Thursday, June 23, 2016

No Malpractice In Model Representation

The New York Appellate Division for the First Judicial Department affirmed the dismissal of a legal malpractice claim against Boies Schiller.

Plaintiff failed to establish that defendants breached their duty by representing her despite a conflict of interest, in violation of Code of Professional Responsibility DR 5-105 [22 NYCRR 1200.24), the conflicts rule in effect at the time. Unlike current Rules of Professional Conduct (22 NYCRR 1200.0) rule 1.7, DR 5-105 did not require that client consent to a conflict be confirmed in writing. An issue of fact exists whether defendants' clients consented orally.

In any event, the violation of a disciplinary rule, without more, is insufficient to support a legal malpractice cause of action (Cohen v Kachroo, 115 AD3d 512, 513 [1st Dept 2014]). Since plaintiff cannot prove that she suffered damages that were proximately caused by defendants' alleged misconduct, her cause of action must be dismissed (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007]).

Nor can plaintiff prove that defendants proximately caused her any injury with respect to her underlying claim for unauthorized use of her image, since that claim was time-barred and had already been released by the time she engaged defendants (see CPLR 215[3]; Nussenzweig v diCorcia, 9 NY3d 184 [2007]).

As for her other, potentially meritorious, claims, plaintiff settled those, and offers no evidence that, but for defendants' negligence, the settlement awards would have been higher (see [*2]Fusco v Fauci, 299 AD2d 263 [1st Dept 2002]).

Indeed, plaintiff failed to demonstrate that she suffered any harm at all as a result of defendants' alleged failings. Although defendants admittedly filed plaintiff's bankruptcy proof of claim one day late, the claim was accepted, and plaintiff received a substantial mediated settlement. Although she complains of defendants' alleged failure to join Elite S.A. as a party in one of the underlying actions, plaintiff nonetheless obtained a substantial settlement from that entity. Although plaintiff objects that she was not named as a class representative in one of the underlying actions, the deadline for adding class representatives had already passed by the time she engaged defendants, and nonetheless she received an incentive award for her active participation in the litigation.

The plaintiff is a fashion model. The ABA Journal had an earlier report on the case. (Mike Frisch)

June 23, 2016 in Clients | Permalink | Comments (0)

Monday, June 13, 2016

Transactional Malpractice

The West Virginia Supreme Court of Appeals reversed the grant of summary judgment to the defendant attorney in a legal malpractice claim and directed that the plaintiff instead be awarded summary judgment.

The issue involved negligent title work that had led to serious repercussions.

Before turning to the arguments of the parties, we note that this case involves malpractice in the performance of transactional work (giving advice or preparing documents for a business transaction) as opposed to litigation malpractice...

The following example illustrates the proximate cause analysis utilized in a transactional legal malpractice claim.

If the client’s position is “my lawyer gave me bad advice that I followed, and it cost me money,” the client in effect is saying, “My lawyer gave me incorrect advice. I acted in reliance on this advice, and as a proximate result, I sustained $ x in damages. But for that advice, I would not have been damaged at all.” At times, the attorney’s negligence does not relate to decisions made in the course of litigation but involves some recommendation or guidance negligently given. Therefore, the “case within a case” will not entail the reconstruction of a trial or appeal; instead, the client must show alternative measures he could have taken “but for” the attorney’s faulty advice.

Richard H.W. Maloy, Proximate Cause: The Final Defense in Legal Malpractice Cases, 36 U. Mem. L. Rev. 655, 676 (2006) (emphasis added). The crux of Rubin’s argument is that the alternative measure here is obvious; had Mr. Morris alerted it to the declaration of pooling, Rubin would have availed itself of the substitution clause in its contract with WVE and avoided the losses at issue.

The court found that damages were established by the undisputed facts and that the plaintiff had mitigated the damages.

Applying this standard to the instant case, it is clear that Rubin took reasonable steps under the circumstances to mitigate its damages. After discovering the title defect, Rubin took responsible actions to minimize the liabilities arising from the problem, which is the essence of mitigation of damages. Rubin weighed the consequences to be avoided and assessed its overall exposure to liability at approximately $147,000 arising from Mr. Morris’s failure to alert it to the title defect.9 By contrast, Rubin negotiated a settlement with CNX that was much less expensive. Based on these facts, we find that Rubin’s decision to settle the matter with CNX instead of pursuing litigation on what it believed to be an unmeritorious affirmative defense of adverse possession was mitigation of damages. “Many settlements are a reasonable response to a difficult situation created by another’s negligence.”

The court also held that the plaintiff was entitled to damages for lost profits.

Application of these principles in a legal malpractice action does not make an attorney an insurer of pie-in-the-sky expectations of the client. Rather, this tenet simply operates to restore the client to the economic position that he or she would be in but for the attorney’s negligence.

(Mike Frisch)

June 13, 2016 in Clients | Permalink | Comments (0)

Wednesday, June 1, 2016

Shotgun Divorce: Attorney Disqualified For Exploring Consultation

The Montana Supreme Court affirmed the disqualification of local and national counsel in an action brought against O. F. Mossberg & Sons as a result of a brief consultation with the plaintiff.

The District Court disqualified Mossberg’s out-of-state counsel, Renzulli Law Firm, and its local counsel, Tarlow & Stonecipher, pursuant to Rule 1.20(c) of the Montana Rules of Professional Conduct. The basis for the court’s disqualification order was a prospective client consultation that Luke Keuffer had with an attorney from Tarlow & Stonecipher, which was later used in a deposition of Stephanie Keuffer by John Renzulli of the Renzulli Law Firm. The court found that the continued involvement in the case by Mossberg’s counsel gave the Keuffers reason to question whether their case can proceed fairly and cause to question what they may have disclosed in the consultation to Tarlow & Stonecipher that may later be used against them in the current litigation. The court also found that Mossberg’s counsel’s actions undermine the public’s trust in the legal profession. For the reasons discussed below, we affirm the District Court’s order disqualifying Renzulli and Tarlow & Stonecipher.

Luke and Stephanie were out hunting. She had a Mossberg rifle.

The Keuffers allege that the Mossberg rifle fell and struck Luke’s rifle and then discharged and shot Luke in the face, causing serious and permanent injury. On August 10, 2010, Luke called Tarlow & Stonecipher, PLLC, and spoke to attorney Margaret Weamer “regarding [Luke’s] possible claim against [a] gun manufacturer for injuries sustained in [a] hunting accident.” Weamer’s time record indicates that she spoke with Luke for six to twelve minutes. After discussing the case with Luke, Weamer advised him that Tarlow & Stonecipher would not be interested in taking the case.

The issue came to light at a deposition and led to a disqualification motion

The court found that Renzulli improperly used the Keuffers’ consultation against them during Stephanie’s deposition. The court found that the purpose of Renzulli’s questioning was to intimidate the Keuffers and create an impression they have a bad case. The court indicated the uniqueness of the situation as Renzulli did not use “information learned” from the consultation, but used the fact that the consultation occurred. The court concluded that this was equally a violation of the Rules because Renzulli used the consultation to intimidate and create an adverse inference about the Keuffers’ case. The District Court disqualified Mossberg’s counsel because their actions defeat the purpose of the Rules of Professional Conduct which threatens the public’s trust in the legal system.

The court

In this case...Renzulli consciously used the information learned in Luke’s consultation with Tarlow & Stonecipher for tactical litigation purposes.

The majority concluded that the trial court had not abused its discretion in ordering disqualification.

Justice Beth Baker dissented

The District Court found that Mossberg’s counsel did not use or reveal information learned from the phone conversation in violation of Rule 1.20(b). The court concluded, however, that there was “no reason why the rule should not be equally applicable when an attorney uses the fact that they consulted with a party and declined to represent that party to intimidate that party or to create an adverse inference about that party’s case.” The court concluded further that “knowing that certain information was not disclosed may be just as harmful as information that was disclosed.” The District Court made no finding that Luke disclosed information that could be significantly harmful to him in the case, and acknowledged that “it is not clear what information was disclosed/learned during Luke’s 6-12 minute consultation with Weamer.” It found nonetheless that “defense counsel used the fact that a consultation even occurred against the [Keuffers] in a significantly harmful manner...

