Freivogel on Conflicts
Malpractice Liability/Fee Forfeitures

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Civil Liability

        Conflicts of interest have become one of the most serious causes of malpractice liability for lawyers and law firms with sophisticated business practices.  Notice the reference to the business practice.  For many years, lawyers believed that conflicts were something that litigators worried about: the fear of disqualification and the accompanying embarrassment and potential loss of fees.  That still happens, but the real monetary exposure is in the business practice.

        Following will be a list of jury verdicts, appellate decisions and press articles about significant payments by law firms and their insurance carriers in just the past few years.  These are the tip of the iceberg.  Dozens of cases, which are not public, are being settled every year for millions of dollars resulting from good lawyers' insensitivity to real or perceived conflicts of interest.

        Examples.  Baldasarre v. Butler, 604 A.2d 112 (N.J. App. 1992) (upholding a $1.9 million judgment against a lawyer and his law firm for attempting to represent both the seller and buyer of real estate); [Law Firm] v. Boon, 13 F.3d 537 (2d Cir. 1994) (upholding a $2 million verdict for a firm's allegedly dropping one client and then representing another in purchasing property that the first client had tried to purchase); Schlesinger v. Herzog, 672 So. 2d 701 (La. App. 1996) (upholding a $5.5 million verdict against lawyer who represented both sides of a business acquisition);  Automated Marine Propulsion Systems, Inc. v. Sverdlin, No. 97-02103, Harris County, Texas (according to the January 31, 1999 Texas Lawyer, a prominent Dallas law firm paid $20 million to settle a case in which it was alleged that the firm abandoned one client in order to assist other clients in taking away his business) ; Swank v. Cunningham, 2008 Tex. App. LEXIS 2207 (Tex. App. March 27, 2008) (fighting over the $20 million described just above); Wall St. J., Nov. 17, 1992 (Pepper, Hamilton & Scheetz paid a $3 million settlement for allegedly betraying one client in representing other clients); Interclaim Holdings Ltd. v. Ness, Motley, Loadholt, Richardson & Poole, 298 F. Supp. 2d 746 (N.D. Ill. 2004) (denial of post trial motions where jury verdict was $8.3 million in compensatory damages and $27.7 million in punitive damages; law firm had allegedly turned on its client); and Wall St. J., Oct. 29, 1992 (Oklahoma lawyer hit with $120 million jury verdict for allegedly changing sides in an oil field development dispute); Lawrence Savings Bank v. Levenson, 797 N.E.2d 485 (Mass. App. 2003) (upholding $1.5 million jury verdict against bank's former lawyers)  In In Re Kujawa, 256 B.R. 598 (8th Cir. 2000), the court imposed a $100,000 sanction against a lawyer for representing creditors in a proceeding in which the lawyer's client was the debtor.  In Gunster, Yoakley & Stewart, P.A. v. McAdam, 965 So. 2d 182 (Fla. App. 2007), a law firm allegedly caused an estate to hire a bank, with which the law firm had an allegedly undisclosed relationship, resulting in a $1 million malpractice judgment.

        New York.  In In re TCW/Camil Holding L.L.C., 2004 U.S. Dist. LEXIS 9659 (D. Del. May 12, 2004), the court held that under New York law a plaintiff cannot base a cause of action against a lawyer on a conflict of interest.  Then, weeks later a New York appellate division held just the opposite in Tabner v. Drake, 780 N.Y.S.2d 85 (N.Y. App. 2004).

        Here is a case of no liability: First Interstate Bank of Arizona, N.A. v. Murphy, Weir & Butler, 210 F.3d 983 (9th Cir. 2000).  A law firm hired a former judicial clerk.  As a result, the judge for whom the clerk worked recused himself from one of the firm's cases.  The client sued the law firm.  The Ninth Circuit affirmed the trial court's summary judgment for the law firm.

        Mis-directed Fax, but no Liability.  Poway Land, Inc. v. Hillyer & Irwin, 2002 Cal. App. Unpub. LEXIS 10786 (Cal. App. November 21, 2002).  The law firm faxed a letter meant for its client to a lawyer for the other side.  The client sued the law firm.  The court upheld a summary judgment for the law firm, because there was no showing that the mistake contributed to the client's loss.  [Note: this is the first case of which we are aware in which a serious claim was made against a law firm for accidentally sending a client communication to the other side.]

        Possible Liability of Board Member to other Client of Firm.  Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150 (Tex. 2004)  A lawyer (Joe) was the member of the city council.  His partner represented a local real estate developer.  Joe sponsored an ordinance that imposed a moratorium on apartment development.  Because of the moratorium the developer was unable to develop some of his property as he wished.  He sued Joe and his law firm.  The trial court granted summary judgment.  The appellate court reversed, essentially calling this a conflict of interest.  Among other things the court said more should have been disclosed to the developer so that he could have adopted a strategy to avoid the effects of the moratorium.  In this opinion the Texas Supreme Court reversed the appellate court, holding, in part, that telling the developer about the council proceedings was not within the firm's scope of representation.  The court also made rulings about legislative immunity under Texas law.

        Julia D. Gray, Pillsbury Winthrop Accused of Malpractice in Atlanta Trust Fund Case, Fulton County Daily Report, December 19, 2001.  Following is a summary of the article.  Timothy Cobb is the divorced father of two sons, each of whom is beneficiary of a trust.  Crichlow is a partner at Pillsbury, and until November 2000, was trustee of the trusts.  Pillsbury represented the trusts.  The new trustee is Madelyn Adams, former wife of Cobb and mother of the beneficiaries.  She has sued Cobb, Crichlow and Pillsbury Winthrop.  It seems that the trust had made loans to Cobb's company, edaflow, totaling $2.4 million.  Crichlow is an investor in edaflow.  The trusts made additional loans totaling some $400,000 to other companies in which Cobb and Crichlow had interests.  Much of the money has been lost.  Among other claims, Adams claims Crichlow had violated the prudent investor rule (the trusts had a total value of $6.5 million).  She also claims Crichlow and the firm had a conflict of interest and were guilty of malpractice.

