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May an insurance company sue the defense firm that it hired where it alleges that the defense firm did not meet the standard of care? In Florida, according to Arch Insurance Company v. Kubicki Draper, 4-D17-2889, the insurance company may not file suit because it lacks privity with the law firm.  The insurance company alleged that it hired the firm to defend a case for one of its insureds. The law firm allegedly failed to raise the statute of limitations defense, which caused the insurance company to incur a loss.

The privity defense holds that a plaintiff cannot sue a defendant unless he was “in privity” with that defendant. Here, even though the insurance company hired the law firm to defend its insured, there was no privity because the law firm was responsible only to its client, the insured. The court rejected the insurance company’s public policy arguments:

The insurer nevertheless argues public policy and common sense dictate that an insurer should be able to pursue legal malpractice claims against defense counsel retained to represent its insureds. According to the insurer:

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One question that comes up over and over again is “How do I prove that the lawyer (who I am unhappy with) was my lawyer?” How do I demonstrate an attorney-client relationship.

This video has some basic thoughts on that issue:

https://youtu.be/oBFGn4SaD-I

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The case is Knox v. Aronson, Mayefsky & Sloan, LLP, 2018 NY Slip Op 9030. The plaintiff was represented in her divorce by two law firms and she sued both firms in this legal malpractice case. Plaintiff lost a custody fight with her ex-husband and was ordered to pay attorney fees when she failed to comply with a court order to return the child to New York from Connecticut. She sued the Aronson firm for bad advice (alleged) and for failing to move for attorney fees. The reasoning is instructive:

Turning first to plaintiff’s legal malpractice cause of action against AMS, she alleges that AMS was negligent in failing to move for attorneys’ fees, resulting in her failure to receive an undetermined award to pay her attorneys. This claim fails because plaintiff’s various successor counsel had ample time and opportunity to make such a motion, and in fact one did (although it was purportedly abandoned) (see Davis v Cohen & Gresser, LLP, 160 AD3d 484, 487 [1st Dept 2018]).

Even assuming AMS was negligent in failing to move for attorneys’ fees, by agreeing as part of the settlement[2] to forgo any award of attorneys’ fees except for $20,000, plaintiff cannot show that but for AMS’s negligence she would not have sustained the loss (see generally Tydings v Greenfield, Stein & Senior, LLP,43 AD3d 680, 682 [1st Dept 2007], affd 11 NY3d 195 [2008] [to establish proximate cause, the plaintiff must demonstrate that “but for” the attorney’s negligence, plaintiff would have prevailed in the matter in question; failure to demonstrate proximate cause mandates the dismissal of a legal malpractice action regardless of whether the attorney was negligent]); 180 Ludlow Dev. LLC v Olshan Frome Wolosky LLP, 165 AD3d 594, 595 [1st Dept 2018] [“While proximate cause is generally a question for the factfinder. . . it can, in appropriate circumstances, be determined as a matter of law”]).

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The case is GB v. Christine Rossi, A-240-17T3. The case was decided in New Jersey and is an unpublished opinion. The case illustrates one problem with legal malpractice cases – there may be wrongful conduct, but the plaintiff must tie the wrongful conduct to her damages.

Plaintiff was getting divorced.   She met with Rossi for about an hour and made numerous disclosures. Rossi declined representation.

Later, plaintiff’s husband filed for a temporary restraining order against plaintiff alleging that she had committed domestic violence. At trial, Rossi represented husband. Husband won the trial and GB was evicted from the marital home. Please note that Rossi did not file an appearance in the divorce case. She only appeared in the domestic violence case.

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The case is Yung v. Grant Thornton, 2016-SC-00571 and 2017-SC-00151. The plaintiffs sued Grant Thornton for fraud for placing them in a tax shelter. The IRS disallowed the tax shelter and the Yungs were required to pay $20 million in back taxes and penalties. The Yungs sued Grant Thornton for fraud and, in the trial court, obtained a judgment of $20 million in compensatory damages (for the back taxes they had to pay) and, more controversially, $80 million in punitive damages.

Punitive damages awards were once quite common. They have become far less common in recent years after the Supreme Court decided a series of cases requiring that the punitive damage award be proportional to the compensatory damages award.

The Appellate Court reversed the punitive damages award and the Yungs appealed to the Kentucky Supreme Court. In a thoughtful and detailed opinion, The Kentucky Supreme Court reinstated the punitive damage award!

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One issue that arises frequently is whether or not a criminal defendant must obtain a finding of actual innocence before he can sue trial counsel for legal malpractice. The Kentucky Supreme Court adopted the Exoneration Rule on December 13, 2018, in the case of Lawrence v. Bingham.  The Rule has been criticized by some scholars and lawyers on the ground that it is unfair to criminal defendants and that it allows bad lawyers to escape liability.

The link to the case is below:

https://law.justia.com/cases/kentucky/supreme-court/2018/2017-sc-000531-dg.html?utm_source=summary-newsletters&utm_medium=email&utm_campaign=2018-12-14-professional-malpractice-ethics-c3b6da0bc8&utm_content=text-case-read-more-3

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In the wake of recent publicity that lying to a government agent is a crime, 18 USC Section 1001, here is a set of simple instructions should two FBI agents appear in person at your home or place of business:

FBI Person – I’m agent so and so and with me is agent so and so and we would like to ask you a few questions:

Person – May I have your card?…Thank you. I’m going to ask you to talk my lawyer. He will be happy to answer your questions.

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I often receive phone calls and emails from people who believe that they have a legal malpractice claim against their current lawyer. Most of these claims are not malpractice claims, often because the underlying matter or lawsuit is not finished.

So, someone calls and says that her lawyer missed court dates, forgot to take a deposition and did not disclose an expert on time. My question is this: “How much money did you lose because of that alleged mistake by the lawyer?” Very often, the answer is (a) the case is still pending and I hired a new lawyer to fix the mistakes of the former lawyer or (b) I settled the case and received a settlement payment.

If the answer is “a”, there is no legal malpractice case as this time, although there may be a case in the future.

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The case is Davis v. Cohen & Gresser, 2018 NY Slip Op 02542, a legal malpractice case filed against a law firm.

Davis alleged that the law firm allowed the statute of limitations to run on RICO claims by failing to name to key parties in a lawsuit. The court ultimately concluded that the statute of limitations had run on the claims. However, the law firm greatly strengthened its position by producing a copy of a carefully drafted engagement letter. The engagement letter demonstrated that the law firm was not retained to handle the RICO action.  Further, the law firm never filed an appearance in that lawsuit.

New York allows the statute of limitations to be tolled where there is a continuous representation of the client by the law firm. Davis attempted to argue that the continuous representation doctrine applied to his case. However, as the court explains, the engagement letter and the court record demonstrated that there was no continuous representation:

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The case is captioned Robert Iuffues Webb II v. Janice Holmes, 2018 IL App (3d) 170167. Webb, who is not licensed to practice law, alleged that he had assisted Holmes with certain federal litigation. It is not clear exactly what the federal litigation involved. He alleged that he entered into an oral agreement with Holmes that he would assist her with the federal litigation in exchange for $150 plus 10% of any settlement.  Eventually, after the case was filed, Holmes retained an attorney and settled her case.

The trial court dismissed Webb’s complaint and the Appellate Court affirmed. The court based its decision on the Illinois Attorney Act 705 ILCS 205/1 which prohibits a nonlawyer from earning compensation as a lawyer.

Conclusion: obviously the court reached the correct result. What is somewhat remarkable is that these allegations resulted in a published opinion given the well-settled law.