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

Boyson v. Archer & Greiner, P.C., 308 N.J. Super. 287 (App. Div. 1998)

NJ Underlying Products Liability Action

Student Contributor: Natalie Resto

Facts: The Defendant law firm was hired by the client to represent it as a defendant in a products liability action. The case was ultimately settled, and the client subsequently brought a malpractice action against the law firm to recover damages and defense costs. The client alleged that the law firm had negligently failed to provide notice to the client’s liability carrier which would have paid for the defense and provided indemnity for damages.
The law firm moved for summary judgment claiming that there was no coverage under the client’s comprehensive general liability policy under New Jersey law, and therefore, they were not negligent in failing to notify the carrier of the claim against the client. The client, however, alleged that Pennsylvania law governed the dispute, and that under Pennsylvania law, the insurance policy would have provided coverage to them in the underlying action despite a products hazard exclusion.

Issue: Did the law firm commit malpractice by failing to pursue a defense from the client’s liability carrier?

Ruling: The Appellate Division held that since the underlying action involved an injury that took place in Pennsylvania to a resident of Pennsylvania, New Jersey choice-of-law principles would require application of Pennsylvania law in deciding whether the law firm proceeded competently in defending the action.

Lesson: In a legal malpractice case, the choice of law to be applied is the law that would have governed in the underlying action.

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Thompson v. Seligman 53 A.D.3d 1019, 863 N.Y.S.2d 285 (N.Y.A.D. 3 Dept., 2008)

NY: Underlying personal injury; workers compensation

Student Contributor: Ryan M. O'Donnell

Facts: Plaintiff was employed by AMFAC Recreational Services, Inc. AMFAC regularly provided cleaning services to the Gideon Putnam Hotel. While performing her duties cleaning at the Gideon, plaintiff suffered injuries and retained defendant attorney to represent her in a workman’s compensation claim. When plaintiff inquired about a possible claim for pain and suffering against the Gideon, defendant advised her that she could not pursue a claim, based on his mistaken belief that plaintiff was employed by the hotel. Plaintiff then consulted with a different attorney who advised her that she did have a claim against the Gideon, except for that the statute of limitations had expired.

 Issue: Can a mistaken assumption by an attorney give rise to a legal malpractice claim?

Ruling: Yes.

“An attorney has the responsibility to investigate and prepare every phase of his or her client’s case.”

There was sufficient documentation that stated plaintiff’s employer was AMFAC, not the Gideon. Had defendant made the appropriate inquiry he would have known that plaintiff was not employed by the Gideon, and that plaintiff could have a third party claim against the Gideon for pain and suffering. The defendant’s failure to investigate the availability of a third party claim by plaintiff raises a question of fact whether the defendant exercised an appropriate duty of care to the client. 

Lesson: As an attorney, you have the responsibility to investigate and prepare every phase of your client’s case. If there is information that will further the interests of your client that is easily ascertainable, and you fail to use such information, you have breached your duty of care to your client. Unless the client actively misrepresents information to you, you can be liable for malpractice if your mistaken assumption would have been corrected by further inquiry.

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Leder v. Spiegel 9 N.Y.3d 836, 872 N.E.2d 1194 (2007)

NY: Underlying Will Contest

Student Contributor: Ryan O'Donnell

Facts: Defendant represented plaintiff in an underlying probate matter. Rather than accept a settlement offer, plaintiff decided to continue to trial, where they were unsuccessful in challenging the will. The plaintiff bases his malpractice claim on defendant’s advice on the prospect of success in the underlying case, and that he would have accepted the settlement were it not for his attorney’s advice. There was no documentary evidence showing that plaintiff refused to settle strictly based on defendant’s advice.

Issue: Is an attorney liable for legal malpractice if he was not the proximate cause of the client’s damages, even if he negligently represented his client?

Ruling: No.

"In order to sustain a claim for legal malpractice, a plaintiff must establish both that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession which results in actual damages to a plaintiff, and that the plaintiff would have succeeded on the merits of the underlying action 'but for' the attorney's negligence"

The failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent. Since there was no evidence that the defendant’s advice was the sole basis for refusing the settlement, the defendant was not the proximate cause of the plaintiff’s loss, the defendant attorney was not liable for malpractice.

Lesson: Even an attorney who negligently represents his client will not be liable for malpractice if he is not the “but for” cause of the client’s damages. To establish liability based on the loss of a settlement opportunity, the plaintiff must prove that but for the attorney’s negligence he would have accepted the settlement offer. A court will not rely on bare allegations of fact by a plaintiff without documentary evidence to prove proximate cause. 

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Gelsomino v.Gorov, 502 N.E.2d 264, 149 Ill.App.3d 809, (App. Ct. Ill., 1986)

IL Underlying Representation: Insurance coverage lawsuit

Student Contributor: John Anzalone

Facts: Plaintiffs sue Attorney and his law firm for legal malpractice for negligently investigating, preparing and presenting Plaintiffs in a lawsuit against the insurer that failed to cover the loss of their restaurant to a fire. Plaintiffs obtained Attorney as their counsel shortly before trial after their previous attorney had to withdraw because he was involved in an ongoing trial. The jury found for Insurer on the grounds that the plaintiffs' had committed arson and fraud.

Issue: Did the lower court err in holding that since the plaintiff did not present a question of fact regarding proximate cause or the attorney's breach of duty, the alleged errors were not actionable because they were errors of judgment, and that Plaintiffs were barred from claiming Defendant was negligent?

The Ruling: In reversing the lower court, the Appellate Court held that summary judgment was improperly given, based on the following considerations:
1) Plaintiffs are estopped from relitigating facts in one action that were specifically litigated and decided in a prior action. The Plaintiff's post-trial motion in the underlying case claiming that the court erred in not granting continuance and that this resulted in their counsel being unprepared did not bar Plaintiffs from asserting that Defendants were negligent.
2) To prove legal malpractice, Plaintiffs must establish that there was an attorney-client relationship, "a duty arising out of that relationship" that was breached, and that the breach proximately caused Plaintiffs' actual damages.
3) Plaintiffs were Attorney's client and were damaged by the jury verdict.
4) There was a question of fact regarding the attorney's breach of duty because Plaintiffs.rovided expert testimony alleging specific breaches of the attorney duty of care to Plaintiffs.
5) There was a question of fact about proximate cause because Plaintiffs supplied affidavits of people Defendants' knew about but failed to investigate whose testimony would have rebutted the circumstantial proof of arson and fraud alleged by Insurer.
6) An error of judgment is not immune for prosecution. If the attorney's judgment was one that a reasonably competent attorney would not come to, the attorney can be held liable for failing to exercise a "reasonable degree of care or skill in representing his client."

The Lesson: Errors of judgment is not an absolute defense to lawyer malpractice.  It is no defense that the allegedly negligent attorney's judgment was a non-actionable tactical choice if a reasonable attorney would not come to that conclusion. 

