Here is a primer in how litigation can go sour, starting with one problem, leading to one after another.  This  NJ case discusses affidavits of merit in NJ legal malpractice cases, pro-se litigants and potential dispensations to them, and the statute of limitations in bankruptcy cases. SHIRLEY A. GOODHEART, v. STEVEN P. KARTZMAN, ESQ.; WACKS, MULLEN & KARTZMAN; GLEN SAVITS, ESQ.; LUCAS, SAVITS AND MAROSE, LLC; and GREEN AND SAVITS, LLC,

"Plaintiff now argues that (1) the statute of limitations did not bar the amended complaint because the discovery rule should apply and no malpractice claim accrued until the bankruptcy plan was confirmed on June 17, 2002; and (2) the trial court erred in failing to enter an order memorializing the trial judge’s instruction that plaintiff file an amended complaint within thirty days, thereby prejudicing a pro se plaintiff.

With respect to the statute of limitations, it is unclear in the complaint whether the allegations arise from confirmation of the bankruptcy plan in 2002 or the reopening of the Chapter 7 bankruptcy proceeding in 1999. We are, therefore, constrained to remand for a hearing pursuant to Lopez v. Swyer, 62 N.J. 267 (1973), to determine when the cause of action actually accrued.

With respect to plaintiff’s second point, she is entitled to no special consideration as a pro se plaintiff. She must be aware of the law and compliant with the Rules of Court as does any other litigant. Tuckey v. Harleysville Ins. Co., 236 N.J. Super. 221, 224 (App. Div. 1989). The judge instructed her to file the amended complaint within thirty days of the July 14, 2006 case management conference. She did not file her motion to restore and amend the complaint until August 27, 2006; however, we expressly decline to reverse the February 16, 2007 order at this juncture. Rather, the matter is remanded for a Lopez hearing to determine whether plaintiff filed the complaint within the statute of limitations. If the court finds that she did, plaintiff may move to restore the complaint and proceed with the litigation. If, on the other hand, the trial court finds that the cause of action accrued in 1999, rather than 2002, the complaint shall remain dismissed.

This front page article from the NYLJ tells of a new type of legal malpractice case originating in a securities law suit, by a non-client, stretching the bounds of privity:

"A federal judge in Manhattan has ruled that a lawsuit brought under Oregon "Blue Sky" law may proceed against the New York law firm Seward & Kissel for allegedly aiding and abetting securities fraud by a client hedge fund.

Aider and abettor claims against lawyers or accountants in securities fraud cases are barred under federal law. But Southern District Judge Harold Baer has ruled they are permissible under a state securities fraud statute, or Blue Sky law.

The suit by Oregon-based investor Howard Houston stems from Seward & Kissel’s representation of Wood River Partners, a hedge fund that collapsed in 2005 after a sharp decline in the stock of Endwave Corp., the small technology company that comprised more than 60 percent of the fund’s holdings.

Mr. Houston claims he invested $2.75 million in Wood River based on offering documents and marketing materials that stated Wood River would pursue a diversified investment strategy. He claims Seward & Kissel helped Wood River perpetrate fraud because the law firm drafted some of the documents and allowed its name to be used in the fund’s prospectus"

Bankruptcy Legal Malpractice cases are on the rise.  Trustees have greater powers than do regular plaintiffs, there are longer statutes of limitation in Bankruptcy situations, and the numbers are really big.  Here is a case from the NY Lawyer site.

"Gibson, Dunn & Crutcher is the latest law firm to be named in a suit stemming from the breakdown of the commodities firm Refco, Inc. The action, filed by liquidators and the trustee for Sphinx Funds, a family of funds that collapsed after doing business with Refco, was filed March 8 in New York trial court; a notice of removal to federal district court in Manhattan was filed by one of the defendants March 28.

Refco filed for bankruptcy in October 2005. Several lawsuits and criminal proceedings have followed. This latest action claims the funds lost $263 million as a result of Refco¹s meltdown; Gibson, Dunn’s representation of various Sphinx entities also contributed to the loss, the suit claims.

Gibson, Dunn represented Sphinx Funds and its investment manager, PlusFunds, Inc., as well as fund directors and entities controlled by those directors.

Work for those entities was a conflict of interest that the firm never disclosed, the complaint says. The plaintiffs also charge Gibson, Dunn with helping to conceal the nature of numerous loans made by Refco to Sphinx directors that were in fact payments to those directors in exchange for Sphinx’s business with Refco. "

Here , in AccuWeb, Inc., Raymond Buisker, v.  Foley & Lardner, Harry C. Engstrom, Quarles & Brady LLP and Nicholas Seay, we find one of the rare state court patent legal malpractice cases.  Generally, as patent law is a federal question, one of the parties either brings the action in Federal District Court or removes it there.  Here is the decision on a motion for summary judgment:

