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Virginia Legal Malpractice:  The burden of proving non-collectibility is on negligent attorney

In Shevlin Smith v. McLaughlin, the Virginia Supreme Court considered the issues of: (1) whether an attorney breaches the duty to a client by failing to correctly anticipate a judicial ruling on an unsettled legal issue; (2) whether collectibility is relevant to a legal malpractice claim when the alleged injury is the loss of an otherwise viable claim; and (3) whether non-pecuniary damages are recoverable in a legal malpractice claim.

Among other things, the Court held that the burden of proving that a judgment in the underlying case would have been uncollectible is on the negligent attorney.

This case involve an allegation of legal malpractice in an underlying legal malpractice claim, which in turn arose from alleged malpractice in a criminal case.

The alleged malpractice in the original criminal matter was that the criminal defense attorneys negligently failed to obtain the taped interview of the alleged victims and compare those tapes with the inaccurate written transcripts used during the first criminal trial.  In that trial, the accused had been represented by two separate law firms.

The first criminal trial resulted in a conviction, and the accused served four years in prison before the conviction was overturned in a habeas proceeding.  After that, the accused was found not guilty in a second prosecution.

The accused hired the firm of Shevlin Smith to represent him in a criminal malpractice case.  Shevlin Smith negotiated a settlement and release with law firm #1 in order to settle the criminal malpractice claim against it. The release did not discharge the criminal malpractice claim against law firm # 2.

Four months later, a Virginia Supreme Court opinion was issued in an unrelated matter, Cox v. Geary.  Based on that decision, law firm # 2 filed a plea in bar, arguing that the criminal malpractice claim against it must be dismissed because under the new decision, the settlement and release of some co-defendants to the legal malpractice claim was a release of all co-defendants.  The trial court agreed, and sustained law firm # 2's plea in bar.

The plaintiff then filed a second legal malpractice claim against Shevlin Smith, based on two theories of liability.  First that Shevlin Smith breached its duty be failing to foresee how the Court's holding in Cox v. Geary would impact the Release Agreement.  Second, that Shevlin Smith breached its duty to the plaintiff by failing to take various actions with respect to law firm # 1, and failing to fully advise the plaintiff about the alternative of refusing the settlement and continuing to proceed against law firm # 1.

Here, the court noted that since the alleged negligence occurred in a criminal proceeding, the legal malpractice plaintiff "must prove post-conviction relief and innocence entitling him to release."

Concerning the issue of judgmental immunity, the Virginia Supreme Court declined to adopt a per se judgmental immunity doctrine.  Instead, the Court held that, if an attorney exercises a reasonable degree of care, skill, and dispatch while acting in an unsettled area of the law, which is to be evaluated in the context of the state of the law at the time of the alleged negligence, then the attorney does not breach the duty owed to the client.  While this determination is ordinarily a question of fact for a jury, it becomes an issue of law when reasonable minds could not differ on the issue.

Further concerning the issue of whether collectability is relevant to a legal malpractice claim, the court held that collectibility is implicated when the injury claimed by the legal malpractice plaintiff is the loss of an otherwise viable claim.  That is, collectibility limits the measure of the legal malpractice plaintiff's damages as to how much the legal malpractice plaintiff could have actually recovered from the defendant in the underlying litigation, absent the attorney's negligence.

The client must prove that the attorney's negligence proximately caused the damages claimed.  As to who must prove that a judgment in the underlying case was collectible, the Court said the following:

"Consequently, collectibility is relevant because a legal malpractice plaintiff's damages for a lost claim can only be measured by the amount that could have actually been collected from the defendant in the underlying action in the absence of the attorney's negligence. Entry of judgment against the defendant in the underlying claim does not guarantee collection of the entire award. Instead, successfully prosecuting a claim to judgment is only half of the marathon that is redressing an injury in our judicial system. Once armed with a judgment, a plaintiff then has 20 years to collect that award . . ."

However, while collectibility is relevant, it is not an element of a legal malpractice plaintiff's prima facie case.  The Virginia Supreme Court held that "we do not place the burden on a legal malpractice plaintiff to also prove the value of the underlying judgment that he would have been able to collect absent the attorney's negligence."

Instead, Virginia joined the growing trend of jurisdictions that place the burden of pleading and disproving collectibility on the negligent attorney as an affirmative defense.

Finally, the court held that a plaintiff cannot recover non-pecuniary damages in a legal malpractice action. The question of what damages are recoverable in a legal malpractice claim is governed by Virginia law pertaining to what damages are recoverable in a breach of contract claim. Regardless of the foreseeability of non-pecuniary injury incident to a breach of contract, however, "[a]s a general rule, damages for breach of contracts are limited to the pecuniary loss sustained."

The "rule," then, is clear: "tort damages" — including non-pecuniary damages such as mental anguish, emotional distress, and humiliation — "are not recoverable for breach of contract."  As this principle holds true for all non-pecuniary, non-economic injury caused by the attorney's malpractice, such loss is not recoverable as damages in a legal malpractice claim.


To discuss these holdings or the defense of a Virginia legal malpractice claim, contact Carol T. Stone of Jordan Coyne LLP at 703-246-0900.



Posted by David B. Stratton on 08/01/2015 at 08:44 PM
Legal MalpracticeVirginiaPermalink

Requirements to plead a legal malpractice action arising from a criminal matter in Virginia

In Desetti v. Chester, the Virginia Supreme Court considered the issue of whether a plaintiff sufficiently pled a claim for legal malpractice that occurred during the course of an attorney's misrepresentation of the plaintiff in a criminal matter.