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Rizzo v. Haines, 520 Pa. 484, 555 A.2d 58 (Penn. 1989)

PA Underlying med mal and personal injury cases

Student Contributor: Evan Michael Hess 

Facts: The clients retained the  attorney in a case arising from a medical malpractice  against a physician and hospital and a personal injury suit against the city of Philadelphia. The attorney did not seek to have the two suits joined, and reassured the clients that the medical malpractice case was still viable. The jury in the personal injury lawsuit returned a verdict for the clients.  The medical malpractice case was dismissed soon thereafter based upon a lack of evidence and that the personal injury suit had fully compensated the clients for the injuries sustained. The clients initiated the legal malpractice action alleging the attorney negligently settled the personal injury case, breached his fiduciary duties, and improperly accounted for costs and expenses. A bench trial was conducted, and the clients were awarded damages.

Issue: Was the trial court correct in finding in favor of the client that the attorney breached his professional duties, and were the damages awarded reasonable?

Ruling: The Supreme Court of Pennsylvania held that:

1) An attorney's must communicate all settlement offers to clients;

2) Failure to investigate offers that were proposed constituted malpractice;

3) Aggrieved clients are entitled to recover as damages the difference between actual recovery and the amount they would have recovered if the attorney was not negligent; and

“The necessity of an attorney’s use of ordinary skill and knowledge extends to the conduct of settlement negotiations.”

Lesson: The attorney must fully communicate to his client all proposed settlement offers in addition to completing due diligence in investigations on the client’s behalf. If an attorney fails to perform her/his duties in accordance with the standard of professional care, they must make the client whole by paying the difference between what the client did receive and should have received in a settlement. 

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Ellison v. Schenck, Price, Smith & King, 654 A.2d 1024 (N.J.Super.A.D. 1995)

NJ: Underlying Real Estate and Litigation

Student Contributor: John J. Anzalone

Facts: Plaintiff's entered into a lease for developing cemetery grounds. Defendant represented both Plaintiff and the Cemetery. The Defendant also represented the plaintiff in negotiating the terms of the sublease of leased land. After the lease had become unprofitable for Plaintiff, Plaintiff sued Defendant. Plaintiff asserted that they relied on defendant's advice to enter into the contract because they were wrongly led to believe there was nothing preventing the lawful lease of the land. Plaintiff also claimed they suffered loses because the defendant failed to put an escalation clause in the contract with the person they sublet to.

Issue: Could the statute of limitations only have started to run when Plaintiff's income from the property decreased and thus entitle defendant to dismissal of the case?

Ruling: In affirming the lower court's decision on other grounds, the Appellate Division held that the lower court erred in dismissing the case based on the statute of limitations because there was a question of fact regarding when the actual damages occurred, based on the following consideration:
1) The cause of action arises when the plaintiff knows or should have known that they were actually damaged by the attorney's negligence.
2) The actual damage did not necessarily occur when Plaintiff's profits were lessened by the increased rent, they could have also occurred when the rate increase made the sublease unprofitable.

Lesson: Statute of limitations for legal malpractice start to run once the Plaintiff knew or should have known that they were actually damaged by the attorney's negligence. This determination is fact sensitive. Thus, in practice a lawyer bringing a suit against the other lawyer for malpractice should not assume that the actual damage that the plaintiff knew or should have known about occurred when it seems the Plaintiff was first injured by the alleged negligence. 

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Ellison v. Schenck, Price, Smith & King, 654 A.2d 1024 (N.J.Super.A.D. 1995)

NJ Underlying Real Estate and Litigation

Student Contributor: John J. Anzalone

Facts: Plaintiff's entered into a lease for developing cemetery grounds. Defendant represented both Plaintiff and the Cemetery. The Defendant also represented the plaintiff in negotiating the terms of the sublease of leased land. After the lease had become unprofitable for Plaintiff, Plaintiff sued Defendant. Plaintiff asserted that they relied on defendant's advice to enter into the contract because they were wrongly led to believe there was nothing preventing the lawful lease of the land. Plaintiff also claimed they suffered loses because the defendant failed to put an escalation clause in the contract with the person they sublet to.

Issue: Did plaintiff's failure to sue the attorney in the suit against the cemetery preclude them from later suing the attorney? 

Ruling: The court affirmed the dismissal of the suit by holding that Plaintiff was barred from suing he should have sued the attorney as well in an earlier suit against the cemetery, based on the following considerations:
1) Under New Jersey's "Entire Controversy Doctrine", any suit against an indispensable party that should have been added to a prior suit, results in the inability to bring a suit against that party that is part of the same dispute.
2) Parties are indispensable when the case cannot be decided between the parties present in the suit without judging or affecting the interest of the party that should have been added.
3) Had the plaintiffs won, the Defendant would have been hampered by the decision in protecting itself from being found liable for substantial damages.

Lesson: New Jersey's "Entire Controversy Doctrine" provides an effective shield from suits by client-plaintiffs who fail to add a claim against an allegedly negligent lawyer to a suit that is ongoing and in which the lawyer's alleged negligence took place.

NOTE: In response to an uproar from its decision in Circle Chevrolet v.Giordanno Halleran & Ciesla, 142 N.J. 280 (1995) which held that the entire controversy doctrine bars subsequent legal malpractice claims, the Supreme Court of New Jersey reversed that holding in Olds v. Donnelly, 150 N.J. 424 (1997) and held that legal malpractice cases are exempt from the entire controversy doctrine. Thus, this case is no longer good law on the issue of the entire controversy's applicability to legal malpractice actions. 

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Builders Square, inc. v. Saraco,  868 F. Supp. 748 (E.D. Pa. 1994).

PA. underlying products liability suit

Student contributor: Cheryl Neuman

Facts: Plaintiff was a defendant in an underlying products liability lawsuit. Plaintiff was a retailer of the allegedly defective product. The distributor of the product was also named as a defendant. The distributor had $1 million of liability insurance coverage. Plaintiff retained defendant lawyer in the product liability suit. The plaintiffs in the underlying products liability offered to settle for $1 million, which was the limit of the insurance policy. Defendant lawyer, however, rejected the offer to settle and did not inform his client (plaintiff) about the settlement offer. After plaintiff found out about the settlement offer defendant attorney withdrew from representation. At trial, the parties agreed to settle for $4.25 million, of which the plaintiff was responsible for $3.25 million. Plaintiff therefore alleges that defendant’s failure to pursue the earlier settlement agreement placed plaintiff in a much weaker position to defend or settle the case.

Issue: Does a lawyer have the duty to explore and timely communicate to his client all settlement offers?

Ruling: Yes. An attorney had the duty to tell his client about all settlement offers as well as other important information relating to the representation.

Lesson:  The plaintiff in this case was dissatisfied  at having to settle a case on terms that were more disadvantageous than the terms of  the initial settlement negotiations.  Allowing this type of lawsuit to go forward heightens awareness and provides incentives to lawyers to fully communicate all settlement offers to their clients. It is, after all, the client's right to settle the case. 

Editor's Note: See RPC 1.4 re the lawyer's duty to communicate to the client. 

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University of Massachusetts Memorial Medical Center, Inc. v. Christodoulou
360 N.J. Super. 313, 823 A.2d 51 (2003)

NJ Underlining collection action for workers comp benefits.

