In this NY Lawyer’s blurb, we see th outcome of a new variety of legal malpractice action:  a sort of secondary liability suit in a transactional setting.

"A New York appeals court has thrown out a lawsuit against Seward & Kissel over the law firm’s representation of failed hedge fund Wood River Partners.

A group of institutional investors had charged that the law firm shared blame for an alleged fraudulent scheme in which investors were misled about the fund’s holdings, 60 percent of which turned out to be in one small technology company named EndWave Corp. That company’s stock collapsed in July 2005, triggering the investors’ claimed $200 million in losses.

But the Appellate Division, First Department, ruled yesterday in Eurycleia Partners v. Seward & Kissel, 600704/06, that the law firm’s preparation of Wood River’s offering memo did not constitute a representation, fraudulent or otherwise, to the investors.

The court noted that Seward & Kissel’s work for the fund was focused on the fund’s formation and its taxes and not its investment strategy. The appellate panel also found that the investors had no relationship with Seward & Kissel as Wood River’s counsel that would impose a duty on the firm to investors.

The court dismissed claims against Wood River’s auditor, American Express Business & Tax Services, on similar grounds. "

The simple answer to this question is, Yes!

Delaware is the state of choice for many corporations, and it is said that there are more attorneys in Manhattan giving advice on Delaware corporate law than there are in Delaware.  Now Sheri Qualters of the NYLJ reports that the Delaware  Court of Chancery has ruled that non-Delaware attorneys are subject to suit there.

"A recent Delaware Court of Chancery ruling that non-Delaware attorneys and law firms can be sued in the state for their advice to Delaware-incorporated companies has raised concerns about courts’ jurisdictional reach and about a lawyer’s duty to challenge a client’s business decisions.

The case is of concern to law firms, investment banks and others who advise companies on Delaware issues, said Barry Sher, the chairman of the litigation practice in the New York office of Paul, Hastings, Janofsky & Walker.

"With relatively minimal actual contact with the state of Delaware in the normal jurisdictional sense, they could nonetheless be brought into court," Mr. Sher said.

Since many U.S. companies are chartered in Delaware and subject to Delaware corporation law, Delaware Court of Chancery decisions have had a major impact on corporate law.

The recent case involves allegations that Baker Hostetler and a Columbus, Ohio-based corporate partner, Joseph Boeckman, aided and abetted the breach of fiduciary duty committed by three managers of Lima, Ohio-based bronze ball bearings maker Randall Bearings Inc. Sample v. Morgan, No. 1214-VCS (New Castle Co., Del., Ch.).

According to court papers, the managers and their lawyer allegedly orchestrated a scheme to entrench and enrich themselves by buying a large block of voting stock from the company at an unfairly low price. "

LEGAL MALPRACTICE CASES IN
FEDERAL COURT THIS MONTH

1. WESTPORT INSURANCE CORP. v. GOLDBERGER & DUBLIN, P.C.
United States Court of Appeals for the Second Circuit 2007 US App Lexis 27612

Law firm was sued by former clients, and insurance company disclaimed coverage because law firm did not give reasonable notice of potential suit. Law firm defended by arguing that it had no basis to expect a suit by its client, who had assured them that she did not intend to sue. She, however, did. Court noted that no court in New York “has addressed the question” of the objective inquiry into a client’s assurances “in deciding what an attorney in the insured’s position could reasonably have foreseen.”

2. SMARTIX INTERNATIONAL LLC v. GARRUBBO, ROMANKOW & CAPESE PC, United States District Court for the Southern District of New York, 2007 US Dist Lexis 85807

Discussion of post-end of discovery subpoenas, as well as whether non-party subpoenas are permissible in what might be called a fishing expedition. These personal records are “not relevant to the claim or defense of any party.”

3. KING v. FOX
United States District Court for the Southern District of New York, 2007 US Dist Lexis 85396

This case has “occupied this court, the magistrate judge, the Court of Appeals on two occasions and the New York Court of Appeals over the past ten years. Presently at issue is Fox’s motion to strike King’s demand for a jury trial.”

