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

Elliott v. Van Kleef, 830 So.2d 726 (2002).

AL: Underlying personal injury action

Student Contributor: Farah Shahidpour

Facts: Client was injured when he was exposed to hazardous chemicals while working in Arkansas. Client hired an Alabama attorney to represent him in a personal injury action in Arkansas. Attorney was not licensed to practice law in Arkansas, so he contacted an Arkansas Attorney by telephone and requested that he serve as local counsel in Arkansas. This action was voluntarily dismissed. Attorney filed a second action, arising from the same injury. This action was involuntarily dismissed because Attorney allegedly failed to serve the defendant in that action within the time allowed by the Arkansas Rules of Civil Procedure. Client filed an action under the Alabama Legal Services Liability Act §6-5-570 in the Jefferson Circuit Court alleging that the Attorney failed to properly represent him in a personal-injury action filed in Arkansas, resulting in the action being dismissed with prejudice. Attorney made a motion to dismiss for lack of personal jurisdiction. Client appeals, stressing his belief that Arkansas attorney would travel to Alabama to represent him.

Issue: Whether the trial court correctly dismissed Client’s action for lack of personal jurisdiction?

Ruling: Yes. Attorney is licensed to practice law in Arkansas and Texas. He is not licensed to practice law in Alabama and has never applied for a license to practice law in Alabama. Exercise of either general or specific in personam jurisdiction over the Arkansas attorney would violate the Due Process Clause, Rule 4.2, Ala. R. Civ. P. and it does not permit the extension of Alabama’s in personam jurisdiction over the Arkansas Attorney. Telephone calls, fax transmissions, and letters sent from the Alabama attorney & client to the Arkansas attorney are not relevant since they were the, “unilateral activity of another person.” Burger King v. Rudzewicz, 471 U.S. 462, 475 (1985). The Arkansas Attorney did not purposefully avail himself of jurisdiction in Alabama merely by receiving telephone calls, fax transmissions, or by opening mail sent from Alabama.

Lesson: The Due Process Clause of the 14th Amendment permits a forum state to subject a nonresident defendant to its courts only when that defendant has sufficient “minimum contact” with the forum state. If an Attorney merely receives telephone calls and fax transmissions or opens mail from another jurisdiction, he is not “purposely availing himself of jurisdiction from that State.”

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Hoagland v. Sandberg, Phoenix & Von Gontard, 385 F. 3d 737 (2004)

7th Cir.: Underlying legal malpractice claim

Student Contributor: Clem Durham

Facts: The district court determined after a bench trial that Hoagland's suit failed as a suit for legal malpractice. Hoagland doesn't disagree. His grievance is that he should have been allowed either to amend his complaint to make clear that his claim, which he believes the district judge misunderstood, is not malpractice but is rather breach of contract or alternatively breach of fiduciary duty, or allowed to dismiss his suit without prejudice and start over. The claim, in substance and without regard to how it might be characterized, is that the Sandberg law firm represented the adversaries — a corporation (Midwest) and its swindling president — in a derivative action and used its dual representation to prevent the corporation from recovering assets of which the president had wrongfully deprived the corporation; that the law firm had wrongfully accepted payment of its fees from the corporation (the client whose interests the firm had sacrificed); and that it should therefore be required to rebate ("disgorge") the fees to Hoagland for the benefit of the corporation.

Issue: Is it proper to dismiss a claim as duplicative, when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury?

Ruling: Yes. Hoagland cannot be permitted, by recharacterizing the claim — whether by calling the conflict of interest a breach of fiduciary obligation or by contending that his contract with the law firm contained an implied promise not to commit such conflicts — to get around the requirement of presenting expert testimony. That is the kind of formalist move that courts rightly reject. Illinois courts hold that "when a breach of fiduciary duty claim is based on the same operative facts as a legal malpractice claim, and results in the same injury, the later claim should be dismissed as duplicative." The fact that restitution was sought instead of conventional damages also does not alter the nature of the suit. Restitution is a remedy, at least when sought as here as reparations for a tort. Asking for restitution doesn't change the cause of action.

Lesson: Make sure all claims are included in the initial complaint, because if a new theory of recovery is brought too late, it may be deemed duplicative. 

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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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Halley v. Myatt, Superior Court of New Jersey, Appellate Division, May 3, 2010

Facts:  Plaintiffs retained a New York attorney, not licensed in New Jersey, to represent them in negotiating a remedy with their lenders to avoid foreclosure proceedings.  Although the attorney negotiated a settlement agreement, Plaintiffs learned shortly thereafter that she had failed to investigate and discover a $12,000 tax lien which had accumulated on their primary residence during the time the lender held title to the property.  Plaintiffs were eventually forced to file a Chapter 13 bankruptcy to avoid a tax foreclosure on their home and sued their former attorney for malpractice.

Issue: Can a New York attorney be sued for professional negligence in New Jersey even though she was never required to appear in New Jersey to handle the matter? 

Ruling: Yes.  If the defendant attorney is able to show they she had no territorial presence in New Jersey, plaintiff is then required to demonstrate the necessary "minimum contacts" to exercise in personam jurisdiction:

So long as a commercial actor's efforts are purposefully directed towards residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.

