Articles Posted in Legal Malpractice

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One common story that I have observed over the years is that legal malpractice insurers frequently deny coverage on the basis that the attorney knew of his own error (or the possibility of a claim) prior to the policy period. The recently decided case, Synergy Law Group, LLC v. Ironshore Specialty Insurance Company, 2015 IL App (1st) 142070-U, is another unfortunate chapter in that story.

Legal malpractice policies are issued on a claims made basis. That means that the insurer agrees to cover any claims made during the policy period even if those claims result from an act that occurred before the policy period. However, the insurance policy always contains a clause that provides that there is no coverage if the Insured “had knowledge of the circumstances that gave rise to the Claim and reason to believe that a Claim might result” before the policy period.

In 2006, the attorney drafted a shareholders agreement for a company, GA, Inc. The agreement established a formula for repurchasing shares if either shareholder left the company. In 2008, Rena Zito, the minority (20%) shareholder left the company. GA exercised its option to repurchase her shares. GA offered the minority shareholder $56,335.47 for all of her shares. The minority shareholder responded that “under the formula established in the shareholders agreement, GA, Inc., owed [the minority shareholder] $56,335.47 per share” for a total of $1,126,707.40. Opinion ¶ 7.

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This is an unpublished decision of the Illinois Appellate Court, captioned Ilija Vasilj v. Harvey Teichman, 2015 IL App (1st) 133955-U. The Appellate court affirmed a decision to grant summary judgment to the lawyer on statute of limitations grounds.

The complaint alleged that in 2007 Vasilj purchased the first floor of a building located at 2650 West Belden in Chicago, Illinois. The first floor was undeveloped, but the second and third floors had existing condominiums. Vasilj intended to develop 12 condominiums for resale. At the time of the purchase, “the second and third floors of the building were part of the existing Brau Haus Condominium Association … and subject to the Declaration of Condominium Ownership. The declaration did not include the first floor of the building as a part of the condominiums. The association, in an attempt to incorporate the first floor, passed the first amendment to the declaration which included the first floor in the association. However, the association did not record a new plat of survey reflecting the changes. The failure to record a new plat survey resulted in a defective title to Vasilj’s property. ¶ 6.

Vasilj alleged that he retained Teichman to represent him in the purchase of the Belden property and that “prior to closing, Teichman did not review the amendment to the declaration, nor did he know that a new plat survey was never filed and recorded with the amendment. The resulting defective title to Vasilj’s property would prohibit him from selling the condominiums that he would later develop. Unaware of the defective title, Vasilj closed on the Belden property and began development of the condominiums.” ¶ 7.

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Paul v. Patton :: 2015 :: California Court of Appeal Decisions :: California Case Law :: California Law :: U.S. Law :: Justia.

This opinion discusses an issue which comes up often – to whom does the estate planner’s duty lie? The typical fact pattern of these cases is as follows. A lawyer represents a parent who has several children. Later the parent dies and the children claim that the will or trust was not consistent with the parent’s intentions.

The first line of defense in these cases was that the lawyer owed no duty to the children. After all he had an attorney-client relationship with the parent, not the children. To accept this defense means that no estate planner could ever be sued for legal malpractice by the beneficiaries. In recent years, courts have steadily rejected the privity argument.

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ALLIED WASTE NORTH AMERICA, INC. v. LEWIS, KING, KRIEG & WALDROP, PC, Dist. Court, MD Tennessee 2015 – Google Scholar.

This is an opinion of the United States District Court for the Middle District of Tennessee denying motions for summary judgment filed by the three law firms that represented Allied Waste in an underlying suit.

The underlying suit was filed after a waste facility owned by the Metropolitan Government of Nashville and Davidson County (“Metro”) burned to the ground. Metro sued Allied and other defendants. The underlying case ended with a $7.2 million verdict against Allied.

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SILVAGNI v. Shorr, 2015 PA Super 62 – Pa: Superior Court 2015 – Google Scholar.

This is a Pennsylvania decision affirming the dismissal of a legal malpractice case. The plaintiff alleged that his lawyer breached the duty of care by advising him to settle his workers’ compensation matter. Plaintiff also claimed that the lawyers gave him incorrect legal advice. But for that incorrect legal advice he would not have settled the case.

