Assessing a Potential Legal Malpractice Action: Key Considerations

Faced with a mountain of unpaid legal fees and a negative result, a legal malpractice action may seem like the perfect way for a disappointed client to “settle the score.” Such actions, however, can be an uphill and expensive battle in their own right, with dismissal at the pleading stage the all too common result.

Therefore, before heading down that path, there are a number of key considerations a potential client and lawyer should keep in mind. These include: (i) the scope of the original engagement letter; (ii) will the potential malpractice action be timely; (iii) does the alleged wrongful conduct, or negligence, amount to something more than a bad “judgment call”; and (iv) finally, do the client’s damages flow directly from the former attorney’s wrongful conduct.

The Engagement Letter

The first thing to review is the engagement letter, which, if well drafted, should provide some basic parameters as to who was being represented and the scope of the representation. Having a fundamental understanding of the players and the field will prevent elementary pleading pitfalls that can be fatal to a legal malpractice action.

When it comes to identifying the client, it is important to ensure that the person or entity asserting the potential legal malpractice claim is, in fact, the party the former attorney represented.

In the context of corporate transactions, there may be questions as to whether an attorney is representing only the corporate entity or whether the attorney is also representing individual directors, officers, and employees. For example, in Kurre v. Greenbaum Rowe Smith Ravin Davis & Himmel, LLP, Docket No. L-1427-05 (N.J. Super. Ct. App. Div. April 16, 2010), individual shareholders brought a legal malpractice action concerning a failed corporate transaction. The court dismissed the lawsuit because the engagement letter specified that the law firm represented only the corporate entity and further advised the individual shareholders to obtain separate counsel due to their differing “interests and concerns.” Id. at 1.

A thorough engagement letter will also define with some specificity the services that the attorney is undertaking to perform. Accordingly, if an engagement letter provides that the representation is limited to proceedings before certain tribunals, a legal malpractice action for the attorney’s failure to take an appeal is likely to be dismissed. ¹See, e.g., Turner v. Irving Finklestein & Meirowtiz, LLP, 61 A.D.3d 849, 879 N.Y.S.2d 145 (2d Dep’t 2009). Similarly, where an engagement letter limited the claims and counterclaims to be litigated, the court found the attorney had no duty to pursue other causes of action that might have been viable. ²DeNatale v. Santangelo, 65 A.D.3d 1006, 884 N.Y.S.2d 868 (2d Dep’t 2009). In AmBase Corp. v. Davis Polk & Wardwell, 8 N.Y.3d 428, 834 N.Y.S.2d 705 (2007), a client sued Davis Polk for failing to properly advise it with respect to whether certain tax liability could be allocated to another entity. Relying on the language of the engagement letter, the New York Court of Appeals concluded that the scope of Davis Polk’s representation was limited to the resolution of tax issues before the IRS—which it did, successfully absolving the client of over $20 million in tax liability. ³8 N.Y.3d at 435, 834 N.Y.S.2d at 709. The court found that Davis Polk had no duty to advise its client with respect to whether the client, in the first instance, was primarily or secondarily liable for that tax liability. ⁴Id.

While the existence of an engagement letter will lend clarity to the boundaries of any potential malpractice action, failing to have one—which is sometimes the case, especially where long-standing relationships are involved—certainly does not preclude such an action. ⁵In New York, for matters where the fee to be charged is expected to be in excess of $3,000 a written engagement letter is required setting forth “the scope of the legal services to be provided” and an “[e]xplanation of attorney’s fees to be charged, expenses and billing practices….” 22 NYCRR §1215.1(b)(1) and (2); see also 22 NYCRR §1215.2(1). There are, however, exceptions to this provision “when the lawyer will charge a regularly represented client on the same basis or rate and perform services that are of the same general kind as previously rendered to and paid for by the client.” Rule 1.5(b), Rules of Professional Conduct, 22 NYCRR §1200.0; see also 22 NYCRR §1215.2(2) (the 22 NYCRR §1215.1 requirement for a written engagement letter does not apply to a “representation where the attorney’s services are of the same general kind as previously rendered to and paid for by the client”). To the contrary, absent documentary evidence demonstrating that the representation did not include matters relating to the alleged malpractice, the scope of the agreed representation has been determined to be a question of fact sufficient to defeat a motion to dismiss. ⁶See Shaya B. Pacific, LLC v. Wilson, Elser, Moskowitz, Edelman & Dicker, LLP, 38 A.D.3d 34, 827 N.Y.S.2d 231 (2d Dep’t 2006).

