A law firm that defended itself in a malpractice suit that also accused its client of wrongdoing now faces another malpractice suit—from its now-former client. The complaint says that client was forced to pay "substantial monies" to settle the underlying case due to errors by its original firm.

A key issue involves the decision by the client, Branch Banking and Trust Co., early in the first case, to dismiss its own cross-claims against the law firm, Morris Hardwick Schneider, and allow the firm to take over the bank’s defense.

A legal malpractice attorney not involved in the case said it was an object lesson in the peril facing a lawyer who represents himself as well as an aggrieved client.

Jenny Jensen, a partner at Norcross’ Jones, Jensen & Harris said she understood why BB&T would have wanted to keep Morris Hardwick on its team. But she questioned the wisdom of allowing the firm to handle the case unassisted, particularly in light of court rulings sanctioning the co-defendants for failing to respond to discovery requests and court orders.

"We routinely handle cases for clients whose attorneys have mishandled cases and want to stay involved in the matter," said Jensen, who is not involved in the suit and reviewed it at the Daily Report‘s request. "It makes sense, because the firm’s interest in sorting out the problem is as high or higher than their client’s."

"But it seems like there was something unusual going on here," she added. "It was ill-advised [for BB&T] to proceed solely with their previous lawyer in an effort to mitigate that lawyer’s malpractice."

None of the attorneys involved in the present litigation would discuss the matter with the Daily Report.

BB&T’s complaint—filed last month in Fulton County Superior Court, along with the more than 400 filings contained in the underlying suit—presents a tale that began with a mishandled real estate closing and spiraled into a legal morass.

Greg Hecht, the lawyer for the BB&T borrower who sued the bank and Morris Hardwick, said he engaged in four years of intense litigation requiring the review of more than 100,000 documents and "reading more law about the commercial foreclosure and commercial real estate closing area than we care to remember."

The original dispute is rooted in a property title mix-up that occurred in 2006, when a McDonough man, Jim Kennerly, and his company Kenn Tex Investments LLC, paid $92,000 for a parcel of property in College Park. They used the land to secure a $341,250 construction loan from BB&T to build a house on the lot.

Morris Hardwick, which specializes in real estate transactions and is affiliated with its own title service, Landcastle Title, served as the closing attorneys on the deal.

By 2008 Kennerly had exhausted the construction loan and put nearly $50,000 of his own money into the house, according to his side’s filings in the first case.

In March 2008, BB&T contacted Kennerly and demanded that he stop work on the house. The bank told Kennerly that his warranty deed "included the wrong legal description" and "that Kenn Tex was never conveyed the property," according to Kennerly’s filings.

Instead, the bank said it had purchased that property at a foreclosure sale 15 months earlier, after a different borrower had defaulted on his loan on a parcel of property on the same street.

The legal description on Kennerly’s warranty deed was for the other property, the complaint said. BB&T launched foreclosure proceedings on both lots in December 2006.

"During this time the Plaintiffs continued to make and BB&T continued to accept payments" and the promissory note, said a plaintiffs’ statement of facts in that case.

In June 2008, Hecht filed suit against multiple defendants including BB&T, Morris Hardwick, Landcastle and another title company on behalf of Kennerly and Kenn Tex. The complaint said Kennerly had spent nearly $400,000 on the house and property and that BB&T had foreclosed when it was 95 percent finished. The suit asserted claims including wrongful foreclosure, defamation of title, and conversion against BB&T. It accused Morris Hardwick and Landcastle of professional malpractice, negligence and breach of fiduciary duty.

The suit sought at least $400,000, in addition to attorney fees and expenses and punitive damages.

In September 2008, Arnall Golden Gregory partners James Gober and Ashley Steiner filed an answer and counter-claim for BB&T. It included a cross-claim against Morris Hardwick demanding that, if BB&T were found liable for any damage, Morris Hardwick be ordered to indemnify the bank for its losses for "failing to acknowledge its error and forcing BB&T to assert this cross-claim."

At the same time, Morris Hardwick filed its own answer, which also contained cross-claims against BB&T.

But the following month, BB&T and Morris Hardwick agreed to allow the firm and its general counsel, Frederick Boynton, to represent both the firm and the bank. The Arnall Golden lawyers were dismissed, although Gober would eventually return on BB&T’s behalf.

‘Death penalty’

Over the next several months, according to the recently filed complaint, Kennerly’s lawyers—Hecht and Hecht Walker senior associate Jon Jordan—submitted numerous discovery requests, many of which Boynton either failed to inform BB&T about or only responded to in part.

In May 2009, after Boynton failed to respond to a "Good Faith Demand Letter" requesting documents and information from BB&T, Kennerly’s lawyers filed a "Motion to Compel and for Attorneys’ Fees."

"Amazingly," said the complaint, "neither Boynton nor anyone else at [Morris Hardwick] sent Kenn Tex’s Motion to Compel and supporting brief to BB&T nor advised BB&T that such motion had been filed."

In a telephone conference with Fulton County Superior Court Judge Melvin Westmoreland, who handled the case before he took senior status in 2011, Boynton "admitted, among other things, that he had not complied with certain promises he had made regarding discovery," the complaint said.

Boynton never informed BB&T about the phone conference, it continued, and following a 2010 hearing on the motion, Westmoreland issued an order finding that BB&T had "willfully and in bad faith failed to abide by their discovery obligations." The order included a list of documents to be provided within 15 days, and a sanction of $20,604 against all the defendants.

