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By Joan C. Rogers
March 6 — A lawyer's reasonable but imperfect judgment regarding an unsettled legal issue does not amount to a breach of duty, the Virginia Supreme Court announced Feb. 26 in a decision that also clarified two other key malpractice issues.
In an opinion by Justice LeRoy F. Millette Jr., the court declined to recognize a blanket rule of judgmental immunity for not correctly predicting the outcome of an unsettled legal issue. But no breach of duty occurs, the court said, when a lawyer exercises reasonable care while acting in an unsettled area of law.
The court also ruled that the collectibility of the judgment the client would have recovered in the underlying case is relevant in the client's malpractice suit. However, the plaintiff need not prove collectibility; rather, the lawyer has the burden of proving that a judgment on the claim would not have been collectible, the court declared.
In addition, the court held that former clients may not recover damages for nonpecuniary injuries such as wrongful incarceration or pain and suffering. Damages for legal malpractice are limited to damages recoverable for breach of contract, Millette said.
Attorney Bruce W. McLaughlin was convicted of sexually abusing his two sons and went to prison, but he got his conviction overturned and regained his law license.
He then retained a law firm, Shevlin Smith, to sue the criminal defense lawyers for malpractice. Shevlin Smith obtained a settlement and McLaughlin released his claim against one lawyer after a judicial ruling that the lawyer's insurer did not have to provide coverage for the claim. However, the release ended up barring McLaughlin's claims against the other defense lawyer when the Virginia Supreme Court held a few months later in Cox v. Geary, 624 S.E.2d 16, 22 Law. Man. Prof. Conduct 50 (Va. 2006), that the release of one defendant in a malpractice case operates to release other defendants too.
Unhappy about the outcome of that malpractice case, McLaughlin sued Shevlin Smith on a variety of theories. The case went to a jury, which found in McLaughlin's favor and awarded him $5.75 million.
In the law firm's appeal, the supreme court threw out the jury verdict, holding that the case must be retried without one key theory of recovery and minus McLaughlin's claim for nonpecuniary damages.
In regard to whether Shevlin Smith was liable for the loss of the malpractice claim that became barred by the release of McLaughlin's claims against one lawyer, the firm invoked the “judgmental immunity rule” discussed in cases such as Sun Valley Potatoes, Inc. v. Rosholt, Robertson & Tucker, Chtd., 981 P.2d 236 (Idaho 1999), and Nelson v. Quarles & Brady, LLP, 997 N.E.2d 872, 29 Law. Man. Prof. Conduct 640 (Ill. App. Ct. 2013).
The court noted that the judgmental immunity rule purports to establish the principle that as a matter of law a lawyer cannot be liable when the lawyer's opinions are based on speculation about an unsettled area of law. Some courts have questioned, Millette said, whether this principle establishes a new substantive rule or instead simply restates the standard of care.
“We decline to adopt a per se judgmental immunity doctrine because it would not provide the clarity or utility it promises,” the court said. On the other hand, Millette wrote, “Allowing an attorney to be liable in malpractice for simply failing to correctly predict the outcome of an unsettled legal issue unduly burdens the practice of law, which does a disservice to the profession, and hampers the development of the law, which does a disservice to the public.”
The court decided that if an attorney exercises a reasonable degree of care while acting in an unsettled area of the law—evaluated in the context of the state of the law at the time of the alleged negligence—the attorney does not breach the duty of care owed to the client. This is ordinarily a question of fact for the jury but it becomes an issue of law when reasonable minds could not differ on the issue, the court said.
When Shevlin Smith executed the release on McLaughlin's behalf, Millette said, no appellate court had addressed whether malpractice claims come within the scope of a Virginia statute under which the release of one joint tortfeasor does not release other joint tortfeasors. Two lines of cases in Virginia made it reasonable for the firm to believe—contrary to the later holding in Cox—that the statute would indeed apply to malpractice claims, the court said.
Accordingly, the court concluded that “as a matter of law, Shevlin Smith did not breach its duty by failing to correctly anticipate a judicial ruling on an unsettled legal issue.”
Addressing additional issues Millette said will likely arise on remand, the court held that when a client's claim is lost because of litigation malpractice, “collectibility is relevant because a legal malpractice plaintiff's damages for a lost claim can only be measured by the amount that could have actually been collected from the defendant in the underlying action in the absence of the attorney's negligence.”
However, collectibility is not an element of a malpractice plaintiff's prima facie case, so the plaintiff does not have to prove the value of the underlying judgment that he would have been able to collect absent the lawyer's negligence, the court said.
In reaching this conclusion, the court said it recognized a split among states on the issue. (See box.) “Today, however, we join the ‘growing trend' to place the burden of pleading and disproving collectibility on the negligent attorney as an affirmative defense,” it stated.