The Statute of Limitations

Assuming the engagement letter poses no problems, the next thing to consider is the timeliness of the potential legal malpractice action.

In New York, a claim for legal malpractice must be brought within three years of the claimed wrongdoing. The clock is, thus, ticking, regardless of whether or not the client is aware of the wrongdoing. For example, in Access Point Med. v. Mandell, Index No. 102082/10, 2013 N.Y. Slip Op. 02208 (1st Dep’t April 4, 2013), the court ruled that a legal malpractice action that was commenced on February 17, 2010 was time barred where the last entry on the law firm’s final invoice was February 14, 2007.

This rule can be particularly unforgiving in a transactional situation where an attorney’s negligent drafting of an agreement exposes the client to a subsequent claim for breach of contract. Under New York law, that breach of contract claim may be brought six years after the events in question—by which time, any claim that the client may have had by virtue of his attorney’s negligent drafting will have long expired.

Where, however, the former attorney continued to represent the client with respect to the matter in question, the “continuous representation doctrine” may save an otherwise time-barred claim. This doctrine provides that the limitations period is tolled until the matter is concluded. ⁷See Shumsky v. Eisenstein, 96 N.Y.2d 164, 168, 726 N.Y.S.2d 365, 368-69 (2001). Included within the ambit of the doctrine is “an attempt by the attorney to rectify an alleged act of malpractice.” ⁸Luk Lamellen U. Kupplungbau GmbH v. Lerner, 166 A.D.2d 505, 506-07, 560 N.Y.S.2d 787, 789 (2d Dep’t 1990); see also N&S Supply, Inc. v. Simmons, 305 A.D.2d 648, 650, 761 N.Y.S.2d 668, 670 (2d Dep’t 2003) (finding that attorney continued his representation after the negligent drafting of an agreement when he attempted to correct his negligence). To the extent, however, that the attorney-client relationship continues, but in connection with an unrelated matter, the doctrine is inapplicable. ⁹See Luk Lamellen U. Kupplungbau GmbH, 166 A.D.2d at 507, 560 N.Y.S.2d at 789. For this purpose, it is, therefore, also essential to inquire if the attorney sent the client a “closing letter” at the conclusion of the engagement, explaining that the representation is complete and the attorney will not be providing any further services with respect to the matter.

In short, one must be vigilant in order to avoid a statute of limitations problem. Attorneys are often willing to enter into tolling agreements, which stop the statute of limitations from running for some agreed period of time. For the attorney facing a potential malpractice action, such an agreement leaves open the possibility that the matter can be resolved short of litigation.

An Error of Judgment

It is also critical to ascertain if the wrongdoing in question amounts to more than an “error of judgment” by the former attorney. As a result, it will be necessary to establish that the former attorney’s conduct fell below “the ordinary and reasonable skill and knowledge commonly possessed by a member of the profession.” ¹⁰Capogrosso v. Lecrichia, No. 07 Civ. 2722, at 5 (S.D.N.Y. May 24, 2010) (citing Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 337 (2d Cir. 2006)) (internal quotations omitted). An “error of judgment” by an attorney, or the “selection of one among several reasonable courses of action,” is not enough to establish an attorney’s negligence. ¹¹Achtman, 464 F.3d at 337; see also Dweck Law Firm v. Mann, 283 A.D.2d 292, 293, 727 N.Y.S.2d 58, 59 (1st Dep’t 2001) (“a purported malpractice claim that amounts only to a client’s criticism of counsel’s strategy may be dismissed”). But see Ackerman v. Kesselman, 100 A.D.3d 577, 954 N.Y.S.2d 103 (2d Dep’t 2012) (motion to dismiss denied where plaintiff alleged that there was no rational strategic reason for counsel to fail to move to have him dismissed from an underlying arbitration over an employment agreement to which the client was not a party and was not personally subject to the arbitration).

