Attorney malpractice claims in $100 million D.C. patent malpractice suit survive preliminary motions
In Lans v. Adduci Mastriani & Schaumberg L.L.P., No. 02-2165 (D.D.C. May 23, 2011), the District Court, in a 120-page opinion, denied the defendants' motion to dismiss an attorney malpractice suit arising out of patent litigation. In this suit, the plaintiffs claim that the defendants' alleged misdeeds resulted in the loss of the plaintiffs' proprietary interests in a patent worth more than $100 million.
Judge Walton's opinion is predominantly a discussion of challenges raised by defendants concerning personal jurisdiction under the D.C. long-arm jurisdiction statute, concerning the fiduciary shield doctrine, and concerning the application of issue and claim preclusion based on decisions in the underlying litigation. Judge Walton dismissed the plaintiffs' civil RICO claims.
Concerning the malpractice claims, Judge Walton ruled that although no federal claims remained in the case, the state law malpractice claims require resolution of substantial questions of federal patent law under 28 U.S. C. sec. 1338(a). Judge Walton decided that the Court would maintain subject matter jurisdiction over the malpractice claim, due to the need to litigate the issue of patent infringement and resulting damages in the malpractice claim. Further, the court maintained supplemental jurisdiction over all the remaining state-law claims in the case.
The defendants had argued that the plaintiffs' claims for breach of contract, breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing should be dismissed because they were all duplicative of the malpractice claim, arose out of the same facts as the negligence claim, and required essentially the same standard of care. The Court rejected this argument, on the grounds that the various causes of action each rested on different proof. The malpractice claim was based on the alleged failure to investigate and clarify ownership of the patent. The breach of contract claim was based on alleged failure to carry out the terms of the contingency fee agreement, and on alleged conversion of funds owed under the terms of the fee agreement. The breach of the implied covenant of good faith was based on the same facts as the breach of contract claim. The breach of fiduciary duty claim centered on alleged violations of the D.C. Code of Professional Conduct and the Swedish Bar's Canon of Ethics, including among other things failure to disclose conflicts of interest. Thus, the Court found that the fiduciary duty claims did not arise out of the same facts as the malpractice claim, and that a failed malpractice claim would not neessarily preclude recovery on a claim for breach of fiduciary duty. Thus, the Court found that none of the other state-law claims were duplicative of the malpractice claims.
Interestingly, the Court also rejected an argument by the defendant law firm that an independent cause of action for breach of the covenant of good faith and fair dealing does not exist in the District of Columbia for claims based on an attorney's representation of a client. See slip op. at 118. The Court distinguished Jacobsen v. Oliver, 201 F.Supp. 2d 93, 98 n. 2 (D.D.C. 2002), on the grounds that Jacobsen dismissed the implied covenant count because it was identical to a malpractice claim in that case. But in this case, the plaintiffs' implied covenant claims were founded upon their contingent fee agreement with the defendant law firm, not on the legal representation or alleged malpractice. Therefore, Judge Walton reasoned, the general rule applies that in every contract there is an implied covenant of good faith and fair dealing. "No cases addressing legal malpractice have carved out an exception for such cases, and therefore, just like other contracts, contracts with attorneys are subject to an implied covenant of good faith and fair dealing."
Employees’ Claim Against Employer for Unpaid Wages Dismissed Pursuant to Iqbal and Twombly
In Eric Johnson, et al, v. Prospect Waterproofing Company, et al., Civil Action No. 11-0077, (D.D.C. Sept. 21, 2011), the U.S. District Court for the District of Columbia dismissed the plaintiffs' suit against their employer for unpaid wages for failing to state a claim pursuant to Ashcraft v. Iqbal, 129 S.Ct. 1937 (2009) and Alt. Corp. v Twombly, 550 U.S. 544 (2007), on the basis that Davis-Bacon Act merely establishes an administrative process for the recovery of unpaid wages, does not give rise to a private right of action, and that it is impermissible to try to circumvent the Act by asserting that the claims governed by the Act arise under state law.
Plaintiffs were hired as roofers by Prospect Waterproofing Company to work on various federally-funded or federally-assisted construction projects in the District of Columbia. Plaintiffs contend that projects were subject to the Davis-Bacon Act, 40 U.S.C. sec. 3141, et seq., which requires employers to pay prevailing wage rates for certain categories of jobs in the community, and that defendants failed or refused to pay them the prevailing wage rate established under the Act. Plaintiffs sought to recover the difference between the Davis-Bacon prevailing wages allegedly owed and the wages defendants' actually paid.
