Articles Posted in National Legal Malpractice Cases

A California appellate court has reversed a summary judgment in favor of an attorney in a legal malpractice action. In Kachlon v. Spielfogel, a husband and wife (“lenders”) had loaned another couple (“debtors”) $53,000 in exchange for a promissory note in that amount, which was secured by a deed of trust. Thereafter, the lenders signed an agreement cancelling the promissory note and then re-conveyed the deed of trust in exchange for $12,000.

The lenders hired an attorney to file suit against the debtors for default on two additional loans. The lenders also maintained that they were still owed the deficiency on the promissory note, pursuant to an oral agreement. Based on the attorney’s advice, the lenders sought non-judicial foreclosure on the deed of trust, which resulted in the filing of three notices of default on the debtors’ property.

The debtors then sued the lenders for damages arising from the foreclosure proceedings, including attorney’s fees they incurred to clear title and the diminished value of the property. The lenders fired the attorney and hired two other lawyers to represent them in that case. Two years later, the debtors’ action resulted in the entry of judgment against the lenders in the amount of $500,000.

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An Ohio appellate court has reversed a summary judgment for an attorney in a legal malpractice case. In Svaldi v. Holmes, a 93 year old client visited an attorney to revise an existing power of attorney. The client was accompanied by two of his neighbors, who also managed the apartment complex where they all resided. At the client’s request, the attorney drafted a new power of attorney naming the neighbors as his agents and granting them authority to manage, sell and transfer his assets.

Under the terms of the power of attorney, within thirty days of their appointment, the neighbors were required to submit to the attorney an inventory of the client’s assets and subsequent yearly accountings of all transactions. The neighbors failed to deliver the initial inventory and never submitted an annual accounting. Other than one letter reminding the neighbors to submit the inventory, the attorney never followed up to determine if accountings were made.

Two years later, a suspicious withdrawal was made from the client’s account, which caused the bank to contact law enforcement. An investigation determined that the neighbors had stolen over $800,000 from the client.

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The Alaska Supreme Court has reversed the dismissal of a legal malpractice action. In L.D.G., Inc. v. Robinson, a man had consumed alcohol at a bar and then shot and killed a woman later that night. The patron was convicted of first degree murder and the estate of a victim brought a wrongful death action against the bar. The bar hired an attorney to defend it in that case.

The estate named the bar as the only defendant. The attorney failed to join the patron as a third-party defendant to bring a claim against him for an allocation of fault. After a jury trial, the court entered a directed verdict for the estate and, following a separate damages hearing, entered judgment in the amount of almost $1 million. The judgment was affirmed on appeal. The bar then brought a legal malpractice suit against the attorney for his failure to add the patron as a third-party defendant.

The attorney moved to dismiss the case on the basis that at the time of the underlying suit, Alaskan law was unsettled as to whether alcohol providers could bring contribution claims against consumers. He argued therefore, that attorneys cannot be held liable for an error in judgment regarding an unsettled area of law. The trial court granted the motion and the bar appealed.

The appellate court reversed. An attorney always has a duty to exercise reasonable care in representing a client. In this instance, the court found that, although the area of law was unsettled, a prudent attorney would have added the patron as a defendant, especially in light of the uncertainty in the law and the risk of not naming the patron. Therefore, dismissal was inappropriate and the court remanded the case for further proceedings.

Decision: L.D.G., Inc. v. Robinson

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A New York appellate court has affirmed a summary judgment for an attorney in a legal malpractice case. In Coccia v. Liotti, a client retained an attorney to represent her in divorce proceedings. The attorney negotiated a settlement of the marital estate, which paid the client $1.6 million and provided additional support payments. The client, however, believed that the settlement was insufficient, based on information obtained from an accountant she had retained, who suggested that the client’s former husband was not reporting all of his earned income. She then filed an action against the attorney, alleging multiple counts, including a negligence count on the basis that he recommended settlement for an insufficient sum.

The attorney successfully moved for summary judgment, but that ruling was reversed on appeal. He then deposed the former husband and his accountant. The attorney made another motion for summary judgment on all counts, on the basis that the deposition testimony clarified any discrepancies about the husband’s income. The trial court denied the motion, relying on New York common law, which generally bars the filing of successive motions for summary judgment. The attorney then appealed.

The appellate court reversed, finding that the motion was not duplicative as to the legal malpractice claim because the deposition testimony constituted newly discovered evidence, and also ruled that the client could not prove that she had suffered any damages, as a matter of law. The court entered judgment in favor of the attorney on the malpractice claim only, and remanded the case for further proceedings on the remaining counts.

Decision: Coccia v. Liotti

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A New York appellate court has reversed a summary judgment granted in favor of an attorney in a legal malpractice action. In Jack Hall Plumbing v. Duffy, a family owned business hired an attorney to advise them on how to properly terminate their chief operating officer (“COO”) in accordance with his employment contract.

The contract specified that the company could fire the COO for cause in writing and he would be given an opportunity to respond. The attorney reviewed the contract and then delivered a letter to the COO informing him that he was terminated, effective immediately. The COO brought an action against the company for violation of his employment contract.

The company prevailed at trial, but an appellate court reversed the judgment, finding that the termination was improper since the COO did not receive sufficient notice and had no opportunity to respond. The company then sued the attorney for legal malpractice. The attorney successfully moved for summary judgment and the client appealed.

