Lead Plaintiff in a class action is unhappy with settlement amount, and seeks to sue the class action attorney and sues class action attorney in legal malpractice.  Holding:  plaintiff is collaterally estopped from suing.

Hinshaw reports: "J. Michael Koehler v. Jules Brody, et al., ___F.3d___, 2007 WL 895864 (8th Cir. 2007)

Brief Summary

Two years after a court approved a class action settlement, a lead plaintiff brought suit against former class counsel for breach of fiduciary duty and misrepresentation, claiming that the settlement was too low and that it should have been paid in stock to avoid adverse tax consequences. The appellate court affirmed the dismissal of these claims on the ground that the plaintiff was collaterally estopped from suing class counsel to attack the class recovery.

Complete Summary

This case arose out of a global settlement of a number of class action cases related to the merger of NationsBank and BankAmerica into Bank of America. J. Michael Koehler was a lead plaintiff and class representative. The court appointed the firms of Green, Schaaf & Jacobsen, P.C., Chitwood & Harley, and Stull, Stull & Brody as co-lead counsel. A mediation was held in January 2002 under the direction of a former federal district judge. Mr. Koehler and some other lead plaintiffs were present at negotiations but left after two days. The mediation continued and resulted in a $490 million settlement.

Hearings were then held to determine the fairness of the settlement. Mr. Koehler retained separate counsel and objected to the settlement. He felt the settlement was too low and was disproportionately distributed among the shareholder classes. He also felt the settlement was invalid because he had not been present when the settlement agreement was reached, because he allegedly had been misled by counsel and because counsel had allegedly made false representations to the court about his approval that violated the Private Securities Litigation Reform Act of 1995 (the “PLSRA”). Mr. Koehler also alleged other ethical violations by the attorneys, and submitted an expert affidavit from a legal ethics specialist regarding the alleged breaches. Id. at *1. "

 

Here is a NJ case about legal malpractice insurance coverage for successor attorneys.

"In this appeal, we decide whether a policy of insurance providing coverage for legal malpractice requires the insurer to provide indemnification to a former partner of a law firm for acts of malpractice allegedly committed subsequent to the dissolution of that firm. Under the facts presented, we conclude that the former partner was acting "solely in a professional capacity on behalf of such firm," as required by the policy of insurance and was entitled to a defense and indemnification. Accordingly, we affirm the trial court’s grant of summary judgment in favor of defendant John J. Marquess"

This "immediate release" letter from whistleblower sounds like an attempt by the client to shame defendants into a settlement.  We are often asked whether shame plays a role in legal malpractice.  Clients often believe that an attorney will settle rather than litigate for fear of having this sort of a press release hit the web.

We saw this on a search for legal malpractice.  How many others read this is unknown.  Do you think this will pressure the attorneys’s insurance carrier to settle?

 

Loeb & Loeb has been using a retainer agreement that required arbitration.  This reported case is the second of two in which Loeb & Loeb has successfully stayed legal malpractice cases in favor of arbitration.  This case held that the Supreme Court Case is stayed whild arbitration goes  forward.  Other courts have held that arbitration of legal malpractice cases runs against public policy.

This story is beyond belief.  Plaintiff is convicted of a crime, and then the conviction is reversed.    However, no one, not his attorney, not the DA, and not the state ever let him out!  Result?  He stayed in jail for 17 years after reversal.

"Although the Michigan Court Appeals in 1989 overturned his 1987 conviction because inadmissible evidence was used against him, no one ever acted on the court’s order. It just sat there while Heyerman sat in prison — for an incredible 17 years. His original attorney did nothing to challenge his imprisonment.

The government was equally at fault. The Calhoun County prosecutor and circuit court failed to either re-try Heyerman or drop charges against him. Meanwhile, the Parole Board denied him release three times after he had served his minimum sentence.

Heyerman would still be in an Upper Peninsula prison if another inmate, a jailhouse lawyer, hadn’t helped him write a writ to get a new trial. Two weeks ago, a Calhoun County judge finally dropped all the charges against the 54-year-old former janitor. "

Heyerman plans to sue his original attorney and to file a civil suit against the state for wrongful imprisonment. This mess is likely to cost taxpayers more than they paid to keep Heyerman locked up.

Here, Hinshaw reports a NJ attorney who lost legal malpractice coverage for failure to report.  Court found that it should have known, subjectively that notice to the insurer was due.  NY has similar cases, for example, Cass v. American Guarantee in which the law firm should have given notice.  As determined by Justice Tolub , any reasonable attorney would have known that a malpractice case was on the way, after the worker compensation case was dismised.

Here is a divorce legal malpractice legal fee case from the upper reaches of NJ society, complete with client meetings at the country club, promises to pay for the divorces of others, vindictive hiring of attorneys…you name it.

By way of background, on August 18, 1997, defendant retained plaintiff to represent him in a contentious divorce action already underway and involving substantial marital assets. At the time, defendant and his wife were separated and defendant was residing with Moran and her children, one of whom was the daughter of John Izmirlian, from whom Moran had already been divorced.

