Archive for February, 2012

It just goes on and on. . .

Monday, February 27th, 2012

Two recent cases illustrate one of the central problems with legal malpractice cases, they frequently just will not end.  In the case of In re: CANOE MANUFACTURING CO., INC., Chapter 7, Debtor, one of the owners of Canoe attempted to reopen a closed Chapter 7 bankruptcy in order to bring an action against the lawyer who had represented the corporation in the bankruptcy.  The Bankruptcy Court for the Eastern District of Pennsylvania noted the owner did not have the ability to bring this action, as a corporation in bankruptcy can only act through counsel.  However, the court also noted the original bankruptcy petition was filed in 1987.  The court noted the owner had information regarding the claim against the attorney, and was making arguments about his attorney’s alleged failures as early as 1990.  The opinion exhaustively lists the various claims made by the owner since that point, a number of which were appealed to the highest levels.  Although the court refused to reopen the bankruptcy proceedings, given the twenty-five year litigation history, it seems unlikely that this matter will end soon.

Last week, in In re Fagel, the court of appeals for the Ninth Circuit issued an opinion with respect to arguments over the proper amount of damages from a legal malpractice action which involved an underlying litigation from 1993.  Another case with a nearly twenty year litigation history.

These cases emphasize the importance of legal malpractice avoidance.  Avoiding professional liability litigation can prevent litigation that will often run on for years.

-Josh J.T. Byrne, Esquire


Another Ponzi, Another Lawyer

Wednesday, February 22nd, 2012

We have previously remarked that nearly every Ponzi scheme seems to have a lawyers involved on one level or another.  This view was reaffirmed this week when an Albuquerque lawyer, Sylvian Segal, settled an action against him for allegedly having given the idea behind a $75 million Ponzi scheme to the schemer, Doug Vaughan.  According to reports, the settlement was for $525,000, paid to the trustee in charge of recovering money for the fraud victims.

-Josh J.T. Byrne, Esquire


Venue Shopping in Philadelphia?

Monday, February 20th, 2012

For years people have asserted that Philadelphia tends to be a “plaintiff friendly” venue.  This has led to Philadelphia being labeled as a “Judicial Hellhole.”  The state of Philadelphia courts is often reported nationally.  However, most of the assessments have been anecdotal, and not based upon any type of rigorous study.  Recently, one law professor has attempted to establish the “plaintiff friendly” nature of Philadelphia in empirical terms.  Joshua Wright, Associate Professor of Law, George Mason University School of Law and Director of Research, International Center for Law & Economics, authored a study last year (which was updated earlier this month), which found that a large percentage of cases in Philadelphia had very little connection with Philadelphia.  Mr. Wright found that more than half of the cases brought in Philadelphia were brought by plaintiffs who lived outside of Philadelphia and had no apparent connection to Philadelphia.

This issue has been of particular concern to defendants in mass tort cases, but there are ramifications for all types of cases.  One of the consequences of the impression that Philadelphia is a plaintiff friendly venue is that, generally speaking, if a case can be brought in Philadelphia, it will be brought in Philadelphia.  In terms of legal malpractice and wrongful use of civil proceedings actions, that means that any tenuous connection with Philadelphia will usually lead to an action being brought in Philadelphia.

-Josh J.T. Byrne, Esquire


A problem for attorneys, a problem for victims

Tuesday, February 14th, 2012

We have written here and here about the case of attorney Michael Kwasnik, who is facing charges of having stolen over $1 million from mostly elderly clients.  Last week, Mr. Kwasnik’s insurance carrier filed a declaratory judgment action in the District of New Jersey, seeking to avoid having to provide coverage for the theft.  Most professional liability insurance policies include some type of exclusion for intentional acts, although the scope of that exclusion can vary widely.  The upshot of such provisions is that when an attorney commits an intentional act, especially a criminal act, as Mr. Kwasnik is accused of doing, there may be no coverage for the attorney, and a severely limited chance of recovery for the victims.  If Mr. Kwasnik’s insurance carrier is successful, the victims will have to seek recovery out of whatever assets Mr. Kwasnik may have left.

-Josh J.T. Byrne, Esquire


Know your professional liablity insurance policy!

Tuesday, February 7th, 2012

The recent District of Colorado decision, Davis & Associates v. Westchester Fire Insurance, No. 10-cv-03126-REB-CBS, emphasizes the importance of understanding the terms of your professional liability insurance policy.  The case involved a law firm which created a trust in 2004, with the intent of allowing the client to qualify for Medicaid benefits.  Despite the trust, an application for Medicaid was denied on March 15, 2007.  An appeal of the application for benefits was taken, the decision was reversed at first, but ultimately the denial was upheld by a decision on September 4, 2007.  The client claimed that after the Final Agency Decision was issued, the firm was direct to seek judicial review of the Final Agency Decision.  The firm filed a motion for reconsideration, and mistakenly believing that tolled the time for appeal, did not file a timely appeal.  The client, utilizing another attorney, unsuccessfully attempted to appeal the decision.

