An Argument Over The Weather Benefits A Law Firm Defendant

A majority of the Wisconsin Supreme Court affirmed a defense victory in a legal malpractice case, rejecting the contention that evidence of settling co-defendants and references to that fact by defense counsel denied plaintiffs a fair trial

This is a review of certain evidentiary determinations and other related issues following a jury verdict in a legal malpractice trial. This matter arose when a media company entered into a seemingly tax-friendly sale—dubbed a "midco transaction"——with the assistance of three entities: a tax law firm, an accounting firm, and corporate law firm Murphy Desmond SC (Murphy Desmond). The deal closed and the shareholders received their payout, but the favorable arrangement fell apart when the IRS came after the shareholders for taxes and penalties. Three shareholders (collectively the Shockleys) intervened in litigation against all three assisting entities and brought their own claims of legal malpractice, negligence, and fraud. The Shockleys later settled with the tax and accounting firms, signed a Pierringer release, and amended their complaint to remove the allegations against them. All that remained were legal malpractice-related claims against Murphy Desmond.

At trial, Murphy Desmond was found negligent in part, but the circuit court concluded it was entitled to indemnification from the other two entities who had already settled, leaving the Shockleys with no additional recovery. The Shockleys appealed, lost, and now present four issues for our review.

Pierringer release defined

"A Pierringer release operates as a satisfaction of that portion of the plaintiff's cause of action for which the settling joint tortfeasor is responsible, while at the same time reserving the balance of the plaintiff's cause of action against a nonsettling joint tortfeasor."

Plaintiffs

In 1985, Terry and Sandy Shockley bought a radio station in Madison and rebranded it to oldies, a move that proved wildly successful. That success encouraged them to start a media company, Shockley Communications Corporation (SCC). Over the years, SCC amassed nine radio stations and six TV stations. Terry and Sandy Shockley eventually became minority shareholders and sat on SCC's board of directors. During that time, SCC began working with law firm Murphy Desmond. 

At trial

the jury found that RSM, Curtis Mallet, and Murphy Desmond were negligent, as was plaintiff-shareholder Terry Shockley. The jury also determined that RSM and Curtis Mallet committed intentional misrepresentations.

Neither admission of the settlement evidence or an improper defense comment in closing argument merited a new trial

Murphy Desmond's improper comment amounted to a single dark cloud on an otherwise sunny day. The statement comprised two sentences in almost 80 pages of closing argument transcript.

Indemnification saves the law firm

Here's how all of this works in this case. The jury found Murphy Desmond negligent, so it is entitled to indemnification from liability that is joint with any intentional tortfeasors. The jury also found that RSM and Curtis Mallet committed intentional torts. Therefore, under Fleming, RSM and Curtis Mallet bear the full responsibility of any joint liability arising out of their intentional conduct, including the negligent conduct by Murphy Desmond. But both RSM and Curtis Mallet signed a Pierringer release with the Shockleys. That means that, per Fleming, any indemnity RSM and Curtis Mallet owe Murphy Desmond is imputed onto Sandy Shockley and Shockley Holdings. In short, so long as the liability is joint, Murphy Desmond is entitled to indemnification from RSM and Curtis Mallet. But Sandy Shockley and Shockley Holdings, by virtue of the Pierringer release, now stand in the shoes of RSM and Curtis Mallet. So Murphy Desmond owes nothing further to them.

ZIEGLER, C.J., filed a dissenting opinion in which ROGGENSACK and REBECCA GRASSL BRADLEY, JJ., joined.

The majority vastly undersells the extent to which Murphy Desmond's counsel exploited the settlement evidence at trial.

The dissenters would not admit the settlement evidence and would grant relief for improper closing argument

In any event, the majority concludes the circuit court properly denied the request for a new trial because the "improper comment amounted to a single dark cloud on an otherwise sunny day." Majority op., ¶34. Not so. The improper comment was instead the last jolting lightning bolt at the end of a long storm. The circuit court and the majority examined the improper comment from the perspective of a person who listened to the closing arguments and nothing else. But the jury sat through a ten-day-long trial, during which defense counsel referenced the settlement agreement relentlessly. He promised the jury during opening statements that the settlement evidence would be "important" for determining who was really at fault, and he brought it full circle in closing argument. In context, the majority's characterization of the comment as a "single dark cloud" is purely fanciful.

Dissent conclusion

Parties attempting to resolve their disputes without turning to the judicial process need assurance that those attempts will not later be used against them. This is especially true for plaintiffs entering Pierringer releases in multi-defendant litigation, as they expect to go to trial with other nonsettling defendants. The majority reduces the assurance in Wis. Stat. § 904.08 to nothing more than a parchment barrier, permitting settlement evidence in this case to be admitted for the very purposes the statute prohibits under the guise of demonstrating a "significant change in posture." The majority compounds this error by minimizing the improper comments during closing argument and ignoring their context.

(Mike Frisch)