June 20, 2008
A client in a divorce case entered into a settlement agreement that included disposition of two parcels of land. Her attorney reviewed a quitclaim deed drafted by opposing counsel and the client executed the agreement. She later sued her attorney for legal malpractice over the property description in the deed, claiming that it was not in accord with the actual agreement. She also sued opposing counsel and her former attorneys cross-claimed against opposing counsel as well.
The New York Appellate Division for the Second Judicial Department held that summary judgment should have been entered as to opposing counsel:
"Absent fraud, collusion, malicious acts, or other special circumstances, an attorney is not liable to third parties not in privity or near-privity for harm caused by professional negligence" (Fredriksen v Fredriksen, 30 AD3d 370, 372; see AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 595). Here, the record establishes that Hecht, who was retained by George Breen to draft a legal document, was not in privity or near-privity with the plaintiff (see Fredriksen v Fredriksen, 30 AD3d at 372; Goldfarb v Schwartz, 26 AD3d 462, 463; Rovello v Klein, 304 AD2d 638). Thus, Hecht established his entitlement to summary judgment dismissing the cause of action alleging legal malpractice, and, in opposition, the plaintiff and the Barket defendants failed to raise a triable issue of fact.
Hecht also established his entitlement to summary judgment dismissing the cause of action alleging breach of contract by showing that the plaintiff was not a third-party beneficiary of the alleged retainer agreement between Hecht and George Breen, but rather was, at most, an incidental beneficiary of such an agreement (see BDG Oceanside, LLC v RAD Term. Corp., 14 AD3d 472, 473). Any benefit the plaintiff may have derived from the alleged retainer agreement was not "sufficiently immediate, rather than incidental, to indicate the assumption by the contracting parties of a duty to compensate [her] if the benefit is lost" (State of Cal. Pub. Employees' Retirement Sys. v Shearman & Sterling, 95 NY2d 427, 434-435). In opposition, the plaintiff and the Barket defendants failed to raise a triable issue of fact.
The plaintiff and the Barket defendants also failed to raise a triable issue of fact in response to Hecht's prima facie showing of his entitlement to summary judgment dismissing the cause of action alleging negligent misrepresentation. As between Hecht and the plaintiff, there was no "special or privity-like relationship imposing a duty on the defendant to impart correct information to the plaintiff" (J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148). Moreover, as Hecht asserted in an affidavit, and the plaintiff does not dispute, Hecht never had any contact with the plaintiff, and thus there was no "linking conduct" evincing his understanding of the plaintiff's alleged reliance (Securities Inv. Protection Corp. v BDD Seidman, 95 NY2d 702, 711; see Credit Alliance Corp. v Arthur Andersen & Co., 65 NY2d 536, 553-554). Nor did the quitclaim deed constitute a representation made by Hecht to the plaintiff (cf. Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377). Furthermore, neither the plaintiff nor the Barket defendants could have justifiably relied on whatever representation the deed may have contained (see Verschell v Pike, 85 AD2d 690, 691). Any such reliance by the Barket defendants would have been particularly unreasonable, since the plaintiff herself discovered the alleged error in the deed and brought it to her attorney's attention, but was advised by the attorney to sign the deed nonetheless.
No Summary Reciprocal Discipline For Agency Action
An attorney who had been reciprocally suspended by a panel of the Arkansas Supreme Court Committee on Professional Conduct sought and obtained mandamus relief by order of the Arkansas Supreme Court. The sanction was imposed "based on information provided... by the Social Security Administration (SSA) and the Department of Veterans Affairs (VA) that [the attorney's] accreditation to represent claimants before those agencies had been cancelled by the VA and suspended for five years by the SSA." The court held that it was obligated to afford the attorney due process and an adequate remedy to challenge the suspension order. In a footnote, the court expained that the agencies in question do not regulate the practice of law and that their actions "did not amount to suspension from the practice of law..." The court ordered the attorney reinstated. (Mike Frisch)
An Untrustworthy Employee
The Mississippi Supreme Court declined to adopt a proposed one-year retroactive suspension and remanded the bar discipline matter for consideration of the proper sanction. The court also found an ethical violation of Rule 5.5(b)(aiding unauthorized practice).
