Jul 3 2017

Legal Malpractice Law Update 6/30/17

Utah Supreme Court

Assignability of Legal Malpractice Claim: There is a strong presumption that legal malpractice claims are freely assignable in Utah, because developments in the Utah Rules of Civil Procedure, particularly Rule 11, and Utah Rules of Professional Conduct have sufficiently addressed concerns raised by other jurisdictions considering the issue.

Eagle Mountain City v. Parsons Kinghorn & Harris, P.C.
2017 WL 2483017 (Utah 6/7/2017)

The plaintiff and a vendor entered into contract whereby payment was due upon the occurrence of triggering events. Plaintiff’s attorneys advised plaintiff repeatedly that such conditions had not been met, and the plaintiff was sued for nonpayment. Shortly before trial, the plaintiff and the vendor reached a settlement agreement incorporating a contingent fee agreement imposing conditions on the plaintiff’s ability to bring a legal malpractice claim against plaintiff’s attorneys and giving the vendor certain contractual rights of control over that prospective action. The plaintiff did bring a legal malpractice claim and attorneys moved for summary judgment on the ground that the plaintiff assigned its claims through its agreement with the vendor and the assignment violated public policy. The district court agreed that the arrangement constituted at least a partial assignment and that transferring a substantial level of control to the vendor violated public policy. On appeal, the Utah Supreme Court elected to answer a more fundamental question about assignability of legal malpractice claims because whether the arrangement constituted an assignment would be irrelevant if legal malpractice claims are freely assignable. The Utah Supreme Court held that there is a strong presumption that the voluntary assignment of a legal malpractice claim does not violate public policy. The Court reasoned as a threshold matter that assignability was consistent with the strong presumption in favor of freedom of contract, and that involuntary assignments of legal malpractice claims through bankruptcy does not violate public policy. The Court next analyzed concerns other jurisdictions have raised about the assignability of legal malpractice claims and explained that each such concern was “significantly mitigated” by safeguards found in the Utah Rules of Professional Conduct and Utah Rules of Civil Procedure. Four particular concerns were analyzed and dismissed: 1) commoditizing and merchandising of legal malpractice claims; 2) despoiling the sanctity of the attorney-client relationship; 3) sowing the opportunity and incentive for collusion; and 4) fostering public loss of respect for the legal profession. The Supreme Court cited the development of Utah Rule of Civil Procedure 11, the lack of concern over champerty and the increased emphasis on access to justice as reasons undermining the commoditization concern. As to the second concern, regarding the attorney-client privilege, there was no justifiable reason to permit involuntary assignment of claims but prohibit voluntary assignment, and bringing a legal malpractice claim involves some affirmative choice by the client to waive privilege in any event. As for the collusion concern, the Utah Supreme Court was satisfied that Rule 11 prevented a victimized client from stipulating to artificially inflated damages which would then be part of the “trial within a trial.” As for the final concern, the Court recognized that assigning claims presented an issue where attorneys would advocate different causation theories in the underlying case versus the legal malpractice case, but found that it was not significant enough to ban assignment of claims altogether. However, in holding that legal malpractice claims are assignable, the Court added that it could envision a future scenario in which an assignment violated clearly defined public policy concerns and would be deemed invalid.  

Supreme Court of the State of New York, Appellate Division

Existence of Attorney-Client Relationship: In connection with County attorneys’ representation of a County employee, the plaintiff could not recover damages for legal malpractice because no attorney-client relationship existed personally between the employee and the County attorneys, as the County attorneys only represented the employee in his capacity as a County employee, and not the employee in his individual capacity.