The plaintiff, her husband, and her son were all involved in a criminal incident with a law enforcement officer at their home.  Based on that incident, she was charged with felony assault and battery of a law enforcement officer and a misdemeanor obstruction of justice count.  Her husband and son were charged with misdemeanor obstruction of justice counts.  They all retained the same defense counsel.

The charges against the husband and son went to trial first.  The defense attorney called the plaintiff as a witness, and during the course of her direct examination, she admitted that she struck the law enforcement officer who had entered her home.  The husband and son were found guilty.

Next, the prosecution gave the defense attorney a plea offer, which would allow her to plead guilt to a misdemeanor assault and battery.  The defense attorney never conveyed this offer to the plaintiff.  Instead, he advised her to plead not guilty and go to a jury trial because "she had a 'slam dunk' case."  He also allegedly failed to inform her that a guilty verdict on her felony charge would entail a mandatory minimum sentence of six months of incarceration.

The Plaintiff's trial then took place.  The Plaintiff alleged that the defense attorney made the unilateral decision, without consulting with her, to reject the prosecution's jury instruction that incorporated the lesser-included offense of misdemeanor assault and battery because the defense attorney was employing a "felony or freedom" strategy.  At trial, the jury returned a verdict on the felony assault and battery charge, and the Plaintiff was sentenced to the mandatory minimum of six months of incarceration.

While serving her sentence the Plaintiff filed a petition for writ of habeas corpus, alleging ineffective assistance of counsel.  A year later, the habeas court granted her petition on the basis that the defense counsel's ineffective assistance of counsel prejudiced the plaintiff in a criminal matter, because of (1) the defense counsel's concurrent representation of the three defendants; (2) the defense counsel's failure to convey and explain the plea offer; (3) the defense counsel's failure to advise and consult with the plaintiff about the inclusion of a lesser-included misdemeanor offense in the jury instructions.  The habeas court vacated her felony assault and battery conviction.

The Commonwealth elected to retry her for her actions giving rise to the original charges.  The Plaintiff this time pled guilty to misdemeanor assault and battery.  She was convicted of misdemeanor assault and battery and was sentenced to ten days of incarceration, with all ten days suspended.

The Plaintiff then brought a legal malpractice suit against her former criminal defense counsel. 

In the malpractice action, the defendant filed a demurrer on the grounds that the plaintiff failed to state a claim upon which relief could be granted because she was not actually innocent of the criminal act of assault that was the basis of her prosecution.  The argument was that although the felony assault and battery had been vacated, the plaintiff subsequently admitted guilt to misdemeanor assault and battery, and it was that guilt of a criminal act which was the proximate cause of her injuries.  The trial court sustained the demurrer.

On appeal, the Virginia Supreme Court affirmed the trial court.

The Court began by pointing out that in the normal legal malpractice action, the essential elements are the existence of an attorney-client relationship which gave rise to a duty, breach of that duty, and that the damages claimed by the plaintiff must have been proximately caused by the defendant attorney's breach.

However, in a legal malpractice action arising out of a criminal matter, there are additional burdens of pleading, to ensure that courts do not assist the participant in an illegal act who seeks to profit from the act's commission.  A criminal defendant may not profit from a crime in a subsequent legal malpractice action.

For that reason, a legal malpractice plaintiff, who alleges that malpractice occurred during the course of a criminal matter, must also plead (1) that the damages to be recovered were proximately caused by the attorney's malpractice and (2) were not proximately caused by the plaintiff's own criminal actions.

The Court reasoned that to adequately plead proximate causation in this case, the plaintiff was required to plead that the damages she seeks to recover were proximately caused by the legal malpractice and not by her own criminal conduct.  However, the only pecuniary damage pled in the compliant was that her nursing license was suspended as a direct result of her felony conviction.  There was no allegation that she would not have lost her nursing license based upon her conviction of misdemeanor assault and battery.  Thus, the Court found that the plaintiff failed to plead damages flowing from her felony conviction that would not have been proximately caused by her misdemeanor sentence.

Secondly, with regard to the length of her jail time, the Court found that the plaintiff had adequately pled that but for the legal malpractice, she would have been sentenced to less than six months.  However, the complaint failed to plead that her damages were proximately caused by legal malpractice, rather than by her own criminal conduct.  The Court pointed out that "there is no basis to determine what sentence a circuit court would have imposed in the original criminal proceeding had [the defense attorney] not been negligent."  This is because a defendant convicted of misdemeanor assault and battery is subject to a sentence of not more than twelve months and a find of $2,500, either or both.  In the plaintiff's second criminal trial, her suspended sentence was after she had already served her original six month sentence.  The original misdemeanor plea offer was not accompanied by a sentence recommended by the Commonwealth.  Thus, there were no facts pled from which to draw the inference that, absent the legal malpractice, the circuit court would have imposed any shorter sentence than the six months that was imposed.

Accordingly, the Virginia Supreme Court affirmed the circuit court's judgment sustaining the demurrer.