In March 2009, the firm was made aware that the client was considering a malpractice claim, and referred the matter to Westchester Fire Insurance Company (”WFIC”), its professional liability insurance company, which refused to provide coverage.  It was undisputed that the firm was insured continually under successive WFIC lawyer’s professional liability policies from April, 2007, through April 1, 2010.  However, as with most professional liability policies, the policies were claims made policies.

The court held:

Its undisputed that the Bates claim against the plaintiffs was reported first to WFIC on March 29, 2009.  Therefore, coverage under the 2008 – 2009 Policy, which was effective from April 1, 2008, to April 1, 2009, is at issue here.  The Bates claim was not first reported to WFIC during the coverage period of the 2007 – 2008 Policy.  Therefore, the 2007 – 2008 Policy does not provide coverage for the Bates claim.

The court determined that WFIC was not obligated to provide a defense for the firm because the allegations in the Complaint show that, at the inception of the 2008 – 2009 Policy (April 1, 2008), the firm had a reasonable basis to believe that it had breached professional duties owed to its client, and that the breaches might result in a claim against the firm.  The court agreed that because the claim (or potential claim) had not been reported during the 2007-2008 policy period, there was no duty to defend or indemnify.

This case highlights the importance of understanding your professional liability insurance policy, and the importance of timely reporting potential claims.

-Josh J.T. Byrne, Esquire (H.T. Jeffrey B. McCarron, Esquire)


Recent Pennsylvania Legal Malpractice Opinions

Wednesday, February 1st, 2012

Although not strictly speaking a “legal malpractice” decision, the Eastern District of Pennsylvania’s decision in Travelers Indem. Co. v. Stengel, 2011 WL 6739458 (E.D. Pa. 2011), is of interest in terms of legal malpractice defense, and the case history shows how convoluted these actions can get.  The case was a contribution action arising out of an underlying legal malpractice action, which arose out of an underlying wrongful use of civil proceedings (Dragonetti) action, which in turn arose out of a zoning appeal.

Travelers was pursuing the action as an assignee of the rights of  a couple by the name of Sanford.  Stengle represented the Sanfords in bringing a zoning appeal, which included a RICO claim against the T members of the Board of Supervisors, although the Sanfords filed the RICO claim pro se, Stengle drafted it.  Immediately thereafter, representation was taken over by Stengle’s co-defendant Berry who filed an amended RICO complaint.  The amended complaint was dismissed, and two members of the Board brought a wrongful use of civil proceedings action against the Sanfords.  The attorneys assigned by the Sanfords’ insurer, the Nelson firm, did not file an answer to the Supervisor’s complaint, and a judgment was entered against the Sanfords for $3,030,000.  The Sanfords then brought a legal malpractice action against the Nelson firm.  Travelers, as insurers for the Nelson firm settled the legal malpractice action and the wrongful use action by paying the Supervisors $1,500,000.  The Travelers v. Stengle case, seeking contribution from Stengle and Berry, followed.

The court granted summary judgment in favor of Stengle and Berry, finding that the Nelson firm and Stengle and Berry were not joint tortfeasors, and as they were not joint tortfeasors there could be no contribution. The court reasoned Stengle and Berry owed the Sanfords a different duty than  the Nelson firm, that different experts would be needed to prove the two cases, and that the acts were severable in time.  Importantly, “neither individual was able to guard against the acts of the other.”  The court also found that the harm was so far removed from Stengle and Berry’s actions that it was not foreseeable and could not constitute proximate cause.

In Javaid v. Weiss,  2011 WL 6339838 (M.D. Pa. 2011), the court granted dismissal of the plaintiffs legal malpractice claims finding that the complaint was too speculative.  The court also found that defendants had raised significant questions about whether the claim was barred by the two year statute of limitations for a professional liability claim.  Although plaintiff had asserted a separate count of breach of contract, the court found he had not “adequately pled a separate claim for breach of contract, but has instead simply repackaged his allegations of negligence and recast them as a breach of contract claim.”  This decision is a strong reiteration of the concept that a legal malpractice claim sounding in contract must be based on the breach of an explicit contractual term.

What is the the malpractice or professional liability avoidance takeaway from these cases?  There are two obvious lessons from the Travelers case: 1) do not over-plead, and 2) file answers to complaints in a timely manner.  The case also will be useful when defending legal malpractice or wrongful use of civil proceedings claim which include cross-claims for contribution.  From the Javaid case we learn that if you do not breach an explicit contract provision, you will have a good statute of limitations defense for cases that are filed more than two years after the alleged negligence.

-Josh J.T. Byrne, Esquire