RECENT CASES IN LEGAL MALPRACTICE

1. CHICAGO TITLE INSURANCE COMPANY, Plaintiff, v BARBARA J. MAZULA, Defendant and Third-Party Plaintiff-Appellant; JAMES E. KEABLE, Third-Party Defendant-Respondent.

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, THIRD DEPARTMENT

2008 NY Slip Op 27
January 3, 2008

This is a case in which the question becomes whether an individual or an estate hired the attorney. In order for plaintiff to prevail, the court must determine that the estate hired the attorney, and each of the mistakes took place while the attorney represented the estate, not the individual.

“ Defendant argues that the toll applies because the sale of the property was not an isolated transaction, but an estate matter during which Keable continued [**4] to represent defendant’s husband’s estate long after the malpractice accrued. We disagree. The first deed attempted to convey what was believed to be the estate’s interest in the property whereas the second deed conveyed defendant’s personal interest. Regardless of how the first deed was executed, defendant, as a surviving tenant by the entirety, solely conveyed her personal interest (see Matter of Mischler, 30 AD3d 859, 860, 819 N.Y.S.2d 118 [2006]). Hence, as to both deeds, Supreme Court correctly determined that Keable was always acting for defendant in her individual capacity, not in her capacity as the executor of her husband’s estate 2. Since Keable performed no further work for [*3] defendant, either personally or in her capacity as executor of the estate after January 2000 in regard to this transaction, the commencement of this third-party action for legal malpractice was not timely.”

2. Gerald Goldman, et al., Plaintiffs-Appellants, v Akin Gump Strauss Hauer & Feld, LLP, et al., Defendants-Respondents.

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT
2007 NY Slip Op 10492
December 27, 2007

In many legal malpractice cases, we find that the attorneys played several roles. Sometimes, they start as transactional attorneys, and morph into litigation attorneys.

Here the “documentary evidence [that] effectively precludes plaintiffs from arguing that defendants’ representation in the arbitrations was continuous with their representation in the sale. Such documentary evidence consists of the affidavit submitted by plaintiffs in a prior litigation that involved an unsuccessful attempt by a limited partner to disqualify defendants from representing plaintiffs in one of the arbitrations. Therein, one of the plaintiffs stated that while defendants were retained to advise plaintiffs and, if need be, serve as their litigation counsel, in connection with litigation then being threatened by the limited partners, as to the sale itself, defendants were retained only to draw the documents necessary to consummate a deal that had already been negotiated and agreed to. Holding plaintiffs to this position (see D & L Holdings v Goldman Co., 287 AD2d 65, 71-72, 734 N.Y.S.2d 25 [2001], lv denied 97 NY2d 611, 742 N.Y.S.2d 604, 769 N.E.2d 351 [2002]), defendants’ [**3] representation in the arbitrations, which involved the merits of the litigation that was being threatened by the limited partners at the time plaintiffs retained [*2] defendants, was distinct from their representation in "papering" the sale, which did not involve negotiating the terms of the sale or advising whether or not to proceed with it.”

Attorneys and clients enter into contingent fee retainer agreements, which do not directly address the question of an appeal.  Is the legal fee for an appeal the responsibility of the client or the attorney in this situation?  Here is a case from Madison/St.Clair which discusses this question:

"A legal malpractice claim filed by Donel Johnson claims Belleville attorneys Jodee Favre and Laura Allen breached their fiduciary duty and appropriated fees greater than they were entitled to in a wrongful termination claim he filed in 1998.

According to Johnson’s suit filed in St. Clair County Circuit Court on Dec. 21, 2007, he entered into a contingency fee agreement with Favre and Allen on April 9, 1998.

Johnson, a tank washer with Rogers Cartage Co., was fired in 1998 after he refused to dump chloronitrobenzene into the sewer, the suit claims. In 2001, a St. Clair County jury awarded Johnson $2.13 million plus costs. Defendants Rogers and Tankstar appealed, and in 2002, a settlement was reached in which Johnson would receive $800,000 in cash and an annuity at a cost and present value of $439,022.

Johnson claims he was damaged in that his annuity is owned by his former employer and it does not guarantee payment to him and his heirs.

"Plaintiff has been further damaged in that Plaintiff paid Defendants in excess of $334,000 more than they were entitled to pursuant to their fee agreement with Plaintiff," the complaint states.

Johnson also claims that his contract with Favre and Allen entitled them to one-third of any sum he recovered.

