

Ruling:  Yes.  In the underlying divorce action, the attorney withdrew from representation of the client before judgment was entered. The attorney-client relationship ended with the withdrawal and no legal injury could occur after that because the attorney had no duty to the client. An attorney’s conduct must raise a risk of harm to a client’s legally protected interest. A cause of action generally accrues when the injuring act is committed and damage is suffered. When the attorney intervened and sued the client for attorney fees in the same pending divorce action, the client suffered a legally recognized injury. The attorney intended to collect money from the client for her alleged unlawful malpractice. The client denied owing the attorney anything and argued she should be awarded attorney fees for the services of her replacement lawyer. A claim of attorney malpractice has been held a compulsory counterclaim to a claim for attorneys’ fees under Rule 97(a). CLS Assoc. Ltd. v. A B , 762 S.W.2d 221 (Tex. App. 1998). In this case, the issue of malpractice arose from the same transaction as the attorney’s fees. Because the client chose not to counterclaim for this action, all claims are barred

Lesson: A claim of damages for legal malpractice is a compulsory counterclaim in an action for attorney fees. 

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Vogel v. Touhey, 151 Md.App. 682, 828 A.2d 268 (2003)

MD: Underlying Divorce Proceeding

Student Contributor: Vanessa L. Wachira

Facts: In 1999, following the couple’s separation, Dr. Harold Alfert and attorney Karen Vogel (Client) entered into a property settlement agreement that provided for the equal division of their marital assets (valued at approximately two million dollars). After apparently discovering that her husband had failed to fully disclose the true value of the couple’s assets, Client retained T. Joseph Touhey (Attorney) to represent her in her divorce proceeding and to renegotiate the property settlement agreement. Dissatisfied with Attorney’s services, Client discharged Attorney and settled the dispute on her own for $50,000—a sum she agreed at the time was “fair and equitable.” Several months later, Client brought a malpractice action against Attorney, alleging that because he had failed to properly request and review documents pertaining to her husband’s finances, she had been forced to settle for an inadequate sum.

Issue: Was Client judicially stopped from asserting a malpractice claim against Attorney for his negligent representation in connection with her divorce after representing to the court that the settlement agreement in which she was entering was “fair and equitable”?

Ruling: Yes. Client’s decision to accept the settlement award prevented her from being able to later assert a claim for legal malpractice. The doctrine of judicial estoppel bars an individual from making inconsistent statements to the court. Having fired Attorney for his negligent conduct, Client was aware that the settlement agreement he had proposed was drafted without full knowledge of the facts of the case. Client was under no obligation to either agree to its terms or assert to the court that its terms were “fair and equitable.” Having done so, however, she was judicially estopped from later claiming that Attorney’s negligence caused her to accept an award that was inadequate. As the appellate court had stated:

“when a person who is particularly knowledgeable as a lawyer stands up, after being dissatisfied with her own lawyer and says, after having the documents in her hands that she later is going to use as the basis of a malpractice action, [] that everything is fair and equitable, I don’t see how this can proceed in violation of the judicial estoppel rule.”

Lesson: In Maryland, a client will be judicially estopped from asserting a claim for malpractice if she first conveys to the court that she is satisfied with the actions of, or the settlement produced by, her attorney. (And no, coercing your client into making such statements on the record is not a good idea.)

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

PA: Underlying divorce case

Student Contributor: Laura Binski

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

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

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

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

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

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Ayre v. JD Bucky Allshouse, PC, 942 S.W.2d 24 (Tex. App. Houston 14th Dist. 1996)

TX: Underlying divorce action

Student Contributor: Megan Diodato

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

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

Ruling: No

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

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

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

MD: Underlying Custody Dispute

Student Contributor: Vanessa L. Wachira

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

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

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

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

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James v. Murray, NJ Law Div. (trial court) Docket No. ESX-L-9471-09 (May 17, 2011)

NJ Underlying Divorce

Facts: Legal Services of NJ provides  free legal representation to indigent litigants. Its revenue comes mostly from  governmental as opposed to private charitable donations.  Plaintiff here was represented by Legal Services in her divorce action.  She was  the beneficiary of two life insurance policies,  which she lost due to her lawyer's negligence in failing to advise her that by statute, N.J.S.A. 3B:3-14,  she would automatically forfeit spousal rights to insurance proceeds in the event of divorce.  Here, plaintiff assumed she still had right to collect the $60,000 in life insurance proceeds. She only found out she was not after her husband died and she  had paid for his funeral expenses. Defendant Legal Services moved for Summary Judgment asserting it was entitled to protection of the Charitable Immunity Law. 