Impact:  This opinion explains in detail what elements a plaintiff must plead in the complaint to allege a cause of action for legal malpractice where the plaintiff was found guilty in the underlying criminal matter.  It would be an over-simplification to say that under Virginia law, a person convicted of a crime cannot bring a legal malpractice claim against his or her criminal defense lawyer unless the conviction is overturned and there is a finding of not guilty. For example, in this case, the opinion suggests that the plaintiff might have stated a cause of action if she had pled that her nursing license would not have been suspended based upon a conviction of misdemeanor assault and battery.  That would have been an allegation that she sustained pecuniary harm not proximately caused by her ultimate misdemeanor conviction.

To discuss the defense of a pending legal malpractice matter in Virginia, contact Carol T. Stone of Jordan Coyne LLP at 703-246-0900.

Posted by David. B. Stratton on 07/27/2015 at 01:00 PM
DefensesLegal MalpracticeVirginiaPermalink

Federal court in D.C. rejects dramshop liability claims arising from off-premises fight

Partner Steve Schwinn, assisted by Raphael Cohen, of Jordan Coyne, LLP secured the dismissal of all claims against a District of Columbia nightclub owner seeking damages arising from the death of a graduate school student who became involved in a fight outside a fast food restaurant with three men who had been served alcohol at the nightclub down the street about an hour before.  U.S. District Court Judge Richard J. Leon held that the nightclub owner could not be liable for the death because it could not have been foreseen that the men would commit the assault upon the decedent.    

Plaintiffs alleged the men were served alcohol while obviously intoxicated, in violation of the Alcohol Beverages Control Act, and argued that the assault was foreseeable because intoxication often leads to irresponsible and criminal behavior.  The Court rejected the argument, finding that the death was caused by the intentional and unforeseeable acts of third parties that were too attenuated from the alleged negligence to support a claim. Recognizing that drinking establishments may be found negligent where a violation of the Act is a contributing cause of an accidental injury, Judge Leon explained that civil liability for the intervening criminal acts of others is extraordinary and requires a more heightened showing of foreseeability than that alleged by the plaintiffs.

 The case, Casey v. Ward, et al., Case No.: 13-1452 (D.D.C. 2015), will continue on the claims against the individuals involved in the fight, and the fast food restaurant where the altercation began.  For further information concerning this matter or any other similar matter, please call Steve Schwinn at 703-246-0900.

Copies of opinions in the case can be found here and here.

Posted by David B. Stratton on 05/15/2015 at 01:10 PM
DefensesDistrict of ColumbiaPermalink

Limit on Virginia courts to enforce subpoena duces tecum on nonresident non-parties

In Yelp, Inc. v. Hadeed Carpet Cleaning, Inc., 2015 Va. LEXIS 51 (April 16, 2015), the Supreme Court of Virginia considered the issue of whether a Virginia Circuit Court was empowered to enforce a subpoena duces tecum against a non-party California company having a registered agent in Virginia.  The Court held that Virginia circuit courts do not hold subpoena power over non-party foreign companies notwithstanding the foreign company’s act of designating a registered agent in Virginia.

The plaintiff filed a defamation suit against three John Doe defendants claiming that the three had posted false negative reviews on Yelp, a social networking website which allows users to rate local businesses.  Yelp, Inc. is headquartered in California but is registered to do business in Virginia and has designated a registered agent in Virginia.  Yelp users are able to use pseudonyms when posting reviews of businesses so Hadeed issued a subpoena duces tecum to Yelp seeking documents that might reveal the identities of the three John Doe defendants.  The subpoena was served on Yelp’s registered agent in Virginia. 

Yelp objected to the subpoena duces tecum.  The Circuit Court for the City of Alexandria issued an order enforcing the subpoena duces tecum and holding Yelp in contempt for failure to comply.  The Virginia Court of Appeals affirmed the decision of the Circuit Court and adopted its reliance upon Va. Code § 8.01-301 (1) which authorizes service of process on the registered agents of foreign corporations registered to do business in Virginia.

The Virginia Supreme Court observed that, while the General Assembly has provided for the exercise of personal jurisdiction over some nonresident defendants, subpoena power has never been expanded so as to allow it to be exercised over nonresident non-parties.  A nonresident party to a legal dispute is subject to the power of the court by way of the pending litigation but a nonresident corporation does not subject itself to the power and authority of Virginia courts by simply registering to do business in Virginia.  The court cited numerous opinions from other states holding that nonresident non-parties were not subject to subpoena power. 

The Virginia Supreme Court further observed that the General Assembly enacted the Uniform Interstate Deposition and Discovery Act (UIDDA) to facilitate the issuance of out-of-state discovery.  Va. Code §§ 8.01-412.8 et seq.  The UIDDA act provides a reciprocal streamlined process for obtaining discovery via subpoena in other  foreign jurisdictions.  Under the UIDDA acts, a party seeking out of state discovery from a non-party should have a subpoena issued by the court in which the litigation is pending.  That subpoena would then be presented to the court having jurisdiction over the territory in which discovery is sought which would be empowered to issue and enforce a subpoena.

The Supreme Court of Virginia held that the Circuit Court for the City of Alexandria could not enforce a subpoena duces tecum directing Yelp, a non-party, to produce documents located in California and the contempt order against Yelp was vacated.  Based on the reasoning presented by the court, it is likely that Hadeed would have been able to subpoena documents located in Yelp’s California headquarters using procedures outlined in the UIDDA acts, by presenting a Virginia subpoena duces tecum to the California court for issuance and enforcement of a subpoena.

