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Legal Malpractice opinion in D.C. declines to follow exhaustion of appeals rule
In Bleck v. Power, 955 A.2d 712 (D.C. Sept. 4, 2008), the D.C. Court of Appeals affirmed the trial court's ruling that the plaintiff's malpractice suit was barred by the three-year statute of limitations. The issue was when the cause of action for legal malpractice accrued.

The legal malpractice suit arose out of a claim under a long-term disability policy. The plaintiff's claim for LTD benefits was denied, and she then retained an attorney to represent her in seeking reconsideration. On May 14, 1999, the insurer rendered a final decision denying the claim. The attorney agreed to bring a lawsuit on the plaintiff's behalf. However, the lawsuit was not filed until May 10, 2002, almost three years later.

The insurer moved to dismiss the suit as time-barred by a policy provision specifying that any action to recover benefits had to be brought within two years from the end of the time within which proof of total disability was required. The trial court granted the motion to dismiss.

The plaintiff discharged the attorney and hired new counsel, who filed a motion for reconsideration. This motion was denied on Jan. 7, 2004, and there was no appeal.

Nearly three years later, on Jan. 5, 2007, the plaintiff filed a legal malpractice action against the defendant in D.C. Superior Court. The defendant attorney moved to dismiss the complaint as barred by the three year statute of limitations. The defendant argued that the limitations period began to run on July 29, 2003, when the court dismissed the plaintiff's suit against the insurer. The plaintiff argued that the statute of limitations did not begin to run until her motion for reconsideration was denied on Jan. 7, 2004.

The trial court granted the defendant's motion to dismiss.

On appeal, the D.C. Court of Appeals affirmed.

The Court reasoned that the plaintiff could have initiated a malpractice actioin against the attorney immediately after the contractual deadline was missed for commencing an action against the disability insurer. In cases where an attorney has missed a deadline for filing suit, the injury occurred when the client's action was legally subject to dismissal, rather than the actual, but fortuitous, date of dismissal.

D.C. does follow the continous representation rule, under which a client's legal malpractice claim does not accrue until the attorney's representation concerning the particular matter in inssue is terminated, even if the client knows before then that her attorney has made an injurious error. However, in this case, the plaintiff by August 2003 knew that the attorney had missed the contractual filing deadline, and she had replaced him with new counsel. This was more than three years before she filed suit.

The plaintiff argued that the statute of limitations on her legal malpractice claim was tolled while her timely Rule 59(e) motion was pending, because there was no final, appealable judgment until the court denied that motion. The D.C. Court of Appeals rejected that argument. In situations where an attorney's error results in a loss at trial, the Court has specifically declined to adopt an "exhaustion of appeals rule", pursuant to which the cause of action for malpractice would accrue only when the adverse judgment is affirmed on appeal.

Posted by David B. Stratton on 04/21/2009 at 01:07 PM
District of ColumbiaLegal MalpracticePermalink

Award of Permanent Partial Impairment by Virginia Commission Is Voided On Appeal
In Hitt Construction v. Pratt, 53 Va. App. 423, 672 S.E.2d 904 (Va. App. Feb. 17, 2009), the Court held that for the Virginia Workers Compensation Commission to exercise its review authority under the Act, when that authority is timely challenged, it must be composed of three statutorily authorized members. As a result, a decision that had concluded that claimant suffered permanent impairment was remanded for review by a properly constituted commission.

The majority of the commissions had appointed a deputy to serve as the third commissioner. However, the Court noted that no statute grants that authority.

The Court emphasized that the commission's decision in this case was "voidable", not void. The authority of the commission to exercise its subject matter jurisdiction was compromised by its composition -- a composition not authorized by statute. While a challenge to the authority of the commission was subject to being waived, that challenge was not here waived. Rather, it was specifically raised to the commission by the employer's motion to reconsider and vacate award. Therefore, the case was reversed and remanded to the commission.

John H. Carstens, Esq. of Jordan Coyne & Savits, LLP represented the employer.

Posted by David B. Stratton on 04/10/2009 at 03:41 AM
VirginiaWorkers CompensationPermalink

In Virginia, An Error of Judgment, or Even Negligence, Does Not Show Bad Faith By Insurer
In Goldstein v. National Casualty Company, 2008 U.S. Dist. Lexis 58129 (W.D. Va. July 28, 2008), Judge Kiser granted the insurer's motion for summary judgment on an insurance bad faith claim.

