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This case is captioned Dustin Scott Roberts v. William R. Ray, No E2015-01522-COA-R3-CV, filed April 13, 2016.

Roberts retained Ray to draft a prenuptial agreement. Later when Roberts was undergoing a divorce the trial court held that the prenuptial was invalid because Ray did not make a full and fair disclosure of his assets to his bride. Roberts then sued Ray and alleged that Ray did not meet professional standards in drafting the prenuptial and that the errors caused Ray damages. Ray’s claim appears to be that the lawyer failed to advise him to make sure that the disclosures of assets attached as an exhibit to the prenuptial was accurate. The trial court granted summary judgment but the appellate court reversed and held that there were factual issues which prevented the grant of summary judgment.

This is the first reported case I have seen on this issue. Apparently the lawyer could have avoided liability by some sort of written communication to the client that the disclosure of assets must be complete and accurate.

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This is another decision affirming, as time-barred, a legal malpractice case. Plaintiffs alleged that they hired Vedder Price to represent them in a commercial real estate transaction in 2003. Plaintiffs signed personal guarantees. The plaintiffs alleged that the lawyer defendants failed to advise them that one of other parties to the venture had signed a limited version of the personal guarantee. Plaintiffs claimed that had they known of the limited version of the guarantee they would not have signed the loan documents. Plaintiffs also alleged that the lawyer defendants failed to notify them that a transfer of a 10% interest in the project to Benjamin Nummy triggered a default under the loan documents.

It was undisputed that the lawyers gave the plaintiffs a complete copy of all the documents signed by all parties in 2003. In 2012, the bank notified the bank that the 2003 transfer to Nummy violated the loan documents and declared a default and sued for foreclosure.

Plaintiffs sued Vedder Price in 2014. The case was dismissed on statute of repose grounds (the alleged negligent act occurred more than 6 years before the lawsuit was filed). Plaintiffs alleged fraudulent concealment but this claim was rejected because the alleged fraudulent concealment consisted of the same allegations that supported the negligence claim. In other words there were no allegations that the lawyers took any action after the transaction to cover up their alleged mistake.

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This legal malpractice claim is a spin-off from other long running litigation filed by Prospect Development LLC against the City of Prospect Heights arising out of a real estate deal that went sour.  The defendant attorney in the legal malpractice action was Robert Kreger. Kreger was the general counsel of Prospect Heights until 2004.

The Underlying Case

The facts of the dispute are set forth in the Appellate Court’s 2012 opinion in the case captioned  Prospect Development LLC v. Village of Prospect Heights, 2012 IL App 103759-U. According to the Appellate Court, Prospect Development, which was owned by John G. Wilson, sought to develop an arena in Prospect Heights. The project was never completed. In 2004, the Village of Prospect Heights terminated the project. Prospect Development sued for breach of contract. The trial court found that Prospect Development had substantially performed the contract with the Village. However, the trial court also found that Prospect Development had unclean hands because it had secretly made loans to Robert Kreger, the general counsel of the Village. The trial court held that the secret loans constituted unclean hands and that the unclean hands barred Prospect Heights from seeking relief against the Village. Kreger had been a partner of a large law firm, Schiff Hardin and had acted as the general counsel for the Village of Prospect Heights. Opinion ¶ 2.

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This is another chapter in the long-running battle between beneficiaries of estates and estate planning attorneys. For much of the 19th century if a lawyer made an error in the drafting of an estate planning document, the intended beneficiary could not sue for legal malpractice because the intended beneficiary was not “in privity” with the lawyer. The words “in privity” meant that the intended beneficiary did not have a direct attorney-client relationship with the lawyer. (Of course, in most estate planning matters, the only person with an attorney-client relationship is deceased by the time the error is discovered).

The privity rule was extremely beneficial to attorneys because it meant that they could rarely be sued for legal malpractice. In recent years, courts have chipped away at the privity rule. The courts have acted from the obvious concern that the lawyer who makes a mistake depriving a beneficiary of an inheritance should not be able to hide behind a technicality to escape liability.

In this case, the plaintiff was the Richmond Society for the Prevention of Cruelty to Animals or RSPCA. RSPCA alleged that there was an error in the drafting of a will and the error caused it to lose an expected inheritance of real property.

