Tuesday, July 25, 2017

Fiduciary Breach Claim Survives Summary Judgment

Summary judgment in favor of Willkie Farr in defending a breach of fiduciary duty claim was modified by the New York Appellate Division for the First Judicial Department

In January 2001, nonparty Ramius Securities LLC hired plaintiff Dennis T. Palmeri, Jr. to serve as manager of its stock lending securities department. At some point in 2007, the Financial Industry Regulatory Authority (FINRA) began a regulatory investigation seeking information on the use of so-called finders in Ramius's stock lending business. In December 2007, after having received information from Ramius in response to its initial requests, FINRA served both Ramius and plaintiff with letter requests for additional information regarding transactions that had included a finder's fee.

In preparing his responses to the FINRA request, plaintiff conferred with Ramius's General Counsel and its Chief Operating Officer, both of whom were attorneys. Plaintiff alleged that the GC and the COO informed him they were "there as his counsel," allegedly leading plaintiff to believe that an attorney-client relationship was formed.

Plaintiff left Ramius's employ in 2008. In early 2009, plaintiff retained defendant Willkie Farr & Gallagher LLP to represent him in connection with the FINRA investigation. Before undertaking any representation of plaintiff, defendant informed plaintiff that Ramius, which was then a client of defendant, would not accept any situation in which defendant was adverse to Ramius. At the same time, defendant noted that it did not foresee any set of circumstances in which plaintiff would be adverse to Ramius. Defendant sent plaintiff an engagement letter dated January 14, 2009; the letter made no mention of any conflict of interest arising from defendant's representation of both plaintiff and Ramius, nor did it enumerate the rights plaintiff would have if he and Ramius were to become adverse. Approximately one month afterward, in connection with the same FINRA investigation, Ramius also retained defendant to represent it and certain of its current or former employees.

On or about January 27, 2009, defendant represented plaintiff during his investigative examination before FINRA. In June 2009, however, defendant informed plaintiff that defendant could no longer represent him because of a conflict of interest concerning defendant's concurrent representation of Ramius and its current and former employees, and unilaterally terminated its representation of him on June 25, 2009. By letter dated September 23, 2009 from defendant to FINRA, defendant appeared to shift to plaintiff all or most of the responsibility for any alleged violations of FINRA's rules.

In January 2010, Ramius entered into a letter of acceptance, waiver, and consent (AWC) with FINRA; defendant negotiated the letter on Ramius's behalf. The AWC absolved Ramius and its employees of further liability.

On or about December 1, 2010, FINRA commenced a disciplinary proceeding against plaintiff, alleging that he had made false and misleading statements to Ramius's chief compliance officer during the FINRA investigation, thus causing Ramius to give inaccurate responses to FINRA.

The hearing on the disciplinary proceeding was held on June 28 and 29, 2011. In the months leading up to the hearing, defendant communicated with FINRA about matters related to the hearing, such as testimony to be given by Ramius employees. Moreover, at the hearing, defendant was present on behalf of Ramius and Ramius employees who testified.

By decision dated on or about November 18, 2011, the hearing panel dismissed the complaint, finding that FINRA had failed to prove by a preponderance of the evidence that plaintiff had violated FINRA rules. The panel also determined that certain of the Ramius employees who testified were not credible. On February 15, 2013, upon FINRA's appeal, the National Adjudicatory Council for FINRA upheld the hearing panel's dismissal of the FINRA complaint against plaintiff.

In the complaint in this action, dated February 15, 2013, plaintiff asserted causes of action against defendant for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, gross negligence, professional negligence, breach of contract, and breach of the implied covenant of good faith and fair dealing. Plaintiff alleged that defendant, during its representation of Ramius in the FINRA investigation, shifted all responsibility for any alleged violations of FINRA's rules to him, suggesting that plaintiff undertook certain wrongful actions without Ramius's knowledge. Plaintiff further asserted that defendant disclosed to FINRA his internal, privileged communications with Ramius's counsel, thus causing FINRA to assert charges against Palmieri. Moreover, plaintiff alleged that defendant disclosed information that it had learned during the time it represented him. Plaintiff also alleged that the FINRA complaint was primarily based on privileged statements he had made to counsel at Ramius, and that these statements were also disclosed during the course of Willkie's representation of Ramius after it ceased representing him.

Defendant moved under CPLR 3212 to dismiss the complaint as time-barred and for failure to state a claim. Plaintiff cross-moved for summary judgment in his favor. In its decision, which it read into the record, the IAS court found that all six of plaintiff's claims were premised on the same operative facts and sought identical monetary damages. Accordingly, the IAS court "merged" plaintiff's claims for gross negligence, breach of contract and breach of the implied covenant of good faith and fair dealing into his legal malpractice claim, leaving for consideration only that claim and claims based on breach of fiduciary duty.

The IAS court then dismissed both claims as untimely. Because plaintiff sought purely monetary damages, the court applied the three-year statute of limitations to the breach of fiduciary duty claim, rather than the six-year period. The court held that the claim was time-barred, since plaintiff filed it in February 2013, more than three years after defendant represented him from January through June 2009.

To begin, the motion court properly dismissed plaintiff's claims for gross negligence, breach of contract, and breach of the implied covenant of good faith and fair dealing as duplicative of his legal malpractice claim, given that they are all based on the same facts and seek the same relief (Sun Graphics Corp. v Levy, Davis & Maher, LLP, 94 AD3d 669 [1st Dept 2012]).

Plaintiff's claim for legal malpractice, in turn, is untimely. Claims for legal malpractice are subject to a three-year statute of limitations and accrue when the malpractice is committed, not when the client learns of it (Lincoln Place, LLC v RVP Consulting, Inc., 70 AD3d 594 [1st Dept 2010], lv denied 15 NY3d 710 [2010]; CPLR 214[6]). Plaintiff's legal malpractice claim first accrued on or about June 25, 2009, when defendant terminated its legal representation of him, but continued to represent Ramius in the ongoing FINRA investigation. He did not, however, file his claim until February 15, 2013, more than three years later.

In addition, the motion court correctly dismissed the claim for aiding and abetting a breach of fiduciary duty, as plaintiff is collaterally estopped from relitigating the question of whether an attorney-client relationship existed between him and his employer's in-house counsel. The identical issue was decided in the FINRA proceeding and plaintiff had a full and fair opportunity to litigate it before FINRA (see Jeffreys v Griffin, 1 NY3d 34, 39 [2003]; Auqui v Seven Thirty One Ltd. Partnership, 22 NY3d 246, 255 [2013]).

However, the IAS court should have permitted the breach of fiduciary duty claim to proceed. The IAS court correctly noted that the claim was subject to a three-year statute of limitations. The court was mistaken, however, in finding that the allegedly wrongful conduct ended on June 25, 2009, when defendant unilaterally terminated its representation of plaintiff. On the contrary, defendant's conduct extended through at least June 29, 2011, during which time it represented Ramius and its employees in their participation at plaintiff's FINRA disciplinary hearing.

Here, plaintiff alleges not only that defendant breached its fiduciary duty when it terminated its professional relationship with him, but also when, until at least June 2011, it acted in a manner directly adverse to his interests. Where there is a series of continuing wrongs, the continuing wrong doctrine tolls the limitation period until the date of the commission of the last wrongful act (Harvey v Metropolitan Life Ins. Co., 34 AD3d 364 [1st Dept 2006]; see also Ring v AXA Fin., Inc., 2008 NY Slip Op 30637[U] [Sup Ct, NY County 2008] [applying continuing violations doctrine to General Business Law § 349 claim where initial payments occurred outside statute of limitations but "the insurer [] continued to bill, and ... [plaintiff] ... continued to pay" within three years of filing suit]).

Here, plaintiff has presented evidence of a "continuing wrong," which is "deemed to have accrued on the date of the last wrongful act" (Leonhard v United States, 633 F2d 599, 613 [2d Cir. 1980], cert denied 451 US 908 [1981]; Harvey, 34 AD3d at 364). Indeed, the record contains evidence sufficient to create an issue of fact as to whether defendant breached its fiduciary obligations to plaintiff after June 2009 and well into June 2011 during its ongoing representation of the Ramius parties.

For example, as noted, the record contains evidence that in the early portion of 2011, defendant helped Ramius identify witnesses who would testify against plaintiff at his FINRA disciplinary hearing. Similarly, defendant was present on behalf of Ramius and Ramius employees who testified at plaintiff's FINRA hearing on June 28 through 29, 2011 — a hearing at which the employees gave testimony that was generally adverse to plaintiff's interests. This evidence is sufficient for a fact-finder to determine that defendant breached its duty of loyalty to plaintiff, a former client (see Cooke v Laidlaw, Adams & Peck, 126 AD2d 453, 456 [1st Dept 1987] [ethical standards applying to the practice of law impose a continuing obligation upon lawyers to refuse employment in matters adversely affecting a client's interests, even if the client is a former client]).

(Mike Frisch) 

July 25, 2017 in Clients | Permalink | Comments (0)

Monday, June 19, 2017


The Idaho Supreme Court has affirmed the dismissal of a legal malpractice claim 

[Plaintiff] Greenfield hired Smith in September 2010 to represent her in a civil suit against her neighbors, Eric and Rosalynn Wurmlinger, for the alleged illegal operation of a bed and breakfast in their home. While the suit was pending, Greenfield was charged criminally with malicious injury to the Wurmlingers’ property. Greenfield retained Smith to represent her in the criminal matter as well.

Smith represented Greenfield for approximately eighteen months. During that time, Greenfield was acquitted of the criminal charges. The civil case was scheduled to go to trial in May 2012. In February 2012, Smith filed a motion to withdraw from representing Greenfield. Smith’s basis for the motion was that the attorney-client relationship had broken down to the point where he was no longer able to represent Greenfield. The district court granted the motion on March 8, 2012.