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A North Carolina Appeals Court has reinstated a legal malpractice action dismissed in a lower court. In Babb v. Hoskins, a client had created an estate planning trust. Several years later, the client hired an attorney to amend the trust documents to appoint two of her friends to be trustees, who sometime later improperly removed funds from the trust. The client died the following year.

In the year after her death, the attorney prepared and filed state and federal estate tax returns for the deceased client. The attorney made various errors, including overpaying the state tax, failing to seek a refund and writing a check to the IRS, which was dishonored, resulting in substantial penalties.

Over five years after the amending the trust documents, and over three years after the tax filings, the client’s estate brought a legal malpractice action against the attorney, on the basis of the improperly filed tax returns, and the failure to discover the friend’s wrongdoing. The lower court dismissed the case on the basis of that the case was untimely filed after the expiration of the applicable three year statute of limitations. The estate appealed on the basis of the continuing representation doctrine.

The appeals court affirmed in part and reversed in part, deciding that the claims against the attorney with respect to the trust documents were barred because his representation had ended, but that the claims involving the tax filings had created a new attorney-client relationship. Those claims were tolled based on continuing representation, and therefore not time barred.

Decision: Babb v. Hoskins

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A Michigan appeals court has affirmed a summary judgment in favor of an attorney in a legal malpractice action. In Vandekerckhove v. Scarfone, a mother hired an attorney to act as personal representative of her deceased son’s estate. The mother entered into a fee agreement, which specified that any disputes arising out of his representation would be resolved through binding arbitration.

Approximately one year later, the mother entered into a second fee agreement for the attorney to represent her to foreclose on a mortgage, which secured money she had lent to her son. That agreement also contained an identical arbitration clause.

The mother eventually became dissatisfied with the attorney’s services and brought a legal malpractice action against him. The attorney moved for summary judgment, seeking to enforce the arbitration clause. The trial court granted the attorney’s motion and ordered the parties to proceed to arbitration. The mother appealed.

The appellate court affirmed, finding that the arbitration clause was enforceable. The mother had argued that the entirety of the fee agreements were unenforceable because they created a conflict of interest for the attorney, representing both the son’s estate, and also the mother who was as a creditor of the estate. However, the court refused to consider this argument on the basis that such a dispute was expressly contemplated by the terms of the arbitration clause, and therefore that issue had to be considered and decided through arbitration.

Decision: Vandekerckhove v. Scarfone

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The Supreme Court of Nebraska has affirmed summary judgment in favor of an attorney in a legal malpractice case on the grounds that the claim was barred by a statute of limitations. In Behrens v. Blunk, a client had operated a Ponzi scheme for over ten years, which offered promissory notes in connection with purported real estate investments. However, the client never invested the funds and instead used the money for personal expenses.

Just prior to federal indictments being handed down, the client filed a legal malpractice action against his long time attorney. The client alleged that he could not have carried out the scheme, if the attorney had properly advised him that the alleged promissory notes were securities, requiring registration under state and federal securities laws. The client pleaded guilty to securities fraud and received a five year prison sentence. The trial court granted the attorney’s motion for summary judgment in the malpractice action, and the client appealed.

The Nebraska Supreme Court affirmed, finding that the claim was barred by the state’s two year statute of limitations. The client had argued that the statute should be tolled because he could not have reasonably discovered the attorney’s negligence acts within the applicable limitations period. The court disagreed, based on the client’s knowledge of an investigation of his conduct by the Nebraska Department of Banking & Finance at least eight years prior to the indictment. The court determined that the statute started running upon the commencement of the investigation, thereby barring the action against the attorney.

Decision: Behrens v. Blunk

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A New Mexico appellate court has affirmed a summary judgment in favor of an attorney in a legal malpractice action. In Encinias v. Whitener Law Firm, parents hired an attorney to bring an action against a school district after their son was brutally beaten on the school’s premises by two fellow students. The attack happened in a food vending area. There were no teachers or security staff present at the time of the fight.

The attorney neglected to file the action within the applicable New Mexico statute of limitations. The parents then sued the attorney, who moved for summary judgment. He claimed that the parents could not prove any damages arising from his conduct, because they would not have been successful in the underlying claim against the school. The trial court allowed the motion and the parents appealed.

The appellate court affirmed. Under New Mexico law, school districts are generally immune from suit. However, there are limited exceptions, including when personal injuries result from the negligence of public employees during the operation or maintenance of a building. The parents argued that the exception applied because the school had failed to supervise the area where the attack occurred.

The court disagreed, reasoning that the premises was not inherently dangerous to the public based on the district’s failure to provide staff where the fight had occurred, thereby providing immunity to the district, and preventing the parents’ malpractice claim.

Decision: Encinias v. Whitener Law Firm

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A New York appellate court has ruled that a legal malpractice claim was barred by the state’s statute of limitations. In Frank Pace III v. Raisman & Associates, Esqs., LLP, a client retained an attorney to make an estate plan, including the creation of a trust. The purpose was to transfer assets into the trust in order to avoid estate taxes. The client died five years after the creation of the trust.

The attorney also prepared the client’s estate tax return. Several years later, the Internal Revenue Service performed an audit of the estate, determining that additional estate taxes were due on property purported in the trust on the basis that the client had retained too much control over the trust assets.

The client’s son was the executor of the estate and filed a legal malpractice action against the attorney, alleging that he had negligently prepared the trust documents. The attorney moved to dismiss on the basis that the action was barred by New York’s three year statute of limitations. The trial court denied the motion and the attorney appealed.

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