In 2014, we wrote about a new and unprecedented rule that if an appeal of the case leading to a legal malpractice action was reasonably likely to succeed, that appeal must be taken or the legal malpractice case is waived. Grace v. Law, 24 N.Y.3d 203 (2014). This rule was thrust on the legal malpractice bar without any warning when the Court of Appeals granted certiorari on an unpublicized case and rendered a novel decision in a question of first impression. The new rule serves as another unique legal malpractice roadblock in addition to the gateways of “privity,” the “successor attorney” rule, the “attorney judgment” rule, the economic damages only rule, the “effectively compelled” settlement rule and the “settlement as waiver” rules. What we did not expect was an almost total lack of case law arising from this new rule. We’ll examine the sparse landscape since.
The Appeal Requirement
The Court of Appeals’ rule in Grace is the natural but unprecedented outcome of the intersection of the requirement to mitigate and an institutional desire to limit legal malpractice cases. In Grace, plaintiffs started and lost a medical malpractice case on statute of limitations grounds. They then sued their attorney for legal malpractice. Their claim was that the attorneys waited too long to start the case. The attorneys moved for summary judgment, which was denied in Supreme Court and affirmed by the Third Department. The Court of Appeals then took the occasion to issue a new rule on forfeiture of legal malpractice cases for the failure to take an appeal which was likely to succeed. It wrote:
We agree that … prior to commencing a legal malpractice action, a party who is likely to succeed on appeal of the underlying action should be required to press an appeal. However, if the client is not likely to succeed, he or she may bring a legal malpractice action without first pursuing an appeal of the underlying action.
On balance, the likely to succeed standard is the most efficient and fair for all parties. This standard will obviate premature legal malpractice actions by allowing the appellate courts to correct any trial court error and allow attorneys to avoid unnecessary malpractice lawsuits by being given the opportunity to rectify their clients’ unfavorable result.
For the first time in New York jurisprudence, a requirement of taking an appeal which is “likely to succeed” is a now a requirement of legal malpractice. The failure to take an appeal under these circumstances is fatal to the law suit. Previously there was no rule that a plaintiff must undertake an appeal prior to suing their attorney in legal malpractice.
The elements of legal malpractice were up to this point stable and well settled. Time and time again, the Court of Appeals and all of the departments of the Appellate Division had repeated that there were four elements of legal malpractice. The four elements were (1) the attorney failed to exercise the care, skill and diligence commonly possessed by a member of the legal profession; (2) that the attorney’s conduct was a proximate cause of the loss sustained; (3) that the plaintiff suffered actual damage as a direct result of the attorney’s action or inaction; and (4) that “but for” the attorney’s negligence, the plaintiff would have prevailed in the underlying action. Rudolf v. Shayne, Dachs, Stanisci, Corker & Sauer, 8 N.Y.3d 438 (2007). The most critical element had been that the plaintiff must show that “but for” the attorney’s negligence there would have been a better economic outcome. Now, there is an additional unique roadblock.
Against this background, Grace considered a per se rule that an appeal must be taken and whether it would force parties to prosecute potentially meritless appeals to their “judicial conclusion” in order to preserve their right to commence a malpractice action. Unnecessary appeals would increase the costs of litigation and overburden the court system, discourage settlements, conflict with plaintiff’s duty to mitigate damages and run out the statute of limitations for legal malpractice. It decided on a “likely to succeed” rather than a per se rule.
There has been a very short list of post-Grace cases considering how “likely to succeed” an appeal would have been. The newest is Dinerman v. Fox, 2018 NY Slip Op 30127 from Judge Bernard Graham of Supreme Court, Kings County with a very straightforward explanation of dismissal:
In any event, this Court is compelled to dismiss the action grounded in legal malpractice based upon the accepted case law in New York. As argued by defendant’s counsel, Dinerman can not establish a prima facie case for legal malpractice without establishing that he sought to appeal the decision of Justice Thomas. (See Grace v. Law, 24 N.Y.3d 203, 997 N.Y.S.2d 334, 21 N.E.3d 995 ; see also Buczek v. Dell & Little, 127 A.D.3d 1121, 7 N.Y.S.3d 558 [2d Dept. 2015]).
This argument is relevant given that the accepted rule is that a parent is not obligated to support a child after the child turns 21 years of age (See Family Court Act sec. 413(1); Social Service Law sec. 101(1); Bani-Esraili v. Lerman, 69 N.Y.2d 807, 505 N.E.2d 947, 513 N.Y.S.2d 382 ). Based upon the statutory law limiting the obligation to support his child until she turned 21 years of age and the fact that there was nothing explicitly stated as to the cut-off of college obligations when his daughter turned 21 years of age, it is entirely possible that Dinerman would be “likely to succeed” on an appeal of Justice Thomas’ decision. Consequently his failure to appeal would bar a legal malpractice claim. (Grace v. Law, 24 N.Y.3d at 211). Dinerman can not establish that Fox’s alleged negligence proximately caused his damages.