        Nederlander v. Papiano, 2012 Cal. App. Unpub. LEXIS 1717 (Cal. App. March 6, 2012).  Beneficiaries of a trust brought this case against a lawyer/trustee for breach of fiduciary duty.  Beneficiaries claim that the defendant allowed the trust settlor to withdraw money for his own use contrary to the terms of the trust.  The case is mostly about trust construction.  However, one of the issues is whether Beneficiaries are entitled to double damages under a California statute because the defendant was guilty of bad faith.  The court's finding of bad faith was based upon the defendant's various conflicts of interest, including: (1) he represented various family members; (2) he was trustee of related trusts; (3) he represented the settlor in the settlor's divorce; and (4) a condition of the defendant's approval of the withdrawals was that some of the withdrawn amounts be applied to the defendant's fee invoices.

        Firm Enjoined from Representing Competitors; Later Paid Large Settlement.  Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277 (Pa. 1992) (injunction granted).  Later the law firm paid a settlement of $3 million to aggrieved former client.

        High Court. Barrowfen Props. Ltd. v. Patel, [2021] EWHC 2055 (Ch) (High Ct. Eng. & Wales July 21, 2021). Law firm liable where one joint client harms another. Judgment more than £1 million.

        Canadian Supreme Court; Side-Switching.  Strother v. 3464920 Canada Inc., 2007 SCC 24 (Can).  A lawyer represented Client A on a series of matters.  The lawyer told Client A that the law no longer permitted the types of transactions they were doing.  While still representing A the lawyer began representing a former employee of A in doing the same type of transaction.  A sued the lawyer and his firm for breach of fiduciary relationship.  The trial court found for the lawyer.  The Court of Appeal of British Columbia reversed, and the Supreme Court affirmed, as to the individual lawyer's liability.

         No Fiduciary Duty Among Co-Counsel, but Indemnification for Malpractice Damages Is Allowed.  Beck v. Wecht, 48 P.3d 417 (Cal. June 27, 2002).  Michael and Ronald Stephens hired Daniel Beck to represent them in a product liability suit against General Motors.  Beck brought in Ronald Wecht as local counsel.  They both were on a contingent fee agreement.  During trial GM offered $6 million to settle the case.  Nevertheless, the case went to the jury, which found for GM.  Beck sued Wecht for not conveying the settlement offer, thereby depriving Beck of his contingent fee.  Reconciling a conflict between two California appellate courts, the California Supreme Court disallowed the claim, holding that co-counsel do not have fiduciary duties to one another.  However, on the same day, in Musser v. Provencher, 48 P.3d 408 (Cal. June 27, 2002), the court held that the policies that prohibit co-counsel from suing each other for breach of fiduciary duty do not apply where one seeks indemnification from the other in a malpractice damages context.  In Mazon v. Krafchick, 144 P.3d 1168 (Wash. 2006), the court reached the same result as Beck.  In Scheffler v. Adams and Reese, LLP, 950 So. 2d 641 (La. 2007) , the court followed Mazon.  In Forensis Group, Inc. v. Frantz, Townsend & Foldenauer, 29 Cal. Rptr. 3d 622 (Cal. App. 2005), the court allowed an engineering expert witness being sued by an unsuccessful client for malpractice to sue the lawyers who had represented the client.

        BCBSM, Inc. v. Walgreen Co., No. 20 C 1853 (N.D. Ill. Feb. 9, 2022). Plaintiffs are health care plans. In this case (actually one of several in N.D. Ill.) Plaintiffs are suing Walgreens for overcharging for drugs provided to plan participants. The conflicts issues in this case relate to law firm, Crowell & Moring ("Crowell"). Crowell represents a number of Plaintiffs in this case. The problem is that Crowell represented Walgreens in 2008 and 2009 regarding its plans to provide "more affordable" drugs for uninsured and underinsured consumers. Seeing aspects of a substantial relationship between the '08 & '09 work and this case, one might assume that Walgreens would have moved to disqualify Crowell. But, that is not what happened. First, Walgreens has sued Crowell in the D.C. Superior Court over Crowell's conflicts in this case. Back to this case: Walgreens has counterclaimed against Plaintiffs (not Crowell) for aiding and abetting Crowell's conflicts and breaches of confidentiality duties. The court denied Plaintiffs' motions to dismiss that counterclaim, finding Walgreens' allegations state a cause of action.

        Aiding and Abetting Breach of Fiduciary Duty.  Anstine v. Alexander, 128 P.3d 249 (Col. App. 2005).  This is not a conflicts case.  But, because a breach of fiduciary duty could be asserted against a lawyer with a conflict of interest, the decision is of interest.  It confirms that in Colorado a lawyer can be sued for aiding and abetting a breach of fiduciary duty of a non-client to other non-clients.  Same in Pennsylvania, Reis v. Barley, Snyder, Senft & Cohen LLC, 484 F. Supp. 2d 337 (E.D. Pa. 2007) .  Suits against lawyers alleging aiding and abetting breaches of fiduciary duty are increasing; however, the court rejected the theory in LeRoy v. Allen, Yurasek & Merklin, 872 N.E.2d 254 (Ohio 2007).  The court in LeRoy did recognize a cause of action by non-client, minority shareholders where "fraud, collusion or malice" is present.