The attorney had employed a former inmate at Parchman Penitentiary (made famous by John Grisham) as a paralegal "on his reputation as a successful writ writer while at Parchman, and his potential ability to generate business for [the lawyer's] firm." An inmate serving a life sentence was assisted by the paralegal in filing a pro se state habeas corpus petition. The unhappy client filed a bar complaint against the lawyer, who testified that she was unaware of the matter and had been taken advantage of by the paralegal. The lawyer also had lost files in an office move and lost the keys to other file drawers that "remain locked because she lost the keys."
As to the files, the attorney did not violate confidentiality rules because there was no evidence that client files were disclosed. There was insufficient evidence that the lawyer indicated that the paralegal "had authority to communicate her consent to undertake the representation of a client." However, the attorney had failed to properly supervise the paralegal and assisted in his unauthorized practice of law. The court's remand order indicates a view that the proposed one year suspension is insufficient. (Mike Frisch)
Lawyer Liable For Failure To Honor Assignment
The Wyoming Supreme Court has held that an attorney who is aware of an agreement to pay the client's medical bills from the proceeds of litigation is obligated to the medical provider if the medical bills are not paid from settlement proceeds. The court concludes:
Mr. Jackman [the client] clearly assigned his interest in the proceeds of his personal injury action to GemCity [the medical provider] for payment of his medical bills. As obligor, Mr. Winship [the lawyer] was required to honor that assignment. It is irrelevant that he had not entered into a direct contract with GemCity. Under the well-settled law of assignments, an obligor who has notice of an assignment and fails to honor it is responsible to the assignee. The district court, therefore, properly held Mr. Winship was responsible to GemCity for Mr. Jackman’s medical bills.
Problems Do Not Prevent Reinstatement
An attorney suspended for attempted income tax evasion was reinstated to practice by the Wisconsin Supreme Court. the attorney had two felony convictions prior to law school and had pardoned for those offenses by Governor Tommy Thompson. There also had been issues with the operation of her trust account and withdrawal from two cases after suspension. Further, there had been information sought that was not properly disclosed on the reinstatement questionnaire. Nonetheless:
Although the items discussed above clearly worked against Attorney Washington's reinstatement petition, the referee emphasized that Attorney Washington had exhibited genuine remorse for her conduct at the reinstatement hearing. The referee noted that Attorney Washington had readily conceded that she did not suffer from a lack of disposable income during the years in which she had misrepresented her income on her federal income tax returns. The referee also stated that while others may have attempted to excuse her misconduct as a result of a lack of business acumen or inadequate clerical support, Attorney Washington did not attempt to use any such excuses. In addition to accepting responsibility for her wrongdoing, Attorney Washington
also convinced the referee that she has a genuine intention to repay her outstanding back taxes.
It is somewhat unusual to see so many negative factors raised in a reinstatement proceeding that results in readmission. (Mike Frisch)
Drug Use Unethical?
The District of Columbia Board on Professional Responsibility rejected a recommendation of Bar Counsel to impose a 30 day suspension in a reciprocal discipline matter where New Jersey had imposed public censure. The offense? Possession of cocaine and drug paraphernalia. New Jersey has, in the past, imposed suspension for like misconduct, but here enumerated a list of reasons in favor of a non-suspensory disposition. In particular, the attorney had made significant strides in recovery and had helped others with their rehabilitation from drug addiction. The board felt that D.C. should "support the New Jersey Court's recognition of [his] commendable effort to overcome the ill effects of his misconduct."
An interesting concurring opinion suggests that personal cocaine use is no violation of Rule 8.4(b): "There have been several periods in our recent cultural history when recreational drug use was common. Prominent individuals with illustrious careers in public service have acknowledged their occasional use of controlled substances. Without endorsing such conduct, the Court can surely recognize that many highly competent, trustworthy members of the Bar may have used controlled substances." The concurring opinion urges the Court to "not hold that personal use of cocaine by an attorney constitutes a disciplinary offense."