Posted by Andrew Suddarth on 04/30/2015 at 06:19 PM

D.C. Court of Appeals adopts the economic loss doctrine

In Aguilar v. RP MRP Washington Harbor, LLC __ A.3d __ (D.C. Sept. 4, 2014), the D.C. Court of Appeals considered the issue whether the District of Columbia will follow the majority of jurisdictions by adopting the "economic loss doctrine" which prohibits claims of negligence where a claimant seeks to recover purely economic loss sustained as a result of an interruption in commerce caused by a third party.  The Court held that it would adopt the economic loss doctrine.

The Plaintiffs had sued for lost wages that resulted from the closure of their workplaces due to a flood at the Washington Harbor retail complex.  That property has unique disappearing flood walls, which can be raised when the Potomac river threatens to flood.  The flood walls were negligently not raised during a river flood in April, 2011.  Plaintiffs claim that the defendant had adequate prior knowledge of the impending flood. 

The defendant moved to dismiss for failure to state a claim because the economic loss doctrine bars recovery of claims alleging solely economic loss stemming from a defendant's negligence.  The Plaintiffs argued that the economic loss doctrine does not apply in the District of Columbia.

The D.C. Court of Appeals held that the plaintiffs are precluded from pursuing a negligence action against appellants for recovery of lost wages, standing alone absent any other injury, by virtue of the economic loss doctrine.  The economic loss doctrine in the District of Columbia bars recovery of purely economic losses in negligence, subject to a limited exception where a "special relationship" exists.  What constitutes a special relationship is illustrated by the Court, which found no special relationship in this case because "there was no obligation on the part of [the defendant] to care for [plaintiffs'] economic well being."

The United States District Court for the District of Columbia had previously stated that the economic loss doctrine is a rule that prevents a party from alleging a tort claim, such as negligence or strict products liability, “‘where the only damage is to the product itself.’” Capital Motor Lines v. Detroit Diesel Corp., 799 F. Supp. 2d 11, 16 (D.D.C. 2011) (quoting Liberty Mut. Ins. Co. v. Equipment Corp. of America, 646 F. Supp. 2d 51, 56 (D.D.C. 2009) (internal citation omitted)). “Under the economic loss doctrine, a plaintiff [suing in tort] may not recover the ‘loss of value or use of the product itself, cost to repair or replace the product, or the lost profits resulting from the loss or use of the product.’” Capital Motor Lines, 799 F. Supp. 2d at 16 (quoting Potomac Plaza Terraces, Inc. v. QSC Products, Inc., 868 F. Supp. 346, 354 (D.D.C. 1994)(internal citations omitted)).  However, in Aguilar, the D.C. Court of Appeals rejected the argument that the application of the economic loss doctrine is limited to cases involving contract or products liability claims.

The economic loss doctrine thus has taken its place as one of the affirmative defenses to be considered in every case in the District of Columbia.

Posted by David B. Stratton on 10/13/2014 at 03:46 PM
DefensesDistrict of ColumbiaPermalink

Failure to issue reservation of rights letter does not waive per claim/per claimant deductible

We previously noted the decision in Cincinnati Insurance Co. v. All Plumbing, Inc., Civil Action No. 12-851 (D.D.C. Oct. 18, 2013)(Kollar-Kotelly, J.), where the Court held that Cincinnati Insurance's failure to properly reserve its rights and five-month delay in disclaiming coverage while controlling important actions in the insureds' defense precluded Cincinnati from asserting any defenses to coverage in the underlying junk fax class action.

In the same case, on August 18, 2014, the Court granted in part and denied in part a motion for reconsideration filed by the insurer.  Significantly, the Court found that the insurer's failure to properly reserve its rights in the underlying tort litigation does not prevent it from asserting the $1,000 deductible with regard to Coverage A under the Policy.

This was a significant victory for the insurer, given that the underlying litigation is a putative class action against the insured for sending unsolicited faxes to the plaintiff and others in violation of the Telephone Consumer Protection Act.  The TCPA provides a private right of action for violations and statutory damages in the amount of $500 for each violation and up to $1,500 for each willful violation. When applied to a large number of faxes in a class action, the damages in these cases can become large.  However, the $1,000 per claim, per claimant deductible mitigates the liability exposure for the insurer.

Coverage A under the Policy provided that a $1,000 deductible applies on a per claim, per claimant basis.  The insurer in its motion for reconsideration requested clarification that, despite the Court's conclusion that the insurer failed to properly reserve its rights in the underlying action, the $1,000 per claim, per claimant deductible still applies with regard to Coverage A. 

The Court agreed with the insurer.  The Court reasoned that a deductible is the portion of the loss to be borne by the insured before the insurer becomes liable for payment. The Court further reasoned that a deductible endorsement is not a coverage defense or exclusion; it is a means of shifting a portion of the risk from the insurer to the insured.  Even where, as here, an insurer assumes an insured's defense unconditionally, the insurer does not waive the deductible endorsement.  Among other authorities, the Court relied on Couch on Insurance for the proposition that "While the defense of the action by an insurer without reservation of rights as to its defense may constitute a waiver of the insurer's defenses, it does not rewrite the policy so as to remove the maximum on the coverage provided."

Posted by David B. Stratton on 08/25/2014 at 12:22 PM
District of ColumbiaInsurancePermalink

DC:  Legal malpractice verdict in favor of plaintiff reversed on appeal due to lack of privity

In Scott v. Burgin, No. 12-V-1474 (D.C. Aug. 14, 2014), the Court reversed a $255,000 jury award in a legal malpractice case against a divorce attorney.  The plaintiff was not a client of the defendant law firm, and consequently the Court held that the defendant's duty of care did not extend to the Plaintiff, and reversed the judgment.  In so doing, the Court refused to expand the third party beneficiary exception to the requirement of privity in a legal malpractice action.