Following Smith’s withdrawal, the district court rescheduled the civil trial for November 26, 2012. Greenfield represented herself at trial, and the jury returned a verdict in favor of the neighbors on November 30, 2012. The jury awarded $52,000 in damages for negligent infliction of emotional distress and $17,000 in damages for timber trespass which were then trebled. The district court also awarded the neighbors’ attorney’s fees and costs. The total judgment entered by the district court was $168,755.37. Greenfield appealed to this Court, and we affirmed the judgment and awarded additional attorney’s fees and costs to the neighbors. Greenfield v. Wurmlinger, 158 Idaho 591, 349 P.3d 1182 (2015).

The legal malpractice suit was filed on December 1, 2014.

The court found that the lower court properly dismissed fraud claims that were not pled with sufficient particularity as well as claims not subject to the malpractice statute of limitations.

There is no dispute that Smith is a licensed attorney. All of Greenfield’s claims arise out of Smith’s alleged failure to perform services in connection with his representation of her. While Greenfield argues that this is really a breach of contract action, she has not pointed to any provision in her written agreement with Smith which he breached. We have reviewed the contract, and there are no provisions which guarantee the outcome of the representation or specify an elevated standard of care because we are unable to find a particular contractual provision that has been breached, we hold that the district court correctly treated all claims as being subject to the professional malpractice two-year statute of limitations.

Plaintiff just beat the statute

Based on the district court’s “some damage” finding, the statute of limitations would have run in this case on November 30, 2014—exactly two years from the date of the adverse verdict—except that it fell on a Sunday. The Idaho Code contains several provisions specifying how time is to be computed when construing statutes. Section 73-109 contains the well recognized rule that the time to perform a specific act is computed by excluding the first day, and including the last unless the last is a holiday...November 30, 2014 was a holiday so it was excluded from the two-year statute of limitations. This means that the last day for Greenfield to file a malpractice action for the civil claim matters was December 1, 2014. Thus, her complaint was timely, and the district court erred in finding otherwise. It is important to note that our conclusion does not apply to the criminal matter claims. Greenfield did not challenge the district court’s determination that the statute of limitations for the criminal matter claims started to run when she was acquitted on October 13, 2011. The district court correctly determined that the criminal matter claims were untimely.

But lost on the merits

These alleged deficiencies are not simple matters like an attorney allowing a statute of limitations to run. Take for example, the allegation that Smith’s performance was deficient because he did not file a motion for summary judgment on the neighbors’ counterclaims. Who controls the decision to file a motion for summary judgment? The attorney or the client? Under what circumstances is a motion for summary judgment appropriate? Would such a motion have been appropriate in Greenfield’s civil case? Did Greenfield have “some chance of success” of prevailing on such a motion? While Greenfield can certainly testify about the fact that Smith did not file a motion for summary judgment in the underlying civil case, she does not have the knowledge or expertise to answer the questions posed and neither does a jury. Greenfield needed an expert to address these types of questions in an affidavit when Smith filed his motion for summary judgment. Without expert testimony, Greenfield could not demonstrate that there were genuine issues of material fact as to whether Smith’s performance fell below the standard of care or proximately caused her damages. As such, the district court properly granted summary judgment in favor of Smith.

The Coeur d'Alene/Post Falls Press had the story of a dispute rooted in a tree-trimming issue. (Mike Frisch)

June 19, 2017 in Clients | Permalink | Comments (0)

Friday, June 16, 2017

Iowa Holds Sex with Client Does Not "By Itself" Give Rise To A Legal Malpractice Claim

The Iowa Supreme Court affirmed a legal malpractice award that in part involved sex with the client and had resulted in bar discipline.

A plaintiff brought claims against her former attorney for legal malpractice, assault and battery, and punitive damages. At the close of the plaintiff’s case, the district court granted the defendant’s motion for directed verdict on two legal malpractice claims: one regarding the preparation of a will and the other for breach of fiduciary duty. The district court submitted to the jury two claims of alleged legal malpractice: representation of the plaintiff in her divorce and representation of the plaintiff in pursuing a claim for assault against her former spouse. The jury returned verdicts for the defendant on the two submitted legal malpractice claims and returned verdicts for the plaintiff on the assault and battery claim and on the punitive damages claim. The jury awarded the plaintiff combined damages of $498,562.44. The plaintiff appeals the district court’s order granting the motion for directed verdict on the two additional claims of legal malpractice. The plaintiff also appeals various evidentiary rulings made by the district court. The defendant cross-appeals on the issue of damages. For the reasons discussed below, we affirm the district court. While we find that the defendant’s cross-appeal was untimely, we reject on the merits the defendant’s challenge to the amount of the jury award.

While representing the client in a divorce

After the meeting, Blessum called Stender and asked if she wanted to meet and catch up. She agreed, and they met at a local restaurant. During this meeting, Blessum told Stender he was unhappy in his marriage. At the end of the evening, Blessum kissed Stender. After Stender got in her car but before she left the parking lot, Blessum sent her a text message asking if they could meet again. Over the next two weeks, Blessum and Stender continued to meet and talk about intimate topics such as Stender’s childhood trauma and her marital and sexual abuse. Within two or three weeks, they began a sexual relationship.

While this sexual relationship continued, Blessum performed several other legal services for Stender. On June 28, Stender executed the will that Blessum had prepared. On August 9, Blessum sent a demand letter to Phillip. In the letter, Blessum demanded that [husband] Phillip agree to three changes in the divorce decree in exchange for Stender’s refraining from filing a civil suit against him for the physical and sexual assault Phillip committed against her in 2009. Blessum was aware the assaults occurred in 2009, and either knew or should have known the statute of limitations had run by the time he sent the letter to Phillip.3 On August 23, Blessum filed the QDRO formalizing Melissa’s interest in Phillip’s retirement account. In January 2012, while the relationship was still ongoing, Blessum assisted Stender with another legal matter.

But things got out of hand

On June 10, Stender went to Blessum’s house to confront him about rumors he was seeing other women. When she arrived, she went into the kitchen where she noticed a bottle of wine with two glasses set on the counter and a frying pan with food on the stove. She picked up the pan from the stove and confronted Blessum by asking if he was cooking for another woman. While Stender was holding the pan, Blessum was standing in front of her. At some point, the pan spilled onto Stender’s shoulder and hot grease caused burns on her back. Because the grease went through her clothing, Blessum began taking off Stender’s shirt.

Stender became anxious from the confrontation and the grease burn. Blessum went outside to retrieve Stender’s purse from her vehicle that contained her anxiety medication. When Blessum came back inside with Stender’s purse, she told him she was done with the relationship and bent down to get the pills out of her purse. While Stender was bent over, but before she could take the pills, Blessum began hitting her arm, forearm, head, and neck. After Blessum hit her, Stender grabbed some of the pills that had spilled on the floor and swallowed them. Stender tried to run out of the house, but Blessum caught her and dragged her back inside. Blessum threw her into the corner and started calling her a “subservient slave.” He pulled her through the living room onto the couch and threatened to sexually assault her. Blessum told Stender if she thought the “other men have hurt [her], . . . just wait and see what [he] do[es] to [her].” He told her he was going to make her vomit her pills so she would remember the entire assault.

It gets even worse

Later in June, Blessum began sending letters to Stender. In the letters, he acknowledged that he had dated other women at the same time as Stender and that he gave her a sexually transmitted disease. The letters also acknowledged the assault and included an apology for all of his misdeeds. Stender also received anonymous items in the mail during this time. On September 19, Stender filed a petition for relief from domestic abuse against Blessum. The district court granted a temporary restraining order that same date.

The majority

We...choose to adopt the majority approach and hold that a violation of one of our Iowa Rules of Professional Conduct cannot be used to establish a per se claim for legal malpractice. A violation may, however, be used as some evidence of negligence as provided in our prior caselaw.See, e.g., Crookham, 584 N.W.2d at 266. But before a violation of our rules of professional conduct can be used—even as some evidence of negligence—there must be an underlying actionable claim against the attorney arising out of how the attorney mishandled a legal matter. To find differently would mean that a violation of the rules themselves provides plaintiffs with an independent cause of action. This result is one that both our rules and our cases have specifically rejected. 

Here, Blessum’s sexual relationship in violation of our rules of professional conduct does not by itself give rise to a legal malpractice claim. In order to succeed on her claim for legal malpractice, Stender would need to demonstrate a duty that was violated and not just the sexual relationship alone.

The court majority's lengthy opinion deals with a host of interesting issues including the testimony of Blessum's spouse

Jan testified that Stender’s version of events was in contrast to her own experience. The testimony was offered to rebut Stender’s testimony that she encouraged Blessum to get back together with Jan. Jan testified that she felt the sexual relationship between Stender and Blessum adversely affected her marriage. Jan testified that Stender harassed her with nasty text messages and emails. She testified about sexually graphic emails and text messages that Stender sent to her. Jan testified that this contact impacted her job and her health and that she lost thirty pounds. Jan moved four times in 2011 and 2012.

Jan also testified that she believed Stender broke into her home on February 14, 2012. Jan testified she and Blessum were attempting to reconcile again around that time. Because their engagement anniversary was February 13, Blessum came to her home and left flowers and a Valentine’s Day card. The next day when Jan returned home, she found a card from Blessum to Stender torn up on the counter next to her own
card with a sign that read “fuck you” next to it.

Jan testified her housekeeper found Stender in Jan’s house in June 2012. Jan was supposed to go to a concert with Blessum that week, but chose not to attend after Stender was found in her house. While Blessum was at the concert, Stender sent Jan text messages stating that Stender was in the shower with Blessum and that Jan did not know how to sexually please her husband and needed Stender to show her. Jan also testified that Stender would send her daughter Facebook messages. Jan testified that she attempted to obtain a restraining order against Stender because of the emails and text messages, but was unsuccessful.

The court held that Jan's testimony was not unduly prejudicial.

Justice Hecht dissented and would remand on Stender's claims for further relief.

I find merit in Stender’s appeal. I would reverse the directed verdict on both the negligence and fiduciary duty issues and remand for a new trial...

