Washington Appellate Court Recognizes ‘Attorney Judgment Rule,’ Stresses Its Limits

By Samson Habte  

April 25 --A lawyer being sued for malpractice after losing a client's $3.2 million sexual harassment lawsuit is not entitled to summary judgment on most of the claims against him--including allegations that he grossly underestimated the settlement value of the case--under the “attorney judgment rule,” the Washington Court of Appeals, Division Two, held April 24.

The ruling is the first Washington appellate opinion to recognize the “attorney judgment” or “judgmental immunity” rule.

Two-Pronged Defense

Writing for the court, Judge Bradley A. Maxa established a two-pronged test for determining whether the rule applies.

First, the lawyer must have made a “good faith judgment” when confronted with an unsettled question of law or a tactical choice between multiple viable strategies.

Next, the lawyer must show both that the “decision was within the range of reasonable alternatives from the perspective of a reasonable, careful and prudent attorney in Washington” and that “in making that judgment decision the attorney exercised reasonable care.”

The court acknowledged that the client's claims against attorney Richard G. Matson “all involve [the] exercise of professional judgment: settlement evaluation, pre-trial case strategy decisions, and whether to object at trial.”

But the appellate panel reversed the trial court's summary judgment dismissal of all but one of the claims.

Factual disputes exist as to whether Matson's settlement advice, pretrial strategic decisions and failure to preserve an issue for appeal were defensible under the second part of the “attorney judgment rule” test, Maxa said.

Lowball Offer, Hefty Verdict

American Alternative Insurance Corp. (AAIC) retained Matson and his law firm, Bullivant Houser Bailey P.C., to defend Clark County Fire District No. 5 in a gender discrimination and sexual harassment lawsuit filed by four employees.

Matson estimated the combined settlement value of the claims at $370,000. The plaintiffs' settlement demand was $6.6 million, and the cases went to trial.

Matson did not file any dispositive motions or move to bifurcate the cases. The plaintiffs won a $3.2 million verdict and an additional $750,000 in attorneys' fees.

The fire district moved for a new trial, alleging that plaintiffs' counsel improperly introduced evidence of liability insurance. The offending statement--to which Matson did not initially object--occurred when plaintiffs' counsel said during closing argument that $4 million in punitive damages “will not in any way reduce fire services,” according to court records.

The trial court denied the motion, saying the comment was “not so prejudicial to warrant” a new trial.

'Judgment' Errors?

AAIC and the fire district sued Matson, alleging he was negligent in failing to properly evaluate the case for settlement, mishandling several pretrial matters and failing to object to improper closing arguments.

The trial court dismissed AAIC's claims on grounds that the insurer was not Matson's client and thus lacked standing.

The trial court thereafter dismissed the fire district's claims as well, finding as a matter of law that Matson could not be liable for “judgment” decisions.

The appeals court affirmed the dismissal of AAIC's claims. Pointing to Stewart Title Guar. Co. v. Sterling Sav. Bank, 311 P.3d 1, 29 Law. Man. Prof. Conduct 641 (Wash. 2013), it said the insurer lacked standing to sue for malpractice because it “was not the intended beneficiary of Matson's representation.”

But the trial judge erred, Maxa said, in dismissing all of the fire district's claims. Although adopting the attorney judgment rule, the court said summary judgment was appropriate only for one claim, that Matson negligently failed to object to opposing counsel's remarks referencing liability coverage.

“These [expert] opinions are sufficient to create questions of fact regarding whether [the lawyer] exercised informed judgment regarding pre-trial strategic decisions.”
Judge Bradley A. Maxa

“Although [the] comments may have been improper, they were fairly vague,” Maxa explained. “Counsel legitimately may decide not to object to avoid the risk of emphasizing an objectionable statement.”

The remaining claims should not have been dismissed, the court held. Expert testimony, it said, “created questions of fact” as to whether those allegations of negligence were excusable under the attorney judgment rule.

Settlement Evaluation

As for Matson's alleged negligence in putting a price tag on the plaintiffs' claims against his client, Maxa acknowledged that settlement advice does indeed involve judgment calls. Therefore, he said, “the attorney judgment rule applies, and the Fire District had the burden to come forward with evidence that Matson's settlement evaluation either (1) was not within the range of reasonable alternatives from the perspective of a reasonable, careful and prudent attorney in Washington or (2) resulted from Matson's negligent conduct.”

That burden was met for purposes of avoiding summary judgment because three experts for the fire district testified that “no reasonably prudent attorney would have agreed with Matson's evaluation,” Maxa said. “In addition, the Fire District produced sufficient evidence to create a question of fact as to whether Matson's evaluation resulted from his failure to exercise reasonable care.”

Those experts, the court said, “provided detailed opinions that Matson's evaluation resulted from his negligence in multiple respects: inexperience in handling discrimination cases, misunderstanding of the applicable law, failure to understand that the Fire District would be found liable, improperly assessing [one plaintiff's] behavior as a mitigating factor, and failing to consult prior jury verdicts and other objective data in developing the evaluation.”

Other Possible Errors

Maxa said that expert testimony also created questions of fact as to whether a reasonable attorney would have acted as Matson did with respect to a range of pretrial decisions. Those included alleged failures to provide a settlement evaluation earlier in the case, make individual settlement offers to different plaintiffs, consult with more experienced attorneys, arrange for a mock trial, consult with a jury consultant, move for bifurcation and file dispositive motions.

“In addition, the Fire District's experts stated opinions that Matson's alleged judgment errors resulted from his negligence--primarily, inexperience in handling discrimination cases and misunderstanding the applicable law,” Maxa said. “These opinions are sufficient to create questions of fact regarding whether Matson exercised informed judgment regarding pre-trial strategic decisions.”

Finally, the court said that although the attorney judgment rule insulated Matson for liability for his failure to object to opposing counsel's closing argument, it was less clear that it excused his subsequent failure to preserve the issue for appeal. The court pointed to one expert's observation that “no reasonable Washington attorney would have done nothing to protect the client from the improper … closing arguments.”

Judges Linda Lee and Joel Penoyar joined Maxa's opinion.

Michael A. Patterson and Daniel P. Crowner of Patterson Buchanan Fobes Leitch P.S., Seattle, represented the plaintiffs.

Ray P. Cox, Richard R. Roland and Terrence J. Cullen of Forsberg& Umlauf P.S., Seattle, represented Matson and his firm.

To contact the reporter on this story: Samson Habte in Washington at shabte@bna.com

To contact the editor responsible for this story: Kirk Swanson at kswanson@bna.com

Full text at http://www.bloomberglaw.com/public/document/Clark_Cnty_Fire_Dist_No_5_v_Bullivant_Houser_Bailey_PC_428644II_C.

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