Protecting Legal Consumers.

Posted on May 12, 2012 by Matthew Weisberg

In the context of attorney-client relationships, people often forget that a client is a consumer of legal services. Given the scope of this definition of consumer, it is inevitable that a client may attempt to bring a cause of action under consumer protection laws in addition to common law malpractice. Beyers v. Richmond, 594 Pa. 654 (2007) is an interesting case which considers the applicability of consumer protection statutes to legal representation which may be more deficient than allowable.

In the case, Donald Richmond admitted to misappropriating settlement funds of the client. The client, Beyers, was injured in an automobile accident, and was represented byRichmond. As part of the representation, a contingency form was signed which would give appellee 42.5% of the eventual settlement. When the case was settled, the firm received the check, andRichmond, converted certain portions to pay a personal bill, some was put in escrow, and the other charges were itemized.

Based upon the distribution schedule, the court ordered Beyers be paid. Beyers then contested the deductions taken byRichmond. Finally, Beyers filed a complaint for negligence, conflict of interest, breach of fiduciary duty, violation of consumer protection laws, and fraudulent misrepresentation. A bench trial was held on damages only at which time, the Judge held the consumer protection claim under advisement. Several months later, the court ruled in favor of Beyers on the consumer protection claim, awarding her treble damages. Eventually, trebled damages in the amount of $467,637.20 were ordered againstRichmond, and his law firm.

The superior court reviewed this decision, and upheld the verdict againstRichmond. They believed that because the damages arose not based on the practice of law, but rather as a result of personal actions, the profession did not provide a shield against these charges. The court believed that the various violations committed byRichmondplaced the actions within the scope of consumer protection.

The Pennsylvania Supreme Court believed otherwise. Doctors were analogized to lawyers, in that doctors are not covered by the consumer protection statutes. Previously, the Court stated that consumer protection laws are intended to apply to trade and commerce, not medical care. These laws protect consumers from misrepresentation in buying goods or services, but not in receiving medical advice.

Additionally, the Court was persuaded by a case which dealt with the consumer protection statutes applicability to a debt collecting law firm. In that case, the Court held that attorneys who regularly engage in debt collection conduct apart from their legal representation are covered under federal consumer protection statutes. Debt collection was considered a trade or commerce. Similarly, a doctor, another professional has only been found to be vulnerable to attack under consumer protection when engaging in debt collection.

Most importantly perhaps was the Court’s consideration of itself as the authority in policing attorney behavior throughout the state. InPennsylvania, the Supreme Court has been granted authority to police attorney behavior by virtue of the State Constitution. Thus, all laws which would otherwise control attorney behavior are essentially preempted by the Court’s rulemaking authority. Similarly, it is the judicial branch’s role to govern attorneys, and separation of powers demands the legislature not encroach in this area. If the consumer protection laws apply to attorneys, then the legislature would be given authority to police attorneys.

Pursuant to the Court’s authority, they have passed rules of professional conduct, as well as rules of disciplinary enforcement. This rule-making power given to courts was used byPennsylvaniato strike down a statute which criminalized conduct of an attorney for compensating a non-attorney for client referrals. Thus, the conduct in this case is a violation of Pennsylvania Rule of Professional Conduct 1.5(c), in which an attorney must immediately notify a client or third party when they receive funds or property that person has an interest in. The lawyer should then promptly deliver such funds or property. Rules 8.4(b) and 8.4(c) provide that attorneys may not engage in criminal conduct which adversely affects their trustworthiness, and it is misconduct to engage in deceit or misrepresentation.

In addition to these rules, the Court used Rule 1.15 to govern client trust accounts to safeguard property. All rules mentioned would then be susceptible to enforcement under Disciplinary Rule 514 which addresses reimbursable losses caused by attorney dishonesty. Thus, although the Court was deeply disturbed by the behavior ofRichmondin this case, they were forced to vacate the verdict.

This is an interesting situation in that often times, legal advertisements are similar to those for any other good or service. It is interesting the Court acknowledged the trust broken in this case, but was virtually powerless to change the law. Whether this is good or bad, is a personal opinion. However, it is interesting that the attorney in this case saved hundred of thousands of dollars by being ordered to only reimburse losses, instead of paying treble damages as punishment.

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Better Safe than Sorry.

Posted on May 6, 2012 by Matthew Weisberg

Swain v. Alterman, A-4214-10T4, 2011 WL 6112126 (N.J. Super. Ct. App. Div. December 9, 2011) is an important case inNew Jersey for legal malpractice plaintiffs who do not properly procure an affidavit of merit. The affidavit of merit is a letter from another attorney stating that the defendant attorney did not uphold his duty as required by the profession.

This case originated from an accident inDelawarebetween theNew Jerseyplaintiffs, and aNew Yorkdriver. On June 9, 2006, the accident occurred, injuring Harry Swain. In September, 2006 Harry, and his wife visited the law firm of Alterman & Associates inCherry Hill. At that meeting, the Swains signed an agreement to be represented by Alterman in this case. There was never a lawsuit filed in this case, and in fact the record of the case disclosed that this September meeting was the only one which ever occurred. No investigation of the injury or accident ever occurred.

According to Alterman, he advised the Swains to seek counsel inDelawarebecause he was not licensed to practice law in that state. He also stated that his staff made various attempts to make further contact with the Swains in order to forward their case toDelawarecounsel. He alleged that as a result of lack of contact, he closed the file prior to the expiration of the statute of limitations.

The Swains disputed Alterman’s fact recitation. They claimed to have signed agreements with Alterman, at which time he kept the copies. Mr. Swain claimed to have made several attempts to contact Alterman’s office numerous times, but with the exception of 2 times, never received a return call. The Swains believed that Alterman was handling their case based on an e-mail from 2007 in which Ms. Swain received an e-mail containing advice from Alterman to come talk about the injury case, because the status had changed. The Swains also, never received a letter containing advice to contact another attorney, or informing them their case was being dropped.

