Tuesday, November 2, 2010

A Bad Result, An Inexact Science

The South Carolina Supreme Court affirmed the grant of summary judgment against plaintiff Harris Teeter, Inc. in a legal malpractice claim. The attorneys had handled an arbitration over a lease. The court concluded that the plaintiff did not establish a breach of the standard of care. A "bad result" does not translate into malpractice:

Because Harris Teeter's malpractice claim seeks to establish the element of a breach of the standard of care through the arbitrator's adverse ruling, we address the relationship between a "bad result" and a professional malpractice claim.  Harris Teeter lost in arbitration—and that bad result forms the core of Harris Teeter's malpractice allegation.  Of course, any professional negligence claim involves a bad result. We reject as a matter of law any suggestion that a bad result is evidence of the breach of the standard of care.  To do so would change the landscape of our malpractice law, for all professionals.  We adhere to the principle that the exercise of a professional's judgment (and accompanying acts and omissions) must be considered at the time the professional service is rendered and not through the lens of hindsight.   

In rejecting a hindsight analysis, the trial court found Respondents' actions were protected under the judgmental immunity rule, which has not been formally adopted in South Carolina.  The judgmental immunity rule provides that "there can be no liability for acts and omissions by an attorney in the conduct of litigation which are based on an honest exercise of professional judgment." Woodruff v. Tomlin, 616 F.2d 924, 930 (6th Cir. 1980).  In referring to the judgmental immunity rule as "a sound rule," the Woodruff court observed that "[o]therwise every losing litigant would be able to sue his attorney if he could find another attorney who was willing to second guess the decisions of the first attorney with the advantage of hindsight."  Id.  In assessing liability, a court should never measure a professional's performance through the lens of hindsight.  Although an attorney may be liable for damages to a client for failure to act with a reasonable degree of skill and care, "[t]his does not mean, however, that an attorney acts as an insurer of the outcome of a case."  Crosby v. Jones, 705 So. 2d 1356, 1358 (Fla. 1998).

Respondents made an informed judgment in their approach to the arbitration hearing.  Respondents made a tactical and strategic decision to focus on whether Harris Teeter actually breached the lease and the materiality of the alleged breach.  Respondents, specifically Howell Morrison, made a tactical decision not to emphasize the precise value (in dollar terms) of the under-market lease because the attorneys believed this could work to Harris Teeter's detriment: "In my judgment it would not have helped the presentation of the case to emphasize the under market lease that Harris Teeter held…and in my view then, and still in my view, if we had spent time showing the Arbitrator emphasizing that we had a submarket lease, it was very much a two-edged sword that could have easily worked to our detriment."    

Morrison made a judgment call concerning the presentation of the Kiriakides factors—a judgment call that was not unreasonable as a matter of law.  Because the judgment call was reasonable as a matter of law (and consequently no question of fact is presented), there is no viable claim of malpractice.  Morrison's judgment call falls squarely in the category of a "professional judgment made with reasonable care and skill."  Biomet Inc. v. Finnegan Henderson LLP, 967 A.2d 662, 666.

Although the judgmental immunity rule correctly highlights the rejection of a hindsight analysis, Respondents' entitlement to summary judgment does not depend on our adoption of the rule.  We therefore leave the question of adoption of the judgmental immunity rule for another day...

The practice of law is not an exact science.  The practice of law involves the exercise of judgment based on the circumstances known and reasonably ascertainable at the time the judgment is rendered.  "[A] lawyer shall exercise independent professional judgment and render candid advice." Rule 2.1, RPC, Rule 407, SCACR.  The Rules of Professional Conduct are replete with the recognition that a lawyer cannot pursue every issue that arises in a case while effectively representing his or her client.  To the contrary, the Rules recognize that in order to provide a client the best and most competent representation, a lawyer has the professional discretion to make a judgment call as to which legal theories are the strongest and will best serve the client's interest.  See Rule 1.3, cmt. 1, RPC, Rule 407, SCACR ("A lawyer is not bound, however, to press for every advantage that might be realized for a client. For example, a lawyer may have authority to exercise professional discretion in determining the means by which a matter should be pursued."); Hudson v. Windholz, 416 S.E.2d 120, 124 (Ga. 1992) (recognizing that "the tactical decisions made during the course of litigation require, by their nature, that the attorney be given a great deal of discretion").

In retrospect, should Respondents have presented precise financial data to the arbitrator concerning the substantial boon of the under-market lease to Harris Teeter?  Perhaps.  But hindsight is not the measuring stick.  A case can always be tried "better."  Respondents made a considered judgment to focus on the merits of the alleged breach and particularly its materiality.  As noted, that judgment call was not unreasonable as a matter of law.  And as the arbitrator acknowledged, lease forfeiture was a "drastic remedy," as all understood that EBV wanted a new lease with market based rent and Harris Teeter wanted to preserve the 1979 lease.

Here, Respondents candidly warned Harris Teeter of the risk of lease termination, even to the point of Harris Teeter characterizing Respondents' legal candor as "wishey washey."  Harris Teeter's flippant disregard of Respondents' candid warning mirrored its longstanding disregard of EBV's inquiries and requests to honor the lease.  Harris Teeter went into arbitration with its eyes wide open regarding the risk.  Respondents exercised independent and reasonable professional judgment in choosing what they deemed a proper strategy in representing Harris Teeter's interest before an arbitrator highly skilled and knowledgeable in commercial real estate matters.  Because Respondents' judgment was not unreasonable as a matter of law, the trial court properly dismissed this malpractice claim.

(Mike Frisch)

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