Student Contributor: Anthony J. Forzano

Facts: A hospital brought action against deceased patient's estate, his employer, and employer's workers' compensation insurer for payment of medical bills. It also includes a cross-claim by the compensation petitioner against the compensation carrier  for counsel fees in defending against the medical providers' action. The Plaintiffs named their  attorney   as a party in this action solely for the purposes of obtaining discovery. Shortly before a scheduled trial date, plaintiffs  then moved for permission to file a claim against their attorney  for malpractice on the grounds that he failed to protect their claim in the compensation proceedings. Their motion was denied because of the impending trial date. During the argument on the motions for summary judgment, plaintiffs asked for permission to dismiss their complaint against the attorney  without prejudice. The attorney opposed. The trial court agreed with plaintiffs, and the attorney now seeks to reverse the “without prejudice” aspect of the order. The attorney claims he should not have to face a substantive action because plaintiffs knew all the facts bearing on that claim when they filed their initial suit. Plaintiffs respond that they should not be foreclosed from pursuing their malpractice claim.

Issue: Does a voluntary dismissal of a claim against an attorney, filed only for the purpose of discovery, preclude a subsequent filing of a legal malpractice action?

Ruling: The Court held that the dismissal without prejudice was entered pursuant to Rule 4:37-1(b). Under that rule, the court may impose “such terms and conditions as the court deems appropriate.” R. 4:37-1(b). The main object of this rule is “to protect a litigant where a termination of the proceedings without prejudice will place him in the probable position of having to defend, at additional expense, another action based upon similar charges at another time”. Since the attorney was only sued for purposes of discovery, it did not defend against a malpractice claim. Therefore, the dismissal without prejudice would not expose it to another action on similar charges.

Lesson: In this case, a voluntary dismissal of medical providers' claim against attorneys, filed for purposes of discovery, did not prevent subsequent filing of action for legal malpractice, where second action was not based on same allegations. In general, the court will not enforce an estoppel when the subsequent malpractice allegations are based on a different set of facts. 

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Collas v. Garnick, 425 Pa. Super. 8; 624 A.2d 117 (1993)

Underlying PA Tort Action

Student Contributor: Colleen Gaedcke

Facts: The plaintiff employed the defendant to represent her in an automobile tort action. The defendant reached a settlement with the plaintiff for $245,000. The plaintiffs were asked to sign a general release, which discharged the driver and all other parties who might be liable for the damages. The plaintiff asked the defendant whether the release would have any effect on her desire to sue the manufacturer of the vehicle. The defendant responded that it would not. In reliance on his advice she signed the release. She subsequently filed an action against the manufacturer, which the court dismissed stating that the action was barred by the release. The plaintiff then filed this action against the defendant for legal malpractice.

Issue: “If a lawyer negligently advises a client regarding the effect of a release and the client, in reliance on the lawyer’s advice, signs a release which unintentionally has the effect of barring an action contemplated by the client, is the lawyer immune from liability because the release was executed as part of the settlement of a prior, separate action?”

Ruling: No.

1) A lawyer has a duty to know how a proposed settlement will affect his client…conducting  legal research sufficient to allow the client to make an informed decision.

2) Here,

the fact that the written agreement was prepared as part of the settlement of their prior action was incidental; it did not relieve counsel of an obligation to exercise care in determining the effect of the agreement which his clients were being asked to sign…counsel was required to exercise the same degree of care as he or she would have exercised in advising a client about a complex agreement not a part of the settlement of a legal action. 

Lesson: An attorney is not expected to be perfect.  But, where the attorney gives erroneous advice that falls below standards that the client has a right to expect form their lawyer they will be held liable for malpractice.

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Darby & Darby, P.C. v. VSI International, Inc. 95 N.Y.2d 308 (2000)

NY Underlying insurance coverage

Student Contributor: Maninder (Meena) Saini

Facts: Defendant (VSI International Inc.), a Florida corporation retained plaintiff (Darby & Darby) a New York law firm to represent it in two Florida lawsuits. Even though defendant paid a portion of a substantial legal bill, the defendant still owed nearly $200,000 in outstanding legal fees. Plaintiff moved to withdraw as counsel because the defendants did not pay them. The plaintiff was relieved as counsel in October 1993. In August 1996, plaintiff commenced an action to recover the outstanding amount in legal fees, plus interest and incidental costs. The defendant then asserted a counterclaim, alleging the plaintiff committed legal malpractice and breached a fiduciary duty by failing to advise defendant that its then-existing general liability insurance policy could have covered defendant’s litigation expenses.

Issue: Does a NY law firm specializing in patent litigation,  retained to defend a corporate client in a Florida patent infringment action have a duty to advise the client about possible insurance coverage to cover the cost of litigation?

Ruling:

 ...attorneys should familiarize themselves with current legal developments so that they can make informed judgments and effectivey counsel their clients... However, [the law firm] should not be held liable for failing to advise [the client] about a novel and questionable theory pertaining to their insurance coverage.

In a legal  malpractice action, a party must demonstrate that an attorney failed to employ “the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession”. What is reasonable skill and knowledge is to be determined at the time of representation.

Lesson: The standard of reasonable care applicable even to specialist-attorneys does not require attorneys to comply with   novel and questionable theories of law. An attorney only has a duty to represent a client in a manner that is reasonable and consistent with the law, as it existed at the time of representation.

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Levinson v. D'Alfonso & Stein, 320 N.J.Super. 312 (App. Div. 1999)

NJ Underlying personal injury action

Student Contributor: Michael Park

Facts: Plaintiff hired attorney to handle his personal injury/automobile negligence claim. Plaintiff and attorney entered into a written retainer agreement, which contained a clause that provided that any settlement would require plaintiff's authorization before being accepted. However, at some time during the case, the attorney accepted settlement on plaintiff's behalf, despite not having authorization. The client filed an action against the attorney alleging negligence-professional malpractice, fraud, and breach of contract, but failed to provide an affidavit of merit. The action was then dismissed for failure to provide the affidavit of merit.

Issue: Was an affidavit of merit required to file a complaint of negligence-professional malpractice?

Ruling: The Superior Court, Appellate Division affirmed in part, and reversed and remanded in part the decision by the Superior Court, Law Division for the following reasons:
1) The court affirmed that the Affidavit of Merit statute, N.J.S.A. 2A:53A-26 to 29, applied to the plaintiff's claims of malpractice because the legally significant facts that gave rise to the cause of action did not occur until after June 29, 1995, the effective date of the statute. The court deferred to the Supreme Court's interpretation in Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218 (1998), where an affidavit requirement was not applicable where the principal facts that gave rise to a cause of action that occurred before the statute's effective date. Therefore, the plaintiff should have provided an affidavit from an appropriate licensed person, which would state that there is a reasonable probability that a departure from acceptable standards occurred.
2) The fraud alleged by the plaintiff was simply a repeat of the malpractice charge with the word “fraud” tacked on, and should therefore be dismissed.
3) The court reversed and remanded the decision by the lower court to dismiss the breach of the retainer agreement's approval-of-settlement clause because an expert evaluation is not needed to see that a simple breach of contract had occurred.

Lesson: When a complaint against an attorney alleges legal malpractice, an affidavit of merit must be provided, with few exceptions. The only way for the court to know whether a standard of care has been deviated from is if an expert in that profession will attest to that possibility by affidavit. For matters that would be obvious to laymen or those which do not involve a deviation from a professional standard of care,  such as breach of a  clause in a contract, an affidavit of merit is not required.

Practice Note:  Play it safe. Get your expert's affidavit of merit before you file your Complaint. You might even attach the Affidavit to your Complaint and file and serve them together. That eliminates the chance of missing the time limitations for timely serving an affidavit of merit, which can then lead to a dismissal of an otherwise meritorious Complaint. 