        More on Aiding and Abetting. Kunasek v. Johnson, 2022 WL 4377299 (Ariz. App. Sept. 22, 2022). A trust beneficiary sued the trust creator and trustees for breach of fiduciary duty and sued the trust law firm for aiding and abetting that breach. A jury returned a verdict against all the defendants for $10.5 million in compensatory damages plus $10.5 million in punitive damages. In this opinion the appellate court upheld the verdicts. [Our note: While we have always felt that lawyer malpractice cases are usually poor vehicles for teaching about legal ethics, this case is instructive in two respects. First, it is a stark illustration of how a law firm can be liable for aiding and abetting someone else's breach of fiduciary duty. Second, the opinion contains a helpful discussion of the propriety of expert testimony on the aiding and abetting claim.]

        Patent Prosecution; Similar Technology as Same Time.  Sentinel Products Corp. v. Platt, 2002 U.S. Dist. LEXIS 13217 (D. Mass. July 22, 2002).  Sentinel sued Dickinson Wright for malpractice, arising out of patent prosecution work Dickinson did for Sentinel.  The Patent and Trademark office denied two Sentinel applications, citing a patent of a former employee of Sentinel, Dennis Knaus.  Dickinson had represented Knaus in obtaining that patent.  The work for Knaus and Sentinel were more or less during the same time period.  Sentinel reworked and resubmitted its applications, and patents ultimately issued.  In the malpractice case Sentinel claimed that Dickinson had a conflict of interest and that Sentinel was damaged by the delays caused by the Knaus patent.  The court granted Dickinson a summary judgment because Sentinel could not show how the alleged conflict caused Sentinel damage. Similar results in patent prosecution situations are Axcess Int’l, Inc. v. Baker Botts LLP, No. 05-14-01151-cv (Tex. App. March 24, 2016); Maling v. Finnegan, Henderson, Farrow, Garrett & Dunner, LLP, 2015 WL 9307162 (Mass. Dec. 23, 2015).

        More No Damages Shown Cases. Nordwind v. Rowland, 2009 U.S. App. LEXIS 23544 (2d Cir. Oct. 16, 2009) (law firm represented competing heirs to German confiscated assets); Swilley v. Tipton, 2008 U.S. App. LEXIS 14109 (6th Cir. July 1, 2008); Elmo v. Callahan, 2012 U.S. Dist. LEXIS 120142 (D.N.H. Aug. 24, 2012); DeMeo v. Provident Bank, 2008 Ohio App. LEXIS 2475 (Ohio App. June 16, 2008); Kuhlman Electric Corp. v. Chappell, 2005 Ky. App. LEXIS 252 (Ky. App. Dec. 2, 2005); Baker Botts, L.L.P. v. Cailloux, 224 S.W.3d 723 (Tex. App. 2007) (reversing $65.5 million verdict involving representation of wealthy family and bank as fiduciary).

       No Duty to Warn Prospective Client of Statute of Limitations.  In Flatt v. Superior Court, 885 P.2d 950 (Cal. 1994), the court held that a lawyer did not have a duty to advise a declined client about the statute of limitations if doing so would disadvantage an existing client.

        Release of Lawyer Effective.  Peebles v. Sheridan Healthcare, Inc., 853 So. 2d 559 (Fla. App. 2003).  A group of doctors sold their practices.  Their lawyer had a relationship with the purchasers.  In connection with the sale the parties signed very broad releases, including a release of any liability to their lawyer, although their lawyer was not a party to the agreements.  When some of the doctors later sued the purchasers, including the lawyer for having a conflict of interest, the defendants relied upon the releases.  In this opinion the court found that the releases were so clear, that the plaintiffs were bound by them, even as to their claim against their lawyer.  Florida has the ABA Model Rule version of Rule 1.8(h).  The court did not discuss the rule.

        Client indemnifies Lawyer; OK. Utah Op. 18-04 (Sept. 11, 2018). Model Rule 1.8(h) prohibits a lawyer's prospectively limiting the lawyer's liability in a client agreement unless the client is advised to seek other counsel. A minority of states, including some big ones (e.g., California & New York), omitted the "unless" clause, meaning a lawyer may never do this. This opinion approves of a lawyer asking a client in advance to indemnify the lawyer for acts of the client. The opinion also briefly discusses whether a lawyer can seek prospectively the client's agreement to reimburse the lawyer's malpractice insurance deductible. The opinion strongly recommends that the lawyer advise the client in writing to seek other counsel regarding this request. 

         Plaintiff Must Prove Case within a Case in Both Legal Malpractice Case and Breach of Fiduciary Case.  Weil, Gotshal & Manges v. Fashion Boutique of Short Hills, Inc., 780 N.Y.S.2d 593 (N.Y. App. 2004).

        Suing for "Conflict of Interest" vs. Breach of Fiduciary Duty. Good discussion of difference in Brenco Oil, Inc. v. Blaney, 2017 WL 6367893 (E.D. Pa. Dec. 13, 2017).

        Inadvertent Breach of Screen Can Be Cause of Action for Damages.  Spur Products Corp. v. Stoel Rives LLP, 122 P.3d 300 (Ida. 2005).

