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Posts Tagged ‘malpractice’

In Attorney Malpractice Suit Alleging “Negligent Settlement,” Massachusetts Appeals Court Holds No Expert Testimony Is Needed to Show “Fair Settlement Value” of the Underlying Claim

Posted on: July 10th, 2019

By: Ben Dunlap

The Massachusetts Appeals Court recently addressed the requirements for expert testimony in an attorney malpractice suit, concluding lack of an expert opinion on “fair settlement value” was not fatal to the plaintiff’s case.

Marston v. Orlando, 95 Mass. App. Ct. 526 (2019) arose from injuries sustained by a worker on an offshore light tower. The injured worker retained counsel to pursue a workers’ compensation claim and also federal law claims against his employer and other parties. His attorneys negotiated a $7,500 lump-sum workers’ compensation settlement and a $200,000 settlement of the federal claims.

Following the settlement, the injured worker’s conservator brought an attorney malpractice action against the attorneys, alleging the settlement was inadequate in light of the severe injuries sustained, and that the attorneys “pressured” their client to accept an inadequate settlement to “disguise” their negligent handling of the case. Among other issues, the plaintiff contended the attorneys took certain positions in the workers’ compensation case that may have precluded recovery in the federal claims.  The plaintiff proffered expert testimony regarding the requisite standard of care applicable to an attorney practicing in Massachusetts but no expert testimony on the issue of what a “fair settlement value” would have been in the underlying case.  The trial court dismissed the case on the eve of trial, ruling the plaintiff was required to show the settlement was “unreasonable” and failed to do so because he lacked expert testimony regarding the “fair settlement value” of the claim.

On appeal, the plaintiff argued, among other things, that the trial judge misapplied the law as to the requirement for expert testimony.  The Appeals Court, revisiting the standards set forth in Fishman v. Brooks, 396 Mass. 643 (1986), agreed with the plaintiff and vacated the trial court’s dismissal, concluding that “[t]he absence of an expert opinion on fair settlement value was not fatal to the conservator’s legal malpractice case.”

The Appeals Court explained there are two ways to establish attorney malpractice based on a “negligent settlement.” One method rests on proving the “case within the case.”  Using this method, the plaintiff must show first that the attorneys breached the standard of care in their settlement of the underlying claims, and second, that if the claims had not been settled, the client would have recovered more than he received in the negligently-obtained settlement.  As in most jurisdictions, Massachusetts law requires expert testimony to prove the attorneys breached the standard of care (except where a breach is “obvious”), but using the “case within the case” method, an expert is not needed to prove what a fair settlement would have been. Instead, a jury could determine what the plaintiff would have recovered in the absence of a settlement – with or without expert testimony.

The second method of proving attorney malpractice relies on the “fair settlement value” of the underlying case. To prevail using this method, a plaintiff shows that absent the attorney’s negligence, he would have obtained a more favorable settlement. The damages are the difference between the settlement obtained and what the fair settlement value would have been in the absence of any malpractice.  This method requires an expert to show what the fair settlement value would have been.

Because the plaintiff in Marston sought to prove malpractice using the first method – the “case within the case,” he was not required to present expert testimony to show the “fair settlement value.”

The Appeals Court’s decision brings into focus two distinct methods for proving an attorney malpractice case under Massachusetts law and clarifies the differing requirements for expert testimony with each method. It also highlights an issue that in many other jurisdictions is unsettled. Although most jurisdictions recognize some form of the “case within the case” method for proving an attorney malpractice claim, the treatment of the “fair settlement value” method varies widely. Some, like California, New Jersey, and New York, permit the use of the “fair settlement value” method but caution against damages that are too “speculative,” suggesting expert testimony may be needed establish the claim. Others, like Pennsylvania and Georgia, generally disfavor claims for “negligent settlement,” regardless of the theory pursued. Florida law permits recovery for “negligent settlement” but appears to favor the “case within the case” method of proof. The Marston case is a significant addition to this developing area of the law.

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

About Accounting Malpractice

Posted on: July 9th, 2019

By: Eric Martignetti

Today, Massachusetts’ highest court did away with an important defense for an accountant who faces a claim of accounting malpractice brought by a client who has committed fraud. In Chelsea Housing Authority v. Michael E. McLaughlin et al., the Supreme Judicial Court held that Mass. Gen. Laws c. 112, § 87A ¾ pre-empts the common law doctrine of in pari delcito. Accordingly, as the SJC held, “where a plaintiff sues an accountant for negligently failing to detect the fraudulent conduct of the plaintiff, the plaintiff may recover damages from the accountant, but only for the percentage of fault attributed to the accountant (as compared to the fault of all others whose fraudulent conduct contributed to causing the plaintiff’s damages).”