Issues: 

1) Even if defendants were negligent, is  a Legal Services organization entitled to the benefit of the NJ Charitable Immunity Law-- N.J.S.A.2A:53A-7(a),  which grants immunity to  employees of non profits organized for religious, charitable or educational purposes?  

2) Are IOLTA funds, which are imposed on NJ attorneys as part of their license registration requirement and are allocated by the NJ Supreme Court for funding of Legal Services to be considered governmental funding or private contributions, the latter of which would afford Legal Services immunity? 

Ruling: 1) No;  2) Stay tuned for an App. Div. decision.

Quoting from Legal Services' own mission statement, the Court noted:

...free legal services to low-income, senior and disabled county residents in order to assure that their legal rights are portected and that access to the civil justice system is not denied...simply because they cannot afford a private attorney...

The defendant had to show that it was engaging in charitable or educational purposes at the time it was rendering the services at issue in order to claim immunity. Whether the Legal Services satisfied that criteria was a fact sensitive analysis which requires the Court to look beyond the defendant's non-profit structure and social service activities to take into account its source of funding.  Here, the Court pointed to Legal Services source of revenues which showed that 99% came from governmental grants and only 1% came from private contributions.  

Moreover, defendants failed to present evidence suggesting that they solicit or depend upon private charitable contributions for funding. In short,...defendants have failed to demonstrate that hey are organized exclusively for charitable purposes.

Lesson:   This was plaintiff's second divorce. If the attorney representing her in either of her divorces advised her that she would forfeit her spousal life insurance benefits because of her divorce, would she have proceeded to divorce? The decision doesn't answer that question, but that would surely be an important question of fact especially in view of the lawyer's duty under RPC 1.4 to communicate such information to the client so that she could have made an informed choice about that statutory forfeiture.  Could the forfeiture been avoided if it were addressed in the  Property Settlement Agreement?  Questions to ponder. And lessons to be learned...  Check back for an Appellate Division decision concerning this trial court decision. 

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

NY: Underlying divorce case and undue influence claim

Student Contributor: Nicole Milone

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

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

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

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

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

PA: Underlying divorce case

Student Contributor: Laura Binski

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

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

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

Lesson: When a client claims that a lawyer has breached his professional obligations, an essential element of the client’s claim is a showing of actual loss. If the client cannot prove actual loss, the claim may be too speculative or remote to survive. “The test of whether damages are remote or speculative has nothing to do with the difficulty in calculating the amount, but deals with the more basic question of whether there are identifiable damages…thus damages are speculative only if the uncertainty concerns the fact of damages rather than the amount.” Pashak v. Barish, 303 Pa. Super. 559, 561-562, 450 A.2d 67, 69 (1982). 

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Pantely v Garris, Garris & Garris, PC, 180 Mich App 768, 773; 447 NW2d 864 (1989)

MI: Underlying uncontested divorce

Student Contributor: Matthew Feinbloom

Facts: A couple was getting divorced so they hired a lawyer to represent both of them in the proceeding. In the report, the woman claimed that she had been living in Livingston County for at least ten days before filing the papers. It became clear to the court that she had lied about this fact and now they attempted to have this modified to show the truth. Because she lied about this, the court that filed the divorce did not have jurisdiction and the divorce was set aside. The woman then filed a malpractice claim against their attorney claiming that he counseled her to testify falsely and then after to have her hire an incompetent lawyer. The first lawyer claimed that she was also at fault and should not be able to profit on the grounds of her on perjury. The newer attorney claims that he had nothing to do with this case because at the time of the perjury he was not even her legal representation. The lower courts agreed and held for the attorneys.

