Campbell Holder, an attorney in Manhattan has the dubious honor of being a jailed legal malpractice defendant.  A significant judgment was just entered against him in Federal District Court.  The New York Law Journal reports:

"An imprisoned former attorney was ordered to pay $250,000 in damages to a client whose case against the Metro-North Commuter Railroad was lost because the lawyer failed to oppose a motion for summary judgment.

Campbell Holder, in prison for stealing over $1.6 million from clients, defaulted on a judgment sought by Christine Robinson, the widow of former Metro-North conductor Charles Robinson.

Mr. Robinson claimed Metro-North forced him into in-patient drug rehabilitation followed a positive drug test on Feb. 8, 1993. Told he would lose his job if he did not comply, Mr. Robinson entered Gracie Square Hospital on March 1, 1993.

He had asked for an independent analysis of his urine test, and on March 5, his physician informed Metro-North that the result of the retest was negative and that Mr. Robinson should be released from the hospital.

But the railroad instructed Gracie Square not to release him until he finished rehabilitation. Mr. Robinson was not discharged until March 29, 1993.

Claiming negligence against the railroad and assault and abuse at the hands of other patients at the hospital, Mr. Robinson retained Mr. Holder to sue Metro-North."

Continuing a trend for bankruptcy/referee/trustee/ unusual settings for legal malpractice litigation, here is an article from NY Lawyer about the settlement of a large legal malpractice "disentanglement" case:

"Wilson Sonsini Goodrich & Rosati has paid $9.5 million to Brocade Communications Systems to release itself — as well its chairman and former Brocade board member, Larry Sonsini — from civil claims stemming from the backdating disaster at the firm’s longtime client.

News of Wilson’s payment was tucked into a footnote in court filings Friday connected to the effort by Brocade’s special litigation committee to recover some of the approximately $830 million it alleges the scandal has cost the company in settlements, legal fees and a missed merger opportunity with Cisco Systems Inc.

The special litigation committee, represented by Dewey & LeBeouf’s Ralph Ferrara, filed suit against 10 former executives and board members late Friday, accusing them of racketeering, securities violations and breach of fiduciary duties. Criminally convicted CEO Gregory Reyes and HR chief Stephanie Jensen are named along with other defendants in the 282-page complaint. The new lawsuit will take the place of pending derivative suits if Brocade wins motions to dismiss them."

Single stockholder corporations are quite common.  Entrepreneurs know that they must start a corporation, and they often equate the corporation’s activities with their own, for they, of course, are the CEO, CFO, COO, and sole shareholder.  Here is an example of what can go wrong.

Baccash v. Sayegh is the story of a sole shareholder who probably has done well with her bridal gown business.  She hears that a competitor is going to retire, and hires attorney to prepare sale/purchase documents.  Here is where things go awry.  Defendant prepares a stock purchase agreement rather than an asset purchase agreement, and plaintiff finds herself [or is it the corporation] indebted to a creditor for $ 50,000.

Plaintiff pays off, and sues attorney.  She wins at trial, only to have the verdict reversed and dismissed.  "Here, the plaintiff’s theory of the case was that she sustained damages because the stock purchase agreement which the defendant negotiated without her knowledge required her to assume responsibility for Peggy Peters’ liabilities, consisting of trade debt and an outstanding bank loan. However, the proof presented at trial revealed that all payments of Peggy Peters’ debts after the February 2001 purchase were made by Bridal Couture rather than the plaintiff, and that Bridal Couture also paid $6,000 in settlement of the creditor’s suit brought against both Bridal Couture and Peggy Peters. Although it is undisputed that the plaintiff is Bridal Couture’s sole officer and shareholder, a corporation has a separate legal existence from its shareholders even where the corporation is wholly owned by a single individual (see Harris v Stony Clove Lake Acres, 202 AD2d 745, 747; see also Rohmer Assoc., Inc. v Rohmer, 36 AD3d 990; Winkler v Allvend Indus., 186 AD2d 732, 734; New Castle Siding Co. v Wolfson, 97 AD2d 501, 502, affd 63 NY2d 782). Moreover, "the courts are loathe to disregard the corporate form for the benefit of those who have chosen that form to conduct business" (Harris v Stony Clove Lake Acres, 202 AD2d 745, 747).

Furthermore, while the doctrine of piercing the corporate veil allows a corporation’s separate legal existence to be disregarded to prevent fraud and achieve equity (see Matter of Morris v New York State Dept. Taxation & Fin., 82 NY2d 135, 141; Millennium Constr., LLC. v Loupolover, 44 AD3d 1016; Rohmer Assoc., Inc. v Rohmer, 36 AD3d 990), the doctrine is typically employed by third parties seeking to circumvent the limited liability of the owners, and requires a showing of a wrongful or unjust act toward the plaintiff (see Matter of Morris v New York State Dept. of Taxation & Fin., 82 NY2d 135, 141-142). Even assuming that the doctrine of piercing the corporate veil would be available to allow the plaintiff to disregard the corporate form in which she chose to do business, no evidence was presented to support the trial court’s conclusion that Bridal Couture is, in fact, the plaintiff’s alter ego. Under these circumstances, the plaintiff’s proof was insufficient to establish that she sustained actual damages as a result of the defendant’s conduct (see Rogers v Ciprian, 26 AD3d 1, 6; Winkler v Allvend Indus., 186 AD2d 732, 734). Thus, the plaintiff failed to establish a prima facie case of legal malpractice (see Carrasco v Pena & Kahn, 48 AD3d 395; Edwards v Haas, Greenstein, Samson, Cohen & Gerstein, P.C., 17 AD3d 517), and that branch of the defendant’s motion which was to set aside the verdict and for judgment as a matter of law dismissing the complaint should have been granted. "

Yesterday we reported on a Nebraska case in which it was found that simply because a legal malpractice case came from a patent matter, it was not a federal question, sufficient for US District Court jurisdiction.

