What is Legal Malpractice?
Legal malpractice is an action for damages caused by an act of negligence, or a failure to perform some act, committed by an attorney in the course of representation. Generally, the act of negligence that gives rise to a cause of action for legal malpractice includes, but is not limited to, the intentional or negligent failure of an attorney to furnish a client with competent, timely and diligent representation . The claim for legal malpractice usually consist of three elements: (1) attorney-client relationship; (2) negligence by the attorney; and (3) damages sustained by the client. It is essential in any claim or complaint alleging legal malpractice, as a fundamental and jurisdictional requirement, that the plaintiff must be a former client of the attorney against whom the legal malpractice is alleged.
Types of Legal Malpractice
There are three categories of legal malpractice. The first is that of negligence, which is the broadest category. The second is breach of fiduciary duty, which involves a lawyer’s systematic cheating of the client, in the context of the attorney-client relationship. The third group is that of breach of contract. Real World examples follow each group.
Negligence or ordinary legal malpractice, even though it is the broadest group, is also the most common. In parsing out the definition of negligence, New Jersey has distillied the concept into four separate elements; (1) The existence of the attorney/client relationship; (2) Breach of duty by the attorney; (3) some damage to the plaintiff, and (4) proximate cause, or proof that the breach of duty caused the loss or harm. In Garden State Racing v. Palmieri, et al., 306 N.J.Super 565, (App.Div. 1997), an alleged failure of a lawyer to answer a complaint in a quiet title action gave rise to a legal malpractice action. In Homes of Distinction v. Day, Berry & Howard, 382 N.J.Super 245 (App.Div. 2005), an alleged failure to file a timely lis pendens precipitated a legal malpractice lawsuit by the plaintiff in the underlying litigation. Even though the plaintiff in the underlying litigation in Homes was able to bring an action for usury, the transfer of the property did not involve any liability on the part of the plaintiff, which barred the usurious transaction. Therefore, it was determined that there was not proximate cause between the alleged breach of duty and any resulting damage, and the legal malpractice suit was dismissed.
Breach of fiduciary duty, the second subset of potential causes of action, is much narrower than that of negligence, but its ramifications are potentially devastating. This is particularly true when applied to large law firms, which may be perceived as de facto trusts. Breach of fiduciary duty is the subject of approximately 5-10% of the overall legal malpractice cases. Its essential elements are fairly simple – a lawyer has the duty to "preserve the client’s secrets," which is equivalent to the confidentiality afforded to a priest under the doctrine of "clerical privilege." When a lawyer breaches this trust the loss or harm to the client is usually palpable and the damages can be devastating. In Allendale Medical, Inc. v. Gitterman, 372 N.J.Super 287, (Law Div. 2003) the court referred to the breach of fiduciary duty as "the black hole of legal malpractice litigation." In Wood v. Smith, Stratton & Wise, 267 N.J.Super 329 (App. Div. 1993) the plaintiff alleged that the defendant law firm breached its fiduciary duties by unauthorized disclosure of confidential information. The plaintiff was a shareholder and creditor in his father’s business. He alleged in the complaint that the law firm represented his father in both individual and corporate matters, and that the lawyers had a conflict of interest due to that representation. The court explained that: "while a law firm does not owe a duty to a non-client and cannot be liable for its breach of duty to a client absent privity of challenging the reasonableness of a fee or preventing actual harm of a known fraud, it may be liable for the breach of an independent duty ‘which may be tortious in nature, and which exists apart from any duty owed to the principal." (citing McGuinness v. Superior Court, 33 Cal.App.4th 725, 39 Cal.Rptr.2d 456, 459 (1995)).
Moreover, in this case, the plaintiff disputed the law firm’s allegations that he had knowingly consented to the representation. "[A]n expired statute of limitations for a particular cause of action will bar only that action, but will not preclude the plaintiff from bringing another action based upon violations of other, disparate duties, such as breach of contract, conversion, or breach of fiduciary duty."
