Saturday, April 20, 2024

Malpractice Dismissal Reversed

The Delaware Supreme Court reversed and remanded a decision granting summary judgment to a defendant attorney in a legal malpractice case

This appeal arises from a claim of professional negligence relating to legal services that appellee Margolis Edelstein provided to appellant GMG Insurance Agency. Margolis represented GMG and Howard Wilson, one of GMG’s employees, in a non-compete dispute in the Court of Chancery. After GMG failed to prevail fully on a motion for summary judgment in that underlying dispute and settlement talks broke down, GMG fired Margolis. On the eve of trial, with GMG represented by new counsel and Wilson represented by separate counsel, Wilson filed an affidavit recanting his prior testimony and providing new testimony that was drastically inconsistent with his prior testimony and unfavorable to GMG. GMG settled the litigation shortly thereafter.

GMG then sued Margolis in the Superior Court for legal malpractice. GMG asserted that but for Margolis’s negligent representation in the Court of Chancery, GMG would not have been exposed to the consequences of Wilson’s pre-trial eleventh-hour change in testimony. The Superior Court granted summary judgment in favor of Margolis on GMG’s professional negligence claim, finding that Wilson’s affidavit was a superseding cause that broke the causal chain linking Margolis’s alleged negligence and GMG’s claimed damages. We hold that this decision was in error because there are disputes of material fact as to whether Margolis deviated from the requisite standard of care. The court also erred by failing to address GMG’s contention that, but for Margolis’s alleged negligence, GMG would have prevailed on all claims in the Court of Chancery litigation—a circumstance that would have effectively negated Margolis’s superseding cause argument. Accordingly, we reverse the judgment of the Superior Court and remand for further proceedings.

Disputed issues

In response to Margolis’s motion for summary judgment, GMG cited record evidence supporting its allegation that Margolis was negligent in its representation of GMG in the Chancery Litigation. GMG claimed that because Lyons’s tortious interference claim survived summary judgment in the Court of Chancery, GMG incurred significant damages in the form of fees and costs and the $1.2 million settlement, which, but for Margolis’s negligence, would not have been incurred. And the Superior Court recognized GMG’s contention that, if Lyons’s tortious interference claim had not survived summary judgment in the Chancery Litigation, then GMG “would not have been in a position to be negatively affected by the Wilson Affidavit.” Yet the court did not squarely address this allegation.

Instead, sidestepping the Court of Chancery’s acknowledgement of the potential effect of Margolis’s discovery deficiencies on the summary judgment proceedings, the Superior Court pointed to Margolis’s success on the claims that were dismissed...

Error below

we explain why this holding was erroneous. GMG proffered record evidence supporting a finding that Margolis breached the standard of care for a Delaware attorney during the Chancery Litigation in three ways: (1) by failing to competently handle discovery and develop the record; (2) by failing to adequately brief and argue in favor of dismissing Lyons’s tortious interference claim; and (3) by simultaneously representing GMG and Wilson despite a potential conflict of interest.


In sum, when the evidence is viewed in the light most favorable to GMG, a reasonable juror could conclude that Margolis breached the standard of care owed by a Delaware attorney while representing GMG in the Chancery Litigation. Because the factual record and the reasonable inferences to be drawn from it could support a finding in GMG’s favor on its allegations of negligence, the Superior Court erred in granting summary judgment in favor of Margolis.

(Mike Frisch)

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