Category Archives: Legal Malpractice

Legal Malpractice Carrier Takes a Hard Line in New Jersey Case

An Article posted today on written by Charles Toutant discusses an interesting and potentially huge declaratory judgment suit filed last week in federal court in Trenton, New Jersey. A legal malpractice insurance carrier is sending up red flags on the level of client grumbling that puts a lawyer on notice of a claim that the lawyer must then report to the insurance carrier. If the carrier prevails, the decision could lead to many sleepless nights for lawyers who become aware that their client has some disappointment in the outcome of his or her underlying case.

The insurance carrier is seeking for the court to find it has no obligation to defend or indemnify the lawyers in their malpractice suit. The carrier argues a lawyer’s silence about a client’s displeasure over the size of a settlement and her threat to consult with separate counsel because of her displeasure is enough to void the lawyers’ malpractice coverage. In defending its position, the carrier cites language very commonplace in legal malpractice insurance policies. The dec. action claims the lawyers “knew or had a reasonable basis to believe that an act, error or omission committed by them during their representation of the client might be expected to result in a claim or suit.” See, General Star National Ins. Co. v. Law Offices of Robert A. Olkowitz, P.C.

Generally, settlements are inherently unpopular on both sides – that is why they are “settlements”. If the carrier is successful here it would most likely lead to a slew of notices by attorneys of possible causes of action which would be unduly burdensome on the carriers and a huge pain for lawyers, as well. Also, how are lawyers supposed to define a client’s “displeasure” – is a client’s off-the-cuff comment on her displeasure with a settlement enough to trigger the notice requirement or is the threat to go to another lawyer the trigger?

Illinois Appellate Court Holds That Defendant’s Solvency is Required Element of Plaintiff’s Legal Malpractice Action

To plead a cause of action for legal malpractice, a plaintiff must allege facts that support a finding that (1) an attorney owed the plaintiff at duty arising from the attorney-client relationship, (2) the attorney breached that duty, and (3) the attorney’s breach proximately caused the plaintiff to sustain damages. Now, The Illinois Appellate Court recently held that the element of solvency is required in a legal malpractice action, as well. This means when a malpractice plaintiff seeks to recover for loss of a cause of action, he must adequately allege and later prove that the defendant in the underlying lawsuit would have had sufficient funds to compensate him had the attorney’s negligence not come into play and the plaintiff prevailed. The Appellate Court elaborated, stating the plaintiff need only show that the underlying defendant would have been capable of paying some of the damages at some point between the attorney’s malpractice and the end date of the judgment’s enforceability. See, Visvardis v. Ferleger, PC (1st Dist. 2007).

In a “Defense-Type” Legal Malpractice Case, Actual Damages Can be Shown by the Entry of a Judgment Adverse to the Client, Even if the Judgment has Not Been Paid

I have been out of the blogging world for a while and have a stack of interesting cases and articles piled up on my desk to write about. Today, I am going to ease back into things and highlight an Illinois Appellate case that came down earlier this year that lays out what needs to be alleged in a legal malpractice complaint to fulfill the element of “actual damages.”

In Fox v. Seiden, the Court held that a client sustained “actual damages” – for purposes of stating a claim for legal malpractice – when an adverse judgment was entered against a client, even though the client never paid the judgment (as long as it is alleged in a legal malpractice complaint that an adverse judgment was entered in the underlying case the payment of the judgment by the client is not required).

In the opinion, Justice Garcia, distinguished between an attorney’s negligence prosecuting a case and negligence in defending a case, holding that to show actual damages in a “prosecution-type” case, the client must show – in the case within the case – the damages the client would have recovered but for the attorney’s negligence. However, to show actual damages in a “defense-type” case, damages may be shown by the entry of an adverse judgment against the client, even though the judgment has not been paid.

In alleging “actual damages” the Court points out that it is the plaintiff’s burden in a legal mal case that she was injured and suffered a loss for which she can seek monetary damage. The argument here is that since the judgment has not been paid the plaintiff has not yet suffered a monetary loss and therefore, cannot allege actual damages. However, with this opinion (which relies on the opinion of the Illinois Supreme Court in Northern Illinois Emergency Physicians v. Landau) holds that the adverse judgment is enough – the fact that the plaintiff has yet to pay the judgment is irrelevant – she still has suffered a damage because she now owes a debt that she wouldn’t have owed if her attorneys would not have been negligent.