My view is that Bar Counsel had no business seeking a suspension here. As I have previously opined, the Bar Counsel that lives by the upward departure in reciprocal cases dies by the downward departure. In order to sustain Bar Counsel's position here, the board and court must conclude that every case involving simple possession of cocaine would result in suspension. This is a tough sell in a jurisdiction that has never sanctioned such conduct in an original case.
Because the attorney had asked for reciprocal discipline, the majority and concurring opinions correctly suggest that the court need not reach the question raised as to whether personal drug use violates the rules of the District of Columbia. In sum, much ado and effort to very little benefit. (Mike Frisch)
Depression Caused Misconduct
The Pennsylvania Supreme Court suspended an attorney for a year and a day for unauthorized practice after he had transferred to inactive status. He was hired as a contract attorney by a Delaware firm while inactive, and became lead counsel for the firm's class action defense litigation in "a national complex and class action defense." He received reimbursement from the firm for his annual registration fee although he never paid the fee. After failing to provide discovery, he forged, or caused to be forged, a letter from opposing counsel that purported to strike the order to compel discovery. The firm terminated him shortly thereafter.
The attorney suffers from a major depressive disorder and had financial reverses that had led to a divorce. He sought treatment and now takes medicine to stabilize his mood. The Disciplinary Board concluded that the attorney "suffers from a psychiatric disorder which substantially caused the misconduct." The board further concluded that the dishonest conduct required a reinstatement proceeding. (Mike Frisch)
June 19, 2008
Collectibility And Legal Malpractice
The Ohio Supreme Court recently held that the plaintiff in a legal malpractice case must prove that the proven damages are collectible. The court's web page notes the following from the majority opinion in the 5-2 decision:
Writing for the Court in today’s decision, Justice Pfeifer noted that the case presents an issue of first impression in Ohio. He observed that courts in other states have issued conflicting rulings on whether the plaintiff or the defendant in a legal malpractice plaintiff bears the burden of proving the amount of damages that would have been recoverable from a tortfeasor. While a minority of courts have ruled that a plaintiff is not required to prove collectibility, Justice Pfeifer agreed with the majority of jurisdictions which have held that “collectibility is logically and inextricably linked to the legal-malpractice plaintiff’s damages, for which the plaintiff bears the burden of proof.”
“The jury in this case arrived at a figure for damages that was not necessarily reflective of the value of the Patereks’ claim against their lawyers; the jury’s damage award reflects what the Patereks’ suffered through the negligence of Richardson,” wrote Justice Pfeifer. “But the appellant attorneys in this case are not responsible for Richardson’s negligent conduct; they are responsible for their own. This case is not about what Irene Paterek suffered on account of Richardson’s bad driving, but what she suffered on account of the appellants’ bad lawyering. The proper inquiry, then, is this: Had the appellants not been negligent, how much could Irene have received from a settlement or a judgment?”
Noting that Mrs. Paterek stipulated that she could not have recovered any damages directly from Richardson, and presented no evidence regarding possible recovery from his future earnings, Justice Pfeifer concluded that the case record “does not show that she could have collected more than $100,000 from sources related to Richardson.”
He went on, however, to note that in reducing the jury’s award to $100,000, the trial court failed to take into account the value of the Patereks’ own UM/UIM insurance coverage, which the parties had stipulated was $250,000 less a set-off for any recovery they made from Richardson’s liability coverage. Citing a 1996 decision of the U.S. Sixth Circuit Court of Appeals, Sparks v. Craft, Justice Pfeifer wrote: “In determining the collectibility of an unrealized judgment, the factfinder should consider the amount of the plaintiff’s underinsured-motorist policy. ... The amount payable under the policy springs from the judgment against the underlying tortfeasor and that tortfeasor’s collectibility. As part of the pot available to a successful plaintiff in a case properly handled by an attorney, underinsured-motorist coverage is evidence of collectibility of the underlying claim in an attorney-malpractice case.”