Issue: Can a client who perjures herself recover damages caused by the failed deceit from the lawyer who counselled the lie?

Ruling: The court agreed with the lower court concluding that a client who perjures herself cannot recover damages caused by the failed deceit from the lawyer who counseled her to lie. The court used the maxim, in pari delicto potior est conditio defendentis (in cases of equal fault, the position of the defendant is stronger). The woman was at equal fault here because she knew the truth of the matter and told the lie anyway. The court did not find it right that she should be able to profit from her own lie.

Lesson: If you perjure yourself in court at the counsel of an attorney, you cannot sure him for malpractice afterwards.

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Cruciata v. Mainiero, Supreme Court, New York County, January 14, 2011.

Facts:  Plaintiff contended that she did not owe Defendant attorney, her former counsel, the legal fees he collected from her in the underlying divorce action since he, allegedly, never provided her with a statutorily compliant retainer agreement.  

Issues: Is an attorney entitled to legal fees if he fails to provide the required retainer agreement under 22 NYCRR 1400.3 - the statute applicable to New York family and divorce lawyers?  What qualifies as a "statutorily compliant" retainer agreement? 

Ruling: As to the first question, no.  As the Court observed, pursuant to the governing case law in New York, simple non-compliance is sufficient to preclude an attorney from recovering any fees.

Here, however, the Court found that Mainiero had served a conforming retainer.  The Court based its holding on the following factors:  (a) the retainer was signed by Mainiero and Cruciata; (b) it specified the work to be completed by Mainiero and the amounts to be charged for the work.

The Court found that such an agreement clearly sets forth the intention of the parties, and therefore, extrinsic circumstances and varying interpretations would not be considered.  Accordingly, the Court denied Plaintiff's motion to recoup her legal fees from Mainiero.

Lesson: In New York written, signed retainers are a must.  The agreement should spell out the scope of the attorney's duties, along with the fees to be charged.  Note that this particular statute contains a requirement not discussed in this case:  "In actions in Supreme Court, a copy of the signed agreement shall be filed with the court with the statement of net worth."

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

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

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

Ruling: Yes. The Appellate Division first explained: 

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

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

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

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

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

GA: Underlying divorce action

Student Contributor: Farah Shahidpour

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

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

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

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

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Hirsch v. Weitz, 16 So.3d 148 (Fla. App. 2009)

FL: Underlying divorce, negotiated marital settlement agreement

Student Contributor: Farah Shahidpour

Facts: Client hired a NY Attorney to represent him in his divorce from his former wife and to negotiate the marital settlement agreement (“agreement”). Under the agreement, the parties’ rights and obligations were to be interpreted under NY law. A NY court entered the final judgment of the divorce, including the agreement. Under the agreement, Client’s grocery store chain was to be sold for $87,500,000. Client’s former wife was to receive 55.7% of shares of stock and 55.7% of the proceeds from the sale. The former wife’s attorney received a letter from another NY attorney stating that the grocery store chain was being reduced by $2,000,000, but her number of shares would increase to make up for the loss. Client’s former wife sued client in a NY court, and won $4.2 million plus interest. This award was the difference between what client paid her and what she was owed under the settlement agreement. Client’s former wife then filed an action in Florida to garnish Client’s bank account in Florida. Client sued attorney for legal malpractice, alleging that attorney was negligent in failing to incorporate language into the settlement agreement that would make sure him and his former wife would get their respective shares.

Issue: Whether there is statutory basis for jurisdiction in Florida when all of the necessary legal work was performed in New York?

Ruling: No, the facts do not bring it within Florida’s long arm statute, and the attorney did not have sufficient “minimum contacts” with Florida to satisfy due process requirements. The tort of legal malpractice occurred, if at all, in New York because it was a NY court that entered judgment against client, not a FL court.

Lesson: A tort occurs in Florida if (1) attorney engaged in acts that injured the client in Florida and (2) client cause of action in tort is substantially related to attorney’s acts. Specifically, courts will look at where the legal work was performed and where court settlement agreements or judgments are entered to determine where a tort occurred.