Plaintiffs' complaint alleged that three state law causes of action arise out of defendants' failure to compensate plaintiffs according to the prevailing Davis-Bacon rate: (1) violation of the D.C. Wage Payment and Collection Law; (2) violation of the D.C. Minimum Wage Act; and (3) a common law quantum meruit claim based upon the defendants retention of the difference between the prevailing wage and what was actually paid to plaintiffs.
The Davis-Bacon Act requires all laborer and mechanics working on federally-funded construction projects to be paid not less than the prevailing wage in the locality where the work is performed. 40 U.S.C. sec. 3142. Every contract entered into pursuant to the Act must stipulate that the contractor shall pay the established wages and, if the contractor fails to pay the minimum wages specified, that the government's contracting officer may withhold so much of the accrued payment as necessary to pay the laborers and mechanics the difference between the wage rate and the wages paid. 40 U.S.C. sec. 3142(c)(1) and (3). The Act goes on to provide that "if the accrued payments withheld under the terms of the contract are insufficient to reimburse" the laborers for the wages owed, those "laborers and mechanics have the same right to a civil action and intervene against the contractor  as is conferred by law on persons furnishing labor or materials." 40 U.S.C. sec. 3144(a)(2). "But, this purely financial remedy is available only after there has been an administrative determination that some money is owed and that insufficient funds have been withheld to compensate the affected laborer." U.S. ex rel. Bradbury v. TLT Constr. Corp., 138 F. Supp. 2d 237, 241 (D.R.I. 2001).
After an analysis and recitation of cases from other districts that have tackled this issue, the Court concluded that the Act did not provide a private right of action to recover unpaid wages.
Even though the Act did not confer a private right of action, plaintiffs' insisted that their suit could proceed because they were not seeking relief under the Act, but instead under D.C. law, which created a valid claim for unpaid wages governed by the Davis-Bacon Act under D.C.'s Wage Payment and Collection Law and Minimum Wage Act. However, the Court ruled that plaintiffs were merely trying to bypass the exclusive administrative remedies of the Davis-Bacon Act by bringing state law and common law claims, even though the complaint makes clear that plaintiffs' claims are founded exclusively on the Act. Consequently, the Court concluded that "plaintiffs' claims are clearly an impermissible end run around the Davis-Bacon Act" and that allowing such a claim would severely undermine the specific remedial scheme established by Congress. Therefore, since no private right of action exists under the Davis-Bacon Act, plaintiffs failed to state a claim upon which relief could be granted and the Court dismissed plaintiffs' complaint.
Posted by Robert D. Anderson on 01/26/2012 at 06:35 PM
District of Columbia
Lawyer Professional Liability: D.C. Circuit discusses remedy following breach of fiduciary duty
In So v. Suchanek, Nos. 10-7071, 10-7087 and 10-7113 (D.C. Cir. Jan. 20, 2012), a professional liability action against an attorney, the Court considered the defendant attorney's appeal of a judgment that the attorney had to disgorge fees, with interest, totaling $455,933.52 as a result of the attorney's breach of fiduciary duty by failing to disclose a direct conflict of interest. The Court also considered the former client's cross-appeal, in which the former client argued that the amount of disgorgement should have been higher. The Court ruled against the attorney and in favor of the former client, affirming the judgment against the attorney as to liability, but remanding the matter to the trial court for recalculation of the amount of disgorgement of fees, in a higher amount, covering the entire course of representation.
The facts of the case are perhaps best summed up by the trial court's one-sentence introduction to its Memorandum Decision:
This case presents the sad story of a blind and
partially deaf retired administrative law judge who robed himself
with the made-up title "Chief Judge Emeritus"; held himself out
as a knowledgeable, indeed powerful, lawyer with experience in
complex international financial matters; undertook to provide
legal representation from Washington, D.C., to a British
corporate entity, an American investor, a wealthy but naive, non-
English speaking Hong Kong investor, and a Chinese woman resident
in Canada, in connection with a financial fraud perpetrated in
London; ignored or failed to recognize conflicts of interest
between and among these clients; accomplished roughly nothing
except administrative duties for any of them; accepted
substantial payments from his client but neither prepared nor
submitted bills; and, when his representation came to an end and
his Hong Kong client demanded the return of $400,000 of the funds
that had been entrusted to him, refused to do it.
