Rounding out the week in legal malpractice, this article caught our eye.  Law firm represents company seeking to go national in the cable market.  Advises in a transaction so large it gets its own nickname.  In one of probably hundreds of document drafts two paragraphs go missing, and everything falls apart. 

What secondarily caught the eye was a month long mediation.  That’s longer than many trials.  Here is the story from the National Law Journal:

"LOS ANGELES – Irell & Manella has settled a $150 million legal malpractice lawsuit with one of its largest clients, Charter Communications Inc., according to a Feb. 10 filing in the case.

The settlement was reached following two months of mediation, according to court documents. Charter Communications Inc. v. Irell & Manella LLP, No. 07-cv-00402 (C.D. Calif.). No details of the settlement, including the dollar amount, were provided.

Irell, based in Los Angeles, had represented Charter and its chairman, Paul Allen, while both were looking to acquire cable systems to build a nationwide cable television company. In 2000, while working on an acquisition dubbed "the Bresnan Transaction," an unnamed Irell associate deleted two important paragraphs of the contract, giving Allen an unintended type of stock. No one noticed the mistake until 2002, after which Charter was forced to negotiate with Allen over millions of dollars to rectify the deal.

Charter then sued Irell for legal malpractice, breach of fiduciary duty, breach of contract and other claims. "
 

Much litigation arises from the "deep pocket" theory.  Put in the best light, it might be said that a plaintiff has really been wronged, and now the search is on for the usual suspects.  Put another way, someone has lost a lot of money, due to no fault of his own, and he would like to be reimbursed.  Who is available to reimburse plaintiff?

Here, in Winter v. Dowdall a New York County case, we see how this unwinds. Will it be the attorneys who handled a transaction?   Justice Tolub analyzes the following:

Plaintiff wants to sell property and do a 1031 like-kind exchange.  He hires attorneys who correctly tell him that a third-party must hold the proceeds of the sale in a designated account, and then give the proceeds back to purchase the second property.

The sale goes correctly, the money is delivered to a company which specializes in like-kind exchanges, and apparently it disappears while it is supposed to be in the company’s accounts.

Is Citibank responsible?  Is the attorney responsible?  From the caption and the opinion, it seems that the actual holder of the funds is no longer a defendant, and probably [we are guessing] no longer is of any use to plaintiff.  Lost, stolen or missing?

In the event, both attorneys are out of the case, because they are not responsible for the independent torts of the third party funds holder.  Although not specifically stated, there does not seem to be a theory of negligence in the selection of the fund holder, which was probably just another company without apparent faults.

Attorney Referrals are a significant part of the attorney compensation field, and some attorneys derive considerable fees from their practice of taking in a large catchment population, and then referring the cases out to attorneys in specialized fields.  What is their potential liability?

Bloom v Hensel ;2009 NY Slip Op 00884 ;Decided on February 6, 2009 ;Appellate Division, Fourth Department discusses this issue.
 

""[A]n attorney-client relationship may exist in the absence of a retainer or fee" (Gardner v Jacon, 148 AD2d 794, 795) and, "[i]n determining the existence of an attorney-client relationship, a court must look to the actions of the parties to ascertain the existence of such a relationship" (Wei Cheng Chang v Pi, 288 AD2d 378, 380, lv denied 99 NY2d 501; see McLenithan v McLenithan, 273 AD2d 757, 758-759). The unilateral beliefs of plaintiffs, without more, do not render them Calandra’s clients (see e.g. Volpe, 237 AD2d at 283; Jane St. Co., 192 AD2d 451). Here, plaintiffs submitted evidence that Calandra referred the personal injury action to Hensel and that plaintiffs met with Hensel in Calandra’s office for the initial meeting and on another occasion as well. Plaintiffs also [*2]submitted evidence that Calandra’s staff arranged for the initial meeting, that both defendants met with plaintiffs during that meeting, and that, at the conclusion of the meeting, Hensel stated that "they would call [Robert W. Bloom, Jr. (plaintiff)] . . . if they were going to take the case." In addition, plaintiffs submitted the affidavit of Hensel in which he stated that he had previously engaged in fee-sharing arrangements in several cases referred to him by Calandra and that there was an oral agreement to split the fee with respect to the instant personal injury action. Hensel also stated that Calandra inquired with respect to the progress of the underlying action several times, and plaintiff testified at his deposition that Hensel informed him of that fact. Several of the pleadings or proposed pleadings in the personal injury action list both defendants as plaintiffs’ attorneys, and plaintiffs also submitted evidence establishing that Hensel sent Calandra copies of certain of his correspondence with plaintiffs. Viewed as a whole, we conclude that the evidence submitted in opposition to the motion raises a triable issue of fact whether there was an attorney-client relationship between plaintiffs and Calandra (see Tropp, 23 AD3d 550; cf. Jane St. Co., 192 AD2d 451). "

