Legal Malpractice Update

By: Michael J. Sullivan and David C. Anderson, Collins Einhorn Farrell P.C.

michael.sullivan@ceflawyers.com, david.anderson@ceflawyers.com

Causation & Case within a Case analysis

Satgunam v Attorney Defendants, 2017 WL 1399982, unpublished opinion per curiam of the Court of Appeals, issued April 18, 2017 (Docket Nos. 330454, 330660, and 331779).

Facts:

On July 15, 2010, the plaintiff performed bariatric surgery on “Patient A” at Sparrow Hospital. Patient A developed complications and died in October 2010. Patient A’s estate submitted a notice of intent as to both Michigan State University (“MSU”) and the plaintiff. Attorney Defendants agreed to represent the plaintiff and MSU.

Ultimately, MSU settled Patient A’s medical-malpractice claim for $650,000. Pursuant to federal regulatory reporting requirements, MSU submitted a report of the settlement to the National Practitioner Data Bank. Reports are confidential; however, potential employers may access the reports.

According to the plaintiff, MSU settled the underlying claim without his authorization or consent. Additionally, the plaintiff claimed that Attorney Defendants did not counsel him as to the “ancillary consequences” of being reported to the data bank. As a result, the plaintiff alleged he is now “under-employable” or “completely unemployable.”

The plaintiff filed a legal-malpractice lawsuit against Attorney Defendants. The circuit court summarily dismissed the legal-malpractice action, concluding that the plaintiff failed to establish that he would have been successful in defending the underlying medical-malpractice action but for the law firm’s malpractice.

The plaintiff also filed a claim against MSU arguing that MSU breached its obligation to defend him in the underlying medical-malpractice action. The Court of Claims also summarily dismissed the plaintiff’s claim, finding that MSU had the authority to settle the underlying action without the plaintiff’s consent.

The plaintiff appealed, arguing that the “case-within-a-case doctrine” should not apply to his legal-malpractice suit. And, even if it did, the plaintiff argued that he met his burden by showing that the underlying medical-malpractice claim was defensible. The plaintiff also contested the circuit court’s finding that he needed to present expert testimony on the issue of causation, reasoning that the harm to his reputation as a result of the report to the data bank could be determined from common knowledge.

As to the Court of Claims decision, the plaintiff argued that neither MSU nor the Attorney Defendants had authority to settle the underlying claim without Plaintiff’s authorization.

The Court of Appeals affirmed the decisions of the circuit court and the Court of Claims.

Ruling:

The Case-Within-a-Case Doctrine

In Basic Food Indus, Inc v Grant, 107 Mich App 685 (1981), the Court of Appeals opined that the “vitality” of the case-within-a-case doctrine is limited in its applicability to cases such as where an attorney’s negligence prevents the client from bringing a cause of action, where the attorney’s failure to appear causes judgment to be entered against his client, or where the attorney’s negligence prevents an appeal from being perfected.

The Court of Appeals distinguished the plaintiff’s claims from Basic Foods, concluding that the plaintiff’s alleged damages make the case-within-a-case analysis relevant. The plaintiff did not suffer any direct monetary damage (the settlement in the underlying medical-malpractice case was paid by either MSU or its insurer). Rather, the plaintiff alleged reputational damage that manifested in his inability to obtain another job. To establish damages, the Court of Appeals determined that the plaintiff must prove he would have prevailed in the medical-malpractice action and would have obtained another job if the report regarding the underlying settlement was not posted to the data bank.

The Court of Appeals also concluded that the fact that the underlying case may have been defensible did not alleviate the plaintiff’s burden of proving causation.

Common Knowledge & Causation

Generally, in professional-malpractice claims, an expert is required to establish the standard of conduct, breach of the standard, and causation. In limited circumstances—where the absence of professional care is so obvious—a malpractice action can survive without expert testimony. The plaintiff’s experts testified as to the standard of care and conflicts of interest, but did not offer their opinions as to causation. The experts acknowledged that predicting the outcome of the case was impossible, highlighting the inherent unpredictability of trials. Interestingly, expert testimony seemed to suggest that there was a triable issue of fact in the underlying medical-malpractice case and possibly a breach of the standard of care by Attorney Defendants. However, that was not enough to create an issue of fact as to causation in the legal-malpractice context.

