There are two principal considerations that we as lawyers must be cognizant of in respect to legal malpractice. We do not want to be sued or adjudged liable for legal malpractice and we do not as officers of the court want to bring groundless claims of legal malpractice and breach of fiduciary duty against other lawyers. Both scenarios sting and can work irreparable harm to our practices and professional reputation. How do we avoid the foregoing?
The easy and best answer is to periodically review the elements of both the causes of action and the defenses, as well as structure our practice in a sound and prudent way to avoid unreasonable risk. Having an appreciation of the risks and how they have to be responded to also allows us to be well-grounded as well as fair in making or not making claims against other members of the bar. Further, the most recent cases give us the best insight.
Elements of Cause of Action
The essential elements of a cause of action and/or a claim for relief for legal malpractice are as follows: (1) an attorney-client relationship; (2) an error or omission by the lawyer that falls below the standard of care and competency; (3) that is the proximate (immediate) cause; and (4) of ascertainable economics damages.
In Island Properties Equities v. Cox,1 the Appellate Division, Second Department, held: "In order to prevail in an action to recover damages for legal malpractice a plaintiff must establish that the defendant attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession, and that the breach of this duty proximately caused the plaintiff actual and ascertainable damages… To establish causation, a plaintiff must show that he or she would have prevailed in the underlying action or would not have incurred any damages but for the attorney’s negligence."2
In order to sufficiently state and recover on a legal malpractice cause of action, there must be an attorney-client relationship and/or a party specifically intended to be benefited by the professional services the lawyer is engaged to render. In Roberts v. Corwin,3 the Supreme Court, New York County, held:
It is well settled that an attorney-client relationship is established where there is an explicit undertaking to perform a specific task. While the existence of the relationship is not dependent upon the payment of a fee or an explicit agreement, a party cannot create the relationship based on his or her own beliefs or actions. (internal quotation marks omitted)
An attorney-client relationship may exist, continued the court, prior to execution of a formal retainer. Indeed an attorney-client relationship "can encompass a preliminary consultation" even where the prospective client does not ultimately retain the attorney.
Standard of Care
The attorney must at least comply with the standard of care and competency of attorneys in the community. No mere error or omission will be sufficient but only mistakes falling below the minimal standard in the community will be actionable. In DelGreco & Company v. DLA Piper (US),4 the Southern District of New York addressed the required standard of care in the context of the Lawyers Judgment Rule.
The court, in addressing a summary judgment motion, held that: "[i]n order for a defendant to succeed on summary judgment, it must establish ‘that the plaintiff is unable to prove at least one of the essential elements.’" To show negligence in a legal malpractice case, a plaintiff must allege that the attorney’s conduct "’fell below the ordinary and reasonable skill and knowledge commonly possessed by a member of the profession.’" A plaintiff, however, the court continued, fails to state a claim for malpractice if he alleges only an "’error of judgment.’" Generally, an attorney may only be held liable for "’ignorance of the rules of practice, failure to comply with conditions precedent to suit, or his neglect to prosecute or defend an action.’"
There is a zone of discretion the law allows to lawyers so that every mistake does not result in liability.
In DelGreco, the court held that in order to demonstrate a breach of duty on the part of the attorney, plaintiff must first establish the standard of care owed to the plaintiff. "The duty of care owed by an attorney must be shown by competent evidence; the plaintiff case cannot rest on conclusory allegations of negligence…. In particular, a plaintiff must offer evidence to demonstrate that the attorney’s conduct was unreasonable and not a mere ‘error of judgment‘"…(emphasis added).
…The requirement that there be expert support for a claim of malpractice reflects the reality that a lawyer’s duties to a client, particularly in complex or nuanced situations, are often not self-evident to a lay person, and discerning the standard of care as to a particular legal problem is often outside of the ordinary experience of a lay fact-finder. Expert testimony thus enables jurors to assess "the standard of care in the legal profession, whether the defendant attorney failed to comply with that standard, and whether the negligence proximately caused any injury to the plaintiff-client."
