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.
The bank then brought this malpractice action against the law firm alleging the firm negligently retained an expert witness who was not qualified to offer the necessary opinions in the Kircher lawsuit and negligently failed to call this same expert as a fact witness. The malpractice case proceeded to trial, and the jury returned a verdict in favor of the bank….
With the exclusion of the bank’s only accounting expert, the jury in the Kircher case could not weigh one side’s expert opinion against the other to see which opinion won the battle; it only heard from one side. The jury had no expert to inform them Kircher performed negligently but had three experts who testified on Kircher’s behalf that there was no negligence in the performance of the audit.”
Again, this is the first time I have ever seen such a legal theory used to hold a lawyer liable for legal malpractice. There is nothing unsound about this theory provided the bank proved that, but for the lawyer’s error, it would have won the underlying litigation.
There is another issue presented in the appeal: whether or not the bank could recover the legal fees it incurred in the underlying matter. The trial court refused to allow the bank to present this evidence. The Iowa Court of Appeals reversed the case and allowed the bank to present evidence of legal fees incurred as damages in a retrial. The court reasoned that legal fees incurred in the underlying case should be recoverable damages because that would allow the bank to be made whole.
Conclusion: this is an interesting and novel legal theory of malpractice. Lawyers are often the driving force behind the decision to retain an expert. Like all the other work that lawyers do, they have a duty to meet professional standards and to obtain a witness who is qualified to render the proposed testimony.