The court gave several reasons for its conclusion. It's unfair to presume, Millette said, that a judgment is uncollectible, particularly where Virginia law allows for judgments to be collected over a long time period. Moreover, lawyers are in a better position to present proof on collectibility, and it's more equitable for the lawyer to disprove collectibility as that factor becomes relevant only after the plaintiff proves a prima facie malpractice case.
Justice Elizabeth A. McClanahan dissented on this issue, saying the majority holding incorrectly relieves the malpractice plaintiff of the burden of proving an actual injury proximately caused by the defendant's negligence.
The court also held that even if a client suffers foreseeable nonpecuniary injury from a lawyer's malpractice—such as pain and suffering or wrongful incarceration—damages are not recoverable from the lawyer for such injuries.
Cox made clear, the court said, that a malpractice claim is one for breach of contract, not tort. Because damages for nonpecuniary, noneconomic injuries are not recoverable for breach of contract, those damages are not recoverable in a malpractice action, the court said.
In a footnote, the court cited Dombrowski v. Bulson, 2012 BL 132094, 971 N.E.2d 338, 28 Law. Man. Prof. Conduct 326 (N.Y. 2012), and said that “Today we join New York in categorically barring the recovery of non-pecuniary damages in a legal malpractice claim.”
The court acknowledged that “many states do allow non-pecuniary damages to be recovered in a legal malpractice claim, at least in some circumstances.” However, “there is wide disagreement over the particular circumstances and justifications allowing for such a recovery,” the court said, citing Miranda v. Said, 2013 BL 191291, 836 N.W.2d 8, 28 Law. Man. Prof. Conduct 431 (Iowa 2013), and Vincent v. DeVries, 72 A.3d 886, 29 Law. Man. Prof. Conduct 315 (Vt. 2013).
Thomas K. Plofchan Jr. and Lavanya K. Carrithers of Westlake Legal Group, Potomac Falls, Va., represented McLaughlin.
Shevlin Smith was represented by Frank K. Friedman and Erin B. Ashwell of Woods Rogers in Roanoke, Va., and David D. Hudgins and Reese A. Pearson of Hudgins Law Firm in Alexandria, Va.
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The Virginia Supreme Court in Shevlin Smith v. McLaughlin cited these opinions as holding that the burden is on a malpractice plaintiff, as an element of her claim, to prove the amount she would have actually collected from the defendant in the underlying case:
▸Klump v. Duffus, 71 F.3d 1368 (7th Cir. 1995) (applying Illinois law)
▸DiPalma v. Seldman, 33 Cal. Rptr. 2d 219 (Cal. Ct. App. 1994)
▸Fernandes v. Barrs, 641 So. 2d 1371 (Fla. Dist. Ct. App. 1994)
▸McDow v. Dixon, 226 S.E.2d 145 (Ga. Ct. App. 1976)
▸Whiteaker v. State, 382 N.W.2d 112 (Iowa 1986)
▸Jernigan v. Giard, 500 N.E.2d 806 (Mass. 1986)
▸Eno v. Watkins, 429 N.W.2d 371 (Neb. 1988)
▸McKenna v. Forsyth & Forsyth, 720 N.Y.S.2d 654 (N.Y. App. Div. 2001)
▸Rorrer v. Cooke, 329 S.E.2d 355 (N.C. 1985)
▸Paterek v. Petersen & Ibold, 890 N.E.2d 316, 24 Law. Man. Prof. Conduct 315 (Ohio 2008)
▸Haberer v. Rice, 511 N.W.2d 279 (S.D. 1994)
▸Akin, Gump, Strauss, Hauer & Feld, LLP v. Nat'l Dev. & Research Corp., 299 S.W.3d 106, 25 Law. Man. Prof. Conduct 617 (Tex. 2009)
The court sided with these cases that place the burden of pleading and disproving collectibility on the allegedly negligent attorney as an affirmative defense:
▸Power Constructors v. Taylor & Hintze, 960 P.2d 20 (Alaska 1998)
▸Smith v. Haden, 868 F. Supp. 1 (D.D.C. 1994)
▸Clary v. Lite Machs. Corp., 850 N.E.2d 423 (Ind. Ct. App. 2006)
▸Jourdain v. Dineen, 527 A.2d 1304 (Me. 1987)
▸Teodorescu v. Bushnell, Gage, Reizen & Byington, 506 N.W.2d 275 (Mich. Ct. App. 1993)
▸Carbone v. Tierney, 864 A.2d 308, 20 Law. Man. Prof. Conduct 442 (N.H. 2004)
▸Hoppe v. Ranzini, 385 A.2d 913 (N.J. Super. Ct. App. Div. 1978)
▸Ridenour v. Lewis, 854 P.2d 1005 (Or. Ct. App. 1993)
▸Kituskie v. Corbman, 714 A.2d 1027 (Pa. 1998)
▸Schmidt v. Coogan, 335 P.3d 424, 30 Law. Man. Prof. Conduct 668 (Wash. 2014)
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