The plaintiff's fiancé was a retired government employee, who was long separated from his first wife, but they had never gotten a divorce. 

The plaintiff and her fiancé had a long-standing relationship of over 25 years.  After the fiancé was diagnosed with terminal bone cancer, the plaintiff met with the defendant attorney to seek his help in getting the fiancé a divorce from his separated wife.  The attorney said he would help the fiancé, if the fiancé chose to retain him.  The fiancé wished to obtain a divorce so that he could marry the plaintiff.  Although he had previously designated the plaintiff as the beneficiary of his federal benefits, he was aware that the plaintiff might not receive them unless their were married.

A year passed before the fiancé met with the attorney.  Shortly thereafter, the fiancé signed a retainer agreement for the lawyer's representation in his divorce proceedings.

Unfortunately, the attorney did not serve the separated wife with the divorce complaint until November, 2007, about 11 months later.  The fiancé died in April, 2008, and a divorce was never secured prior to his death.

Afterwards, the federal government denied the plaintiff's claim for survival benefits under the Civil Service Retirement System, based on evidence showing that the earlier marriage was never terminated.

The plaintiff brought suit against the lawyer for legal malpractice and the related breach of contract as a third-party beneficiary, and the jury returned a verdict in favor of the plaintiff.

On appeal, the sole issue was whether the plaintiff lacked standing to sue for legal malpractice or breach of contract.

The Court held that the plaintiff did not have standing.  It was undisputed that the fiancé and the fiancé alone, was the lawyer's client.  In the District of Columbia, both contracting parties must intend a direct benefit which the third party can enforce against the promisor, for classic third-party beneficiary liability to exist.  Here, there was no real evidence that the attorney himself intended to incur any liability beyond that imposed by law as part of his duty of care.

The Court reaffirmed the general rule that the obligation of an attorney is to his client, and not to a third party.  The Court distinguished the recognized exception to that rule, where the impact upon the third party is not an indirect or collateral consequence, but the end and aim of the transaction.  The classic situation that meets that exception is the failure of an attorney to properly draft a will. 

Here, the anticipated divorce decree did not provide the same direct benefits to the plaintiff.  The Court stated that the fiancé of either party to a divorce is a complete stranger to the transaction, and the divorce does nothing to change that status.  The newly divorced person would have had to take at least one further action, that is, marry the plaintiff.  The Court noted that in the divorce proceedings, the pension rights at issue might have been the subject of controversy, since the separated wife had had four children in the marriage.

To permit the plaintiff's suit here would frustrate one of the primary goals of the privity rule, that is, avoiding exposure to the attorney to indeterminate liability to an indeterminate class of people.  It would also undermine the ability of the attorney and the client to exercise control over their contractual agreement.

Posted by Jordan Coyne LLP on 08/16/2014 at 07:36 PM
DefensesDistrict of ColumbiaLegal MalpracticePermalink

Expert witness ruling in District of Columbia cell phone litigation

“Can cell phones cause brain cancer?”  That is a fundamental issue in Murray v. Motorola, Case No. 2001 CA 008479 (Superior Court for the District of Columbia, Aug. 8, 2014), in which Judge Frederick H. Weisberg has issued a 76 page opinion, ruling on the defendants’ Dyas/Frye challenges to the admissibility of the plaintiffs’ expert witnesses.  Judge Weisberg, however, did not render an opinion on that causation issue.  Rather, his opinion focuses only on whether plaintiffs’ expert witnesses should be permitted to testify before the jury.

Under the Dyas/Frye test which is currently the law in the District of Columbia, the expert testimony is presumptively admissible if the subject is beyond the ken of an average layperson, the expert is qualified to offer an opinion on the subject, the expert uses a methodology that is generally applied in the relevant scientific community to arrive at his opinion, and the probative value of the expert’s testimony is not substantially outweighed by the risk of undue prejudice.

In December 2013 and January 2014, Judge Weisberg conducted an evidentiary hearing to determine the admissibility of plaintiffs’ experts, hearing four weeks of testimony from plaintiffs’ eight experts and defendants’ four rebuttal experts, receiving 280 exhibits containing thousands of pages of documents, and reviewed hundreds of pages of legal briefing.  At this stage of the litigation, the general causation question presented is whether the non-ionizing radiation from cell phones has a non-thermal effect that causes, promotes, or accelerates the growth of brain tumors, specifically gliomas and acoustic neuromas.

The opinion contains an in-depth discussion of the Dyas/Frye standard, which practitioners will find useful. 

Further, Judge Weisberg included a four page discussion of the differences between the Dyas/Frye standard adopted by the D.C. Court of Appeals, and the federal Daubert standard governing the admissibility of expert testimony.  The Court noted that “the scientific dispute in this case illustrates that the choice of one approach over the other can be outcome determinative.”  This discussion may ultimately set the stage for the D.C. Court of Appeals to undertake an en banc review of whether to adopt the Daubert standard.