Here, Renzulli used Luke’s communication with Weamer during his deposition of Stephanie as a litigation tactic to imply that the Keuffers had a weak case. Renzulli’s questioning demonstrated a lack of professional, courteous, and civil attitude toward not only the Keuffers, but to the legal system. Renzulli’s attempt to harass and intimidate the Keuffers was out of bounds. Even though the District Court found as a matter of fact that Renzulli did not reveal any specific information that Luke divulged to Weamer, the District Court properly recognized that Luke’s communication to Tarlow & Stonecipher of “the facts” that prompted him to seek legal assistance was not to be “used” against him by counsel for the adverse party. Accord Perry, ¶¶ 29-30 (analyzing whether an attorney violated her duty of confidentiality to a prospective client). See also M. R. Prof. Cond. Preamble ¶ 18. Renzulli acknowledged that he was attempting to do just that by suggesting that the Keuffers had to shop the case around before they could find a lawyer who was willing to take it...

The interests of Renzulli’s client—about whom the Court is noticeably silent— also are entitled to consideration before disqualifying counsel of its choice. Recognizing that a party “must not be lightly separated from her counsel of choice,” we have suggested that disqualification of counsel should not be used for punitive purposes.

Justice Laurie McKinnon also dissented

In my opinion, the District Court abused its discretion in imposing the severe remedy of disqualification, particularly given that the relationship between a prospective client and a lawyer do not impose duties as stringent as between an actual and/or former client and his lawyer. Imposition of such a severe remedy as disqualification should be sparingly imposed, in light of its significant effect in disrupting litigation...Under the circumstances here, disqualification of Mossberg’s counsel was an abuse of discretion when the District Court could have simply precluded the offensive line of questioning by both Renzuilli and Tarlow & Stonecipher and thereby maintained the integrity of the proceeding. The public’s trust in the legal system in not undermined when a trial court perceives an abuse by counsel and corrects it by a fair, proportionate, and measured remedy.

(Mike Frisch)

June 1, 2016 in Clients, Law Firms, Professional Responsibility | Permalink | Comments (0)

Tuesday, May 31, 2016

Legal Malpractice Suit Dismissed

The CEO of Blue Star Jets has lost his legal malpractice suit of claims brought against the attorneys who had handled his divorce from his first wife.

The New York Appellate Division for the First Judicial Department held that

This malpractice action arises from defendants' representation of plaintiff in a contentious divorce proceeding, and focuses primarily on the matrimonial court's purported improper valuation of plaintiff's interests in two marital assets: Blue Star Jets LLC (Blue Star) and International Star Investments Limited (ISI Ltd.). Plaintiff contends that, but for the negligence and malpractice of defendants, the court's valuation of his interest in Blue Star and ISI Ltd. would have been lower, and that he would have had to pay his ex-wife a lower distributive award.

Plaintiff failed to state a malpractice claim regarding defendants' failure to present independent expert testimony to rebut the court-appointed expert's valuation report regarding Blue Star, because the record shows that defendants' decision not to call such a witness was a strategic and reasonable one (Pouncy v Solotaroff, 100 AD3d 410, 410 [1st Dept 2012], lv denied 21 NY2d 857 [2013]). Plaintiff also has not alleged adequately that this decision was the proximate cause of his damages (Bender Burrows & Rosenthal, LLP v Simon, 65 AD3d 499, 499 [1st Dept 2009]).

Plaintiff failed to state a malpractice claim with respect to defendants' failure to move for a reappraisal or revaluation of Blue Star and ISI Ltd., since plaintiff failed to allege adequately that such a motion would have been successful (id.), particularly given the matrimonial court's discretion in determining valuation issues (see McSparron v McSparron, 87 NY2d 275, 287 [1995]).

Plaintiff failed to state a cause of action based on defendants' failure to move to reargue or reconsider the divorce judgment, since the decision of whether to make such a motion is a strategic one and plaintiff has not alleged adequately that such a motion would have been successful (Warshaw Burnstein Cohen Schlesinger & Kuh, LLP v Longmire, 106 AD3d 536, 536 [1st Dept 2013], lv dismissed 21 NY3d 1059 [2013]).

The motion court correctly dismissed plaintiff's allegation that defendants failed to appeal from the divorce judgment, because the record shows that defendants informed plaintiff of his right to appeal, but that he chose not to do so in light of the cost and his minimal chance of success (Rodriguez v Fredericks, 213 AD2d 176, 177-178 [1st Dept 1995], lv denied 85 NY2d 812 [1995]).

The motion court should have dismissed the allegations regarding defendants' failure to present "appropriate evidence" at trial to establish the correct value of plaintiff's interest in ISI Ltd. The record does not support plaintiff's allegation that defendants possessed this documentation but failed to submit it to the matrimonial court. In any event, the admission of this documentation would not have altered the matrimonial court's calculations and distributive award.

The motion court providently exercised its discretion in denying plaintiff's request for further discovery, since he failed to specify how additional discovery would enable him to state a sufficient claim with respect to the dismissed allegations (see CPLR 3211[d]; Putter v North Shore Univ. Hosp., 7 NY3d 548, 554 [2006]).

Page Six had this story on the post -divorce litigation between the plaintiff and his ex-wife. (Mike Frisch)

May 31, 2016 in Clients | Permalink | Comments (0)

Wednesday, May 25, 2016

Malpractice Clock Starts When Appeal Is Lost

The South Carolina Supreme Court overruled prior precedent and reinstated a legal malpractice claim that the lower court dismissed on statute of limitations grounds.

the client was an auto dealership sued by an unhappy customer who was awarded judgment.

[Client] Stokes-Craven filed a legal malpractice action against Respondents, alleging negligence and breach of fiduciary duty in trial counsel's representation of Stokes-Craven both prior to and during the trial. Specifically, Stokes-Craven alleged that trial counsel failed to: adequately investigate the facts of the case; prepare or serve written discovery; depose witnesses; obtain copies of the plaintiff's experts' curricula vitae; prepare a pretrial brief, trial exhibits, voir dire, and requests to charge; preserve certain evidentiary issues for appellate review; notify Stokes-Craven's insurance carrier about the claims; and settle the case prior to the jury verdict. Based on these purported errors, Stokes-Craven claimed the jury returned the adverse verdict. Respondents generally denied the allegations and asserted several defenses, including that Stokes-Craven's claims were barred by the expiration of the three-year statute of limitations.

The court acknowledged that its minority position articulated in the Epstein case was problematic

The facts of the instant case present us with an appropriate opportunity to address the criticism and conflict that has arisen out of our decision in Epstein. As legislatively mandated, we begin our analysis with the well-established discovery  rule. Pursuant to this rule, all legal malpractice actions must be commenced within three years after the claimant knew or by the exercise of reasonable diligence should have known that he or she had a cause of action...

 As evidenced by this case, the key question is when the claimant's cause of action accrues to trigger the running of the three-year statute of limitations. The answer to this question is complicated by the seemingly endless factual scenarios surrounding the underlying claim of a legal malpractice cause of action. For example, legal malpractice claims may stem from matters involving litigation or negotiated settlements while others may arise out of matters involving the probate of a will or a divorce. Further complicating the determination of when a cause of action accrues is if the claimant pursues an appeal of an unfavorable ruling, such as in the instant case.

Our decision regarding the accrual date must also take into consideration the preservation of the attorney-client relationship as well as the public policy that is fundamental to the efficient management of our judicial system. Clearly, if a client files a legal malpractice cause of action while the client is still represented by counsel during an appeal, the attorney-client relationship is compromised and there are simultaneous lawsuits advocating conflicting positions.

Here, the statute of limitations did not commence until the case was lost on appeal. Thus, the malpractice claim was timely. (Mike Frisch)


May 25, 2016 in Clients | Permalink | Comments (0)

Tuesday, May 17, 2016

Privileged Legal Bills

Dan Trevas reports a case decided today by the Ohio Supreme Court

When attorney-fee billing statements with detailed information about the tasks undertaken by a law firm representing a city are intertwined with summaries of the legal work performed, the detailed information is not a public record, the Ohio Supreme Court ruled today.

