Saturday, June 2, 2018

An Unusual Arrangement Led To Legal Malpractice

The Nebraska Supreme Court reduced  a legal malpractice damage award but ordered a fee disgorged for a conflict of interest

In November 2013, David LeRette, Jr., individually and as the owner of Master Blaster, Inc., filed a complaint against Steven H. Howard and his law firm, alleging, among other nthings, that Howard committed legal malpractice and breached  his duty as LeRette’s attorney when he failed to advise LeRette of his conflicts of interest and when he acted adversely to LeRette’s interests. A jury trial was held on the matter in early 2017.

 The case involved an unusual situation.

LeRette had secured a judgment against Anderson, who declared bankruptcy. LeRette's counsel suggested that Howard (a law school classmate) be retained through LeRette but on behalf of Anderson to sue Anderson's prior counsel for legal malpractice.

LeRette’s bankruptcy attorney thought Anderson’s bankruptcy attorneys may have been negligent in their representation of Anderson and suggested to LeRette that Anderson could pursue a legal malpractice claim against them in order to generate funds that could be used to satisfy his debt to Master Blaster. Based on this information, LeRette contacted [prior attorney] Maass, who told LeRette that she thought her former classmate, Howard, might be able to help.

With LeRette’s approval, Maass called Howard to discuss the matter. Howard indicated that he was interested in the case. Thereafter, Maass gave Howard’s contact information to LeRette, who then called Howard.

After talking to Howard, LeRette contacted Anderson and asked him if he was interested in pursuing a legal malpractice claim against his bankruptcy attorneys. Anderson indicated that he was, and LeRette and Anderson met at a fast food restaurant to discuss it. According to LeRette, he told Anderson that he would hire the attorney.

LeRette and Anderson agreed to the arrangement after meeting with Howard

At the meeting, Howard advised LeRette and Anderson that any proceeds from the suit would be used to satisfy the judgment against Anderson. Howard advised LeRette not to execute on the judgment against Anderson, because it would make the case more difficult for Howard. LeRette did not execute on the judgment. According to LeRette, Howard told him that he could not be named in the malpractice action, because malpractice suits cannot be assigned. But Howard represented that the suit would be successful and that LeRette would “get [his] money and get paid.”

But twas not to be

On July 23, 2012, without discussing the matter with LeRette, Howard settled the legal malpractice action for $350,000. Howard deposited the settlement proceeds into his firm’s trust account and dispersed $235,964.78 to Anderson, retaining the remaining $114,035.22 in payment of his fees and expenses. Anderson did not pay LeRette, and LeRette never received any of the settlement proceeds. According to LeRette, he stopped receiving information from Anderson and Howard after the mediation. When LeRette followed up with the malpractice case, he was told that the trial was to occur on October 29, 2012. Sometime later, LeRette learned about the settlement and the payment and filed the suit against Howard and his law firm.

At the trial

the jury was instructed on two theories: legal malpractice and fraudulent misrepresentation. After the case was submitted, the jury returned a general verdict for LeRette and Master Blaster with damages of $775,000.


LeRette and Master Blaster assert that the trial court erred in reducing the damages to $235,968.78, the amount Anderson received in the settlement. He argues that reasonable minds could have concluded that LeRette and Master Blaster were entitled to $775,000. We disagree.

The conflict had consequences

Because Howard violated the rule regarding representations involving conflicts of interest, we conclude that, as a matter of law, Howard is not entitled to compensation for his services in the settlement. Thus, we modify the jury award to include the $114,035.22 that he received for those services.

LeRette v. Howard can be found at this link. (Mike Frisch)

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