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Archive for the ‘Professional Liability and MPL’ Category

California Lawyers Now Have A Duty of Diligence

Posted on: September 13th, 2019

By: Greg Fayard

The prior rules of professional conduct for California lawyers required them to be competent but were silent on also being “diligent.” Under the latest version of the rules, California lawyers now have an express duty of diligence. (Rule 1.3) That is, California lawyers can now be disciplined by the State Bar for neglecting or disregarding a matter.

The State Bar, after all, is a consumer protection organization, and its focus is on protecting the public from unscrupulous or incompetent lawyers. It is not a trade association that promotes lawyer interests.

Hence, California lawyers now have a duty “to get the job done”—the new duty of diligence. Lawyers should therefore stay on top of their matters and not let them languish. Doing so could expose the lawyer to a State Bar complaint.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

NJ Appellate Division Finds Trial Court Had No Jurisdiction in Fee Dispute Between Firm and Client In Successful Legal Malpractice Action Against Client’s Previous Attorney

Posted on: September 11th, 2019

By: Erin Lamb

A three-judge panel of the New Jersey appellate division has ruled that a trial judge, having presided over a successful legal malpractice trial, had no jurisdiction to award fees in a dispute between a law firm and its client that was unrelated to the shifting of Plaintiff’s fees from her to the negligent counsel, as required under the Saffer decision.

Plaintiff hired a firm to represent her in a malpractice suit against an attorney who had advised her on the purchase of a home in Mantoloking, Ocean County, New Jersey. She claimed the attorney failed to inform her that the property contained a storm water easement. She also brought suit against the New Jersey Department of Transportation for negligence over its installation of a storm water pipe under the foundation of her home. The suit named other Defendants who were not involved in the trial.

In 2016, a jury found her previous attorney liable and ordered her previous attorney to pay $980,000 in compensatory damages.  The jury also found the NJDOT, the only other remaining defendant, was not liable.

In New Jersey, negligent attorneys are responsible for the reasonable legal expenses and attorney fees incurred by a former client in prosecuting the legal malpractice action. Saffer v. Willoughby, 143 N.J. 256, 272 (1996). The Saffer court determined such costs were “consequential damages that are proximately related to the malpractice.”  Plaintiff was therefore eligible for an award of counsel fees and costs. The trial judge held a bench trial and awarded Plaintiff $99,506.10 in consequential damages.

There were, however, two outstanding issues pertaining to the costs and fees – 1) her previous attorney likely was not liable for all of Plaintiff’s consequential damages, because the Action had included other parties and causes of action, and 2) the firm representing her in the malpractice action had remaining, unpaid, legal bills, which exceeded the awards of the compensatory and consequential damages. The trial court ordered limited discovery into these issues of apportionment, focusing on the apportionment of the costs and fees to be paid by the negligent previous counsel.

Plaintiff reached a settlement with her previous counsel on the costs and fees claim and informed the court of that development. The only remaining issue was the unpaid bills of the firm that represented her in the malpractice action. Plaintiff had already paid the firm $400,000.  The firm claimed $1.7 million remained unpaid.

The trial judge informed both parties that he would issue a resolution if they could not resolve the dispute. Both the firm and Plaintiff objected to the trial court’s desire to determine the reasonableness of the costs and fees. The firm asserted the retainer agreement listed Cook County, Illinois, as the forum for any disputes arising from the attorney-client relationship. The firm duly informed the trial court that they objected to any further determinations from the judge as New Jersey had no jurisdiction to determine the reasonableness of the costs and fees. Plaintiff informed the court she intended to dispute the reasonableness of Freeborn’s fees separately. However, she never pursued any action.

Despite the objections, the trial judge proceeded with a plenary hearing on the reasonableness of the firm’s fees.  It entered an order reducing the $1.7 million bill to $359,000. The trial court claimed jurisdiction was proper under a 2005 Appellate Division case, Levine v. Levine, 381 N.J. Super. 1 (App. Div. 2005).

The appellate division disagreed with the trial court’s reasoning and found it should not have relied on Levine, which involved the right of an attorney in a matrimonial action to petition for a lien on a client’s assts, and protecting substantive and procedural due process rights regarding attorney-client fee disputes under the New Jersey Attorney’s Lien Act.

The appellate court noted that the firm had not taken any steps to involve the trial court in their fee dispute with their client; no petition had been filed seeking a lien and determination under the Attorney’s Lien Act; and the court proceeded under the objection of the firm. Plaintiff also had not taken any steps to involve the trial court. There was no subject matter jurisdiction. The firm was never named as a party in any action related to the claim.