“Here, the appellants stipulated to the existence of the underinsured-motorist coverage and the amount that would be available to Irene Paterek from that policy. The trial court erred in failing to include the additional $150,000 available to Irene under the UIM policy in its calculation of damages. It should have entered judgment for her in the amount of $250,000. Accordingly, we reverse the judgment of the court of appeals, remand the cause to the trial court, and instruct the trial court to enter judgment in favor of the appellees in the amount of $250,000 plus applicable interest.”
"Some Realism About Bar Associations"
That is the title of a new essay by Elizabeth Chambliss (NYLS) and Bruce Green (Fordham), which is now available on SSRN. Here is an excerpt of the abstract:
What are bar associations' responsibilities for law reform? Under what conditions do bar association committees act in the public interest? Do lawyers even believe in the 'public' interest as something that can be collectively defined?
The lawyer-statesman is a powerful icon among American lawyers. Yet many observers are skeptical that lawyers, individually or collectively, can set aside their clients' interests, political leanings, and other biases to serve as purely public-interested members of the 'governing class.' The empirical literature on bar associations likewise invites a certain amount of cynicism - or at least pessimism - about the possibility of public-interested law reform. Research shows that representative bar groups tend to be politically ineffective due to internal division. Most examples of effective bar influence involve elite, ideologically homogenous groups. ...
This Article considers the implications of this research for the role and design of bar law reform committees. ...
Elefant Announces New Clearinghouse Website for Lawyers' Events On- and Off-line
The new site will be called Lawagora. Long-time blogger Carolyn Elefant (she is at myshingle and at law.com) announced it here and welcomes reader content, easily input on the platform she chose. Here is her intro:
I've just completed a new project that I'm rolling out tonight...Lawagora.ning.com - a marketplace of events for and by lawyers. In the past few months, I've realized how many quality events, on and offline are available for lawyers - yet we often never hear about them because the publicity is either ad hoc, or directed at a speaker's mailing list, which others may not know about. So I saw a need for a centralized location for all types of events of interest to lawyers, identified ning.com as a decent platform and set it up in beta.
Those with events should "visit the site and add your events - webinars, bar events or events for lawyers by non-lawyer providers."
Upcoming Minnesota Ethics CLEs (Including Today) Are Also Available for Out-of-Staters
Posted by Alan Childress
The late-June fare out of Minnesota looks interesting and the remote programs are pretty affordable. An archived one available to non-Minnesota participants, and earning 2 hours credit, is "Chemical Dependency and Mental Health in the Legal Profession." (I don't know if that earns an 'ethics' credit, but all the following seem to, and seem to be credited throughout the U.S.) "The Family Law Series: Ethics," is webcast live today (6/19) at 9:00 am cst. And tomorrow offers a 3-hour ethics programs for in-house counsel (but video only, in state), and also one webcast live on a topic that I rarely see but sounds very useful to some: Winding Down a Law Practice. On June 25, see the live webcast of Ethics - Best Practices in Business Development, for 3 MCLE credits. Then Monday, June 30 means two 1-hr. programs on "conflicts checks" and on "lessons from recent discipline cases."
June 18, 2008
Legal Post Mortem the Night After the Texas Execution That Wasn't
Posted by Alan Childress
I am flat wrung out a day after following minute-by-minute via emails the near-execution of Charles Hood in Texas, though I hope the twitter-like effort was worth it to some of our readers who were not getting updated info from regular media sources. It may actually turn out someday that twitter will not just be used to catalog the next time a cat sneezes (OMG!). But tired I am: the case leaves not just a weariness of seeing a society too quick to judge humans and not quick enough to judge authority figures, but also a sense of sadness for all of us who expect more from judges -- and way more from a system meant to be about declaring guilt and innocence, or right and wrong, and not just powerful and powerless.
