Legal Malpractice Cases: An Introduction
Legal malpractice law in New York refers to the legal negligence of an attorney. No attorney can be perfect, and sometimes he/she will make a mistake that results in even a very successful client suing his/her attorney or law firm.
A legal malpractice case exists in New York if a mistake by an attorney caused a client to lose a client case involving the following: negligence, breach of fiduciary duty, or breach of contract. A legal malpractice claim is about a breach of the duty of care . In other words, the attorney had a duty to look out for your best interests, and if he/she failed the duty of care, he/she has committed legal malpractice.
In legal malpractice cases, sometimes a case is decided by a verdict: when an impartial jury or judge renders a decision. Other times, a case is settled, meaning that the parties have reached an agreement in which the plaintiff agrees to accept a sum of money from the defendant in exchange for not pursuing litigation.
What Principles Guide Verdict and Settlement?
New York juries deliberate all of the evidence and balance the totals in favor of liability, with a balance attributable to damages elements. This means that New York juries weigh the factors influencing verdicts and settlements against each other, determining for example whether the comparative fault defense is applicable. As with any combination of factors, it is rife with nuance and distinctions, but the bottom line is that experienced counsel can predict fairly accurately what type of verdict or settlement amount is likely to result. As indicated in our summary statistics the factors that most determine the outcome of legal malpractice cases are, we believe, finding that there was negligence on the part of the attorney, that the attorney violated his or her duty/covenant of good faith and dealing with the plaintiff, the client’s underlying case was meritorious, and that the attorney proximately caused the damages. We are guided by the language from the Second Department’s decision in Palumbo v. Burr: The essential elements of a legal malpractice action are the existence of an attorney-client relationship, the negligence of the attorney, the attorney’s failure to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, that the error was the proximate cause of the loss sustained, and actual damages." We look for the first breath of a jury’s decision whether to find liability, and then the numerical value of damages taken from the verdict sheet. Translated into dollars we also count the amount of the settlement.
The Changing Landscape of Legal Malpractice Verdicts
The last two years have produced what I believe of as a new wave of verdicts. Of the nine cases last year, 6 were at 5,000,000 or higher. Five of those six were by juries, and the result is that the trial verdicts of 2018 are very high. There are a few that I have not yet noted, but in the interim there are several which must be mentioned.
Cohen v. Spector Gadon & Rose, P.C. ; 2018 NY Slip Op 00746 ; Decided on January 30, 2018 ; Appellate Division, Third Department. The issue was whether counsel for the Plaintiff (Cohen) was negligent in failing to pursue a legal malpractice claim against the prior lawyers. Since Plaintiff could not show that such a claim would have succeeded, there was no proximate cause to the claimed damage.
Luftman & Weiker, LLP v Sheridan : 130994/2017; 2018 NY Slip Op 32293(U), December 19, 2018; Supreme Court, New York County, Judge Jennifer G. Schechter. A rare case of disclosure of settlement and confidentiality agreements in legal malpractice cases.
Ayers v Judiciary USA, 2018 NY Slip Op 08001 ; Decided on November 7, 2018 ; Appellate Division, Second Department. The trial court improperly dismissed a breach of contract action between a client and her lawyer based upon arbitration. An arbitrator may not resolve a legal malpractice claim.
Friedman v Fried, 2019 NY Slip Op 02072, Decided on March 13, 2019, Appellate Division, Second Department. In plaintiff’s medical malpractice action, the court erred in dismissing a cause of action for legal malpractice as untimely.
Beckman v4 Weinstock, 2019 NY Slip Op 01979, Decided on March 14, 2019, Court of Appeals. The attorneys were found liable for breach of fiduciary duty in approving a settlement that they were prohibited from participating in. The client can now sue them in a legal malpractice action.