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Ingemi v Pelino & Lentz  866 F. Supp. 156 (D.N.J. 1994)

NJ Underlying Action-Claim for pension benefits

Student Contributor: Candice L. Deaner

Facts: Plaintiff instituted a malpractice suit against related New Jersey and Pennsylvania law firms due to their mishandling of the underlying litigation. Plaintiff specified her desire to have a New Jersey attorney and the New Jersey law firm was retained as local counsel. They then petitioned the court to admit pro hac vice two lawyers from the Pennsylvania firm. The New Jersey firm argued that one of the Pennsylvania lawyers was the only one to give advice and act “on the judgmental and strategic issues,” and contended that the New Jersey firm served “merely” as local counsel, performed ministerial tasks, and undertook “discovery and motion practice in a manner that did not require making judgments or giving advice regarding prejudgment remedies or settlements,” and therefore was not liable in this action.

Issue: What is the role of local counsel when pro hac attorneys are admitted to handle the case?

Ruling: The Court found that the New Jersey firm “underestimated the role of local counsel” and stated that “by virtue of submitting the pro hac vice application, the New Jersey firm was responsible for the ‘conduct of the cause.’” Local court rules “require local counsel to take more than a de minimis role in the representation,” and clearly indicate “that local counsel is the counsel of record with attendant responsibilities, not out-of-state counsel admitted pro hac vice.”

The Court held that

“Local counsel must also supervise the conduct of pro hac vice attorneys and must appear before the court in all proceedings. Even if pro hac vice attorneys attempt to delegate solely routine or ministerial tasks to local counsel, local counsel remains counsel of record and wittingly or unwittingly exposes itself to liability for penalties such as sanctions.”

Lesson: A law firm retained as local counsel has equal responsibility even though other counsel is actually handling the prosecution of the case. ,  Liability is not delegated to the pro hac vice attorneys. Local counsel must continue to supervise the pro hac vice attorneys and appear in court. A law firm cannot avoid liability by claiming that other counsel was primary. The responsibility still lies with the local counsel to supervise and handle the case.

Editor's Note: For other cases holding local counsel potentially liable  for malpractice to client, see also:. Ortiz v. Barrett, 278 S.E.2d 833, 838 (Va. 1981);  Gould, Inc. v. Mitsui Mining & Smelting Co., 738 F. Supp. 1121 (N.D. Ohio 1990); Neel v. Magana, Olney et al., 98 Cal. Rptr. 837, 491 P.2d 421 (1971); Wildermann v. Wachtell, 267 N.Y.S. 840, 841 (1933), affirmed, 271 N.Y.S. 954 (1934). 

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Donohue v. Kuhn, 696 A.2d 664 (N.J. 1997) (PDF)

Student Contributor: John Anzalone

Facts: Plaintiffs retained Defendant attorney to represent them in a wrongful death and survivorship suit. The attorney failed to file the cases before the applicable statute of limitations.  The Plaintiffs secured another attorney after the statute of limitations passed, but the suit for wrongful death was dismissed for not being filed within the statute of limitations period. While the survivorship claim case was on going, the plaintiffs brought this malpractice suit.

Issue: Does the "entire controversy doctrine" prevent the Plaintiffs from suing Defendant attorney because they failed to add a legal malpractice claim against Defendant attorney in the survivorship case that was still before the trial court?

Ruling: In reversing the Appellate Division, the New Jersey Supreme Court held that the entire controversy doctrine did not require that the Plaintiffs had to amend their complaint to add an attorney that allegedly committed legal-malpractice claims in the survivorship suit to that case for their suit against the Defendant attorney to go forward.

Lesson: Legal malpractice claims are exempt from the entire controversy doctrine in NJ. A plaintiff's failure to add a claim  against a malpracticing attorney to an ongoing case in which it is alleged that the attorney committed an act or acts of negligence that harmed the plaintiff is not grounds for dismissing the case.

Editor's Note: This case was one of three on this issue decided by the New Jersey Supreme Court on the same day. See Olds v. Donnelly, 150 N.J. 424  (PDF).  See also, NJ Court Rule 4:30A.

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Moores v. Greenberg 834 F.2d 1105, 9 Fed.R.Serv.3d 1314 (1987)

PA: Underlying personal injury

Student Contributor: Ryan O'Donnell

Facts: Longshoreman was injured during the course of his employment and was able to collect compensation benefits through his employer. He then retained an attorney to bring a third party liability claim against the ship owners. The ship owners allegedly made two settlement offers of $70,000 and $90,000, which the attorney did not communicate to the client. The third party liability claim was subsequently lost, and the client brought this malpractice claim against the attorney claiming that he would have accepted the settlement offer had he been informed of it. The attorney was found to be liable for $12,000, and he appealed the verdict claiming that the settlement offers were too meager to be relayed.

Issue: Is a lawyer required to communicate all reasonable settlement offers?

Ruling: Yes. A lawyer has a duty to use a degree of skill, diligence, and judgment necessary to the practice of his profession and which others who are similarly situated ordinarily possess. “As part and parcel of this duty, a lawyer must keep his client seasonably appraised of relevant developments, including opportunities for settlement.” The court implies that an attorney might not have a duty to communicate offers only when they are “so divorced from a realistic appraisal of the merits,” and unresponsive to the upside and downside of the litigation.

Lesson: A lawyer has a duty to keep his client informed of relevant developments, including opportunities for settlement. Lawyers are obliged to promptly communicate to the client settlement offers and all matters that may be relevant to the client’s appreciation and understanding of the matter. 

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Frazier v. New Jersey Manufacturers Insurance Company, 142 N.J. 590, 667 A.2d 670 (1995) (pdf)

NJ: Underlying litigation; workers compensation lien

Student Contributor: Michael Park

Facts: Plaintiff was injured on the job while working for a third-party general contractor, and his attorney filed a worker's compensation claim against his employer's insurance carrier. However, his attorney failed to file a complaint against the third-party general contractor before the statute of limitations had run out. Plaintiff then retained a new lawyer to file a malpractice claim against his former attorney, and obtained a settlement. After learning of the settlement, the insurance carrier said it would file a lien against the recovery for legal malpractice. The matter went to court and the trial court ruled that the workers' compensation lien could not attach to his legal malpractice settlement. However, the Appellate Division reversed and held for the insurance carrier, and the plaintiff appealed.

Issue: Can a workers' compensation lien attach to the proceeds of a malpractice suit brought to recover damages from an attorney who failed to institute an action against the third-party tortfeasor responsible for the worker's injury?

Ruling: In affirming the Superior Court, Appellate Division, the Supreme Court held that a worker's compensation lien can attach to a legal malpractice settlement.

“It was the tortious act of the third party (the general contractor) that was the predicate for Frazier's malpractice action against his former attorney. But for the third-party tortfeasor's tortious conduct, Frazier would not have recovered against his attorney...No apparent justification exists for allowing an injured employee who receives a legal malpractice recovery to be in a better position than an injured employee who recovers directly from the tortfeasor. Malpractice claims that are derivative of third-party claims are therefore subject to the workers' compensation lien under N.J.S.A. 34:15-40."