"Because this agreement did not specifically exclude the handling of an appeal, Defendants Favre and Allen were deemed to have agreed to include any and all appellate work regarding Plaintiff’s claim," the complaint states. "

It’s winter, and our thoughts turn to the Caribbean.  Here, a Philadelphia law firm, 1400 lawyers strong, gave commercial advice pertaining to the Cuban embargo, and are now defendants in a legal malpractice case.  Here is the story from Bloomberg, via the Caribbean news agency.

"NEW YORK, USA (Bloomberg): Morgan, Lewis & Bockius, the largest Philadelphia-based law firm with 1,400 attorneys, gave advice regarding sales to Cuba under the US trade embargo that led to a criminal investigation, a lawyer for an ex-client has argued.

Dan and Stefan Brodie, the founders of Purolite Corp., a manufacturer of specialty resins for water purifiers based outside Philadelphia, sued Morgan Lewis in 2004 for legal malpractice. The case began in the early nineties when an accountant questioned a sale by Purolite’s Canadian subsidiary to a company in Cuba. Purolite claims Morgan Lewis attorneys repeatedly advised them that the sales were legal because there was no US involvement.

"Morgan Lewis’s malpractice, sloppy work and their bad advice cost Purolite and the Brodies and it cost them severely," said Marc Kasowitz, a lawyer for the brothers, in opening arguments on Friday in state court in Philadelphia.

In 1996, the US Customs Service began an investigation into Purolite’s sales to Cuba. Morgan Lewis told the inspectors that the company’s foreign subsidiaries were separately owned and advised the Brodies to continue doing deals with the Cuban company, leading to a criminal indictment by the US Attorney’s office in Philadelphia, Kasowitz said.

In 2002, the Brodies were convicted of making illegal trades to Cuba, a verdict that was later reversed on appeal. The Brodies and Purolite pleaded guilty to charges concerning reimbursement of travel expenses, the company said in court filings.

A lawyer for Morgan Lewis said the firm advised the company not to sell to Cuba and that Purolite continued to do so because they wanted the money. "

The question of pre-judgment interest in legal malpractice has not been widely understood .  Generally, it was thought that an award of pre-judgment interest was determined on the same basis as in the underlying case.  Contract damages, yes.  Pain and suffereing, no.

However, this case indicates that the real inquiry is whether there should be pre-judgment interest calculated from a hypothetical judgment which the plaintiff should have obtained, had there been no malpractice.  Such a hypothetical judgment, years prior to the legal malpractice case, may allow for interest from that date, at 9% per annum!

Barnett v. Schwartz, 2007 NY Slip Op 09712, Appellate Division, Second Department, Decided 12/11/07  stands for a somewhat novel principal. Prejudgment interest appears to be permitted in legal malpractice, whether it would have been permitted in the underlying case or not. This wide sweeping pronouncement appears to apply not only to recognized breach of contract causes of action, but to personal injury legal malpractice damages, too.

“CPLR 5001 operates to permit an award of prejudgment interest from the date of the accrual of the malpractice action in actions seeking damages for attorney malpractice”, citing Horstmann v, Grasso PC, 210 AD2d 671; Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 444 (2007)

This is a seminal, important case which will, we predict, be widely cited and discussed in Legal Malpractice.   Barnett v. Schwartz, 2007 NY Slip Op. 09712, 2d Dept, December 11, 2007 is important for several reasons. We’ll discuss the first here

“But for” causation is not as difficult as had previously been believed.

Does the failure to exercise” that degree of care, skill and diligence commonly possessed and exercised by members of the legal community.” have to be “the” proximate cause of damages? Must it be “a” proximate cause of damages?

The Appellate Division says that it must be nether “the” or “a” proximate cause of action, but simply requires proof that “but for” the negligence of the defendant-attorney, the plaintiff-client would have prevailed in the underlying action.”

This formulation does not require a greater, more direct degree of causation, and the Appellate Division did not find a “substantive import to the variations in the formulations discussed above, holding that a plaintiff-client in a legal malpractice action need prove only that the defendant-attorney’s negligence was a proximate cause of damages.”

“But for” causation is not synonymous with sole proximate cause, and it is not required that the degree of causation in legal malpractice be any greater than “proximate cause. i.e., greater than that which must be typically proved as against any other professional or lay defendant in a negligence action. There is no case which singles out attorneys for “special treatment on causation.”