Now, hot on the heels, is this case: Singh v. Duane Morris, No. 07-20321.  We’ll get the decision, but for now, here is the article in which a state court action was removed to Federal District Court, and then dismissed under summary judgment.  Now the Circuit has reversed, remanded and remanded to state court. 

"The 5th U.S. Circuit Court of Appeals has thrown out a summary judgment win for Duane Morris in a lawsuit alleging that one of the law firm’s partners bungled a trademark infringement case involving an LSAT test-prep company.

The three-judge panel found on July 30 that the federal district court lacked subject-matter jurisdiction in granting summary judgment to the law firm, after deciding that the state law malpractice claim did not arise from the federal trademark law and therefore was not properly in federal court.

The decision means that the plaintiff could revive the case in state court "

Jurisdiction in Federal District Court…harks back to the first few weeks of law school.  Well, there’s diversity…and…and federal question.  So, a legal malpractice case arising from a patent transaction…state court or federal district court?

Many the removed case has been found to have federal jurisdiction, but this Nebraska Case says that it may be brought in State Court.  Here is the case.  Can someone explain why this decision was not written by a Federal District or Circuit Court? 

Here is a convoluted intelectual property – patent legal malpractice case. Thelen Reid answers, and with its answer, raises more questions.  Here, from Law.Com:

"Thelen argued that the company "and/or" third parties contributed to the IP losses and that IVI waived the alleged conflicts of interest. The firm also said the claims are barred by the statute of limitations.

Thelen acknowledged that an associate reassigned an IVI patent to a Gardiner company and that an alleged Gardiner company replaced an IVI subsidiary as a party to a research agreement with Johns Hopkins University. However, Thelen’s lawyers wrote, the latter change was made "pursuant to instructions from e-Smart," another IVI subsidiary.

IVI alleged that Thelen withdrew from representing it in a suit against Gardiner when his counsel demanded the firm do so because of its alleged concurrent representation of both parties. Thelen only confirmed receiving the letter from Gardiner’s counsel and later withdrawing. "

Criminal Defense practitioners enjoy a special dispensation in the legal malpractice world.  Plaintiff there must be able to allege [in New York] actual innocence.  One need not allege freedom from wrong in the civil end of things.

In Hitham Abuhouran, Plaintiff-Appellant, -v.- Asher E. Lans, et al., Defendants-Appellees.

06-2857-pr UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT  the 2d CC goes to great lengths to distinguish between a potential claim in civil legal malpractice v. criminal legal malpractice. "Under New York law, to state a cause of action for legal malpractice arising from negligent representation in a criminal proceeding, a plaintiff must allege his innocence or a colorable claim of innocence of the underlying offense, for so long as the determination of his guilt of that offense remains undisturbed, no cause of action will lie. This rule has been consistently applied to alleged malpractice occurring outside of the actual trial, where the representation arises out of the criminal proceedings. The showing of innocence is unnecessary, however, where the representation arises out of civil proceedings, even if malpractice in the civil proceedings eventually led to an associated criminal prosecution."

"Here, Abuhouran alleged that he retained Jackson & Nash to "assign[] defense lawyers," "negotiate[e] with appell[ate] [c]ounsel," and to "attempt[] to meet with King Hussein, late King of Jordan, in efforts to ease the harsh sentence that was [previously] imposed" after Abuhouran had pleaded guilty to criminal charges. This representation plainly arose out of the criminal prosecution and is not the result of a prior civil representation. Thus, to succeed, Abuhouran would have had to show innocence or a colorable claim of innocence. See Carmel, 511 N.E. 2d at 1128. Because Abuhouran failed to allege his innocence in the amended complaint or in any of the subsequent proposed amended complaints, the district court did not abuse its discretion in denying the motions to amend the complaint as futile or in denying [**4] the motion for reconsideration. Additionally, the district court properly dismissed the complaint for failure to state a cause of action. "

In this Bankruptcy-Legal Malpractice Case In re Monahan Ford Corp. of Flushing, Debtor. Richard J. McCord, as Chapter 7 Trustee of the Estate of Monahan Ford Corp. of Flushing, Plaintiff -against- Jaspan Schlesinger Hoffman, LLP, Defendant.

Case No. 02-23134-CEC, Chapter 7, Adv. Pro. No. 04-1496-CEC

UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF NEW YORK

the Trustee in Bankruptcy brought an action against defendants "The trustee for a Chapter 7 debtor asserted claims against a law firm for legal malpractice in their representation of the then-Chapter 11 debtor-in-possession. The trustee filed a motion for partial summary judgment as to all issues except damages and the firm filed a cross motion for summary judgment. "

Of specific interest is the folling rendition of the "but for" rule:

"However, even if [*13] an attorney’s conduct was negligent, the requirement that a plaintiff show that but for the negligence it would have not been injured, sets a "high bar" to proving that the attorney committed legal malpractice. Littman Krooks Roth & Ball v. N.J. Sports Prods. Inc., Case No. 00 CIV. 9419 (NRB), 2001 U.S. Dist. LEXIS 12677, 2001 WL 963949, at *3 (S.D.N.Y. Aug. 22, 2001). This last element "seeks to insure a tight causal relationship exists between the claimed injuries and the alleged malpractice, and demands a nexus between loss and injury even closer than that required by the proximate cause prong." Sloane v. Reich, Case No. 90 Civ. 8187 (SS), 1994 U.S. Dist. LEXIS 2851, 1994 WL 88008, at *3 (S.D.N.Y. Mar. 11, 1994). "