Lesson: The Court did not want to allow the plaintiff to receive double recovery, pocketing the money from the legal malpractice settlement that arose from the attorney not filing a complaint against the original tortfeasor, and the money he received for workers' compensation for being injured. If the lien did not attach, he would be receiving compensation twice for the same injury. 

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Costco Warehouse v. Greg Randall (2009 CAL LEXIS 12375) (pdf)

Decided Nov. 30, 2009.

CA: Attorney Client Privilege

FACTS: In June of 2000, Costco retained Sheppard, Mullin, Richter & Hampton to provide legal advice regarding whether certain warehouse managers in California were exempt from California wage and overtime laws. One of Sheppard’s wage and hour law attorneys interviewed warehouse managers and produced a 22-page opinion letter on the issue. Costco, the interviewed managers and the lawyer all testified that they understood the communications between the managers and Hensley were, and would remain, confidential.
Several years later, a group of Costco employees filed a class-action suit against Costco alleging that between 1999 and 2001, Costco had misclassified some of its managers as ‘exempt’ and had therefore failed to pay overtime wages. In the course of the litigation, Costco employees sought to compel discovery of the lawyer’s opinion letter. Costco objected on grounds that the letter was subject to the attorney-client privilege and the attorney work product doctrine. Plaintiffs argued that the letter contained unprivileged information and that Costco had waived the privilege by placing the contents of the letter in issue.

RULING: Overruling the intermediate appellate court, the California Supreme Court reiterated California’s strong policy in favor of maintaining client confidences and secrets.

1. In Costco, after finding that an attorney-client privilege existed by virtue of an opinion letter written by independent counsel who had interviewed and taken witness statements from company employees, the Supreme Court found the entire letter, including the witness statement summaries, to be privileged.

2. Additionally, the majority ruled that, while the court can require an in camera hearing to determine whether the relationship constituted an attorney-client relationship, there is no authority for allowing the court to require in camera disclosure of the communications themselves. Those communications are privileged from disclosure, even in camera. If “ the dominant purpose” of the relationship was to provide legal advice from lawyer to client, no disclosure of communications is permitted.

3. Additionally, the Supreme Court held that it was not necessary to demonstrate any harm resulting from the disclosure; the intrusion into the attorney-client relationship was deemed to be harm in itself.

'[T]he privilege is absolute and disclosure may not be ordered, without regard to relevance, necessity or pany particular circumstance peculiar to the case.'

LESSON: From a legal malpractice point of view, it is crucially important to maintain client confidences, even in the face of a judicial order to reveal confidential material in camera. At least in California, it has long been held that a lawyer has a duty to preserve client secrets and confidences, even in the face of a contempt citation. See, In Re Navarro, 93 Cal. App. 3d 325,330 (pdf). 

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

Student Contributor: Melissa Goldberg

PA Underlying personal injury action.

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

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

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

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

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

3) He received the full judgment.

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

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Campagnola v. Mulholland, Minion & Roe, (pdf)
76 N.Y.2d 38 (N.Y. 1990); 555 N.E.2d 611

N.Y. Underlying personal injury action

Student Contributor: Jason Klein

Facts: Plaintiff was struck by a car while working as a crossing guard and was permanently disabled. Plaintiff retained Defendant to pursue a claim for personal injuries and agreed to a contingency fee of one third for any money recovered. The owner of the car that struck Plaintiff was insured for only  $10,000. Plaintiff herself was insured under a Government issued policy for underinsured benefits for $100,000. The Government policy required consent prior to the settlement of any claim against the person deemed responsible for the insured’s injuries. Defendant failed to notify the Government insurance company before settling with the car owner for $10,000, of which $3,150 was deducted as a fee and $550 for expenses. When Plaintiff submitted a claim under the Government issued policy, her claim was denied because the settlement with the car owner was made without consent. Plaintiff commenced this action against Defendant seeking $100,000 in damages for malpractice and Defendant asserted an affirmative defense to reduce any recovered damages by the amount Defendant would have received as attorneys’ fees and expenses in the personal injury action.

Issue: In a malpractice action against an attorney, can the attorney deduct the “hypothetical” fee that would have been payable to the attorney in the underlying action?

Ruling: No. An attorneys’ malpractice constitutes a failure to honor faithfully the loyalty owed to a client. Thus, the plaintiff’s recoverable damages are not limited by a deduction for the fee that she would have paid the defendant had the defendant  properly performed the contract of representation.

The Lesson: A reduction in the plaintiff’s recovery  equal to what the attorney would have earned but for his negligence, is impermissible because a negligent attorney is precluded from collecting a fee. 

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Christie v. Jeney, 167 N.J. 509 (2001)

Student Contributor: Daniel Schick

NJ Underlying Civil/Commercial Litigation

Facts: Christie retained Jeney to pursue three claims on his behalf. Christie then alleged that in the course of the representation, Jeney failed to answer discovery requests in a contract claim, failed to properly serve and plead a civil-rights claim, and negligently allowed the statute of limitations to run on a defamation claim.

Plaintiff subsequently retained new counsel (Lucas) and filed a three-count malpractice complaint against Jeney. Jeney answered the complaint and demanded that Christie serve an affidavit of merit pursuant to the New Jersey Affidavit of Merit statute (“AMS”). Upon Plaintiff’s failure to do so, Jeney moved to dismiss the action for failing to satisfy the AMS. Christie then submitted the requisite Affidavit of Merit. Since dimissals under the AMS were without prejudice, and Christie could simply re-file the malpractice action, the Law Division denied Jeney's motion to dismiss, despite the fact that Christie’s Affidavit of Merit had not been submitted within the time limits set forth under the AMS.

Thereafter, the Supreme Court of New Jersey affirmed a portion of Alan J. Cornblatt, P.A. v. Barow, 153 N.J. 218 (1998), an earlier case, holding that dismissals under the AMS were to be with prejudice. In light of this decision, Jeney moved for reconsideration. The Law Division concluded that Christie's claims against Jeney accrued after the effective date of the AMS, and therefore, Christie's failure to provide a timely affidavit of merit required dismissal of the claims with prejudice.

Christie then filed a second amended complaint adding Lucas as a defendant, alleging that Lucas negligently failed to provide an affidavit of merit, leading to the dismissal of the action against Jeney. Lucas challenged the Law Division order dismissing Christie's complaint against Jeney. The Law Division denied the motion and the Appellate Division denied leave to appeal. The Supreme Court granted Certification.

Issue: How do you determine whether a legal malpractice action is or is not subject to the requirements of the AMS?

Ruling: The critical inquiry under the AMS is whether the actual conduct underlying the legal malpractice claim took place before the effective date of the statute (June 29, 1995). As the Law Division recognized, the allegations of malpractice against Jeney almost entirely referenced his conduct prior to June 29, 1995. Therefore, the AMS did not apply to Christie's claims against Jeney. The lower court’s holding was reversed and the action was remanded for further proceedings.

Lesson: The AMS became effective June 29, 1995, and explicitly states that it would apply to causes of action which “occur” on or after that date. Accordingly, the statute applies only to cases where the acts constituting the alleged malpractice took place on or after the effective date of the statute. The “filing” date of the malpractice action is irrelevant.