The Supreme Court voted 5-2 to affirm a Ninth District Court of Appeals decision to release redacted copies of invoices from a law firm representing Avon Lake to James E. Pietrangelo II. The records are connected to pending litigation between Avon Lake and Pietrangelo. In a per curiam decision, the Court majority reasoned that Pietrangelo may acquire information useful in his litigation strategy against the city if provided more details than what the Ninth District permitted to be released.

In a dissenting opinion, Justice Sharon L. Kennedy wrote that only the narrative summary portion of the bills describing the work the firm did can be withheld and that Pietrangelo is entitled to more information as well as damages from Avon Lake.

Detailed Information Sought

Pietrangelo requested from the city and its law director the invoices from a law firm for services it rendered concerning his lawsuit. The city provided copies of invoices with the name of the firm, the general matter for which services were provided, the date of the invoice, the total fees billed for the period, and itemized expenses.

The city redacted the remaining information on the invoices citing exemptions for attorney-client privilege and attorney-work product. The information that was redacted included narrative descriptions of the particular legal services rendered, the name of each attorney in the firm providing services along with the service provided, the time spent, the billing rate, the total number hours billed, and the total fee attributed to each attorney.

Pietrangelo filed a writ of mandamus with the Ninth District to compel the city to provide unredacted invoices and requested statutory damages and attorney fees. Pietrangelo and Avon Lake both filed for summary judgment, but the Ninth District determined it could not side with a party without more information and ordered the city to file unredacted copies of the billing statements for the judges to review under seal.

After review, in March 2015 the Ninth District concluded the city disclosed all the records not exempt from disclosure by the Ohio Public Records Act, which is R.C. 143.43, except for one portion. The Ninth District found the part of the invoice titled “professional fee summary,” that described the hours, rates, and money charged for services was not exempt. It ordered the city to provide Pietrangelo with copies of the billing statements that included the professional fee summary.

The Ninth District denied Pietrangelo’s request for the fully unredacted records plus damages and attorney fees. He appealed to the Supreme Court, which agreed to hear the case.

Extent of Attorney-Client Privilege at Issue

Citing its 2011 State ex rel. Dawson v. Bloom-Carroll Local School Dist. decision, the Court’s opinion explains that narrative portions of itemized attorney billing statements containing descriptions of legal services are protected by attorney-client privilege and are not public records.

Pietrangelo argued that based on the Court’s 2012 State ex rel. Anderson v. Vermillion decision he is entitled to all the dates legal services were performed along with the hours and rates of services, which is more than what is provided in the professional fee summary. The Court in Anderson stated that “the general title of the matter being handled, the dates services were performed, and the hours, rates and money charged for the services,” on an attorney billing statement need to be disclosed.

The Court explained that Anderson was the former mayor of Vermillion and was seeking the billing statements regarding the legal services provided to the new mayor. His entire request was denied. The Court ordered Vermillion to turn over all of the billing statements, ruling only the narrative portions were exempt from the public records act by attorney-client privilege.

Avon Lake argued the situation with Pietrangelo is similar to the Dawson case where a parent sought billing statements for legal services provided to the school district regarding pending litigation between the district, the parent and her children. The district provided summaries with the attorney’s name, invoice total, and the matter involved, but withheld the actual invoices because they contained confidential information.

The Court allowed the district to withhold the invoices because the information in the invoices was “either covered by attorney-client privilege or so inextricably intertwined with privileged materials as to also be exempt from disclosure.”

“Like Dawson, the records that Pietrangelo seeks relate to the pending litigation between the parties. If disclosed, Pietrangelo may acquire information that would be useful in his litigation strategy against the city, whereas in Anderson, any harm from disclosure of attorney-client communication was remote and speculative,” the Court stated. “To the extent that Pietrangelo requests the dates, hours, and rates not identified in the professional-fee summary, they are inextricably intertwined with the narratives of services that are privileged materials. Such information is exempt from disclosure.”

Pietrangelo also sought $1,000 in statutory damages and attorney fees because the Ninth District found the city did not fully comply with the public records law. The Court affirmed the Ninth District’s denial of Pietrangelo’s request because Avon Lake reasonably believed it was entitled to withhold the information it did.

Chief Justice Maureen O’Connor and Justices Paul E. Pfeifer, Terrence O’Donnell, Judith Ann Lanzinger, and William M. O’Neill joined the opinion.

More Disclosure Required, Dissent Maintains

In her dissent, Justice Kennedy stated she would order the redaction of only the narrative services information and release all the other information on the billing statements to Pietrangelo in accordance with the Ohio Public Records Act.

She further disagreed with the majority’s conclusion that the relevant distinction between Dawson and Anderson regarding what information is subject to disclosure is whether litigation is pending between the record requestor and the government entity. Instead, Justice Kennedy wrote that the fact the records requestor is involved in litigation against the government body should have no bearing on whether the records are public.

“Whether a public-records requestor and a government entity are engaged in litigation is irrelevant to the question of whether the information in an itemized attorney-fee billing statement is privileged and exempt from disclosure. Instead, our case law mandates the proper focus is on the information sought and whether that information is privileged,” she wrote.

The relevant distinction between the two cases was that the school board in Dawson reduced the nonexempt information to a summary and released it, whereas the city in Anderson denied the request and failed to provide an alternative record.

Justice Kennedy recognized that the narrative portions of a billing statement containing descriptions of legal service are protected by the attorney-client privilege and not subject to disclosure. She explained that the billing statements at issue contain summary information on the first two pages, and that all subsequent pages contain four independent columns divided into the categories of date, name, services, and hours. Each billing statement concluded with the total number of hours invoiced, a professional fee summary, disbursements and expenses, and a total invoice amount.

She wrote the majority’s reliance upon Dawson to conclude that the date, name, and hours information was inextricably intertwined with the narrative of the services was disingenuous. She noted that Dawson offered little discussion of how the billing statements were constituted, whereas the format used in the statements to Avon Lake separated the information about the attorneys providing the services and the hours billed so that they “are not intertwined with the narrative services column.”

Justice Kennedy reasoned that the ability to redact the narrative services column mandated all remaining portions of the billing statements be released. By affirming the appellate court's decision not to release the remaining non-exempt portions of the billing statements the majority created a new “redundancy” exemption not authorized by the General Assembly she concluded.

Justice Kennedy would have also granted Pietrangelo damages because after Anderson decision it should have been clear to Avon Lake what information in a billing statement was privileged and what must be disclosed.

“Subsequently, no well-informed public office could reasonably believe that any portion of an attorney-fee billing statement, other than the narrative description of the legal services performed, is subject to redaction,” she wrote.

Justice Judith L. French joined the dissent.

2015-0495. State ex rel. Pietrangelo v. Avon Lake, Slip Opinion No. 2016-Ohio-2974.

(Mike Frisch)

May 17, 2016 in Billable Hours, Clients, Privilege | Permalink | Comments (0)

Sunday, May 15, 2016

Hedging Bets

Counsel for a hedge fund may be liable to investors for losses based on assurances provided by them, according to a recent opinion of the New York Appellate Division for the First Judicial Department

The evidence shows that plaintiffs requested a letter from defendants, who were outside counsel to a hedge fund in which plaintiffs had invested, regarding the implications of certain Security and Exchange Commission (SEC) inquiries into the fund. Defendants responded with a letter, addressed to plaintiffs, specifically answering plaintiffs' questions by characterizing the SEC inquiry as part of a new routine the SEC would be following under the newly passed Dodd-Frank legislation. Plaintiffs allege that, based upon defendants' assurances, they did not withdraw their investment in the fund. About a year after receiving the letter, the SEC instituted administrative cease and desist proceedings against the fund's managers, and the SEC ultimately prevailed in the proceedings. Plaintiffs allege that they lost their entire investment as a result of their reliance on defendants' false and misleading statements. Under the circumstances, plaintiffs adequately pleaded and showed the required "privity-like" relationship for their negligent misrepresentation claim (J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148 [2007]; see Prudential Ins. Co. of Am. v Dewey, Ballantine, Bushby, Palmer & Wood, 80 NY2d 377, 382-385 [1992]).