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Gombert v. Herzner, Conn. Super., September 9, 2010 (Unpublished)

CT: Underlying child abuse case

Facts: Plaintiff filed a complaint against defendant, who was appointed by the court as an attorney for his minor child in a neglect case against the child’s mother. During the course of such representation, the defendant filed a petition for termination of parental rights as to the plaintiff. Plaintiff alleged that he suffered loss of communication with his daughter and emotional stress as a result of defendant’s negligently filed petition for termination of his parental rights. Plaintiff also alleged legal malpractice against defendant for deviating from the standard of care required by attorneys who represent children, and for failing to advocate the position of the child.

The Defendant filed a motion to dismiss the complaint arguing that she is entitled to absolute quasi-judicial immunity as an attorney for a minor child, and that plaintiff lacks standing to pursue his claims against the defendant.
.
Issue: Is Defendant is entitled to quasi-judicial immunity as an attorney appointed to represent a minor child?

Ruling: Yes. Attorneys appointed by the court pursuant to statutory law of Connecticut are entitled to absolute, quasi-judicial immunity for actions taken during or activities necessary to the performance of functions that are integral to the judicial process. The purpose of appointing counsel for a minor child is to ensure independent representation of the child’s interests, and such representation must be entrusted to the professional judgment of appointed counsel within the usual constraints applicable to such representation. Absolute immunity in this situation is both appropriate and necessary in order to ensure that the guardian will be able to function without the worry of possible later harassment and intimidation from dissatisfied parents.

The Court ruled that plaintiff also lacked standing to bring this legal malpractice action against defendant because there was never an attorney-client relationship between the defendant and plaintiff. And while plaintiff attempted to argue next of friend of the minor child, it has been recognized by the Connecticut Supreme Court that in order to have standing to bring a claim as next of friend, a person must “1) must be truly dedicated to the best interests of the person on whose behalf he seeks to litigate…[and] 2) must provide an adequate explanation such as inaccessibility, mental incompetence, or other disability why the real party in interest cannot appear on his own behalf to prosecute the action.” The plaintiff in this case fails to meet the criteria and, therefore, lacks standing.

Lesson: Court appointed counsel for minor children are entitled to absolute, quasi-judicial immunity.
 

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DeAngelis v. Rose, 320 N.J. Super. 263, 727 A.2d 61 (App. Div. 1999)

NJ Underlying Divorce Action

Student Contributor: Evan Kusnitz

Facts: A father guaranteed in writing his daughter’s fees for her divorce attorney. He was not a party to the agreement between his daughter and the attorney. When the legal fees exceeded more than double the expected amount, and his daughter defaulted on the fees, the father sued the attorney and his firm for legal malpractice. The daughter did not join as a plaintiff, and the court noted that there was no evidence of her dissatisfaction with the attorney’s services.

Issue: Does an attorney have any duty towards a guarantor of his client’s legal fees?

Ruling:

1) There is generally no attorney-client relationship between an attorney and a guarantor of legal fees, and thus, there can be no claim of legal malpractice.

2) However, an attorney may owe a duty to a non-client when the attorney knows, or should know, that a non-client will rely on the attorney’s representations, and the connection between the attorney and the non-client is not too remote.

Here, the father did not rely on any communication of the attorney, and thus he had no claim of legal malpractice.

Lesson: An attorney generally has no duty to non-clients, including guarantors of legal fees. However, a duty may arise when an attorney knows, or should know, that a third party is relying on a representation of the attorney.

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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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Martos v. Concilio, 642 A.2d 1096 (Pa. Super. Ct., 1993)

Underlying PA Divorce Action.

Student Contributor: Colleen Gaedcke

Facts: Plaintiff retained the defendant to represent him in renegotiating a property settlement agreement with his former wife. The new agreement was made part of a stipulation that settled personal property and child custody issues. The stipulation became a court order and a court appointed master decided the remaining issues. Both the plaintiff and his ex wife filed exceptions to modify the master’s recommendations, resulting in the plaintiff owing $250,000.00 to his ex-wife. The plaintiff then filed a legal malpractice and breach of contract action against the defendant claiming that the defendant was not competent in advising him that the plaintiff’s initial settlement agreement with his ex-wife should be opened by stipulation that allowed for the renegotiation of items that were already settled.