So v. Suchanek, No. 08-2091 (D.D.C. May 6, 2010)(U.S. District Judge James Robertson).
Finding several conflicts of interest in violation of D.C. Rule of Professional Conduct 1.7, the district court stated that:
The controlling Circuit precedent found in Hendry v.
Pelland, supra, amply supports a finding that a lawyer who
represents his client although he has conflicts of interests has
violated his fiduciary duty, and that such a violation, without
more, will support an order for the disgorgement of legal fees.
Hendry does not, however, require disgorgement, nor does it
prescribe the amount or proportion of fees that must be disgorged
if disgorgement is to be the remedy. For those matters, the
trial court is left to its sound, equitable discretion.
On appeal, the D.C. Circuit observed, in pertinent part, that although not every ethics violation rises to the level of a breach of fiduciary duty, a breach occurs when an attorney represents clients with conflicting interests.
The Circuit Court agreed that disgorgement is an equitable remedy entrusted to the sound discretion of the district court. Here, however, the Circuit Court held that the district court's award of damages was founded on an erroneous view of the law, namely, a misapplication of rule 1.7, because the district court erroneously considered the conflict of interest limited to two discrete time periods. The Court directed that on remand, the district court consider the following factors:
The remedy . . . [the district court] fashions should account for the full extent of the conflicts found; the need to deter attorney misconduct; the "fundamental principle of equity . . . that fiduciaries should not profit from their disloyalty"; and the decreased value of the services provided to So resulting from Suchanek's rampant misconduct. Hendry, 73 F.3d at 402; see also Restatement (Third) of the Law Governing Lawyers [sec.] 37 cmt. e (2000)("Ordinarily, forfeiture extends to all fees for the matter for which the lawyer was retained . . . . ")
This case illustrates the importance of early identification of conflicts of interest and an effective response to such conflicts.
Posted by David B. Stratton on 01/23/2012 at 10:28 PM
District of Columbia
Employee’s disclaimer of third party tort action against employer’s customers upheld by D.C. Court
In Brown v. 1301 K Street Limited Partnership, No. 09-CV-695 (D.C. Nov. 23, 2011), the D.C. Court of Appeals upheld the validity of a disclaimer signed by a security guard, in which she agreed that her workers' compensation benefits from her employer would be her sole remedy and that she waived any rights she had to make a claim against her employer's customers arising from injuries covered under the Workers' Compensation statutes.
The wording of the disclaimer was as follows:
I understand that state Workers' Compensation statutes cover work-related injuries that may be sustained by me. . . . As a result, and in consideration of Allied Security offering me employment, I hereby waive and forever release any and all rights I may have to:
- make a claim, or
- commence a lawsuit, or
- recover damages or losses
from or against any customer (and the employees of any customer) of Allied Security to which I may be assigned, arising from or related to injuries which are covered under the Workers' Compensation statutes.
The plaintiff had slipped on a wet floor while working as a security guard for Allied Barton Security, which had a contract with the building owner and property manager to provide security services. Plaintiff received a lump sum workers' compensation settlement for her injuries, and then filed suit against the building owner and property manager. In her action, she alleged negligence, OSHA violations, and violation of the D.S. Industrial Safety Act.
The defendants were granted summary judgment on the basis of the above disclaimer, and the plaintiff appealed.
On appeal the plaintiff argued that the disclaimer was invalid because it is an agreement to forego her right to compensation under the D.C. Workers' Compensation Act. The Court rejected that argument, because the disclaimer did not purport to limit in any way the plaintiff's right to compensation under the Act.
The Court also rejected the plaintiff's argument that the disclaimer was too general, finding that the parties' intent is clear from the face of the disclaimer.
The Court rejected the argument that the disclaimer violated public policy. The Court has previously invalidated only a few exculpatory clauses on public policy grounds: an exculpatory clause in a will that excused self-dealing by the personal representative; and an exculpatory clause in a lease the excused the landlord's obligations under the implied warranty of habitability. However, the Court found "nothing violative of public policy in an employer's choice to protect its customers from liability for workplace injuries, choosing instead to compensate its employees itself exclusively through workers' compensation."