The third category of legal malpractice is a breach of contract. Often, a breach of contract claim in a legal malpractice context will contain within it an element of negligence. For example, the Schneider v. Litner variation in which five attorney defendants were each sued, alone or in combination with other defendants, for the alleged negligence in representing a client. The Schneider action alleges that the lawyer who was primarily involved in the litigation was negligent in his to do research or challenge the points made. In this case, there were five lawyers who were sued, one who had previously filed a bankruptcy, and the other four who took over each area of the practice. The plaintiff alleges that in the Fischer matter, the lawyers failed to respond appropriately to the petition for order to show cause by which the debtor sought to vacate the stipulation, and thereby lost the chance to recover close to $300,000.00.
Proving Legal Malpractice
The burden of proof – more specifically the burden of proof on a legal malpractice case – on the plaintiff (the client) is difficult enough, that only a small portion of cases go to trial in this area. Just recently was this proven again in the case of Byers v. Maral, 2014 NY Slip Op 08306 [121 AD3d 1357] (December 11, 2014). No need to review the entire case, just a quote from the Court should get the point across: "In addition to the elements of duty, breach and proximate cause, "the injured plaintiff must demonstrate that the attorney’s negligence was the proximate cause of actual damages" Here, Forsyth failed to demonstrate the existence of an attorney-client relationship between her and Maral; thus, she could not show Maral’s liability for legal malpractice. Forsyth did not proffer an agreement entered into by her and Maral. Rather, she relied upon invoices sent to Kane after Maral commenced practicing law. Kanes testified that Forsyth had her own attorney during the dissolution of their marriage and never retained Maral’s law firm. Forsyth, for her part, claimed that she did not sign a retainer agreement with "clearly stated terms;" rather, she "engaged Maral" a "number of times." Forsyth testified that they "had a business relationship" and "discussed" handling her divorce. However, in an email to Maral, Forsyth declared, "I do not have a written contract with you." While Forsyth referred to Maral as her "attorney" and "counsel" in some communications, she did not dispute that she addressed Maral as "Susie." Given this evidence, we cannot conclude that Forsyth established an attorney-client relationship between the parties. "
Commencing a Legal Malpractice Suit
Filing a legal malpractice suit is straightforward. The statute of limitations is important, and any claim must be brought before the period ends. The statute begins to run from the time the claim accrued. The first step is to determine when the claim began to run. In most instances, the statute of limitations begins after the client lost the action at hand. However, the statute of limitations for a legal malpractice claim is determined not by the usual contract statute of limitations, but by the statute of limitations for the underlying claim.
The statute of limitations for a legal malpractice claim is usually two years and six months. That time runs from the loss of the underlying action. This may seem like a long time, but this short time period has been inserted into the law for the benefit of lawyers who have the legal expertise to effectively defeat all but the strongest legal malpractice cases before they start.
The first step in the process is the selection of legal counsel. Selecting a legal malpractice lawyer is not as easy as selecting other types of attorneys. In New York, legal malpractices lawyers are very few in number. The reason for the shortage is very clear – legal malpractice is rarely remunerative. Unless the attorney is extremely successful , he or she can expect to only receive the costs to pursue the claim as a fee. The remainder of the fee award, which could be in the millions of dollars, must be returned to his client. So while the suit against the lawyer will provide monetary damages, there will be no remuneration for the lawyer who brings the action, except for his or her expenses. Usually, a legal malpractice lawyer will only accept an additional legal malpractice case if it is very strong. The reason for this exception is that legal malpractice cases in which the damages exceed the limits of the attorneys’ insurance coverage become very difficult to defend.
Part of the decision making process involving whether to bring a legal malpractice action is whether the damages of the legal malpractice case are worth pursuing. While courts regularly award damages as high as the limits of the insurance coverage, an adverse case can virtually void any amount of insurance, especially if the insurance coverage has been purchased for the express purpose of covering claims by clients harmed by the attorney’s legal malpractice.
Legal Malpractice Results
Potential outcomes of a legal malpractice case can be very broad, which we explain in this section in terms of the potential settlement, trial, amount of damages, and other remedies.