In the practice area, this is known as a bad deal case. Plaintiff agrees to settle a case and then regrets the settlement or believes that the settlement amount was too low. The complaint frequently contains an allegation that the lawyer pressured the client into the settlement.

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QUAD CITY BANK & TRUST v. ELDERKIN & PIRNIE, PLC, Iowa: Court of Appeals 2015 – Google Scholar.

This is an unusual legal theory in a legal malpractice case. In the underlying case, the plaintiff bank brought a case against an accounting firm on the ground that the accounting firm had failed to detect improper transactions by one of the bank’s lending clients. The lending client had apparently falsified its inventory reports, leading the bank to believe that there was more inventory than in fact existed. The bank’s claim in the legal malpractice case was that had it received accurate information from the auditing firm, the bank would have been able to foreclose on the loan sooner and it would have mitigated its losses. The underlying case went poorly for the bank because the bank’s expert witness was barred from testifying at trial. The court summarized the facts as follows:

“The case against [the accounting firm] proceeded to trial, but [the accounting firm] successfully moved to have the bank’s sole expert witness excluded from testifying because the expert was not qualified to offer an opinion regarding the standard of care applicable to [the accounting firm]. See Quad City Bank & Trust v. Jim Kircher & Assocs., P.C., 804 N.W.2d 83, 93-94 (Iowa 2011) (upholding the district court’s ruling excluding the bank’s expert from testifying because he was not qualified to offer an opinion as to the applicable standard of care). The case proceeded to the jury, which returned a verdict in favor of [the accounting firm], and that verdict was upheld on appeal. Id.

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2nd Circ. Holds JPMorgan To Faulty Mayer Brown Loan Deal – Law360.

The allegations are that Mayer Brown, which represented General Motors, drafted a release of JP Morgan’s UCC lien. JP Morgan did not object after the release of the lien was filed. Interestingly, the law firm that represented JP Morgan did not object to the documents prepared by Mayer Brown.

The Second Circuit, after a decision of the Delaware Supreme Court, held that JP Morgan lost is secured creditor status and became an unsecured creditor.

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This case was decided by the Illinois Supreme Court in October 2014.

Plaintiffs alleged that the defendants committed legal malpractice when they failed to preserve a cause of action under the Illinois Securities Law against an investment firm. Plaintiffs alleged that the lawyers failed to file a rescission claim in a timely fashion causing it to be barred under the statute of limitations. A rescission claim allows the buyer to undo the purchase and obtain a refund of the purchase price. A complicating factor was the settlement of the underlying securities case for $3.2 million.

The main issue in the appeal before the Illinois Supreme Court was section 13(A) of the Illinois Securities Law, 815 ILCS 5/13(A) and how that section impacted the damage claim of the plaintiffs. That section provides:

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In the appeal captioned, Stevens v. McGuirewoods, LLP, 2014 IL App (1st) 13-3952, the Illinois Appellate Court reversed a grant of summary judgment in favor of McGuirewoods. The Appellate Court held that the trial court erred in applying collateral estoppel to bar the claims.

In their complaint against McGuireWoods, the plaintiffs alleged that the law firm breached its fiduciary duty to plaintiffs by failing to assert claims against Sidley Austin LLP (Sidley). McGuireWoods moved for summary judgment on the ground that in the underlying case the trial judge ruled that the plaintiffs lacked standing to sue Sidley.

The plaintiffs were former minority shareholders of Beeland Management LLC. They hired McGuireWoods to bring both individual and derivative claims on their behalf and derivative claims on behalf of Beeland against Beeland’s managers and majority shareholder. In the litigation, the plaintiffs eventually sued Sidley for breach of fiduciary duty and other claims. (In a derivative claim, the shareholder stands in the shoes of the corporation and files a lawsuit against someone who has allegedly breached a duty to the corporation.).

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Former Navy SEAL, Author of Bin Laden Best Seller, May Face Costly Penalties, Lawyer Says – NYTimes.com.

The former Navy Seal who wrote a book on the Bin Laden raid has filed a legal malpractice lawsuit against his former lawyers. He alleges that the lawyers were negligent in failing to advise him that publishing the book would run afoul of government rules. The alleged errors may cost the former Navy Seal $4.5 million in royalties and the movie rights to the book.

Edward X. Clinton, Jr.

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