From Law.Con [sorry, we reprinted the entire blurb here]:

"Pillsbury Caught In Another Bankruptcy Conflict

Perhaps Pillsbury Winthrop Shaw Pittman needs to reevaluate its system for screening conflicts and disclosing material developments that may impact bankruptcy claims. Back in March, we mentioned that Pillsbury was the subject of a motion filed by the U.S. Trustee to disqualify the firm from representing Sonic Boom and to force it to disgorge fees earned. Now, according to this article, Pillsbury has been accused of another confict. Apparently, Pillsbury failed to disclose an agreement between the firm and directors of its clients, extending the statute of limitations on a potential malpractice claim. Creditors argue that this situation should have been disclosed to the court.

The California Business Bankruptcy Blog explains the significance of the case to bankruptcy practitioners:

In the first instance, Pillsbury lost the business of representing SonicBlue in the case, and thus its presumable large revenue stream. Now, if the accusation comes to anything, Pillsbury stands to lose money in the form of damages for losses to the corporation due to the directors’ actions. Yikes.

It is important for bankruptcy counsel to always bear in mind the competing constituencies involved in every bankruptcy proceeding. What may be a good idea in garden variety civil litigation, may be a devastating decision in the bankruptcy arena. Deals with clients in business litigation such as that between Pillsbury and the SonicBlue board may be perfectly reasonable in most situations, but in bankruptcy, where the interests of creditors are paramount in a debtor-in-possession situation, such a deal undermines the entire process because Pillsbury could not be expected to fully pursue claims against the board if Pillsbury was potentially on the hook for any damages by agreement. Being able to recognize hidden conflicts as well as the obvious ones is essential to a successful bankruptcy practice, as the SonicBlue representation highlights.

If there’s anything else that Pillsbury hasn’t revealed about this matter, now would seem to be the appropriate time, indeed, the last chance, to disclose it.

Posted by Carolyn Elefant on November 14, 2007 at 02:23 PM "

Arguments between insurers and reinsurers are a fertile area of litigation.  Important decisions on attorney-client privilege have come from these cases, and in this particular report, Federal Ins. Co. v North Am. Specialty Ins. Co. ,2007 NY Slip Op 08391 ,Decided on November 8, 2007 ,Appellate Division, First Department , the issue of privity between the attorneys defending a personal injury case and the re-insurer is discussed.

Here, there is no privity between them, and the case is dismissed.  "Plaintiff Federal Insurance Company, claiming it should have contributed only $1,000,000 to the settlement, sues individually and as subrogee of Galaxy General Contracting Corp. to recoup half of the $2,000,000 it paid as Galaxy’s excess liability insurer to settle an underlying personal injury action in which Galaxy was a named defendant. In this action, Federal named as defendants Rivkin Radler, LLP and Bruce A. Bendix (collectively Rivkin), who represented Galaxy in the underlying action, asserting legal malpractice, and also Allied World Assurance Company (U.S.) Inc., formerly known as Commercial Underwriters Insurance Company (CUIC), Galaxy’s primary liability insurer, asserting as against it bad faith, indemnity and legal malpractice.

Federal’s fourth cause of action, against both CUIC and Rivkin, alleged legal malpractice. Without asserting a client relationship with Rivkin or alleging the existence of privity or any allegations of "near privity," Federal claimed merely that CUIC and Rivkin owed Galaxy a duty to defend. Federal further alleged that Rivkin was negligent in opposing the owners’ motion for summary judgment on their indemnification claims by failing to assert antisubrogation or to apprise Federal in a timely manner that the owners had asserted such cross claims. According to [*4]the complaint, had Rivkin raised the antisubrogation rule, the court would have "limited any right of indemnity to the amount above the $1,000,000 limit of CUIC’s OCP." Federal’s fifth cause of action, also against CUIC and Rivkin, alleged a similar theory of liability, but as Galaxy’s subrogee.

None of the determinations reached to justify denial of Rivkin’s motion withstands scrutiny, and its dismissal motion should have been granted. To state a cause of action for legal malpractice, a complaint must allege the negligence of the attorney, that the negligence was a proximate cause of the loss sustained, and actual damages (Leder v Spiegel, 31 AD3d 266, 267 [2006], affd 9 NY3d 836 [2007]). In addition, "New York courts impose a strict privity requirement to claims of legal malpractice; an attorney is not liable to a third party for negligence in performing services on behalf of his client"
(Lavanant v General Acc. Ins. Co., 164 AD2d 73, 81 [1990], affd 79 NY2d 623 [1992]; see also D’Amico v First Union Natl. Bank, 285 AD2d 166, 172 [2001], lv denied 99 NY2d 501 [2002]). Thus, absent an attorney-client relationship, a cause of action for legal malpractice cannot be stated (Baystone Equities, Inc. v Handel-Harbour, 27 AD3d 231 [2006]; Linden v Moskowitz, 294 AD2d 114, 115 [2002], lv denied 99 NY2d 505 [2003]).