The Fourth Department handed down four legal malpractice decisions this week, which is surely a record. Three were decisions without reasoning.  The fourth, KEITH LONG, , v CELLINO & BARNES, P.C., THE BARNES FIRM, P.C., STEPHEN E. BARNES, ESQ., RICHARD J. BARNES, ESQ., ROSS M. CELLINO, JR., ESQ., 1620 CA 07-01737;SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FOURTH DEPARTMENT;2009 NY Slip Op 910; 2009 N.Y. App. Div. LEXIS 968
 

permits a look at how the Appellate Division peels away the layers of a case.  The facts seem simple.  Plaintiff was a construction worker who fell from a height while working.  Defendants were his attorneys, and the appellate decision says that they sued the wrong parties.  Plaintiff had three causes of action, negligence, contract, fraud and he asked for punitive damages.

"Contrary to plaintiff’s contention, Supreme Court properly granted those parts of the first cross motion of defendants seeking summary judgment dismissing the breach of contract and fraud causes of action against them as duplicative of the malpractice cause of action. The breach of contract cause of action arises from the same facts and alleges the same damages as the malpractice cause of action (see InKine Pharm. Co. v Coleman, 305 AD2d 151, 152, 759 N.Y.S.2d 62). With respect to the fraud cause of action, defendants met their initial burden by establishing that plaintiff failed to allege fraud "premised upon one or more affirmative, intentional misrepresentations–that is, something more egregious than mere [*2] concealment or failure to disclose [defendants’] own malpractice’ . . . –which have caused additional damages, separate and distinct from those generated by the alleged malpractice" (White of Lake George v Bell, 251 AD2d 777, 778, 674 N.Y.S.2d 162, [**3] appeal dismissed 92 NY2d 947, 704 N.E.2d 230, 681 N.Y.S.2d 477; see Tasseff v Nussbaumer & Clarke, 298 AD2d 877, 878, 747 N.Y.S.2d 621). Plaintiff failed to raise a triable issue of fact in opposition to those parts of the first cross motion (see generally Zuckerman v City of New York, 49 NY2d 557, 562, 404 N.E.2d 718, 427 N.Y.S.2d 595).
Contrary to the contention of defendants on their [**4] cross appeal, the court properly denied that part of the first cross motion seeking summary judgment dismissing the malpractice cause of action. Defendants’ own submissions raise triable issues of fact whether plaintiff would have succeeded in the underlying action absent defendants’ negligence (see generally Phillips v Moran & Kufta, P.C., 53 AD3d 1044, 862 N.Y.S.2d 875).
 

How much money can be made in the business of incarcarating juviniles?  Apparently, quite a bil.  This Pennsylvania judge was suspended upon "accusations that two now-suspended Pennsylvania judges accepted $2.6 million in kickbacks in exchange for incarcerating juveniles at specific detention facilities "  That’s bad.  Now, from the ABA Journal,  the spillover:

"Accusations that two now-suspended Pennsylvania judges accepted $2.6 million in kickbacks in exchange for incarcerating juveniles at specific detention facilities have spilled over into another multimillion-dollar case.

A law firm seeking to overturn a $3.4 million legal malpractice award says in a motion for a new trial yesterday that it should be allowed to introduce evidence of the judges’ alleged criminal conduct and plea agreements in the federal kickbacks case, reports the Wilkes-Barre Times Leader.

Because one of the two judges, former Luzerne County President Judge Mark Ciavarella Jr., presided over the legal malpractice case—and a lawyer representing the malpractice plaintiff was then an owner of a juvenile detention facility central to the criminal case—information about the federal criminal case is relevant to show bias on the judge’s part in the legal malpractice case, contends Laputka Bayless Ecker & Cohn in the motion."

Here is the story of a three-way deal in a legal malpractice / overpayment of fees / municipal negligence case which we reported at the onset.  In Lodi, California [I must admit that the CCR song quickly comes to mind] target attorney had represented the city in litigation, especially an underground pollution case, and claimed he was owed $ 7 million or more.  Here, from Recordnet.com is the story:

"Lodi officials called lawyer Michael C. Donovan incompetent and a fraudster.