After a lengthy examination of the legislative history of § 87A ¾, the SJC concluded that “the Legislature sought to remedy… not only the potential unfairness to accountants of joint and several liability, but also the need to hold accountants accountable for negligently failing to detect and reveal financial fraud committed by their client and its officers.”

Before today’s decision, in pari delicto was a powerful defense because it generally prevented an accountant from being held liable for accounting malpractice where a client committed fraud and was at least “in equal fault” with the accountant. After today’s decision, however, the in pari delicto defense is no longer available to an accountant where a client has committed fraud.

Importantly, because § 87A ¾ applies to all individuals or firms licensed to practice pubic accountancy in Massachusetts, accountants performing any level of services—whether compilation, review, or audit—face potential liability where a client has committed fraud. Although an accountant’s liability is limited to “the percentage of [its] fault in contributing to the plaintiff’s damages,” its liability cannot be eliminated altogether by in pari delicto.

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

Engagement Letters Can Reduce The Risk of a Legal Malpractice Claim

Posted on: April 26th, 2019

By: Greg Fayard

Lawyers often ask: what can I do to reduce the risk of a legal malpractice lawsuit? They can do several things, but a clear, narrowly-tailored engagement letter can certainly help decrease the risk of a claim. Here are some tips on effective lawyer-client engagement letters.

• Treat the letter more as an opportunity to build rapport with the client, and less as a formal, intimidating contract. How the relationship begins often determines how it will end, thereby mitigating the risk of a dispute down the road.

• Specifically, identify who the client is to avoid confusion. For example, an engagement letter can state the client is a corporation while excluding officers, directors and shareholders. Stating who is not the client can be as important as stating who is the client.

• State clearly how long the representation will last. Will it end upon settlement, a plea, a conviction, judgment enforcement, but not an appeal? For transactional matters, will the representation end when funds have been transferred and received or after any monitoring provisions lapse? A well-defined length-of -representation clause can also aid the lawyer in a statute of limitations defense. Statutes of limitation begin to toll on termination of the lawyer-client relationship.

• A good engagement letter should also specify precisely the fees in a matter, how fees are calculated, how fees are different than costs, and who is responsible for costs. Contingency matters should also be precise in terms of the percentage going to the attorney, and if different percentages apply, when those percentages apply. Whether a personal injury attorney is entitled to additional funds upon successfully negotiating a medical lien should be succinctly laid out as well. However, the client should be given the opportunity to consult independent counsel with regard to extra attorney compensation for negotiating a medical lien.

• Most importantly, an engagement letter that specifies the scope of representation can help address any misunderstandings over whether the lawyer was to advise a client on all legal issues faced by the client, or only a specific matter. A general scope of representation clause in an engagement letter can lead to a client believing the lawyer represents the client on all of its legal issues, indefinitely, causing some clients to believe the lawyer has an ongoing duty of representation.

For any questions, please contact Greg Fayard at [email protected].

Cooperation: A Policyholder’s Duty…or Downfall?

Posted on: April 12th, 2019

By: Marc Finkel

A policyholder’s duty to cooperate with its insurer is one of the most significant commitments made in the relationship between an insurer and its insured. It goes without saying that the consequences can be dire for an insurer when this commitment is broken. However, a potential remedy is possible when insurers are caught in the predicament of facing surprise exposure due to a policyholder’s failure to cooperate and adequately updating the insurer as to claims in litigation. This is illustrated in the recent case Ironshore Specialty Insurance Co. v. Conemaugh Health System Inc. et al., 2019 U.S. Dist. LEXIS 45690, currently being litigated in the Western District of Pennsylvania.

In that case, Ironshore defeated Conemaugh’s attempt to dismiss an insurance coverage dispute that began when Conemaugh, a large regional health care provider in western Pennsylvania, was found liable for a $19,000,000.00 award in a medical malpractice action. Ironshore, an excess insurer for Conemaugh, routinely requested updates from Conemaugh and Conemaugh’s defense counsel concerning the status of the underlying malpractice action. Ironshore was informed that the underlying matter was potentially “problematic” for Conemaugh, but Ironshore was never informed of the potential for a verdict that would trigger excess coverage under the Ironshore policy. Furthermore, Ironshore was not informed of the trial date or that there had been ongoing pre-verdict settlement discussions which would have required participation from Ironshore.

