Tuesday, August 8, 2017

No Malpractice Where Court Permits Withdrawal

The Washington State Supreme Court has held

In this case, former clients are suing their attorneys for legal malpractice based, in part, on the attorneys' withdrawal from a prior case. But the attorneys obtained that withdrawal by court order. In the original case, the former clients appealed the court's order approving withdrawal, and that appeal was rejected. The attorneys thus argue that collateral estoppel applies to bar a malpractice action based on their withdrawal. We agree. We hold that the fact of withdrawal by court order in an earlier proceeding is dispositive in a later malpractice suit against the attorney. Although  other malpractice complaints unrelated to the withdrawal would not be precluded, a client cannot relitigate whether the attorney's withdrawal was proper. If we are to have rules permitting attorney withdrawal, we must allow attorneys to have confidence in those rules. We, therefore, reverse the Court of Appeals...

In the prior proceeding, the Schibels had a full and fair opportunity to actually litigate their challenge to the trial court granting the Attorneys' motion to withdraw. The fact of withdrawal by court order is dispositive in a later malpractice suit. Collateral estoppel thus precludes any malpractice claim based on that withdrawal and summary judgment on those claims is appropriate. We therefore reverse the Court of Appeals as to those claims that involve withdrawal. Because the complaint alleges malpractice claims separate from the withdrawal, such as failing to prepare for trial, those claims are not precluded.

Justice McCloud dissented joined by two colleagues

This case presents a question of first impression for this court: whether a trial court order approving an attorney's withdrawal from representation, over the client's objection, has preclusive effect barring the client's later action for attorney malpractice arising from the withdrawal. Under traditional collateral estoppel analysis, as applied to the facts in this case, the answer is clearly no. The majority departs from traditional collateral estoppel analysis and adopts a new rule barring malpractice plaintiffs from asserting that a court-sanctioned withdrawal was, in fact, improper. The majority certainly asserts policy reasons for this departure. But the policy reasons can be addressed in the context of traditional collateral estoppel analysis, without adopting a new rule that will be difficult to apply. I therefore respectfully dissent...

I believe the majority's new rule will prove confusing and difficult to apply in practice. In this case, for example, the Schibels allege that the Attorneys failed to prepare adequately for trial and mishandled settlement negotiations. Majority at 2. The majority holds that they may pursue those claims since they are "separate from the withdrawal." Id. at 12. But in addition to proving that the Attorneys breached their professional and fiduciary duties, the Schibels must prove causation and damages—^they must prove that the Attorneys' breach caused them to lose money they would otherwise have recovered in a jury trial or settlement. Presumably, the Attorneys will defend against those allegations by arguing that any such loss had a very different cause: the Attorneys' proper withdrawal, necessitated by their "ethical obligations." CP at 73. If the Attorneys do raise that defense, will they be able to cite Judge Plese's withdrawal order, recognizing those "ethical obligations" as evidence? Will the Schibels be allowed to refute the allegation that their unethical conduct forced the Attorneys to withdraw?

The majority's new rule does not answer these questions. It assumes a clean distinction between malpractice claims "based on the withdrawal" and malpractice claims "separate from the withdrawal," but that distinction breaks down in practice. At best, this new rule will prove confusing to apply. At worst, it will shield attorneys who have not been candid about their true reasons for withdrawing from a case. Certainly, it is not justified by the policy concerns the majority cites.

(Mike Frisch)


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