Put simply, sexual relationships between lawyers and their clients are fraught with risk of financial and emotional injuries to clients. Because the risk of such injuries to clients is so grave, the rules of professional conduct for lawyers do not merely recommend avoidance of sexual relationships with clients—the rules categorically prohibit the commencement of such relationships during a lawyer–client professional relationship. Blessum clearly breached his professional duty to avoid a sexual relationship with Stender...

Again viewing the record in the light most favorable to Stender, I credit the substantial evidence tending to establish that even before Stender was severely beaten by Blessum, the relationship between the parties was tumultuous and marked by great emotional turmoil. A reasonable jury could find on this record that Stender was exquisitely vulnerable to emotional injury because she had an unfortunate preexisting history of sexual abuse and posttraumatic stress—a history of which Blessum was aware when he commenced the sexual relationship. I find substantial evidence in the record tending to prove Blessum expressly used his knowledge of that history in asserting power over Stender during the assault and that Stender suffered substantial emotional distress as a consequence of the sexual relationship before and after the severe beating. Accordingly, under the applicable standards of review, I believe the district court erred in concluding Stender failed to engender a jury question on damages arising from
Blessum’s breach of duty...

Because a reasonable juror could find that Blessum used information he acquired within the scope of the lawyer–client relationship to Stender’s disadvantage during the assault and that Blessum  dishonestly reinitiated the lawyer–client relationship as a pretext for beginning a sexual relationship, the theory of liability based on a breach of a fiduciary duty should have been submitted to the jury.

Two justices joined the dissent.

The ABA Journal reported on the trial verdict

A former client won a jury award of nearly $500,000 on Wednesday in a malpractice and domestic assault lawsuit against the Iowa lawyer who represented her in a divorce case.

The award against Anthony Zane Blessum, a West Des Moines practitioner who formerly served for 11 years as the top prosecutor in Madison County, includes $100,000 in punitive damages, reports the Des Moines Register.

Blessum earlier pleaded guilty to misdemeanor assault in a related criminal case concerning the attack on Melissa Stender. He was sentenced to seven days in jail and ordered to pay Stender $7,000, the Associated Press reported at the time. He also had his law license suspended for 18 months.

The Iowa Supreme Court imposed the discipline in a legal ethics case, based on findings that Blessum had a sexual relationship with Stender; withdrew unearned funds from a $1,000 retainer she had paid him from a trust account; and physically attacked her, the Des Moines Register reported when the court made its determination earlier this year.

Justia provides a copy of the court’s March 27, 2015 opinion in the ethics case.

The opinion explains that Blessum began representing Stender (referred to as Jane Doe) in a divorce case in 2008 and, in 2011, agreed to help her draw up a will. At that time, a relationship began which lasted more than a year. However, it ended in 2012 after an argument at Blessum’s house erupted into a physical attack.

“Doe was angry Blessum appeared to be fixing a romantic dinner for someone else and she picked up and threw the cooking pan he had been using,” the opinion says.

During the argument, Blessum struck her in the face; hit her multiple times; tried to prevent her from taking anti-anxiety medication; and physically restrained her from leaving his home, the court wrote. She called 911 when he briefly left her alone in the room, then hid the phone.

“Both were unaware the call had gone through and was being monitored and recorded,” the opinion says. Treated at a hospital emergency room after police arrived, Doe suffered a black eye; bruising on her face, neck, arm and abdomen; and other facial injuries.

Blessum apologized and she initially resumed their relationship. Within a few months, however, the two parted for good and he was eventually criminally charged in the attack.

Attorney Roxanne Conlin represented Stender in the civil suit. Conlin said it had been important to her client to hold Blessum accountable for his conduct, the Register reports. “Certainly half-a-million dollars does that. For that part, she’s happy,” Conlin said.

A lawyer for Blessum said he was disappointed by the verdict but declined to discuss the merits of the case with a reporter for the newspaper.

(Mike Frisch) 

June 16, 2017 in Bar Discipline & Process, Clients | Permalink | Comments (0)

Saturday, June 3, 2017

Malpractice Claim May Proceed

A legal malpractice claim may proceed per a decision of the New York Appellate Division for the First Judicial Department

The court properly declined to dismiss the corporate plaintiff's claim that it would not have accepted the landlord's buyout offer of the remaining six years on its commercial lease if it had been properly advised by W & S of a $400,000 New York City corporate tax obligation it would have to pay on the buyout figure. Deposition testimony and affidavits offered from the corporate plaintiff's principal assert that it was W & S's responsibility to ensure that the negotiated buyout covered all of plaintiff's anticipated relocation expenses and attendant tax obligations such that plaintiff would not be out of pocket financially when relocating to allow the nonparty landlord to undertake a major renovation of its building. Under the circumstances presented, triable issues exist as to whether, but for W & S's failure to inform plaintiff of the corporate tax obligation, plaintiff would have declined the buyout offer, remained in its existing leasehold and avoided any damages associated with having to pay, out of pocket, a corporate tax on the buyout sum (see Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer, 8 NY3d 438 [2007]; Miuccio v Straci, 129 AD3d 515 [1st Dept 2015]).

Another branch of the malpractice claim alleged that but for counsel's negligence in failing to raise the tax issue, the landlord would have offered a higher buyout figure to cover the New York City corporate tax obligation. This branch of the claim is also viable. Although the claim is founded upon a discretionary decision residing in another over whom the corporate plaintiff had no control, the circumstances support plaintiff's contention that the landlord would have agreed to satisfy the tax liability. As we opined in sustaining the malpractice cause of action in the complaint on defendant's motion to dismiss, plaintiff had a strong bargaining position because the amount of time left on the lease, as well as the importance of the leased space to the landlord's conversion plans, would have pressured the landlord to acquiesce to plaintiff's relatively minor request (see Leggiadro, Ltd. v Winston & Strawn, LLP, 119 AD3d 442, 442-443 [1st Dept 2014]; see also Campbell v Rogers & Wells, 218 AD2d 576, 580 [1st [*2]Dept 1995]; Khadem v Fischer & Kagan, 215 AD2d 441, 443 [2d Dept 1995]). W & S has not proffered any new probative evidence to counter this aspect of plaintiff's legal malpractice claim.

(Mike Frisch)

June 3, 2017 in Clients | Permalink | Comments (0)

Friday, May 26, 2017

Not Utterly Refuted

The New York Appellate Division for the Second Judicial Department held that a legal malpractice action should not have been dismissed in a case where the defendant attorney's alleged legal malpractice involved prosecution of a legal malpractice claim

In this action to recover damages for legal malpractice, the complaint alleges that the defendants, Anthony P. Gallo, P.C., and Anthony P. Gallo (hereinafter together Gallo), who represented the plaintiff in a prior legal malpractice action against the plaintiff’s former attorneys, Demartin & Rizzo, P.C., and Joseph N. Rizzo, Jr. (hereinafter together Rizzo), negligently failed to respond to certain discovery demands by Rizzo, which resulted in the Supreme Court (Gazzillo, J.) precluding the introduction of evidence in the plaintiff’s legal malpractice action against Rizzo (4777 Food Serv. Corp. v DeMartin & Rizzo, P.C., 2013 NY Slip Op 33007 [U] [Sup Ct, Nassau County]; hereinafter the Rizzo order). The complaint further alleges that, as a result of this evidence being precluded, the court which issued the Rizzo order found that the plaintiff had failed to meet its burden of proof as to the element of damages sustained as a result of Rizzo’s malpractice.

The trial court found damages were speculative but 

Here, the Rizzo order does not utterly refute the allegations in the complaint, nor does it establish a defense as a matter of law. The order concludes, in part, that there was no proof of actual damages presented by the plaintiff, due to the plaintiff’s failure to respond to at least two of Rizzo’s discovery demands, which resulted in the preclusion of the damages evidence. The Rizzo order then states, referring to the precluded evidence, “[m]oreover, even if, arguendo the [c]ourt were to overlook that deficiency, its probative value is highly suspect” (4777 Food Serv. Corp. v DeMartin & Rizzo, P.C., 2013 NY Slip Op 33007 [U], *9). Contrary to the Supreme Court’s conclusion, this alternate holding, which constitutes dicta, was not a finding on the merits and did not utterly refute the allegations in the complaint against Gallo (see O’Connor v G & R Packing Co., 53 NY2d 278; Malloy v Trombley, 50 NY2d 46, 50; Pollicino v Roemer & Featherstonhaugh, 277 AD2d 666, 667-668). Accordingly, the Supreme Court should have denied Gallo’s motion pursuant to CPLR 3211(a) to dismiss the complaint.

(Mike Frisch)

May 26, 2017 in Clients | Permalink | Comments (0)

Sunday, May 14, 2017

Not Illiterate, Blind Or A Non-English Speaker

A former client's legal malpractice claim founders on the shoals of the plain text of the agreement that she signed settling the underlying claim, affirmed the New York Appellate Division for the Second Judicial Department

In 2003, the plaintiff’s then husband, the defendant Yoni Anderson (hereinafter Yoni), retained the defendants Dinkes & Schwitzer, P.C. (hereinafter the Dinkes firm), William Schwitzer, and Michael Kimmelman to represent him in filing a personal injury action (hereinafter the prior action), in which a claim for loss of services was asserted on behalf of the plaintiff, allegedly without her knowledge. On June 10, 2009, following negotiations to settle the prior action, the plaintiff signed a document stating, inter alia, that she agreed to receive $200,000 from the settlement proceeds “as full and final compensation for her loss of services claim.” In February 2012, the plaintiff commenced the instant action against, among others, the Dinkes firm, Schwitzer, and Kimmelman, seeking, inter alia, to recover damages for legal malpractice and fraudulent concealment, based on the alleged failure to disclose her status as a plaintiff in the prior action and that she was accepting $200,000 in full settlement of her claim in that action. The plaintiff also asserted a cause of action alleging notarial misconduct against the defendant Alice Lin, a notary public who notarized documents including a general release that allegedly contained the plaintiff’s forged signature. Thereafter, the Dinkes firm, Schwitzer, and Lin (hereinafter collectively the Dinkes defendants) moved for summary judgment dismissing the complaint insofar as asserted against them, and the plaintiff cross-moved, among other things, to compel the Dinkes defendants and Kimmelman to appear for depositions. In an order dated February 3, 2015, the Supreme Court, inter alia, granted the Dinkes defendants’ motion for summary judgment and denied that branch of the plaintiff’s cross motion which was to compel depositions.