According to the plaintiffs, Alterman called on the day the statute of limitations was set to expire, at which time they promptly returned his call. They received no answer, and tried to call once more. Following the lack of contact, the Swains sought out new counsel to handle the complaint. In February 2010, Alterman was inFloridalitigating a case and advised the new attorney he had lost the file, after first claiming it was in storage. The plaintiffs then filed this claim in July of 2010 based on mishandling the file, failing to file the case within the statute of limitations, and overall breach of duty. The trial court initially dismissed the case because of the lack of a letter of merit. The plaintiffs disputed the necessity of such a letter.

The court explained the applicable case law to such circumstances. Filing of a certificate of merit is partially dependent on whether expert testimony will be needed to prove any element of the legal malpractice cause of action. To establish legal malpractice requires proof of the existence of an attorney-client relationship creating a duty on the attorney, the breach of the duty, and proximate causation of harm. In most cases, expert testimony is needed to prove these elements. But there are times when an attorney’s duties are so basic, that a court may decide as a matter of law, that an expert report is not needed. This exception is often called the common knowledge exception.

Cases within the exception mean the actions being contested are so common, that a regular juror can understand a duty has been breached by the attorney. In determining whether the affidavit is needed according toNew Jersey’s statute, a court should determine if the facts supporting the claim require proof of a deviation from the attorney’s professional standard of care. If proof is required, then the affidavit is needed unless an exception applies. Common knowledge legal claims glean any real additional support from expert testimony which is why the exception was created. Categories of such cases include failing to investigate a claim, or initiate an action before the statute of limitations expires.

Despite the defense raising issues which would have been outside the common knowledge exception, the court believed no affidavit was necessary. The purpose of the certificate is to act as a barrier to meritless claims based on professional duty. Thus, when a claim is within common knowledge, there is no such barrier, since it is patently obvious that if true, there was a breach. The court believed there was a showing of merit by pleading a cause of action based on failure to file the claim, which is within the spectrum of common knowledge. The court cautioned that it was important to provide affidavits in all malpractice trials, even where they do not intend to rely on expert testimony.

This case while acknowledging that legalese is not a language exclusively for lawyers should provide incentive for certificates of merit to always be filed. It is indicative of defense strategy in at least this case, that by not filing, it is another avenue whereby a defendant may attack the claims of a plaintiff. When a judge puts a discretionary sentence in an opinion such as the one above, it is important to understand that it serves more akin to a highly recommended idea.

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Starting off on the Right Foot.

Posted on April 27, 2012 by Matthew Weisberg

Burns v. Drier, No. 2009-3763, 2010 WL 3398757, June 11, 2010 (Pa. Comm. Pl. Ct. 2012) is a case which shows how important it is to properly draft a complaint. Prior to instituting any lawsuit, the Plaintiff must draft a complaint, affording a defendant a chance to answer. This case primarily involves what facts must be stated within a complaint.

The case originated from an underlying house fire where Ronald Burns filed a suit against Westfield Insurance Company in 2006. The original suit was related to restoration services provided byWestfieldfollowing a fire. In August, 2009 filed a writ of summons related to the institution of proceedings. In September, following the summons, the attorneys filed a pracepice for rule to file complaint, meaning that Ronald Burns had a limited time to file the complaint with the court.

In October, 2009, the plaintiffs then filed a complaint stating that the breach of contract and bad faith claims related to the fire were both meritorious actions. However, the Drier defendants allegedly did not pursue the suit effectively, and thus Burns received a very low settlement compared to the damage. The defendants then filed preliminary objections because they did not believe the complaint as issued by the plaintiffs complied with what was required for complaints.

When drafting a complaint inPennsylvania, it must set forth the material facts on which the claim is based. The evidence is considered in a light most favorable to the non-moving party. In this case, Drier was challenging the complaint, thus all facts must be considered in favor of Burns.

Drier’s first claim was that the Burns complaint failed to specify the case within a case requirement ofPennsylvania. In Pennsylvania, a legal malpractice claim requires the plaintiff to establish that they employed the defendant attorney or can show a duty based on some other relationship, that the attorney charged with malpractice failed to use ordinary skill and knowledge in carrying out their duty, and finally that the attorney’s negligence was the proximate cause of damage  to the plaintiffs. According to the court, the legal malpractice standard inPennsylvaniarequires the plaintiff to prove the underlying action was viable against the putative defendant or Westside Insurance in this case. In drafting the complaint, the court believed that the facts as alleged, met all of these elements. At this stage, Burns didn’t have to prove the facts, he only needed to show, that if true, the legal malpractice action, and “case-within-a-case” were proven. The court agreed that Burns did this.

The defendants did challenge based on lack of specificity regarding time, and location regarded to damages. The court ruled against Burns on these issues, but the reasons were unrelated to legal malpractice.

Drier also challenged the causes of action for breach of fiduciary duty and for breach of contract. InPennsylvania, the court noted that breach of contract between an attorney and a client does not require a specific instruction to be breached. The court believed Burns alleged that Drier violated instructions generally, and thus the complaint for breach of contract was upheld.

Finally, Drier alleged that the breach of fiduciary duty charge was a repackaging of legal malpractice. In essence, they believed that there were no new facts, and thus it did not give rise to an independent cause of action. The court did not agree. While not stating the elements, it is useful to remember from previous postings, that the breach of fiduciary duty requires the plaintiff prove employment of an attorney which would provide a basis for duty, the failure of the attorney to exercise ordinary skill and knowledge, and that such lack of knowledge was the proximate cause of damage to the plaintiff. To actually recover requires the plaintiff to show they would have won on the underlying claim but for defendant’s negligence. The court also agreed with Burns that this breach requires a duty not to participate in self-dealing, and the offending party breaches that duty. Again, Burns probably won this case, because at this stage facts are decided in favor of the non-moving party.