Issue: Whether an action for legal malpractice covers claims made by the client against their attorney for fraud in the inducement?

Ruling: No.

Citing the Pennsylvania Supreme Court in Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick, 587 A.2d 1346 (Pa., 1991), the court stated, “…in light of our longstanding public policy which encourages settlements…we will not permit a suit to be filed by a dissatisfied plaintiff against his attorney following a settlement to which that plaintiff agreed, unless that plaintiff can show he was fraudulently induced to settle the original action. An action should not lie against an attorney for malpractice cased on negligence and/or contract principles when that client has agreed to a settlement. Rather, only cases of fraud should be actionable.”

Lesson: Where a client is unhappy with the outcome of a settlement agreement their only redress against their attorney is fraud by inducement, not legal malpractice. An attorney should make sure that his or her client explicitly agrees to any modifications to a stipulation in order to protect him or herself from a legal malpractice claim where their client was dissatisfied with the outcome

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McMahon v. Shea, 547 Pa. 124 (1997)

Student Contributor: Justin Lieberman

Underlying Divorce Matter

Facts: The husband in an underlying divorce action brought a professional malpractice suit against his attorneys, claiming that they had failed to properly advise him in his divorce settlement. More specifically, the husband claimed that his attorneys had failed to advise him as to the length of his duty to pay alimony and to generally read and review the alimony agreement in its entirety.

The wife remarried two months after the divorce was finalized, and husband moved to terminate his alimony payments. The court denied the termination of alimony payments, holding that the alimony agreement survived the divorce since it was not merged with the divorce decree. The court ordered continued payment of alimony until the parties’ youngest child turned twenty-one. Consequently, husband further alleged that his attorneys had been negligent in advising him to stipulate that the alimony agreement be incorporated but not merged with the divorce decree.

The attorneys argued that husband’s action had to be dismissed, since a dissatisfied plaintiff may not file a malpractice suit following a settlement to which he agreed, unless he could show he was fraudulently induced into settling the action.

Issue: Can an attorney be held liable for advice rendered to a client in a settlement to which the client subsequently agreed?

Holding: The Court rejected the attorneys’ argument and held that an attorney’s use of ordinary skill and knowledge extends to the conduct of settlement negotiations:

The fact that the legal document at issue had the effect of settling a case should not exempt his attorneys from liability…An attorney may not shield himself from liability in failing to exercise the requisite degree of professional skill in settling the case by asserting that he was merely following a certain strategy or exercising professional judgment.

Lesson: Negligence in failing to advise a client as to the controlling law applicable to a contract is actionable as malpractice, even if the contract serves to settle the underlying dispute.

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Rosemary E. Smith v. Jerome R. Lewis,  12 Cal. 3d 349 (Cal. 1975)

CA Underlying divorce action

Student Contributor: Evan Michael Hess

Facts:  Defendant attorney was retained to represent Plaintiff in a divorce proceeding. The Plaintiff brought the malpractice action asserting Defendant negligently failed to assert Plaintiffs community interest in the retirement benefits of her husband. Defendant alleges that the law with regard to retirement benefits was unclear at the time of representation, thus insulating him from liability for failing to assert said claim.

Issue: How much research is enough for an attorney to avail oneself from malpractice?

Ruling: The Supreme Court of California held:

I.

 “The law is now settled in California that "retirement benefits which flow from the employment relationship, to the extent they have vested, are community property subject to equal division between the spouses in the event the marriage is dissolved." (In re Marriage of Fithian, 10 Cal.3d 592, 596, (1974) citing Waite v. Waite, 6 Cal.3d 461 (1972));

II.

“In determining whether defendant exhibited the requisite degree of competence in his handling of plaintiff's divorce action, the crucial inquiry is whether his advice was so legally deficient when it was given that he may be found to have failed to use "such skill, prudence, and diligence as lawyers of ordinary skill and capacity commonly possess and exercise in the performance of the tasks which they undertake." (Lucas v. Hamm, 56 Cal.2d 583, 591 (1961))”;

III.