Spring v. County of Monroe, et al.
2017 WL 2491382 (N.Y.A.D. 6/9/2017)

The plaintiff was first employed by the County in 2001 and became the Executive Health Director/Chief Administrative Officer of the County Hospital (“the hospital”) in 2004. In February and March of 2013, “questions arose” regarding the treatment of a patient at the hospital and an investigation was initiated by the Department of Health (“DOH”) and the Attorney General. The County provided the plaintiff with representation by County attorneys. The County attorneys also provided representation to the County itself as well as other hospital employees, whose interests plaintiff alleged were adverse to his own. On March 29, 2013, the DOH issued a statement of deficiency that included accusations against the plaintiff with respect to treatment of a patient at the hospital. In the next month, the County hired an independent consultant to assist with a response to the statement of deficiencies and to help file an “Informal Dispute Resolution” (“IDR”) appeal. The consultant informed the plaintiff that filing an IDR appeal was in his best legal interest and that it would protect his reputation. The IDR appeal was finalized, but the County attorneys decided not to file it. The plaintiff then asked to be represented by private counsel. Two days later, the plaintiff was terminated. The plaintiff brought suit against the County attorneys, the hospital, the County itself, and the County Executive. All defendants filed separate motions to dismiss all claims, all of which were denied by the lower court. All defendants appealed. In reviewing the lower court’s denials, the New York State Supreme Court, Appellate Division, held that the lower court erred in denying the County attorney defendants’ motion to dismiss the plaintiff’s legal malpractice claim. In reversing the lower court’s decision, the Appellate Division reasoned that in order to recover damages for legal malpractice, the plaintiff initially must prove that an attorney-client relationship existed. The Appellate Division reasoned that the County attorneys only represented the plaintiff in his capacity as a County employee, and consequently, the plaintiff was collaterally estopped from claiming that the County attorneys represented him in his individual capacity. Because no attorney-client relationship existed, the plaintiff’s legal malpractice claim should properly have been dismissed. Additionally, the Court held that further discovery would not reveal an attorney-client relationship between the plaintiff and the County attorneys. The Court also held that plaintiff’s negligence claim against defendants must be dismissed, because in order to succeed on a claim for negligence against a municipality, the plaintiff was required to allege that a special duty existed between him and the municipality, and he had failed to do so.  

Supreme Court of Idaho

Expert Testimony Required When Malpractice is Not Obvious: Without expert testimony, plaintiff could not demonstrate that there were genuine issues of material fact as to whether the attorney’s failure to file a motion for summary judgment in the underlying matter fell below the standard of care or proximately caused any damages.

Greenfield v. Smith
2017 WL 2438759 (Idaho 6/6/17)

Plaintiff retained defendant-attorney in September 2010 to represent her in unrelated civil and criminal matters. The attorney represented the plaintiff for approximately 18 months and obtained an acquittal for the plaintiff on the criminal charges. The civil case was scheduled to go to trial in May 2012. The attorney filed a motion to withdraw from representing the plaintiff in February 2012 on the basis that the attorney-client relationship had broken down to a point beyond repair. The district court granted the motion to withdraw and the civil trial was rescheduled for November 26, 2012. The plaintiff represented herself pro se in the civil trial and a jury returned a verdict against her on November 30, 2012. The plaintiff subsequently filed a legal malpractice action against the attorney on December 1, 2014—two years and one day after the jury verdict in the civil trial. The attorney filed a motion for summary judgment, arguing that the plaintiff’s claims were time barred and that the prima facie elements of legal malpractice could not be established because no expert witness was designated by the plaintiff. The district court granted the attorney’s motion for summary judgment. The Supreme Court of Idaho held that the district court erred in determining that the plaintiff’s civil claims were time barred. Idaho Code Section 5-219(4) provides a two-year statute of limitations for professional malpractice lawsuits. The plaintiff argued that the claims are instead governed by a five-year statute of limitations for breach of written contract and that even if the two-year statute of limitations was applied, the suit was timely. The Court held that the plaintiff’s claims were governed by the two-year professional malpractice statute of limitations because the contract was part of the professional services performed by the attorney. The only exception to this rule is where an attorney has failed to perform an elevated standard of care that is expressly specified in a written agreement. There was no provision in the contract that specified an elevated standard of care and therefore the two-year statute of limitations applied. However, the Court also held that the plaintiff’s December 1, 2014 filing of the malpractice action was timely. Although the jury in the civil trial returned a verdict against the plaintiff on November 30, 2012, and therefore November 30, 2014 otherwise would be the last date upon which the action could be filed timely, that day was a Sunday. Idaho Code §73-108 and § 73-109 explicitly states that holidays are excluded when computing time and every Sunday is a holiday, therefore the deadline for the plaintiff to file was December 1, 2014, thereby rendering her filing timely. Nonetheless, the plaintiff’s action failed because expert testimony was not provided to prove that the attorney’s conduct fell below the standard of care. The plaintiff alleged that the attorney’s performance was deficient because the attorney did not file a motion for summary judgment in the underlying matter. The Court noted several important questions that required expert testimony, such as who controls the decision to file a motion for summary judgment, under what circumstances a summary judgment motion generally is appropriate, whether a motion for summary judgment was appropriate in the plaintiff’s matter, and whether the plaintiff had some chance of success on such a motion. The only exception to the need for expert testimony, i.e., when the attorney’s conduct is obviously below the standard of care, therefore was not applicable. The Court also rejected the plaintiff’s argument that the district court had a duty to advise her of the impact of summary judgment because Idaho has repeatedly held that pro se litigants are held to the same standards and rules as those represented by an attorney.  