“‘A party is under an obligation to read a document before he or she signs it, and a party cannot generally avoid the effect of a [document] on the ground that he or she did not read it or know its contents’” (Fulton v Hankin & Mazel, PLLC, 132 AD3d 806, 808, quoting Martino v Kaschak, 208 AD2d 698, 698). Generally, a cause of action alleging that the plaintiff was induced to sign something different from what he or she thought was being signed only arises if the signer is illiterate, blind, or not a speaker of the language in which the document is written (see Ackerman v Ackerman, 120 AD3d 1279, 1280). Here, the Dinkes defendants established their prima facie entitlement to judgment as a matter of law dismissing the causes of action asserted against the Dinkes firm and Schwitzer by presenting evidence that the plaintiff could read and understand English, that she had the opportunity to read the document dated June 10, 2009, which expressly stated that she was accepting $200,000 “as full and final compensation for her loss of services claim,” and that she never expressed any difficulty understanding the terms of the document (see Matter of Augustine v BankUnited FSB, 75 AD3d 596, 597; Cash v Titan Fin. Servs., Inc., 58 AD3d 785, 788). In opposition, the plaintiff failed to raise a triable issue of fact as to whether she was incapable of understanding the document signed by her based on her conclusory testimony that “[n]o one . . . explained [it] to me.”

The court also affirmed dismissal of the notarial misconduct claim. (Mike Frisch)

May 14, 2017 in Clients | Permalink | Comments (0)

Friday, April 7, 2017

No Deal

The Iowa Supreme Court declined to enforce a settlement agreement in a legal malpractice matter, concluding that the evidence did not establish the mutual consent to the deal.

Because there was "no deal," the court did not address whether the disputed confidentiality provision violates ethics rules.

In this case, we are asked to determine whether the parties in a legal malpractice case entered into a binding settlement agreement, and if so, whether the settlement’s confidentiality provision would result in a violation of our rules of professional conduct. Here, following mediation, the parties agreed on what would be paid to settle the case. They also exchanged versions of a confidentiality provision to be included in the settlement agreement, although they never settled on the same version at the same time. The defendant law firm nonetheless asked the district court to enforce the settlement.

Following a hearing, the court concluded that the parties had reached a final settlement and dismissed the underlying malpractice case. Plaintiffs now appeal, arguing (1) there was no meeting of the minds on settlement; (2) the confidentiality provision in the settlement as approved by the district court restricts the right of plaintiffs’ counsel to practice law in violation of Iowa Rule of Professional Conduct 32:5.6(b); (3) the court had no authority to seal documents relating to the settlement; and (4) because the defendant law firm practices primarily in Black Hawk County, this case should have been heard by a judge from a different judicial district.

 For the reasons discussed below, we hold that the parties never mutually assented to the same settlement agreement. We therefore do not reach the question whether a confidentiality provision requiring the attorneys not to disclose the existence and terms of the settlement may violate Iowa Rule of Professional Conduct 32:5.6(b). We also conclude the district court did not abuse its discretion in sealing documents related to the parties’ mediation and follow-up negotiations or in declining to arrange for an out-of-state district judge to preside over the case.

Accordingly, we reverse the judgment enforcing the settlement, we affirm the court’s orders sealing portions of the file and declining to arrange for an out-of-district judge, and we remand for further proceedings.

 The underlying allegations of legal malpractice involved a prenuptial agreement. (Mike Frisch)

April 7, 2017 in Clients | Permalink | Comments (0)

Thursday, March 23, 2017

A Cavalier Attitude In The Bluegrass State

The Kentucky Supreme Court has denied relief to an incarcerated defendant who was convicted of biting off the ear of a fellow inmate.

The defendant was represented at trial by a public defender from the Pacudah Department of Public Advocacy.

Another attorney in the same office represented the victim in an unrelated criminal matter in which the representation concluded eight days prior to the trial of the defendant.

Defense counsel advised the court of the potential conflict on the morning of trial (with her erroneous belief that the representation of the victim was ongoing). The defendant refused to sign a waiver of the conflict of interest but the trial nonetheless went forward to conviction.

The court here found counsel was not burdened by an actual conflict of interest under these circumstances.

As to the ethics of the situation: "Attorneys ethical obligations under our Rules of Professional Conduct do not define the scope of [the defendant's] Sixth Amendment rights."

Translation: It may have been unethical, but the defendant gets no relief. 

Justice Hughes concurred and expressed concern about Pacadah DPA's "cavalier approach to shielding its clients from intra-office conflicts."

Justice Wright also concurred, opining that a public defender office need not be treated the same as a for-profit law firm for imputed conflict of interest purposes.  (Mike Frisch)

March 23, 2017 in Clients, Professional Responsibility | Permalink | Comments (0)

Tuesday, March 21, 2017

No Rule 3.7 Exception For Fee Collection Actions

An opinion of the North Carolina Court of Appeals affirms a disqualification order based on the witness-advocate rule. 

This case presents the question of whether a categorical exception to the applicability of Rule 3.7 of the North Carolina Rules of Professional Conduct exists in fee collection cases. Harris & Hilton, P.A. (“Harris & Hilton”) appeals from the trial court’s order disqualifying Nelson G. Harris (“Mr. Harris”) and David N. Hilton (“Mr. Hilton”) from appearing as trial counsel in this action based on their status as necessary witnesses. Because this Court lacks the authority to create a new exception to Rule 3.7, we affirm the trial court’s order.

The story

On 10 June 2015, Harris & Hilton filed the present action in Wake County District Court against James C. Rassette (“Defendant”) to recover attorneys’ fees for legal services the firm had allegedly provided to Defendant prior to that date. The complaint asserted that Harris & Hilton was entitled to recover $16,935.69 in unpaid legal fees. On 13 November 2015, Defendant filed an answer in which he asserted various defenses, including an assertion that no contract had ever existed between the parties.

On 10 June 2016, a pre-trial conference was held before the Honorable Debra S. Sasser. During the conference, Judge Sasser expressed a concern about the fact that Harris & Hilton’s trial attorneys — Mr. Harris and Mr. Hilton — were also listed as witnesses who would testify at trial on behalf of Harris & Hilton. After determining that Mr. Harris and Mr. Hilton were, in fact, necessary witnesses who would be testifying regarding disputed issues such as whether a contract had actually been formed, Judge Sasser entered an order on 20 June 2016 disqualifying the two attorneys from representing Harris & Hilton at trial pursuant to Rule 3.7. On 27 June 2016, Harris & Hilton filed a notice of appeal to this Court.

The issue

Harris & Hilton does not dispute the fact that (1) Mr. Harris and Mr. Hilton will both be necessary witnesses at trial; (2) their testimony will encompass material, disputed issues; and (3) none of the three above-quoted exceptions contained within Rule 3.7 are applicable. Nor does it contest the fact that a literal reading of Rule 3.7 supports the trial court’s ruling. Instead, it asks this Court to adopt a new exception based on its contention that Rule 3.7 should not be applied in fee collection actions to disqualify counsel from both representing their own firm and testifying on its behalf.

 Harris & Hilton argues that permitting a law firm’s attorney to serve both as trial counsel and as a witness in a fee collection case is no different than allowing litigants to represent themselves pro se. It is true that litigants are permitted under North Carolina law to appear pro se — regardless of whether the litigant is an attorney or a layperson. See N.C. Gen. Stat. § 1-11 (2015) (“A party may appear either in person or by attorney in actions or proceedings in which he is interested.”); N.C. Gen. Stat. § 84-4 (2015) (“[I]t shall be unlawful for any person or association of persons, except active members of the Bar . . . to practice as attorneys-at-law, to appear as attorney or counselor at law in any action or proceeding before any judicial body . . . except in his own behalf as a party thereto[.]” (emphasis added)). 

However, the present case does not involve the ability of Mr. Harris or Mr. Hilton to represent themselves on a pro se basis. Instead, they seek to represent their law firm — a professional corporation — in a suit against a third party while simultaneously serving as witnesses on their firm’s behalf as to disputed issues of fact. It is well established that an entity such as Harris & Hilton is treated differently under North Carolina law than a pro se litigant. See LexisNexis, Div. of Reed Elsevier, Inc. v. Travishan Corp., 155 N.C. App. 205, 209, 573 S.E.2d 547, 549 (2002) (holding that under North Carolina law, a corporation is not permitted to represent itself pro se).

Harris & Hilton also makes a policy argument, contending that the current version of Rule 3.7 is archaic and fails to take into account the disproportionate economic burden on small law firms that are forced to hire outside counsel to litigate fee collection cases. However, in making this argument, Harris & Hilton misunderstands the role of this Court given that it is asking us not to interpret Rule 3.7 but rather to rewrite it — a power that we simply do not possess.


we cannot say that the trial court abused its discretion by applying Rule 3.7 as written as opposed to creating a new exception that neither appears within the Rule itself nor has been recognized by North Carolina’s appellate courts. Accordingly, we affirm the trial court’s disqualification order.

(Mike Frisch)

March 21, 2017 in Clients, Current Affairs, Economics, Law & Business, Law Firms | Permalink | Comments (0)

Tuesday, March 14, 2017

Client Gets No Refund When Attorney Withdraws For Cause

The Tennessee Court of Appeals held that a former client was not entitled to a partial fee refund, reversing the holding of the trial court and allowing the law firm to keep the full retainer.

Xingkui Guo signed a contract, structured as an engagement letter, with the Law Offices of Woods & Woods (“the Firm”), on June 15, 2014, for the Firm to represent him in an ongoing lawsuit against two of his former employees. Allen Woods, an attorney with the Firm, had primary responsibility for Mr. Guo’s case.