In the instant matter, there is no privity between Rivkin and Federal; Rivkin’s duty in the Bermejo lawsuit ran only to its client, Galaxy, and not to any third party ."

The Attorney judgment rule holds that no attorney may be held liable for a strategic decision which was reasonable both objectively and subjectively. This may include choices of questions at trial, selection of experts, choices of evidence.

Here is a story from Hinshaw, of a Michigan Case: Bowman v. Gruel Mills Nims & Pylman, LLP, 2007 WL 1203580 (W.D. Mich. April 24, 2007)

"A federal district court in Michigan has held in a legal malpractice case that an attorney was precluded from obtaining summary judgment under the “attorney judgment rule” because he violated the Michigan Rules of Professional Conduct requirement that he keep his client informed of important decisions. Bowman retained attorney Gruel to seek maximum retirement benefits. Gruel consulted with an employee benefits specialist, attorney Stevenson, who advised that if Gruel sought to recover the retirement benefits by asserting causes of action under the Employee Retirement Income Security Act (ERISA), the claim would face “a number of significant obstacles.”

Gruel filed suit in state court seeking recovery solely under a state law theory of breach of contract. Knape & Vogt contended that ERISA preempted the claim. In response, Gruel contended that Bowman had been wrongfully denied benefits in violation of § 1132(a)(1)(B) of ERISA. The case was tried to the state court judge, who applied ERISA to Bowman’s claim. The judge ruled that under ERISA, the Administrative Committee’s decision to deny maximum retirement benefits was not “arbitrary and capricious.” The trial judge then applied a theory that Gruel had not raised, and ruled that Bowman was entitled to maximum retirement benefits under ERISA based on a promissory estoppel theory.

A Michigan appellate court reversed the trial court’s award of benefits, ruling that the trial court lacked subject matter jurisdiction over § 1132(a)(3) of ERISA, which was the basis for the promissory estoppel claim. Instead, the appellate court held, state courts have subject matter jurisdiction only over claims under § 1132(a)(1)(B) of ERISA, which applies to wrongful denial of benefits. The Michigan Supreme Court denied leave to appeal.

Bowman sued Gruel for legal malpractice for seeking recovery under a state law breach of contract claim rather than under ERISA, and for failing to advise him that recovery would not be sought under ERISA. Gruel moved for summary judgment based on the “attorney judgment rule” and on the grounds of causation. The court ruled that Gruel was not entitled to summary judgment under the attorney judgment rule, but that he was entitled to partial summary judgment on the ground of causation. "

This case is all about Long Island law firms and a case against Computer Associates and Kaye Scholer.  Plaintiff is reprsented by Tom Liotti, who is the defendant in a libel case we reported yesterday.  Computer Associates and its employees are represented by anlther Long island law firm, Lynn & Gartner.  Farrell Fritz rounds out the LI lineup.

Salvatore v. Kumar, 2007 NY Slip Op 08435  Case of legal malpractice dismissed  against the law firm. "The defendants Kaye Scholer and Parver correctly contend that, inasmuch as they were never retained by the plaintiffs Wright and Press, the complaint should have been dismissed insofar as asserted against them by those two plaintiffs.

Further, the defendants Kaye Scholer and Parver also correctly contend that the Supreme Court erred in denying that branch of their motion which was for leave to renew their motion to dismiss the complaint insofar as asserted against them pursuant to CPLR 3211(a)(7), based on the dismissal of the underlying causes of action alleging defamation, wrongful termination, promissory estoppel, and civil conspiracy. We agree with the contention of Kaye Scholer and Parver that dismissal of the underlying causes of action requires dismissal of the legal malpractice claim asserted against them. With the dismissal of those causes action, the plaintiff Salvatore cannot allege that "but for" Kaye Scholer’s and Parver’s alleged legal malpractice, Salvatore was wrongfully terminated and defamed and, therefore, cannot allege a legally cognizable injury ."

Legal Malpractice can pop up in any number of situations, as we have said just last week.  Here is a short blurb on a big dollar legal malpractice case in California, concerning Surfing Chicks, Paul Hastings, Kat House and trademarks.

"Too many ‘Surf Chicks’?

Los Angeles-based law firm Paul Hastings, Janofsky & Walker LLP has been hit with a $30 million legal malpractice suit by a surfing-gear maker that hired it to trademark the phrase “Surf Chick.” The suit by Ventura, Calif.-based Kat House Productions claims Paul Hastings failed to register trademarks after saying it had done so. The suit, in Manhattan federal court, says Christian Dior SA was able to copy the “Surf Chick” mark because of the alleged negligence of the firm and several attorneys. “Had defendants properly applied for, and diligently prosecuted, the trademark applications, Christian Dior would not have been able to mimic and copy plaintiffs’ mark,” the complaint says. "

Hinshaw reports on Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 2007 WL 1213712 (N.Y. April 26, 2007)   We discussed this case last April.