In this regard, the Court noted that the defendant attorney commenced negotiations in New Jersey, communicated regularly with Plaintiffs in New Jersey, and the final settlement agreement was executed in New Jersey: 

Most significantly, defendant's activities were purposefully directed at New Jersey residents and directly impacted New Jersey real property, which was the subject of litigation in New Jersey courts.

The Court further noted that the exercise of in personam jurisdiction in New Jersey would place no special burden on a New York attorney since the two states are contiguous.  Moreover, the exercise of long arm jurisdiction was necessary to shield New Jersey citizens from unauthorized practice of law within its borders.  See R.P.C. 5.5(b)(3)(iii):  Non New Jersey lawyers may participate in mediation in New Jersey only for existing clients and only if the dispute originates in or is otherwise related to a jurisdiction in which the lawyer is admitted to practice.

Lesson: Non New Jersey lawyers are subject to professional negligence suits in New Jersey in the event the matter substantially relates to a New Jersey resident or New Jersey property and plaintiff is able to establish minimum contacts.  Lack of territorial presence is not a determinative factor.

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Roof Technical Services, Inc. v. Hill, 679 F.Supp.2d 749 (N.D.Texas 2010)

Underlying Patent/Trademark Matter

Facts:  Plaintiff invented a roof venting technique and retained Defendant Hill to secure patent protection.  In the instant action, Plaintiff alleged that it was unable to obtain patent protection due, in part, to Defendant's failure to timely submit a conforming application to the U.S. Patent and Trademark Office.  Based on that allegation, Plaintiff filed suit in the United States District Court, Northern District of Texas.  Since there was no diversity of citizenship, the Court examined whether the action "arose under" federal patent law to establish jurisdiction.

Issue:  Can a legal malpractice action based on underlying patent law issues be brought in federal court? 

Ruling:  Not where a determination of the professional negligence action requires only application of federal law. 

Plaintiff argued that it properly brought the malpractice action in federal court, since a determination would require the Court to (1) analyze whether its invention was patentable under federal law; (2) the standard of care against which Defendant's conduct would be measured requires reference to patent regulations and guidelines; and (3) the determination of damages requires a valuation of the allegedly lost patent. 

The Court, however, found Plaintiff's argument to be unpersuasive and held that the action was "traditionally" a state case.  The Court found that federal jurisdiction would be inappropriate, since there was, apparently, no need to "determine the meaning of federal patent law".  Rather, the issues raised required "only application of federal law to the specific facts of the case". 

Furthermore, the Court explained that while "there is a federal interest in the uniform application of patent laws...that interest is not implicated here, where no patent rights are actually at stake."

No patent has issued for [Plaintiff's] invention and none will issue.  Thus, even if the Court must decided patent law issues, those decisions will not create or destroy any patent rights such that uniformity in the way patents are issued or enforced will be threatened.  In other words, the determinations that might occur in this action do not justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues.

***

Boiled down, this action is about Defendant's [alleged] failure to meet deadlines and communicate with their clients.  Patent issues are merely floating on the periphery.  Thus, this action does not belong in federal court.

Lesson:  Actions that require only the application of federal law to make a determination with regard to plaintiff's legal malpractice claims, do not sufficiently "arise under" federal law for purposes of establishing federal jurisdiction.

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First American Title Ins. Co v. Jordan W. Kapchan,  Superior Court of NJ App Div. Docket No. A-5953-08T2 (decided April 12, 2010)

NJ Underlying mortgage loan

Facts: Plaintiff title insurer from California,  had to pay out $150,000 to 5 intended payees of mortgage proceeds—all from outside NJ, who did not receive payment from mortgage closing related to NJ property. Title Insurer now sues its closing attorney for not following closing instructions. The closing attorney was located in New York. He was not admitted to practice in NJ, had no office in NJ and did not solicit business in NJ. There was no physical loan closing in NJ. The loan proceeds were deposited by the California mortgage lender into the closing attorney’s trust account in NY and was disbursed by the closing attorney from NY. The NY closing attorney sent the mortgage for recordation in Mercer County, NJ to the title agency, which was in NJ.
The trial court dismissed for lack of personal jurisdiction over the NY attorney.
The Appellate Division reversed and found that NJ had personal jurisdiction over the NY attorney.

ISSUE: How little must a NY closing attorney do to be subject to suit for legal malpractice in NJ?

RULING:

The NJ property “itself, provides a very tangible and central nexus between [the NY closing attorney] and the State of New Jersey.” 

The only other NJ contact was that the NY lawyer mailed the marked up title binder, the HUD-1 and the mortgage for recordation to the title agency in NJ. And that was all done from NY.

LESSON: The case shows how  truly “minimal” the out-of-state closing attorney’s contacts with the State of NJ needs to be and how very long NJ’s jurisdictional arm can be. Other issues to be decided: Choice of law. Will the NY lawyer’s conduct be measured by NY or NJ standards? Will the California title insurer be entitled to recover consequential damages such as its attorney’s fees and litigation expense under Saffer v. Willoughby or will the law of some other state apply?

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