Finally, the Court rejected the plaintiff's argument that the disclaimer violated the public policy underlying the OSHA and ISA statutes. The Court noted that those statutes are not strict liability statutes, but are analogous to negligence in that they establish standards of care. "Although releases purporting to limit liability for gross negligence, willful acts, or fraud will not be enforced, releases are viable and enforceable when they limit liability for ordinary negligence."
This case illustrates that the Courts are willing to allow businesses to structure their relationships to apportion risk, at least where negligence claims are concerned. Here, the security company may end up paying higher workers' compensation insurance premiums than it would without the disclaimer. On the other hand, the security company can adjust its fee structure to account for its insurance costs.
Posted by David B. Stratton on 01/16/2012 at 11:19 PM
District of Columbia
D.C. Workers Compensation: Court of Appeals rejects objective standard for mental disability claims
In Muhammad v. District of Columbia Depart. Of Emp. Serv., No. 10-AA-1049 (D.C. Jan. 5, 2012), the claimant had suffered a back injury on the job and was on temporary total disability. After three years, the employer enrolled the claimant in vocational rehabilitation, in an effort to find him sedentary work. After a year of unsuccessful vocational counseling, rehabilitation efforts were terminated. Subsequently, the claimant's treating physician recommended that the claimant begin seeing a psychiatrist, and the psychiatrist diagnosed the claimant with severe depression. The employer then arranged for a psychiatric IME, which diagnosed the claimant with a depressive disorder caused by the claimant's limited coping response to the challenges imposed by vocational rehabilitation.
The claimant then petitioned for permanent total disability benefits. The ALJ denied the claim, concluding that claimant's psychiatric injury was not medically causally related to the workplace injury to the claimant's back. The Compensation Review Board ultimately affirmed.
On appeal, the Court reversed and remanded the Compensation Review Board's denial of benefits on the grounds that the claimant's psychological injury did not arise out of and in the course of employment. The Court directed that on remand, the Board must resolve the question whether a claim flowing from vocational rehabilitation might be covered as involving what Professor Larson refers to as a 'quasi-course of employment' injury. Quasi-course of employment activities are activities undertaken by the employee following upon his or her injury which, although they take place outside the time and space limits of employment, and would not be considered employment activities for usual purposes, are nevertheless related to the employment in the sense that they are necessary or reasonable activities that would not have been undertaken but for the compensable injury. This was recognized as an issue of first impression in the District in the case of Nixon v. District of Columbia Dept. of Emp. Serv., 954 A.2d 1016 (D.C. 2008), but the issue has never been reached by the Compensation Review Board.
The Court noted that the Board incorrectly directed the ALJ to determine if the psychological injury resulted from a strictly personal reaction by the claimant. The Court stated that contrary to the Board's assertion, employers must accept employees as they find them. The controlling standard is that the Workers' Compensation Act neither requires, nor permits, use of an objective test under which an employee seeking compensation for psychological injuries must show that an average person not predisposed to such injury would have suffered a similar injury.
Although the Court has rejected the use of an objective standard for evaluating an individual's reaction to workplace conditions, it did not eliminate the requirement that the workplace conditions that a petitioner asserts caused the injury must exist in reality. In mental-mental cases a test for the existence of actual workplace stressors must be one verifying the factual reality of the stressors in the workplace environment, rather than one requiring the claimant to prove that a hypothetical average or healthy person would have suffered a similar psychological injury.
Posted by David B. Stratton on 01/09/2012 at 02:43 PM
District of Columbia
Negligence per se based on traffic regulations: A D.C. refresher
Two recent opinions from the U.S. District Court for the District of Columbia provide a refresher on D.C. law concerning negligence per se based on the violation of D.C. traffic regulations.
In Mahnke v. Washington Metropolitan Area Transit Authority, No. 10-0021 (D.D.C. Oct. 20, 2011), the plaintiff was a pedestrian who marched out into a crosswalk when she had the "walk" light, and was hit by a WMATA bus which had started through the eight lane intersection on a yellow light. The accident was videotaped, and WMATA filed a motion for summary judgment on the grounds that the plaintiff was contributorily negligent for not looking for oncoming traffic before stepping off the curb as the video appeared to show. As the bus neared the intersection, the bus driver saw the traffic light change from green to yellow, and she accelerated in an effort to clear the eight-lane intersection. WMATA conceded that the light turned red before the bus exited the intersection. The video showed that the bus was halfway through the intersection when the plaintiff entered the crosswalk. The plaintiff sustained numerous injuries, allegedly including a fractured, skull, epidural hematoma, broken clavicle, fractured ribs, collapsed lung, pelvis fracture, and traumatic brain injuries, and she claimed $20 million in damages as of the time of the trial court's opinion.