The client paid a flat fee of $7,000 and agreed to an additional fee of 1/3 of any amounts recovered in the litigation minus the retainer.

The agreement further provided

The contract further states: “[The Firm] may terminate this representation at any time, for good cause . . . .” Upon signing the engagement letter, Mr. Guo paid the Firm $7,000, and the Firm began its representation of Mr. Guo.


A disagreement arose between Mr. Woods and Mr. Guo beginning in early October 2014. After Mr. Woods conducted phone interviews with two third-party witnesses, he strongly advised Mr. Guo against taking their depositions because he thought their testimony would hurt Mr. Guo’s case and because he thought it would be unethical to depose the witnesses under the circumstances. When Mr. Guo insisted that Mr. Woods depose these two witnesses, Mr. Woods withdrew as Mr. Guo’s attorney

Mr. Guo sued for breach of contract.

The trial court

 Defendant admits that it refused to take the depositions of these witnesses, but states that it refused to take the depositions because to do so would violate Rule of Professional Conduct 1.2(d) and would further the Plaintiff’s ulterior motive to take those depositions for a fraudulent purpose not related to the litigation. The Defendant requests that the Court rule it is entitled to the entirety of the $7,000.00 fee the Plaintiff previously paid it. In support of its argument, the Defendant offers evidence that its attorneys performed 20.4 hours of work on the Plaintiff’s lawsuit. Plaintiff requests $22,000.00 in damages for this alleged breach of contract. Based on the evidence presented at trial, the Court makes the following findings of fact: 

The Defendant had justifiable reasons to refuse to take the depositions of the third party witnesses because the Defendant reasonably believed that to do so would violate Rules of Professional Conduct; and 

The 20.4 hours of work the Defendant performed on the Plaintiff’s case is overblown.

Based on these findings of fact, the Court hereby rules that the Plaintiff is entitled to a judgment of $3,500 against the Defendant.

The court here

We next consider the Firm’s argument that the trial court erred in entering judgment in favor of Mr. Guo because it did not find that the Firm breached the contract. We agree. The trial court expressly found that Mr. Woods “had justifiable reasons to refuse to take the depositions of the third party witnesses because [Mr. Woods] reasonably believed that to do so would violate Rules of Professional Conduct.” The trial court’s order does not include a statement that the Firm breached the contract. Instead, the trial court’s finding that Mr. Woods had “justifiable reasons” for refusing to take the depositions suggests that the Firm did not breach the contract. Thus, the trial court erred in entering judgment in favor of Mr. Guo.

Rather, the winner is the law firm

We find that the evidence preponderates against the trial court’s finding that Mr. Woods’s hours spent on the case were “overblown.” Mr. Woods’s written summary and testimony support the hours he claims to have spent on the case. His set fee was reasonable in light of his qualifications and experience, Mr. Guo’s concerns about paying an hourly rate, the time and labor required, the likelihood of collecting on the judgment, and the fees typically charged in the local legal market for similar services.

We conclude that the trial court erred in awarding Mr. Guo $3,500 because he was not entitled to the return of any of the $7,000 he paid to the Firm.

(Mike Frisch)

March 14, 2017 in Clients | Permalink | Comments (0)

Friday, March 3, 2017

Once Extended, "Professional Courtesy" Enforced In Fee Suit

The Massachusetts Supreme Judicial Court has held that a law firm suing for fees cannot collect waived "professional courtesy credits"

This appeal arises from a fee dispute between a law firm and its former clients. The plaintiff law firm, BourgeoisWhite, LLP, brought this action against the defendants, Sterling Lion, LLC, and its owner, David G. Massad, alleging breach of contract and unjust enrichment following the plaintiff's representation of the defendants in an employment dispute. The judge granted the plaintiff's motion for summary judgment, determining that the plaintiff was owed the $83,681.84 amount sought in the complaint, including $29,944.45 in "professional courtesy credits" that the plaintiff extended and then rescinded, plus prejudgment interest.  We conclude that the undisputed facts establish that the $29,944.45 in credits was written off by the plaintiff law firm and thus waived. Summary judgment therefore should have been granted in favor of the defendants with respect to the credits. We further conclude that the defendants have failed to identify any factual disputes as to the reasonableness of the remaining fees, because they rely solely on unsupported and conclusory assertions about the representation. We therefore remand for the entry of summary judgment in favor of the plaintiff in the amount of the fees sought, less the credits.


...reversal of the professional courtesy credits in this case would not comport with the "highly fiduciary" nature of the lawyer-client relationship. Malonis, 442 Mass. at 692. This type of belated attempt by a fiduciary to claw back fees that were previously "written off" would not be fair and equitable to the client -- the party for whom the relationship exists. 15 See Goldman v. Kane, 3 Mass. App. Ct. 336, 342 (1975) (attorney who made advantageous loan to client "breached his fiduciary duty," because "fundamental unfairness" of loan was "self-evident"); Beatty, 31 Mass. App. Ct. at 612-613 ($721,888 "premium" billing inconsistent with agreement to bill on hourly basis and violated fiduciary duty owed to client). We therefore conclude that the defendants, not the plaintiff, should have been granted summary judgment with respect to the $29,944.45 in credits.

As to the other bills

Summary judgment was, however, properly granted for the plaintiff on the issue of the reasonableness of the remaining fees. The defendants have failed to raise a genuine issue of material fact with respect to the reasonableness of those fees. The defendants argue that they were billed for duplicative and "legally unsound" motions, and that the trial was over staffed. Our review of the record indicates that the allegedly duplicative motions predate the contested bills by nearly a year. The defendants do not identify which motions are "legally unsound," and we are provided no explanation for why the trial was over staffed, given the complexity of the case and the amount in controversy. More is required for appellate argument.

Chief Justice Kafker authored the opinion. (Mike Frisch)

March 3, 2017 in Billable Hours, Clients | Permalink | Comments (0)

Wednesday, March 1, 2017

No Suit Where Attorney Uses Confidential Information To Defend Against Former Client's Claims

The Massachusetts Supreme Judicial Court has held an action following the settlement of a legal malpractice claim alleging violation of confidentiality in defending the malpractice action was not sustainable

Attorney H. Ernest Stone represented John Doe in a criminal case and a related tort action. In the course of that representation, Doe relayed certain information to Stone that all parties indisputably agree was subject to attorney-client privilege. After the tort action ended in a default judgment against Doe, Doe brought a legal malpractice action against Stone based on his handling of the tort case. The malpractice action concluded via a settlement agreement. Doe next filed a complaint in the Superior Court alleging that in defending the malpractice action, Stone misused the privileged information he received during his earlier representation of Doe. Doe named as defendants Stone; George Rockas, the attorney who represented Stone in the malpractice action; and American Guaranty and Liability Co. (American), Stone's legal malpractice insurer. The defendants filed motions to dismiss, raising a wide variety of defenses. See Mass.R.Civ.P. 12(b), 365 Mass. 754 (1974). The judge allowed the motions and judgment entered dismissing the complaint. Doe appeals. Because we agree with the motion judge that in bringing the malpractice action, Doe waived the privilege that otherwise applied to the information at issue, we affirm. Resolving the case on that ground, we have no occasion to reach the defendants' other defenses.


 As a matter of law, the Foster 2 issues were relevant to the malpractice action, and they are not rendered irrelevant by Doe's conclusory suggestions that Foster 2's whereabouts would have remained unknown. It follows that by bringing the malpractice action, Doe waived his privilege with respect to information related to Foster 2. Accordingly, none of the defendants could be liable for their use of that information in defending the malpractice action, and their motions to dismiss were properly allowed.

(Mike Frisch) 

March 1, 2017 in Clients, Privilege | Permalink | Comments (0)

Friday, February 17, 2017

No Lien On Property Not Owned By Former Client

The North Dakota Supreme Court rejected the assertion of an attorneys' lien because the former client had no interest in the subject real property.

DeWayne Johnston, individually, and as registered agent of Johnston Law Office, P.C., appeals from a judgment invalidating a notice of attorney lien recorded against Johnston's former client and ordering Johnston Law Office and Johnston, individually, to pay $1,330 in costs and attorney fees. We modify the judgment to relieve Johnston of personal liability and affirm the judgment as modified.

Wayne and Janel Nusviken acquired real property from Johnston's former client Barbara McDermott on October 2, 2013. On October 8, 2013, Johnston recorded a "notice of attorney lien" against McDermott. The notice of attorney lien included the legal description of Nusviken's property and stated McDermott owed Johnston nearly $66,000 in attorney's fees relating to Johnston's representation of McDermott in earlier matters unrelated to the sale of the property.

The Nusvikens petitioned the district court to invalidate the notice of attorney lien, arguing McDermott no longer owned any interest in the property. The court issued an order to show cause directing Johnston to appear and show why the notice of attorney lien should not be declared void. At the hearing, Johnston argued the notice of attorney lien was not a nonconsensual common-law lien but a valid attorney's lien under N.D.C.C. § 35-20-08, and therefore, the court did not have jurisdiction to invalidate the lien. In response Nusviken's attorney stated the notice of attorney lien was invalid because McDermott no longer had an interest in the property and no attorney-client relationship existed between Johnston and the Nusvikens. The court concluded the purported lien was a nonconsensual common-law lien and not a valid attorney's lien because it failed to satisfy the statutory requirements for an attorney's lien under N.D.C.C. § 35-20-08. The court invalidated the lien and ordered the Johnston Law Office and Johnston, individually, to pay the Nusvikens $1,330 in costs and attorney's fees.

No lien on thee

We agree with the district court's analysis. The notice of attorney lien recorded by Johnston against McDermott referenced two cases in which Johnston represented McDermott. Johnston did not submit any evidence indicating a judgment was awarded in favor of McDermott or that she was due any money in those cases. McDermott no longer had an interest in the real property when Johnston recorded the notice of attorney lien, nor did Johnston represent McDermott in the land sale to the Nusvikens. Johnston appears to argue it had a valid attorney's lien simply because the document is titled "notice of attorney's lien." As the district court noted, however, the document on its face failed to meet the requirements of N.D.C.C. § 35-20-08. The district court did not err by invalidating Johnston's "notice of attorney lien."

