The Pennsylvania Superior Court has ruled the limitation on legal malpractice damages to the fees paid to an attorney only applies in criminal cases, not civil.
The court's ruling reinstates a legal malpractice suit filed against Duane Morris that had been thrown out by the trial court because the plaintiffs never paid Duane Morris' bills and, therefore, had no damages to collect, according to the lower court.
The three-judge Superior Court panel also ruled the trial court erred in granting Duane Morris' motion for judgment on the pleadings as to damages because the plaintiffs' damages claims of $2.5 million in lost stock value and interest and penalties owed on taxes were, if proven, actual losses under a breach of contract theory rather than consequential damages.
The Superior Court's ruling in Coleman v. Duane Morris, which came in the form of an unpublished memorandum opinion November 13, dealt with the interpretation of the Pennsylvania Supreme Court's 1993 decision in Bailey v. Tucker. The Bailey court dealt with a criminal case and malpractice claims in both tort and in assumpsit, or breach of contract.
The Bailey court dealt with whether there should be immunity for attorney malpractice in the criminal setting. The court noted there are "'substantial differences'" between malpractice claims based in tort in the criminal context versus the civil context and that they should be treated differently, Superior Court Judge John L. Musmanno said for the panel in Coleman.
The Bailey court addressed, in part, what happens when a malpractice claim is brought under a breach of contract theory, as was done in Coleman. The court said traditional contract principles apply, but out of public policy concerns regarding criminal representation, only actual damages, not consequential damages, can apply.
The Bailey decision has often been cited by lawyers defending malpractice claims. They argue that if their bills weren't paid, there would be no damages available for a malpractice plaintiff to collect as consequential damages are not available.
The Superior Court panel in Coleman disagreed with that argument.
"We conclude that the limitation on damages imposed by the Bailey court applies to an action in assumpsit based on a claim of attorney malpractice in a criminal case, but that limitation does not extend to an action for legal malpractice in assumpsit where the underlying action was, as here, a civil action," Musmanno said.
In Coleman, the plaintiffs filed a breach of contract action toward the end of the four-year statute of limitations for that claim. The defendants have argued that, while the plaintiffs were barred from collecting damages for breach of contract under the Bailey precedent, they would have been able to collect consequential damages through a malpractice claim filed under a negligence theory had it been filed by the two-year statute of limitations.