The plaintiff not only denied that summary judgment could be granted based on contributory negligence, but also filed a motion in limine to prevent WMATA from raising the contributory negligence defense at trial. The parties also filed 11 other motions in limine to preclude the admission of certain evidence at trial.
The trial court denied WMATA's motion for summary judgment because the parties disputed whether the plaintiff checked for oncoming traffic before crossing the street, whether the plaintiff would have been able to see the WMATA bus if she had looked for oncoming traffic, and whether the WMATA bus driver had the last clear chance to avoid the accident. Among other things, when the plaintiff stepped off the curb after waiting for the "walk" sign, another pedestrian stepped off the curb with her and might have blocked her view. (The other pedestrian saw the bus coming and stepped back onto the curb.)
The trial court denied the plaintiff's motion in limine to preclude a contributory negligence defense because the determination of whether the defendant was negligent per se rests on jury determinations, and in any event, a defendant's violations of traffic regulations do not bar a contributory negligence defense. The trial court noted, among other things, that the D.C. Court of Appeals has explicitly stated that there is "no merit" to the contention that a "violation of a traffic regulation precludes application of a contributory negligence defense." Massengale v. Pitts, 737 A.2d 1029, 1032 n.1 (D.C. 1999).
Following the Mahnke opinion, the case settled before trial.
In Sibert-Dean v. Washington Metropolitan Area Transit Authority v. Woodson, No. 08-2145 (D.D.C. Dec. 4, 2011), the trial court denied WMATA's post-trial motion for a new trial, based on the court's instructions to the jury that a violation of any of the seven traffic regulations applicable in this case would constitute negligence per se.
This case involved a WMATA bus accident, in which a WMATA bus collided with Woodson's car, when Woodson made a left turn in front of the bus in order to enter a grocery store parking lot. The plaintiff was a passenger on the bus, and injured her shoulder and neck in the accident. Prior to trial, WMATA asserted that Woodson]s violation of traffic regulations constituted negligence per se and evidence of negligence. The traffic regulations included 18 DCMR sec. 2213.4, which provides that "[a]n operator shall, when operating a vehicle, give full time and attention to the operation of the vehicle." The plaintiff requested inclusion of 18 DCMR sec. 2206.1, which provides that "[n]o person shall start a vehicle which is stopped, standing, or parked unless and until the movement can be made with reasonable safety."
At a charging conference near the conclusion of the trial, the trial court concluded that the negligence per se instruction was appropriate. However, before the jury was instructed, WMATA objected to the negligence per se instruction, on the grounds that traffic regulations are generally not the type of regulation for which a violation creates negligence per se. The trial court overruled the objection.
At trial, the jury returned a verdict against WMATA and the third party defendant, Woodson, concluding that both defendants' negligence proximately caused the accident, and awarded the plaintiff $675,000 in damages.
In its motion for new trial, WMATA argued that the trial court erred when it included traffic regulations 18 DCMR secs. 2213.4 and 2206.1 among the seven traffic regulations in the Court's negligence per se instruction. WMATA's argument was that these two regulations are inappropriate for a negligence per se instruction because they do not establish specific guidelines governing the defendant's actions, but merely reiterate the duty of care established by the common law.
The trial court rejected this argument. It began by noting that in the District of Columbia, unexplained violations of traffic regulations may constitute negligence per se. D.C. courts have repeatedly held that the unexplained violation of a traffic regulation enacted to prevent the type of accident that occurred constitutes negligence per se. The trial court agreed with the proposition that in general, a statute or regulation offered to establish a standard for negligence per se purposes must not merely repeat the common law duty of reasonable care, but must set forth specific guidelines to govern behavior. However, the trial court found that the regulations objected to in this case are appropriate for a negligence per se instruction. The Court found that:
Contrary to WMATA's contention, 18 DCMR ?? 2213.4 and 2206.1 prescribe a sufficiently specific standard of care for vehicle operators to warrant a negligence per se instruction. Traffic Regulation 2213.4 states that "[a]n operator shall, when operating a vehicle, give full time and attention to the operation of the vehicle." This regulation does more than simply require a driver to pay attention, but demands "full attention," which, as the plaintiff notes, requires a driver to "not be distracted, and not be engaging in other activities while driving (certainly a problem in these days of multitasking and technology)."