Judge Sweet discusses the equitable/law nature of the legal malpractice claims, and gives a short historical tour of the right to a jury trial.”

4. BRITESTARR HOMES INC. v. PIPER RUDNICK LLP
United States Court of Appeals for the Second Circuit 2007 US App Lexis 27935

Piper Rudnick wins motion for summary judgment, finding that client “failed to establish the required proof of damages for any of its claims.” “In particular, as to the difference between the value of the client’s property in bankruptcy and outside of bankruptcy, the client failed to show that any damage to the property was” the result of the bankruptcy proceeding.

This is abattle between a major celebrity dancer and a football player’s ex-trophy wife, in which she claimed the dancer raped her.  She hires attorney who starts law suit against dancer.  End result ?  Attorney and ex-wife accused of extortion, attorney pays substantial settlement to dancer, ex-wife has an $11 million verdict against her.

"A woman who accused Michael Flatley of sexual assault has been ordered to pay him more than $11 million for making false allegations to extort money from him, according to documents obtained Monday.

Superior Court Judge Michael L. Stern found that real estate agent Tyna Marie Robertson had defamed and intentionally inflicted emotional distress upon Flatley, 49, who appeared in "Riverdance," "Lord of the Dance," "Feet of Flames" and "Celtic Tiger."

Robertson had alleged Flatley raped her in a Las Vegas hotel in 2002 and threatened to sue unless he agreed to pay a "seven figures" settlement, according to court papers.

Police declined to press criminal charges, and Flatley said the sex was consensual.

Robertson then filed a $33 million lawsuit in Illinois alleging sexual assault, but it was dismissed.

Flatley countered with a lawsuit against Robertson and her lawyer D. Dean Mauro claiming extortion, intentional infliction of emotional distress and defamation.

The California Supreme Court held in July 2006 that Mauro had committed extortion, and he settled the case by making "a substantial payment" to Flatley, according to a statement from the dancer’s lawyer, Ricardo P. Cestero. "

Examiner.com reports that in Maryland, discipline numbers are small and decreasing, while legal malpractice cases are increasing.

"The vast majority of Maryland lawyers never get into trouble.

In fact, the number of lawyers sanctioned by the state has fallen in the past 10 years, with the biggest drop happening in the latest fiscal year — when only 57 of the state’s 33,018 lawyers were disciplined by being disbarred, suspended or reprimanded.

Data and reports from Maryland’s disciplinary agency, the Attorney Grievance Commission, show that less than a quarter of all complaints are investigated, nearly half of those investigated complaints are “closed administratively” and about a third of the remaining receive some kind of discipline.

What the data do not show is any information on cases dismissed by the commission, with or without an investigation. All complaints are considered private and confidential unless the commission brings charges against an attorney. All charges are public. .

While lawyer punishments are declining, the number of attorney malpractice lawsuits, in which lawyers are sued, is increasing at the same rate as the expansion of the bar, said Dave Whitworth, a Crofton attorney who has practiced for 30 years.

The number of people who want to sue their lawyers has increased, said Stacie Dubnow, a legal malpractice attorney from Hunt Valley. But she has not seen an increase in the number of cases that merit a lawsuit.

We don’t know the rule in Montana, but in NY one may not successfully sue his criminal defense attorney without showing actual innocence.  Here is a case from Montana of an exonerated criminal defenendant who wants to sue his attorney, now decesed.  There are of course, many hurdles.  Is there insurance for a public defender?  is there still an estate for the deceased attorney?  Is there a public defender agency?

"A man exonerated of rape charges after 15 years in prison claims in a federal lawsuit seeking damages that he was poorly represented at trial, by a now-deceased court-appointed defender.

Jimmy Ray Bromgard, whose conviction was overturned in 2002, is suing the state of Montana and Yellowstone County for $16.5 million. In depositions reviewed by the Billings Gazette, Bromgard claims his court-appointed attorney, John Adams, advised him to "plead guilty" the first time they met, then mounted a shoddy defense and bungled his appeal.