Defendant’s own matrimonial dispute was scheduled for trial on May 19, 1998, less than nine months after plaintiff was retained. Rather than proceed to trial, defendant and his former wife elected to engage in settlement negotiations and after two days, on May 21, 1998, reached an agreement. A final judgment of divorce was entered the next day, May 22nd, after a hearing in which the terms of the property settlement agreement (PSA) were placed on the record and the parties testified they entered into it knowingly, freely and competently.

Defendant also appeals from an October 28, 2005 order of final judgment holding him liable for fees and costs incurred by plaintiff on behalf of Moran. The genesis of that matter was in late January-early February, 1999 when, during the course of his own post-divorce litigation, defendant arranged a meeting with plaintiff and Moran to discuss plaintiff’s representation of Moran in a post-divorce action initiated by Moran’s former husband Izmirlian. Earlier, defendant had conveyed to plaintiff his opinions that Izmirlian was dishonest, concealing his income from both the Internal Revenue Service and Moran, and that he should be made to pay all the child support for the daughter then living with defendant and Moran. By all accounts, that meeting was held at a local country club and thereafter, on February 5, 1999, plaintiff and Moran signed a retainer agreement.

According to plaintiff, the meeting lasted two hours during which they talked almost exclusively about Moran’s legal situation. Defendant once again mentioned that Izmirlian was attempting to hide his finances and that he wanted to ensure Izmirlian paid his support obligations. Moran said she was unable to pay for plaintiff’s services and plaintiff herself knew that Moran had no steady means of supporting herself, that Izmirlian had no money, and that Moran had previously discharged a fee obligation of approximately $15,000 in bankruptcy proceedings. Consequently, plaintiff raised the issue of payment, asserting that litigation would be expensive and that she could not proceed without payment. According to plaintiff, defendant assured her that he was "willing to throw some money at this, so that that little prick pays to support his kid." With that assurance, plaintiff entered into a retainer agreement, and commenced preliminary work on the case, including arranging a meeting between the parties, which turned out to be unproductive.

The following day, May 23rd, defendant, apparently concerned for his former wife, agreed to renegotiate the PSA, however, these negotiations eventually proved unavailing. As a result, defendant’s former wife moved to set aside the PSA and a twenty-two day plenary hearing ensued in which she claimed she was under duress at the time. At the conclusion of the evidence, Judge Cass denied the application to set aside the PSA, finding it was fair and reasonable and not the product of duress or incompetence. "  Read the rest!

Anthony Lin reports in the NYLJ that Sidley Austin has avoided prosecution for tax shelter manipulation, even though one of its "expelled" attorneys is facing felony charges.  SA will pay $ 39 milliion in fines.

"Federal prosecutors have decided not to bring criminal charges against Chicago law firm Sidley Austin over its involvement with illegal tax shelters, though the law firm will pay a civil penalty of $39.4 million to the Internal Revenue Service.

In announcing the decision yesterday, U.S. Attorney Michael J. Garcia of the Southern District of New York distinguished the actions of the firm from that of former tax partner Raymond J. Ruble, who is already facing a criminal trial in Manhattan federal court.

Mr. Ruble, who was expelled from Sidley Austin in 2003, and several former employees of accounting firm KPMG are charged with creating and promoting tax shelters banned by the IRS, with Mr. Ruble also issuing hundreds of opinion letters meant to provide legal cover for the shelters. The IRS estimates 700 wealthy individuals and corporations relied on Sidley Austin opinions in purchasing illegal tax shelters.

In deciding not to prosecute the law firm, Mr. Garcia said his office took into account the fact that most of Mr. Ruble’s activities took place when he was a partner at New York’s Brown & Wood, with which the firm then known as Sidley & Austin merged in 2001. The former Sidley & Austin had never had a tax shelter practice and took steps at the time of the merger to rein in Mr. Ruble’s practice. Mr. Garcia said Mr. Ruble continued his practice only by misleading his partners at the merged firm. "

Here is a very interesting case from the 2d Department.  It involves one of the best and most known medical malpractice practitioners, who has more multi-million dollar verdicts and settlements than most of us have even read about.  This case teaches three lessons.

The first is that an infant’s compromise, a wrongful death compromise or other judicially decided award of legal fees virtually kills any legal malpractice claim.

The second is that it is probably always better to communicate with your clients over settlement demands in writing.  Here there was an offer of $ 1 million to settle, which was turned down, ending in a verdict of $ 350,000.  Client admitted, kind of, that she knew of offer, perhaps…but called it a "settlement value" rather than an offer.

Third lesson, well known to all, is don’t ask a question without either knowing what answer will be given, or prepping the witness with an appropriate answer.  Here, plaintiff’s attorney asked what would have happened if the $1 million had been offered, and the client waffled.

Result?  Legal malpractice dismissed.