This case is most important for exemplifying the importance of a complaint. In this case, if Burns had not met all the elements of each cause of action in his complaint, it may have turned out better. Luckily, the pleadings he submitted to the court touched on each issue. It is unclear how exact the elements must be touched, but it is important that the pleadings at least touch all the issues.

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How to Get into the Right Place.

Posted on April 22, 2012 by Matthew Weisberg

Last week, I discussed when New Jerseycourts would not have jurisdiction over a defendant attorney. It is only fitting to discuss when jurisdiction would be proper for this week. First American Title Insurance Co. v. Kapchan, A-5953-08T2, 2010 WL 1881896, (N.J. Super. Ct. App. Div. April 12, 2010) is a case which involves a legal malpractice case filed inNew Jersey against an attorney inNew York, involving a property inPrinceton,New Jersey.

The litigation originally arose in relation to a mortgage loan for a single home property in Princeton Borough. At the time, the record owner was Gertrude Banks, and she sought a loan from Accredited Homes, Inc., aCaliforniacompany. As with all refinancing transactions, title insurance was required. Allstates Title Service was the broker that provided the requisite insurance, and its offices were inNew Jersey. Finally, First American Title insurance company provided the actual insurance policy.

The defendant, Kapchan, was licensed inNew Yorkat the time, and did not have offices in the State ofNew Jersey. He did not actively solicitNew Jerseyclients, nor was he licensed to practice inNew Jersey. When asked about his relationship to the property transaction, Kapchan described himself as a settlement agent between Banks and Accredited. The funding for the loan passed through Kapchan’s trust account.

As part of his settlement agent role, Kapchan received instructions concerning how the loan should be disbursed. The instructions specifically denoted 5 relatives of Gertrude Banks that were to receive a portion of the funds. Those identified relatives were all grandchildren of the property’s original owner. Gertrude was the wife of the sixth grandchild who had passed away while still owning the home. The $30,000 specified was signed by Banks, and also by Kapchan, who identified himself as “closing officer.”

There was no closing ceremony where all the papers were signed. Rather, the requisite documents were sent from Kapchan to Banks, in Washington D.C. Eventually, Kapchan sent 5 paychecks to the Banks grandchildren, which were returned to him, because Gertrude was to pay the Banks 5, from her own proceeds. After several years, in 2008, the mortgage note went into foreclosure. In response, the Banks 5 filed actions which reflected a possible cloud on the title, because they were never paid their interests out of the loan proceeds. First American then paid a settlement to each Banks party member, to prevent a cloud on title.

In April, 2009, First American sued Kapchan for their costs of suit, as well as $150,000 in damages. When sued, Kapachan alleged he was a “settlement agent” and that all work related to the loan took place inNew York, precluding suit inNew Jersey. After hearing arguments, the motion judge dismissed for lack of jurisdiction. First American appealed, because they believed that Kapchan had enough minimum contacts to warrant jurisdiction by the State ofNew Jersey.

As recognized in last week’s case, State courts have jurisdiction over individuals to the limits allowed by the Constitution. There are several requirements which must be met for jurisdiction to be Constitutional. First, the defendant must have certain minimum contacts if they are not in theforumState, orNew Jerseyin this case. Second, these contacts must be sufficient to the point that jurisdiction would not work an unfair disadvantage to the defendant. In this case, First American was alleging jurisdiction based simply on the loan transaction between Kapchan and Banks. This is as opposed to general jurisdiction, where a person continuously maintains contacts with a State.

The minimum contacts question must focus on the connection of the defendant to the State, as well as to the litigation. One of the main questions is whether a defendant intentionally acted in a way which allowed them to receive benefit from theforumState. There are several specific interests the court must weigh in making the final determination, including the burden on the defendant, the interests of theforumState, and the plaintiff’s interest in obtaining relief. The court advised that interstate interests and relationships in fostering social policy must also be analyzed.

After reviewing the facts of this case, the court ruled that minimum contacts did exist for the purposes of this lawsuit. It seems one of the court’s main reasons for deciding the case in this direction was that the residence which was at the center of litigation was inNew Jersey. Even though none of the individuals involved resided inNew Jersey, the property itself was a substantial nexus between the State and Kapchan. All disputes developed from the loan transaction related to theNew Jerseyproperty.

The court also determined that Kapchan should have foreseen that his actions could have led to economic damages in theforumState. The court based this on a “but-for” analysis where First American alleged there would have been no damages if Kapchan had not listened to the contrary directions of Gertrude’s attorney. By disbursing the loan to Gertrude, Kapchan set up a potential unfunded liability inNew Jersey.

Kapchan also had relations with Allstates at itsNew Jerseyoffice. He also delivered a bill to that office, and the mortgage note by mail to be recorded. The court believed that Kapchan had a business relationship with Allstates which gave rise to jurisdiction inNew Jerseyas well.

The court believed that physical presence alone did not determine whether a State had jurisdiction. It was the interests which were triggered by the contacts withNew Jersey. Finally, the court noted there was little difficulty for Kapchan to travel fromNew YorktoNew Jersey, and that was not enough of a hardship. Nor was there any problem with the States of the other people involved, since the land at the center of the disputes was inNew Jersey.

The major take-away from this case is that a client will usually be able to know where a malpractice suit is filed based on the scope of representation. Venue is important in lawsuits because different juries may decide cases are worth different amounts. Prior to initiating a lawsuit, a client should sit down with the malpractice attorney representing them, and detail all transactions. At many times, there is more than one State where “minimum contacts” may be fulfilled.

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Novel Thinking.