Similarly, 18 DCMR ? 2206.1 also sets forth a specific standard of conduct. The regulation states that "[n]o person shall start a vehicle which is stopped, standing or parked unless and until the movement can be made with reasonable safety." The plaintiff correctly observes that Regulation 2206.1 "specifically applies to beginning to move your vehicle before it is safe to do so. It speaks to a driver understanding his/her surroundings and checking to make sure everything is safe before starting."
The trial court also found that these regulations were similar in specificity to the traffic regulations which the D.C. Circuit determined warranted a negligence per se instruction in Burns v. Washington Metropolitan Area Transit Authority, 114 F.3d 219 (D.C. Cir. 1997). Among those regulations were 19 DCMR sec 2200.3, which states, in relevant part, that "no person shall drive a vehicle on a street or highway at a speed greater than is reasonable and prudent under the conditions and having regard to the actual and potential hazards then existing," and sec. 2200.5, which provides that "[t]he driver of every vehicle shall, consistent with requirements of this section, drive at an appropriate reduced speed when approaching and crossing an intersection . . . Or by reason of weather . . . ."
Finally, the trial court observed that WMATA presented no evidence at trial to establish that its bus driver's failure to comply with applicable regulations was excusable. A jury should be instructed that the violation of a statute is merely evidence of negligence, and not negligence as a matter of law, if a party charged with statutory or regulatory negligence produces competent evidence tending to explain or excuse his or her violation of the statutory or regulatory standard. The trial court found that the testimony cited by WMATA did not offer an excuse or explanation for violation of traffic regulations, but rather merely reflected an effort to prove that no violation occurred. In other words, a denial is not an explanation. An excuse or explanation can only arise if a violation did occur, therefore a denial is obviously not the sort of explanation that rebuts a negligence per se charge.
Posted by David B. Stratton on 01/01/2012 at 11:17 PM
District of Columbia
Motor Vehicle Accidents
Independent contractor rule in D.C.: WMATA not liable for tuberculosis exposure
In a recent case before the District Court for the District of Columbia, the plaintiff unsuccessfully attempted to invoke two exceptions to the "independent contractor rule." Andrews v. Wash. Metro. Area Transit Auth., 2011 U.S. Dist. LEXIS 119916 (D.D.C. 2011). That rule provides that a principal is generally not liable for the actions of his independent contractor.
Mr. Andrews filed suit against the Washington Metropolitan Area Transit Authority (WMATA), asserting that a driver of a MetroAccess bus was infected with tuberculosis and exposed his passengers to this disease. WMATA filed a motion to dismiss, on the grounds that the driver was an employee of an independent contractor, MV Transportation, Inc. This motion was later converted into a motion for summary judgment.
Mr. Andrews asked the court to find WMATA liable for the actions of its independent contractor on two grounds. First, Mr. Andrews argued that the independent contractor was engaged in an inherently dangerous activity. Second, MV Transportation was an apparent agent of WMATA because WMATA holds out the MetroAccess bus service as being part of a network of services provided by WMATA.
The court granted WMATA's motion to dismiss. First, this was not an inherently dangerous activity. Driving a bus does not usually pose a danger to others when the driver exercises reasonable care. Even though the particular driver who was infected with tuberculosis posed a risk to passengers, there was no reason WMATA should have known of this risk.
Mr. Andrews' claim of apparent agency was also rejected because it was not supported by competent evidence. The court noted that apparent agency usually does not apply to a government entity as a matter of law, because someone who enters into a formal arrangement with the government bears the burden of ascertaining that "he who purports to act for the government stays within the bounds of his authority." However, the court stated that passengers on a MetroAccess bus would not bear this burden, given the limited and informal nature of their interaction with WMATA. Therefore, if Mr. Andrews had produced evidence in support of his apparent agency argument, he might have prevailed.