In Buczek v. Dell & Little, 127 A.D.3d 1121 (2d Dept. 2015), plaintiff commenced a medical malpractice action against the attending physicians and the hospital. The case lay dormant for years and then was dismissed due to the attorney’s “failure to prosecute” the action. During the medical malpractice action, the attorneys discontinued the case against the hospital but continued against the attending physicians. A legal malpractice case followed. In defending the legal malpractice case, the defendant attorneys argued that the medical malpractice case against the hospital lacked merit under Mduba v. Benedictine Hosp., 52 A.D.2d 450 (3d Dept. 1976) because the hospital staff properly carried out the directions of the attending physicians and did not engage in any independent negligent acts. They argued that their dismissal against the hospital was proper. They admitted that they might be liable for dismissal of the attending physicians, but that the court’s decision to dismiss was an error, which could have been cured on appeal. They argued that because no appeal was taken the error was never corrected.
The Second Department agreed that an appeal would have been successful regarding dismissal of the attending physicians because Supreme Court wrongly dismissed the medical malpractice case where no 90-day demand had been served and where the case was not “marked off or stricken from the trial calendar.” So, because no appeal of this wrong decision was taken, when it would have been likely to succeed, the legal malpractice case should be dismissed pursuant to Grace.
In another post-Grace case, Buckskin Realty v. Greenberg (In re Buckskin Realty), 2017 Bankr. LEXIS 907 (E.D.N.Y. 2017), the court discussed Grace v. Law only in passing. Footnote 5 mentions that “prior to commencing a legal malpractice action, a party who is likely to succeed on appeal of the underlying action should be required to press an appeal.”
In the second post-Grace decision, the opposite result was reached. Levine v. Horton, 127 A.D.3d 1395 (3d Dept. 2015). After a gas truck spill and explosion, the gas station owners sued the gas truck company. Faced with discovery deadlines, plaintiff’s attorney conducted only a little discovery and then negligently limited the bill of particular claims to “stigma resulting from the spill” and waived any damages for loss of revenue or property damage sustained by the owners. When motions for summary judgment were granted to the gas truck company and the gas truck driver plaintiff, the owners filed Chapter 7 bankruptcy petitions. The trustee in bankruptcy took over the case.
Rather than perfect the appeal on behalf of the bankruptcy estate, the trustee commenced the legal malpractice action alleging that the attorney had committed legal malpractice in limiting and jettisoning good claims in the underlying action. Defendant attorney moved for summary judgment under Grace, arguing that the failure to appeal the order dismissing the underlying action precluded the claim for legal malpractice. The Third Department was not convinced that the appeal would be likely to succeed. It did not dismiss the legal malpractice action.
The last post-Grace case is Harvey v. Handelman, Witkowicz & Levitsky, 130 A.D.3d 1439 (4th Dept. 2015). Harvey was a two-car collision case brought against a driver who was also working for a school district. Plaintiff’s attorneys commenced the action against the owner and driver of the other vehicle who was working for the Central School District and the County, but did not sue the Central School District or the County for whom the driver was working. Later, when they discovered the failure to sue the Central School District or the County, plaintiff’s attorneys successfully moved for leave to file a late notice of claim against the County and the District. However, even though given the right to file a late notice of claim the complaint against both of them was dismissed as time-barred. Shortly thereafter, plaintiff changed attorneys. At that point defendant driver individually successfully moved to dismiss for failure to serve a notice of claim upon him. No appeal was taken from that dismissal.
In the legal malpractice case which followed, the attorneys won dismissal and the Third Department considered the entire case. It wrote: “Where a client fails to pursue an appeal in an underlying action, in order to determine whether the failure to pursue an appeal, as opposed to defendants’ negligence, was the proximate cause of the client’s injury, we must determine whether an appeal in the underlying action was ‘likely to succeed.’” It quoted Grace.
The Third Department then analyzed the case events. “The court dismissed the action against Gaulin’s estate on the ground that Gaulin was not served with a notice of claim in her official capacity as a County employee. However, defendants did not oppose the motion of Gaulin’s estate on that ground. Thus, defendants failed to preserve for our review the issue for any possible appeal by plaintiff and/or his substitute counsel … . We therefore conclude that any appeal of the dismissal on this issue was not likely to succeed, and ‘defendants failed to establish as a matter of law that any negligence on their part was not a proximate cause of plaintiff’s damages.’” The legal malpractice case was not dismissed.
How does a requirement to take an appeal actually play out in real life? Normally, a retainer agreement stops at the trial stage. After that, the attorney might refuse to handle an appeal saying his (contingent) retainer agreement does not oblige him to perfect an appeal. He may underscore that point by charging an unattainable fee. The availability of a legal malpractice could now turn on whether the client could afford an appeal, which can be very expensive. This may well be a stunning unexpected result of the new rule. To sue the attorney, a client may be required to pay another layer of appellate attorney fees. The potential problems do not end there. If the appeal is unsuccessful, the appellate attorney will surely become a third-party defendant when the trial attorney is sued. The trial attorney will posit that he made no mistake and the appellate attorney could have won with more effort. Additional litigation will follow.
It has been almost four years since Grace was decided. Legal malpractice litigation continues at its typical pace, and the defense bar is aware of the implications of plaintiff’s appeal status. Our earlier confident expectoration of a spike in the use of Grace has not yet materialized.
Andrew Lavoott Bluestone is an attorney in Manhattan specializing in legal malpractice litigation. He is an adjunct professor of law at St. John’s University School of Law.