The most recent issue of the Solicitor newsletter is out, featuring a review of the professional liability insurance market for attorneys, and an article reviewing legal calendaring programs. The author likes "Deadlines on Demand", which is a web service that provides calendaring information.
The D.C. Court of Appeals has recently affirmed a decision by the trial court which granted summary judgment in a legal malpractice case, on the grounds that the plaintiff failed to name an expert witness.
Disclosure: This case was defended by one of my partners, David P. Durbin, who has defended many legal malpractice cases over the years.
Applying Virginia law, the U.S. District Court for D.C. granted summary judgment to a professional liability insurer in a rescission action brought against a law firm based on misrepresentations in the application for insurance. The law firm had failed to disclose the existence of a potential claim, which was evidence by a letter from the claimant which announced the intent to bring a claim.
The opinion summarized Virginia law concerning rescission based on a material misrepresentation in the application for insurance.
Even in D.C., sometimes (but rarely) default judgments are upheld. In a recent case, a law firm's default judgment against a former client for roughly $55,000 in legal fees was upheld.
Generally, law firms are well advised not to bring suit to collect unpaid fees, because more often than not, there follows a counterclaim for legal malpractice. On the other hand, sometimes law firms decide that if the word on the street is that they will not sue to collect their fee, the problem of uncollected receivables will get out of hand. It probably is an issue that is debated from time to time in most firms.
U.S. District Judge Catherine Blake of the District of Maryland has issued an opinion denying a D.C. law firm's motion for summary judgment in a suit brought by a former client for alleged malpractice in defending him in a criminal matter. Among other things, the opinion analyzes the interrelationship of D.C. law governing limited liability partnerships and general partnerships and the issue of apparent authority to bind a partnership during the winding up period between dissolution and termination.
Virginia has long been one of the minority States that follow the payment rule in legal malpractice actions, i.e., that a plaintiff who sustains a judgment against him does not have a cause of action for legal malpractice against his attorney until he actually pays all or part of the judgment. In a recent case, Shipman v. Kruck, the Virginia Supreme Court overruled the Duesterdick case and adopted the judgment rule. The meat of the opinion on this point is as follows:
First and foremost, adherence to a payment rule would vest the aggrieved client with the power to forestall the running of the statute of limitations by the deferral of payment, regardless of whether he has already suffered damages sufficient to give rise to his cause of action. It is the legislature that decides when causes of action shall accrue, not plaintiffs. Second, such a rule does not protect a client who, due to bankruptcy or insolvency, cannot afford to pay whatever damage he has suffered. “If the client has no cause of action until he has paid the judgment against him, then the larger the judgment, the greater the client’s burden and the lawyer’s impunity; the greater the injury wrongfully inflicted, the less the liability of the wrongdoer.” Duesterdick, 217 Va. at 767, 232 S.E.2d at 777 (Poff, J., dissenting). Finally, the “payment rule”, in a statute of limitations context, would work an injustice on attorneys who may be forced to defend allegations of malpractice brought many years after the alleged breach occurred, dependent entirely upon the ability or whim of the complaining client to pay the resulting damages. In this regard the “payment rule” defeats the primary objectives of statutes of limitations, such as compelling “the exercise of a right of action within a reasonable time,” Street v. Consumers Min. Corp., 185 Va. 561, 575, 39 S.E.2d 271, 277 (1946), preventing surprise, and avoiding problems “incident to the gathering and presentation of evidence when claims have become stale.” Truman v. Spivey, 225 Va. 274, 279, 302 S.E.2d 517, 519 (1983). Application of the “payment rule” to the facts of the case at bar, as the Shipmans urge, illustrates these defects. Even if we determined that when the Shipmans hired the second attorney they incurred legal fees, and thus damages sufficient to establish a cause of action, there is no indication in the record as to when those fees were paid. If they had given a retainer to that attorney on their first visit, presumably the “payment rule” would then be satisfied and their cause of action would begin to accrue. Suppose, instead, the Shipmans did not pay their attorney for six months, one year, or longer. Such a scenario exemplifies why the payment rule would frustrate the will of the legislature and circumvent the objectives of the statutes themselves if made applicable in a statute of limitations context. In the context of a judgment entered against a client by virtue of his attorney’s purported negligence, we said in Duesterdick, “until the client has made a payment on that debt he has suffered no actual loss or damage.” 