Please read some extra-inning thoughts on this very odd night, wonderfully stated the day after by Andy Perlman (plus replies by John Steele and me, in comments) over at LEF here. His post is an EXCELLENT post mortem analysis, with interesting and useful links, and there's a bonus: a nice bibliography by Patrick O'Donnell in comments (wouldn't you just hate to be the one guy to write a book and no Patrick O'Donnell noticed?). Over there, I comment on why everyone should be disappointed in this spectacle, not just knee jerk liberals.
Attorney-Client Privilege for LLC's?
The Unincorporated Business Law Prof Blog, and that is a mouthful (or a typeful), raised the interesting question in this recent post, per Donald Scotten (Lect., Southern Cal). "The federal district court in Nevada recently addressed an issue of first impression involving LLCs and the attorney-client privilege. ...whether an LLC should be treated as a partnership or corporation for purposes of the attorney-client privilege. The court had to make this determination in order to determine 'who the client is' in an LLC. After reviewing several cases that the court pointed out were distinguishable, the court determined that LLCs should be treated as corporations for purposes of the attorney-client privilege."
Of course, treating it as a corporation raised its own issues of "who is the client," as the law and ethics on that is a very mixed bag. This court concluded that only the LLC entity was the client for privilege purposes, such "that the LLC properly asserted the privilege against the former manager in refusing to produce documents in discovery." Scotten has the WL cite for the opinion.
June 17, 2008
Breaking: Tx Ct Crim App Orders New Judge to Reinstate Death Warrant; UPDATE: Execution Ran Out of Time
Update at 10:03 pm -- The prior petition for writ of mandamus was denied, but a new one by Texas prosecutors aimed at the new (transferred-to) Judge just got granted. The Court of Criminal Appeals ordered mandamus to the new Judge below. Download cca20order2008202006.17.2008.pdf This means the death warrant is directed to be reinstated immediately.
Update at 10:27 -- The Austin American-Statesman reports:
The Court of Criminal Appeals has ordered a North Texas judge to reinstate the death warrant for Charles Dean Hood. The warrant had been recalled earlier in the day. Prosecutors in Collin County successfully asked the state’s highest court to order the region’s presiding judge to reinstate the case. Hood could be executed this evening if the order is reinstated by midnight, when the warrant expires.
Later, from the Statesman:
UPDATE, 11:10 p.m.: A North Texas judge has reinstated the death warrant ordering the execution of Charles Dean Hood, said his lawyers. Hood remains in a cell adjacent to the Texas death chamber in Huntsville as prison officials await word on his final appeals.
Update 11:18 -- from Hood's lawyers: The presiding judge signed the warrant, the governor denied reprieve, and "just denied in SCOTUS."
Final update 12:02 am -- Hood's lawyers report that the execution was stopped. They wrote at 11:56: "We just learned from a reporter who is at the prison that the execution has been stopped because prison officials said they ran out of time."
Even if you're a death penalty supporter you can't think it's a good thing for Texas' highest criminal court to rubber stamp executions with such obvious problems in the case, especially when there's a conflict of interest that might implicate them personally. You just don't use a legal technicality to avoid examining possible wrongdoing by your friend, not when somebody's life is literally hanging in the balance.
All of the recent SCOTUS-created restrictions on the death penalty - for juveniles, for the mentally retarded, in cases where black jurors were eliminated because of race - were established because of routine abuses, both real and perceived, allowed in Texas courts by the CCA. In each instance, SCOTUS found Texas' judicial practices so egregious it eliminated the death penalty or ordered new trials for large classes of defendants. I've often thought that if SCOTUS ever does wind up abolishing the death penalty entirely down the line, it might well be because Texas does the most executions and our courts aren't giving these cases enough scrutiny.