Defendants are correct that this Court can affirm on alternative bases argued to, but not reached by, the motion court (Nickerson v Volt Delta Resources, 211 AD2d 512, 512 [1st Dept 1995], lv dismissed in part and denied in part 86 NY2d 860 [1995]), and that they cured their improper submission of the attorney defendant's affirmation by submitting the same affirmation in affidavit form on reply (see Berkman Bottger & Rodd, LLP v Moriarty, 58 AD3d 539, 539 [1st Dept 2009]). Nevertheless, they are not entitled to dismissal of the complaint. Plaintiffs adequately pleaded the other elements of their negligence claim, and defendants failed to establish as a matter of law that there were no false statements in the letter, that plaintiffs' reliance on defendants' statements was unreasonable, or that the alleged false statements did not proximately cause plaintiffs' alleged losses (see generally J.A.O. Acquisition Corp., 8 NY3d at 148).

(Mike Frisch)

May 15, 2016 in Clients | Permalink | Comments (0)

Thursday, May 12, 2016

Disgorgement Of Attorney Wages Improper

The Washington State Court of Appeals has held that a trial court exceeded its authority in reducing an award of wages to a former in-house counsel

Following a month-long jury trial, attorney Geoffrey Chism was awarded $750,000 for breach of two compensation contracts by his former employer, Tri-State Construction, Inc., and exemplary damages for unlawful wage withholding. The trial court then dramatically reduced Chism's recovery, premised on findings that Chism violated Washington's Rules of Professional Conduct (RPCs) during his time as Tri-State's in-house general counsel. By ordering disgorgement of Chism's wages based on novel interpretations of several RPCs, the trial court exceeded the disciplinary authority delegated to it by our Supreme Court. Moreover, the trial court disregarded the strong legislative policy preference in favor of payment of earned wages by failing to even acknowledge that, unsupported by precedent, it was ordering disgorgement of an attorney's wages, as opposed to an attorney's fee. Accordingly, we reverse the trial court's challenged rulings and remand the cause for entry of judgment consistent with the jury's verdict.

The court

The question presented arises at the intersection of judicial power over the practice of law and legislative power over the conditions of employment. Our Supreme Court has offered some guidance about resolving such situations, stating, "While we should jealously protect our prerogatives, if the legislative power is not limited by the constitution, it should be unrestrained." Demopolis, 103 Wn.2d at 65. As previously stated, in the area of attorney wages, the Supreme Court has taken no action, but the legislature has enacted a broad policy in favor of the payment of employee wages. Given this stark contrast, we defer to the strong legislative policy in this area.

This conclusion is consequential for how we view the application of the disgorgement sanction to attorney wages. As has been described, disgorgement does not require proof of either causation or damage, only misconduct. This is unlike other, related claims, including breach of fiduciary duty and restitution, both of which require such proof. Because there is no standard measure for a disgorgement order, nor a requirement that it be imposed as a compensatory measure, it poses a significant threat to the legislative policy in favor of the consistent payment of employee wages.

This threat is illustrated by the trial court's order in this case. Herein, Tri-State chose to pursue only disgorgement from Chism, not a separate claim for damages or restitution. Accordingly, Tri-State was never required to prove that it suffered any injury as a result of Chism's alleged misconduct. Nevertheless, the trial court ordered Chism to disgorge $550,000 in wages (plus another $550,000 in exemplary damages for wage withholding).

The trial court exceeded its disciplinary authority by ordering Chism to disgorge a significant portion of the wages otherwise owed to him without either acknowledging that itwas disgorging wages, not fees, or accounting for the strong legislative preference in favor of employers paying earned employee wages. Therefore, the trial court's order was improper as a matter of law.

Thanks to Alan Kabat for sending this opinion to us. (Mike Frisch)

May 12, 2016 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, May 11, 2016

Take My Husband's Bills Please

A divorcing spouse was properly granted summary judgment in claims brought against her by her deceased husband's attorney, according to a decision of the New York Appellate Division for the First Judicial Department.

Beginning in September 2008, the plaintiff represented Daniel Sitomer (hereinafter the husband) in a matrimonial action commenced by his wife, Sheila Sitomer (hereinafter the defendant), pursuant to a retainer agreement dated September 15, 2008. The retainer agreement stated that the plaintiff would provide the husband with an itemized statement of charges every 60 days, and in the event that he discharged the plaintiff, or the plaintiff was relieved, the plaintiff reserved the right to seek to have a charging lien fixed "on the proceeds realized by you from the litigation."

In January 2009, the plaintiff moved pursuant to CPLR 1201 and 1202 to have a guardian ad litem appointed for the husband on the ground that "he had proven to be incapable to assist us so as to adequately defend his rights in [the] matter." The husband hired another attorney to oppose that application and paid that attorney over $32,000 in legal fees, and sought to discharge the plaintiff as his attorney. On June 5, 2009, the court relieved the plaintiff as counsel for the husband, at the husband's request.

The plaintiff moved to fix its attorneys' fees, and the husband opposed the motion on the ground that the plaintiff never provided him with periodic invoices every 60 days pursuant to their retainer agreement. Nevertheless, on August 24, 2010, the plaintiff and the husband entered into a so-ordered stipulation, fixing the husband's obligation for legal fees at the sum of $100,000, to be satisfied by a charging lien on "any and all equitable distribution proceeds" following satisfaction of the first $50,000 of a charging lien in favor of the husband's former attorney. The stipulation provided that in the event that the plaintiff provided no further services to the husband, the "charging lien shall serve in full satisfaction for all the [plaintiff's] claims for fees and services."

In September 2010, the husband died, and the divorce action abated. Therefore, there were no equitable distribution proceeds to satisfy the plaintiff's charging lien. In May 2011, the plaintiff commenced the instant action against the defendant, seeking to recover $100,000 in legal fees under a theory of common-law necessaries.

The court below properly ordered summary judgment

Under the common-law doctrine of necessaries, a spouse who receives necessary goods or services is primarily liable for payment. A creditor seeking to recover a debt against the nondebtor spouse must demonstrate that the primary debtor was unable to satisfy the debt out of his or her own resources, that necessaries were furnished on the nondebtor spouse's credit, and that the nondebtor spouse has the ability to satisfy the debt (see Gilberg v Lennon, 212 AD2d 662, 663; Medical Bus. Assoc. v Steiner, 183 AD2d 86). Legal services provided to a spouse in a matrimonial action have been considered necessaries (see Jordan v Jordan, 226 AD2d 349, 349; D'Agostino v Genovese, 190 AD2d 773, 774; Fernandes v Rucker, 186 AD2d 171, 172).

Here, the defendant established that the plaintiff's services were not furnished on her credit. Rather, the services were furnished in the expectation of "the proceeds" of the litigation, specifically articulated in the charging lien. Since the action abated, there were no proceeds of the litigation. Further, it is clear from this record that, although the husband may have had sufficient resources to pay the plaintiff, which included marital assets appropriated by him and court-ordered spousal support, he was unwilling to voluntarily pay the plaintiff, owing to their adversarial relationship.

In opposition, the plaintiff failed to raise a triable issue of fact.

(Mike Frisch)

May 11, 2016 in Billable Hours, Clients | Permalink | Comments (0)

Tuesday, May 3, 2016

Within The Range Of Reasonable Alternatives

The Washington State Court of Appeals Division II has held that a trial court properly granted summary judgment to defendants

Roff and Bobbi Arden appeal the trial court’s summary judgment order dismissing their claims against Forsberg & Umlauf, PS, and attorneys John Hayes and William “Chris” Gibson (collectively Forsberg) for breach of fiduciary duties and legal malpractice. Property and Casualty Insurance Company of Hartford (Hartford), the Ardens’ homeowners’ insurance company, retained Forsberg to defend a lawsuit filed against the Ardens. Hartford provided the defense under a reservation of its rights to deny coverage for any judgment entered against the Ardens.