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Proximate causation is often the issue that defeats a legal malpractice case. In this case, even though a law firm failed to timely appeal an interlocutory ruling, there was no malpractice because the ruling was correct. Thus, even if the appeal had been filed on time, the plaintiff would have lost the case anyway.

The underlying case was litigated in the courts of the State of Oregon. Here, the plaintiff hired a law firm to give an opinion on whether an adverse ruling in a case could be appealed. The law firm essentially said that the ruling was interlocutory and that no appeal could be taken until the entire case was completed. To complete the case the plaintiff dismissed its remaining claims and appealed. The appeal was, however, dismissed because it was not timely.

Plaintiff then sued the law firm alleging that the law firm gave incorrect advice on the appeal deadline. The trial court granted summary judgment for the law firm. It held that plaintiff could not establish proximate causation, that is, but for the negligence, plaintiff would have obtained a better result in the underlying lawsuit.

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This is an important issue in legal malpractice cases. A lawyer represents a client in litigation. If the lawyer is granted leave to withdraw from that matter by the court, does that decision bar a legal malpractice claim by the client? The Washington Court of Appeals held that the withdrawal, even where approved by a court, does not collaterally estop a legal malpractice claim.

Generally, a litigant must establish four things to collaterally estop the other party from litigating an issue: (1) the identical issue was decided, (2) there was a final judgment on the merits, (3) the party against whom the doctrine is asserted must have been a party to the earlier proceeding, and (4) application of collateral estoppel will not work an injustice against the estopped party.

The court explained that two of the four factors required to establish collateral estoppel were not present:

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The Nebraska Supreme Court has reversed a grant of summary judgment in favor of a lawyer in a legal malpractice claim. The plaintiff was a former client of a divorce attorney. She alleged that he breached the standard of care by failing to explain to her that she had signed an agreement that unambiguously waived any interest in her ex-husband’s life insurance policy.

The underlying case was a typical divorce case resolved by an equally typical Marital Settlement Agreement. The Court quotes from three of its provisions:

In the agreement, Brenda and Dale divided the marital estate and waived whatever interest they had in certain property owned by the other spouse. Paragraph VI provided:

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This is an opinion affirming the dismissal of a legal malpractice claim against divorce attorneys. Plaintiff alleged that her former attorneys did not “ascertain the full extent of her former husband’s income, and failed to make an adequate record before the matrimonial court regarding her former husband’s level of adherence to the tenets of Orthodox Judaism and the needs of their children not to have visitation with the former husband on the Jewish Sabbath and holidays.” The lawyers moved for summary judgment and the plaintiff, also a lawyer, filed a response in opposition to that motion. The court held that the client’s affidavit was insufficient to rebut the lawyer’s prima facie showing of entitlement to judgment as a matter of law. The court does not state why the affidavit was deficient but one may guess that the affidavit by the former client did not explain how the work done by the lawyers failed to meet the standard of care for a divorce lawyer involved in the divorce of an Orthodox couple.

Plaintiff may have been able to avoid this problem by hiring a divorce lawyer to act as her expert witness. She apparently chose not to go down that path and the result was unfavorable to her.

Edward X. Clinton, Jr.

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This is a decision of the Nebraska Court of Appeals reinstating a legal malpractice claim against a personal injury attorney even though the underlying case was settled.

The defendant attorney urged the client to accept a $45,000 settlement of a personal injury claim arising out of an auto accident. The plaintiff agreed to the proposed settlement, but then sued the lawyer for legal malpractice. The basis of her claim was essentially that the settlement was inadequate because she had suffered serious permanent injuries requiring medical expenses far exceeding the amount of the settlement.

The court explained:

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The plaintiff sued a lawyer for legal malpractice. The lawyer failed to timely report the legal malpractice claim to his carrier and the claim was denied. The plaintiff then sued the insurer directly with no success for the same reason. Because the lawyer failed to report the claim to the insurer, the claim for coverage was denied.

Do not ever retain an attorney who does not have insurance.

Source: McCarty v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Dist. Court, SD Ohio 2016 – Google Scholar

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