The claim arose from an excess judgment. The insured was a truck driver who was involved in an accident as he was attempting to pull out of a lot and onto a major road. The other driver was killed, and his family brought suit for twenty-five million dollars. Liability was contested. The insurer sent the truck driver a reservation of rights letter, pointing out that the insurer would not be responsible payment of any amount in excess of the policy limits.

Defense counsel's assessment of the case was that there was a 55% chance of a defense verdict, and that a potential verdict range of $1,000,000 to $1,500,000 if plaintiff prevailed. There was a future loss of income claim of $884,000. However, defense counsel only recommended a settlement offer of $100,000. Prior to trial, the plaintiffs made a demand for policy limits of $1,000,000. This offer was rejected. Later, during trial, the plaintiffs reduced their demand to $925,000. The insurer did not make any increased offer.

The jury returned a verdict for $2.5 million. The insurer paid its $1,000,000 policy limits. Plaintiffs then offered to release the insured truck driver from his debt in exchange for his assignment to them of a bad faith claim against the insurer. The truck driver rejected the offer. After trying to settle the debt of $1.5 million with an offer of $7,000, the truck driver was forced to declare bankruptcy.

The truck driver's bankruptcy trustee then filed the action alleging bad faith by the insurer. The truck driver's deposition was favorable to the insurer, and included testimony that the truck driver told the insurer that it should not pay the policy limits and that the insurer did not owe the plaintiffs anything. He testified that he did not think there was any bad faith.

The Court granted the insurer's motion for summary judgment. The Court stated the applicable law as follows:

In Virginia, "an insured, in order to recover for an excess judgment on the ground that the insurer failed to take advantage of an opportunity to settle within the policy limits, is required to show that the insurer acted in furtherance of its own interest, with intentional disregard of the financial interest of the insured." State Farm Mut. Auto. Ins. Co. v. Floyd, 235 Va. 136, 366 S.E.2d 93, 97 (1988). Further, because bad faith requires proving more than simply negligence and because there is a presumption of good faith, the insured must make the necessary demonstration by clear and convincing evidence. Id. at 98.

The Court noted that the insurer did not make a settlement offer above $100,000 and did not accept an offer of $925,000 when the defense counsel suggested offering $100,000 -- even though she determined that there was a 45% chance of a verdict between $1,000,000 and $1,500,000. The Court found that this did not constitute clear and convincing evidence that the insurer acted in its own interest with intentional disregard of the insured's financial interest. The $100,000 offer seemed low given defense counsel's assessment, but the insurer was responsible for the next $900,000 and there was no certainty that the insurer would go beyond that. The Court concluded that in retrospect, the insurer's settlement offer "seems to have been an error of judgment, maybe even negligence. But it does not demonstrate bad faith."

John H. Carstens, Esq. of Jordan Coyne & Savits, LLP was lead counsel for the defense.

Posted by David B. Stratton on 04/09/2009 at 02:09 AM

Legal Malpractice Suit in D.C. Dismissed For Plaintiff’s Lack of Expert Testimony

In Footbridge Limited Trust v. Zhang, 584 F.Supp. 2d 150 (D.D.C. Nov. 5, 2008), Judge Kollar-Kotelly dismissed a legal malpractice suit due to plaintiff's lack of expert testimony to support the claim. The suit arose out of a real estate closing in which the plaintiff had loaned certain non-party borrowers $1.5 million, through Cambridge Holdings Group. Cambridge Holdings at the time employed the defendant attorney. Plaintiff alleged that the defendant attorney's negligence was responsible for a seven month delay in the recordation of its security interests on the property that was purchased. During the seven month period, a bank recorded a mortgage as to which a security interest in the same property was pledged. Subsequently, the borrowers defaulted on their loan and filed for bankruptcy. The plaintiff attempted to foreclose on its security interests, but alleged that because of the intervening security interest of the bank, it received only $467,959 from the sale instead of $2.25 million.

The defendant attorney denied any responsibility for the delay in the recordation, and denied having attended the loan closing or having any knowledge of the loan transaction.

The defendant moved for summary judgment after the close of discovery, on the grounds that the plaintiff had not presented any expert testimony in support of its claims. The plaintiff argued that an attorney's failure to file a lien instrument for over one-half year following a real estate closing demonstrates a lack of skill and care so obvious that the trier of fact can find negligence as a matter of common knowledge.

