As messy as legal malpractice lawsuits can be, the base relationship is usually straightforward: a lawyer facing accusations of wrongdoing by a client. But a case before the District of Columbia Court of Appeals this month is testing the limits of who can be considered a client and when nonclients can sue for malpractice.
Boston-Maine Airways Corp. is appealing the dismissal of malpractice claims against Sheppard, Mullin, Richter & Hampton. Boston-Maine claimed that Sheppard, which had represented several of the airline’s sibling companies, was to blame for a poor outcome in proceedings before the U.S. Department of Transportation. The company accused Sheppard of foul play after the firm failed to immediately disclose that it was advising a general counsel, shared among the companies, who was facing allegations of misconduct.
One of the few things both sides agreed on was that there was never what Boston-Maine referred to as a "traditional" attorney-client relationship — that is, Sheppard never signed a contract directly with Boston-Maine. A D.C. Superior Court judge dismissed the airline’s claims in February 2012, finding no evidence of a substantive relationship that would give Boston-Maine the green light to pursue a malpractice lawsuit.
Boston-Maine has argued that even absent a traditional attorney-client relationship, Sheppard could still owe a duty of care because of the firm’s representation of sibling companies and the common bonds they shared. In the opinion of Boston-Maine and its sibling companies, Sheppard helped their ex-general counsel try to cover up conduct that could hurt them, said J. Michael Hannon of Hannon Law Group, the airline’s lead attorney. "It seems unusual that they would not be able to have a trial to assess the damage," he said.
Sheppard has countered that its ties to what it called Boston-Maine’s "corporate cousins" created no such duty. Alan Strasser of Robbins, Russell, Englert, Orseck, Untereiner & Sauber is representing Sheppard and John Fornaciari, a former Sheppard partner also named as a defendant. Fornaciari is now a partner at Baker & Hostetler. Strasser declined to comment.
Although there are limited circumstances in which a nonclient or nontraditional client can pursue legal malpractice claims, Arthur Burger, who chairs Jackson & Campbell’s professional-responsibility practice, said courts are more inclined to keep the parameters of an attorney-client relationship narrow.
"Obviously if you have a victim of negligence and the lawyer really screwed up, there’s a sympathetic notion of wanting to not have overly artificial barriers to the person who was wronged filing suit," Burger said. However, he added, "it is very elemental that the lawyer shouldn’t be distracted by claims, threats from people who could undermine the lawyer’s focus on zealously taking the interest of their own client under wing."
A three-judge appellate panel is scheduled to hear arguments on March 13.
Boston-Maine wasn’t the only plaintiff. Its sibling companies, Pan American Air­ways Corp. and Pan American Rail­ways Inc., also sued Sheppard in March 2007. According to filings, Sheppard represented Pan Am Railways and Pan Am Airways in previous matters, as well as Timothy Mellon, who owned the majority shares in all three companies.
John Nadolny was at one time the shared general counsel for all three Pan Am companies. In early May 2005, he approached Fornaciari seeking confidential advice and disclosed that he had forged the signature on a surety bond needed to settle labor litigation involving a pilots’ union. Fornaciari said in filings that he urged Nadolny to tell Pan Am, but that Nadolny said he wanted to try to fix the problem on his own.
Around the same time, Boston-Maine was applying to the U.S. Department of Transportation for approval to fly additional large aircraft. In June 2005, the union made Nadolny’s forgery public in opposing Boston-Maine’s application. The department ultimately denied the application and revoked Boston-Maine’s certificate to provide air transportation.
Boston-Maine blamed Sheppard for the outcome, arguing that Sheppard shouldn’t have represented Nadolny and that had Fornaciari told the Pan Am companies about the forgery, they could have taken steps right away to minimize any harm in the Transportation Department proceedings.
Sheppard and Forna­ciari countered that the firm’s actions had nothing to do with the Trans­portation Department’s decision. They noted in briefs that the department found that Boston-Maine generally lacked the financial stability and managerial competence to run an airline.
D.C. Superior Court Judge Anita Josey-Herring granted Sheppard’s motion for summary judgment on Boston-Maine’s claims. She wrote that, although a juror could potentially find a link between Sheppard’s actions and Boston-Maine’s loss before the Transportation Department, the lack of any attorney-client relationship was the fatal flaw.
The following month, Pan Am Air­ways and Pan Am Railways agreed to drop their claims against Sheppard and Sheppard agreed to drop its counter-claims. The firm had claimed that the lawsuit stemmed from the Pan Am plaintiffs’ refusal to pay legal fees.
One of Boston-Maine’s main arguments on appeal is that a lawyer’s fiduciary duty can extend beyond the traditional attorney-client relationship, calling Sheppard’s representation of Nadolny an "abhorrent abuse" of its relationship with the Pan Am companies. The companies were so close that Sheppard had a duty not to take matters that would be adverse to one, Boston-Maine argued.
But Sheppard said in its brief that if the appeals court sided with Boston-Maine, lawyers would suddenly have to account for any number of "unforeseen obligations." If the court adopted Boston-Maine’s theory, the firm wrote, those "misguided arguments would greatly expand attorneys’ duties, to the detriment of both attorneys and their clients."
Zoe Tillman can be contacted at email@example.com.