Out of the eight experts for the Plaintiffs, the Court excluded the testimony of three completely:  Dr. Shira Kramer; Dr. Guatam Khurana; and Dr. Dimitris Panagopoulos.  The Court further ruled that the testimony of three of the Plaintiffs’ experts on general causation is not excluded:  Dr. Michael Kundi; Dr. Wilhelm Mosgoeller; and Dr. Abraham Liboff.  Finally, the remaining two Plaintiffs’ experts were only excluded in part:  Dr. Igor Belyaev; and Dr. Laura Plunkett.  Thus, the Plaintiffs’ case has apparently survived a knockout punch in this round of litigation, and the parties will now move on to conduct broader discovery on the general causation issue before proceeding to specific causation.

Judge Weisberg’s opinion makes it clear that, based on the present record, he thinks that the scientific evidence on the general causation question is too unsettled for any scientist to say, to a reasonable degree of scientific certainty, that cell phones cause brain cancer.  On the other hand, Judge Weisberg’s opinion also calls for more research and cautions that, “If there is even a reasonable possibility that cell phone radiation is carcinogenic, the time for action in the public health and regulatory sectors is upon us.  Even though the financial and social cost of restricting such devices would be significant, those costs pale in comparison to the cost in human lives from doing nothing, only to discovery thirty or forty years from now that the early signs were pointing in the right direction.”

Posted by David B. Stratton on 08/10/2014 at 06:36 PM
District of ColumbiaExpert Witness IssuesPermalink

D.C. Court of Appeals affirms summary judgment based on judicial estoppel

In Atkins v. 4940 Wisconsin LLC, ___ A.2d ___, 2014 D.C. App. LEXIS 192 (D.C. July 3, 2014), the Court affirmed the trial court's award of summary judgment to the defendant on the grounds of judicial estoppel, based on the plaintiff's filings in bankruptcy court in which he represented in his schedules that he had no unliquidated claims.  An aggravating factor here was that the defendant in the personal injury suit had had a claim of $328,606 against the plaintiff due to a retail lease, which claim was discharged in the bankruptcy.

In the District of Columbia, the courts generally consider three factors in deciding whether to apply judicial estoppel: (1) whether a party's later position is clearly inconsistent with its earlier position; (2) whether the party has succeeded in persuading a court to accept the party's earlier position, so that judicial acceptance of an inconsistent position in a later proceeding would create the perception that either the first or the second court was misled; and (3) whether the party seeking to impose an inconsistent position would derive an unfair advantage or impose an unfair detriment on the opposing party if not estopped.

Editor's note:

The doctrine of judicial estoppel precludes a party from taking one position on an issue before one court and the opposite position before a different court, and has been adopted in the District of Columbia.  See Fairman v. District of Columbia, 934 A.2d 438, 443 (D.C. 2007); Porter Novelli v. Bender, 817 A.2d 185, 188 (D.C. 2003); Thoubboron v. Ford Motor Co., 809 A.2d 1204, 1212 (D.C. 2002);  Lofchie v. Wash. Square P'ship, 580 A.2d 665, 668-69 (D.C. 1990)(concurring opinion by Schwelb, J);  See also Comcast Corp. v. FCC, 390 U.S. App. D.C. 111, 116, 600 F.3d 642, 647 (D.C. Cir. 2010).

In Moses v. Howard Univ. Hosp., 391 U.S. App. D.C. 21, 30, 606 F.3d 789, 798 (D.C. Cir. 2010), the United States Court of Appeals for the District of Columbia Circuit stated,

While “‘[t]he circumstances under which judicial estoppel may appropriately be invoked are probably not reducible to any general formulation of principle,’” Maine, 532 U.S. at 750 (quoting Zurich Ins. Co., 667 F.2d at 1166), we have explained that “[c]ourts may invoke judicial estoppel ‘[w]here a party assumes a certain position in a legal proceeding, . . . succeeds in maintaining that position, . . . [and then] simply because his interests have changed, assume[s] a contrary position.’”  Comcast Corp., 600 F.3d at 647 (quoting Maine, 532 U.S. at 749). 

The Moses Court stated that “[c]ourts may invoke judicial estoppel ‘[w]here a party assumes a certain position in a legal proceeding, . . . succeeds in maintaining that position, . . . [and then,] simply because his interests have changed, assume[s] a contrary position.’” Id. at 798. (citing Comcast Corp., 600 F.3d at 647 (quoting Maine, 532 U.S. at 749).

In New Hampshire v. Maine, 532 U.S. 742, 749 (3d ed. 2000), the Supreme Court spoke approvingly of judicial estoppel in that it “’prevents a party from asserting a claim in a legal proceeding that is inconsistent with a claim taken by that party in a previous proceeding,’” (quoting 18 MOORE’S FEDERAL PRACTICE § 134.30 (3d ed. 2000)), and explained that judicial estoppel is “’an equitable doctrine invoked by a court at its discretion,’” Maine, 532 U.S. at 750 (quoting Rolfs, 893 F.3d at 1037).  See also Moses v. Howard Univ. Hosp., 606 F.3d 789, 798 (D.C. Cir. 2010).

In the context of bankruptcy proceedings, “[a] debtor is required to disclose all potential claims in a bankruptcy petition. See 11 U.S.C. §§ 521(1), 541(a)(1).  The Moses Court interpreted this to mean that “. . . a debtor is under a duty both to disclose the existence of pending lawsuits when he files a petition in bankruptcy and to amend his petition if circumstances change during the course of the bankruptcy.” Id. at 793.

