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

Sahli v. Woodbine Board of Education, 386 N.J.Super. 533, 902 A.2d 296 (App. Div. 2006)
NJ Underlying Subrogation Action

Student Contributor:  Jason Klein

Facts: The Woodbine Board of Education entered into a contractual agreement with Ronald Sahli, an attorney licensed to practice in the State of New Jersey, to hire him as its attorney. Pursuant to the agreement, Sahli’s duties included attending Board meetings, providing counsel and advice to board members and carrying out the Board’s specific instructions as related to legal matters involving the district.

Toy, an Administrative Assistant in the Special Education Department of the Woodbine School District, appeared at a meeting of the Board to discuss her complaints regarding the district’s failure to comply with federal and state laws governing special education programs. Because of confidentiality concerns at the meeting, the Board designated Sahli, rather than the Board’s usual secretary, as secretary pro tem, responsible for providing minutes of the session, as well as performing his usual duties as attorney.

Following Toy’s presentation, Sahli recommended to the Board that Toy be removed from her position and explained that if the Board felt it was necessary, they could subject Toy to a physical and/or psychiatric examination. Toy declined to undergo the requested examination and left the employment of the Woodbine School District. Toy sought damages from Sahli for violating her civil free speech rights, Law Against Discrimination rights, and due process and equal protection rights. Sahli sought indemnification under New Jersey Statute 18A:16-6 which provides that "the board shall defray from all costs of defending [a civil action]...any person holding office, position or employment under the jurisdiction of any board of education".

Issue: Whether an attorney has a right to indemnification for legal fees incurred in the defense of a suit against him under the indemnification provisions of N.J.S.A. 18A:16-6.

Ruling: The Court, in reversing a motion for summary judgment, found that a third party independent contractor operating as a board attorney is not entitled to indemnification under N.J.S.A. 18A:16-6.

Lesson: The intent of the legislature in passing N.J.S.A. 18A:16-6 was “to confine indemnification to Board members, employees, and students preparing for teaching careers.” None of the statute’s various amendments since its enactment in 1937 have referenced school board attorneys, or otherwise suggested coverage for legal fees incurred in the defense of malpractice actions.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Grubbs v. Knoll,
376 N.J. Super. 420, 870 A.2d 713 (App. Div. 2005)

Student Contributor:  Cheryl Neuman

NJ Underlying real estate transaction

Facts: Plaintiff was involved in a real estate transaction wherein the Defendant and his real estate agent failed to disclose evidence revealing that the real estate was situated above wetlands, which would result in building and construction limitations. Plaintiff's attorney similarly failed to bring this critical information to light.  Upon learning of these constraints, Plaintiff sued the Defendant for common law fraud, the Defendant’s real estate agent for violation of the Consumer Fraud Act ("CFA"), and his own lawyer for legal malpractice. The jury awarded the plaintiff $75,650 in compensatory damages for common law fraud, consumer fraud, and legal malpractice and allocated 60% of the liability for compensatory damages to the broker, 30% to vendors, and 10% to plaintiff’s counsel.  The trial court increased the damages under the CFA to $226,950. The plaintiff settled with the defendant for $20,000 and with the real estate agent for $500,000. The malpractice claim, however, did not settle, and plaintiff subsequently sued the allegedly negligent attorney for reimbursement of attorney's fees incurred in the malpractice action.  

Issue: Will a negligent attorney sued for malpractice be liable for the legal fees incurred by his former client in the malpractice action?  

Ruling: As a general rule, New Jersey Courts ascribe to the American Rule:  there is no fee shifting between parties irrespective of who prevails.  Legal malpractice cases, however, are an exception.  Legal fees incurred by a former client in a legal malpractice action are considered additional compensatory damages in instances where the client prevails.  The Grubbs Court found that the negligent attorney was liable for one-third of the attorney's fees and costs incurred by his former client in the malpractice action. 

Lesson: A negligent attorney is responsible for the reasonable legal expenses, costs, and attorney's fees incurred by a former client in prosecuting the legal malpractice action against the negligent attorney.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

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. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

LaBracio Family Partnership v. 1239 Roosevelt Avenue, Inc.,
340 N.J. Super. 155, 773 A.2d 1209 (App. Div. 2001)

Student Contributor:  Cheryl Neuman

N.J. Underlying real estate transaction

Facts:  Sevdalis was represented by his attorney, Kroop in selling his diner. Zervas, the buyer, was represented by his lawyer, Abazia. There were two mortgages involved in this transaction:
1.    Zervas was supposed to assume the first mortgage to a party named LaBracio, and
2.    Sevdalis was going to take the purchase money mortgage which would be secondary to the LaBracio mortgage.
At the closing, Abazia (buyer’s lawyer) took the deed and Sevdalis’s mortgage and said he was going to record them. He didn’t record them. Subsequently, Zervas physically assaulted Abazia, and took his files, the deed, and mortgage. Abazia told Kroop that the mortgage and deed were never recorded, but Abazia was then fired and Zervas hired a new lawyer, Burger.
Burger also did not record the deed or mortgage, and he gave the documents to his client, Zervas. During this time, Zervas granted mortgages on the property to unrelated mortgagees, thereby giving these new liens priority over the Sevdalis mortgage.  Sevdalis then brought a legal malpractice suit against  Kroop (seller's attorney)  Abazia (buyer's attorneys) and Burger (seller's second attorney).

Issue : Whether Burger was negligent and if so, how should responsibility be allocated between the three lawyers?

Ruling: Burger was negligent and is therefore responsible for 25%, Abazia is responsible for 25%, and Kroop is responsible for 50% of the award. The court used the substantial factor test in determining whether Burger would be held responsible. Since his actions were a substantial factor in causing the injuries, he was indeed responsible.

Lesson: N.J. recognizes the existence of duties owed not only to an attorney’s client but also to third parties, such as  opposing counsel:

 attorneys may owe a duty of care to non-clients, when the attorneys know or should know, that non-clients will rely on the attorneys’ representations and the non-clients are not too remote from the attorneys to be entitled to protection.

LaBracio, 340 N.J. Super. 155, 163. 

The court further said that:

a duty to a non-client third party depends on balancing the attorney’s duty to represent clients vigorously, Rule of Professional Conduct, Rule 1.3 (1993) with the duty not to provide misleading information on which third parties foreseeably will rely, Rule of Professional Conduct, Rule 4.1 (1993).
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link