The trial court had no legal authority to assert jurisdiction, rendering any relief granted a legal nullity. The Appellate Division ruled that the firm must file a separate cause of action to adjudicate its claim for fees against its client and expressly rendered no opinion as to the enforceability of the forum selection clause in the retainer agreement.

The case is Lucas v. 1 on 1 Title Agency, et al. No. A-2217-16T2 (App. Div. 2019).

If you have any questions or would like more information, please contact Erin Lamb at [email protected].

 

Don’t Shoot the Messenger: Tips for Avoiding Claims of Negligent Contract Negotiation

Posted on: September 4th, 2019

By: Catherine Bednar

When negotiating on behalf of a client, an attorney focuses on obtaining the best possible deal, balancing the client’s needs and objectives against the other side’s demands as well as the limitations of the law. An attorney must also be mindful, however, of the possibility the client might someday bring a malpractice claim in if the deal goes sour later.

In Jenkins v. Bakst, 95 Mass. App. Ct. 654 (July 23, 2019), the Massachusetts Court of Appeals recently affirmed an award of summary judgment in favor of an attorney, Bakst, who had negotiated an employment contract on behalf of the Plaintiff, Jenkins. In 2003, Jenkins entered into negotiations with a security services company, Apollo, to join the company as its president and chief operating officer.  Ten years later, when Jenkins left Apollo he was disappointed by the valuation of his stock buyout under the employment agreement.  After challenging the stock valuation, Jenkins settled his claims with Apollo. He then pursued a malpractice claim against his attorney, who had proposed the methodology used in the contract.

Before Bakst entered into any negotiations with Apollo, Jenkins informed Bakst of his wishes regarding the stock buy-back clause. The draft employment agreement prepared by Apollo’s counsel provided for buy-back of Jenkins’s stock at book value. Jenkins told Bakst he wished to receive fair market value for his shares, which he believed should be measured at between twenty-five to thirty-five percent of annual revenue, equivalent to 3 to 4 months of the company’s average revenue. Notably, an existing agreement between Apollo and two other shareholders provided for buy-back of two months of the average annual revenues. Bakst told Apollo’s counsel that Jenkins would not accept book value and believed Apollo’s fair market value should be equal to four months of revenues, not two months. Bakst also suggested an alternative method for establishing Apollo’s fair market value, which Bakst had used in agreements for other clients. Apollo’s counsel accepted Bakst’s proposed alternative methodology.

Jenkins argued Bakst was negligent by failing to follow his instructions for a buy-back provision based on three or four months of revenues. The superior court ruled a fact finder could not find either that Bakst had breached the standard of care or caused Jenkins any injury.

In reaching its decision, the court noted Bakst’s testimony that he had described the alternative valuation method to Jenkins before proposing it to Apollo’s counsel. Jenkins, on the other hand, testified he could not remember his conversations with Bakst prior to signing the employment agreement. The court found there was no evidence Apollo would have accepted Jenkins’ formula based on three to four months of revenues.  The court further noted Jenkins was an

experienced businessperson. It was undisputed he read the employment agreement, initialed the relevant pages, and then signed it.  Because Jenkins could not contradict Bakst’s testimony that he had explained the valuation before Jenkins signed, there was no material fact dispute to survive summary judgment.

The Jenkins case highlights potential pitfalls for attorneys when negotiating contracts. While an attorney may not be able to entirely avoid a lawsuit by an unhappy former client, there are some measures one can take to minimize the risk.

  1. Know the Client: Be sure to ask which terms are most important to the client. What concessions is the client willing to make? What terms are considered deal-breakers?
  2. Communicate Often and In Writing: In Jenkins, the client did not rebut the attorney’s testimony he had counseled his client about the buy-back provision. But what if the client had testified differently? In order to minimize risk, an attorney should take care to communicate with the client during the course of a contract negotiation, ideally in writing. Correspondence to the client detailing what terms have been accepted, rejected or modified, discussing the pros and cons, and advising the client of their options may avoid any misunderstandings down the road as to how the final agreement was reached. Tracking changes in a document is another useful too for showing the client exactly how the contract has changed.
  3. Confirm Understanding of Terms: Make sure the client understands the terms of the contract/agreement. Ask the client in writing if the final version is agreeable and obtain their written confirmation before proceeding.
  4. Read, Initial and Sign: In Jenkins, the court cited the fact that the Plaintiff had initialed the relevant pages and signed the contract. While one might think it goes without saying, say it anyway: have the client read and sign the entire agreement, initialing each page of the contract.