The doctrine of judicial estoppel may be applied where the plaintiff has failed to comply with these statutory requirements:

Courts have routinely held that judicial estoppel is appropriate when a debtor fails to identify a claim in a bankruptcy proceeding and then proceeds to assert that claim in a separate judicial action. See Moses v. Howard Univ. Hosp., 606 F.3d at 798 ("[E]very circuit that has addressed the issue has found that judicial estoppel is justified to bar a debtor from pursuing a cause of action in district court where that debtor deliberately fails to disclose the pending suit in a bankruptcy case."); Kopff v. World Research Group, LLC, 568 F. Supp. 2d 39, 43-44 (D.D.C. 2008) (citing cases).

Frese v. Empire Fin. Servs., 725 F. Supp. 2d 130, 140 (D.D.C. 2010).

A debtor in bankruptcy court has a continuing duty to disclose all assets and potential assets to the court until her discharge date.[1] 11 U.S.C. § 521(1) and 541(a)(7); In re Wilmoth, 412 B.R. 791, 798-99 (Bankr. E.D. Va. 2009) (explaining that [t]he duty to list all property and applicable exemption is an ongoing duty prior to closing of the case and the duty falls squarely on the Debtor’s shoulders); Burnes v. Pemco Aeroplex, 291 F.3d 1282, 1286 (11th Cir. 2002); Browning Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir. 1999).[2]

“Reopening a case does not automatically grant the Debtor a right to amend schedules or take other actions that ought to have occurred prior to closing; instead, the reopening of the case allows administrative and ministerial loose ends to be tied. See Finch v. Coop (In re Finch), 378 B.R. 241, 246 (B.A.P. 8th Cir. 2007) (citing In re Barlett, 326 B.R. 436, 438 (Bankr. N.D. Ind. 2005)). Chapter 7 trustees are not automatically reappointed as trustees upon the reopening of a bankruptcy case. Fed. R. Bankr. P. 5010.”  In re Wilmoth, 412 B.R. 791, 795-796 (Bankr. E.D. Va. 2009)


[1] Federal bankruptcy law requires a debtor to list in the initial petition, inter alia, a “schedule of assets.” 11 U.S.C. § 521(a)(1)(B)(1).  Official Form 6 for Schedule B requires a debtor to list “all personal property of the debtor of whatever kind,” and property of a bankruptcy estate is defined broadly to include “all legal or equitable interests of the debtor in property as of commencement of the case.” 11 U.S. C. § 541(a)(1).  Courts have interpreted this definition to include “all causes of action that could be brought by a debtor.”  USinternetworking, Inc. v. Gen. Growth Mgmt., 310 B.R. 274, 281 (Bankr. D. Md. 2004) (citing Seward v. Devine, 888 F.2d 957, 963 (2d Cir. 1989)).  The duty to disclose such claims continues for the duration of the bankruptcy proceeding. Id. at 282 (citing Browing Mfg. v. Mims (In re Coastal Plains, Inc.), 179 F.3d 197, 207-08 (5th Cir. 1999)).

[2] "'The debtor need not know all the facts or even the legal basis for the cause of action; rather, if the debtor has enough information … prior to confirmation to suggest that it may have a possible cause of action, then that is a "known" cause of action such that it must be disclosed'".  Browning Mfg., 179 F3d at 208, quoting Union Carbide Corp. v. Viskase Corp. (In re Envirodyne Indus., Inc.), 183 B.R. 812, 821 n.17 (Bankr. N.D. Ill. 1995)). "Any claim with potential must be disclosed, even if it is 'contingent, dependent, or conditional'".  Browning Mfg., 179 F.3d at 208, quoting Westland Oil Dev. Corp. v. MCorp Management Solutions, Inc., 157 B.R. 100, 103 (S.D. Tex. 1993) (emphasis the Court’s).



Posted by David B. Stratton on 08/09/2014 at 03:13 PM
DefensesDistrict of ColumbiaPermalink

Failure to issue reservation of rights letter results in waiver of all coverage defenses

In Cincinnati Insurance Co. v. All Plumbing, Inc., Civil Action No. 12-851 (D.D.C. Oct. 18, 2013)(Kollar-Kotelly, J.), the Court held that Cincinnati Insurance's failure to properly reserve its rights and five-month delay in disclaiming coverage while controlling important actions in the insureds' defense precluded Cincinnati from asserting any defenses to coverage in the underlying junk fax class action.   This decision teaches the importance of issuing a separate reservation of rights letter for each action filed, even where successive lawsuits are closely related or almost identical.

The underlying litigation involve two putative class actions against All Plumbing and its owner, each alleging that they sent unsolicited faxes in violation of the Telephone Consumer Protection Act ("TCPA").  The first of these class actions was filed on November 5, 2010, with the class representative named "Love the Beer, Inc."  According to Cincinnati, the insureds never notified it of the class action.  Finally, more than a year later, on November 15, 2011, plaintiffs' counsel contacted Cincinnati and requested Cincinnati to defend the action.

In response, on November 18, 2011, Cincinnati notified plaintiffs' counsel that coverage for the Love the Beer action may be barred under the policy, asserting that the insureds failed to comply with the notice requirements under the policy.  In addition, on December 2, 2011, Cincinnati informed the insureds that it was assuming the defense of the Love the Beer action pursuant to a full and complete reservation of rights.

Meanwhile, also on December 2, 2011, another business, FDS Restaurant, filed a second putative class action against All Plumbing and its owner in D.C. Superior Court based on the same allegation of unsolicited faxes as at issue in the Love the Beer action.  This second action was filed by the same plaintiffs' counsel as the Love the Beer action, and apparently was filed to circumvent Cincinnati's late notice defense to the Love the Beer action. If so, this procedural fencing paid off in a big way for plaintiffs' counsel.