Posted on April 21, 2012 by Matthew Weisberg

Bayview Loan Servicing, LLC v. Law Firm of Richard M. Squire & Associates, LLC, CA 10-1451, Dec. 14, 2010, 2010 WL 5122003 (E.D. Pa. 2012) is a legal malpractice case concerned with when damages occur, and whether an attorney’s actions rise to a legal wrong which requires a lawsuit. This case involves the intersection of a foreclosure sale with legal malpractice. It also speaks to the importance of knowing a little of the law as a client, because without such knowledge, the plaintiff would not have been able to bring a case.

In the case, Bayview acquired a note and mortgage from MetWest Commercial lender. The mortgage note was taken out against an individual for $262, 500.00 and granted the note holder a lien on the property if this amount were not paid. The individual defaulted on the mortgage in July, 2007, so the owners retained Squire to represent them in a foreclosure action, which they won in January, 2008. The plaintiff subsequently purchased the property at a sheriff’s sale, and then sold it to a 3rd party.

In December, 2008, Bayview instructed Squire to get another judgment against the individual. Squire filed the lawsuit in March, 2009; however they failed to file a petition to fix fair value within 6 months of the foreclosure sale, as required byPennsylvanialaw. The six month period ended shortly before the suit was initiated.

In April 2009, the individual’s wife sought to have the judgment satisfied, based on the failure to fix the fair value of the house within the appropriate time. A Judge approved the satisfaction in June, 2009. Despite the satisfied judgment, a default judgment was served on the individual. He recognized however, that his judgment was already satisfied, and his motion to dismiss the default judgment was granted. The plaintiffs moved to open the judgment in December, 2009, but the Judge denied it. The plaintiff’s subsequent appeal was also recommended to be denied by the judge. The plaintiffs then filed this suit.

The defendants sought to have all claims against them dismissed. The court then analyzed each count in turn. The first was the breach of fiduciary duty, which is a claim commonly, utilized in legal malpractice cases. The breach of fiduciary duty was based on both negligence, and disloyalty. UnderPennsylvanialaw, fiduciary duty is proven when the plaintiff proves employment of an attorney which would provide a basis for duty, the failure of the attorney to exercise ordinary skill and knowledge, and that such knowledge was the proximate cause of damage to the plaintiff. To actually recover requires the plaintiff to show they would have won on the underlying claim but for defendant’s negligence. This was a summary judgment stage, but the Court believed based on the facts plead; it was reasonable that defendant’s misconduct was to blame. In this case, the court deferred to the fact of forgetting the petition, along with the duty as providing cause.

Next, the court analyzed the action for disloyalty. InPennsylvania, an attorney who takes on client representation much give the client undivided loyalty, and must not engage in conflicts of interest. Doing so provides a basis for malpractice. In establishing the disloyalty associated with a breach of fiduciary duty, a plaintiff must show that the attorney negligently or intentionally failed to act in good faith and solely for the benefit of the plaintiff in all matters for which they were employed, that the plaintiffs suffered injury, and that the failure to act in plaintiff’s interest was a real factor in bringing about the plaintiff’s injuries. The failure to act in good faith in this case arose form the failure of the defendants to notify the plaintiffs that the Judge had marked the foreclosure action satisfied. The court suggested that if there was no way to recover the lose judgment once it was marked satisfied, and then it was actionable.

The contract based claim was upheld as actionable, but the court noted that inPennsylvania, there is a definitive split. Some courts only allow damages to equal what was actually paid to the attorneys, while others believe the damages can include the amount lost by the attorneys lack of good conduct. The court did not define which approach they endorsed.

The claim which is not common in legal malpractice actions was negligent supervision. This claim is usually based on an employee’s misconduct outside the scope of employment. However, inPennsylvania, the law of agency may provide an actionable claim. Whether or not an employee is liable, an employer may be liable for negligent instructions and directions. In this case, the plaintiff was imputing liability on Squire for the poor work of the attorney employed by the firm. It is interesting to note this action, since it would seem that it should be commonly plead with typical professional negligence cases. This does not happen often however.

Finally, the court looked to the request for punitive damages. Punitive damages are available inPennsylvania, only when conduct is outrageous based on evil motive or recklessness. To support the claim, the plaintiff must show a defendant had a subjective appreciation of the risk of harm to which the plaintiff was exposed, and that the defendant failed to act in conscious disregard of that harm. While the original conduct may not have provided a basis for punitive damages, there is a chance that because of the attempt to conceal the wrongdoing, Squire actually exposed themselves to punitive damages.

This is an interesting case from the standpoint of companion actions. If nothing else, even if some of the actions are knocked down early in the trial, it still provides an extra opportunity for a plaintiff to recover. In this case, the plaintiff’s attorney was able to find several alternative theories which seemed to defeat the arguments of the defense against those actions. In the field of law, it is easy to be stale, thus novel thinking should always be appreciated.

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Location, Location, Location!

Posted on April 15, 2012 by Matthew Weisberg

Finely v. Zimmerman, No. A-1131-11T2, March 27, 2012 (N.J. Super. App. 2012) is a case which addresses the jurisdiction over a legal malpractice suit. Jurisdiction is important, because the law of malpractice is based on the venue where suit is commenced. However, the relevant portions of this case discuss whether the State ofNew Jersey had jurisdiction over an attorney, Moore, who was licensed inFlorida.

The case arose out of a realty transaction whereby the co-defendant Zimmerman proposed that the Plaintiffs, Donald and Shirley Finley and he should become partners on a piece of real estate inFloridaworth $400,000. Zimmerman made this proposal in 2005, and provided the recommendation ofMooreto serve as the attorney in conducting the transaction. In agreeing to useMoore, the Finleys were assured by the same that he would protect their interests and partner ownership position at the time of the transaction. On June 20, 2005, the plaintiffs placed 50% of the purchase price into a trust account held byMoore. This deposit was the capital investment required of the Plaintiffs.