Chewing the Numbers on Legal Malpractice Verdicts
Parties to an action, including legal malpractice actions, will often arrive at a settlement in order to avoid protracted litigation and potentially adverse results. In general, settlements are used to eliminate the risk of trial, for businesses to gain certainty, to preserve relationships, when appeals are unlikely to succeed, and when litigation expenses are too high to justify the costs of further litigation. Legal malpractice settlements are typically negotiated at or after the time of mediation. Most settled cases are closed without any formal record of the amount of the settlement and the court is not informed of the terms. However, there are certain reported settlement figures in some cases that speak to the willingness of parties to settle.
Reported settlement figures are typically found in the context of misconduct where a plaintiff estimates damages, which an attorney then tries to negotiate down. When a defendant tries to settle an action as soon as possible, their basis for settlement is often due to a fear of excessive jury verdicts. Other reasons for settling may be to avoid the bad publicity of an adverse public judgment, or because the evidence against them in a legal malpractice action is overwhelming. Sometimes, settlement figures are released as a result of the terms of a confidential settlement with a third party such as an insurance company.
The following are some examples of reported settlement figures: in Bodnar v. Signoracci, 102 A.D.3d 588 (2d Dep’t 2013), the parties reached a settlement agreement of a $1 million settlement with $650,000 being paid to the plaintiff on behalf of the defendants involved in the real estate litigation; in Batiste v. Insurance Company of North America, 745 F. Supp. 2d 161 (E.D.N.Y. 2010), a settlement agreement for a confidential amount to be paid by the law firm to the plaintiff for work performed on a bad faith insurance lawsuit was confirmed; in Michaels v. Antonelli & Antonelli, 41 A.D.3d 571 (2d Dep’t 2007), a settlement agreement to be paid by the defendant law firm was for the defendant to pay plaintiffs $125,000.00, which is the amount defendant originally agreed to pay plaintiffs in a related personal injury matter; and in Brillman v. Fundaro, 25 Misc.3d 954 (N.Y. Sup. Ct 2009), the defendant agreed to pay $200,000 in settlement of the action.
Not all settlements are deemed reasonable by the courts. In Margo v. Weissberg, 152 A.D.2d 171 (2d Dep’t 1989), the court held that a settlement of payment of $20,000 would not absolve attorneys from liability in a case where the value of the claim was thought to be in excess of $5,000,000. Similarly, in Montalto v. Farley & Gruber, 229 A.D.2d 952 (2d Dep’t 1996), the plaintiff accepted a $900,000 settlement for medical malpractice of which $700,000 was payable to the plaintiff. The court affirmed the trial court’s refusal to dismiss the action against plaintiff’s counsel notwithstanding the settlement amount as the court concluded that the settlement amount seemed "unfairly low and obviously inadequate when compared to the magnitude of plaintiff’s loss as described by him and his expert."
Settlements do not always spell the end of the case. For example, in Feinsod v. Seeber, Nos. G039485, G040131, 2005 WL 6133436, (Cal. Ct. App. 2005) the court held that a settlement of the underlying action merely accelerated, rather than amended, the running of the statute of limitations for legal malpractice claims. In McMahon & McDonald, P.C. v. Ward, 233 S.W.3d 577, 580-82 (Tex. App.—Fort Worth 2007, no pet.), the Court held that the release or covenant-not-to-sue between the plaintiff and defendant in the underlying case did not prevent the legal-malpractice suit from proceeding to a verdict in favor of the plaintiff.
Parties can avoid the uncertainty of a jury finding by seeking a settlement, and while not all settlements will be voluntary, it may be more beneficial to settle the claims in order to preserve relationships and allow business and/or governmental entities to get back to business as usual.
The Importance of Legal Malpractice Insurance in Settlement
The presence of malpractice insurance can serve as an important means to settlement. Law firm insurers should be open to discussing settlement because, after all, the lion’s share of an ultimate settlement or verdict will be paid by the law firm’s insurer. At the very least, we have always found that insurer correspondence and the size of the malpractice premium are direct indicators of the amount which the insurer will authorise as a settlement.