“an attorney does not ordinarily guarantee the soundness of his opinion . . . he is expected, however, to possess knowledge of those plain and elementary principles of law which are commonly known by well informed attorneys, and to discover those additional rules of law which, although not commonly known, may readily be found by standard research techniques.”

Lesson: Regardless of the state of the law, an attorney must, at the very least conduct due diligence to assure that the advice he gives his client is legally sound. If an attorney conducts a reasonable assessment of the state of the law, an attorney will not be held liable for failing to anticipate how that unsettled point of law will be resolved.

Note: Smith v. Lewis was overturned on other grounds in In re Marriage of Brown, 15 Cal. 3d 838, 851 (Cal. 1976).

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Martos v. Concilio, 427 Pa. Super. 612; 629 A.2d 1037 (1993)

Student Contributor: Christopher Henn

PA Underlying divorce- property settlement agreements

Facts: The plaintiff retained defendant to represent him in his divorce. Plaintiff and his former spouse agreed to a property settlement. The parties then executed a new property settlement agreement that modified the first. The second settlement resolved property distribution and custody of their children. Alimony, debt repayment and other obligations were submitted for judicial determination. The trial court appointed a master to make recommendations after the property settlement agreement was incorporated by court order. Following the master’s recommendations, plaintiffs financial burden exceeded $250,000. Dissatisfied, the Plaintiff brought a malpractice suit against defendant attorney alleging inadequate representation. The Plaintiff was especially displeased that the terms reached by the first settlement agreement had been renegotiated in the second settlement agreement.

Issue: Whether the plaintiff was required to allege fraud in the inducement of the property settlement agreement.

Ruling: The court distinguished its prior holding in Collas v. Garnick, 425 Pa. Super. 8 (1993) by noting that there were two separate and distinct actions in that case; “[t]he prior action in which they signed the release had been completely settled; the action which they planned to bring against the seatbelt manufacturer was a separate and distinct action.” Id. at 615.

After recognizing the judicial preference for settlement, the court recited its holding in Miller v. Berschler, 423 Pa. Super. 405 (1993) as dispositive of the issue;

a party dissatisfied with the settlement agreement can only seek redress if it can establish that it was fraudulently induced into agreeing to settle, and it is incumbent on the client to plead with specificity fraud in the inducement.

The Lesson: Once a client expressly agrees to settle a dispute he will not be permitted to recover against his attorney on a malpractice claim absent fraudulent conduct by the attorney. However, if the settlement of one dispute serves to prevent subsequent actions against third parties, without the client’s knowledge, the client may be permitted to recover on a malpractice theory.

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Ponden v. Ponden,  374 N.J. Super. 1 (App. Div. 2004)

Student Contributor: Maninder (Meena) Saini

NJ Underlying Matrimonial Action

Facts: Plaintiff (client) sued defendant (attorney) who represented her in a divorce action. The defendant committed an error that gave the plaintiff’s ex-husband an opportunity to empty the accounts and depart the country. The defendant failed to submit particular letters that would have placed a restraining order on two different accounts and prevented the plaintiff’s ex-husband from obtaining the funds. Plaintiff then filed a lawsuit, claiming defendant negligently failed to pursue proper and effective means to protect her interests against her ex-husband’s anticipated unlawful behavior. At the end of the discovery period, plaintiff switched attorneys. The defendant submitted his expert report the very last day of the discovery period. Plaintiff’s new counsel sought permission to serve a new expert report after the discovery period ended because the former expert report was inadequate. The trial court held that under the “Best Practices” rule, its discretion was narrowed and it did not have the authority to grant relief from the discovery cut-off date.

Issue: Was it fair to reject the plaintiff’s request to present a new expert report when the defendant submitted his report on the last day of discovery? Did the plaintiff deserve some leeway since the defendant’s negligence adversely affected the plaintiff?

Ruling: The plaintiff raised valid reasons for the need to extend discovery. Therefore, the trial judge mistakenly exercised its discretion by denying a brief extension of discovery to allow an essential piece of evidence.