Here is an article from Hinshaw which tells us that  "A law firm may represent itself and may pursue not only contract or quasi-contract but also tort theories in suing a former client, at least as long as the amount sought in damages does not exceed the amount of unpaid legal fees"

"Law firm Pedersen and Houpt provided a variety of legal services to Summit Real Estate Group, LLC (Summit) including successfully litigating a breach of contract claim. Soon thereafter Summit’s assets were transferred to another entity, Main Street West, and Summit was dissolved. The two members of Summit were 50 percent owners of Main Street West. Id. Pedersen and Houpt brought suit to recover attorney’s fees naming five closely related defendants including Summit and Main Street West.

Pedersen and Houpt sued on multiple causes of action including breach of contract, quantum meruit and account stated. However, given Summit’s insolvency, Pedersen and Houpt’s best chance at recovery was through more far-reaching legal theories such as piercing the corporate veil and unjust enrichment. Defendants argued that these more far reaching legal theories were “an attempt to create new liabilities beyond the scope of [Pedersen and Houpt’s] contractual relationship with its clients.” Id at 8. Defendants consequently asserted that any use of confidential information to pursue these “new liabilities” was beyond the scope of Illinois RPC 1.6(c), which provides: “[a] lawyer may use or reveal * * * (3) confidences or secrets necessary to establish or collect the lawyer’s fee.” Id.

The trial court agreed with the defendants’ argument and granted a motion to compel Pedersen and Houpt to seek outside counsel. Reviewing this decision on an abuse of discretion standard, the court of appeals reversed, noting that the plaintiff’s legal theories were within the scope of RPC 1.6(c)(3) and that requiring Pedersen and Houpt to seek outside counsel did not resolve or even address the issue of the scope of RPC 1.6(c)(3).

The appellate court’s reasoning was based on the premise that limiting the legal theories available under RPC 1.6(c)(3) would reward fraudulent behavior by clients and would not serve any reasonable client expectation or legitimate purpose. The appellate court also noted that the damages sought by Pedersen and Houpt were limited under all theories to the amount of legal fees owed. Consequently, Pedersen and Houpt was not attempting to profit improperly from its former attorney-client relationships "

This story from LA is about a failed City of LA law suit over an underground gas main construction project.  The action was filed late, and dismissed.  Now the city attorney is a defendant.

"A jury will decide if the former attorney for the city of Vernon committed legal malpractice and if he should pay more than $1 million in damages.

The city sued Eduardo Olivo in April 2005, alleging that he mishandled various litigation involving the city. One allegation stems from Olivo’s decisions involving work done by contractor Kenko in the installation of an underground gas main.

The city alleged the work was defective and that Olivo did not act quickly enough to sue Kenko. When the city did eventually file a complaint against the firm, it was dropped because it was lodged after the statute of limitations had expired. "

In this New Hampshjre newspaper report, a city attorney is now a defendant in legal malpractice.

"CLAREMONT – The City of Claremont has filed a lawsuit alleging malpractice and negligence on the part of then-city solicitor John J. Yazinski for his role in the dismissal of former city tax assessor Steve Snelling in September 2000. The suit was filed in Sullivan County Superior Court late last week.  It alleges Yazinski, now a Claremont District Court judge, acted in "derogation of his duty and in violation of the applicable standard of care," and that he "failed to reasonably advise the city in this regard."

"Shortly after his firing, Snelling asked for a hearing before the Claremont Personnel Advisory Board, during which Yazinski and his partner Daniel G. Smith of Hughes, Smith, and Yazinski, LLP of Claremont were present in an advisory role to the city. The city said that although Snelling informed the board that night he intended to file suit, "the law firm failed to notify the city that Snelling had given notice of his intention to sue and failed to give notice of the threat of suit to the insurance carrier providing coverage to the city at the time or to recommend to the city that such a notice be given."

As a result, "the insurance carrier to which the city had paid insurance premiums at all times material would not provide coverage to the city for the Snelling suit because no notice had been provided of Snelling’s intention to sue during the applicable policy period."

Snelling filed suit against the city in 2003, claiming his termination was a violation of his First Amendment free speech rights. Snelling won his case, which was upheld by the state Supreme Court following appeal. A second trial to examine damages is set to begin in March.

Specifically, the suit alleges "legal malpractice" against Yazinski, and the same allegation against the firm. In the suit against Yazinski, the city said that "had Yazinski provided the advice required by the standard of care under these circumstances, Snelling would not have been terminated. "