On July 21, 2005,Moorewas again called into service by both parties. This time,Mooreserved as the closing agent responsible for settling the sale and transferring the real estate. The balance of the payment came from the Plaintiffs’ capital investment, a bank loan for Zimmerman, and $40,000 from Zimmerman. The Finleys alleged that their interests were not protected byMoore, and that over a 3 year period he did nothing to protect their interests.

In February, 2007, Zimmerman allegedly refinanced the mortgage without providing notice to the Finleys. The new financing agreement was for a $460,000 mortgage note. Once the mortgage note was taken against the house, Zimmerman received all of his capital investment, the capital investment of the Finleys, as well as an extra $60,000. At this point, the plaintiffs still did not have any evidence of their purchased interest in the real estate. In 2010, Zimmerman filed for bankruptcy inFort Lauderdale. Also, in January 2010, the Finleys filed a malpractice suit inNew Jersey. This was followed in May, 2011 by a motion to dismiss the suit becauseNew Jerseydid not have jurisdiction.

At the trial level the Judge denied the motion. She based this on one case, in which aNew Yorkattorney with no contacts inNew Jerseybut the client was sued inNew Jersey. The Judge recognized her mistake in relying on only one case, and reviewed the law. After a review she decided that based on the personalty, whichMooreconverted fromNew Jersey, there were sufficient contacts for the suit to be brought inNew Jersey. The defendant attorney then appealed to the law division.

New Jersey’s long-arm statute, which is intended to reach out of state defendants, has as much reach as allowed by Federal law. The Federal law relies on the International Shoe doctrine, and 2 fundamental principles within the doctrine. First, in order for a defendant to be subject to jurisdiction of a place, they must have minimum contacts. Second, the minimum contacts must be such that they do not offend traditional notions of fair play and justice.

Furthermore, there are two types of jurisdiction, general and specific. General jurisdiction arises when a defendant’s contacts are continuous and substantial. For example ifMoorewere located inFlorida, but advertised inNew Jersey, the general jurisdiction may apply. The other option is specific jurisdiction, which is established when a defendant’s actions in a state give rise to a cause of action. The jurisdiction pleaded by the plaintiffs in this case was specific jurisdiction because it was based on what they perceived to be arising out of contacts withNew Jersey.

However, specific jurisdiction does not end there. It focuses on the relationship between the defendant, the forum, and the litigation. A defendant must have purposefully availed themselves of the protections of the State of New Jerseyto be within their jurisdiction. The rule is set up like this so a defendant does not have to answer a law suit in some foreign state, as a result of the conduct of someone else. The court warned that a defendant must have made purposeful conduct with the forum state, such that they could reasonably anticipate being sued there. Because it is a case by case basis, the court cited Shah v. Shah, 184 N.J. 125, 138 (2005) in stating the court must weigh:

“The burden on the defendant, the interests of theforumState, and the plaintiff’s interest in obtaining relief. It must also weigh in its determination “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and the shared interest of the several States in furthering fundamental substantive social policies.”

Plaintiffs have the burden of pleading facts which indicate that the court’s exercise of jurisdiction is proper.

The court then applied the law to the facts of this case. In the court’s opinion the relevant facts were thatMooredid not reside or do business as an attorney inNew Jersey. His law firm operated inFlorida, and did not solicit business inNew Jersey. The relevant actors and activities which were the subject of this lawsuit all took place or were located inFlorida. The money which was put inMoore’s account was from a credit account inIllinois. Thus, the only contact the defendant had withNew Jerseywas that the Finleys resided in the state.

The court noted that the ties betweenMooreandNew Jerseywere virtually non-existent. He took no purposeful action to avail himself ofNew Jerseylaw. In fact, his clients hired him at the recommendation of someone else, meaning there was no solicitation fromFlorida. Overall the court viewed this case as “a quarrel lacking substantial connection toNew Jersey.” The court then remanded the case, and decided thatNew Jerseyhad no interest in litigating this case.

The important part of this case is that the clients were seeking protection of their home state, but unwittingly lost those protections by being represented by aFloridaattorney. It is arguably unfair, however, the careful client can learn from the mistake of the Finleys. Representation is probably best sought where the attorney has some connection to your home. In this case, hadMoorebeen aNew Jerseyattorney, many things may have been different. First, they would have had the protection ofNew Jerseycourts. Most importantly however, the Finleys would have had the ability to personally converse withMooreconcerning the lack of evidence relating to their second home. It is a problem the Finleys must now take up with the State ofFlorida.

 

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The Countdown Begins

Posted on April 14, 2012 by Matthew Weisberg

Skibbe v. Snitow and Taras M. Wochock, 2010 WL 5213777, December 6, 2010 (Pa. Com. Pl. 2010) is a case where a client was ignored. It is an interesting case because of what it stands for concerning the statute of limitations on legal malpractice actions. The case applies law concerning how much time may pass between a wrong and suit commencement, such that a case is still able to be heard.

The matter was originally heard in arbitration but when Skibbe lost, he appealed the decision. On appeal, the court found summary judgment in favor of the attorneys, thus it was appealed again, which is this case. Skibbe was in a car accident in 1987, and in 1989 he filed a complaint claiming personal injury against the other driver, and the other driver’s employer. At the outset, Skibbe was represented by Peter Hileman, who withdrew representation in 1991. Taras Wochock then represented Skibbe until 1994, when Snitow was retained. On September 30, 1994 a letter was delivered to Wochock requesting the file, which was subsequently delivered to Snitow in 1995. During this period, neither attorney entered appearance with the court.

On June 15, 1995, the court issued a notice of termination because there had been little docket activity. All parties involved claimed to never have received the notice. On August 15, 1995, the action was officially terminated. Snitow claimed he was not aware of the termination until told by opposing counsel in November 1996.

Over the next few years, Snitow and Skibbe had some communication regarding the file. Snitow indicated he would appeal the termination. In 1997, Skibbe provided the document with dates of termination, and active file removal as of October 10, 1995, the case was removed from active files. The court finally heard the appeal in 2006, and denied it. Subsequently, in 2006, Skibbe brought this action.