217 Va. at 766, 232 S.E.2d at 776. For the reasons set forth above, we conclude that this is an incorrect statement of law. As Justice Poff stated in his dissent in Duesterdick, a client who suffers the entry of a judgment against him indeed suffers a legal injury or damage. There is little remote, speculative, or contingent about a money judgment. Indeed, it is a legal creature of singular dignity. Such a judgment calls into existence what did not exist before, viz., a liquidated debt. Except for jurisdictional defect, that judgment and the debt it creates cannot be collaterally attacked and is actionable in every state. The recorded judgment constitutes a continuing lien (securing the debt and the interest as it accrues) on the debtor’s assets (presently owned and later acquired), a lien that is enforceable by public sale. Subject to the statute of limitations, the debt survives the debtor’s death and may be revived against his personal representative. Code § 8-396 (Cum. Supp. 1976). Some judgments, such as that suffered by the client here, survive bankruptcy. 11 U.S.C. § 35. Id., 217 Va. at 768, 232 S.E.2d at 777. Accordingly, our prior decision in Duesterdick is overruled and cannot be viewed as supporting the Shipmans’ argument, which we reject.
Maryland has a business and technology case management program, and one facet of it is a website where trial court decisions that are relevant to business and technology issues will be posted. The Maryland State Bar Association website has posted an article to publicize this program.
As a sample offering, the B&T website has published a trial court opinion in which a legal malpractice claim against a firm acting as counsel for Prince George's County, Maryland, brought by borrowers who were unhappy that filing statements were not properly done in the District of Columbia, was dismissed due to lack of privity and under the statute of limitations. Bank of New York v. Ronald Sheff, et al., CAL 02-21119 (Circuit Court for Prince George's County, Maryland).
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In Supik v. Bodie, Nagle, Dolina, Smith & Hobbs, P.A., No. 1697, Sept. Term, 2002 (Md. App. Oct. 29, 2003), the Court of Special Appeals reversed a Circuit Court ruling that granted summary judgment to the defendant law firm based on the statute of limitations. This opinion illustrates the difficulty of mounting a statute of limitations defense to a legal malpractice claim arising from an allegedly negligent settlement, where the settlement itself took place within the period of limitations.
The plaintiffs alleged that they had settled a toxic tort case against several pest control companies for less than full value. The defendant law firm had represented them in the prior litigation. They filed suit against the defendants for professional negligence, breach of fiduciary duty, negligent misrepresentation, and fraudulent misrepresentation.
The trial court had granted summary judgment because the plaintiffs had said that they felt under "duress" to settle the claim against their homeowners' insurer for $22,000 as of March 7, 1997, more than three years prior to the date they filed suit, March 31, 2000. The plaintiffs had settled with the tort defendants in the prior suit on April 1, 1997.
Essentially, the Court of Special Appeals found that no cause of action had arisen based on the initial settlement with the homeowner's insurer:
A trier of fact could find that no legally cognizable injury existed sooner than April 1, 1997 when the toxic tort case was settled and, hence, that a cause of action did not exist against Bodie, Nagle until that time. Before that time their claim remained viable, their entitlement was not fixed, and damages remained unliquidated. Further negotiation was possible. They continued to possess the right to present their case and their claim for damages to the court. With the execution of the settlement agreement their potential dissolved into a certainty -there could be no greater recovery than that agreed to. Because it appears that there were a number of allegedly negligent acts prior to that date, a jury could find no injury to the Supiks caused by those acts until the settlement actually occurred on April 1, 1997, and that there was no loss or detriment to them, as they could have at any point prior to the settlement decided not to settle.
In a recent opinion letter, Judge Keith of the Circuit Court of Fairfax County, Virginia overruled the defendants plea in bar based on the statute of limitations, on the grounds that plaintiffs' right of action had expired before his cause of action accrued, and to enforce the statute of limitations in that situation would deprive plaintiffs of their property without due process of law. McLean Crest, LLC v. Wickwire Gavin, P.C., 2003 Va. Cir. LEXIS 174 (Aug. 12, 2003).
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