First, the Ardens argue that Forsberg breached its fiduciary duty of loyalty to them by defending them in a reservation of rights context while also representing Hartford in other cases. We hold as a matter of law that Forsberg’s representation of the Ardens while it also represented Hartford did not create a conflict of interest and that Forsberg had no obligation to notify the Ardens that they represented Hartford in other cases. We also hold that there is no evidence that Forsberg breached its duty of disclosure regarding the potential conflicts of interest between Hartford and the Ardens.

Second, the Ardens argue that Forsberg breached its fiduciary duty of loyalty to them during settlement negotiations. We hold that (1) as a matter of law, Forsberg had no duty to the Ardens to persuade Hartford to accept the claimants’ initial settlement offer; (2) there is no evidence that Forsberg breached a fiduciary duty regarding the Ardens’ interest in a swift resolution of the lawsuit; (3) a question of fact exists as to whether Forsberg breached its duty to consult with the Ardens before rejecting settlement demands, but there is no evidence that any breach injured the Ardens; and (4) even if Forsberg had a duty to consult with the Ardens before making settlement offers, there is no evidence that Forsberg breached any such duty regarding its first settlement offer and that the breach of any duty for the second settlement offer injured the Ardens.

Third, the Ardens argue that Forsberg was negligent in requesting an extension of the start of settlement negotiations when they had an interest in a prompt settlement. We hold that there is no evidence that Forsberg was negligent regarding its judgment decision to extend the start of settlement negotiations.

The case

The Ardens and Wade and Anne Duffy were neighbors in Shelton. In December 2011, Roff Arden shot and killed the Duffys’ puppy. He claimed that the shooting occurred after the puppy and another dog chased him and Bobbi down their driveway. The Mason County Sheriff’s Office investigated, and referred the investigation to the prosecutor’s office to pursue animal cruelty charges...

The Duffys filed suit against the Ardens in May 2012 after settlement negotiations broke down. The lawsuit apparently alleged that the Ardens were liable for (1) willful conversion of the dog, (2) malicious injury, (3) intentional or reckless infliction of emotional distress, and (4) gross negligence and willful or reckless property damage. The Ardens requested insurance coverage for the lawsuit from Hartford under the liability portion of their homeowners’ insurance policy. Hartford initially refused to defend the lawsuit based on an intentional act exclusion in its policy.


We assume, without deciding, that an attorney representing an insured in a reservation of rights case has an obligation to consider the insured’s “personal” interests, even though they may not directly affect the merits of the case. Under Tank, only the insured is the defense attorney’s client, and a defense attorney arguably cannot disregard his or her client’s interests. However, a client may have many, sometimes competing, interests that the attorney must consider in the exercise of his or her professional judgment in defending the case. Under the attorney judgment rule, the question is whether an attorney’s particular judgment decision is within the range of reasonable alternatives or whether the attorney was negligent during the decision-making process. Clark County Fire, 180 Wn. App. at 704.

Here, the Ardens had an interest in the prompt settlement of the case. However, they were not willing to settle unless Hartford funded the settlement. Therefore, the Ardens’ predominant interest was having Hartford fund any settlement. When the Duffys made a settlement demand before providing their discovery responses, the Ardens’ two interests conflicted. Without discovery responses, Hartford did not have enough information to evaluate the settlement demand. Therefore, without an extension of time there was no possibility that Hartford would agree to fund the $55,000 settlement demand.

The evidence shows that Forsberg made a judgment decision about the best way to obtain a settlement of the Duffy lawsuit with Hartford funding that settlement. Forsberg determined that the best strategy was to obtain an extension of time for responding to the Duffys’ settlement demand until after Hartford had enough information to determine the settlement value of the claim. The Ardens presented no evidence that this decision was outside the range of reasonable alternatives from the perspective of a reasonable, careful, and prudent attorney in Washington or that Forsberg somehow failed to exercise reasonable care in making that judgment decision. Accordingly, we hold that there is no evidence that Forsberg was negligent in delaying the beginning of settlement negotiations.

(Mike Frisch)

May 3, 2016 in Clients | Permalink | Comments (0)

Friday, April 29, 2016

Why People Hire Lawyers

The Nebraska Supreme Court has held that a legal malpractice case may go forward

In 2011, the district court dissolved the marriage of Brenda R. Rice and Dale E. Rice. Attorney Terrance A. Poppe represented Brenda in the dissolution action. Later, Dale died and Brenda made a claim for the death benefits under life insurance policies owned by Dale. The court determined that Brenda was not entitled to the benefits, because she waived her beneficiary interest under the property settlement agreement. Brenda sued Poppe for legal malpractice, alleging that he had failed to advise her that the property settlement agreement waived her beneficiary interest in Dale’s life insurance policies. The trial court sustained Poppe’s motion for summary judgment, reasoning that Poppe had no duty to advise Brenda of the legal effect of an unambiguous agreement. We conclude that Poppe, the summary judgment movant, did not establish a prima facie case entitling him to judgment as a matter of law. We therefore reverse the judgment and remand for further proceedings.

The story

In August 2011, the district court dissolved Brenda and Dale’s marriage. The court approved the property settlement agreement and incorporated it into the decree.

Dale died a week later. Brenda tried to claim the death benefit for two term life insurance policies owned by Dale, only one of which, with a death benefit of $250,000, concerns this appeal. The personal representative of Dale’s estate argued that Brenda had waived her right to the death benefits in the property settlement agreement. The trial court agreed and ordered Brenda to withdraw her claim. Brenda appealed.

We affirmed the determination that Brenda had waived her interest as a beneficiary of Dale’s life insurance policies in Rice v. Webb.  There, we explained that divorce does not affect a beneficiary designation in a life insurance policy. But a spouse may waive a beneficiary interest in the divorce decree. Synthesizing paragraphs VI, IX, and X of the property settlement agreement, we concluded that Brenda unambiguously gave up her right to claim the death benefits...

As to potential malpractice

Brenda argues that Poppe committed malpractice by not asking what her and Dale’s intentions were concerning their life insurance beneficiary designations and failing to explain the effect that the property settlement agreement would have on those designations. She contends that the “intricate rules of construction which may render a written settlement agreement that has been incorporated into a decree ‘unambiguous’ to members of the Nebraska Supreme Court do not apply equally to the uninitiated layperson.”  Poppe responds that he had no duty to inform Brenda that she was waiving her beneficiary status, because the “fact she was doing so was readily apparent from the clear language of the Agreement.” 

 Poppe owed Brenda a duty to reasonably advise her about the property settlement agreement’s effect on her interests. And, as the summary judgment movant, he had the burden to produce evidence that he did not breach that duty. The general standard of an attorney’s conduct is established by law, but whether an attorney’s conduct fell below the standard in a particular case is a question of fact. Expert testimony is generally required to show whether an attorney’s performance conformed to the standard of conduct. An attorney moving for summary judgment must generally make a prima facie case by producing expert testimony that his or her conduct did not fall below the standard of care.

The court surveyed cases from other jurisdictions

These cases show that attorneys are not always insulated from malpractice liability because their clients read or ought to have read the documents themselves. Instead, they “stand only for the proposition that for purposes of determining when an action for alleged legal malpractice begins to run, a client must know what lay persons of ordinary intelligence are deemed to know.” We would not have discussed the statute of limitations at all in Interholzinger and Nichols if the fact that the plaintiffs signed the documents was an absolute bar to recovery. A rule that insulates attorneys from liability as a matter of law on the theory that clients ought to know what they are signing ignores the fact that laypersons often hire attorneys because they lack the knowledge and skills needed to understand the transaction.

We conclude that reasonable minds could disagree concerning whether Poppe’s failure to advise Brenda about the effect of the property settlement agreement on beneficiary designations was the proximate cause of Brenda’s loss.

(Mike Frisch)

April 29, 2016 in Clients | Permalink | Comments (0)

Sunday, April 24, 2016

A Friend Can Be An Agent: Privilege May Survive

An opinion from the North Carolina Court of Appeals

This appeal presents the question of whether a party to litigation who engages her friend as an agent to participate in meetings with her attorney waives the protections of attorney-client communications and attorney work product for information arising from the meeting with her attorney and any work product created with the assistance of or shared with the agent as a result of those meetings. Based on our caselaw and the record here, the answer in this case is no.