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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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Joyce A. Popwell v Law Offices of Broome and Horn, 363 N.J. Super. 404 (App. Div. 2002)

NJ Underlying  Personal Injury action

Student Contributor: Candice Deaner

Facts: After the court appointed arbitrator found that plaintiff had no cause of action for negligence against the underlying defendant plaintiff’s attorney failed to file for a trial de novo within the time limits set out by R. 4:21A-6(b)(1),  A trial de novo filing would have preserved plaintiff’s claim for trial and would not have subjected it to dismissal. Defendants made a cross motion to dismiss, alleging that Plaintiff’s failure to submit an affidavit of merit in the legal malpractice action,  as required by statute, required the  grant  of summary judgment  dismissing the malpractice complaint.

Issue: Does the Plaintiff’s failure to submit an expert's affidavit of merit  to support its allegation of legal malpractice when it was common knowledge that failure to file a timely application for a trial de novo amounts to negligence per se for which no expert affidavit or testimony would be necessary.

Ruling:   The requirement of the filing of an affidavit of merit is not applicable in this matter because Plaintiff's allegations do not require the testimony of an expert in order to permit the jury to determine the issue of negligence.  Affidavits of merit are not required where, as here, it was  “common knowledge” that the defendant attorney was negligent in blowing a time limit the consequences of which included the dismissal with prejudice of plaintiff's causes of action.

Lesson: In clear cases of attorney negligence, where it is common knowledge that the attorney was negligent by violating a statutory time limit  that caused plaintiff to forefeit her claim, no expert's affidavit is required,  because the jury can determine whether the Defendants is negligent based on "common knowledge" and without the need for expert testimony.

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The Texas Supreme Court’s new opinion in Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. National Development and Research Corporation holds that

a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence.

Prior to this holding, Texas courts had generally disfavored the recovery of attorneys’ fees qua damages unless allowed by statute or contract.

At first glance, the Akin Gump Court’s holding appears straightforward and logical, and in some cases will be easy to implement. For example, if a lawyer fails to file an answer, resulting in a default judgment, the plaintiff should be able to recover the fees it must pay a second attorney to have the default set aside. In this example, 100% of the extra fees are attributable to cleaning up the first lawyer’s mistake. Most cases, however, are not so cut and dried. 

I fear several unintended consequences from the Court’s ruling: 

• First, will there be a new class of cases in which there are no damages but attorneys fees? For example, if a lawyer obtains a total victory for the client, will the client (perhaps hoping to bargain for a fee reduction) comb the record for inconsequential errors that nevertheless may have increased the total fee by some amount?
• Second, will the new rule be used to avoid summary judgment in cases in which the undisputed facts prove the negligence caused no damages? Take appellate malpractice. If a trial court decides as a matter of law that the client would have lost the appeal regardless of the malpractice, will the client’s claim now survive based on a “fact issue” regarding increased appellate costs due to the negligence?
• Third, how much will the rule expand the number and costs of mandatory expert witnesses? Expert testimony is needed to prove causation in all but the most obvious situations. Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113 (Tex. 2004).(PDF) Doesn’t this mean a new set of experts will be needed in every malpractice case in which the plaintiff seeks attorneys’ fees as damages? The experts will need to review the record and opine whether the malpractice proximately caused an increase in attorneys’ fees and, if so, how much.

Question: Does Akin Gump open Pandora’s box or is it simply a logical extension of “but for” causation? Are there any special rules or limits that should apply?

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Akin Gump Strauss, etc. v. National Development and Research Corp. (07-0818).

Supreme Court of Texas- Decided October 30, 2009

The Supreme Court of Texas took a giant step  closer to  New Jersey's rule in Saffer v. Willoughby, which permits a prevailing plaintiff in a legal malpractice action to recover as consequential damages attorneys' fees and expenses from the negligent attorney, in order to make the plaintiff whole again.

The case involved an underlying trial and botched jury verdict questions caused by the attorney's malpractice and then an appeal to correct the damage it caused.

Here's what the High Court in Texas said:

A negligence claim, unlike a fee forfeiture claim for breach of fiduciary duty, is about compensating an injured party. See Douglas v. Delp, 987 S.W.2d 879, 885 (Tex. 1999) (“[W]hen the injuries caused by an attorney’s negligence are economic, the plaintiff can be fully recompensed by the recovery of any economic loss. Restoration of the pecuniary interest suffices to return a plaintiff to her prior circumstances.”); Thomas D. Morgan, Lawyer Law: Comparing the ABA Model Rules and the ALI Restatement (Third) of the Law Governing Lawyers 98 (2005) (“A key distinction between fee forfeiture and the malpractice remedy is that the amount forfeited need have no relation to actual damages suffered by the client.”) (emphasis omitted); Restatement (Second) of Torts § 903 cmt. a (1977) (“When there has been harm only to the pecuniary interests of a person, compensatory damages are designed to place him in a position substantially equivalent in a pecuniary way to that which he would have occupied had no tort been committed.”).

We see little difference between damages measured by the amount the malpractice plaintiff would have, but did not, recover and collect in an underlying suit and damages measured by attorney’s fees it paid for representation in the underlying suit, if it was the defendant attorney’s negligence that proximately caused the fees. In both instances, the attorney’s negligence caused identifiable economic harm to the malpractice plaintiff. The better rule, and the rule we adopt, is that a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the defendant attorney’s negligence. See Alexander v. Turtur & Assocs., Inc., 146 S.W.3d 113, 119 (Tex. 2004); Knebel v. Capital Nat’l Bank, 518 S.W.2d 795, 799 (Tex. 1974); 3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 21:19 (2009). 

In Saffer, the New Jersey Supreme Court similarly held:

A client "may recover for losses which are proximately caused by the attorney's negligence or malpractice." Lieberman v. Employers Ins., 84 N.J.325, 341, 419 A.2d 417 (1980)...The purpose of a legal malpractice claim is "to put a plaintiff in as good a position as he [or she] would have been had the [attorney] kept his [or her] contract."

                                                         * * *

...,[the prevailing plaintiff] is nonetheless entitled to reasonable expenses and attorney fees, as consequential damages, incurred in a successful malpractice prosecution.

143 N.J.256, 272, 670 A.2d 535.

According to one Texas blogger:

So, in a later malpractice action, the additional portion of fees attributable to the original lawyer’s negligence — added hearings, procedures, or appellate procedures — might be recoverable.

Question: The "later malpractice action" is  an "added procedure". So, aren't  the additional fees that a client has to pay to another lawyer to prosecute the later legal malpractice  action also "attributable to the original lawyer's negligence"? The Texas Court made clear in the Akin Gump case, as did New Jersey in Saffer, that these cases  do not involve the "American Rule" nor fee shifting. They involve compensating the damaged client for his losses and making the client that is  damaged by his lawyer's negligence whole again-- even if doing that requires bringing a later legal malpractice action against the negligent lawyer.

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Brizak v. Needle,  239 N.J. Super. 415, 571 A.2d 975 (1990)

Student Contributor: Maninder (Meena) Saini

NJ Underlying Statute of Limitations and Duty to Investigate

Facts: Plaintiff-client commenced a malpractice lawsuit against defendant-attorney, alleging the defendant was negligent by failing to file a medical malpractice claim before the expiration of the statute of limitations (“SOL”). The defendant argued the SOL did not start until there was expert opinion recognizing that medical malpractice had occurred. The facts are as followed: In 1981, plaintiff sustained an arm injury and was treated by Dr. Shafi. Instead of conducting surgery, the doctor simply placed her arm in a hanging cast. On December 5, 1983, plaintiff retained defendant to pursue an action against Dr. Shafi because she was still suffering from the affects of her arm injury. In May 1984, the defendant requested a copy of the hospital records. Next, in March 1985, the defendant obtained an opinion from a radiologist who advised defendant that no malpractice transpired. In June 1987, defendant obtained another medical expert opinion that held malpractice had occurred.