        Can't Sue other Side's Lawyer.  Gibo v. U.S. Nat'l Ass'n, 2013 U.S. Dist. LEXIS 25749 (D. Haw. Jan. 29, 2013); Lima v. Deutsche Bank Nat'l Trust Co., 2013 U.S. Dist. LEXIS 25756 (D. Haw. Jan. 29, 2013).  These are two cases involving alleged wrongful foreclosure proceedings by banks.  The plaintiffs joined the banks' lawyers, Hawaii citizens.  The banks removed the cases, alleging fraudulent joinder of the lawyers.  In these opinions the magistrate judge denied motions to remand.  The court held that allowing actions against the other side's lawyers would create an unacceptable conflict of interest and that, because of the conflict, the complaints failed to state a cause of action against the lawyers.  For a similar holding, see Clark v. Druckman, 624 S.E.2d 864 (W. Va. 2005). 

        Estate Planning Lawyer Should Inquire into the Relationship between Husband and Wife Clients.  Smith v. Hastie, 626 S.E.2d 13 (S.C. App. 2005).  Lawyer represented H and W in the creation of a family limited partnership.  Later W discovered that her interest in the partnership could be impaired.  She sued Lawyer for malpractice.  H and W had a history of marital problems.  Lawyer claims he did not know that when he did their estate plan.  For that reason the trial court granted Lawyer’s motion for summary judgment.  The appellate court, in this opinion, reversed.  It relied principally on an expert witness affidavit of an experienced estate-planning lawyer.  The expert opined that Lawyer should have inquired about H and W’s relationship before recommending a specific estate plan.  This might have, among other things, caused Lawyer to recommend that W seek other counsel.

        Standing Required to Sue Lawyer with Conflict.  Sadler v. Creekmur, 821 N.E.2d 340 (Ill. App. 2004).

       "Simple" Breach of Fiduciary Duty Does Not Qualify for Award of Punitive Damages.  Fortnow v. Hughes Hubbard & Reed, LLP, 814 N.Y.S.2d 561 (N.Y. Misc. 2005).

        Excessive Reliance on Ethics Rules in Complaint Results in Dismissal.  Lear Corp. v. Butzel Long, PC, 2006 Mich. App. LEXIS 1697 (Mich. App. May 18, 2006).  But, in Recker v. Malson, 2006 Mich. App. LEXIS 2543 (Mich. App. Aug. 17, 2006), the court held that ethics rules could be admissible in a malpractice action.  That was also the gist of Teague v. St. Paul Fire and Marine Ins. Co., 2009 La. App. LEXIS 470 (La. App. Apr. 7, 2009).

        Smith v. Morrison, 2012 Pa. Super. LEXIS 545 (Pa. Super. May 23, 2012).  In this legal malpractice case the trial court refused to instruct the jury on the Pennsylvania ethics rules regarding the lawyers' alleged breach of fiduciary duty, but gave the plaintiff an opportunity to support the instructions through the common law, which she failed to do.  In this opinion the appellate court affirmed, relying primarily on the strict Preamble in the Pennsylvania rules.

        Interesting Malpractice Insurance Coverage Case.  Milgrub v. Continental Cas. Co., 2007 U.S. Dist. LEXIS 80 (W.D. Pa. Jan. 3, 2007).  Lawyer and Lawyer's wife sold their residential real estate to Purchasers, husband and wife.  Lawyer represented Purchasers in the transaction, which, in the court's words was a "scenario that tests the boundaries of professional ethics and common sense."  Later, Purchasers sued Lawyer and Lawyer's wife for fraud, etc.  One of the counts was against Lawyer for breach of fiduciary duty, largely due to Lawyer's conflict of interest.  Lawyer's malpractice carrier denied coverage, asserting the contractual liability exclusion (in this case, the real estate sales contract).  That exclusion carried an exception for situations in which the lawyer would have been liable absent the contract.  Lawyer filed this case, seeking coverage.  The court granted Lawyer a judgment on the pleadings, finding that Lawyer could be found liable for breach of fiduciary duty even had there been no contract.

        More on Insurance Coverage. Associated Industries Ins. Co., Inc. v. Kleinhendler, 2023 WL 8468854 (2d Cir. Dec. 7, 2023). Client has sued Lawyer and his law firm ("Law Firm") arising out of their representation of Client in a real estate transaction. Lawyer owned the company that acquired the property. Law Firm's malpractice carrier brought this case seeking a declaration that it does not cover the case because of the policy's "explicit exclusion" covering business activities of the lawyers involved. The trial court granted the carrier's motion for judgment on the pleadings. In this opinion the appellate court affirmed.

        Client "Waives" Civil Cause of Action against Lawyer for Conflict of Interest by not Moving to Disqualify Lawyer in Earlier Matter. Swilley v. Tipton, 2007 U.S. Dist. LEXIS 7481 (E.D. Ky. Jan. 30, 2007).

        Class representative barred from suing class counsel where court had earlier found settlement to be reasonableKoehler v. Brody, 483 F.3d 590 (8th Cir. 2007) .

       In re The Brown Schools, 368 B.R. 394 (D. Del. 2007).  This opinion dealt with a motion to dismiss, so we should not make too much of it at this stage.  Nevertheless, it is illustrative of what a bankruptcy trustee can allege against the former law firm for the debtor.  The claims here included breach of fiduciary duty (motion denied), aiding and abetting a breach of fiduciary duty (motion granted with leave to replead), aiding and abetting a fraudulent transfer (motion granted with leave to replead), deepening insolvency (motion denied pending further developments in the Delaware courts),  civil conspiracy (motion granted with leave to replead), and a declaratory finding that the law firm’s claim for fees should be subordinated (motion granted - no mention of repleading).  As to deepening insolvency the bankruptcy judge said that the opinion in Trenwick Am. Litig. Trust v. Ernst & Young, L.L.P., 906 A.2d 168 (Del. Ch. 2006), was “well reasoned,” but she denied the motion pending a decision by the Delaware Supreme Court.