At its best, a personal meeting with the law firm insurer will lead to a frank discussion of the merits of the claim. With the threat of a large verdict looming , the insurer may well be moved to pressure the insured firm into an honest assessment of its and the client’s prospects. Many such insurers have a mediation program which they will offer to try and resolve the matter short of a verdict. The experienced malpractice lawyers we know all have stories of successful mediation attempts before a verdict. We have been able to obtain settlements prior to trial for the client at 4 times what the client had expected, never mind what the verdict would have been.
Lawyers who go without malpractice insurance, or lawyers who suffer from inadequate policies for the work they do for difficult clients, limit the ability to settle. While we know of a few personal relationships with those who will underwrite these risks, they are few and far between. All in all, the availability of coverage is a major factor in settlement of legal malpractice cases.
Compensatory Damages in Legal Malpractice
As in all cases, the legal malpractice victim must prove damages. Here again there are pitfalls and strategies in the trial preparation and damages portion of the case.
There are two types of damages that can be recovered in a legal malpractice case: economic and non-economic damages. Economic damages are financial losses and fluctuations in non-economic damages do not affect a claimant’s right to receive those damages. In determining the amount of the damages jury awards, some courts will adjust the amounts received for inflation, while others do not. Since inflation results in an increasing value of the money that is received, some courts believe it therefore follows that inflation should not be considered when thinking about damages in the present.
However, if someone receives $100 in 2018, they are going to have more purchasing power than if they received the same $100 two years ago in 2016 or if they were to receive the same $100 now in 2020. It has been argued that the monetary value of an amount is highly influenced by the time it was earned, that a reward received today does not carry the same value that a reward obtained at a future date would most likely bear as you are losing the time value of that money.
In Illinois, the law is as follows: "In determining damages, the jury should allow interest on the total amount found by the jury from June 18, 1971, the date of the occurrence complained of in the case, until the date of the verdict." This means that jury awards of damages do not usually account for the time between the loss and the date of the verdict. Therefore, as the time between the occurrence and present date increases, so does the value of that amount.
Non-economic damages, defined as "compensatory damages for pain and suffering and mental suffering-including grief, anxiety, humiliation, mental distress, and other mental suffering, unnecessary injury to one’s senses, temporary loss of normal life, and loss of society, companionship, and affection," have been limited by the Illinois Code of Civil Procedure, limiting awards for non-economic harms to $500,000. O’Brien v. Northwestern Memorial Hospital, 236 Ill.2d 422, 939 N.E.2d 463, 337 Ill. Dec. 98 (2010). The limit is doubled where there is a newly born infant. William Hughes, J.D., Office of Illinois State Senator Dale Righter, The Patient Right to Know Act of 2011 (2015).
Legal malpractice damages can also include consequential damages outside the statute’s limit on non-economic damages. In E.J. Land Title, Inc. v. Krol, 148 Ill.App.3d 671, 499, N.E.2d 601, 102 Ill.Dec. 342 (1st Dist. 1986), the Virginia Supreme Court recognized that non-economic damages are often the most severe consequence of legal malpractice, and reassured the plaintiff that because he had proven that he sustained non-economic damages and that those damages were not irrelevant to the damages that he suffered as a result of the defendant’s negligence, he was entitled to recovery. 436 S.E.2d 405 (1993).
Preventing Legal Malpractice
Attorneys can use various best practices to reduce their exposure to legal malpractice claims. One use is Risk Management very similar to what any landscape architect would do for a high rise or any architect would do for a financial firm. The steps are simple but can be executed in many ways. First is the retainer agreement, which ought to include lawyer and client responsibilities. The next set of attorney/client responsibilities are to communicate and confirm all decisions relating to the case. Arguably, for many lawyers their best practice is to make contemporaneous notes of all decisions taken , so that these can be relied upon later in a malpractice fight. Follow-up letters are sent after meetings and telephone conversations. Clients are asked by lawyers to sign-off on decisions. When litigation is involved, case status letters go out periodically throughout the case. All of these steps add up to what ultimately amounts to a "Defense Manual" prepared contemporaneously with the case. A possibility for making a personal note on a calendar, with a reminder function both for the lawyer and his/her legal assistant.