Settlement Sometimes a defendant will agree to settlement in mediation. This can happen early, at any time during the litigation, or even at the door of the trial and after the close of the plaintiff’s case. Most times, even if the settlement is favorable, it doesn’t contain an admission of liability by the defendant. In many cases, the defendant’s insurer is the one who will be paying the settlement. From the insurer’s perspective, settling the case is a good way to avoid the expense of the trial. Even when a case settles, plaintiff’s are often worried that a settlement sends a message to the defendant that they were liable. Sometimes the defendant takes the position that it is a "prevailing party," and the plaintiff’s attorney is not entitled to a fee. The plaintiff’s attorney may find himself in the position of having to argue that a fee is owed even though he just acceded to a settlement. Many times, settlement creates problems. This is particularly true when there is a confidentiality agreement that the plaintiff cannot tell the family or others about the case or the settlement. Of course, the real life consequence of confidentiality provisions is that the plaintiff cannot brag, he cannot tell his friends or his golf buddies or his sister, and this can cause a great deal of resentment that can eventually spill out into the relationship with the attorney. Another difficulty that comes with settlement, and to the extent possible, it should be avoided, is if the defendant wants the plaintiff to execute an affidavit saying that there was no malpractice. The argument is that the defendant must defend its actions and continuing position, particularly if it intends to have a settlement stashed away in case it gets a future claim against it. On a case by case basis, and with great care, depending on the facts, this could be done.
Trial If the case proceeds to trial, much will depend on the skill of plaintiff’s legal malpractice attorney and the facts of the underlying matter. The only time that a trial becomes necessary is when settlement attempts fail. Most legal malpractice cases, however, require extensive preparation, many hours of law relating to the application of the statute of limitations, recitation of the facts of the underlying action, and most importantly, the legal theories of the case. All of which require a substantial investment of time, expertise, and substantial legal minds like Bobby and Anna Silbering.
Amount of Damages Legal malpractice damages can range from $1 to millions of dollars. But, more importantly, the real issue in damages is the concept of loss. A plaintiff may lose money, but he also might avoid costly mistakes in the future. A plaintiff may eventually become a millionaire, but the current cash flow is stymied by the defendant partner. The real issue of damages is lost wages, but lost equity can be considered as well. Further complicating matters is when an indemnity and contribution claim is also brought against the defendant, and the court determines that those damages will exceed the amount of the legal malpractice judgment. There are many more complicated issues that are raised, and they may not be waived by agreement.
Other Remedies The bottom line is that the bottom line is never the same for every case. But plaintiffs need to know that there are other remedies; they are not limited to cash in the hand, 144 slices of the same pie, and the ability to brag to the golf club about winning.
Avoiding Legal Malpractice Claims
The best scenario in legal malpractice is never having to face a claim of malpractice by a former client. Unlike the lawyer, the client does not have the advantage of being able to redeem the case with a near perfect policy of insurance.
Preventing Legal Malpractice from the client’s perspective is a multi-part program which begins with choosing a lawyer carefully, but does not end there. Many clients have no way to know whether their client has malpractice insurance or not, or how adequate it is, if too hard for experience civil lawyers to evaluate.
The most useful way to prevent legal malpractice risks is to maintain constant contact with the client. The purpose of the contact is several-fold: first, it alerts the lawyer to problems before they spiral into a major crisis; second, the contact helps the lawyer understand the emotions involved and the motives of the client better; and third, it insures that the client is not left without feedback . In the best of all worlds, the best contact is a daily note from lawyer to client about what is going on. Colleagues and experts point out that witnesses and other facts can alter daily, and it is important to keep the client up to date.
Another piece to the puzzle is documentation: keeping notes is critical because the lawyer’s only standard of care is the same as that of other lawyers in the community. If a lawyer thoroughly and accurately documents everything, he can not be held liable for missing an appointment which the client knows nothing about (i.e. advising the client that the deposition is in 20 minutes does not require leaving a message overnight). Keeping notes is a very hard discipline, but the use of a black box recorder will still help.
Continuing education is also critical. Staying aware of the state of the law and the status of new cases is of paramount importance. In addition, refining skills by attending CLE seminars, workshops and practice groups is equally important.