The Court acknowledged that under D.C. law, there is a "common knowledge" exception to the requirement that a legal malpractice claim must be supported by expert testimony. The following examples are under the "common knowledge" exception: allowing the statute of limitations to run on a client's claim; permitting entry of default judgment against the client; failing to instruct the client to answer interrogatories; failing to allege affirmative defenses; failing to file tax returns; failing to follow the client's explicit instructions; and billing a client for time not spent providing services. Beyond that, the "common knowledge" exception is narrowly applied.

Here, the Court noted that the defendant attorney was not employed by the plaintiff, and that there is no allegation that the attorney received instructions from his own client which he failed to follow. The Court stated that "lt is entirely unclear what duties an attorney owes not only to his client, but to ta third-party, by merely attending a loan closing (even assuming that there was evidence that [defendant] attended the closing, which tere is not)." The Court also pointed out that on the issue of proximate cause of plaintiff's damages, to evaluate the parties conflicting evidence, the jury would need to know the effect that priority security interests have on properties subject to multiple unrelated liens, and particularly how those liens are paid when they are subject to a bankruptcy proceeding.

Accordingly, because the plaintiff did not produce a timely expert report, the Court granted the defendant's motion for summary judgment.


Posted by David B. Stratton on 04/08/2009 at 02:12 PM
District of ColumbiaLegal MalpracticePermalink

Legal Malpractice Insurance Policy Rescinded Due To Fraud in the Application
In Minnesota Lawyers Mutual Ins. Co. v. Hancock, 2009 U.S. Dist. LEXIS 20536 (E.D. Va. March 3, 2009), Judge Henry E. Hudson granted summary judgment in an insurer's rescission action based on fraud in the application. The policy at issue was a legal malpractice insurance policy issued by Minnesota Lawyers Mutual Insurance Company. One of the partners in a two-man firm had for several years been engaged in a practice of embezzling money from his clients by moving money from his client escrow account to his operating account without his clients' authority and without having earned the money. The funds were used in part to cover the firm's overhead and operating expenses. The attorney voluntarily reported his misconduct and surrendered his law license to the Virginia State Bar, and subsequently he was indicted by a grand jury for embezzlement.

His partner was unaware of all this until reviewing pleadings filed by the Virginia State Bar. Meanwhile, applications for the firm's professional liability insurance had been submitted without any disclosure of the basis for possible claims. The insurer brought a rescission action, arguing that the misrepresentations made on behalf of the firm warrented rescission of the Policy, and moved for summary judgment.

The policy contained an exclusion for claims arising ouf of the dishonest, criminal, malicious or deliberately fraudulent act, error, or omission of the insured. However, that exclusion was qualified by an "Innocent Insured" provision, which afforded coverage for any insured who did not personally participate in or acquiesce to any actual or alleged dishonest, criminal, malicious, or deliberately fraudulent act, error, or omission of another insured.

The policy also contained language that specifically incorporated the application for coverage as part of the policy.

The defendant attorneys argued that because the application required the firm's representative to certify that "a reasonable inquiry has been made . . . to ensure the accuracy of all information contained herein", the firm had only been required to answer the application to the best of its knowledge. Therefore, defendants argued, the insurer must among other things demonstrate by clear proof that the insured's statements were knowingly false to obtain rescission.

The Court rejected that argument, saying that the provision imposed upon the firm an additional affirmative duty to investigate the truthfulness of the statements made to the insurer. That was not the equivalent of language permitting an insured to warrant that its statements are only true to the best of its knowledge. Accordingly, the insurer was not required to demonstrate that any of the insureds knowingly made a false representation; rather, the insurer only needed to demonstrate by clear proof that the application contained a false statement and that the false statement was material to the company's decision to issue the policy. The insurer easily satisfied its burden on those points.

The Court concluded by observing that the innocent partner's lack of awareness of the embezzlement did not prevent rescission of the policy as to all insureds. The policy did contain an Innocent Insureds provision which, absent rescission, may have afforded the innocent partner coverage under the facts of this case. But the policy's Innocent Insured provision did not reference or preclude the remedy of rescission for a material misrepresentation in the application. Therefore, the policy was rescinded as to all insureds notwithstanding the innocent partner's lack of personal knowledge of the embezzlement.