Issue: When does the “discovery” rule apply in any given case?

Ruling: The “discovery rule” tolls the statute of limitations when one “is either unaware that he has sustained an injury, or although aware that an injury has occurred, he does not know that it is, or may be, attributable to the fault of another.”  When one knows or has reason to know of the injury, the SOL starts to run.

Issue: What is the scope of a lawyer's duty  to investigate the basis of a client’s claim?

Ruling: An attorney must undertake a reasonably diligent investigation to determine if there is a  basis for commencing an action and when the statute of limitation starts to run.
The appellate court stated the “[d]efendant’s clearly erroneous advice to plaintiff that she need not be concerned about the time limitations until she found a physician to support her claim was itself a sufficient basis for linking his negligence to her failure to commence a timely action against the doctor.” The SOL started in December 1983 when the plaintiff had suspicion of the malpractice and retained a lawyer.  

Lesson: The defendant was not diligent in his investigation of the  medical malpractice nor of the ascertaining the date the cause of action accrued in order to determine the correct statute of limitations. . An attorney has a duty to take any steps reasonably necessary to properly handle the case which includes the duty to investigate and to file any action necessary for recovery within the applicable  time period.

Moreover, said the Court:

...[the] attorney who litigates a legal malpractice claim without the opinion testimony of a legal expert unnecessarily exposes his client to a serious risk...

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

NY Underlying defense of criminal  action

Student Contributor: Angela M. Ignelzi

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

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

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

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

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

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Muhammed v. Strassburger, McKenna, Messer, Shilobod and Gutnik
526 Pa. 541, 587 A.2d 1346 (Pa. 1991)

PA Underlying Medical Malpractice Litigation

Student Contributor: Justin B. Lieberman

Facts: Former client sued attorney for legal malpractice after the client was unhappy with the settlement received in the underlying medial malpractice action. In the underlying action clients accepted a settlement offer at a pre-trial conference, and then recanted the acceptance after their lawyer informed the opposing side of acceptance. The opposing side sought enforcement of the settlement and the trial court, at an evidentiary hearing, upheld the settlement, as did the Superior Court on appeal. The clients filed suit against the attorneys. The law firm defended on the following grounds: that the action should be dismissed as the claims were too speculative and settling clients were seeking to relitigate the settlement. The case was brought to the Supreme Court of Pennsylvania.

Issue: Can a settling defendant sue his/her lawyer for malpractice although they agreed to settle the underlying claim?

Ruling: A client cannot bring a malpractice claim against a former attorney because of their later dissatisfaction of a settlement to which they agreed,  unless they can show some fraudulent conduct by the attorney  in advising the client on accepting the settlement. Here, the clients, were dissatisfied not able to renegotiate their settlement after they had already voluntrarily accepted an offer. They were thus, not fraudulently induced to settle by their attorney.

We foreclose the ability of dissatisfied litigants to agree to settlement and then file suit against their attorneys in the hope that they will recover additional monies.

Lesson: An attorney may not be held liable when a client later decides they are unsatisfied with a settlement they willingly agreed to at a prior time, unless the attorney fraudulently induced or intentionally misadvised the client to accept the settlement.

Editor's note: This was the law in PA for many years. The stringent rule in this case, of barring a malpractice suit against the lawyer who represented the settling party-- has  since  been substantially limited  and liberalized.

See, e.g., McMahon v. Shea, 441 Pa. Super. 304, 657 A.2d 938 (1995).

The holding in Muhammad has been rejected in New Jersey (Ziegelheim v. Apollo, 128 N.J.250, 607 A.2d 1298 (1992) and Connecticut (Grayson v. Wofsey, Rose, Kweskin & Kuriansky, 231 Conn. 168, 646 A.2d 1994).

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Cherry Hill Manor Associates v. Faugno (N.J.Super.A.D., 2004) (PDF) reversed by 182 N.J. 64 (2004)

NJ Underlying Real Estate and Litigation

Student Contributor: John Anzalone

Facts:   Plaintiff retained Attorney 1 to represent it in a real-estate purchase. After the transaction failed, Plaintiff retained Attorney 2 to recover its deposit from seller. Attorney 2 failed to add a claim for legal malpractice against Attorney 1 in the suit. Plaintiff then hired Attorney #3, the Defendant, to file a malpractice claim against Attorney 1, but the suit was dismissed because he should have been sued in the case against the seller Attorney #2. Plaintiff then filed a malpractice complaint against Attorney 2 for failure to include Attorney 1 in the suit against the seller, but the suit was dismissed because he should have been sued in the case against Attorney 1. Plaintiff then sued Defendant and his law firm for failing to add a claim against Attorney 2 to the suit against Attorney 1. Defendant and his law firm added Attorney 2 and Attorney 1 to the case under a New Jersey statute providing for indemnification and contribution by those also responsible for Plaintiff's damages.

Issue:   Could the defendant attorney seek reimbursement for damages paid to the Plaintiff from the lawyers the plaintiff previously retained to try to recover its deposit?

Ruling:   In reversing the lower court, the Appellate Division held that an attorney could seek to recover from the lawyers Plaintiff previously retained to try to recover its deposit, based on the following factors:
1) The Defendants' liability and the predecessor attorney's potential liability to the plaintiff were all for failing to protect the interest of the Plaintiff.
2) All liability in the case followed from Attorney 1's potential malpractice in protecting the Plaintiff's interest in its contract with the seller.
3) Defendant was liable for failing to protect Plaintiff's claim against Attorney 2, who was potentially liable for failing to protect Plaintiff's claim against Attorney 1, who was potentially liable for failing to protect Plaintiff's interest against the seller.

Lesson:   When attorneys are sued for failing to protect the plaintiff's interest by a subsequent lawyer for that plaintiff, the attorneys remain potentially liable to the paying defendant lawyer for the extent of the damages to the plaintiff that they caused.

Editor's Note: This summary is posted for educational purposes only, as the Appellate Division decision summarized above was reversed by the NJ Supreme Court. See, 182 N.J. 64,76 (2004). (PDF)

The Supreme Court stated:

...we are dismayed by the cottage industry of litigation that was spawned by a rather commonplace real estate transaction that occurred eighteen years ago. By this opinion, we bring this matter to an end today. We, therefore, hold that, under the circumstances of this case, the prior tortfeasors are not liabile for statutory contribution to the subsequent tortfeasor because the prior and subsequent tortfeasors were not jointly or severally liable to plaintiff for the same cause of action.  We further hold that the subsequent totfeasor cannot claim statutory contribution form the prior tortfeasor inasmuch  as the "injury" inflicted by the prior  tortfeasrn is not the "same injury" as the one inlficted by the subsequent tortfeasor.

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The New Jersey Supreme Court is about to  take another look at the "settle and sue" syndrome: When a client settles a case and then sues  his or her lawyer over it. The case is Guido v. Duane Morris.