The Illinois Apellate Court Clarifies When the Two-Year Statute of Limitations Period Begins to Run in Legal Malpractice Cases

A recent Illinois Appellate decision (Warnock v. Karm Winand & Patterson) stemming from a failed real estate sale addresses the issue of when the two-year statute of limitations begins to run in a legal malpractice case – is it 1) when the underlying action is first filed and the client is put on notice that his attorney(s) may have been negligent or 2) when a decision is rendered in the underlying action resulting in a monetary loss for the client due to the lawyer’s negligence. In it’s decision the Appellate Court found that in the majority of legal malpractice cases the answer is the latter, saying “in Illinois, a ’cause of action for legal malpractice will rarely accrue prior to the entry of an adverse judgment, settlement, or dismissal of the underlying action in which the plaintiff has become entangled due to the purportedly negligent advice of his attorney.'” (citations omitted). The Court further stated, “[t]he existence of actual damage…is essential to a viable cause of action for legal malpractice.”

In trying to establish that the two-year statute of limitations began to run when the plaintiffs hired their new lawyers to represent them in the underlying action, the defendant relied on the Appellate Court’s decision in Goran v. Glieberman, 276 Ill. App. 3d 590 (1995). The Goran decision stands for the proposition that subsequently incurred attorney fees automatically give rise to a cause of action for legal malpractice against a former attorney (i.e. Once a client is sued in an underlying case and that client hires new lawyers to represent him, in that case, the fees paid to the new lawyers are a monetary damage the client has suffered and therefore, those damages can give rise to a legal malpractice case against the former negligent lawyer). The Appellate Court in the Warnock decision pointed out that while it still believes the Goran case was correctly decided, their holding in Goran is a limited one: “the incurring of additional attorney fees may trigger the running of the statute of limitations for legal malpractice purposes, but only where it is clear, at the time the additional fees are incurred, that the fees are directly attributable to former counsel’s neglect (such as through a ruling adverse to the client to that effect).”

In Warnock, the Court made it clear that in almost all cases the two-year statute of limitations will begin to run on a legal malpractice case only when there has been some conclusion (adverse judgment, settlement, dismissal) to the underlying case that has left the client monetarily damaged. This is because meritless claims and nuisance lawsuits are a fairly commonplace occurrence, and the Illinois courts don’t want to require every client to seek a second legal opinion whenever he finds himself threatened with a lawsuit.

Court Lambastes Lawyers in their Handling of a Jamaican Immigrant’s Case

The ABA Journal reported yesterday on a New York based 2nd Circuit Court of Appeals decision that came down this week reopening the case of an immigrant who was scheduled for deportation and jailed for nine months (forcing his wife and child into a homeless shelter) when his initial counsel ‘failed spectacularly’ by misinforming him about the date of a scheduled hearing resulting is his failure to appear and then failing to tell him of either the missed hearing or the deportation order (citing The Associated Press). The appeals court wrote, “[i]n immigration matters, so much is at stake – the right to remain in this country, to reunite a family or to work…When lawyers representing immigrants fail to live up to their professional obligations, it is all too often the immigrants they represent who suffer the consequences.” The court went on to state, “[w]e appreciate that unfortunately, calendar mishaps will from time to time occur. But the failure to communicate such mistakes, once discovered, to the client and to take all necessary steps to correct them is more than regrettable – it is unacceptable. It is nondisclosure that turns the ineffective assistance of a mere scheduling error into more serious malpractice.”

Can a Lawyer Be Held Accountable for Aiding & Abetting Their Client’s Wrongful Conduct?

Generally, lawyers believe that their sole duty is to their client – some may be surprised to learn that a lawyer can be sued by adverse parties for intentional torts, like aiding and abetting your client’s wrongful conduct. Here is an interesting case I have had in my research files on this topic. This decision specifically addresses the effectiveness of releases in a settlement agreement between an opposing party and the lawyers who represented the other side, however, it also contains interesting language about holding lawyers accountable for the wrongful acts of their clients. The ethical questions that arise from the facts are the compelling part of this case.