Court of Appeals of Texas – Houston, 1st District

Anti-Fracturing/Attorney’s Burden of Proof on Summary Judgment: Anti-fracturing rule applies where the gravamen of the client’s complaint relates to the quality or adequacy of the attorney’s representation. Attorney had burden on summary judgment to provide expert evidence establishing lack of duty to client.

Young v. Day, P.C.
2017 WL 2117542 (Tex. App. – Houston [1st Dist.] 5/16/17)

Defendant attorney represented clients in a personal injury lawsuit arising out of a motor vehicle accident. The clients were found solely responsible for the accident and the court rendered a take-nothing judgment against the clients. On June 14, 2012, the judgment was affirmed on appeal. On October 8, 2014, the clients filed a professional negligence law suit against the attorney, asserting that the attorney was negligent with respect to pretrial advice and trial tactics. The clients further alleged that the attorney falsely advised them that they had to go to trial because there was no settlement offer, when, as they later learned, an offer had been made. They also alleged that the attorney entered into an oral agreement to represent one of the clients in a lawsuit against a hospital for negligent medical treatment for his accident-related injuries. They assert that the attorney did not follow through on the alleged oral contract and caused them to miss the deadline to sue the hospital. The clients later added claims for negligent misrepresentation, fraud, breach of fiduciary duty and violation of the Deceptive Trade Practices Act (DTPA) after the attorney produced a .pdf file that the clients claimed was fraudulently prepared; a refusal in writing of a $200,000 settlement offer, which had apparently been signed by the clients). The clients denied that any settlement offer had been conveyed to them. The attorney moved for summary judgment on the grounds that the non-negligence claims were barred by the rule against fracturing a professional negligence claim, the negligence claims were barred by the applicable two-year statute of limitations, and any remaining claims failed because the clients did not designate an expert. The trial court agreed and granted summary judgment, from which the clients appealed. The Court of Appeals of Texas, Houston (1st District) first held that the anti-fracturing rule applied. The rule against fracturing claims prevents plaintiffs from converting what are actually professional negligence claims against an attorney into other claims. The rule prevents legal malpractice plaintiffs from “opportunistically transforming a claim that sounds only in negligence into other claims” to avail themselves of longer limitations periods, less onerous proof requirements, or other tactical advantages. For the anti-fracturing rule to apply, the spirit of the complaint must focus on the quality or adequacy of the attorney’s representation. Upon review of the clients’ claims and contentions, the Court of Appeals concluded that the gravamen of the clients’ claim was professional negligence, in that their claims were based on the allegations that the attorney failed to call certain witnesses to testify at trial or failed to convey the settlement offer to the clients and failed to file suit against the hospital before the statute of limitations expired. As a result, the two-year statute of limitations applied to all the claims. With respect to the allegations related to the alleged negligent pretrial advice and trial tactics, the Court noted that the underlying judgment had been affirmed on appeal on June 14, 2012, that the clients’ appellate remedies had been exhausted by October 6, 2012. This aspect of the clients’ claim was barred because the Complaint was filed on October 8, 2014, two days after the statute of limitations expired. As for the unfiled medical malpractice claim, the Court found that the clients were aware that the applicable limitations period was set to expire on September 28, 2009 due to a letter they received from the attorney. The clients did not file suit against the attorney until October 8, 2014, well past the limitations period for the case against the attorney. With respect to the remaining allegation that the attorney failed to convey the settlement offer, the attorney argued that the clients intended to withhold settlement funds from creditors and therefore the clients were required to present expert testimony on the standard of care in communicating the settlement offer under those circumstances. The Court disagreed. As the moving party, the attorney bore the burden to disprove that he owed a duty to the clients to convey the settlement offer. The attorney did not bring forward expert testimony to explain why he had no duty to inform the clients of the settlement offer based on their alleged unethical and illegal motives. Therefore, the Court of Appeals reversed and remanded that issue to the trial court.  

