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Law Firm’s Position Vindicated On Appeal – Malpractice Case Dismissed

The case is Iliescu v. Hale Lane Peek Dennison and Howard, No 76146, Supreme Court of Nevada.This is a complicated case and factual scenario that does often come up in legal malpractice cases. It goes like this:

A. Your client loses a ruling in a trial court in the underlying case.

B. Your client fires you.  (Next, they sue you for malpractice).

C. New counsel in the trial court files an appeal of the adverse ruling.  (At the same time the malpractice case is pending).

D. The appellate court reverses the bad ruling and the lawyer obtains summary judgment in the malpractice case.

E. The costs to the legal system are significant because the lawyer and his insurer are required to litigate a malpractice case (and expend money) that exists in an alternate universe and then disappears.

F. The result is that the lawyer wins, but it takes years of work.

Here is how this scenario played out in this case:

This action stems from a failed real estate transaction initiated in 2005.[1] Appellants, John Iliescu, Jr., et al., (collectively, Iliescu) retained respondent law firm Hale Lane Peek Dennison and Howard (Hale Lane) in an attempted sale of Iliescu’s undeveloped property in downtown Reno. The would-be purchaser, who planned to develop a high-rise condominium project on the property, contracted with an architectural firm to perform off-site design services for the planned development. Hale Lane represented both Iliescu and the would-be purchaser. After the would-be purchaser failed to obtain financing and the proposed sale fell through, architect Mark Steppan filed a $1.8 million mechanic’s lien against Iliescu’s property for unpaid fees. Hale Lane attempted to expunge the mechanic’s lien, arguing that it was filed without statutorily required notice, and that a legal exception excusing strict compliance with pre-lien notice requirements[2] did not apply. The district court rejected Hale Lane’s attempt to expunge the lien and ordered further discovery in the action to foreclose the mechanic’s lien.

Iliescu replaced Hale Lane with new counsel and moved forward with the litigation challenging the mechanic’s lien. Iliescu also filed a third-party complaint against Hale Lane for professional malpractice and negligence, alleging Hale Lane negligently executed the failed transaction, specifically in failing to advise Iliescu to protect against a mechanic’s lien by filing a notice of non-responsibility, and subsequently failing to expunge the mechanic’s lien. The mechanic’s lien suit proceeded while the professional negligence action against Hale Lane was stayed.

After this court decided Iliescu v. Steppan, 133 Nev. 182, 394 P.3d 930 (2017), in favor of Iliescu, invalidating the mechanic’s lien and holding that the Fondren exception did not apply to offsite design services, Hale Lane moved for summary judgment in the professional negligence action. Hale Lane argued that its original attempt to expunge the lien should have succeeded, and that this court’s decision in Iliescu v. Steppan validated its earlier argument, which the district court rejected. The district court agreed with Hale Lane and determined that, despite any purported negligence on Hale Lane’s part, once the district court erroneously rejected Hale Lane’s legal argument, there was no causal connection between any alleged transactional negligence and Iliescu’s litigation damages. The district court also rejected Iliescu’s NRCP 15(a) motion to amend his pleadings, and Iliescu’s NRCP 56(f) motion for more time to complete discovery and to secure an expert witness to establish the appropriate standard of care. Iliescu now appeals.

As discussed, Iliescu’s replacement counsel made substantially similar arguments as Hale Lane made in its 2007 challenge. This court clearly stated that it had not addressed the onsite/offsite distinction prior to the Iliescu v. Steppan decision in 2017. Hale Lane reasonably raised the appropriate legal argument, and the district court rejected it. Iliescu’s replacement counsel made substantially the same argument to no avail. It was, therefore, judicial error, not any negligent representation on Hale Lane’s part, that necessitated further litigation and this court’s ultimate decision that the mechanic’s lien was invalid, as Hale Lane originally contended. “[W]hen [legal] malpractice is alleged to have caused an adverse ruling in an underlying action … [a]pparent damage may vanish with successful prosecution of an appeal and ultimate vindication of an attorney’s conduct by an appellate court.” Hewitt v. Allen, 118 Nev. 216, 221, 43 P.3d 345, 348 (2002) (third alteration in original) (internal quotation marks omitted). And “when an attorney has raised the appropriate arguments and the court nevertheless commits judicial error, a plaintiff’s suit can be appropriately dismissed on summary judgment.” Crestwood Cove, 164 P.3d at 1256. Accordingly, we conclude the district court correctly determined that summary judgment was warranted in favor of Hale Lane.

Once the unfavorable ruling disappears, the lawyer wins the malpractice case. This is a good result for the lawyer, but it imposes costs on the legal system in that there is dual litigation pending for several years.

Ed Clinton, Jr.


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