Posted by Raphael J. Cohen on 12/16/2011 at 11:12 PM
District of Columbia
Subrogation suit dismissed based on contractual limitations period in arbitration clause
In Vigilant Insurance Company v. American Mechanical Services of Maryland, LLC, the U.S. District Court for the District of Columbia dismissed a subrogation action by an insurance company against a contractor on the grounds that the claim was barred by a contractual limitations period.
Vigilant sued American Mechanical Services to recover amounts paid by Vigilant to Venable, LLP following a fire at Venable's offices which Vigilant claimed was caused by American Mechanical Services. As Vigilant was subrogated to the rights of its insured, it was bound by the contract between American Mechanical Services and Venable, LLP, which included a mandatory arbitration clause. That clause included a requirement that a written demand for arbitration needed to be served within one year after the date the dispute arose.
Vigilant conceded that no written demand for arbitration was made, but argued that a demand letter sent to American Mechanical Services (which did not mention arbitration) was sufficient to discharge American Mechanical Services' obligation to initiate arbitration. The Court disagreed, finding that the term was unambiguous, and that no reasonable jury could find that American Mechanical Services had lulled Vigilant into disregarding the contractual period of limitations.
Posted by Padraic K. Keane on 11/22/2011 at 07:13 PM
District of Columbia
Legal malpractice in D.C.: the common knowledge exception to the requirement of expert opinion
In Carranza v. Fraas, No. 05-0117 (D.D.C. Oct. 31, 2011), Judge Urbina granted summary judgment on legal malpractice and breach of fiduciary duty claims, due to the plaintiffs' lack of expert testimony supporting some of their claims, and the plaintiffs' lack of admissible evidence to support their last remaining claim. The plaintiffs, who were two female farmers from Montana, brought suit against the defendant attorney for legal malpractice and breach of fiduciary duty arising out of their underlying civil rights action against the USDA.
The plaintiffs had three claims. First, they alleged that the attorney failed to meet USDA-imposed deadlines in pursuing a settlement in the civil rights action. Second, they alleged that the attorney failed to disclose a conflict of interest arising from his work as a registered lobbyist before the USDA. Third, they alleged that the attorney failed to inform them of a settlement offer by the USDA.
Judge Urbina granted summary judgment on the first two claims in an earlier opinion, Carranza v. Fraas, 763 F.Supp.2d 113 (D.D.C. Feb. 7, 2011). The Court noted that to establish legal malpractice under D.C. law, the plaintiffs must demonstrate the applicable standard of care, that the attorney violated that standard and that the violation caused a legally cognizable injury. They must establish the standard of care by presenting expert testimony, unless the attorney's lack of care and skill is so obvious that the trier of fact can find negligence as a matter of common knowledge.
Here, the plaintiffs had failed to designate an expert witness, and argued that their allegations fell within the common knowledge exception. Concerning the allegation that the attorney failed to meet USDA deadlines, Judge Urbina acknowledged that failing to adhere to court filing deadlines is a type of negligence that may fall within the common knowledge exception. However, not every failure to meet a deadline falls within the common knowledge exception. The alleged deadline here was an unspecified time during which the USDA expected the defendant to file paperwork in accordance with the purported settlement offer. The Court found that "it is far from clear that a lay jury could determine the significance of the defendant's alleged failure to comply with such deadlines without the aid of expert testimony", and that the common knowledge exception did not apply to these deadlines.
The plaintiffs' second claim was based on an alleged conflict of interest. While other jurisdictions have held that no expert testimony is necessary in cases involving obvious conflicts of interest, in D.C. the Court observed that it has been held that "assessing an alleged conflict of interest is a task that falls beyond the ken of a lay juror relying on common knowledge and requires expert testimony." Thus, the Court found that the common knowledge exception did not apply to the conflict of interest claim.
The plaintiffs' third claim was that the attorney failed to inform them of the USDA's January 2001 settlement offer. The Court did find that the common knowledge exception applied to this claim:
Without question, an attorney has a duty to inform his client of meaningful settlement offers made in the course of civil litigation. See, e.g., D.C. RULES OF PROF'L CONDUCT R. 1.4(a) cmt. 1 (providing that "[a] lawyer who receives from opposing counsel an offer of settlement in a civil controversy . . . is required to inform the client promptly of its substance") . . . .
The Court reasoned that a lay juror could recognize that an attorney's failure to report a settlement offer is a breach of duty, and is a withholding of information necessary to make decisions that are at the core of the attorney-client relationship. However, the Court denied summary judgment on this claim without prejudice, to allow for further discovery as to whether the USDA had in fact ever made the alleged settlement offer.