The Court of Appeals held that the plaintiff had the burden of proving that he would have prevailed completely in the underlying action for there to have been no report to the data bank and that the jury could not make such a determination without expert opinion.

The panel also pointed out a potentially more challenging causation issue for the plaintiff to overcome, which highlighted the need for expert testimony. The plaintiff claimed that his employment opportunities were affected due to the report to the data bank as a consequence of the settlement in the underlying medical-malpractice claim. However, there were actually two reports to the data bank. Because the plaintiff had to show that the report regarding Patient A’s case (and not the other report) resulted in reputational harm, the need for expert testimony to establish causation was even more apparent.

Authority to Settle

The plaintiff argued that MSU lacked legal authority to settle the underlying medical-malpractice claim without his consent, based on their agreement to provide him with representation and indemnification. The Court of Appeals determined that the agreement did not provide the plaintiff the authority to control the case, nor did the agreement abridge MSU’s statutory right to settle the claim pursuant to MCL 691.1408(1). Importantly, the Court of Appeals noted that the plaintiff was aware of the facilitative process and knew that settlement negotiations were ongoing.

Practice Note:

On its face, this unpublished (and very fact specific) case buttresses the case-within-a-case doctrine. A literal reading may support the position that legal-malpractice claims against defense attorneys fail unless the former client shows they would have prevailed on a summary disposition or directed verdict motion.

Judicial estoppel bars malpractice action premised on position inconsistent with prior testimony

Roth v. Attorney Defendants, 2017 WL 1488869, unpublished opinion per curiam of the Court of Appeals, issued April 25, 2017 (Docket No. 329018).

Facts:

The plaintiff hired Attorney Defendants to represent her in divorce proceedings. On the record and under oath, the plaintiff acknowledged her understanding of the terms of the settlement agreement, that she would be bound by the settlement agreement, and that she had the right to go to trial. The plaintiff testified it was her choice to resolve the divorce proceedings pursuant to the terms of the settlement agreement, and the judge subsequently granted the judgment of divorce consistent with the settlement agreement.

The plaintiff filed a legal-malpractice lawsuit against Attorney Defendants arguing that Attorney Defendants were negligent in failing to determine the value of the marital estate before engaging in settlement negotiations. The trial court granted Attorney Defendants’ motion for summary disposition on the basis that the plaintiff failed to establish that she would have obtained a better result had she proceeded to trial.

The plaintiff appealed.

Ruling:

The Court of Appeals affirmed the trial court’s decision, but for a different reason. The panel premised its holding on the theory of judicial estoppel. Judicial estoppel prevents a party from maintaining a position inconsistent with one asserted under oath in an earlier judicial proceeding. Paschke v Retool Industries, 445 Mich 502, 509 (1994). The doctrine is “widely viewed as a tool to be used by the courts in impeding those litigants who would otherwise play fast and loose with the legal system.” Id. (internal citations and quotations omitted).

The Court of Appeals concluded that the “heart of Plaintiff’s legal malpractice case is her assertion that she was tricked and/or coerced into agreeing to the settlement” at the hearing. In her deposition, the plaintiff claimed that she did not know that the purpose of the hearing in the underlying case was to place a settlement on the record, and she did not want to settle her case. The Court of Appeals determined that this was contrary to her unequivocal testimony in the divorce proceeding.

Based on her prior testimony, the plaintiff was judicially estopped from asserting that she did not want to settle the case in the subsequent legal-malpractice action.

Practice Note:

A client generally cannot sustain a legal-malpractice action based on a position that is inconsistent with prior testimony in a judicial proceeding. However, settling a case does not, as a matter of law, preclude a client from maintaining a legal-malpractice action against the attorney who represented the client in the underlying matter. In Lowman v Karp, 190 Mich App 448 (1991), the plaintiff signed a settlement agreement with the notation: “Even though I feel this case is worth more I am accepting on the sole advise [sic] of my attorney.” In contrast to the instant case, the Lowman plaintiff claimed that after she informed attorney defendant that she did not want to settle, attorney defendant “flatly refused to try the case.” Id., at 454. Being so close to the trial date, the Lowman plaintiff was left with little recourse besides accepting the settlement offer. The Court of Appeals did not discuss Lowman in affirming summary disposition in the instant case.

Categories: Volume 8-1

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