Johnston argues the district court lacked jurisdiction because under N.D.C.C. § 35-35-05(1) only those who have property subject to nonconsensual common-law lien may petition the court to invalidate the lien. Johnston also argues that before entering the order to show cause the court was required to make a finding that the Nusvikens were subject to a nonconsensual common-law lien...

Here, there was no attorney-client relationship between Johnston and the Nusvikens. We decline to extend Amundson to an attorney's improper or unethical actions toward parties who are not clients. We therefore modify the judgment to relieve DeWayne Johnston of personal liability.

(Mike Frisch)

February 17, 2017 in Billable Hours, Clients | Permalink | Comments (0)

More Than Unhappiness Needed To Establish Legal Malpractice

The Delaware Superior Court affirmed the dismissal of a legal malpractice claim involving the representation of the plaintiff in a personal injury action.

Appellant engaged Appellee to represent her in a personal injury lawsuit. Initially, Appellee, representing Appellant, made a demand on the defendant in that lawsuit for $20,000. The defendant in that action refused to pay the $20,000, and Appellee then filed a personal injury action alleging $20,000 in damages. The Appellant then engaged in mediation with the defendant in that lawsuit, represented by Appellee. The mediation resulted in Appellant accepting a settlement offer for less than the full $20,000 claimed. Appellant received and subsequently cashed the settlement check.

Unhappy with Appellee’s representation of her, Appellant filed a complaint with the Office of Disciplinary Counsel (“ODC”). In her complaint to the ODC, Appellant claimed that Appellee tricked her into signing the settlement agreement. The ODC reviewed the complaint and Appellee’s response to the complaint and determined that Appellee’s representation of Appellant did not fall below the acceptable level of representation.

Appellant then filed a legal malpractice action with the Court of Common Pleas. In that action, Appellant alleged that “[she] was promised to be fully compensated with all medical bills paid, . . . and was encouraged to sign paperwork of legal documentation without any clarity of what [she] was signing.”1 Appellee then filed a Motion to Dismiss pursuant to Court of Common Pleas Civil Rule 12(b)(6) on grounds that Appellant had not sufficiently made a claim for legal malpractice.

The Court of Common Pleas held argument on Appellee’s Motion to Dismiss on April 29, 2016. The Court of Common Pleas issued on oral ruling granting Appellee’s motion to dismiss.

The malpractice claim failed

It appears from the record that the trial court’s factual findings are the result of a logical and deductive reasoning process. The trial court found that Appellee put forth his best efforts in representing Appellant in her personal injury action. Appellant was able to obtain a settlement offer to which Appellant ultimately agreed. Although Appellant may now be unhappy with the settlement agreement into which she entered, that does not create a colorable claim for legal malpractice against the attorney who represented her. Additionally, it is noteworthy that the ODC, upon investigating Appellant’s claim of legal malpractice, found that Appellee committed no malpractice. Accordingly, as Appellant has failed to set forth any reason that Appellee neglected his professional obligation owed to her, her general claim that the trial court committed reversible error is without merit.

(Mike Frisch)

February 17, 2017 in Bar Discipline & Process, Clients | Permalink | Comments (0)

Tuesday, January 31, 2017

Right To Fee Vindicated

A law firm that had secured a judgment in excess of $28 million and sought fees from a guardianship trust  won a significant victory in the Florida Supreme Court.

This case arose after the birth of Aaron Edwards, during which he sustained a catastrophic brain injury as a result of the negligence of employees at Lee Memorial Health System (Lee Memorial) in 1997. The law firm of Searcy Denney Scarola Barnhart & Shipley, P.A. (Searcy Denney) was retained by the family to seek compensation under a standard contingency fee agreement providing for a payment of 40 percent of any recovery if a lawsuit was filed, plus costs. The agreement also stated that “[i]n the event that one of the parties to pay my claim for damages is a governmental agency, I understand that Federal and Florida Law may limit the amount of attorney fees charged by [Searcy Denney], and in that event, I understand that the fees owed to [Searcy Denney] shall be the amount provided by law.”

Collection was limited by sovereign immunity but 

Searcy Denney and various other firms were involved in litigation of the medical malpractice suit, the first appeal, and a subsequent two-year lobbying effort to secure a claims bill from the Legislature on behalf of the injured child and his parents.  Because the waiver of sovereign immunity in section 768.28 limited the family’s recovery to only $200,000 of the $28.3 million judgment, a claims bill for the excess judgment amount was filed in the Florida Legislature in 2011, but was not passed during that legislative session. However, in 2012 the Legislature passed a claims bill, chapter 2012-249, Laws of Florida, directing Lee Memorial to pay $10 million, with an additional $5 million to be paid in annual installments of $1 million each to “the Guardianship of Aaron Edwards, to be placed in a special needs trust created for the exclusive use and benefit of Aaron Edwards, a minor.” Ch. 2012-249, § 2, Laws of Fla. The claims bill further stated that payment of fees and costs from funds awarded in the claims bill shall not exceed $100,000. No funds were awarded in the claims bill for the parents. In November 2012, the child’s mother petitioned to establish a guardianship over the minor son’s property, and Lee Memorial subsequently made its first payment of $10 million.

Searcy Denney, with the full support of the family, then petitioned the guardianship court to approve a closing statement allowing $2.5 million for attorneys’ fees and costs. This requested amount was based on the contract that existed with the Edwards family, as limited by the provisions of section 768.28(8), Florida Statutes. Section 768.28(8), a provision of the limited waiver of sovereign immunity statute, states in pertinent part, “No attorney may charge, demand, receive, or collect, for services rendered, fees in excess of 25 percent of any judgment or settlement.”

The court

The right to contract for legal services in order to petition for redress is a right that is related to the First Amendment, and any impairment of that right not only adversely affects the right of the lawyer to receive his fee but the right of the party to obtain, by contract, competent legal representation to ensure meaningful access to courts to petition for redress...

This same constitutional right extends to a party’s right and practical ability to retain an attorney by contingency fee contract in order to have meaningful access to courts. The “draconian limitation” on the fees in this case, in contravention of the preexisting contract and the provisions of section 768.28, sets an unfortunate precedent that, if allowed to stand, would effectively chill the right of future litigants to obtain effective counsel to make their case for compensation due for injuries caused by the State or its agencies and subdivisions.

...we conclude that the $100,000 fee limitation contained in the claims bill impermissibly impairs the preexisting contract between Searcy Denney and the Edwards family, and that nothing has been presented to justify this violation of the family’s constitutional right to contract with legal counsel to seek full redress of injury, as well as Searcy Denney’s contract right to receive the agreed-upon fees. This is especially true where, as here, the services producing the judgment and claims bill, and the fee amount sought under the contract, are in accord with sections 768.28(5) and (8). The Legislature has expressly provided for both the claims bill mechanism and for fees payable from the judgments obtained under the limited waiver of sovereign immunity statute. We conclude the permissible fees based upon recovery of those funds include funds recovered pursuant to the claims bill process. 

...we conclude there is no impediment to the law firms seeking contractual attorneys’ fees and costs in this case pursuant to the preexisting contract up to and including the amount previously sought—an amount that the Edwards family has urged the courts to award—based on the limitation contained in section 768.28(8), which is 25 percent of the initial $10 million payment made pursuant to the claims bill enactment.

There were dissents

CANADY, J., dissenting. I dissent from the majority’s decision regarding both the certified question and the issue of severability.

POLSTON, J., dissenting. I would answer the certified question in the affirmative. The Florida law limiting the amount of attorneys’ fees does not unconstitutionally impair a preexisting contract that expressly contemplates and accepts that Florida law may limit the amount of attorneys’ fees.

(Mike Frisch)

January 31, 2017 in Clients | Permalink | Comments (0)

Thursday, January 26, 2017

Not Patently Unreasonable

The dismissal of a legal malpractice claim against Alston & Bird was affirmed by the New York Appellate Division for the First Judicial Department

A focal point of this appeal is Brookwood's claim that A & B, in the patent action, negligently litigated defenses that were available to Brookwood pursuant to 28 USC § 1498. 28 USC § 1498 provides that when a patent is infringed for the benefit of the United States government, the patent holder's remedy is against the United States in the United States Court of Federal Claims. Brookwood alleges that had A & B not been negligent, the motions that A & B eventually brought based on 28 USC § 1498 would have been granted and Brookwood would have avoided the approximately $10 million it expended on defending itself at trial and on appeal. Important in this analysis is the fact that Brookwood ultimately prevailed in the underlying patent action, achieving a judgment of noninfringement. The theory of Brookwood's malpractice case is not that but for A & B's negligence it would have prevailed in the patent action; rather Brookwood's claim is that but for the manner in which A & B interposed the defenses available to Brookwood under 28 USC § 1498, Brookwood would have prevailed without incurring the additional legal fees it expended. In other words, but for A & B's negligence, Brookwood could have achieved the same result more expeditiously and economically. The Supreme Court granted A & B's motion and dismissed the complaint in its entirety, holding, among other things, that the allegations did not support a finding of attorney negligence or of proximate cause. We now affirm.

Second-guessing the strategy of counsel was an insufficient basis for a malpractice claim

Decisions regarding the evidentiary support for a motion or the legal theory of a case are commonly strategic decisions and a client's disagreement with its attorney's strategy does not support a malpractice claim, even if the strategy had its flaws. "[A]n attorney is not held to the rule of infallibility and is not liable for an honest mistake of judgment where the proper course is open to reasonable doubt" (Bernstein v Oppenheim & Co., 160 AD2d 428, 430 [1st Dept 1990]). Moreover, an attorney's selection of one among several reasonable courses of action does not constitute malpractice (see Rosner v Paley, 65 NY2d 736, 738 [1985]; Rodriguez v Lipsig, Shapey, Manus & Moverman, P.C., 81 AD3d 551, 552 [1st Dept 2011]). Brookwood has not alleged facts supporting its claim that A & B's evidentiary decision, to rely on Nextec's expert, rather than compromise the merits of Brookwood's position on other arguments, was an unreasonable course of action.