In Jack Hall Plumbing & Heating v. Duffy,5 the Appellate Division, Third Department, also held: "The issue of the adequacy of the professional services provided here requires a professional or expert opinion to define the standard of the professional care and skill owed to plaintiff and to establish whether the attorney’s conduct complied with that standard…."
It also makes eminent sense for the litigator to consult an expert at the outset so that there will be a comfort level that the claims and/or defenses are not inherently unreasonable.
To demonstrate legal malpractice the lawyer’s error, albeit a serious one, must be shown to be the proximate cause of the client’s actual and ascertainable economic damage. The standard of causation for legal malpractice is the "but for" cause of the harm in contrast to the breach of fiduciary duty standard of causation i.e. "a substantial factor in the sequence of causation." The distinction in essence defines proximate cause. It is the causative event closest in point of time to the client’s economic loss.
To be actionable the lawyer’s failure to adhere to professional standards must be the "proximate cause" of the client’s "actual damages." Morrison v. Davis,6 was a case where a lawyer was sued because he pressured a client-brother to transfer back to his disabled sister a condominium because the lawyer was trying to avoid professional discipline for his conflict of interest in his earlier role in the initial conveyance. The Eastern District of New York held:
Even if defendant’s conduct over the course of his representation may be found to have fallen below the standard of care reasonably expected of the legal profession, the inquiry is not at an end. To make out a claim of legal malpractice, plaintiff must also show that he would have prevailed in the underlying action or would not have incurred any damages but for the attorney’s negligence…. To satisfy this second element of malpractice, plaintiff must establish that…[the attorney's] conflict of interest or asserted pressuring of plaintiff to relinquish his right to the condominium caused plaintiff to incur damages. More specifically in the circumstances of this case, plaintiff must show that had he not relinquished any right…he would have prevailed…. Defendant…[lawyer] argues that there is no evidence in the record that, but for defendant’s alleged misconduct, plaintiff would not have suffered any "actual and ascertainable damages."
On this record…there is no reason even to address whether plaintiff would have successfully defended his claim… Under New York Law, plaintiff must come forward with some facts in the record, beyond his mere speculation to establish that he would have prevailed in the lawsuit to void the conveyance based on…[defendant-lawyer's] incompetence….
…[P]laintiff has adduced no evidence that he would have succeeded in the underlying action to retain his rights to…[the] condominium….
There was no question that the lawyer was acting unethically out of a conflict of interest in respect to the initial transaction, but there was also no legal malpractice liability because the client-brother could not show the initial transfer was valid and he would have been able to retain the property.
The Case Within the Case
Plaintiff in a legal malpractice case in the context of a failed lawsuit must prove he would have prevailed in the underlying action.7 In a legal malpractice action involving a lawyer’s faulty representation the client has to show he would have won the underlying case but for a lawyer’s error.
Lovino Inc. v. Lavallee Law Offices8 addressed what is cognizable damages in a legal malpractice case. The Second Department held:
In an action to recover damages for legal malpractice, a plaintiff must demonstrate that the attorney failed to exercise the ordinary reasonable skill and knowledge commonly possessed by a member of the legal profession and that the attorney’s breach of duty proximately caused plaintiff to sustain actual and ascertainable damages (emphasis added).
Amaker v. Lee,9 stands for the proposition that in a legal malpractice case the plaintiff "must demonstrate causation between the malpractice and ascertainable pecuniary loss" (emphasis added).
Only actual out-of-pocket losses are recognized as recoverable damages, and not items such as pain and suffering or emotional distress that in some contexts can be translated into monetary damages.
Legal Malpractice Defenses
To avoid legal malpractice and also not to assert frivolous claims the nature of the typical defenses have to be truly considered. There are principally three critical defenses to a legal malpractice cause of action or claim. All the defense has to do in defending a case is reverse one of the essential elements and demonstrate the claim does not exist because of its absence in the pleadings and/or the facts or argue that even if there is seemingly a meritorious claim it is untimely.