The procedural posture

Defendant-Appellant Melissa Berens (“Defendant”) appeals the interlocutory order denying her request for a protective order and her motion to quash Plaintiff Appellee Michael Berens’s (“Plaintiff’s”) subpoena duces tecum to Brooke Adams Healy (“Ms. Adams”) compelling production of all documents relating to Ms. Adams’s communications with Defendant; her communications with the Tom Bush Law Group (“the law firm”), the firm representing Defendant in her divorce; and her communications with any third party regarding “one or more members of the Berens family” and the legal proceedings that are the subject of the underlying divorce case. On appeal, Defendant argues that Plaintiff’s subpoena to Ms. Adams seeks information protected by the attorney-client privilege and by the work product doctrine because Ms. Adams was Defendant’s agent. Consequently, according to Defendant, Ms. Adams’s presence during Defendant’s meetings with her attorney did not waive the privileges nor did her involvement in the preparation of materials for litigation defeat the privileges.

The court 's analysis

Plaintiff argues that Ms. Adams was not functioning in the capacity of an agent but was “merely Defendant-Appellant’s friend” and that the presence of a friend during attorney-client communications and giving her access to work product defeats the claim of privilege under our state’s established caselaw. Defendant argues that Ms. Adams’s presence during and access to attorney client communications and work product as a “friend, agent, and trusted confidant” did not destroy the attorney-client privilege or work product doctrine because Ms. Adams was acting as Defendant’s agent.  In support of this argument, Defendant cites the written confidentiality agreement providing that Ms. Adams was acting as her “agent and personal advisor to specifically assist her in this litigation” and that Ms. Adams’s presence and involvement in attorney-client communications “is necessary for the protection of [Defendant’s] interest.”

Defendant does not contend, and did not contend before the trial court, that she and Ms. Adams had an attorney-client relationship. Rather, she contends that because Ms. Adams was her agent for purposes of this litigation, the privileges and protections arising from her attorney-client relationship with the law firm within the context of the confidentiality agreement remained intact despite the sharing of attorney communications and work product with Ms. Adams...

In failing to address the confidentiality agreement and other evidence of the agency relationship between Defendant and Ms. Adams, the trial court misapprehended the law regarding the extension of the attorney-client privilege and the attorney work product doctrine to communications with a client’s agent within the context of the litigation and confidentiality agreement.

The error below

The trial court failed to conduct the essential analysis as to whether the affidavit, confidentiality agreement, and other evidence established an agency relationship. We are aware of no caselaw, nor has Plaintiff cited any authority, that being a client’s “good friend” and being a client’s agent are mutually exclusive. Nor does our caselaw prohibit a non-practicing attorney from acting as an agent for purposes of assisting another person in communications with legal counsel. Our holding would be the same if Ms. Adams had been a friend trained as an accountant, a psychologist, or an appraiser who agreed to assist with the litigation without charge. Consequently, we must reverse the trial court’s order concluding that the attorney-client privilege does not apply in this case.


Plaintiff’s subpoenas requested all documents relating to all of Ms. Adams’s communications with Defendant, all documents relating to her communications with the law firm, and all documents relating to her communications with any third party regarding the ongoing legal proceedings during a specified time period. While we have held that the record evidence established an agency relationship between Ms. Adams and Defendant, it is unclear whether all the requested materials fall within the scope of the attorney-client privilege by satisfying the five-factor Murvin test. For example, communications between Ms. Adams and third parties outside the law firm may not fall within the protection of the attorney-client privilege. Therefore, we must remand for the trial court to determine whether the attorney-client privilege applies to the requested communications, using the five-factor Murvin test and considering Ms. Adams as Defendant’s agent. Unless the trial court can make this determination from other evidence such as a privilege log, it must conduct an in camera review of the documents...

We also are unable to determine based on the limited record whether the documents requested, or any of them, are subject to the work product doctrine. This determination is necessary only for documents which Defendant asserts are work product and which the trial court concludes are not protected by the attorney-client privilege.

(Mike Frisch)

April 24, 2016 in Clients | Permalink | Comments (0)

Tuesday, April 19, 2016

Timber Trespass Malpractice Claim Survives

Summary judgment was properly granted to a law firm but not the individual attorney sued for legal malpractice, according to a decision of the New Hampshire Supreme Court.

This is the second appeal of this case and many of the underlying facts and procedural history are set forth in our prior decision, Yager v. Clauson, 166 N.H. 570 (2014). The client’s legal malpractice claim stems from the defendants’ representation of him in two timber trespass actions. See id. at 571. The first action was brought against Mighty Oaks Realty, LLC (Mighty Oaks) in 2007 (the Mighty Oaks action). Id. Summary judgment was granted to Mighty Oaks, in part, because the client failed to prove that Mighty Oaks was the entity that cut the timber. Id.

The second action was brought against D.H. Hardwick & Sons, Inc. (Hardwick) in 2008 (the Hardwick action). Id. In that action, the client alleged that Hardwick was the entity that cut the timber. Id. Summary judgment was granted to Hardwick because the action had been filed more than three years after the timber cutting had ceased and, thus, was barred by the applicable statute of limitations. Id. We affirmed the trial court decisions in both actions. Id.


In this case, the trial court concluded that a legal expert was necessary for the plaintiff to prove "what result should have occurred" had the Hardwick action been timely filed. Carbone, 151 N.H. at 528 (quotation and ellipsis omitted). The client argues that this was error because he could have used the "trial-within-a-trial" method to prove this. We hold that, to the extent that the trial court determined that the trial-within-a-trial method was unavailable to the client, as a matter of law, the trial court erred. See McIntire v. Lee, 149 N.H. 160, 165-66 (2003); Witte v. Desmarais, 136 N.H. 178, 189 (1992).

Recreating the underlying case is "[t]he traditional means of resolving what should have happened" had an attorney’s negligence not occurred. Mallen & Smith, supra § 33:3, at 626; see Garcia v. Kozlov, Seaton, Romanini, 845 A.2d 602, 611-12 (N.J. 2004). "Recreating the underlying action requires calling and examining those persons who would have been witnesses and presenting the demonstrative and documentary evidence that would have been presented but for the attorney’s negligence." Mallen & Smith, supra § 37:15, at 1510. "This process then becomes in essence a trial within a trial." Witte, 136 N.H. at 189; see McIntire, 149 N.H. at 165; see also Mallen & Smith, supra § 37:15, at 1511. In the "trial within a trial," the jury in the legal malpractice action "substitute[s] itself as the trier of fact" in the underlying action and "determine[s] the factual issues presented on the same evidence that should have been presented to the original trier of fact." McIntire, 149 N.H. at 165 (quotation omitted). The trial-within-a-trial approach is "regularly employed in most jurisdictions" in legal malpractice cases, Garcia, 845 A.2d at 612, and has been employed in New Hampshire, see McIntire, 149 N.H. at 165-66; Witte, 136 N.H. at 188-89...

Here, to the extent that the trial court ruled that the client could not use the trial-within-a-trial method to prove "what result should have occurred" had the Hardwick action been timely filed, the trial court erred. Carbone, 151 N.H. at 528 (quotation and ellipsis omitted). This method was an acceptable means of proving proximate cause in the client’s legal malpractice claim. See McIntire, 149 N.H. at 165-66.

 The law firm was dismissed due to the plaintiff's discovery lapse. (Mike Frisch)

April 19, 2016 in Clients | Permalink | Comments (0)

Wednesday, April 13, 2016

Prenup Issues Result In Viable Malpractice Claim

A client who retained an attorney to draft a prenuptial agreement stated a claim that survived summary judgment, according to a recent opinion of the Tennessee Court of Appeals.

The issue came to light in the ensuing divorce and issues relating to enforceability due to disclosure of assets

Plaintiff agreed that he selected the attorney but that he also believed that Defendant represented him and Wife. He said that Wife had access to his filing cabinet and that he never prohibited her from viewing the documents in the cabinet. He claimed that she retrieved documents from the cabinet on occasion. He admitted that he was a "fairly private person" and that they had not engaged in specific discussions concerning financial issues prior to signing the Agreement.