Plaintiffs' counsel sent Cincinnati a copy of the FDS complaint a few weeks after it was filed, and Cincinnati assigned defense counsel to the action.

On December 22, 2011, an amended complaint was filed in the Love the Beer action to eliminate the class action allegations, and the Love the Beer action was never certified as a class action.  About six months later, the Love the Beer action was voluntarily dismissed as part of a settlement.

Meanwhile, with regard to the FDS action, Cincinnati sent a letter dated February 16, 2012 to plaintiffs' counsel in the FDS action that coverage may be barred under the Policy due to the terms, provisions, conditions and exclusions of the Policy, including the insured's failure to comply with the conditions requiring the prompt reporting of offenses, claims and suits.  However, Cincinnati never sent a separate letter or oral communication to the insureds, All Plumbing and its owner, stating that the defense of the FDS action was being provided by Cincinnati pursuant to a reservation of rights. This turned out to be a fatal error.

The assigned defense counsel proceeded to defend the FDS action, answering the complaint, opposing the class certification, removing the action to federal court, and opposing the remand of the action to Superior Court.

Meanwhile, Cincinnati filed a declaratory judgment action on May 21, 2012, against the insureds and FDS, seeking a declaration that it has no duty to defend the insureds in the FDS Superior Court action.  Cincinnati obtained a default order against all the defendants in the declaratory judgment action, but subsequently, the Court on April 22, 2013 vacated the entry of default as against FDS Restaurant only.  Following that, the declaratory judgment action was litigated between Cincinnati and FDS Restaurant.  (The effect, if any, of the default against the insureds on the coverage issues was not mentioned in the decision.  Presumably, FDS's victory on the waiver issue redounds to the benefit of the insureds.)

In the declaratory judgment action, Cincinnati and FDS filed cross motions for summary judgment.  Among other things, FDS argued that Cincinnati waived its ability to disclaim coverage because it assumed the defense of the insureds without properly reserving its rights.  Cincinnati argued in response that it had reserved its rights properly when it sent a full reservation of rights letter to the insureds on December 2, 2011 in connection with the Love the Beer action.  Cincinnati maintained that FDS Restaurant was part of the putative class plaintiffs identified in the Love the Beer action, and that the FDS action involved the identical claims that were raised in the Love the Beer action.  Alternatively, Cincinnati argued that the filing of the declaratory judgment action itself informed the insureds of the coverage issues.

The Court rejected Cincinnati's arguments, and awarded summary judgment to FDS.  It is well settled in the District of Columbia that an insurer undertaking the defense of an insured against a litigious assertion of an unprotected liability, without a disclaimer of contractual responsibility and a suitable reservation of rights, is foreclosed from thereafter taking refuge in the policy provisions exempting the liability from coverage.  Further, when an insurer assumes control of the insured's defense without a proper reservation of rights, prejudice is presumed as a matter of law by virtue of the insurer's assumption of the defense.

The Court found that Cincinnati's reservation of rights letter dated December 2, 2011 in the Love the Beer action cannot serve as a reservation of rights letter in the FDS action because the letter, on its face, exclusively addressed coverage concerns relating to Cincinnati's defense of the Love the Beer action.  The Court noted, "Despite the many similarities in the Love the Beer and FDS actions, they remain two distinct lawsuits."  The Court also observed that the Love the Beer action was never certified as a class action, and consequently FDS was never even a party to the Love the Beer action.  Thus, the December 2, 2011 letter did not provide a reservation of rights with regard to the FDS action.

Cincinnati did send a letter to counsel for FDS on February 16, 2012, notifying FDS that coverage may be barred by the insureds' failure to comply with the reporting requirements of the policy.  However, the Court found that that letter cannot be considered to be a proper reservation of rights in the FDS action because it was sent to FDS's counsel, and not to the insureds.  The Court observed, "An insurer's obligation to provide notification of its reservation of rights under an insurance policy is to the insured, not to the party seeking a judgment from the insured." 

Finally, the Court rejected the argument that the declaratory judgment action itself was an adequate notification to the insureds of Cincinnati's coverage defenses.  The Court pointed out that Cincinnati took important actions in defense of the FDS action in the approximately five month period between assuming the defense and disclaiming liability.  The Court found that the five month delay was not justified in this case by any need to conduct an investigation, because Cincinnati had already investigated the facts in the Love the Beer action.

Accordingly, the Court found that Cincinnati had failed to rebut the presumption of prejudice and was found to have "waived all defenses to coverage by assuming the defense of All Plumbing and Shafik without a reservation of rights." 

Cincinnati's motion for reconsideration and clarification is still pending before the Court.

In conclusion, this case turned on a technicality.  The lesson it teaches is that where there are closely-related, almost duplicative lawsuits, the better practice is to issue a separate reservation of rights letter as to each lawsuit, rather than assume that the initial reservation of rights letter encompasses the related lawsuit.  As illustrated by this case, the marginal costs of preparing another reservation of rights letter is trivial compared to the litigation expenses and indemnity exposure resulting from a waiver issue.  A reservation of rights letter should be issued for each separate lawsuit, no matter how closely related.

Posted by David B. Stratton on 02/17/2014 at 05:15 PM
District of ColumbiaInsurancePermalink

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