        Need for Expert Witness.  Hoagland v. Sandberg, Phoenix & Von Gontard, P.C., 385 F.3d 737 (7th Cir. 2004).  This is a suit against a law firm arising out of the firm’s conflict of interest.  The plaintiff did not call an expert witness.  For that reason the trial court “entered judgment” for the law firm (procedural history all but nonexistent).  The Eighth Circuit affirmed.  A similar case is Strong v. Baker, 2008 Tenn. App. LEXIS 200 ( Tenn. App. March 31, 2008).

        No Need for Expert Witness.  Wilson v. Vanden Berg, 687 N.W.2d 575 (Iowa 2004).

        Discuss Need for Expert Witness. Carranza v. Fraas, 2011 U.S. Dist. LEXIS 11460 (D.D.C. Feb. 7, 2011) (discusses “common knowledge” exception to need for expert); Floyd v. Hefner,  2008 U.S. Dist. LEXIS 25642 (S.D. Tex. March 31, 2008).

        Need for Expert on Standard of Care (posted July 26, 2023) Tsutsui Enters., Inc. v. Anderson, 2023 WL 4722885 (Cal. App. Unpub. 3d Dist. July 25, 2023). Certain family members, involved with a closely held family business, have sued Lawyer for malpractice. Lawyer's alleged misconduct involved "corporate matters, shareholder disputes, estate planning, trusts, and conflict of interest." When it became clear to the trial judge what the issues were and the fact that the plaintiffs would not have an expert on Lawyer's standard of care, the judge dismissed the case. In this opinion the appellate court affirmed. Although unpublished, the opinion is a good discussion of "the 'common knowledge' exception to the general rule requiring expert testimony." Warning to non-California lawyers: The opinion discusses California decisions only.

        Need for Expert (posted August 8, 2023) Kendall v. Utah Estate Planners PLLC, 2023 WL 4940198 (Utah App. Aug. 3, 2023). This is about a legal malpractice case that does not involve a conflict of interest, but which should be interesting to this audience. In this opinion the appellate court affirmed the trial court's dismissal of a malpractice, non-jury, case because Plaintiffs failed to provide an expert witness on trust administration law and procedures. The court refused to adopt a rule that the need for an expert is relaxed in a bench trial because the judge is also a lawyer. The court explained several reasons for this. The one that grabbed us the most is that the judge may have practiced in areas unrelated to the issues in the case at hand.

        Presumption of Shared Confidences in Disqualification Context Does not Apply in Malpractice Action.  Capital City Church of Christ v. Novak, 2007 Tex. App. LEXIS 4148 (Tex. App. May 23, 2007).

        Lawyer for Executor not Lawyer for the Heirs.  Campbell v. Johnson, 2007 Wash. App. LEXIS 2930 (Wash. App. Oct. 29, 2007).

        Common Law Breach of Fiduciary Duty and "Standard-Commercial-Transaction" Exception.  Liggett v. Young, 877 N.E.2d 178 (Ind. 2007).  Liggett, a building contractor, brought a claim against his lawyer (“Lawyer“), for whom Liggett built a house.  Lawyer had drafted the construction contract using a standard form, which among other things, said that only lawyers should complete the form.  Lawyer also added a paragraph to the form.  Liggett’s claim was based on Lawyer’s violation of Indiana’s version of Model Rule 1.8(a), and Lawyer’s breach of his common law fiduciary duty to Liggett.  Lawyer based his defense, in part, on the “standard-commercial-transaction” exception to Rule 1.8(a), and the same exception to Lawyer’s common law fiduciary duty to Liggett.  The trial court granted Lawyer summary judgment on Ligget’s claim.  In this opinion the Indiana Supreme Court reversed, holding there were questions of fact to be resolved by a trier of fact.  The supreme court made two important findings: (1) regardless of the Preamble to Indiana’s ethics rules, Liggett could still maintain an action for breach of the common law fiduciary duties owed by lawyers to clients; and (2) the transaction in question was not a “standard commercial transaction.”  The court based the finding upon the fact that only lawyers should complete the standard form, and the fact that Lawyer had added a custom clause to the contract.

        Cannot Avoid Statute of Limitations Problem by Calling a Negligence Claim a Breach of Fiduciary Duty or Fraud.  Murphy v. Gruber, 2007 Tex. App. LEXIS 9707 (Tex. App. Dec. 13, 2007).  Legal malpractice action.  The complaint purported to plead negligence, fraud, and breach of fiduciary duty.  In this opinion the court affirmed the trial court’s dismissal of the action based upon the statute of limitations.  The court held that all three counts were merely negligence claims, for which the statute was two years.

        Denial of Motion to Disqualify in One Suit Constitutes Collateral Estoppel in Subsequent Suit for Damages.  Weinberger v. Tucker, 510 F.3d 486 (4th Cir. 2007), but not if appellate court affirmed trial court on laches grounds only, Zevnik v. Superior Court, 2008 Cal. App. LEXIS 84 (Cal. App. Jan. 18, 2008).

        Duty of Confidentiality Versus Duty to Keep Client Informed.   Sitar v. Sitar, 2008 N.Y. App. Div. LEXIS 2964 (N.Y. App. April 1, 2008).  In this opinion the Appellate Division reversed the trial court’s order granting a motion to dismiss in favor of Lawyer.  Lawyer had represented both sides in the sale of business assets.  This is a classic illustration of the tension created in a multiple representation between the duty of confidentiality and the duty to keep clients informed.  In the words of the court:

Here, the plaintiffs alleged that McGraw represented both sides of the transaction, and was thereby burdened by a conflict of interest, and that he was aware of information critical to the purchase price of Business Computing but withheld that information from the plaintiff John Sitar, who was his client. These allegations were sufficient to state a cause of action to recover damages for legal malpractice . . . .