The public defender program was funded by the county. County attorneys have argued state judges were largely responsible for its operations, the Gazette reported.

Yellowstone County recently made a final offer to Bromgard in an attempt to settle the lawsuit, deputy county attorney Dan Schwarz told the newspaper. Schwarz would not provide further details except to say the offer is open until the end of the year.

The state has filed motions to be dismissed from the case, but they have not yet been ruled on by U.S. Magistrate Judge Carolyn Ostby. That part of the case is expected to focus on allegations of incompetent forensics work by the State Crime Lab and its former director, Arnold Melnikoff. "

Here is a case from California in which plaintiff’s attorney came into possession of a set of notes made by defendant’s attorney concerning the expert and his testimony.  Even though the notes inadvertently came into plaintiff’s possession, the attorney has been taken off the case by the court.

If things go wrong from here, will there be a legal malpractice case to follow?

"Taking advantage of an opposing lawyer’s privileged documents, even if they’re accidentally obtained, is a major no-no, the California Supreme Court ruled Thursday.

To drive its point home in the anxiously awaited ethics case, the court unanimously upheld El Segundo, Calif., lawyer Raymond Johnson’s disqualification from an automobile rollover case for using his opponent’s notes to impeach expert witnesses.

"An attorney in these circumstances may not read a document any more closely than is necessary to ascertain that it is privileged," Justice Carol Corrigan wrote. "Once it becomes apparent that the content is privileged, counsel must immediately notify opposing counsel and try to resolve the situation."

Johnson represented a family who sued Mitsubishi Motors Corp., Mitsubishi Motor Sales of America and the California Department of Transportation following the 1998 rollover crash of a Mitsubishi Montero sport utility vehicle. Eleven-year-old Denise Rico died in the accident and her 18-year-old sister, Zerlene, was partially paralyzed.

Before the case reached trial, Johnson came into the possession of opposing attorney James Yukevich’s notes concerning a meeting with expert witnesses. Johnson copied the 12-page document, prepared by one of Yukevich’s paralegals, and used it during a subsequent deposition to discredit Yukevich’s experts.

Johnson claims the notes were given to him accidentally by a court reporter, while Yukevich insists they were illicitly taken from his co-counsel’s briefcase during an earlier deposition.

San Bernardino County Superior Court Judge Ben Kayashima eventually ruled that Johnson obtained the document inadvertently. But he still disqualified Johnson and his legal team from the case for breaching his ethical duties by using another lawyer’s confidential work product. "

Here is an interesting take on the issues of electronic discovery, its blossoming, and future legal malpractice cases.  In short, learn and the new rules, or face problems.

"Much ink has been spilled about the demands of discovery in the current technological age. The storage of electronic data, the existence of metadata and the wholesale migration from printed hard copy documents to electronic documents have challenged all practitioners, particularly those trained in discovery during the era of banker’s boxes and hard copy documents. The 2006 e-discovery amendments to the Federal Rules of Civil Procedure, along with other standard-setting rules, have raised the stakes. In fact, in the current climate, given the interplay between ethical obligations and standards for professional conduct and these e-discovery requirements, attorneys may be surprised to learn that inattention to e-discovery may not only work to the detriment of clients — it may lead to professional malpractice or the imposition of sanctions on counsel. If any doubt remained, the ongoing discovery dispute in the Qualcomm v. Broadcom case, discussed below, should eliminate

Despite the low standard, failure to provide competent representation nevertheless creates the potential for malpractice actions. Restatement, supra § 48 (2000). In legal malpractice actions, the client must establish that, but for the attorney’s neglect, the litigation would have ended in a result more favorable for the client. That is, the client must prove the existence of a duty, a breach of that duty, proximate cause and damage. 4 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 30:5 (2007 ed.).

Thus, in general, an attorney owes a duty of care to clients to "exercise the competence and diligence normally exercised by lawyers in similar circumstances." Restatement, supra § 16 (2000). "