The underlying medical malpractice action was ultimately settled with a contribution from Ironshore that was subject to a “continued reservation of rights, including its right to recoup.” In denying Conemaugh’s motion to dismiss, the Court found that the Ironshore policy’s Cooperation Clause unambiguously required Conemaugh to “cooperate” with Ironshore by “making available all such information and records as [Ironshore] would reasonably require” upon Ironshore’s election to associate in the “investigation, settlement, or defense” of the underlying claim against Conemaugh. The Court further found that Ironshore’s allegations of receiving inadequate information concerning the status of the underlying claim, despite having made repeated requests for such information from its insured, was enough to allege a breach of the Cooperation Clause, thereby preserving Ironshore’s right to seek a claw back of the share it paid to settle the malpractice action.

In the coverage dispute, Ironshore positioned itself to potentially recover part or all of its contribution to the settlement proceeds from Conemaugh by taking the following steps beginning during the pendency of the underlying litigation: (1) making a clear and express election of its rights to associate; (2) regularly requesting reasonable updates from its insured; and (3) reserving its rights to seek recoupment as part of the underlying settlement agreement. The court recognized these efforts as solid bases for limiting Ironshore’s exposure by virtue of questionable cooperation by its insured.

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

Revisiting the Applicability of the Entire Controversy Doctrine to Legal Malpractice Claims

Posted on: April 2nd, 2019

By: Nicole Graham

The New Jersey Supreme Court recently revisited the applicability of the entire controversy doctrine as it relates to legal malpractice claims. In Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C., 2019 N.J. LEXIS 272, 219 WL 1065049 (N.J. 2019), the client asserted a claim for legal malpractice against the law firm three years after a default judgment was entered against the client in a collection action the law firm had previously filed. The law firm moved to dismiss based on the entire controversy doctrine because the legal malpractice claim was not raised as a counterclaim in the collection action. The clients claimed they were not obligated to assert a malpractice claim in the collection action because (1) the statute of limitations on the malpractice claim had not run and (2) they did not know during the pendency of the collection action that the law firm had committed malpractice. The clients argued they were representing themselves in the collection and as pro se litigants could not identify a malpractice claim. They further claimed that requiring a pro se litigant to identify malpractice claim is contrary to public policy.  The law firm argued the client did know about their claim as evidenced by their answer to the collection action complaint in which they alleged there were billed for legal work that was unnecessary and contrary to their direction.

The trial court dismissed the legal malpractice claim finding it was precluded by the entire controversy doctrine. The appellate court affirmed. The New Jersey State Bar Association filed an amicus brief and argued that unless the entire controversy applied, no attorney’s collection judgment would be considered final because the client would be permitted to bring a malpractice claim at a later stage.

The New Jersey Supreme Court reiterated its holding in Olds v. Donnelly, 150 N.J. 424, 443, 696 A.2d 633 (1997), that the entire controversy doctrine does not compel a client to assert a legal malpractice claim against an attorney in the underlying litigation in which the attorney represents the client. The Court noted, however, a collection action brought by a law firm against its client for unpaid legal fees does not constitute “underlying litigation” because the lawyer and client are already adverse and, therefore, such litigation does not raise the privilege and loyalty concerns that warrant the exception to the entire controversy doctrine recognized in Olds. Therefore, a court may apply the entire controversy doctrine to preclude a later filed legal malpractice claim the client declined to assert in the attorney’s action to collect unpaid legal fees.

Such preclusion is not absolute. The entire controversy doctrine is an equitable doctrine whose application is left to judicial discretion based on the factual circumstances of individual cases. The client can avoid preclusion by demonstrating the prior forum did not afford a fair and reasonable opportunity to have fully litigated the malpractice claim. The court may consider such issues as the steps required to investigate, file and prosecute the malpractice claim in that forum, the status of the collection action when the malpractice claim accrued, the time constraints imposed by the rules of court, and the prospect of obtaining extensions of time to litigate the malpractice claim. A client may also avoid preclusion if he or she did not know, and should not have reasonably known, of the existence of the malpractice claim during the pendency of the collection action.

The New Jersey Supreme Court remanded the case to the trial court to determine when the legal malpractice claim accrued and whether the malpractice claimants would have had a fair and reasonable opportunity to have fully litigated their claim in the collection action.

When defending a legal malpractice claim where the defendant law firm previously litigated a collection action for unpaid fees, it is not enough to argue the entire controversy doctrine bars the claim. The defendant law firm must also prove the client knew or should have reasonably known of the existence of the claim during the pendency of the collection action, and that the forum in which the collection action was pending would have provided the client a fair and reasonable opportunity to fully litigate the malpractice claim.

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