A golf course developer filed a complaint against his former partner’s attorneys, Jenner & Block, who had drafted a settlement agreement providing the terms for the developer’s partner to acquire his interest in the partnership, accusing them of aiding and abetting a breach of fiduciary duty, aiding and abetting a scheme to defraud, and aiding and abetting a scheme of fraudulent inducement. The firm moved to dismiss the complaint, first claiming the developer had previously released his claims against them, and secondly, contending that the aiding and abetting claims failed to state a claim upon which relief could be granted. The trial court agreed with Jenner & Block and dismissed the complaint. On appeal, the Illinois Appellate Court reversed and remanded the trial court’s decision.

In early 1991, Thomas Thornton (the developer) and James Follensbee (the former partner) formed a limited partnership for the purpose of developing an Illinois farm as a residential community and golf course. Thornton contributed the land and agreed to fund the endeavor until it was able to secure investors and Follensbee contributed his expertise and experience as an architect and engineer. Thornton received a 75% ownership interest in the partnership and Follensbee received 25% with an additional right to be compensated for working as the partnerships general manager.

Three and a half years later, Thornton had expended cash and incurred debt of over $8 million on behalf of the partnership. Follensbee had tried to recruit investors and develop the course into a PGA Tournament Players Course – which would lead to substantial economic benefits for the partners. After discussion with possible investors, Follensbee communicated to Thornwood that it was not going to be possible to develop the land into a PGA Tournament Course. However, unbeknownst to Thornton, Follensbee continued negotiations with the PGA. During this time Thornton expressed concern over the amount of money and debt he had incurred on the project and the lack of possible investors and Follensbee offered to buy-him-out of the partnership. Follensbee retained Jenner & Block to assist him in acquiring Thornton’s interest. Jenner & Block had also participated in Follenbee’s negotiations with the PGA. At the time of the offer and subsequent sale of Thornton’s interest, no one informed Thornton that his share was most likely to be worth much more in the near future because of the deal Follensbee was working on with the PGA. Shortly thereafter, the parties entered into a settlement agreement and Thornton signed two separate releases – one releasing Follenbee and one releasing Jenner & Block.

Thornton did not become aware of the negotiations with the PGA until almost four years after the releases had been signed. He then commenced this lawsuit. In reversing the trial courts dismissal of the complaint, the appellate court found the Jenner & Block Release contained sweeping, general language and so it could not be construed to release the claims made by Thornton against the firm because those claims were unknown to Thornton when he signed the release and he could not have contemplated the claims when he signed it.

Additionally, the court found that Illinois [like many states] recognizes claims against lawyers for conspiring with their clients for a wrongful purpose. In making this decision, they noted that Illinois had never recognized the cause of action against a lawyer for aiding and abetting, but the court saw no reason why such a claim could not be recognized.

I think this case is interesting because of the ethical questions the facts raise as to what duties and responsibilities a lawyer has to a party on the other side of a transaction or litigation. These ethical issues are thoroughly discussed in the ABA article, “What Gets Lawyers Sued” Representative Cases on Aiding and Abetting, Conflicts of Interest, Drafting Errors & Unauthorized Practice of Law, here. Was it Jenner & Block’s responsibility to inform Thornton that Follensbee had continued negotiations with the PGA, or was it Thornton and his attorneys’ duty to inquire into what negotiations were taking place and question Follensbee’s motives in the buy-out? These are interesting ethical questions that a lawyer must consider when they are dealing with a less-than-forthcoming client. The lawyer must ask himself or herself, does my silence or inaction lead to my liability? The detail in Thorton that really seemed to stick with the court was the fact that Follensbee and Thornton were partners, and as the general partner, Follensbee owed fiduciary duties to Thornton. In the court’s eyes, Jenner & Blocks alleged aiding and abetting of Follensbee’s breach of fiduciary duties raised the lawyers to conduct to an actionable level.

