Monday, August 3, 2009

Vicarious Malpractice Liability

Also from the Ohio Supreme Court web page:

...the Supreme Court of Ohio held that a law firm as an entity does not engage in the practice of law and therefore cannot commit legal malpractice directly. The court also held that a law firm cannot be vicariously liable for legal malpractice unless one of its principals or associate attorneys is found liable for malpractice.

The Court’s lead opinion, authored by Justice Terrence O’Donnell, was rendered in response to a certified question of state law submitted by the U.S. Sixth Circuit Court of Appeals.

The National Union Fire Insurance Company of Pittsburgh retained the Columbus law firm of Lane Alton & Horst and a partner in that firm, attorney Richard Wuerth, to defend a claims adjustment firm, McLarens Toplis, and an individual claims adjustor, Lany Wood, against a civil lawsuit filed against them in federal court by Nationwide Insurance.  During the second week of an extended trial, Wuerth informed several Lane Alton partners and also mentioned to the trial judge that he was not feeling well. Later that week, while the trial was still underway, Wuerth collapsed at home and was taken to the hospital. His doctor subsequently advised the court that Wuerth was not physically or mentally capable of continuing with the trial, and would not be able to do so for a significant period of time. Lane Alton filed an unsuccessful motion for a mistrial, then assigned other firm attorneys to complete the trial. On Feb. 21, 2002, the jury returned a verdict in favor of Nationwide for $16.2 million. As the result of a high/low settlement agreement previously negotiated between the parties, National Union paid Nationwide $8.25 million on behalf of its insureds.

On Feb. 21, 2003, National Union filed suit in the United States District Court for the Southern District of Ohio, claiming that Wuerth had committed legal malpractice, that Lane Alton was vicariously liable for Wuerth’s malpractice, and that the firm itself committed malpractice. While National Union alleged numerous wrongful acts and omissions by several individuals in the firm, Wuerth was the only individual named as a defendant in the complaint. On a motion for summary judgment filed by Wuerth and Lane Alton, the district court dismissed Wuerth from the action because National Union had filed its complaint after the expiration of the one-year statute of limitations for legal malpractice claims set forth in R.C. 2305.11(A). Because National Union was time-barred from obtaining a judgment against Wuerth, the district court also dismissed the company’s claims for vicarious liability against Lane Alton. Finally, the district court determined that Lane Alton cannot be held directlyliable for legal malpractice because it is not an attorney and does not practice law.

National Union appealed to the United States Court of Appeals for the Sixth Circuit, asserting among other arguments that Lane Alton may be held directly liable for legal malpractice. The court of appeals determined that Ohio law is unsettled on this issue and asked the Supreme Court of Ohio to answer the following certified question: “Under Ohio law, can a legal malpractice claim be maintained directly against a law firm when all of the relevant principals and employees have either been dismissed from the lawsuit or were never sued in the first instance?” The Court agreed to answer the certified question.

In today’s decision, Justice O’Donnell wrote that the Sixth Circuit’s inquiry raised two separate issues: “one, whether a law firm may be directly liable for legal malpractice – i.e., whether a law firm, as an entity, can commit legal malpractice – and two, whether a law firm may be held vicariously liable for malpractice when none of its principals or employees are liable for malpractice or have been named as defendants.”

With regard to direct liability, Justice O’Donnell noted that in past rulings dealing with professional malpractice issues the Court has applied similar standards to physicians and attorneys.  He cited several decisions in which the Court has held that the practice of medicine is limited to individual practitioners, and therefore that “because only individuals practice medicine, only individuals can commit medical malpractice. For instance, in Browning v. Burt (1993) ... we explained that ‘[a] hospital does not practice medicine and is incapable of committing malpractice,’” Justice O’Donnell wrote.  

“This precedent concerning medical malpractice is consistent with the general definition of ‘malpractice’ that we set forth in Strock v. Pressnell (1988) wherein we stated, ‘The term “malpractice” refers to professional misconduct, i.e., the failure of one rendering services in the practice of a profession to exercise that degree of skill and learning normally applied by members of that profession in similar circumstances.’ As with the practice of medicine, it is apparent that only individuals may practice law in Ohio.  Section 2(B)(1)(g), Article IV of the Ohio Constitution grants this court original jurisdiction with respect to ‘[a]dmission to the practice of law, the discipline of persons so admitted, and all other matters relating to the practice of law.’” Pointing to multiple provisions in the Court’s rules governing the practice of law that apply only to “persons” rather than business entities, Justice O’Donnell concluded: “(A) law firm is a business entity through which one or more individual attorneys practice their profession. While clients may refer to a law firm as providing their legal representation or giving legal advice, in reality, it is in every instance the attorneys in the firm who perform those services and with whom clients have an attorney-client relationship. Thus, in conformity with our decisions concerning the practice of medicine, we hold that a law firm does not engage in the practice of law and therefore cannot directly commit legal malpractice.”

With regard to the issue of vicarious liability of a law firm when none of the firm’s attorneys has been found liable for malpractice, Justice O’Donnell wrote that Ohio’s law of agency is based on the well-established doctrine of respondeat superior (the master is responsible for the acts of its servant).

“Although a party injured by an agent may sue the principal, the agent, or both, a principal is vicariously liable only when an agent could be held directly liable ... (I)n Comer v. Risko (2005) we recognized that ‘[t]he liability for the tortious conduct flows through the agent by virtue of the agency relationship to the principal. If there is no liability assigned to the agent, it logically follows that there can be no liability imposed upon the principal for the agent’s actions.’ ... There is no basis for differentiating between a law firm and any other principal to whom Ohio law would apply. In fact, the Restatement of the Law 3d, The Law Governing Lawyers (2000) ... indicates that a law firm has no vicarious liability unless at least one principal or employee of the firm is liable. ... Based on this authority, we hold that a law firm is vicariously liable for legal malpractice only when one or more of its principals or associates are liable for legal malpractice.  Accordingly, we answer the certified question of state law in the negative.”

Justice O’Donnell’s opinion was joined by Chief Justice Thomas J. Moyer, Justices Maureen O’Connor and Robert R. Cupp and Judge Mary DeGenaro of the 7th District Court of Appeals, who sat by assignment in place of Justice Evelyn Lundberg Stratton.

Chief Justice Moyer also entered a separate concurring opinion that was joined by Justice O’Connor, Judge DeGenaro and Justices Paul E. Pfeifer and Judith Ann Lanzinger in which he emphasized that today’s ruling was in response to the very narrow legal question posed by the U.S. Sixth Circuit, and does not preclude the possibility of direct liability by a law firm to a client based on tortious conduct other than legal malpractice.

He concluded: “I stress the narrowness of our holding today. This opinion should not be understood to inhibit law-firm liability for acts like those alleged by the petitioner. Rather, a law firm may be held vicariously liable for malpractice as discussed in the majority opinion. Further, our holding today does not foreclose the possibility that a law firm may be directly liable on a cause of action other than malpractice. Yet the limited record and the nature of answering a certified question do not permit us to entertain such an inquiry in this case. Therefore, I concur in the majority opinion.”

Here is the court's opinion. (Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2009/08/vicarious-malpractice-liability.html

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