As yet another example of why legal malpractice is a difficult discipline, here is a case in which there was a failure to file a counterclaim,  The legal malpractice case ends in dismissal, because the Appellate Division determines that the counterclaim, even if made would have failed. Ginther v Rosenhoch ;2008 NY Slip Op 10292 ;Decided on December 31, 2008 ;Appellate Division, Fourth Department
 

"One necessary element of such a cause of action is that, " but for the [defendants’] negligence, the plaintiff[] would have been successful in the underlying action’ " (Oot v Arno, 275 AD2d 1023, 1023). Here, plaintiff alleges that defendants committed legal malpractice by, among other things, failing to assert a counterclaim in the underlying action, for recovery of premiums paid by plaintiff under a disability insurance policy. We note, however, that the Second Circuit affirmed the judgment of the District Court in favor of the plaintiff insurer in the underlying action on the sole ground that the claim for benefits made by defendant, the plaintiff herein, was untimely under the policy (Provident Life & Cas. Ins. Co. v Ginther, 51 Fed Appx 72). Thus, it cannot be said that, but for defendants’ negligence, plaintiff would have been successful on a counterclaim for recovery of premiums in the underlying action (see Oot, 275 AD2d 1023).
 

The matter of Chen v. Mt. Sinai was handled by attorney Steven F. Goldman, and settled just after depositions for $ 2.4 million.  Mt. Sinai was represented by Martin Clearwater & Bell, a premiere NY med-mal defense firm.  One would think that was good news for Mr. Goldman.  However, he ends up, after a Second Circuit decision, with no fee at all.  Legal Malpractice litigation might follow had he garnered a fee.  It might still if one scrutinizes the question of whether sufficient provision was made for a severely injured child. From the opinion: "The circuit noted that Mr. Goldman provided no real assistance to Judge Korman in his effort to determine whether the settlement was reasonable."Equally disturbing, the record suggests that Goldman himself had made only limited inquiries into David’s condition and the nature and extent of David’s future medical needs,"

Law.Com writes: "A federal judge acted within his authority when he denied all fees to a lawyer who won a $2.4 million medical malpractice case but who failed to investigate the future needs of a child disabled at birth and overcharged his client, a federal appeals court has ruled.

The U.S. Court of Appeals for the Second Circuit on Monday upheld the discretion of Eastern District Judge Edward Korman to refuse Steven F. Goldman’s application for $388,000 in fees.

Mr. Goldman obtained a settlement with the Mt. Sinai-NYU Medical Center Health Systems, NYU Downtown Hospital and the doctors involved. He then filed a stipulation of settlement and infant compromise order directing that he be paid $408,000 in fees and $20,000 in expenses, and that Ms. Chen be paid $250,000 for her loss of services claim, and $1.7 million as trustee for her son’s special needs trust.

But Judge Korman said he was unable to analyze the reasonableness of the settlement because Mr. Goldman failed to provide documentation for his fees and for David’s current medical condition and a projection of his expenses for future medical care.

Saying the attorney’s information was "totally unhelpful," the judge appointed a special master, attorney Steven North, who was told by Mr. Goldman that he had applied the sliding scale fee system set forth in New York Judiciary Law §474-a for medical malpractice compensation.

When Mr. North inquired as to the fee, Mr. Goldman claimed he had miscalculated it under the sliding scale, and it was actually $388,000."
 

Law.Com reports [as does the BLT Blog] that a legal malpractice case by Blackwater Security Consulting has been dismissed, now for the second time against Wiley Rein.    The legal malpractice case arises from the horrible death of Blackwater employees in Falugia, Iraq.

The fact of deaths in Iraq ending in US litigation brings to mind a recent speech which attributed the idea to Alexis de Tocqueville that all serious issues in the US ultimately end in courts.  If it ends in court, look for legal malpractice litigation to follow.

"On Dec. 29, Judge Jennifer Anderson of D.C. Superior Court dismissed the $30 million malpractice suit brought against the firm by Blackwater Security Consulting on summary judgment. She’s the second judge to throw out the case since it was filed last January.

"They have the right to ask more judges to look at it," says Zuckerman Spaeder partner Mark Foster, who represents Wiley Rein in the matter. But if Blackwater’s lawyer, Barry Nace of Paulson & Nace, chooses to do so, Foster says, "I think he’d be wasting his time." (Nace is on overseas travel and could not immediately be reached for comment.)

Blackwater alleged that Wiley botched its defense of the security contractor in a wrongful death case brought on behalf of four Blackwater guards killed in Iraq in 2004. Blackwater claimed the suit would have been dismissed if it had been heard in federal court, instead of in a North Carolina trial court. Blackwater said the Wiley lawyers failed to get a venue change because they didn’t invoke the federal officer removal statute, which grants federal jurisdiction to claims involving federal officers."