The Appellate Division had decided to permit  the Guidos' malpractice lawsuit against their former attorneys who had represented them in an underlying shareholder dispute that was settled.

Duane Morris has filed an interlocutory appeal and brief (PDF) arguing that the suit should not be permitted.

Plaintiffs oppose (PDF) and say that their malpractice claim should be allowed.

Trial Attorneys of New Jersey,  representing the interests of the trial bar, wants  permission to file an amicus brief.(PDF).

Pennsylvania had faced the same problem and has resolved it in a way that seems to have pleased all the contending parties. How should New Jersey’s High Court proceed? For one suggestion, see, "Holding Lawyers Accountable for Bad Settlements" in the New Jersey Law Journal.  (PDF) Should New Jersey follow Pennsylvania's lead or should it chart a different course to calm the unrest in the Appellate Divisions resulting from its 2005 decision in Puder v. Buechel?

Stay tuned. More to come on this hot topic. 

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Connell, Foley & Geiser, LLP v. Israel Travel Advisory Service, Inc.,377 N.J. Super. 350, 872 A.2d 1100 (App. Div. 2005)

NJ Underlying litigation

Student Contributor:  Dannis Le,  Class of 2009.

Facts: Out-of-state law firm recommended a New Jersey law firm to represent client in litigation. That firm worked closely with the N.J. law firm but did not appear as counsel of record. After client lost the case, the NJ law firm sued client for unpaid legal fees and client counter-claimed for malpractice. Client did not claim that out-of-state firm committed malpractice. The NJ law firm sought contribution  from the out-of-state firm in the malpractice action, on the theory that it was either co-counsel or successor counsel in the underlying case. 

Issue: Is out-of-state counsel liable for contribution tn a malpractice action when it did not appear as counsel of record with NJ local counsel?

Ruling: The Appellate Division remanded the malpractice claim for trial and affirmed that the NJ law firm could seek contribution from the out-of-state firm, because: 

1. Co-counsel owes a duty to the client, not to other co-counsel. NJ local counsel must show that the out of state law firm had a duty to their joint client in order to seek contribution in the client's malpractice claim. 
2. Liability under the NJ Joint Tortfeasors Contribution Law. It would defeat the purpose of the JTCL to allow the out of state law firm to escape liability because it was not named in the malpractice claim: "The purpose of the JTCL is to promote the fair sharing of the burden of judgment by joint tortfeasors and to prevent a plaintiff from arbitrarily selecting his or her victim." 
3. Malpractice can occur whether or not an attorney is formally admitted to practice in the state. The Court found no authority to the contrary. Not being admitted to a state does not bar a malpractice claim against out-of-state counsel in that state. 

Lesson: A firm acting as co-counsel has a duty to the client. Co-counsel can be held jointly liable for any malpractice committed. This is true even if they are not admitted pro hac vice in NJ and are not the counsel of record. But under NJ law there is no successor counsel liability. 

Editor's Note: On the duty of local NJ counsel when lead counsel is an out-of-state firm acting pro hac vice, see Ingemi v. Pelino & Lentz, 866 F. Supp. 156 (D.N.J. 1994) where NJ local counsel was held to a reasonable care standard and a duty to take more than a de minimis role in representing the client.

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Gilles v. Wiley, Malehorn & Sirota,
345 N.J. Super. 119, 783 A.2d 756 (N.J.Super.A.D., 2001)

NJ Underlying case: Litigation; Medical Malpractice

Student Contributor: Geri Mulligan

Facts: Lawyer represents plaintiff in a medical malpractice case. Six months after getting a favorable expert witness report, lawyer writes to client that his firm has reconsidered and will not file suit. Lawyer suggests client immediately find a new lawyer and even recommends others who might take the case. Lawyer also stated that client had two years from the malpractice incident to file suit and failure to do so would forfeit client's right to sue. By the time plaintiff met with a new lawyer the statute of limitations had run.

Issue: How long does the lawyer's duty to the client last even after the attorney-client relationship has come to an end?

Ruling: The trial court dismissed the complaint against lawyer. The Appellate Division reversed, holding that lawyer breached his duty of care based on these factors:

1. There was an established lawyer-client relationship. Lawyers had to protect the client's cause of action. Therefore, lawyer's termination of the relationship so close to the expiration of the statute of limitations, without preserving client's cause of action is a breach of duty.
2. RPC 1.16 (b) provides that "where the conduct of the client does not justify the attorney's withdrawal, the attorney may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interest of the client." RPC 1.16 (d) further provides: "upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interest." 
3. Lawyer had the information necessary to file a complaint six months before withdrawing from the case at which point he could have made the determination of whether to continue representation.
4. Although the letter discontinuing representation mentioned the two-year statute of limitations and advised client to obtain new counsel, it failed to provide the date that the statute began to run. Also, the time between termination and expiration of the statute was too short to find new counsel to thoroughly review the case and go forward with filing a complaint.

A lawyer who agrees to represent a client has to preserve the client's cause of action. If the lawyer terminates the representation he must do so in a timely fashion so the cause of action won't become time-barred.

Editor's Note: What could the lawyer have done to preserve the cause of action under these circumstances? 1) With client's consent, file the complaint to stop the statute of limitations and then farm the case out to another lawyer who will substitute into the case. Having done the investigation, gotten a favorable expert report and then filed the complaint will entitle the lawyer to get a fee from substitute counsel; (2) file the complaint pro se for the client and then help client arrange to secure new counsel. After filing pro se Complaint make sure it is timely and properly served.

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Togstad v. Vesely, Otto, Miller & Keef
291 N.W.2d 686 (Min. 1980)

Facts: Plaintiff had consulted with an attorney about bringing a medical malpractice claim. At the conclusion of the consultation, the attorney decided not to take the case, but failed to inform the client about the applicable statute of limitations, that he was not an expert in the field, or that she should consult with another attorney. Relying on the lawyer’s silence, the client did not bring an action until after the statute of limitations had run.

Issue: Was an attorney client relationship formed between the non-client and the attorney?

The Ruling: The trial court held that there was sufficient evidence to create an attorney-client relationship, and the Minnesota Supreme Court affirmed the decision based on the following factors:

1. The attorney acted as a legal advisor on the viability of the plaintiff’s claim. The non-client reasonably relied on that advice and on the attorney’s silence that his firm would not take the case.
2. It was reasonable for the non-client to rely on the attorney’s advice. An attorney-client relationship is created when one asks and receives legal advice from an attorney in circumstances where a reasonable person would rely on such advice.
3. The attorney’s advice injured the non-client. An attorney-client relationship comes into effect when an attorney gives legal advice, where it is reasonably foreseeable that the client will rely on the advice and could be damaged if the advice given by the attorney was incorrect.

The Lesson: When consulting with a non-client giving an opinion about the viability of a case will create an implied attorney-client relationship because he/she has the right to rely on the lawyer’s professional legal opinion. In order to prevent liability, its a good idea to send a “non-engagement” letter informing the prospective client about the applicable statute of limitations for his or her cause of action, and clearly stating that you are not their lawyer and that they should promptly seek other counsel to protect their legal rights. You might even gve them the local bar association's lawyer referral service.

Editor’s Note: For how little it takes to form an attorney-client relationship which can give rise to liability, see, Restatement of Law Governing Lawyers §14.

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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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