Other hindsight arguments concerning the nature and quality of the evidence supporting the second summary judgment motion in the patent action fare no better. There is no factual basis to conclude that the governmental email to Brookwood about the inclusion of a broad patent infringement indemnity clause would have changed the outcome of the motion because the clause never made its way into the government's contract with ADS. Nextec's attorney's letter stating that Brookwood necessarily infringed on Nextec's patents is hearsay. Not only was it apparently sent by the attorney after the underlying lawsuit had been commenced, it was not based upon any personal knowledge. Thus, Brookwood's negligence claim is wholly speculative and "depend[s] on too many uncertainties" to support a conclusion that there would have been a more favorable, that is quicker, outcome in the underlying litigation (Estate of Feder v Winne, Banta, Hetherington, Basralian & Kahn, P.C., 117 AD3d 541, 542 [1st Dept 2014]; Sherwood Group v Dornbush, Mensch, Mandelstam & Silverman, 191 AD2d 292, 294 [1st Dept 1993]). Having prevailed in the underlying patent action and having otherwise failed to plead negligence, Brookwood has also failed to show that its litigation expenditures were damages proximately caused by A & B's alleged negligence (see e.g. Rudolf v Shayne, Dachs, Stanisci, Corker & Sauer., 8 NY3d 438, 443 [2007]).

(Mike Frisch)

January 26, 2017 in Clients | Permalink | Comments (0)

Legal Malpractice Claim Survives In Idaho

The Idaho Supreme Court has issued this recent decision in a legal malpractice case.

Some background

On September 19, 2005, Molen was charged with lewd conduct with a minor child, S.Z. Molen pleaded not guilty at his arraignment. On the morning of trial, Christian arrived at the courthouse under the influence of alcohol. His blood alcohol content was measured at .329 and .344. The trial was vacated. An amended information was filed on May 11, 2007, and the case proceeded to jury trial on June 18, 2007. 

Yes, the attorney showed up for trial with a blood alcohol content way north of legally intoxicated and just south of legally dead.

I might look for another lawyer right there. 

At the rescheduled trial

On June 22, 2007, the jury returned a guilty verdict. Molen moved for a new trial arguing that the disclosure of the photographs of the colposcopic examination was unfair. The district court denied Molen’s motion. On June 4, 2008, Molen was sentenced to twenty years consisting of eight years fixed and twelve years indeterminate. Molen appealed his conviction, but the conviction was affirmed by the Idaho Court of Appeals.

Post-conviction relief was secured in 2014

The district court’s grant of postconviction relief was premised on the conclusion that Molen’s trial counsel’s performance fell below an objective standard of reasonableness in: (1) failing to consult with and/or retain an expert in pediatric sexual abuse; (2) failing to discover the existence of the colposcopic photographs prior to trial; and (3) failing to request either a continuance of the trial or a mistrial so that the new evidence could be reviewed by an expert in pediatric sexual abuse. The district court vacated the judgment of conviction entered on January 7, 2008, granted Molen a new trial, and ordered the Idaho Department of Corrections to release Molen from custody. In a hearing on July 10, 2014, the district court granted the State’s motion to dismiss the case.

The former client filed his legal malpractice claim in February 2015.

The court summary

In a case arising out of Ada County, the Idaho Supreme Court vacated the district court’s summary judgment dismissal of a legal malpractice action brought against Ronald Christian (“Christian”). The malpractice action stemmed from Christian’s defense of criminal charges brought against Michael Scott Molen (“Molen”). The crux of Molen’s appeal was whether the statute of limitations on his malpractice cause of action had accrued at the time of his initial criminal conviction in 2007 or when he was later exonerated in 2014. In granting summary judgment in favor of Christian, a district court made two holdings: (1) Molen’s malpractice cause of action against Christian accrued at the time of Molen’s initial conviction, and (2) whether actual innocence is an element of a legal malpractice claim arising from a criminal conviction would only be an issue if the Idaho Supreme Court adopts the exoneration rule. Generally, the exoneration rule requires a convicted party to obtain direct or collateral relief on that conviction prior to filing suit against a criminal defense attorney for legal malpractice.

The Idaho Supreme Court held that Molen’s malpractice cause of action did not accrue until he was exonerated, which occurred on July 10, 2014. The Court explained that if the exoneration rule was not adopted, a convicted defendant would have to file two lawsuits simultaneously: (1) a malpractice claim, and (2) an appeal and/or post-conviction relief proceeding. The malpractice claim would serve as a protective lawsuit to prevent the claim from being later barred by the statute of limitations, and the appeal and/or post-conviction proceeding, if successful, would be the basis for the malpractice action. The Court held that such a result would be contrary to this Court’s holding in City of McCall v. Buxton, 146 Idaho 656, 663, 201 P.3d 629, 636 (2009). That is, the Idaho Supreme Court does not favor protective lawsuits that must be filed only to be stayed.

Additionally, the Court held that actual innocence is not an element of a criminal malpractice cause of action because: (1) requiring a plaintiff to prove actual innocence is contrary to the fundamental principal that a person is presumed innocent until proven guilty beyond a reasonable doubt; (2) a criminal defendant can be harmed separately from the harm he or she incurs as a result of being guilty of a crime; and (3) requiring actual innocence would essentially eliminate a defense attorney’s duty to provide competent counsel to a client he or she knows to be guilty. Christian’s request for attorney’s fees on appeal was denied because he was not the prevailing party. Costs on appeal were awarded to Molen.

(Mike Frisch)

January 26, 2017 in Clients | Permalink | Comments (0)

Monday, January 23, 2017

Discovery Of Work Done For Other Clients Permitted In Legal Malpractice Case

The Rhode Island Supreme Court decided a case where the court had granted review of the following question

“May a former client in a legal malpractice action against his former attorney properly compel discovery from his former attorney and law firm related to documents the attorney prepared for the attorney’s other clients in order to gain evidence to prove subsequent remedial measures in the legal malpractice action?”

The unhappy client sued and sought discovery

This case came before the Supreme Court on November 2, 2016, on certiorari from the Superior Court, seeking review of a discovery order entered on October 2, 2014, compelling production of any antenuptial or postnuptial agreements drafted, prepared, or negotiated by the defendant, Richard A. Boren (Attorney Boren), from 2005 through 2009 and in 2013, while he was employed at the defendant law firm, Visconti, Boren & Campbell, Ltd. (VBC), (collectively, defendants). Before this Court, the defendants contend that the documents sought exceed the scope of permissible discovery, as provided by Rule 26 of the Superior Court Rules of Civil Procedure, and are protected under the attorney-client privilege, the marital privilege, and the work product doctrine. For the reasons discussed herein, we affirm the discovery order in its entirety.

The story

In 2000, plaintiff, Sergio A. DeCurtis (plaintiff or DeCurtis), retained Attorney Boren to draft an antenuptial agreement. DeCurtis and his then-fiancée, Michelle Tondreault (Tondreault), executed the antenuptial agreement on March 22, 2000, and were married on March 28, 2000. They did not live happily ever after, and Tondreault filed for divorce in 2005.

The divorce petition was dismissed in a negotiated settlement that required DeCurtis and Tondreault to execute a postnuptial agreement. Attorney Boren drafted the postnuptial agreement for the couple, which was executed in November of 2005. The marriage nonetheless failed.

The plaintiff claims that the six antenuptial and postnuptial agreements drafted by Attorney Boren are discoverable under Rule 26(b)(1) because they are relevant to demonstrate if and when Attorney Boren undertook subsequent remedial measures in the drafting of antenuptial and postnuptial agreements. Unlike many other jurisdictions, subsequent remedial measures are admissible in Rhode Island to prove negligence “[w]hen, after an event, measures are taken which, if taken previously, would have made the event less likely to occur...

In the case before us, plaintiff initially retained Attorney Boren in 2000, and the antenuptial agreement between plaintiff and Tondreault was drafted in that same year. In 2005, Attorney Boren drafted a postnuptial agreement, which affirmed the terms stated in the prior agreement. The instant malpractice suit arises out of language that was included in both documents. As a result, we are of the opinion that the triggering “event” for purposes of Rule 407 is the drafting of the later document, the 2005 postnuptial agreement. Accordingly, any measures taken after 2005 would be relevant under Rule 407 and, therefore, discoverable under Rule 26(b)(1)

The attorney-client, work product and marital privileges did not prevent discovery

we are of the opinion that defendants do not have standing to assert the attorney-client privilege on behalf of their clients in this context. In this case, the documents are not confidential communications such that third parties were privy to the discussions surrounding the documents and their execution, thus vitiating the privilege. We conclude that the Superior Court justice amply placed safeguards on the order by requiring redaction and limiting the purpose for which the documents could be used. Adequate redaction will eliminate any sensitive or identifying information and prevent the disclosure of any confidential interests contained in the documents...

The defendants’ argument that the marital privilege applies in this context is unavailing. The parties to the six agreements are not testifying, and the production of executed contracts is not testimonial in any way. Furthermore, the parties were not married at the time the antenuptial agreements were executed. The marital privilege focuses on communications between a husband and wife, such that the communications must occur “during [the] marriage.”


In complying with this discovery order, the defendants are directed to adequately redact all confidential information and take any additional steps they deem reasonably necessary to ensure confidentiality, including contacting their clients should that be deemed necessary. To the extent that the clients wish to assert the attorney-client privilege, the Superior Court should welcome those motions and use our discussion herein as guidance in rendering a decision.

Finally, we anticipate that the trial justice will act as an additional gatekeeper and conduct an in camera review of the documents after adequate redaction by the defendants, in order to ensure that all confidential and identifying information has been removed.