Court of Appeals of Minnesota

Standing: Personal representative of the decedent’s estate has standing to bring an action for legal malpractice under Minnesota’s survival statute where the decedent sustained “some damages,” and the cause of action accrued in his lifetime when he signed the estate planning documents pursuant to the attorney’s allegedly negligent advice.

Security Bank and Trust Company v. Larkin, Hoffman, Daly & Lindgren, Ltd.
2017 WL 2063013 (Minn. App. 5/15/2017)

The Court of Appeals of Minnesota reversed and remanded a dismissal on the pleadings in a legal malpractice claim arising from estate planning services performed by a law firm, in favor of a personal representative of the decedent’s estate. In this case, the defendant law firm was retained by a client to draft a revocable trust and will to be executed upon his death. The will was structured so that the assets remaining after gifts and personal items would pass into the trust. Neither the will nor the trust contained a provision for a generation-skipping trust or other mechanism for avoiding a generation-skipping tax. After the decedent’s death, the personal representative (“PR”) and trustee commenced a malpractice action against the law firm. The complaint alleged that because the law firm failed to advise the decedent of the tax implications of a generation-skipping tax, the law firm missed opportunities to provide for alternative estate dispositions to avoid the tax. The PR alleged that, as a result of the law firm’s negligence, the estate had been required to pay approximately $1.654 million in generation-skipping transfer taxes. The law firm moved for judgment on the pleadings, arguing that as personal representative of the estate, the PR lacked standing to pursue a malpractice action because no damages had occurred before the testator’s death, no cause of action for legal malpractice accrued during his lifetime, and therefore no cause of action existed to which the PR might succeed. The district court agreed and dismissed the matter on the pleadings. At issue on appeal was whether the PR had standing to pursue the action under the Minnesota survival statute because a claim of legal malpractice accrued before the decedent’s death. Generally, a personal representative has standing to assert claims on behalf of the decedent’s estate. However, if a client has no claim against an attorney for legal malpractice when the client is living, no cause of action exists to which a personal representative may succeed after the client’s death, as Minnesota adheres to the rule requiring “some damage” to occur for a cause of action to accrue. The PR argued that the decedent suffered “some damage” when he acted on the law firm’s advice and signed the estate documents that created a new exposure to liability for his estate. The law firm argued that the decedent did not incur damages before his death because he could have changed his will and trust at any time. Examining Minnesota case law regarding the time for accrual of a claim based on malpractice, the Court determined that the decedent sustained “some damage” when he signed the will and trust after the law firm failed to inform him that his estate would be subject to a generation-skipping tax and failed to provide him with alternatives to avoid such a tax, creating new exposure liability for his estate. In response to the law firm’s argument that the client had not been damaged because he could have changed his estate plan before his death, the Court stated that being “locked into” a position is evidence of “some damage,” but it does not provide the only possible evidence of damage. Finally, the Court was concerned that if it held differently, certain harms caused by estate-planning malpractice would lack redress. Reversing and remanding the dismissal order of the district court, the Court of Appeals of Minnesota concluded that the PR had standing to assert the claim on behalf of the estate.  

