Professional Liability

The Sixth Circuit Court of Appeals has determined that an insurance company was entitled to rescind the malpractice policy that covered one of the plaintiff’s lawyers successfully sued for millions of dollars for malpractice related to the settlement of a class action lawsuit involving the diet drug Fen-Phen. Thus, the court left in place a $234,000 monetary judgment against the attorney, “which was the amount of the defense costs Continental paid on his behalf in the initial class action.” The class claimants joined the attorney in appealing the district court’s grant of the carrier’s motion for summary judgment to the Sixth Circuit.

According to the court, the attorney knew, when he answered questions on the policy’s application about potential claims against the firm or its attorneys, of pending ethics investigations into his conduct arising from the class-action settlement, but failed to disclose this in his response. The attorneys involved in settling the claims failed to disclose to class members that the settlement would provide just 37 percent of the $200-million settlement fund to them, while the attorneys took most of the remainder. “Because Mills made a material misrepresentation, in his malpractice insurance application with Continental, the policy was properly voided under Kentucky law,” the court said. The court also found that the policy could have been rescinded “under the plain terms of a clause in the policy excluding coverage for dishonest acts.” Although Mills was apparently acquitted of criminal charges, the Kentucky Supreme Court order disbarring him from the practice of law was, in the court’s view, “a sufficient basis for precluding coverage under the policy’s dishonesty exclusion clause.”

Cont’l Cas. Co. v. Law Offices of Melbourne Mills, Jr., PLLC, Nos. 10-5813/5814 (6th Cir. April 13, 2012).

Guardians ad litem serve an important function in domestic proceedings and are often sued by disgruntled litigants. For example, guardians ad litem were sued in Holder v. State of New Hampshire, 06-CV-252-PB (D.N.H.), Hall v. Markiewicz, No. 08-CV-494-PB (D.N.H.), and Puiia v. Cross, 12-CV-54-PB (D.N.H.). The fear of lawsuits may deter guardians ad litem, who are not required to be attorneys under New Hampshire law, from serving this important function. In Holder, Hall, and the First Circuit Court of Appeals case of Cok v. Cosentino, 876 F.2d 1 (1st Cir. 1989), the courts held that the guardians ad litem were entitled to absolute quasi-judicial immunity because they serve as officers of the court. The New Hampshire Supreme Court recently adopted the immunity rule. The plaintiff sued a guardian ad litem based upon alleged negligent misstatements of his criminal history that breached an implied contract to observe “reasonable standards of care and fair dealing.” The New Hampshire Supreme Court affirmed the dismissal of the plaintiff’s claims on the basis that guardians ad litem are entitled to absolute quasi-judicial immunity.

Surprenant v. Mulcrone, No. 2011-661 (N.H. Supreme Court, April 20, 2012).

The Connecticut Supreme Court affirmed the importance of expert testimony for legal malpractice cases in deciding Grimm v. Fox. The defendant attorneys represented Mr. Grimm as local counsel in the dissolution of his marriage. The plaintiff appealed a number of issues in an appeal from the dissolution judgment of a Connecticut Appellate Court, including a determination that he had diminished the marital estate by $2.9 million. The Appellate Court found the plaintiff had abandoned his claim with respect to this amount because he failed to move for a rectification of factual findings. He also addressed the issue in the facts section of his brief instead of the argument section.

The plaintiff then brought a legal malpractice claim against his attorneys, relying solely on language from the court opinion deciding his divorce appeal. The day of trial, the Court granted summary judgment in favor of the defendants based on the plaintiff’s failure to identify an expert. The plaintiff argued he did not need an expert because court records and the judge’s disapproval of his attorneys’ actions were sufficient to establish a breach of the standard of care.

The Court disagreed, stating “Although the specific language we used can certainly be characterized as critical of the materials that the defendants submitted to this court, it did not delve into whether the activities in preparing those materials satisfied the requisite standard of care or whether other attorneys would have performed similarly in a comparable situation.” Even while conceding the defendants’ submissions had been “inadequate” and likely a violation of the technical rules of appellate procedure, the Court found expert testimony was still necessary, and the plaintiff’s failure to secure an expert was fatal to his case.

The New Hampshire Supreme Court, on recommendation from the Professional Conduct Committee (PCC) disbarred an attorney for making false statements in the course of a bankruptcy proceeding. The attorney represented a client who requested her husband’s income not be involved in her Chapter 13 bankruptcy petition. The attorney disregarded instructions on the pleadings and filed the petition with zeroes for fields requesting information regarding income of the debtor’s spouse. He also entered zeroes in the marital adjustment field that would have allowed the debtor to request her husband’s income not be used in calculation of disposable income.

The PCC petitioned the Court to disbar the attorney for knowingly making a false statement of fact or law to a tribunal in violation of Rule 3.3(a)(1) of the New Hampshire Rules of Professional Conduct. The attorney argued that the PCC failed to prove its claim by clear and convincing evidence because bankruptcy law is unsettled on the impact of debtor’s spouse’s income, and because he accounted for such income elsewhere on the petition. The Supreme Court rejected this argument.

The Court noted the express instructions on the petition, which required disclosure of a spouse’s income, to support its decision that Clark had made false statements. Further, the Court explained there were appropriate avenues for challenging use of the debtor’s spousal income in calculations, including a motion to the bankruptcy court. The Court set forth factors for consideration in imposing sanctions: (a) the duty violated; (b) the lawyer’s mental state; (c) the potential or actual injury caused by the lawyer’s misconduct; and (d) the existence of aggravating or mitigating factors. Taking these into account, the Court held that “because no single transgression reflects more negatively on the legal profession than a lie, attorney misconduct involving dishonesty justifies disbarment.” Clark’s Case, (quoting Young’s Case 154 N.H. 359, 369 (2006)).

The US District Court for the Eastern District of Louisiana found a clearly drafted engagement letter provided a defense to the client’s allegation that the firm did not provide adequate representation.

The plaintiff had formed a community development district to issue bonds in order to fund a planned residential development. The defendant law firm was hired as special counsel and bond counsel, and the parties signed a detailed engagement letter defining the scope of representation. After development of the project commenced, the Army Corps of Engineers issued a public notice that part of the property had been used for gunnery, rocket and bombing practice in the 1940s, and noted the potential for unexploded munitions. All further permits and approvals for the property were withheld pending investigation and remediation of concerns related to the notice.

The developer defaulted on the bonds and filed suit against the law firm for failure to conduct environmental due diligence, failure to obtain informed consent for limited scope of representation and charging excessive fees. The law firm argued its engagement letter clearly defined the scope of its obligations, and that it undertook no duty to perform environmental due diligence. The plaintiff countered that the firm failed to obtain informed consent for the limited scope of its duties.

The Court granted the law firm’s summary judgment motion based on its finding that the engagement letter was clearly drafted and created a clear scope of representation.