Furthermore, failure to come forward with expert testimony on the applicable standard of care—and that the attorney’s conduct fell below that standard—is often fatal to a claim. ¹²See, e.g., Joseph DelGreco & Co., Inc. v. DLA Piper LLP (U.S.), 10 Civ. 06422, at 7 (S.D.N.Y. Oct. 1, 2012); Stonewall Corp. v. Conestoga Title Ins. Co., 678 F. Supp.2d 203, 209 (S.D.N.Y. 2010); Kranis v. Scott, 178 F. Supp.2d 330, 334-35 (E.D.N.Y. 2002).

Therefore, in considering the viability of a legal malpractice claim, a client should think about the nature of the negligence at issue, whether former counsel has a viable defense in the form of a “judgment call,” and whether it will be possible to locate an expert that will be prepared to testify with respect to the standard of care.

‘But For’ Causation

Finally, before bringing a legal malpractice action, it is necessary to address the requirement that the damages flow directly from the former attorney’s wrongful conduct, or what is known as proximate causation. This requirement is a “high bar to attorney malpractice liability” which “ ‘seeks to ensure a tight causal relationship … between the claimed injuries and the alleged malpractice … .’ ” ¹³Flutie Bros. LLC v. Hayes, No. 04 Civ. 4187, at 5 (S.D.N.Y. May 18, 2004) (citing Sloane v. Reich, No. 90 Civ. 8187, at 3 (S.D.N.Y. March 11, 1994)).

Proximate causation is often referred to as the need to prove “but for” causation, i.e., “but for” the attorney’s wrongful conduct, the client would not have been injured. In cases where the malpractice is alleged to have occurred during the course of a litigation, or in the “case within a case” scenario, it is well-established that a plaintiff must demonstrate that “but for” the attorney’s negligence, the plaintiff would have prevailed in the underlying litigation. ¹⁴See, e.g., Tydings v. Greenfield, Stein & Senior, LLP, 43 A.D.3d 680, 682, 843 N.Y.S.2d 538, 540 (1st Dep’t 2007), aff’d, 11 N.Y.3d 195, 868 N.Y.S.2d 563 (2008).

In the transactional context, there is some law to suggest that the attorney’s negligence need not be the “sole” cause of the client’s injury, but rather “a” cause of the harm, such that the attorney’s negligence was one of myriad factors contributing to a client’s decision to pursue a particular course of action. ¹⁵Barnett v. Schwartz, 47 A.D.3d 197, 848 N.Y.S.2d 663, 668 (2d Dep’t 2007); see also Kirk v. Heppt, No. 05 Civ. 9977, at 10 (S.D.N.Y. Sept. 3, 2009) (“need not show that [attorney’s] negligence was the sole cause of [plaintiff’s] lost severance benefits”).

While this standard is certainly more consistent with the proof required to establish proximate causation in other negligence claims, including medical malpractice, ¹⁶See, e.g., Mortensen v. Mem’l Hosp., 105 A.D.2d 151, 158, 483 N.Y.S.2d 264, 270 (1st Dep’t 1984) (if defendant’s negligence “is a substantial factor in producing the injury, it is a proximate cause of the injury”). many courts have been resistant to move away from requiring plaintiffs to meet the “but for” standard. ¹⁷See, e.g., Joseph DelGreco & Co., Inc., 10 Civ. 06422, at 21. And, as with the applicable standard of care, expert testimony is often used to establish proximate causation. ¹⁸See, e.g., Stonewall Corp., 678 F. Supp.2d at 209; Kranis, 178 F. Supp.2d at 334.

Conclusion

Legal malpractice actions face a number of unique hurdles that will need to be addressed. Making sure that a claim is viable enough to withstand dismissal in the early stages of the litigation is crucial to ensuring that it is worth the time, effort, and resources it will take to litigate and prevail.