The court thus affirmed the discovery order. (Mike Frisch)

January 23, 2017 in Clients, Current Affairs, Privilege | Permalink | Comments (0)

Saturday, January 7, 2017

Between Scylla And Charybdis

The United States District Court for the District of Maryland Southern Division (Judge Paul Grimm) disqualified an attorney and his firm for both a former client conflict and a material limitation in the representation of the current client.

Attorney Jonathan Rose represented CytImmune with respect to employee non-compete agreements and other matters while at Katten Muchin. Now at Alston & Bird, he undertook to represent a former employee in litigation adverse CytImmune.

In March 2016, CytImmune filed its complaint against Dr. Paciotti in the Circuit Court for Montgomery County. Dr. Paciotti’s out-of-state attorney retained Rose as local counsel to handle the case. Shortly thereafter, CytImmune notified Rose of its belief that he had a conflict of interest in the case. Rose consulted his firm’s general counsel, who concluded that no conflict existed. 

Dr. Paciotti then removed the case to this Court, Notice of Removal, where CytImmune filed the instant Motion to Disqualify. (record cites deleted)

The court

I am left with the impression that Rose’s inability to recall the precise details of his prior work for CytImmune placed him squarely between the Scylla of MLRPC 1.9 and the Charybdis of MLRPC 1.7. And if Odysseus could not navigate such treacherous waters, then, respectfully, neither can Rose. And the Rules forbid any such attempt. In light of the apparent constraints that I have observed Defense counsel struggle with, I am persuaded that Rose cannot continue to represent Dr. Paciotti without a significant risk of a materially limited defense. Accordingly, I find that Rose has a conflict of interest in representing Dr. Paciotti. Additionally, MLRPC 1.10(a) imputes Rose’s conflict to all of the attorneys at Alston. Waiver of the conflict is possible, but only with the informed consent of “each affected client.” MLRPC 1.7(b); see also MLPRC 1.10(d) (allowing waiver of imputed conflicts according to the requirements enumerated at MLRPC 1.7(b)). CytImmune has made clear that it will not consent to Rose’s representation of Dr. Paciotti. Pl.’s Mem. Supp. Mot. Disqualify 17. Accordingly, both Rose and Alston are disqualified from representing Dr. Paciotti in the remainder of this litigation.

The court did not reach the Rule 3.7 (lawyer as witness) issue

Given the significant divergence between Rose’s recollection of the legal advice he provided concerning CytImmune’s NDA and Marder’s, I cannot discount the possibility that Rose will be called as a fact witness should the case proceed to trial. The Defense does not appear to disagree but argues that Rose need not be disqualified at this juncture because the conflict contemplated by the Rule is only triggered “at trial,” which has not yet been scheduled. Def.’s Opp’n Mot. Disqualify 18–20. The Defense cites no case law in support of its position. In any event, because I find Rose disqualified under MLRPC 1.7, I do not find it necessary to resolve the issue.

Bottom line

MLRPC 1.7 exists for the very purpose of ensuring that a litigant’s claims or defenses are not refracted through the multifaceted prism of an attorney’s conflicts. Dr. Paciotti is entitled to a lawyer whose ability to develop a theory of the case is unencumbered by his own uncertainty concerning his representation of a former client. I am persuaded based on how this case has evolved that Rose and the other lawyers at Alston are unable to provide such unfettered counsel.

CytImmune’s Motion to Disqualify is GRANTED.

(Mike Frisch)

January 7, 2017 in Clients | Permalink | Comments (0)

Tuesday, January 3, 2017

Katten Muchin Prevails In Charging Lien Litigation

The Delaware Supreme Court has ruled in favor of the Katten Muchin law firm in a case involving application of the law of charging liens.

The case was a complex fight over the client's ouster from a family business

Martha reacted to her ouster by, among other things, litigating. She first retained plaintiff Katten Muchin Rosenman LLP to represent her in a § 220 books and records request of the Sutherland Lumber Companies.  Although Martha and Katten disagree over whether they entered into a written fee agreement, the parties agree that Katten was not providing its services on a contingency fee basis and was instead entitled to fees on an hourly rate basis and to reimbursement of its expenses.   Indeed, Katten sent Martha monthly invoices based on hourly billing, which Martha paid for several years.

In 2006, Martha, with Katten as her counsel, filed a derivative and double derivative action against Perry, Todd, and Mark alleging, among other things, that Perry‘s and Todd‘s employment agreements with the Sutherland Lumber Companies were a result of self dealing...

Some benefits were realized with respect to the employment agreements at issue but 

By 2011, [client] Martha accrued $766,166.75 in unpaid attorney‘s fees for services that Katten provided in this litigation between 2009 and 2011. In the spring of 2011, Katten withdrew as counsel. One of Martha‘s attorneys from Katten, Stewart Kusper, left the firm and continued to represent her.

After Martha‘s litigation concluded in 2012—without her securing any additional relief on behalf of the Sutherland Lumber Companies—she sought an award of attorney‘s fees from the Sutherland Lumber Companies for all of her fees arising from the § 220 action and from overcoming the special litigation committee‘s investigation and recommendation to terminate the litigation, plus $25,000 in fees for defending against the summary judgment argument aimed at the employment agreement claim. In total, Martha asked for $1.4 million in attorney‘s fees and, in doing so, she used Katten‘s invoices that detailed the services it provided to her and its expenses incurred on her behalf while it represented her as a reasonable basis for the fees she should be awarded.  Indeed, in Martha‘s petition for an award of attorney‘s fees, she argued that the $1.4 million in attorney‘s fees she incurred from Katten were "fair and reasonable."

...Relying on Katten‘s invoices, the Court of Chancery awarded Martha $275,000 in fees for the minor benefits that she obtained on behalf of the Sutherland Lumber Companies in 2007 when, as a result of Martha‘s and Katten‘s efforts, the Sutherland Lumber Companies amended Perry‘s and Todd‘s employment agreements.

The firm intervened and asserted a lien on the fee award.

The court here reversed the Court of Chancery

Although Delaware does not have a statute governing charging liens, Delaware has a long lineage of cases recognizing charging liens as a matter of common law.  Two recent Delaware cases address charging liens.   In Doroshow,  this Court confirmed that Delaware recognizes the long-standing common law right of charging liens. In Zutrau, the Court of Chancery adopted the definition provided by Corpis Juris Secundum that a charging lien is "an equitable right to have costs advanced and attorney‘s fees secured by the judgment entered in the suit wherein the costs were advanced and the fee earned." Today, we also endorse that definition of a charging lien.

Here, the modifications to Perry‘s and Todd‘s employment agreements— which are the basis for Court of Chancery‘s fee award—were adopted as a result of Martha‘s and Katten‘s efforts in the derivative and double-derivative action. Furthermore, Katten‘s unpaid fees arose from the same litigation that produced the benefits for the Sutherland Lumber Companies and which led to the Court of Chancery‘s award of attorney‘s fees. Therefore, based on our definition of a charging lien, Katten is entitled to a lien on the entire fee award of $275,000. The historical rationale for a charging lien—to promote justice and equity by compensating the attorney for her efforts and thus encouraging attorneys to provide legal services to clients—also supports this conclusion.

In its decision, the Court of Chancery seemed to read Doroshow as standing for a rule that an attorney may only seek a charging lien for fees the attorney incurred that were directly connected to her client‘s recovery. The Court of Chancery cited Doroshow‘s finding that, because the law firm in that case represented its client on a contingent fee basis, it was entitled to a charging lien because "the law firm had not been compensated before its work produced the funds." The Court of Chancery reasoned that because Katten had already been paid for the services that led to the benefits for the Sutherland Lumber Companies, it was not entitled to a charging lien. But, Doroshow dealt with a charging lien based on a contingency fee, and we held that the law firm was entitled to its agreed 40% contingent fee. Our decision in Doroshow did not limit the scope of charging liens in general. Rather, Doroshow demonstrates the application of this equitable right to a particular type of fee arrangement, and one fundamentally different than the one between Martha and Katten.

Here, Katten billed Martha regularly for its services based on the amount of time Katten‘s attorneys spent on the case and the attorneys‘ hourly rates. Katten billed Martha for approximately $3.5 million, of which Martha paid roughly $2.7 million. That Katten‘s services underlying the unpaid fees did not result in any benefit to the Sutherland Lumber Companies does not matter. In the case of hourly billing, unlike with a contingency fee, the total amount that the client is required to pay her lawyer is not based on the client‘s recovery. In Zutrau, the Court of Chancery considered the scope of a charging lien in the context of hourly billing and explained that "[i]t is no secret that litigation is expensive and that the costs of prosecution easily can exceed the recovery." The Court of Chancery found, "that the cost of prosecution conceivably could exceed the recovery does not excuse Zutrau from paying those fees." If, as here, an attorney has unpaid fees that are greater than the client‘s recovery, the attorney is entitled to a charging lien on the entire recovery. Moreover, the client remains obligated to pay her attorney any remaining unpaid fees. Martha was required to pay Katten its reasonable fees in accordance with their agreement whether she won or lost. Because Martha did not pay Katten for all of its services stemming from the litigation in which Katten produced the only benefits, Katten is entitled to the equitable right of a charging lien on the entire $275,000 fee award. Finding otherwise would lead to an inequitable result where attorneys with a claim for unpaid fees from litigation— where work had been billed on an hourly basis—could use the equitable right of a charging lien only to recover fees relating to the services that were directly connected to the litigation‘s beneficial results.

Like other contracts, contracts for the provision of legal services create incentives for parties, including clients. When a party, such as Martha, agrees to pay hourly fees to prosecute a complex case, she is assuring her counsel that it will not suffer the commercial damage of uncompensated services if it presses her claims as aggressively as she demands and as the law permits. To permit a client who is a party to such an agreement to escape a charging lien as if she made a strict contingency fee agreement limiting fees to a percentage of recovery is to judicially rewrite the contract at the expense of the attorney and to undermine the traditional purpose of a charging lien.

(Mike Frisch)

January 3, 2017 in Billable Hours, Clients, Current Affairs, Hot Topics | Permalink | Comments (0)