Absence of Proximate Cause. In Hassan v. Wallach,10 the plaintiff did not file a timely Sarbanes-Oxley (SOX) whistleblower action against his former employer prior to the expiration of the statute of limitations. When his first counsel withdrew from the representation there was still time to file the action, and when the second counsel had been retained the time had already expired. The First Department held: "Plaintiff’s motion was properly denied because the underlying complaint was without merit. Plaintiff failed to show that ‘but for’ his attorney’s negligence, he would not have been damaged." The former client could not show but for the lawyer’s error in handling the case he would have won the case.
Protection of the Lawyers Judgment Rule. The lawyer does not have to be right, only reasonable. In Farrell Family Ventures v. Sekas & Associates,11 the Southern District of New York held: "Even where a complaint ‘poses several other alternatives which might have been pursued,’ if it alleges ‘no more than an error of judgment,’ the allegations do not rise to the level of malpractice and the complaint may be dismissed" (emphasis added).
The underlying and key predicate of the Lawyers Judgment Rule is informed consent, confirmed in writing, with the lawyer discussing strategic alternatives with the client including the risks and attendant costs to each of the alternatives, and then memorializing those discussions. In Farrell, there was written informed consent by the client and the lawyer made thorough inquiry into the facts and a thorough analysis of the issues that are documented in the lawyer’s files.
Time Deadline Malpractice Risk. Missing a deadline is classic malpractice and does not generally allow for the protection of the Lawyers Judgment Rule. In New York, CPLR 214(6) requires the action be commenced within three years from the date of the accrual of the cause of action, i.e., when all the events constituting the elements of the cause of action have taken place, not when the wrong could have been reasonably discovered.12
The Continuous Representation Tolling Doctrine. Where the attorney-client relationship continues with respect to a given and specific task or service the cause of action accrues only when the relationship terminates with respect to that task. The statute is not tolled even if the relationship continues on other matters. It is the repose, confidence, and dependency the client has in respect to the specific matter that tolls the statute and not the client’s trust and confidence in the lawyer based on their overall and even longstanding relationship.13 Time deadlines have to be strictly observed on each matter the lawyer handles for the client.
The Retainer Letter Defense and Conduct Not Within the Scope of the Representation. Where there is a written retainer letter agreement and the services to be performed by counsel are clearly defined, a client cannot sue the lawyer for not performing services the lawyer has not expressly agreed to undertake. In re Brooke Corporation v. Kutak Rock,14 the Kansas Bankruptcy Court held that under applicable Kansas law the liability of the attorney for malpractice depends on whether a duty was breached that was reasonably within the scope of the attorney’s employment. Therefore, retainer letters should carefully define what services the lawyer is undertaking for the client and what services the lawyer is not rendering for the client.
Duplicative Causes of Action Are Subject to Dismissal. Where the pleadings hypothetically allege breach of contract, legal malpractice, and breach of fiduciary duty arising from the same set of facts all the causes of action but one are dismissed as duplicative. The Southern District of New York in Duran v. Moody15 noted: "New York law prohibits pleading alternative causes of action to malpractice where those claims arise from the same facts as the malpractice claim and do not allege distinct damages" (emphasis added). This is a defense asserted in the context of motions to dismiss the pleadings and is intended to more clearly define the issues that will be litigated.
Breach of Fiduciary Duty. Lawyers are subject to liability for breach of fiduciary duty, i.e., they merely do not comply with a standard of competency but an ethical standard. In United States Fire v. Raia,16 the Second Department held: "To state a cause of action to recover damages for breach of fiduciary duty, a plaintiff must allege: ‘(1) the existence of a fiduciary relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct’" The court further stated, "A breach of fiduciary duty cause of action must be pleaded with the particularity required by CPLR 3016(b)." The court further noted: "’bare legal conclusions are not presumed to be true’" and therefore will not survive a motion to dismiss.
Honestly handling the client’s money, billing fairly, and avoiding conflicts of interest are essentials for any practicing attorney as these areas are where fiduciary duty comes into play.