Court of Appeals of Indiana

Burden of Attorney Seeking Summary Judgment: Burden was on legal malpractice defendant to affirmatively negate the plaintiff’s claims and failure to do so justified denial of attorney's motion for summary judgment.

Mundia v. Drendall Law Office, P.C.
2017 WL 2350921 (Ind. Ct. App. 5/31/17)

This matter arose from the attorney’s representation of the client in her wrongful death claims against the County prosecutor and investigating police department (“County Defendants”). The client’s claims against the County Defendants arose from their alleged collective failure to properly investigate the existence of a protective order in favor of the client and her daughter. The client alleged that due to this collective failure, the client’s husband was released from police custody and killed their daughter. Approximately five months later, the client engaged the attorney to assist in the prosecution of her claims against the County Defendants. Her claims were allegedly supported by the County Defendants’ public statement admitting their failure to properly investigate the existence of the protective order. Under the Indiana law, the client was required to file a tort claim notice with the County Defendants within 180 days of the date of her loss and prior to filing her action. Despite informing the client of her time sensitive obligation to file the tort claim notice, the attorney failed to do so within the requisite time period. The client’s claims were therefore barred. Thereafter, the client filed the malpractice action against the attorney. As part of her Complaint, the client attached certain correspondence from the attorney that demonstrated the attorney’s knowledge of the tort claim notice requirements. The client also included a copy of the County Defendants’ press release admitting they were negligent in releasing her husband from custody. The attorney admitted that he was aware of the tort claim notice requirements and that upon being retained by the client, the 180- day period had not yet expired. The attorney nonetheless moved for summary judgment, arguing that the client could not prove that his actions or inactions were the proximate cause of her alleged damages. The attorney’s arguments were wholly based upon the immunity afforded to the County Defendants under the Indiana Tort Claims Act (“ITCA”). During the summary judgment hearing, the trial court placed the burden upon the client to demonstrate the inapplicability of ITCA immunity. The client argued that there was a genuine issue of material fact as to whether the County Defendants’ failure to conduct an adequate search for the protective order was a purely discretionary act entitling the County Defendants to immunity. The client also argued that the issue of immunity should not be dispositive, as the attorney’s failure to file the tort claim notice eliminated any possibility of engaging in settlement negotiations with the County Defendants. The trial court rejected the client’s argument and found the proper application of ITCA immunity required granting summary judgment to the attorney. In reviewing the trial court’s grant of summary judgment, the Court of Appeals focused upon the uniquely heavy burden imposed upon a party moving for summary judgment. Specifically, Indiana law provides that the movant has the burden to affirmatively negate least one element of opponent’s claim. The attorney, as the moving party, therefore was required to negate at least one element of the client’s claim. The attorney conceded for summary judgment purposes that he owed his client a duty and that he breached that duty. However, he asserted that, in light of the ITCA’s immunity provisions, the client had not shown that the underlying litigation would have resulted in a benefit to her, either through verdict or settlement. While acknowledging that the client would have that burden at trial, the Court held that it was not her burden on summary judgment. Rather, it was the attorney’s burden on summary judgment to show that his actions were not the proximate cause of the client’s damages. So, instead of requiring the client to show that she would have obtained a verdict or that the County Defendants would have considered settling, the burden was on the attorney to show that the client would not have received a verdict and that the County Defendants would not have settled, which the attorney’s motion did not address. Therefore, the attorney was not entitled to summary judgment and the judgment of the trial court was reversed.

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