When speaking of legal malpractice actions inPennsylvania, a plaintiff may use either tort or contract law. However, becausePennsylvaniastrictly applies statutes of limitation, the time period during which an action may be brought changes. For contract actions the statute of limitations is 4 years, and for negligence actions, it is 2 years.

To determine the trigger date for when an action accrues,Pennsylvaniauses the occurrence rule. This means the period during which an action may be brought begins when the alleged breach of duty happens, not at the realization of the actual loss. There is no pause for the statute because of an appeal of the underlying claim.

The exception to the occurrence rule is the discovery rule. When an injured person thoroughly investigates the cause of injury, but can not discover it, the statute is tolled. It is not tolled for mistake, lack of knowledge, or misunderstanding; the person must be unable to discover the injury or its cause. This prevents a retrospective view of whether the facts were ascertained within the allowable period.

In this case, the court considered the breach to have occurred as of August 15, 1995, when the underlying action was terminated. That is the date from which the statute of limitations for negligence begins. However, because Skibbe stated he never received the notice form the court concerning termination, this triggered the discovery rule. Thus, the statute was tolled from August 15, 1995 until Skibbe learned of the termination on April 11, 1997. In deciding on that date, the court focused on Skibbe’s inability to ascertain any information relating to the legal malpractice cause of action. Notice, the court strictly applies the discovery rule, and does not even get into what Skibbe should have known, could have known, or mistakenly did not find out.

On April 11, 1997, the statute began running because on that date the delivery of the docket changed the nature of information. At that point, due diligence would have provided Skibbe with discovery of the termination. The court did not address whether the claim sounded in contract or negligence, but it did not matter because the action was not commenced until 2006. This was 9 years after the accrual began, which is much longer than either the 4 or 2 year period.

This case is a teaching point, because of the way in which the appeal affected the outcome of the malpractice. While Skibbe was appealing, the termination, the statute of limitations had already begun to run. Based on what the court stated Skibbe should have brought the malpractice action as soon as he learned of the termination. Alternatively if nothing else, some claim should have been brought by 1999 since it would have preserved both claims within the statute. Time is always ticking in legal actions, and that is the greatest lesson of this case.

 

 

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Overcoming the Puder Hurdle.

Posted on April 8, 2012 by Matthew Weisberg

Gere v. Louis, 209 N.J. 486 (2012) is a New Jersey case which discusses when a client may sue their attorney after a settlement. It is an important case because it takes into consideration many facts of settlements that up to this point had not been considered by courts. Furthermore, it builds on the Puder doctrine which is an essential line of jurisprudence in the malpractice arena.

Julia Gere is the plaintiff in this case which originates from a divorce action involving her ex-husband Peter Ricker. After a long marriage, during which the couple attained a large amount of assets, the couple underwent an acrimonious divorce in 1997. In 2000, the couple prepared a property settlement agreement, where each side was represented by counsel.

Under the terms of the agreement, Gere was to receive a fixed amount of alimony over 7 years. The settlement also provided an equitable distribution of assets, including both real estate investments and businesses. As part of the distribution scheme, there were deadlines placed regarding notice of option executions. Louis was the attorney who represented Gere throughout these proceedings and settlements.

Louis testified under deposition concerning one of the 6-month options. He had not yet heard from Gere, so he called her to ostensibly ask her opinion. When he called, he instead reached a good friend of Gere’s. Trusting this friend to communicate Gere’s wishes, Louis asked, and received an answer which he believed satisfied his obligations. Based on a flawed interpretation of Gere’s friend, Louis prepared a letter for Ricker’s attorney which expressed Gere’s interest in part of the assets. A draft of this letter was not provided to Gere.

About a year after the first letter, Louis followed up with a letter intending to acquire equitable interests in certain assets or as an alternative to sell some assets. Louis believed he was reflecting the intentions of Gere to maintain a partial interest still. This was however contentious, and Ricker believed that all deadlines had passed, resulting in relinquishment of Gere’s rights to property.

This disagreement led to post-judgment proceedings concerning the extent of interest Gere had waived. Since much of this litigation concerned the letter sent, but never approved by Gere, Louis withdrew as the attorney of record. The hearing on these property issues did not actually commence until 2006, at which time out of concern for the statute of limitations inNew Jersey, Louis agreed to extend it to whenever the action finished. Another extension was signed, and the original post-judgment proceeding was settled in July, 2007. This later agreement was intended to supplement the original agreement as opposed to completely replacing it. When the settlement was recorded, it included a reservation clause concerning actions for Gere against former attorneys. In a hearing on this reservation clause, it was clear that Gere settled for the best she could, and did not wish the settlement to act as a defense in a malpractice action.

The importance of Puder in this case, is that the doctrine normally prevents a matrimonial litigant who resolves a dispute and testifies that an agreement is an acceptable, fair, and voluntary compromise may not thereafter sue the attorney for the balance not received in that settlement. In this case the issue is whether Puder applies to divorce agreements like Gere’s.

The main public policy of Puder is settlement which courts have a strong incentive to promote. Normally, the doctrine acts to prevent a person from taking a contradictory position between settlement and post-settlement whenever they are unhappy with an outcome.

The Court then stated they believed this case was factually distinguishable from Puder. In the original Puder case, a woman divorced her husband and considered a settlement agreement recommended by her first attorney; Puder. However, she later consulted a second attorney who believed the settlement inadequate. As a result, she did not intend to comply, discharged Puder and hired a new attorney. Her ex-husband then tried to enforce the settlement, but before the enforcement hearing, there was a second settlement where the ex-wife received more than in the original agreement, and testified she was voluntarily agreeing to a fair agreement. After several months, the ex-wife sued Puder for malpractice, and the Supreme Court eventually ruled that because the ex-wife had been happy with the second agreement, the malpractice claim would be barred by public policy. Thus any deficiency from the first settlement which was affected by malpractice was cured by the second settlement according to the court. Pursuing her first attorney now would lead to monetary gain as opposed to making the ex-wife whole, thus the Puder doctrine was created.