        Failure to Report Theft of Colleague Can Be Cause of Action.  In re Estate of Spencer, 2008 N.J. Super. LEXIS 90 (N.J. Super. April 23, 2008).  This is a suit against a lawyer for failing to report the theft of funds from several estates by a fellow lawyer.  It is very state specific and the interrelationships are complex.  At bottom, here is the court’s holding:

. . . [A]n attorney such as Averna who has a close and interdependent business relationship with another lawyer, and who is performing legal work for a common client at that lawyer's request, has a duty to report that lawyer if he or she develops actual knowledge that the lawyer has been stealing funds from their common client.

        Vaxiion Therapeutics, Inc. v. Foley & Lardner LLP, 2008 U.S. Dist. LEXIS 98612 (S.D. Cal. Dec. 4, 2008).  Law Firm's San Diego office prosecuted patents for Co. A.  Law Firm's D.C. office prosecuted patents for Co. B.  Both representations involved related technologies.  Co. A wound up suing Law Firm because of this conflict (this case).  This opinion deals with the court's disposition of Law Firm's motion for summary judgment.  The opinion is very fact-intensive, but two of the issues should be of interest to this audience.  First, as to what Co. A had to show establish damages, the court said:

In order to prevail on its claim of breach of fiduciary duty under California law, [Co. A] need not demonstrate that [Law Firm] actually disclosed its confidences or degraded the qualify of its work.  [Law Firm] is not entitled to summary judgment on [Co. A's] breach of fiduciary duty claim.

       The second issue, which the court did not resolve, was whether passage of time constitutes a waiver of a conflict of interest in a malpractice suit (as opposed to a disqualification) context.

        In New York claims for malpractice and breach of fiduciary duty are almost always duplicativeNordwind v. Rowland, 2009 U.S. App. LEXIS 23544 (2d Cir. Oct. 16, 2009); Alphas v. Smith, 2017 WL 628281 (N.Y. App. Div. Feb. 16, 2017).

        Leonard v. Dorsey & Whitney LLP, 2009 U.S. App. LEXIS 870 (8th Cir. Jan. 15, 2009).  This is one of several cases involving the financing of an Indian casino.  The situation is complex both procedurally and substantively.  The main lesson of this opinion is that the lawyer for a loan originator, or "agent," is not, without more, the lawyer for the banks that participate in the financing.  Nor, absent extraordinary circumstances, do the participating lenders have a cause of action against the lawyer on a third-party beneficiary theory.  Because of recent declarations of the Minnesota Supreme Court on this point, the Eighth Circuit, in this opinion, reversed findings of liability for a lender/participant against the law firm for the agent.

        Award of Fees from Conflicted Lawyer.  THOIP v. The Walt Disney Co., 2009 U.S. Dist. LEXIS 3507 (S.D.N.Y. Jan. 20, 2009).  Lawyer had a pretty clear conflict in a corporate family context.  He ultimately withdrew voluntarily, but not before dragging his feet in the face of very explicit correspondence from the other side and oral urging from the court.  Lawyer also notified the other side of his withdrawal several days after the court said he should, causing the other side to file papers that they otherwise would not have filed.  As a result, in this opinion, the court ordered Lawyer and his firm to pay the other side's fees and expenses related to the conflict.  The court relied upon 28 U.S.C. Sec. 1927 and, alternatively, the court's inherent power.

        $35 Million Verdict Against Law Firm Reversed.  Blanks v. Seyfarth Shaw, LLP, 2009 Cal. App. LEXIS 187 (Cal. App. Feb. 20, 2009).

        Adams v. Small, 2009 Cal. App. Unpub. LEXIS 9029 (Cal. App. Nov. 16, 2009).  This is a suit by investors for fraud against the promoter of the investments.  The investors also sued an estate planning lawyer who would accompany the promoter to meetings with investors.  The trial court granted the lawyer a summary judgment on all counts.  In this unpublished opinion the appellate court affirmed as to all counts but one.  The last count was for the lawyer's failure to disclose to those investors for whom he had done estate planning that he was also doing corporate work for the promoter.  The complaint also included counts for aiding and abetting and conspiracy.  The opinion illustrates just how difficult it is to sue a lawyer in these types of cases.

        Anti-SLAPP not Applicable to this Malpractice Case.  PrediWave Corp. v. Simpson Thacher & Bartlett LLP, 2009 Cal. App. LEXIS 1925 (Cal. App. Dec. 2, 2009).  This is a legal malpractice action arising out of defendant/law firm's ("Law Firm") alleged earlier representation of the plaintiff, PrediWave ("PW") and PW's CEO, Qu.  PW claims that Law Firm had a conflict of interest, because Qu was a crook, and Law Firm did not tell PW that Qu was a crook.  Law Firm moved to dismiss the suit under California's anti-SLAPP law.  The trial court granted the motion, and in this opinion, the appellate court reversed.  We will not get into the nuances of anti-SLAPP; however, the court held that because PW was suing its own counsel for legal work done on behalf of PW, while having a conflict of interest, anti-SLAPP did not apply.