Posted by David B. Stratton on 04/07/2009 at 06:04 PM
Legal MalpracticeVirginiaPermalink

Legal Malpractice Suit Dismissed Following Daubert Challenge to Mold Expert
In Young v. Burton, 567 F.Supp.2d 121 (D.D.C. July 22, 2008), the plaintiffs filed a legal malpractice claim based on the defendants' alleged failure to file a timely personal injury lawsuit. The underlying suit was a claim for damages suffered by plaintiffs as a result of exposure to toxic mold while residing at an apartment building. In order to succeed on their legal malpractice claim, plaintiffs were required to show that they could have recovered in the underlying tort suit. To make this showing, the plaintiffs relied on the expert testimony of Dr. Ritchie Shoemaker as to the cause, nature, and extent of their injuries from exposure to toxic mold.

At the close of discovery, the defendants moved to exclude Dr. Shoemaker's testimony, on the grounds that his opinions were not based on a reliable methodology, and that regardless, Dr. Shoemaker did not follow his own methodology with respect to plaintiffs.

In a lengthy and well-reasoned opinion, Judge Huvelle concluded that Dr. Shoemaker's diagnosis of plaintiffs, as well as his opinions relating to general and specific causation, were not sufficiently grounded in scientifically valid principles and methods to satisfy Daubert. The defendants' motions were granted.

In a subsequent ruling, Judge Huvelle granted the defendants' motions for summary judgment on the grounds that the plaintiffs had no expert testimony to support their underlying claims.

Deborah Murrell Whelihan, Esq. was lead counsel for one of the defendants in this matter, and further inquiries regarding this matter may be directed to her.

Posted by David B. Stratton on 04/07/2009 at 02:19 PM
District of ColumbiaLegal MalpracticePermalink

Maryland Court of Appeals Holds That Co-Counsel Owes No Tort Duty to Referring Counsel
In Blondell v. Littlepage, No. 16, Sept. Term, 2008 (Md. March 30, 2009), the Court held that a plaintiffs' co-counsel, who advised the clients to settle the medical malpractice claim, owed no tort duty to referring counsel. After the settlement, the referring counsel sued co-counsel, asserting negligence, fraud, breach of fiduciary duty, intentional interference with contract, and breach of contract. Referring counsel alleged that co-counsel had improperly advised the client that there was a meritorious limitations defense in the malpractice action, that referring counsel had delayed in filing suit, and that the client might have a claim against the referring attorney.

The Circuit Court granted summary judgment to the co-counsel on all counts, concluding that co-counsel owed no tort duty to referring counsel, that co-counsel fulfilled her contractual duty under the fee agreement, and that co-counsel as a matter of law could not have interfered with the contract between the plaintiffs and referring counsel because co-counsel was a party to the agreement.

The Maryland Court of Appeals affirmed. Although referring counsel did not style his suit as an attorney malpractice action, the Court found that the same policy considerations underlying the strict privity requirement in a legal malpractice case, apply with equal force here. The Court reasoned that if this type of claim were allowed, the resulting expansion of potential tort claims by non-clients would have a potential effect on an attorney's duty of loyalty to the client. An attorney's preoccupation or concern with potential negligence claims by third parties might result in a diminution in the quality of legal services received by the client as the attorney might weight the client's interests against the attorney's fear of liability to a third party.

Posted by David B. Stratton on 04/05/2009 at 09:46 PM
Legal MalpracticeMarylandPermalink

Legal malpractice: Defense of Judgmental Immunity Recognized in D.C.
In Biomet, Inc. v. Finnegan Henderson LLP, No. 07-CV-813 (D.C. March 19, 2009), the Court formally recognized the defense of judgmental immunity in legal malpractice actions. Concerning this defense, the Court stated the following:

Essentially, the judgmental immunity doctrine provides that an informed professional judgment made with reasonable care and skill cannot be the basis of a legal malpractice claim. Central to the doctrine is the understanding that an attorney's judgmental immunity and an attorney's obligation to exercise reasonable care coexist such that an attorney's non-liability for strategic decisions 'is conditioned upon the attorney acting in good faith and upon an informed judgment after undertaking reasonable research of the relevant legal principals and facts of the given case.'

Id. The Court also observed that if judgmental immunity were not recognized as a defense, that would

"mean that 'every losing litigant would be able to sue his attorney if he could find another attorney who was willing to second
guess the decisions of the first attorney with the advantage of hindsight.'

The Court also pointed out that "no claim of legal malpractice will be actionable for an attorney's reasoned exercise of informed judgment on an unsettled proposition of law." Id., at p. 10. This unsettled law exception to malpractice liabiity is a specific application of the judgmental immunity doctrine.

Posted by David B. Stratton on 04/05/2009 at 12:42 PM
District of ColumbiaLegal MalpracticePermalink