"The New York Court of Appeals recently held that a client was entitled to recover attorneys’ fees and expert witness costs incurred when his attorney’s error forced him to appeal an adverse verdict and to try the case a second time. The client was entitled to recovery, notwithstanding that a successful settlement was obtained during the second trial.

While walking across a road, the client was struck and injured by an automobile whose driver was making a left turn. A traffic signal controlled the intersection in which the accident occurred. The client retained attorney Corker to sue the driver. At trial, there was conflicting testimony as to whether the client was in the crosswalk at the time of the accident. At Corker’s request, the trial court gave an instruction based on N.Y. Veh. & Traf. Law § 1151, which addresses intersections without operational traffic signals. Section 1151 provides that pedestrians have the right of way in crosswalks, but have a duty not to “suddenly leave a curb or other place of safety and walk or run into the path of a vehicle which is so close that it is impractical for the driver to yield.” A jury found the client and the driver each 50% at fault, and awarded damages of $255,000.

The client retained a new lawyer, who filed a motion to set aside the verdict on the ground that the jury should have been instructed based on N.Y. Veh. & Traf. Law § 1111, which applies to intersections controlled by traffic signals. Section 1111 provides that vehicles “must yield the right of way to other traffic lawfully within the intersection or an adjacent cross walk.” The trial court denied the motion, reasoning that the client’s initial counsel had requested an instruction based on N.Y. Veh. & Traf. Law § 1151. The appellate court reversed, ruling that the client was entitled to a new trial because instructing the jury based on § 1151 was an error, and it affected the jury’s assessment of the client’s fault.

A retrial resulted in a jury’s finding that the driver was solely at fault. Before the jury returned a verdict on damages, the parties settled for $750,000. The client then filed a legal malpractice action against his initial attorney, alleging negligence in requesting an instruction based on § 1151 rather than N.Y. Veh. & Traf. Law § 1111. As damages, plaintiff sought to recover: (1) the legal fees that he incurred in moving to set aside the verdict in the first case, and in appealing the verdict; (2) the expert witness fees that he incurred in the second trial; and (3) $190,000 as an amount representing interest that would have accrued had he obtained a $750,000 recovery in the first trial.

The trial court granted partial summary judgment in favor of plaintiff, ruling that he was entitled to recover $28,703.27 as reimbursement for the attorneys’ fees incurred in obtaining a new trial and the expert fees incurred in the second trial. The trial court denied the motion with respect to plaintiff’s claim for interest. An appellate court reversed, and reasoned that the client did not sustain any actual damages because he had obtained a substantial recovery in the second trial. The Court of Appeals of New York reinstated the trial court’s ruling. "

Legal Malpractice can pop up in any number of situations.  Here is a totally unexpected possibility.  In a Blog blurb the Construction Attorney Blog talks about this problem:

"Much is being written about the 2007 AIA Documents, which were released in early November. One of the much-discussed differences in these documents is the fact that arbitration is no longer the default dispute resolution mechanism, being replaced by a "check-box" system whereby three options are provided: arbitration, litigation and "other." If none of the boxes is checked, then litigation is the default mechanism, following mandatory mediation.

It was with great interest that I opened the new documents using the AIA’s Electronic Documents software system. I immediately printed out several of the new documents, including various owner-architect agreements and an owner-contractor agreement. At this point, I had not filled in anything. I was, therefore, astonished to find that the "arbitration" box had been checked on all of the documents where that option appeared. Thinking that I had made some type of mistake, I again started a brand new document and made sure not to check anything. Once again, the arbitration choice was checked.

However, most users today are using the electronic documents and may not be aware that they actually need to check the litigation box if that is what they intend. If they just read the articles that claim that litigation is the automatic "default," they may not even look at this provision when drafting the documents if they actually want to have litigation as the real default. They may be surprised years later to receive a demand for arbitration. If they are attorneys, they may be open to a claim for legal malpractice if their client insisted on not using arbitration and they relied on the "default" litigation story.

It is usually defendant’s strategy to blame the client, at least to some extent.  Here in this case, even the court joined in.  Plaintiff was in an auto accident, hired an attorney who filed the complaint, and then gave up on discovery responses. Case dismissed, and incidently, the attorney was suspended, for an unrelated case.

Attorney lied to client, who eventually discovered the truth.  Outcome?  She sues attorney, wins uncollectible judgment, loses her attempt to revive auto accident suit.  Court says :

"Bland retained Graham in July 1998,” Sharer wrote. “It was not until December 2004, more than six years later, that she finally grew sufficiently suspicious of Graham’s inaction and failure to respond to her repeated calls, over several years time, to contact the Circuit Court directly to inquire into the status of her case. We agree with the trial court that Bland’s own actions do not rise to the level of ordinary diligence, nor did she satisfy her duty to keep herself informed of the status of her case."