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

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

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

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

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

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

Ruling: No. 

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

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

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

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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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