Update: Tx Ct Crim App Denies Prosecutors' Mandamus Request to Reinstate Death Warrant
Further Update (8:44 pm Texas time): The latest in the Texas case of Charles Dean Hood, noted earlier below, is that very recently the state's highest criminal court issued an opinion essentially denying mandamus, thus the death warrant is not reinstated. The opinion is here: Download cca20order2007202006.17.2008.pdf
There is a twist: the Court finds that the Judge should not have dealt with the merits since it itself had not given leave to do so after deciding the matter earlier this week. But since the Judge had also recused himself and transferred the case, mandamus could not lie against the Judge because he no longer had authority to act in the case. Interesting opinion to read. [Alan Childress]
Breaking News: Texas Judge Removes Date of Execution in Case Involving Allegations that Trial Judge and DA Were Involved; State Appeals
Posted by Alan Childress
Updating Nancy Rapoport's post on LPB here (and more at her personal blog), and the vital efforts of Monroe Freedman at LEF here, I just received an email from one of Charles Dean Hood's attorneys (Andrea Keilen) saying:
Just a few minutes ago, the Collin County District Court judge presiding over this case withdrew Charles Hood's execution date and recused himself (without explanation) from any further proceedings. The prosecutors have not decided whether they will appeal this ruling.
I will update more soon. (The execution would have been six minutes from now.)
Update: To see the Judge's order and recusal, Download order20collin20county206172008.pdf
Further update: A Notice that was made requesting discovery on the relationship under Brady and the like, filed today before the Judge entered the removal of execution date above (and apparently is still pending), was emailed by another attorney for Hood, Laura Burstein. To read it, Download notice_of_brady_evidence.rtf Both documents were posted here with permission from the relevant attorney.
Update #3: Prosecutors right now are appealing the Order, above, of removal of the execution date, reports Ms. Burstein (6:22 pm cst). The mandamus request has been filed in the Texas Court of Criminal Appeals (that's the state's "supreme court" for all criminal matters). They are seeking for the Order to be vacated and the execution to proceed tonight.
Update #4: The Dallas Morning News is on top of the story and notes that the Judge who withdrew the execution had worked as an ADA in the office that tried Hood. It also notes that legal ethicists have protested the potential execution in light of the possible conflict.
Further LPB updates are in new and separate posts above this post, such as this new one.
Conspiracy To Bribe Warrants Disbarment
The D.C. Board on Professional Responsibility has recommended the disbarment of an attorney convicted of conspiracy to pay a $40,000 bribe to a Mississippi state court judge. The attorney was a co-defendant in the criminal case against "Dickie" Scruggs. The board held that the conviction involved moral turpitude per se, which requires the sanction of disbarment in the District of Columbia. (Mike Frisch)
Tx Ct Crim App denies appeal of death row inmate who alleges that judge & prosecutor slept together during case
OK, here's a first for me. Charles Hood is set to be executed tonight because the Texas Court of Criminal Appeals has denied his appeal, which alleged that the judge and prosecutor on his case were sleeping together at the time that he was being tried. The appeal was denied on procedural grounds. More...
According to an email that I received, Hood's allegations were bolstered by an affidavit by
a former assistant district attorney in the Collin County District Attorney's Office . . . testifying that "[i]t was common knowledge" that Judge Holland and District Attorney O'Connell "had a romantic relationship" for several years, including at the time of Mr. Hood's trial and death sentence.
Isn't this type of situation a clear ground for recusal at trial? I'm stunned. If you want to read my take on this, go here (the post includes a phone number for calling the person inTexas Gov. Perry's staff in charge of the Hood case). [Nancy Rapoport]
No CPO For Website Comments
The North Carolina Court of Appeals today held that a civil protection order was improperly issued in a case involving "cyberstalking." The conduct at issue:
Plaintiffs alleged defendant had “posted information on her website stating that Erin Knox [Linda Ramsey's daughter] harasses other children and accused [Erin Knox] of being the reason kids hate to go to school.” Plaintiffs also alleged that on numerous occasions defendant had referred to Erin Knox on her website as“endangered,” “offspring,” “bully,” and “possum,” which caused Erin Knox to suffer emotional distress. At the hearing, defendant admitted publishing the following message on her website:
With all the bulling [sic] and harassing that goes on in our school system. Then the trouble that went on Friday at Madison Middle. The first student in that age group that came to mind was Linda Knox's daughter. Wasn't this the student that harassed the Cantrell child? And we wonder why some kids hate to go to school.....