If you have any questions or would like more information, please contact Catherine Bednar at [email protected].

 

Does a California Lawyer Have to Convey All Settlement Offers to the Client?

Posted on: July 31st, 2019

By: Greg Fayard

Not necessarily. Under Rule 1.4.1 of the ethics rules for California lawyers, in criminal matters, all terms and conditions of plea bargains or other dispositive offers, whether written or oral, have to be communicated to the client promptly. In non-criminal matters, all WRITTEN offers have to be promptly communicated. But what about a VERBAL offer in a non-criminal case? That’s a judgment call for the lawyer. If the lawyer believes the verbal offer is a “significant development,” then, yes, an oral offer should be promptly conveyed to the client. If, however, only a nuisance value oral offer is made, and the lawyer does not believe such offer is significant, then the lawyer cannot be disciplined for failing to communicate said offer. Of course, in the off chance the State Bar investigated the lawyer’s decision to not convey a verbal offer, the Bar would determine if the oral offer was significant or not.

That said, the best practice is to convey all offers, regardless of form, to the client, and to do so promptly.

If you have any questions or would like more information, please contact Greg Fayard at [email protected], or any other member of our Lawyers Professional Liability Practice Group, a list of which can be found at www.fmglaw.com.

Pennsylvania Superior Court Maintains a Contempt/Sanctions Proceeding is a ‘Civil Proceeding’ Contemplated by the Dragonetti Act

Posted on: July 29th, 2019

By: Courtney Mazzio

In Pennsylvania, the Dragonetti Act created a wrongful use of civil proceedings cause of action, when a person who takes part in the procurement, initiation or continuation of civil proceedings against another is subject to liability to the other for wrongful use of civil proceedings if: (1) he acts in a grossly negligent manner or without probable cause and primarily for a purpose other than that of securing the proper discovery, joinder of parties or adjudication of the claim in which the proceedings are based; and (2) the proceedings have terminated in favor of the person against whom they are brought. See 42 Pa.C.S.A. § 8351(a). Attorneys may be found liable under this cause of action.

Raynor v. D’Annunzio is a Dragonetti action brought by Plaintiff/appellant attorney,  stemming from contempt proceedings where sanctions were sought against her in an underlying civil suit. Raynor v. D’Annunzio, 2019 PA Super 72, 205 A.3d 1252. In the underlying action, a Philadelphia County Judge ultimately issued over $900,000 in sanctions against counsel for attempting to elicit certain testimony from her expert that was off-limits per a pre-trial in limine ruling. Plaintiff/appellant then appealed ruling to the Superior Court. There was a question over whether counsel had (1) intentionally violated the in limine ruling with her line of questioning of the expert, particularly where there was no  order instructing counsel to instruct her witness not to mention Plaintiff’s smoking history existed; and (2) whether there was evidence of record proving that counsel colluded with the expert in order to actively ignore the in limine ruling during questioning. On these bases, the Superior Court reversed the sanction orders of the trial court.

Plaintiff/appellant then brought this separate Dragonetti action against Plaintiff’s counsel in the underlying action, claiming counsel knew their requests for sanctions and contempt were unsupported by the facts and law, yet they pursued the action anyway in an effort to ruin counsel’s livelihood and professional life. Appellee filed Preliminary Objections, which resulted in the rare dismissal of a case with prejudice, in part on the basis that the phrase found in the Pennsylvania cause of action  “procurement, initiation, or continuation of civil proceedings” means the filing of a civil action, and does not include the filing of a post-trial motion. See id. at 1260. Plaintiff/appellant once again appealed the decision of the trial court. The Pennsylvania Superior Court found that a motion seeking a finding of contempt and a request for sanctions is, separate and distinct from post-trial motions alleging trial court error filed in the underlying lawsuit for the purposes of the Dragonetti Act. See id. at 1261-62. They determined it is essentially the same as the filing of a civil lawsuit. See id. Put another way, the Court found that seeking an adjudication of contempt and requesting sanctions constituted the procurement, initiation, or continuation of civil proceedings as contemplated by the Dragonetti Act. See id.  On this basis, the Court reversed the decision of the trial court sustaining the Preliminary Objections and remanded it to the trial court. It remains to be seen how the trial court will ultimately rule in this longstanding dispute riddled with contention.

If you have questions or would like more information, please contact Courtney Mazzio at [email protected].