Even though the “best practices” rule amendments were intended to improve efficiency and expedition of civil proceedings, the rule amendments “were not designed to do away with substantial justice on the merits or to preclude rule relaxation when necessary to secure a just determination”.

Lesson: As seen in this case, an attorney will not necessarily overcome a well-founded claim of negligence by “playing the game according to the rules”. The lawyer submitted his expert report on the very last day of discovery that caused a disadvantage to the plaintiff. A court should allow an extension for discovery when it is necessary to one’s case. Court rules are only a framework for obtaining fair and just results.

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Ziegelheim v. Apollo, 607 A.2d 1298, 128 N.J. 250 (N.J. 1992)

NJ Underlying Divorce Action Settlement

Student Contributor: John Anzalone

Facts: Plaintiff discussed her concern with Defendant Attorney that her husband was concealing substantial assets and asked Attorney to make a thorough inquiry into her husband's assets that attorney failed to undertake before negotiating the property settlement agreement. This resulted in the marital estate being undervalued. Plaintiff received 14 percent of the estate's value in the settlement. Plaintiff signed the agreement after Attorney advised that she would receive no more than 10-20 percent of the estate's value at trial. Plaintiff later filed a malpractice suit against Attorney and a suit to get the settlement set-aside that was rejected.

Issue: Did the lower court err in holding that there was only one factual dispute that Attorney had committed malpractice and that Plaintiff's claims were estopped because the settlement was deemed fair?

Ruling: In partially reversing the lower court, the New Jersey Supreme Court held Plaintiff's  malpractice case could go forward, based on the following considerations:

1) A dissatisfied litigant does not have to prove that their attorney committed fraud in the settlement before they can sue the attorney for malpractice in settlement negotiations.

2) Litigants rely on attorney's advice on whether to accept settlements and the law insists that their recommendation be made with the skill, diligence, and knowledge of a reasonably competent attorney. Attorneys are expected to know the reasonable probability of their case's success and the range of potential outcomes. A lawyer must exercise reasonable care in negotiating a settlement for a client, just as he must exercise such care in all other aspects of the representation. 

3) The doctrine of estoppel should not be applied here because the fact the court hearing  on setting aside the settlement  called the award "fair and equitable" does not mean that Plaintiff could not have secured a better award had Attorney not been negligent.

4) The prior ruling also did not touch on whether or not Plaintiff's husband hid assets. Consequently, the ruling does not bar a claim that Attorney negligently failed to discover hidden marital assets.

5) Given the evidence, Plaintiff's further claims that Attorney negligently failed to put agreed upon terms into writing and delayed in making the final settlement resulting in financial losses,  should not have been disposed of with summary judgment.

Lesson: Rulings regarding the fairness of a settlement do not preclude suits against attorneys for malpractice in reaching that settlement. To avoid malpractice claims in settlement situations attorneys should explain the settlements as written to the consenting parties and their legitimate basis for believing that the client should accept the proposed agreement. 

Editor's Note:  This case highlights the "settle and sue" syndrome  in legal malpractice actions. At this posting, the NJ Supreme Court has heard oral argument in Guido v. Duane Morris, LLP  and is taking a fresh look at the issue. Stand by for a decision in the near future. 

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 Lafasciano v. Lorber, 823 N.Y.S.2d 427, (2006)

NY Underlying matrimonial action; holding marital assets in trust

Student Contributor: Jason Zemsky

Facts: During a matrimonial action between the Lafascianos, the Supreme Court determined that the proceeds of the sale of certain real property owned by a closely held family corporation, was marital property. Lorber, the attorney who represented the sale placed the proceeds in a non-interest bearing escrow account. The court then ruled that the money Lorber placed in the trust account should be divided equally among the Lafascianos. The wife, Carla M. Lafasciano, sued Lorber for legal malpractice claiming that he had failed to put that money in an interest bearing account. Lorber moved for Summary Judgment which the trial court granted.

Issue: Does a lawyer commit legal malpractice by not placing sale proceeds in an interest bearing account?