Puder is an equity based exception according to the court. It does not erect an absolute bar to malpractice actions if a former client enters into a settlement with regard to the underlying action before obtaining a decision with respect to the complained-of conduct by the attorney. This case provided no basis for believing that equity requires a bar against the malpractice action for many reasons.

In this case, Gere claimed it was post-settlement actions of the attorney as opposed to actions which affected the settlement. The actions of Louis following settlement jeopardized the rights of Gere relating to the initial settlement. Another big difference in the second settlement is that afterwards, Gere did not have what she believed she would at the outset. Puder provided a bar because the plaintiff was in the same position after renegotiation as she would have been had there been no malpractice. In this case, Gere was still missing out on some property, and would not be able to be placed in a similar position because of the requirement to get the best deal she felt she could.

This case is obviously most important in divorce settlement actions. A settlement does not necessarily bar a client from a malpractice suit. In New Jersey, a client is best served by analyzing the interests at settlement, and whether malpractice affected these interests. If the malpractice affected the interests, and the client was unable to be placed back into the position originally intended by their actions, then Puder will not be a bar. It does however remain a strong defense tool for legal malpractice actions with divorce settlements, since the court must engage in fact intensive analysis to overcome the bar, and meet an exception.

 

 

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Defining Relationships.

Posted on April 8, 2012 by Matthew Weisberg

Behr v. Imhoff, 2009 WL 6962145, July 8, 2009 (Pa. Com. Pl. 2009) is aPennsylvania case which examines some of the most important requirements for initiating a legal malpractice action. Most importantly, this case qualifies when damages exist and when there is a duty originating from an attorney-client relationship. Both of these are necessary before a legal malpractice case can advance to the case-within-a case stage.

Behr and Imhoff were two of the three managers of a large investment fund. The managers formed the fund as a group of limited partners. At an annual investors’ meeting in late 2002, Behr announced that the fund had received almost 300 potential investment opportunities between January and August of 2002. Following the meeting, Behr believed Imhoff and the third partner had misled the limited partners, and believed that the limited partners needed to be apprised of the situation. Behr sought the advice of an attorney who was employed as counselor to the Fund; she advised him that it would be against the Fund’s interest to raise the issue with the partners because it was a minor issue and would be counter-productive.

Behr acted against this advice, issuing a clarifying statement concerning the number of reported investment opportunities. After releasing the statement in March 2003, Behr raised the issue publicly, accusing Imhoff, the attorney, and the third partner of various complaints. As a result of these accusations, the limited partners voted to remove Behr from his position as a Fund manager, and continued with Imhoff and the third partner.

Once removed from Fund management, Behr brought legal malpractice claims against the attorney, as well as claims against his former partners. Behr based the legal malpractice action on the counselor’s representing the interests of the Fund over his individual interests. Behr also believed the poor legal advice provided by counsel prevented him from properly addressing the problems with the Fund, and increased the risk of harm to him personally. The court initially believed the case had no merits, and granted summary judgment; however, Behr appealed this order.

One of the hurdles to clear in a legal malpractice action is establishment of an attorney-client relationship which forms a duty; the failure of the attorney to exercise ordinary care; and that failure proximately caused damages. An essential element is proof of actual loss rather than breach of duty causing nominal, speculative, or threat of future loss.  When referring to speculative damages, the standard is whether there is uncertainty concerning the identification of the existence of damages rather than the ability to precisely calculate the amount or value of damages.

Pennsylvaniais a bit different than other states in proving the employment context, because a fee-service contract is not required. An express contract is certainly helpful, but if not available the relationship can be implied in a number of ways; the purported client sought advice from the attorney, the advice sought was within the attorney’s professional competence, the attorney expressly or impliedly agreed to render such assistance, and it is reasonable for the putative client to believe such attorney was representing him.

Behr’s claim in this case was mainly it was not clear if the attorney was acting for him or for the Fund, or for both. He insisted that the attorney had a duty to advise Behr of any conflict of interest arising from the representation. By failing to advise Behr of any conflicts, Behr asserted that he was terminated by the Fund. His theory of liability was negligent performance of undertaking to render services.

The tort liability of negligent undertaking subjects a person to liability when they undertake to render services to another which he should recognize as necessary for the other’s protection if the failure to exercise care increases that person’s risk of harm, or harm is suffered because of reliance on the undertaking. InPennsylvania, increased risk of harm is not applicable to legal malpractice actions, thus Behr had to show actual damages. Because he could not show actual damages, this tort was dismissed.

The legal malpractice action initiated by Behr was also amenable to dismissal. There were two reasons cited by the Court; Behr failed to show the existence of actual damages and it was not reasonable for Behr to believe that the attorney was representing both his and the Fund’s interests at the same time.

Behr could not prove actual damages because he acted against the advice of the attorney. When he initiated the case, Behr only submitted speculative numbers for damages. Additionally, he made claims which were based on an alternative course of action. However, the Court noted that had Behr listened to the advice of counsel, he likely would not have been terminated. Despite moving on, the advice from the attorney helped effectively resolve the issue regarding deception, and the termination was a result of Behr’s poor decisions.

The second reason given by the court was based on a more objective test. Behr was an experienced businessman, and thus should have known that it was unreasonable for him to believe the attorney was acting for him if he suspected a conflict existed. This was considered in tandem with evidence that Behr had been responsible for hiring several outside attorneys to represent the Fund. This suggested that he was aware of the attorney’s role as fund advisor. This negated a key element of the implied attorney-client relationship.