The Court also refused plaintiffs' motion to appoint an expert under Fed. Rule of Evidence 706(A), which was a ruling that drew some scholarly attention.
In the subsequent opinion, the Court granted the renewed summary judgment motion by the defense. After discovery, it simply turned out that there was no evidence that the USDA had actually made the alleged settlement offer in January, 2001. The plaintiffs' opposition to the renewed motion for summary judgment rested only upon their own unsupported affidavit, which itself merely presented hearsay. The contemporaneous documentation of the settlement negotiations indicated that the USDA had never made the alleged settlement offer after all.
This case illustrates the need for a practitioner to document settlement negotiations carefully, in order to avoid any misunderstandings and resolve any claims expeditiously.
Legal malpractice decision explores roles of judge, jury, and expert in District of Columbia
In a legal malpractice case, Hickey v. Scott, No. 07-1866 (D.D.C. July 11, 2011), the District Court explored the respective roles of the judge, jury, and expert under D.C. law. (An earlier decision in this case was previously discussed here.)
The claim discussed in this ruling was the plaintiff's allegation that the lawyer violated the applicable standard of care by failing to request Laffey Matrix hourly rates in his petition for attorney's fees in the underlying action before the EEOC. Before the District Court was the issue of the permissible scope of expert testimony with regard to that claim. Should the parties' experts be permitted to testify on whether it is a breach of the appropriate standard of care for an eligible attorney not to request Laffey rates in his fee petition before the EEOC, and instead request only his lower, contractual rates? Second, should the experts be permitted to testify whether the attorney met the legal criteria for an award of Laffey rates? Third, should the experts be permitted to testify whether the attorney's failure to petition for Laffey rates was the proximate cause of any injury to the former client?
Each of these questions implicated the respective roles of the Court, the jury, and the experts at trial.
The Court ruled that whether it is a breach of the applicable standard of care for an eligible attorney not to file a fee petition for Laffey rates before the EEOC is a question that the jury must decide.
However, expert testimony as to the applicable standard of care is appropriate and necessary, unless the attorney's lack of care and skill is so obvious that the trier of fact can find negligence as a matter of common knowledge.
The Court also ruled that the experts would be allowed to opine on whether it is a breach of the standard of care for an attorney in the same circumstances not to petition for Laffey rates.
On the other hand, the legal criteria for an award of Laffey rates was ruled to be a matter of law, within the sole province of the Court, and upon which the experts were not permitted to testify. Surprisingly, the District Court cited an Illinois decision on this point.
The Court also ruled that once it had instructed the jury as to the law on an attorney's eligibility for Laffey rates, the question of whether the attorney satisfied these legal criteria was one for the jury to decide.
Finally, the Court considered the issue of who would decide whether the attorney's failure to petition for Laffey rates was the proximate cause of injury? In other words, whether such a petition for Laffey rates, if made, would have been successful? The District Court characterized this as a variety of the "case-within-a-case" issues typical of legal malpractice cases. Here, the issue was whether a reasonable Administrative Law Judge would have awarded fees at the higher Laffey rates if the attorney had sought them.
Adopting the approach of a number of non-District of Columbia precedents, the District Court ruled that the jury should perform its traditional function of applying law to facts, even when the earlier factfinder was a judge -- as long as it only involves an application of law to facts, not a decision on a disputed issue of law. Under this approach, the Court simply instructs the jury on the legal aspects of the case, and then leaves it to the jury to decide what a reasonable fact-finder would have concluded if the attorney had not been negligent.
Finally, the Court considered whether the jury may be assisted by expert testimony in making that assessment. Citing precedent from the Second Circuit, Virginia, and California, the District Court ruled that no, the parties experts would not be permitted to testify on this, and invade the jury's function by reaching the ultimate question of whether a petition for Laffey rates before a reasonable ALJ would have been successful.
The District Court acknowledged that there is a fine line between an expert's testimony on why an attorney's failure to petition for Laffey rates constituted a breach of the standard of care, and expert testimony on whether a reasonable ALJ would have awarded Laffey rates, however "[a]lthough the distinction may be subtle, it is one that must be drawn."
This decision provides a framework for future legal malpractice cases to help properly delimit the respective roles of the parties' experts, the jury, and the Court.
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