Following the hearing, the trial court set aside the Agreement, finding that the Agreement failed to conform to the requirements set forth in Randolph because a reasonable disclosure of assets had not been made and because Wife did not possess independent knowledge of the same. The court granted Wife‟s request for pendente lite support. Plaintiff and Wife later entered into a marital dissolution agreement.

As to disclosure, plaintiff testified that

He provided that he kept his financial information in a filing cabinet that she could have easily accessed. He believed she accessed this information because she always searched the residence to discover the identity of gifts he purchased for her birthday or Christmas.

 In the malpractice case

The trial court granted summary judgment, finding that the undisputed material facts negated an essential element of Plaintiff‟s claim. In so finding, the court held that Defendant had not breached the applicable standard of care because the Agreement was sufficiently drafted in that it provided that the parties possessed knowledge of one another‟s assets. The court continued that Wife had also signed the Agreement, thereby affirming her knowledge of the assets. This timely appeal followed.

 The court here disagreed

The record reflects that genuine issues of material fact remain as to whether Wife possessed independent knowledge of the full nature, extent, and value of the holdings as evidenced by the conflicting testimony presented by the parties. Likewise, genuine issues of material fact remain as to whether Defendant breached the applicable standard of care in drafting the Agreement. With these considerations in mind, we conclude that the trial court erred in granting summary judgment. In so concluding, we express no opinion as to whether Defendant actually breached the applicable standard of care or as to the extent of Plaintiff‟s damages, if any.


 (Mike Frisch)

April 13, 2016 in Clients | Permalink | Comments (0)

Friday, April 8, 2016

A Twist On Privilege Law

An attorney's effort to resist compelled disclosure of allegedly privileged information was rejected by the West Virginia Supreme Court of Appeals.

The case involved litigation over drilling rights

In January 2004, the Martins leased the right to drill for and produce natural gas on approximately sixty-one acres (the “Martin Lease”) to Martin Twist Energy Co., LLC (“MTEC”). Pursuant to the lease, MTEC drilled three wells upon the Martins’ property. Subsequently, AIO lent $2 million to MTEC. The loan was collateralized by various oil and gas leases and wells, including the Martin Lease and the wells that had been drilled. MTEC defaulted on its loan with AIO. Thereafter, AIO instituted foreclosure proceedings against MTEC in Kentucky. The proceedings resulted in the entry of an Agreed Judgment whereby the entire right and interest in the Martin Lease and the drilled wells was transferred to AIO in October 2008.

In March 2009, the Martins filed suit against AIO. The complaint set forth multiple grounds, including failure to pay appropriate royalties under the Martin Lease. Counsel for AIO, Scott Kaminski, first appeared in April 2009. Subsequently, AIO filed an answer and a counterclaim against Mr. Martin alleging that he interfered with AIO’s production from the wells by chasing AIO employees off the property with a gun and prohibiting them from working. A court-ordered mediation held in July 2010 was unsuccessful. A settlement offer presented by the Martins was rejected by Todd Pilcher (“Mr. Pilcher”), who was said to be acting on behalf of AIO.

Kaminski withdrew after consulting with disciplinary counsel. He then asserted attorney-client privilege to resist disclosure despite AIO's explicit waiver. He did so on behalf of a Mr. Twist (now deceased)

Rule 1.8(f) of the West Virginia Rules of Professional Conduct provides that a lawyer cannot accept compensation for representing a client from anybody other than the client unless three criteria are met. First, the actual client must give consent. Second, there can be no interference with the lawyer’s independent judgment. Third, all information relating to representation of the client must be protected as confidential. While Mr. Twist may have retained and paid Mr. Kaminski, the record does not establish how the Rule 1.8(f) criteria were met. Rather, what is plainly established is that no consent was given by AIO.

The attorney-client privilege belongs to the client. Typically, the client alone may waive the privilege. USF &G, 194 W. Va. at 442, 460 S.E. 2d at 688. The only privilege with respect to the Martin litigation belongs squarely with AIO, who is entitled to waive it regardless of the protestations of others who claim to be acting on behalf of AIO. We observe that all parties appear to accept the existence of an attorney-client relationship between AIO and Mr. Kaminski. The record establishes that AIO has expressly waived the privilege and provided documents to the Martins. The trial court’s conclusion that Mr. Kaminski failed to establish the existence of an attorney-client relationship with Mr. Twist and/or 530 West Main regarding the matters at issue with respect to the Martin complaint is not clearly in error and will not be disturbed...

We now address the claim by Mr. Kaminski that the West Virginia Rules of Professional Conduct apply to this matter such that he cannot be compelled to disclose client confidences. We find that Mr. Kaminski has failed to distinguish the evidentiary attorney-client privilege and the professional and ethical duties of confidentiality. The trial court correctly found that the evidentiary privilege exists apart from, and is not coextensive with, the ethical confidentiality precepts...

Rule 1.6 of the West Virginia Rules of Professional Conduct provides for the confidentiality of information relating to the representation of a client. Confidentiality applies even after withdrawal from representation. Here, Mr. Kaminski recognized his potential duties, consulted with disciplinary counsel, withdrew from representation, and disavowed pleadings. He has continued to assert and maintain confidentiality. Nevertheless, Rule 1.6(b)(6) specifically provides that an attorney may be compelled to reveal information relating to representation of a client so as to comply with a court order. That is the situation confronting Mr. Kaminski. The trial court did not commit clear error when it determined that the West Virginia Rules of Professional Responsibility do not bar disclosure of the contested documents.

The court further held that an attorney may not assert a "blanket claim of privilege" in response to an effort t o compel disclosure. (Mike Frisch)

April 8, 2016 in Clients, Hot Topics, Professional Responsibility | Permalink | Comments (0)

Friday, April 1, 2016

Carving Up The Benihana Estate

The New York Court of Appeals decided a case involving the estate of Benihana founder Rocky Aoki.

This appeal involves a challenge to the validity of two partial releases of testamentary powers of appointment executed by the decedent Hiroaki (Rocky) Aoki, the founder of the Benihana restaurant chain. The Appellate Division's order declaring the partial releases valid should be affirmed.

The court discussed the role of attorneys in various instruments prepared before and after Rocky's marriage to his third wife. She had attacked the validity of the releases.

[Attorneys] Dornbush and Shaw were clearly Rocky's fiduciaries. But that is only one part of the equation. The critical inquiry is whether they were either parties to the Releases or stood to directly benefit from their execution, such that the burden shifted to Devon and Steven to demonstrate that the Releases were not procured by fraud.

 Here, the only individuals who stood to benefit from Rocky's execution of the Releases were his descendants. Neither Dornbush nor Shaw were parties to the Releases or stood to directly benefit from their execution (cf. Matter of Gordon, 45 NY2d at 698-700; Fisher, 108 NY at 29-30). If anything, the execution of the Releases all but ensured that Dornbush and Shaw would have no interest in, nor would receive any benefit from, the trust assets...

  Absent any evidence of fraud, one who signs a document is bound by its terms...Because Keiko failed to raise a triable issue of fact that the Releases were signed as a result of fraud or other wrongful conduct, the Appellate Division properly granted Devon and Steven summary judgment.

Justice Stein dissented

 To be sure, nothing in the record provides uncontroverted proof that the attorneys drafted, and arranged to have Rocky execute, the Releases at the behest of the children, only, and in the absence of a request by Rocky. In fact, there is some evidence to indicate that Rocky was present at all of the meetings attended by Kevin and Kana, perhaps demonstrating that the attorneys were not in an attorney-client or agency relationship with the children, but met with them only in furtherance of their professional and fiduciary obligations to Rocky. Nevertheless, all of the conflicting evidence, considered together, is sufficient to create a triable question of fact regarding whether the attorneys were acting on behalf of -- or as agents of -- the children, and not Rocky, when they drafted the Releases and supervised their execution.

Accordingly, I would reverse the Appellate Division order granting summary judgment to Devon and Steven Aoki, and remit the case to that Court...