When analyzing this case, it is important to note the objective and subjective reasoning courts use. In defining “reasonable”, courts will impute knowledge which they believe someone should have. This means a given person may or may not actually have that knowledge. Of course, this case describes someone who has experience hiring attorneys and should be familiar with the process. It would be equally viable that a first time client would reasonably not know of conflicts. This informs decisions an attorney should make in speaking with clients. Secondly, the subjective analysis of the alternative paths; courts are often asked to look at what would have happened had a person not done something. As with any other speculation, this sort of analysis can certainly provide grounds for disagreement. Most importantly, is the fact that the implied relationship is much harder to prove because of the various elements. Thus, when a client is unsure of representation, a fee-service contract which explicitly outlines the relationship should always be used.

 

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Calculating Damages.

Posted on April 1, 2012 by Matthew Weisberg

How are damages calculated in a New Jersey legal malpractice action? This is a difficult question and a court must determine how many damages are proximately caused by the defendant’s behavior.  In a legal malpractice situation, the damages may be limited by actions taken or not taken by the aggrieved client. In Nix v. Verp, A-3179-09T2, 2011 WL 557947 (N.J. Super. App. 2011), the attorney did not contest the existence of a duty, or a breach of the duty, but rather contested the amount of damages.

Donald Nix had been a commercial tenant in Patterson, NJ. After occupying the same building for 10 years, Nix was approached by a bank he believed to be selling the property for $5000. Nix believed the deal to be good, and hired Verp to represent him in acquiring the property. After a preliminary meeting with the bank, Verp explained to Nix that the purchase price was for the mortgage note, and that Nix would still have to bid at a sheriff’s sale. When the relationship began, Verp promised to check to make sure the title was clear so that Nix would have no problem in obtaining clear title. In 2003, the mortgage was assigned to Nix, and a year later, the sheriff’s sale proceeded. At the auction, Nix was the only bidder, and won it for $100.

After completing the Sherriff’s sale, Verp was made aware of a tax lien for $8974, based on unpaid taxes in 2004. Verp then sent Nix a letter detailing the tax lien situation. In response, Nix went to pay the tax lien, and was told by officials there was a $176,000 tax lien as well. The municipality filed a tax sale certificate in response to the lien, and Verp filed a motion to postpone the sale. It was denied, and in 2005, tax sale proceedings began, culminating in a sale in 2006 for $214,977.  This was not the price Nix believed he would pay at the time.

The trial court issued a decision for summary judgment in favor of Nix for $13, 885 and requested submission of documents for attorney’s fees and costs. As a result, Nix was awarded $44,685 in counsel fees and $5548 in costs. Nix appealed because he believed more damages were owed.

Because attorneys owe a duty to their clients to provide their services with reasonable knowledge, skill, and diligence; and as part of that duty an attorney is obligated to communicate to his client all information necessary for a client to make an informed decision. In this case, Nix retained Verp to represent him in the context of a real estate transaction, meaning he should have conducted a proper record search. Without the record search, Nix was forced to rely on the inaccurate word of mouth from municipality employees. Based on the lack of contest to liability determination, the court determined informal communication deviated from the accepted standard of care. The court then needed to determine what damages were caused by the breach.

The measure of loss or amount of damages recoverable against an attorney for malpractice necessarily depends upon the nature of the attorney’s undertaking for the client. Proper measure of the amount of damages should be the amount that will put a plaintiff in as good a position as if the professional had not committed the breach. The court stated that in addition to the above two propositions, damages were those which would have placed Nix in a position he would have occupied but for the negligence. The measure was thus the cost of what was expected versus the cost received when he relied on Verp’s incomplete advice. The damages are equal to the difference between the result sought and the actual result.

Based on the above damage formulae, the court was required to consider the critical date from which the damages should be decided. In this case, the critical date was December 2004, when the title was transferred by delivery of Sherriff’s deed. At that time, none of the parties was aware of the $176,000 municipal tax lien. Verp was required to be aware of this lien. Nix took title to the property believing the property to be encumbered by $8984 in outstanding taxes, as opposed to the far greater municipal tax lien. The motion court which first decided damages incorrectly believed that Nix learned of the additional encumbrance prior to closing title, but he did not learn until the title had closed.

In New Jersey, attorneys are liable for paying the amounts of liens which would have been discovered had the attorney conducted a proper title search. In this case, the result of failing to discover the lien cost Nix at least $176,000 regardless of the property value of the property. Nix did not receive what he retained Verp to protect. An attorney is not liable for “sky-in-the-pie expectations” but rather, he is responsible for returning the client to the anticipated economic position. The court ultimately remanded the case to be decided with these principles in mind for damages.

The court also spoke briefly about the duty of mitigation in this case, and merely noted that this is a subjective standard. Where a person suffers damages, they must take reasonable actions to restrict damages. The court did not pass opinion on whether there was mitigation in this case.

Finally, the court undertook a Saffer analysis of attorney’s fees which has been discussed in this blog previously. The awarding of counsel fees in this analysis is governed by what fee is reasonable, taking into account the hours expended, the lawyer’s customary hourly rate, the success achieved, the risk of nonpayment and other nonmaterial factors. As this is an independent court-performed accounting, Verp could not challenge the form of agreement with Nix and his litigation counsel in the malpractice case.

One of the ways courts award fees in using the lodestar calculation. This calculation is defined as hours reasonably expended by the attorney, multiplied by a reasonably hourly rate. A court must engage in this expedition carefully. A trial court should exclude hours for non-productive time, and should be based on the records kept by the attorneys. The court must be reasonable above all else in carrying out the tenets of Saffer.

The crux of this case is that a plaintiff who has sustained a loss due to legal malpractice, damages are limited to a degree. Most importantly, damages are limited to what is realistically calculable. There must be some way to figure out how to best put the plaintiff in as good a position as before the negligence.

 

 

 

 

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