Failure to List Legal Malpractice Lawsuit as an Asset In a Bankruptcy Leads to Dismissal of Lawsuit

In a recent article in the Chicago Daily Law Bulletin a decision by the Illinois Appellate Court was discussed dealing with the failure to schedule legal malpractice claims in a bankruptcy proceeding (Unfortunately, the case itself is unpublished, Dawn and Donald Patrzykont v. Randall A. Wolff, No. 1-07-0238). According to the article, a couple of weeks ago the Illinois Appellate Court dismissed a couple’s legal-malpractice lawsuit based on a lack of standing because of their failure to list the cause of action as an asset during their bankruptcy proceeding. The Court wrote that when a debtor files a bankruptcy petition, he must file a schedule of assets and liabilities, including any cause of action that accrued prior to the bankruptcy filing. A trustee is then assigned to handle the debtor’s property , with the trustee having the exclusive right to pursue the causes of action listed in the bankruptcy schedule. The Court further explains that a trustee can abandon a scheduled asset, but if an asset is not properly scheduled (like in the present case) it is not abandoned when the bankruptcy case is closed. Consequently, if a legal malpractice action is unscheduled in the client’s bankruptcy the claim remains the asset of the bankruptcy estate (not the client) even after the bankruptcy case is closed.

Blackwater Legal Malpractice Suit Dismissed

Articles on and detail how a $30 million legal malpractice suit brought against the Law Firm Wiley Rein by Blackwater Security Consulting has been dismissed for a second time. In 2004, a wrongful death suit was filed against Blackwater by the families of four former employees who were brutally killed in Fallujah, Iraq. The employees were security guards on a mission that went terribly wrong – they were ambushed, burned, beheaded, mutilated and their bodies were paraded around Fallujah and hung from a bridge as reporters captured the incident on film. PBS story here.

After losing the wrongful death suit, Blackwater filed suit against the attorneys who represented them arguing that the law firm should have had the wrongful death case removed from state court in North Carolina to federal court – where the company alleges it had a better chance of winning. The theory for removal was based on a statute that requires all suits against “federal officers” be heard in federal court. In both dismissals of the case, the judges found that Blackwater’s argument that a federal court would have ruled differently from the state court purely speculative since the federal court might well have ruled that the private security company’s employees were not federal officers.

Illinois Appellate Court Holds Client’s Settlement of Underlying Case Does Not Preclude Malpractice Claim

An Illinois appellate court recently held that under the doctrine of judicial estoppel, a client’s statement in court that she understood and agreed to the terms of her divorce settlement did not bar the client from bringing a legal malpractice claim alleging her attorney failed to conduct adequate discovery and gave her negligent advice.

The doctrine of judicial estoppel is designed to protect the integrity of the judicial process by precluding a party from asserting a position in a judicial proceeding that is totally inconsistent with a position the party asserted in a prior judicial proceeding. In the instant case, the defendant attorney argued that the client’s testimony at the divorce settlement prove up hearing that she understood and agreed to the terms of the divorce settlement precluded the malpractice action. The Court rejected this argument finding that because the client’s testimony in the dissolution proceeding was predicated on her attorney’s negligent failure to conduct adequate discovery and the attorney’s negligent advice, the testimony in the prove-up was not inconsistent with the allegations of malpractice.

The case probably would have been decided differently if the plaintiff client had alleged in her malpractice action that she did not understand the terms of the divorce settlement; instead, it was alleged that the attorney’s malpractice prevented the client from making an informed decision as to whether to accept the divorce settlement. See, Wolfe v. Wolfe, 2007 WL 2350187 (Ill.App., Aug. 2007).

Justice Sandra Day O’Connor Launches New Civics Web-Site for Kids!

I happened to stumble across a great new website that all parents, students, teachers and grandparents should know about – so spread the word!  Justice Sandra Day O’Connor recently launched which is a site containing a wealth of knowledge for children on American Civics and the Judicial Branch.  I plan on spending some time with my kids on it this weekend.  Check out Justice O’Connor’s recent appearance on the Daily Show with Jon Stewart promoting the site (watch the video clips).  During the interview, Justice O’Connor stated some shocking statistics – she said “[o]nly a third of young Americans can name the 3 branches of government, much less know what they do..but 75% can name at least one American Idol judge.”  She also pointed out that today half of the states in America do not require Civics as a part of the school’s required curriculum.