"This case centers on whether AccuWeb, at the summary judgment stage, put forth sufficient evidence to raise a genuine issue of material fact on the question of whether the alleged failure of the Respondents to prevent the premature expiration of AccuWeb’s 5,072,414 patent (the 414 patent) was a substantial factor in causing AccuWeb actionable damages, thus preventing summary judgment. The second issue is whether AccuWeb presented sufficient evidence to allow a fair and reasonable estimate of the amount of such damages, so that there was a genuine issue of material fact, thus preventing summary judgment as to the amount of those damages. We address the second issue because it was addressed by the circuit court. This case involves the interpretation and application of Wis. Stat. § 802.08 (2003-04),[2] the Wisconsin summary judgment statute. "

The familiar triumverate of client, insurance company and independent defense attorney is a familiar model.  Certainly, there are cracks in the facade.  The attorney has dual roles, and a divided loyalty…  In Texas, a recent ruling permits the insurance company to use in-house attorneys to defend insureds. 

Law and Insurance Blog reports: "Unauthorized Practice of Law Committee v. American Home Assur. Co., #04-0138 (Tex. March 28, 2008) See Law Committee Decision.

The Texas Supreme Court ruled that, despite genuine concerns for potential conflicts of interest, insurers’ use of salaried employee-staff lawyers to defend insureds did not constitute an unauthorized practice of law by an insurance company. However, staff lawyers may be used only where the interests of the insurer and the insured are aligned in defeating the claim against the insured. Also, the insurer must fully disclose the defense attorney’s affiliation with the insurer.

Unauthorized Practice of Law Committee v. American Home Assur. Co., #04-0138 (Tex. March 28, 2008) See Law Committee Decision.

The Texas Supreme Court ruled that, despite genuine concerns for potential conflicts of interest, insurers’ use of salaried employee-staff lawyers to defend insureds did not constitute an unauthorized practice of law by an insurance company. However, staff lawyers may be used only where the interests of the insurer and the insured are aligned in defeating the claim against the insured. Also, the insurer must fully disclose the defense attorney’s affiliation with the insurer. "

Here is a subscription article from Law.com  on recoverable legal fees in NJ legal malpractice litigation:

"A six-year-long legal malpractice epic shows why the N.J. State Bar Association wants to abolish the state’s unique fee-shifting benefits. A jury found that a firm that had sued its client for an unpaid fee, and was countersued, had handled the case improperly. The judge then ordered the firm to pay $52,000 in fees, plus costs, based on case precedent that says sums spent in the successful pursuit of a negligent lawyer are recoverable. The State Bar is hoping the Legislature will step in to change the law."

We’ve been following this case.  Bank is scammed by person running a structured settlement company, and clients’ structured settlement funds are lost.  Bank sues the attorney who recommended the structure guy, and on Friday, a jury awarded the bank $ 3.7 million in damages.

Here is the story of the verdict in Magna v. Coburn.

 "The day after he won $3.7 million in a legal malpractice case, East St. Louis lawyer Rex Carr said he would ask that part of the case be retried because he believes the jury should have awarded his client more money.

Carr had asked the jury for more than $11 million for his client, Regions Bank, then named Magna Bank. The bank had sued the St. Louis law firm of Thompson Coburn, alleging that bad legal advice opened the bank to liability in the meltdown of financial scam artist James Gibson in the 1990s.

Gibson’s scheme involved the establishment of trusts for people, mostly accident victims, who had won large civil suit awards or settlements. Gibson initially invested the money with various banks, including Magna, but eventually took direct control of the money through a series complicated court cases.

Gibson then lavishly spent the money on himself and his family and squandered most of it on a failed attempt to resurrect the National supermarket chain.Advertisement
In the end, 155 investors lost some or all of their funds, more than $60 million at the time and more than $150 million in promised payments over time. Gibson was sent to prison for 40 years. "

This article from the Daily Report tells us more about a new trend, legal malpractice cases arising and related to bankrupcy filings:

"A federal judge has approved a settlement—apparently totaling $4.25 million—of a lawsuit against Paul, Hastings, Janofsky & Walker.

The suit had alleged that some of the firm’s Los Angeles lawyers helped Mobile Billboards of America and its affiliates sell investments in roving billboards that they should have realized were a scam. The plaintiff was a court-appointed receiver for Mobile Billboards, but U.S. District Judge Charles A. Pannell Jr.’s March 7 order approving the settlement makes clear settlement monies will go to those who purchased billboards.

The Securities and Exchange Commission has contended Mobile Billboards was a “Ponzi scheme.” The receiver’s suit against the firm alleged that billboard purchasers relied on misrepresentations in the circulars reviewed by the Paul Hastings lawyers.

In court filings, Paul Hastings maintained that its lawyers didn’t know at the time Mobile Billboards’ promotional materials may have contained false information and had warned the company that it risked SEC problems. Pannell’s order declares that the settlement agreement is not an admission of liability by Paul Hastings.

Prior to the March 7 hearing on the settlement, one investor had written a letter to the judge saying the settlement was inadequate. But Pannell’s order of the same date shows that no one appeared at the hearing to argue any objection. It also prohibits all purchasers from suing Paul Hastings over Mobile Billboards."