A recurring theme of these entries is the ubiquitous nature of legal malpractice.  All roads, it seems, require attorneys to mix a metaphor.  Downturns in the real estate marketplace are no exception.  Here is a story from Law.Com about a legal malpractice case against Quinn Emanuell, a biglaw litigation firm.  This one is from California:

"Quinn Emanuel Urquhart Oliver & Hedges has been hit with a malpractice lawsuit that claims the firm botched a $48.8 million settlement even as it took in some $12 million in contingency fees.

Former client Todd Kurtin, a one-time principal at the real estate concern SunCal Cos., filed the claim earlier this month in Los Angeles Superior Court. In his complaint, Kurtin accuses Quinn Emanuel of negligence for failing to advise him of "the meaning and ramifications of all terms of the settlement agreement" he reached with a former business partner, Bruce Elieff, that unwound their co-ventures.

Under the 2005 settlement, Kurtin was to receive his payout in four installments, but, according to the complaint, wound up getting only two payments and is still owed nearly $23 million not including interest. Kurtin is pursuing claims against Elieff for reneging on the settlement agreement.

The complaint against Quinn Emanuel highlights how — as a result of a contingency agreement that essentially guaranteed Quinn Emanuel half of any amount recovered up to $20 million and 20 percent thereafter — the firm has received approximately $12 million in fees for representing Kurtin. That amount is equal to what Kurtin himself has gotten to date from the settlement, which was reached a little more than four months after Quinn Emanuel took on the case.

SunCal, like other real estate development companies, has been hit hard by the downturn in the economy. The company has been plagued with cash flow issues and has had to back out of several projects. Lehman Brothers Holding Inc. was a major backer of the company."

Asbestos settlements have changed the landscape of tort law, and especially mass tort law.  Back in the mid ’90s asbestos cases started to cascade and overwhelm the system.  The defense bar’s response was to try to streamline the process.  While this may seem counter intuitive, the intersection between defense costs and settlement costs, especially when insurance/limited insurance coverage was factored in, required litigation committees, typology of injury and the like.  On occasion, good claims were lost and bad claims were paid.

This article from the venerable Madison County Record tells the story of the aftermath of an asbestos case.  Aftermaths often mean legal malpractice litigation.

"Asbestos lawyer John Simmons, facing trial on a widow’s malpractice claim, boasts that he obtained $100,000 from W.R. Grace & Co. after the statute of limitations ran out, plus $214,000 from other businesses despite "sketchy product identification."

Simmons offered these examples in hopes of winning summary judgment and escaping a trial that Madison County Circuit Judge Barbara Crowder has set for Feb. 9.
 

Buckles hired Simmons in 1999, when he worked at Hopkins Goldenberg, to represent the estate of her late husband Charles Buckles, she claims. When Simmons left Hopkins Goldenberg, he retained her case and others.

Roy Dripps of the Lakin firm alleges in Buckles’ complaint that Hopkins Goldenberg entered into secret agreements with asbestos defendants to classify claims of clients and settle them "in accordance with predetermined figures of money for each such classification."

The complaint stated that Hopkins Goldenberg settled claims "for amounts of money which were manifestly inadequate and which bore no reasonable relationship to the actual loss sustained by the clients."

It stated that Hopkins Goldenberg "fabricated, exaggerated, or otherwise manipulated the bookkeeping" and wrongly ascribed advanced costs to Buckles, and that Hopkins Goldenberg settled groups of claims without obtaining consent of each client.

Simmons failed to provide timely, aggressive and zealous representation to Buckles, according to Dripps.

For Simmons, A.J. Bronsky of St. Louis moved in 2007 for summary judgment.

Bronsky attached an affidavit in which Simmons wrote, "Even though the statute of limitations had run with respect to W.R. Grace, I was able to, with Judy Buckles’ consent, obtain a settlement for $100,000 in October of 2000."
 

The question of when a legal malpractice claim belongs to the debtor and when it belongs to the debtor’s estate is of strong significance.  If the former, plaintiff may hire his own attorney and proceed; if the latter, then the trustee in bankruptcy or debtor’s estate holds the reins.  Here, from Bankruptcy Law Network is a case in which the legal malpractice included a claim of negligently advising a Chapter 11 filing rather than a Chapter 13 filing.

"A recent New Jersey case, In re Hussain, 2008 WL 5102458 (Bky.D.N.J. Dec. 5, 2008), held that a bankruptcy debtor’s legal malpractice claim against his former bankruptcy attorney was property of the estate, to be administered by the bankruptcy trustee for the benefit of creditors.

The bankruptcy court observed that the legal malpractice claim involved the alleged failure to advise the debtor that he could have filed a Chapter 11 case rather than a Chapter 13 case, and the failure to propose a Chapter 13 plan which could be confirmed by the court. These were actions involving pre-bankruptcy conduct. Accordingly, the legal malpractice claim accrued on the date the bankruptcy petition was filed, and it was therefore property of the estate under bankruptcy code section 541(a)(1). Although the filing of the legally inadequate chapter 13 plan was a post-petition event, it served only to magnify the malpractice claim, and not to create a new malpractice claim belonging to the debtor."