Ruling: Affirmed. The plaintiff failed to prove that the court directed Lorber to place the sale proceeds in an interest bearing account and Judiciary Law § 497(4) allowed Lorber to place the proceeds in a non-interest bearing escrow account.

Lesson:   It might have been prudent for the lawyer to deposit the  proceeds into an interest bearing escrow account pending resolution of any dispute.  But would that have avoided the legal malpractice action?  Maybe yes. Maybe no.   RPC 1.15 "Safekeeping of Property" provides guidance.  Otherwise, Court Rules generally do not require Attorney Trust Accounts to be interest bearing.  

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Wallenstein v. Cohen, 45 A.D.3d 674, 845 N.Y.S.2d 428 (App. Div. 2007)

NY Underlying  Fee Arbitration

Student Contributor: Maninder (Meena) Saini

Facts: Defendant-attorneys represented the plaintiff-client in a matrimonial action that resulted in a judgement for divorce pursuant to a stipulation of settlement. The plaintiff then complained to the grievance committee that the defendants over-charged her for their services and did not protect her interests. The case was transferred to Fee Arbitration. During the arbitration, it was found that defendants were entitled to the fees, which they sought. Two years later, the plaintiff commenced an action, alleging that defendants charged excessive fees and committed legal malpractice in representing plaintiff.

Issue: Can plaintiff re-litigate the issue of excessive attorney’s fees that was formerly resolved in arbitration?

Ruling: The Appellate Division held in this case that the action was barred by fee arbitration award and by collateral estoppel because all of the allegations in the complaint were “reasonably and plainly comprehended to be within the scope of the dispute submitted to arbitration.”

[T]he determination fixing the value of the defendants' services necessarily determined that there was no malpractice.

Lesson: If the excessive fee allegation in the complaint was resolved by previous arbitration, the fee awarded to the attorney during arbitration may ultimately conclude that there is no malpractice. This is a fact sensitive ruling.  The  jurisdiction of the Fee Arbitration Committees in New Jersey, however, does not extend to deciding issues of legal malpractice, even if they are raised in the fee arbitration proceeding. 

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Newell v. Hudson,
376 N.J. Super. 29, 868 A.2d 1149 (App. Div. 2001)

Student Contributor:  Natalie Resto

NJ Underlying matrimonial action

Facts: Hudson, an accountant, retained Newell as her attorney to defend her in a matrimonial action filed by her then husband. After lengthy negotiations and discussions with Newell, Hudson signed an Interspousal Agreement, which provided that she would receive monthly limited payments for four years based upon his income plus a discretionary bonus. Before Hudson signed the agreement, Newell explained to her the concept of alimony, and advised her that the amount she received might depend, in part, on the marital standard of living. After entering into the agreement Hudson and her husband each testified that they understood and voluntarily consented to the terms of the agreement.

About a day later, Hudson contacted Newell stating that she felt “pressured and intimidated by her husband’s counsel, the Judge and Newell,” and called into question his preparation and legal representation. Newell later filed a suit against Hudson for failing to pay outstanding legal fees. She filed a counterclaim alleging that Newell had committed legal malpractice by, among other things, failing to serve interrogatories on her husband, and failing to secure documents reflecting the status of certain investment accounts.

Issue: Can a litigant, dissatisfied with her decision to enter into a settlement, bring a claim for legal malpractice alleging that she actually had not understood the agreement, and was forced to enter into it, or will she be judicially estopped from bringing such a claim? 

Ruling: The court barred Hudson’s legal malpractice claim:

Hudson’s self-serving behavior is precisely the type of inconsistent judicial position-taking that the doctrine of judicial estoppel is designed to prevent. To permit this litigant to assert a contrary position in the malpractice action presumably to bolster her counterclaim in an effort to defeat Newell’s legitimate claim for counsel fees would result in a miscarriage of justice and impugn the integrity of the judicial process. Id. at 47.

Lesson:  New Jersey does not allow litigants to sue for legal malpractice based on settlement agreements that were entered into voluntarily, freely, and willingly in the underlying action.  Superficial allegations of duress and intimidation will not be countenanced by the Court.  Dissatisfaction with a settlement agreement is not grounds for a legal malpractice action in New Jersey. 

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