        Anti-SLAPP not Applicable (posted December 15, 2015) Diaz v. Palmieri, 2015 WL 8484013 (Cal. App. Dec. 10, 2015). Lawyer defended Diaz and TapouT in a trademark infringement action. Later, Diaz sued TapouT, and Lawyer showed up representing TapouT. Finding that the two matters were substantially related, the trial court in the latter action disqualified Lawyer. In this suit Diaz sued Lawyer for breach of fiduciary duty and malpractice. Lawyer filed an anti-SLAPP motion, which the trial court denied. In this opinion the appellate court affirmed. The court found that the basis of this suit was Lawyer’s misuse of Diaz’ confidential information gathered during the earlier representation and Lawyer’s decision to defend TapouT in the subsequent case. [Note: although “unpublished,” the opinion appears to be a thorough discussion of California cases on the relationship of lawyer malpractice cases and the California anti-SLAPP law.]

        Cal. Op. 2009-178 (undated).  Outlines what a lawyer must do when settling a malpractice claim with a client.  This includes dealing with California Civil Code section 1542 and California Rule 3-400.

        Boston Prop. Exchange Transfer Co. v. Iantosca, 2010 U.S. Dist. LEXIS 16242 (D. Mass. Feb. 18, 2010).  A lawyer cannot be liable to a non-client where there had been a conflict between the interests of the client and the non-client.

        Representing Lender and Substitute Trustee.  Laws v. Priority Trustees Services of N.C., LLC, 2010 U.S. App. LEXIS 8815 (4th Cir. April 28, 2010).  Law Firm represented the lender in this foreclosure action.  Law Firm also created and represented the substitute trustee, the appointment of which was authorized by the deed in trust.  At the foreclosure sale, the property was sold leaving $19,000 owing on the note.  The owners filed this action against Law Firm and the substitute trustee.  The trial court granted a motion to dismiss.  In this opinion the appellate court affirmed, holding that the relationship among Law Firm, the lender, and the substitute trustee, did not, without more, give rise to a cause of action.

        Gorshek v. Trewin, 2010 Wisc. LEXIS 46 (Wis. June 24, 2010).  Lawyer purchased his clients' farm.  The clients sued for breach of fiduciary duty.  The trial court found for the clients and ordered the purchase rescinded.  The appellate court affirmed, and in this opinion the supreme court affirmed.  The trial court had also ordered punitive damages.  The supreme court held (with one dissent) that because there were no compensatory damages, an award of punitive damages would be inappropriate.  The overall outcome of this case was heavily dependent on the factual findings of the trial court.  This opinion contained no mention of Rule 1.8(a).

        In Vinewood Capital v. Sheppard Mullin Richter & Hampton, LLP, 2010 U.S. Dist. LEXIS 85575 (N.D. Tex. Aug. 19, 2010), a three-year delay in raising a conflict resulted in dismissal of a breach of fiduciary claim by an alleged former client against its law firm.

        Abusive Tax Shelters.  We have collected cases involving tax opinions from law firms with conflicts of interest at the page entitled, “Investing . . . “

        Purchasing Client’s Property; Breach of Fiduciary Duty.  Houston v. Ludwick, 2010 Tex. App. LEXIS 8415 (Tex. App. Oct. 21, 2010).  In this opinion the court upheld a $142,000 breach-of-fiduciary-duty jury verdict against a lawyer who had received four condominium units from the plaintiff/client in payment of fees.  Among other things, the jury held that the client received considerably less than what the units were worth.  The court did not mention Texas' version of Model Rule 1.8(a).

        Inducing Clients to Invest.  Minnesota Lawyers Mut. Ins. Co. v. Ahrens, 2010 U.S. Dist. LEXIS 107873 (M.D. Pa. Oct. 8, 2010).  Law Firm allegedly caused Clients to invest several million dollars in an investment scheme.  Clients lost their money and sued Law Firm.  Law Firm's malpractice carrier ("InsCo") filed this action seeking a declaration that an exclusion in its policy, relating to investment activities, precludes coverage for the investment losses.  In this opinion, construing the exclusion, the court granted InsCo a judgment on the pleadings.  [Editorial Comment: we had thought that lawyers stopped inducing their clients to enter into investments years ago, particularly because of jaw-boning by malpractice carriers.  Evidently, some lawyers will never learn.]

        Freedom Financial Group, Inc. v. Woolley, 2010 Neb. LEXIS 134 (Neb. Nov. 12, 2010).  Corporate affiliates do not normally have a cause of action against a lawyer who allegedly committed malpractice for another affiliate.  Court applied “undue burden upon the legal profession” without explanation.

        Leff v. Fulbright & Jaworski, L.L.P., 2010 N.Y. App. Div. LEXIS 8531 (N.Y. App. Div. Nov. 18, 2010).  Law Firm did estate planning for W and H, but evidently separately and at different times.  After H's demise, in this action, W sued Law Firm for malpractice relating to its handling of H's estate plan.  In this opinion the court affirmed the trial court's order dismissing the complaint.  First, the court held that W did not have a cause of action as a beneficiary.  Second, the court held that under the circumstances W was not "in privity" with Law Firm with respect to its planning H's estate.  Last, the court held that damages would be "grossly speculative."

        Country Club Partners, LLC v. Goldman, No. 508950 (N.Y. App. Div. Dec. 16, 2010).  Law Firm represented client who tried to buy real estate.  After negotiations fell through, a partner in Law Firm successfully purchased the same real estate.  There was another bidder, as well.  In this opinion the court affirmed the trial court's grant of summary judgment.  There was no showing that the partner's conduct in any way harmed the client.