Daughter Devon is an actress of some note. (Mike Frisch) 

April 1, 2016 in Clients, Professional Responsibility | Permalink | Comments (0)

Thursday, March 31, 2016


The dismissal of legal malpractice claims was affirmed by the Maine Supreme Judicial Court

We agree with much of the rationale set forth by the court in its order granting the Eaton Peabody attorneys’ motion to dismiss. The court concluded that the Board of Appeals’ findings of fact in 2005 were not a final judgment—and therefore not appealable—because the case was remanded to the Planning Board for reconsideration due to the inadequate notice of the hearing. The Board of Appeals’ findings were ultimately immaterial because at the hearing on remand Montgomery did not object to the partial revocation of the permit and at later proceedings Montgomery conceded that the lot was indeed not grandfathered. Beyond this, in its order on Goodall’s motion for summary judgment—a decision that Montgomery did not appeal and is therefore final—the court found that the 1975 partition of lots thirty-seven and thirty-eight from the other lots resulted in a property that was less than 20,000 square feet, thereby terminating any grandfathered status from that point forward. Because the lot was not grandfathered at the time of the initial application for a building permit in 2004, as the court found, “there [was] nothing that Attorney Goodall or any other attorney could have done to obtain a different result” in this matter. The court, therefore, properly granted the Eaton Peabody attorneys’ motion to dismiss.

Too late to amend

In the proposed third amended complaint, Montgomery sought to raise additional claims against Goodall, contending that he was negligent in failing to advise Montgomery that his property was, in fact, not grandfathered. This new allegation reflected Montgomery’s apparent understanding that the lot was never grandfathered following the 1975 conveyance, and therefore was not a nonconforming lot of record during all relevant times here. However, Montgomery could have raised the proposed allegations much earlier in the litigation because the 1974 SZO, by its plain terms, outlines the minimum lot-size requirement. Thus, the Superior Court acted within the bounds of its discretion in denying the motion to file a third amended complaint made three years after the commencement of the suit.

(Mike Frisch)


March 31, 2016 in Clients | Permalink | Comments (0)

Wednesday, March 23, 2016

Emails Over Settlement Support Former Client's Claims

A claim of legal malpractice in a divorce case has sufficient evidence to go forward, according to an opinion of the New York Appellate Division for the First Judicial Department.

In her first cause of action, plaintiff alleges that defendant attorney was negligent in, among other things, failing to advise her of her rights in an underlying divorce proceeding, and in pressuring her to settle the action before trial. According to plaintiff, but for defendant's negligence, she would have recovered a larger equitable distribution.

Defendant moved to dismiss plaintiff's malpractice claim, based on the express terms of the settlement agreement, in which plaintiff acknowledged that she was apprised of her rights and that she was not entering into the settlement agreement under duress. In opposition to defendant's motion, plaintiff submitted her affidavit and several emails between the parties, in which plaintiff complains about defendant's representation of her during settlement negotiations and defendant urges plaintiff to settle the matter and contemplates withdrawal as counsel.

Under the circumstances, the motion court correctly sustained the first cause of action because plaintiff has properly pleaded a cause of action for legal malpractice (see Fielding v Kupferman, 65 AD3d 437 [1st Dept 2009]). Her affidavit and attached emails are sufficient to support her allegations (see generally Global Bus. Inst. v Rivkin Radler LLP, 101 AD3d 651, 651 [1st Dept 2012]).

(Mike Frisch)

March 23, 2016 in Clients | Permalink | Comments (0)

Friday, March 18, 2016

Where There's Not A Will There's Not A Lawsuit

The New Hampshire Supreme Court affirmed the dismissal of claims brought against an attorney who allegedly failed to get her client to sign a new will before her death.

In February 2012, Gregory Riso’s mother, Beatrice Riso, hired Dwyer to redraft her will. Beatrice had five children: Rocco, Ronald, Carolyn, Kenneth, and Gregory. Her existing will granted one-third interests in her estate to Kenneth, Ronald, and Gregory; however, she wished to make Gregory her sole beneficiary. Beatrice wanted to change her will because she believed that Kenneth and Ronald had intended to distribute Gregory’s share of her estate to Carolyn and Rocco, whom she had disinherited. Beatrice suspected that Kenneth and Ronald had deceived her about the contents of the first will and delayed when she asked for their assistance in revising it. Thus, she wished to remove Kenneth and Ronald from her will without delay. She told Dwyer that she wanted to execute the new will by March 2, 2012.

The plaintiffs and Beatrice met with Dwyer on February 28, and Beatrice provided the necessary information to draft the will. Beatrice, who was 90 years old, also provided a letter from her physician stating that she was mentally competent to make decisions. March 2 passed without Beatrice executing her will. Soon after, Beatrice was hospitalized. Throughout this time, the plaintiffs and Beatrice did not contact Dwyer. Nor did Dwyer contact Beatrice. Beatrice died on March 10, without executing her new will.

 The court

To hold that the existence of a specific date for the execution of Beatrice’s will would establish a duty from Dwyer to the plaintiffs would undermine her duty of undivided loyalty to Beatrice. The fact that Beatrice seemed determined to disinherit four of her five children did not eliminate potential conflict. We ruled against a duty to the intended beneficiary to draft the will promptly to protect the decedent’s interest in "having sufficient time to consider and understand his or her estate planning options." Id. at 509. This encompasses all the considerations a client might make, not only who the beneficiary might be. In Sisson, for example, the decedent changed his mind about including a contingent beneficiary clause in his will on the date he intended to execute all of his estate documents. Id. at 504-05. Thus, even if we were to agree with the plaintiffs that Beatrice’s "certainty" eliminated the potential for conflict as to who her beneficiary would be, that would not eliminate the potential for conflict as to some other aspect of her estate plan. Because the potential for conflict still exists on these facts, we conclude that the defendants did not owe a duty to the plaintiffs.

(Mike Frisch)


March 18, 2016 in Clients | Permalink | Comments (0)

Wednesday, March 16, 2016

Strategy Of Dubious Merit

A claim against a law firm has a sufficient basis to proceed pursuant to a recent opinion of the New York Appellate Division for the First Judicial Department.

The motion court correctly declined to dismiss the complaint of Selajdin Sejfuloski as against defendants Michelstein & Associates, PLLC, Michelstein & Greenberg, LLP, and Steven D. Michelstein (collectively, the firms). The firms' decision in the underlying personal injury action not to sue the tenant in possession of the office space where plaintiff Selajdin Sejfuloski was injured cannot, as a matter of law, be characterized as a reasonable course of action (compare Rosner v Paley, 65 NY2d 736 [1985]). Further, the firms' claim that this decision was part of a strategy in which they focused on Labor Law claims is bellied by the pleadings in the personal injury action, which allege common law liability premised on lessee status, albeit against incorrect parties. Moreover, since the firms were aware at the outset that there was no construction, renovation, or demolition going on at the time plaintiff, a daily cleaner, was hit on the head by a falling piece of cabinetry, a Labor Law strategy was of dubious merit.

Questions of fact exist, however, with regard to whether, but for the negligence of the firms, plaintiff would have recovered (see Russo v Feder, Kaszovitz, Isaacson, Weber, Skala & Bass, 301 AD2d 63, 67 [1st Dept 2002]). It is possible that the tenant could have been found responsible since its contractor allegedly caused and created the defect, an improperly installed cabinet, and the affidavit submitted in the underlying action did not foreclose the possibility that tenant was on notice of a problem with the cabinet (see e.g. Grant v Caprice Mgt. Corp., 43 AD3d 708, 709 [1st Dept 2007]). But such a finding cannot be said now to have been a certain occurrence but for the firms failure to name the tenant. Thus, the motion court correctly denied plaintiff summary judgment over the firms.

The motion court also correctly dismissed the derivative claims of plaintiff wife, Selvijan Sejfuloska. No evidence was adduced that the firms were even aware that the injured plaintiff was married. Thus, there was no evidence of an attorney-client relationship in the first instance (see Fortress Credit Corp. v Dechert LLP, 89 AD3d 615, 616 [1st Dept 2011], lv denied 19 NY3d 805 [2012]).

The motion court should have, however, dismissed plaintiffs' complaint as against Richard Ashman, since he was not a member of or partner in the firms that represented plaintiff.

(Mike Frisch)

March 16, 2016 in Clients | Permalink | Comments (0)