Defendant's website also featured: (1) a voice recording of plaintiffs' deceased mother and grandmother and (2) references to Linda Ramsey as being a “crow,” “idiot,” and “wack.”
The court held:
... the record is wholly devoid of any evidence that tends to show the messages published on defendant's website were intended to and in fact caused plaintiffs to suffer “substantial emotional distress” as is required by N.C. Gen. Stat. § 50C-1(6). We also note the trial court failed to enter any findings of fact orconclusions of law regarding “substantial emotional distress” for either plaintiff. Id.
Without condoning the language used on defendant's website, the statute does not allow parties to implicate and interject our courts into juvenile hurls of gossip and innuendo between feuding parties where no evidence of any statutory ground is shown to justify entry of a no-contact order. Because the trial court's sole finding of fact does not compel a conclusion that defendant “stalked” plaintiffs in accordance with N.C. Gen. Stat. § 50C-1, the order appealed from is vacated.
Duty To Investigate
The South Carolina Supreme Court affirmed a sanctions award against an attorney for instituting a frivolous claim against another attorney. Attorney Malloy was retained to represent a seriously injured client through the client's elderly mother. An agreement was reached and settlement proceeds received by Malloy. The mother testified that she was thereafter unable to reach Malloy and that she "thought [he] had either kept or spent the settlement proceeds."
Mother then consulted attorney Gregory. He determined that the settlement check had been presented for payment and advised the client to file a bar grievance to "shake [the money] loose." Mother fired Malloy and hired Gregory and another lawyer. Gregory filed suit against Malloy and included a conversion claim. The suit was filed because of concern about the statute of limitations. Gregory felt that a "shoot first, ask questions later" approach was necessary.
News reports of the suit resulted in Malloy immediately tranferring the trust funds to Gregory. Malloy had held the funds as a result of unresolved third-party claims. The suit was dismissed seven weeks later. Malloy sought and won a sanction award against Gregory for filing suit without reasonable investigation, particularly with respect to the conversion claim. Gregory had not contacted Malloy or sought the file prior to filing suit. The court here concluded:
The court correctly found that, had appellant conducted a reasonable investigation, he would have known there was no basis for the conversion action. We find it troubling that appellant was willing to speak with a news reporter and make statements that he would have known to be false if he had conducted any type of meaningful investigation. Without a reasonable basis, appellant relied on his client’s statements that she did not know where the settlement money was to make inflammatory statements to the newspaper, i.e. accusing respondent of commingling funds and of keeping the settlement money “in his pocket” and collecting all the interest on it.
There was evidence appellant had time to investigate whether respondent had contacted Medicaid and that he could have realized much sooner that respondent was not engaging in any wrongful conduct by holding the settlement money. In fact, the associated attorney, Barroll, had suggested to appellant that he contact respondent, but appellant refused. Had appellant spoken with respondent and relayed Melton’s worries over the money, then the suit would have never been filed. Under the particular facts of this case, a simple phone call may have led to an explanation by respondent as to why the money was being held. Such a discussion between the attorneys could have prevented the grievance and suit from being filed against respondent.
We find that while an attorney or a pro se litigant does not have a duty to consult with a potential defendant prior to filing suit, before alleging conversion against an attorney for misappropriation of client funds or legal malpractice, a reasonable investigation is necessary.
A concurring opinion warns:
I concur in the result reached by the majority but am troubled by the imposition of a new duty forcing an attorney to conduct a “reasonable” investigation so as to comply with § 15-36-20. In my opinion, this new responsibility places upon an attorney an additional requirement not currently required by statute. I would not create a blanket rule that precludes an attorney from obtaining a reasonable belief in the merits of a case based solely on information related to him by a client.
I agree that, based on the facts of this case, appellant filed the action primarily for a purpose other than securing the proper adjudication of the claim upon which the proceedings were based. I would affirm the lower court but see no need to impose additional duties on an attorney beyond that which is required by statute.