Over the course of seven years, they paid Donovan and his firms $16 million to pursue a legal strategy that was later discredited.

After they fired him in 2004 and abandoned his failed legal tactics in a behemoth underground pollution ordeal, officials said they did not owe him a penny more.

Now, after already spending millions more fighting him in court, it will cost the city another $1 million to make Donovan go away for good.

A divided City Council on Wednesday approved settlement agreements that end a back-and-forth legal battle:

The city will drop its 2005 lawsuit against Donovan, in which it claimed he committed fraud and legal malpractice, and receive $200,000 from the attorney’s legal insurance.

Donovan, in turn, will get $1.2 million to drop his countersuit"

If one were to peruse the legal press, headlines seem limited to merger, layoffs and legal fee disputes.  There is a definite tie-in to legal malpractice litigation.  Lesson one by legal malpractice insurers to attorneys is that legal fee cases engender legal malpractice defenses.

Here, from Legal Profession Blog is yet another example:  attorney who has the benefit of an arbitration clause in its retainer agreement sues for fees.  Client defends with malpractice claim.  Outcome?  Attorney gets no fees, client recovers fees. 

"A Maryland lawyer retained to handle a custody suit filed suit against the client for unpaid fees. The client counterclaimed alleging that the lawyer had breached the retainer contract by failing to properly represent him and sought the return of fees that had been paid. Counsel for the lawyer then sought but did not get arbitration of the dispute, as contemplated by the retainer agreement. The jury gave the lawyer nothing; the client won the return of almost $25,000 in previously paid fees."

"The lawyer appealed, claiming that the arbitration provision should have been applied and that the breach of contract counterclaim was a veiled claim of legal malpractice. The Maryland Court of Special Appeals rejected these contentions, "

For some reason, it seems legal malpractice cases are subject to an inordinately high percentage of motions to dismiss, more so than other categories of cases.  Here in SHAHRAM DAVID LAVIAN,  -v.- IRA DANIEL TOKAYER, ESQ., 08 Civ. 938 (PAC) (GWG);
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK;2009 U.S. Dist. LEXIS 6066

we have a primer on the law of 12(b)(6) motions:  "A party may move for judgment pursuant to Fed. R. Civ. P. 12(b)(6) where the opposing party has "fail[ed] to state a claim upon which relief can be granted." Separately, Fed. R. Civ. P. 8(a)(2) requires that a pleading contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Under this rule, a complaint "must simply ‘give the defendant fair notice of what the plaintiff’s claim is and the grounds upon which it rests.’" Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007) (quoting Swierkiewicz v. Sorema N. A., 534 U.S. 506, 512, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002)). When considering motions [*4] to dismiss the claims of a plaintiff proceeding pro se, pleadings are construed liberally. See, e.g., Haines v. Kerner, 404 U.S. 519, 520-21, 92 S. Ct. 594, 30 L. Ed. 2d 652 (1972)."

Nonetheless, "a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level . . . ." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1964-65, 167 L. Ed. 2d 929 (2007) (citations, internal quotation marks, and brackets omitted); see also 127 S. Ct. at 1966 (pleading must "possess enough heft to show that the pleader is entitled to relief") (citations, internal quotation marks, and brackets omitted). Thus, "a complaint must allege facts that are not merely consistent with the conclusion that the defendant violated the law, but which actively and plausibly suggest that conclusion." Port Dock & Stone Corp. v. Oldcastle Ne., Inc., 507 F.3d 117, 121 (2d Cir. 2007) (citation omitted). As one case puts it, the factual allegations of a complaint must be sufficient to render the claim "plausible." Boykin v. KeyCorp, 521 F.3d 202, 213 (2d Cir. 2008) [*5] (citing Iqbal v. Hasty, 490 F.3d 143, 158 (2d Cir. 2007)) (emphasis omitted).

On a motion to dismiss for failure to state a claim, all factual allegations in the complaint are accepted as true. See Swierkiewicz, 534 U.S. at 508 n.1. While a court normally examines only these allegations on a motion to dismiss, "[d]ocuments that are attached to the complaint or incorporated in it by reference are deemed part of the pleading and may be considered." Roth v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007) (citations omitted). In addition, matters of public record, such as court filings, may also be considered. See, e.g., Blue Tree Hotels Inv. (Can.), Ltd. v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004).