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

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

TX: Underlying divorce action

Student Contributor: Megan Diodato

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

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

Ruling: No

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

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

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Johnson v. Babcock, Court of Appels of Oregon, November 10, 2010 (Unpublished). 

Facts:  After being sentenced to 30 years in prison, Dwayne Johnson filed a post-conviction appeal in which he was represented by Attorney Babcock.  The Appellate Division remanded the case for a resentencing hearing.  The trial court again found Johnson to be a dangerous offender and imposed the 30 year sentence.  

Plaintiff then pursued a petition for post-conviction relief, alleging ineffective assistance of counsel at the resentencing hearing.  Plaintiff argued that under Oregon law, the maximum sentence he could have received was 80 months.  The trial court denied this petition and the appellate court affirmed, finding that Plaintiff failed to show his former attorney's performance was "unreasonably deficient."

Shortly thereafter, Plaintiff sought habeas relief in the United States District Court for the District of Oregon.  The federal court concluded that the attorney's representation did not comport with constitutionally minimum standards of effective assistance.  Specifically, the federal court determined that the attorney's failure to object to the 30 year sentence on the basis of pertinent Oregon case law was unreasonable and prejudiced Johnson.  Ultimately, the state court stipulated to a sentence of 80 months. 

Plaintiff then initiated this legal malpractice action.  Babcock argued that the suit was barred by the doctrine of issue preclusion because the state court had already decided that his performance had not been "unreasonably deficient."

Issues:  When two separate courts have rendered two separate findings with regad to the same issue, is that issue precluded from relitigation in another proceeding? 

Ruling:  No.  

First, the Court set out the five factors that must be present in order for the doctrine of issue preclusion to apply 

1. The issue in the two proceedings is identical.
2. The issue was actually litigated and was essential to a final decision on the merits in the prior proceedings.
3. The party sought to be precluded has had a full and fair opportunity to be heard on that issue.
4. The party sought to be precluded was a party or was in privity with a party to the prior proceeding.
5. The prior proceeding was the type of proceeding to which this court will give preclusive effect.

The Court then noted that the doctrine does not come without exceptions.  One exception is the existence of inconsistent determinations of the pertinent issue: 

Those courts and commentators which have considered the question are in virtually unanimous agreement that where outstanding determinations are actually inconsistent on the matter sought to be precluded, it would be patently unfair to estop a party by the judgment it lost.

Given the disparate determinations on the issue of the adequacy of Babcock's representation in the state and federal courts, the issue preclusion doctrine did not bar Johnson's subsequent suit for legal malpractice.

Lesson:  Inconsistent determinations on the issue of ineffective assistance of counsel, or legal malpractice, will not bar relitigation of the issue in a subsequent suit where the sufficiency and adequacy of the attorney's representation is again at issue.

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Perry v. Emerson, Supreme Judicial Court of Maine, October 26, 2010. 

Facts:  Emerson initiated a fee arbitration proceeding against her former attorneys, alleging that she never agreed to be responsible for the legal fees incurred in her divorce action and she was led to believe her husband would be responsible for the fees.

The arbitration panel determined that: 

Emerson routinely asked Perry and K&P about her obligation to pay fees billed to her, indicating that she doubted that her husband would actually pay her fees, and that she "was fully cognizant of" the possibility that a provision requiring her then-husband to pay her attorney fees "might not be a part of the ultimate judgment or settlement agreement." The panel also found that Emerson was aware that the final divorce agreement did not require her husband to pay her legal fees.

Based on this determination, Emerson's attorneys moved for summary judgment in a pending malpractice action.  The lower court concluded that Emerson's prior litigation of factual issues concerning her obligation to pay her own attorney's fees before the arbitration panel precluded re-litigation in the form of a malpractice complaint.  Emerson appealed.

Issues:  Can the factual determinations of a fee arbitration committee preclude litigation of a pending malpractice action? 

Ruling:  Perhaps. 

The findings made by a Fee Arbitration Panel, to the extent necessary to its determination, have preclusive effect for purposes of collateral estoppel.  A valid and final award by arbitration has the same effect under the rules of res judicata as a judgment of a court, so long as the process contains the essential elements of "adjudication":

(1) adequate notice, (2) the right to present evidence and legal argument and to rebut opposing evidence and argument, (3) a formulation of issues of law or fact to apply rules to specified parties concerning a specified transaction, (4) the rendition of a final decision, and (5) any other procedural elements as may be necessary to constitute the proceeding a sufficient means of conclusively determining the matter in question.

The lack of de novo review of the panel's decision is not a factor that is considered in determining the decision's preclusive effect. 

Based on this analysis, the Court held that Emerson's claim of an oral agreement/contract with her former attorneys that she would not pay her own attorney's fees was necessarily barred. 

The Court also barred, for different reasons, Emerson's claim of negligence against her former attorneys for their failure to include a provision in the settlement agreement providing that her husband would pay her attorney's fees.  The Court noted that the arbitration panel's determinations would have no bearing on this issue, since it was not necessary to the resolution of the fee dispute. Rather, Emerson was estopped from pursuing her negligence claim because she failed to present necessary expert testimony: 

The appropriate standard of care, and whether [the attorneys] breached a duty of zealous representation to Emerson by negotiating a divorce settlement that did not include a requirement that Emerson's ex-husband pay all of her attorney fees, is not obvious or within a layman's common knowledge and would have required expert testimony.

Lesson:  A fee arbitration panel's determinations will have preclusive effect on a pending or subsequent malpractice litigation, so long as those factual determinations were necessary to a resolution of the fee dispute.  Expert opinion is necessary to contest whether or not an attorney adequately drafted a settlement agreement.

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Liberty Associates v. Etkin, 2010 NY Slip Op 225 (2nd Dept. Jan. 10, 2010)

Facts:  In March, 2002, the plaintiff, Liberty Associates, commenced an action to recover damages for legal malpractice against their former attorney. In January, 2003, the attorney's firm commenced an action against Liberty Associates in the Superior Court of New Jersey to recover fees for the legal services rendered. In 2004, during the pendency of the malpractice action, Liberty Associates and the attorney's firm settled the New Jersey fee dispute action, which was dismissed with prejudice. Upon learning of the settlement, the attorney moved for summary judgment dismissing the complaint in the malpractice action. The Supreme Court granted the attorney's motion.

Issue: Was Liberty Associates' pending malpractice claim against its former attorney barred by the doctrine of res judicata because of the dismissal of a separate action by the former attorney's firm to collect attorney's fees?

Ruling:  Yes.  

[T]he plaintiff's claim is barred by the doctrine of res judicata, which "precludes a party from litigating a claim where a judgment on the merits exists from a prior action between the same parties involving the same subject matter. A valid final judgment bars future actions between the same parties on the same cause of action, which includes "all other claims arising out of the same transaction or series of transactions . . . even if based upon different theories or if seeking a different remedy."

The Court further noted that a stipulation of discontinuance with prejudice without reservation of right or limitation of the claims disposed of is entitled to preclusive effect under the doctrine of res judicata.

Lesson:  Dismissal of one action involving the underlying matter, without an adequate reservation of rights, will preclude the client from pursing malpractice claims as to the same matter in a separately filed action. 

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