Tuesday, October 8, 2024

Changing Story And Legal Malpractice

The Delaware Supreme Court reversed the Superior Court's grant of summary judgment in a legal malpractice action

This appeal arises from a claim of professional negligence relating to legal services that appellee Margolis Edelstein provided to appellant GMG Insurance Agency. Margolis defended GMG and Howard Wilson, a GMG employee, in a noncompete action brought by Lyons Insurance Agency, Inc. in the Court of Chancery.

After GMG failed to prevail fully on its motion for summary judgment in the Court of Chancery, GMG fired Margolis. Around the same time, GMG also fired Wilson. 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. Wilson’s new sworn statements were drastically inconsistent with his prior testimony and unfavorable to GMG. GMG requested a continuance from the Court of Chancery to seek discovery on Wilson’s changed statements, but the court denied that request. Instead of proceeding to trial, GMG settled its part of the litigation for $1.2 million. The trial still went forward as to Wilson.

After the Court of Chancery action concluded, GMG filed a legal malpractice claim against Margolis in the Superior Court. There, 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 eleventh-hour change in testimony. The Superior Court granted summary judgment in favor of Margolis on GMG’s professional negligence claim, finding that Margolis’s representation did not fall below the applicable standard of care and that, in any event, Wilson’s eleventh-hour affidavit recanting prior testimony 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 material disputed facts 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. And, finally, the Superior Court erred by concluding that Wilson’s affidavit was a superseding cause as a matter of law. Accordingly, we reverse the judgment of the Superior Court and remand for further proceedings.

The court here

We conclude that the Superior Court erred in three ways. First, the Superior Court erred in granting summary judgment for Margolis because there are disputes of material fact as to whether Margolis’s representation of GMG in the Chancery Litigation breached the standard of care owed by Delaware attorneys. Second, the court erred by failing to address GMG’s contention that, but for Margolis’s alleged negligence, GMG would have prevailed on all claims in the Chancery Litigation. Third, the Superior Court erred in concluding as a matter of law that the Wilson Affidavit was a superseding cause that broke the causal chain leading to the settlement of the Chancery Litigation.

Plaintiff's claims of actionable malpractice

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, documented in part by Margolis’s contemporaneous internal emails; (2) by failing to adequately brief and argue in favor of dismissing Lyons’s tortious interference claim, shown by Margolis’s conclusory or non-existent discussion of that claim in its submission to the Court of Chancery; and (3) by simultaneously representing GMG and Wilson despite a potential conflict of interest, which may have hindered Margolis’s ability to appropriately counsel GMG. 

The alleged conflict was the joint representation of GMG and Wilson

In sum, when the facts and inferences are 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.

Causation and Wilson's changing story

Our concurring colleagues reprove us for insufficiently attending to the intentionality—and conceivable criminality—of the Wilson Affidavit. That is not our intention. We readily concede that, under § 442B of the Restatement, whether the harm is intentionally caused by the intervening actor is a relevant and potentially dispositive issue. But, in our view and according to § 442B’s explicit terms, it will only be dispositive when the intentionally caused harm “is not within the scope of the risk created by the [initial] actor’s [here, Margolis’s] conduct.” And the Superior Court did not address—and the concurrence seems to downplay—that essential aspect of the superseding-cause doctrine. Nor could the Superior Court have addressed that issue on summary judgment, because whether Wilson’s changed testimony was within the scope of the risk created by Margolis’s conduct—i.e., whether Margolis’s conduct was indeed the proximate cause of the harm or not— involves a factual question for the jury.

In brief, the Superior Court’s departure from the principles discussed above led it to the erroneous and reversible conclusion that the Wilson Affidavit was, as a matter of law, a superseding cause of GMG’s damages.

EITZ, Chief Justice, concurring, in which VALIHURA, Justice, joins:

I agree with the Majority that the Superior Court erred in granting Margolis Edelstein’s motion for summary judgment. But I would reverse because a material issue of disputed fact exists whether GMG committed a fraud on the court and therefore forfeited any right to relief. And even if GMG was not privy to or did not participate in Wilson’s perjured testimony, the Superior Court should still decide whether the false testimony was an unforeseeable intervening act by a third party and therefore a superseding cause that cuts off Margolis’s liability. The Majority’s superseding cause analysis fails to account sufficiently for intentional acts by third parties – such as Wilson’s perjury – that are superseding acts that can break the causation chain.

On remand

if the court concludes that GMG was a party to or had knowledge of Wilson’s perjured testimony (the lie/truth scenario) and GMG now relies on the perjured testimony to support its legal malpractice action, then GMG committed a fraud on the court and is not entitled to any relief.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2024/10/the-delaware-supreme-court-reversed-the-superior-courts-grant-of-summary-judgment-in-a-legal-malpractice-action-this-appeal.html

| Permalink

Comments

Post a comment