Distinction Between Legal Malpractice and Breach of Fiduciary Claims. In Brook Corporation v. Kutak Rock,17 the Kansas Bankruptcy Court observed: " The essence of an action for malpractice is violation of a standard of care. A breach of fiduciary duty, however [,] involves a standard of conduct, not a standard of care. As a fiduciary, an attorney has a duty ‘to represent the client with undivided loyalty, to preserve the client’s confidences, and to disclose any material matters bearing upon the representation of the client.’" The court further noted malpractice concerns negligence and the fiducIary duty standard of conduct concerns a breach of loyalty or confidentiality, which implicates such issues as excessive fees and conflicts of interest.
Where there is a breach of fiduciary duty the proximate cause standard is relaxed to assure members of the bar do not profit from unethical conduct. If the conduct in issue does have a material causal effect and is not necessarily the event immediately preceding the loss, a breach of fiduciary duty claim can be asserted and a lawyer cannot only be required to compensate the client for the loss but disgorge fees paid.
By reviewing the cases cited and discussed in this article and the principles they enunciate, we can utilize tried, true, and well-established principles to avoid both legal malpractice and bringing groundless claims. First, lawyers should with great care avoid time deadline malpractice risks by rigorously calendaring all events so as not to cause a client to default in a way that cannot be cured.
Confirming informed consent in writing should also be kept at the forefront of our loss prevention.18 Not only does this maximize the application of the Lawyers Judgment Rule should an issue arise but it puts into play the implicit issue of whether the client made full disclosure of all material facts to counsel and then in fact specifically relied on counsel’s advice. Reliance on counsel cannot be maintained when the client is not forthcoming and does not specifically rely on the lawyer’s advice.19
Lawyers also need to provide the client with meaningful and descriptive billing that will not only educate the clients as to what on an ongoing basis is being done in their matters but what they are being charged for the work and services. Keeping in mind both the essential elements of a legal malpractice claim as well as the defenses not only avoids our own malpractice but keeps us from going after our colleagues at the bar when there is no basis for it.
Norman B. Arnoff practices in New York City with the Law Offices of Norman B. Arnoff and serves as a legal malpractice expert consultant and witness.
1. 93 AD3d 639, 939 NYS2d 707 (2d Dept. 2012).
2. See also the following cases that articulate the essential elements of a legal malpractice cause of action: Magnus v. Sklover, 95 AD3d 837, 944 NYS2d 187 (2d Dept. 2012); Aramarine Brokerage v. Hall, 95 AD3d 464, 944 NYS2d 499 (1st Dept. 2012); and Morrison v. Davis, 2012 WL 2202946 (EDNY 2012).
3. 2012 WL4512895 (S. Ct. New York Co., 2012).
4. 2012 WL 45109691 (SDNY 2012).
5. 952 NYS2d 848 (3d Dept. 2012).
6. 2012 WL 2202946 (EDNY 2012).
7. See the following cases that address issues of causation and the case within the case concept: Manolis v. Brecher, 2012 WL 527450 (SDNY 2012); Catuzza v. Rodriquez, 93 AD3d 1214, 940 NYS2d 420 (4th Dept. 2012); Eighth Avenue Garage v. Kaye Scholer, 93 AD3d 611, 941 NYS2d 110 (1st Dept. 2012).
8. 96 AD3d 910, 948 NYS2d 303 (2d Dept. 2012).
9. 2012 WL 4477622 (S. Ct., Kings Co., 2012).
10. 92 AD3d 446, 938 NYS2d 51 (1st Dept. 2012).
11. 863 F.Supp.2d 324 (SDNY 2012).
13. Fleyshman v. Suckle & Schlesinger, 91 AD3d 591, 937 NYS2d 92 (2d Dept. 2012).
14. 467 B.R. 513 (U.S. Bankruptcy Ct., Kansas, 2012).
15. 2012 WL 2878088 (SDNY 2012).
16. 94 AD3d 749, 942 NYS2d 543 (2d Dept. 2012).
17. 467 B.R. 513 (U.S. Bankruptcy Ct. Dist. Kansas, 2012).
18. Norman B. Arnoff and Sue C. Jacobs, "Informed Consent Confirmed In Writing," NYLJ, Nov. 19, 2009.
19. Norman B. Arnoff and Sue C. Jacobs, "Reliance on the Advice of Counsel," NYLJ, June 30, 2006.