In January 2011, the complaint said, Boynton learned that Kennerly had filed for bankruptcy protection. Because Kennerly owned Kenn Tex, it said, Boynton mistakenly believed the suit was stayed by the bankruptcy, when Kenn Tex actually remained an active plaintiff.

Because of that erroneous conclusion, the complaint said, Boynton advised BB&T that there was no need to comply with Westmoreland’s order. When the deadline passed, Hecht filed a second motion for sanctions. In February 2011, Judge Kelly Lee, who took over the case from Westmoreland, conducted a second sanctions hearing. The next month, she entered what the complaint terms the "Death Penalty Order," a 15-page ruling striking BB&T’s answers and defenses, finding the defendants liable by default for all of Kenn Tex’s claims, and dismissing the bank’s counterclaims with prejudice.

Lee ordered BB&T to pay Kenn Tex an additional $13,392 in fees and sanctions; Morris Hardwick was ordered to pay $17,083, and Landcastle was ordered to pay a near-identical sum.

The order said a jury would decide the amount of damages due Kenn Tex, as well as any attorney fees and expenses to be awarded. The jury would also decide whether punitive damages were appropriate and, if so, how much each defendant should pay.

The judge also ordered BB&T "to produce a vast amount of documents and other information one week later, on March 11," said the complaint.

Even so, it added, when Boynton received the order, "[r]ather than calling or e-mailing anyone at BB&T about the Death Penalty Order, and despite the one-week deadline for BB&T’s response, Boynton simply placed a copy of the order in the regular mail to BB&T."

Three days later, it said, bank representatives called Boynton to discuss an unrelated matter.

"During that call," it said, "Boynton mentioned the Death Penalty Order in general terms and the need to produce a large volume of documents."

BB&T immediately assigned four paralegals "to work exclusively during business hours and overtime on efforts to meet the March 11 deadline," it said.

BB&T also once again turned to Arnall Golden’s Gober to "assist Boynton" in meeting the deadline.

In January 2012, the AGG lawyers stepped out of the litigation because of an unexplained conflict of interest, and BB&T retained Alston & Bird partner Judson Graves and associate Samuel Rutherford to handle the litigation.

The same month, Morris Hardwick filed a motion substituting a team of Hall, Booth, Smith & Slover lawyers including Rush Smith Jr., Howard Reese III and William Gordon Jr. to represent it in place of Boynton.

As trial was set to begin April 9, 2012, BB&T’s risk of a "substantial jury award" increased when Kenn Tex filed a new complaint adding more claims, according to the new complaint.

"The magnitude of the risk faced by BB&T as a result of the Death Penalty Order, and following the filing of the Consolidated Complaint, is demonstrated by the fact that in 2011, in a wrongful foreclosure suit against a mortgage company, a jury in Columbus, Ga., awarded $20 million in punitive damages together with compensatory damages," said the complaint.

Shortly before trial, both BB&T and Morris Hardwick entered into settlement negotiations with Kenn Tex. BB&T and Kenn Tex mutually dismissed their suit last September; the Morris Hardwick and Landcastle litigation was also dismissed with a stipulation that those defendants must satisfy the terms of the settlement by May 14, 2014.

The new suit

On Feb. 28 Doffermyre Shields Canfield & Knowles attorneys Everette Doffermyre, Kenneth Canfield and Jonathan Palmer filed BB&T’s new complaint, naming Morris Hardwick and Boynton as defendants and alleging legal malpractice and breach of fiduciary duty, and seeking unspecified damages.

The requisite expert affidavit attached to the complaint, provided by legal malpractice attorney Frank Beltran, said his review of the case revealed "clear and palpable breaches and deviations from the standard of care" resulting in BB&T being forced to pay "substantial monies" to settle Kenn Tex’s claims.

Neither Doffermyre nor Smith would discuss the suit, and Boynton did not respond to inquiries.

Jensen, the legal malpractice lawyer who reviewed the suit, said she would have advised the bank to retain other counsel to work alongside Morris Hardwick as the litigation unfolded.

"We often work collaboratively with the defendant lawyer in an effort to mitigate damages," Jensen said. "One of the first things we do when we get a case is call the defendant lawyer and give them an opportunity to weigh in on that process, because what we’re able to salvage may mitigate both their and the client’s damages. But the client has got to have somebody looking over that attorney’s shoulder with just the cleint’s interests at heart."

"Any lawyer can make a mistake; that doesn’t mean they’re not generally competent or they’re not a good lawyer," Jensen said. "But I would never let, nor would I encourage a client, to just trust a lawyer who’s made a mistake. You’ve already had a warning; you shouldn’t hand the keys to the kingdom to the person who made the mistake in the first place."

For a lawyer facing a malpractice claim, she said, "there comes a time where your judgment can be compromised by your own risk. A prudent lawyer would not want to put himself in that position: That’s a huge responsibility to take on when you’re already trying to correct your own mistake."

The case is Branch Banking & Trust v. Morris Hardwick Schneider LLC, No. 2013CV227976.

I would never let, nor would I encourage a client, to just trust a lawyer who’s made a mistake. You’ve already had a warning; you shouldn’t hand the keys to the kingdom to the person who made the mistake in the first place.

—Jenny Jensen, partner, Jones, Jensen & Harris