Thank you for reading our commentary this year.  We wish a wonderful holiday season to all.  We’ll be returning on January 2, 2009.

A sole shareholder of a closely held corporation hires an attorney.  The retainer agreement does not always reflect that the attorney is representing both the individual and the corporation, and at the begining it probably means little.  After a progression into a legal malpractice case it may well take on epic porportions.  Here, in this caseLeach v. Bailey we see the confusion and trouble it can cause:

"Leo Wells sought specific performance of an agreement to convey real property or, in the alternative, money damages (Wells v Ronning, 269 AD2d 690 [2003]). Defendants represented plaintiff at the trial level in the underlying action. In brief, Wells obtained summary judgment on liability against both plaintiff and a corporation of which plaintiff was the sole shareholder and, after the corporation was dissolved, the successor in interest. Upon plaintiff’s appeal, this Court reversed the judgment against plaintiff but concluded that judgment could be entered against the corporation because it neither opposed the summary judgment motion at the trial level nor appealed (id. at 691-693). The judgment was later satisfied after the sale of real property that remained titled in the corporation. Plaintiff then commenced this action.

Supreme Court (Spargo, J.) granted defendants’ motion for partial summary judgment dismissing that part of the complaint that sought damages arising out of the sale of the [*2]corporation’s property. The court concluded that defendants had demonstrated that they did not represent the corporation and, thus, could not be liable to plaintiff for losses suffered by the corporation. This Court reversed, finding that plaintiff had raised questions of fact regarding whether defendants represented the corporation (37 AD3d at 898-899).

The parties subsequently stipulated that defendants did not represent the corporation, but did commit malpractice in their representation of plaintiff individually. They further elected to proceed to a nonjury trial on certain stipulated issues of proximate causation and damages. At trial, plaintiff presented expert testimony and an appraisal report from real estate appraiser James Edward Beatty to rebut the testimony given on Wells’ behalf by real estate appraiser Bruce Bauer in the underlying action. Supreme Court (Lynch, J.) determined that defendants’ malpractice did not cause the unfavorable result against the corporation in the underlying action, and dismissed the complaint. Although one of the stipulated issues was whether plaintiff may recover counsel fees both paid to defendants and incurred on his appeal in the underlying action, the court made no findings regarding whether plaintiff could recover such fees from defendants. Plaintiff now appeals.

Plaintiff asserts that the focus in this action is the issue of defendants’ failure to call an expert to value the real property at issue in the underlying action. Specifically, plaintiff asserts that Beatty’s appraisal testimony offered herein establishes that the value of the real property at issue in the underlying action was $30,000 and, thus, "but for" defendants’ failure to challenge the $90,000 appraised value offered by Wells, judgment in the amount of $30,000 plus interest, rather than $90,000 plus interest, would have been entered against him and the corporation. Plaintiff’s argument misses the mark.

As noted above, the judgment in the underlying action was reversed insofar as it imposed personal liability on plaintiff (Wells v Ronning, 269 AD2d at 692-693) and, ultimately, the judgment as against the corporation was satisfied from the sale of the corporation’s assets. Thus, any damages arising out of the entry of the judgment in the prior action were suffered by the corporation, not plaintiff. Generally, a shareholder has no cause of action "[f]or a wrong against a corporation . . . [even] though he [or she] loses the value of his [or her] investment" (Abrams v Donati, 66 NY2d 951, 953 [1985]). While exceptions to the general rule exist, they are inapplicable inasmuch as the parties have stipulated that defendants did not represent the corporation and there are no allegations of fraud, collusion or malicious acts herein. Accordingly, defendants cannot be liable for any losses suffered by the corporation (see Griffin v Anslow, 17 AD3d 889, 892 [2005]; C.K. Indus. Corp. v C.M. Indus. Corp., 213 AD2d 846, 847 [1995]; see also Abrams v Donati, 66 NY2d at 953-954; cf. Lawrence Ins. Group v KPMG Peat Marwick, 5 AD3d 918, 919 [2004]; Benedict v Whitman Breed Abbott & Morgan, 282 AD2d 416, 418 [2001]; Weiss v Salamone, 116 AD2d 1009, 1010 [1986]). In any event, even assuming that plaintiff could recover based upon the $90,000 judgment entered against the corporation, he failed to demonstrate that the corporation would have prevailed or that the amount of the judgment would have been lower "but for" the failure to submit an appraisal report in the underlying action (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438, 442 [2007]; AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434-436 [2007]; Antokol & Coffin v Myers, 30 AD3d 843, 845 [2006]). "