        Allen v. Steele, 2011 Colo. LEXIS 365 (Col. May 9, 2011).  Husband and Wife visited Lawyer about possibly representing them in a personal injury case.  They claim the Lawyer gave them bad statute-of-limitations information causing them to miss a deadline.  They sued Lawyer for negligent misrepresentation, among other things.  In this opinion the court held that non-clients cannot sue a lawyer for giving bad advice about a tort case.  It must relate to a business transaction.  The court rejected the claim that Section 15(1)(c) of the Restatement applied.  The court also noted that Colorado's version of MR 1.18 only protected non-clients as to confidentiality and conflicts of interest.

        Liability to Non-Client. Morgan v. Sun Trust Mortgage, 2011 U.S. Dist.  LEXIS 71730 (W.D. Mich. July 5, 2011).  Law Firm represented mortgagee in a foreclosure and, after receiving a title report, published a notice of foreclosure.  In fact, the mortgage had been released.  The mortgagors sued Law Firm for defamation, among other things.  In this opinion the court granted Law Firm summary judgment.  The court said that allowing non-clients to sue a law firm would, among other things, create a conflict of interest for the law firm. Same result in Hungate v. Law Office David B. Rosen, a Law Corp., 2017 WL 747870 (Haw. Feb. 27, 2017). This lengthy opinion concerns largely interpretation of Hawaii’s statutory scheme for real estate foreclosures. Plaintiff-Mortgagor sued the lawyer for Mortgagee, arising out of foreclosure of Plaintiff’s property. This opinion upheld dismissal of that part of Plaintiff’s claim because allowing such a claim “would create an unacceptable conflict of interest” for the mortgagee’s lawyer. Here are more, Rich v. Sheppard, 2017 WL 831253 (S.D. Miss. February 28, 2017); Barber v. Sedgwick Claims Mgmt. Sys. Inc., 2017 WL 1027593 (S.D. W. Va. March 16, 2017); Lee v. South Crabtree Olsen, P.S., 2017 WL 2709781 (Haw. App. June 22, 2017); Bailey v. South Crabtree Olsen, P.S., 2017 WL 2705751 (Haw. App. June 22, 2017).

        Flycell, Inc. v. Schlossberg LLC, 2011 U.S. Dist. LEXIS 126024 (S.D.N.Y. Oct. 28, 2011).  This is the district judge's ruling denying the lawyers' FRCP 12(b)(6) motion to dismiss this legal malpractice case.  Without getting into details the opinion is a pretty clear what it takes to plead a cause of action based, largely, in part, on a conflict of interest.  The court did, consistent with New York jurisprudence, dismiss a breach of fiduciary count because it was based upon the same facts and same damages calculation as the malpractice count.  The court also sustained an aiding and abetting breach of fiduciary duty count, and refused to dismiss the plaintiff's prayer for punitive damages.

      Frankel v. McDonough, 2011 U.S. Dist. LEXIS 123992 (S.D.N.Y.).  Rule 12(b)(6) motion to dismiss a malpractice suit against a law firm and one of its members ("Lawyers").  Plaintiff is a securities broker who, along with her employer, was a respondent in a FINRA arbitration.  Lawyers represented Plaintiff and the employer in the arbitration.  The arbitration panel found for the claimants and awarded them several million dollars.  The award was upheld by the New York Supreme Court and the Appellate Division.  In this opinion the district judge granted the Rule 12(b)(6) motion.  The court seemed impressed that Plaintiff's alleged wrongdoing was the subject of an arbitration, a trial court review, and an appellate court review.  As to Plaintiff's claim that Lawyers had a conflict of interest in representing both Plaintiff and her employer, the court reasoned that, because the employer's liability would be derivative of Plaintiff's, Lawyers would have had every motivation to succeed for Plaintiff.

        Instructing the Jury.  Abreu v. Mackiewicz, 2012 N.J. Super. Unpub. LEXIS 2646 (N.J. App. Div. Dec. 5, 2012).  This opinion is from an appeal by a legal malpractice plaintiff from a jury verdict for the lawyers.  Malpractice cases rarely edify conflicts issues, and this is no exception.  However, it is an interesting exploration on how to instruct a jury on issues dealing with whether a person is a current client or former client and what a lawyer's duties are to former clients.  The opinion combines considerations raised by various sections of the Restatement and applicable ethics rules, particularly Rules 1.7 and 1.9.

        Bolton v. Crowley, Hoge & Fein, P.C., 2015 WL 687277 (D.C. Ct. App. Feb. 19, 2015). This opinion was, in part, a reversal of a summary judgment below. It contains an interesting discussion of a lawyer’s fiduciary duties to a client and a history of those duties.

        Siegal v. Gamble, 2015 WL 3660204 (N.D. Cal. June 12, 2015). Parent Corp. formed Sub to purchase drilling rights and issue securities. Plaintiffs brought this securities class action against a number of defendants including Law Firm for malpractice. The primary claim against Law Firm was that it represented both Parent and Sub in filing for bankruptcy and that Law Firm favored Parent over Sub, thus damaging Plaintiffs. In this opinion the court granted Law Firm’s motion to dismiss the malpractice claim with prejudice. First, the court held that res judicata barred the claim because the conflict could have been raised in the bankruptcy court. Moreover, the court found that Law Firm never represented Plaintiffs.

        I Am not Your Lawer. Lahn v. Vaisbort, 2016 WL 641115 (Ore. App. Feb. 18, 2016). Lawyer represented Borrower in a loan transaction. One of loan documents provided clearly and unambiguously that Lawyer, who was preparing the loan documents, was representing only Borrower. The document went on to urge Lender to seek other counsel. When things went bad, Lender sued Lawyer for malpractice. Both the trial court and appellate court, in this opinion, found against Lender, thus showing the value of documents stating expressly who is, and who is not, a client. The courts also dealt with securities law issues probably not relevant to this audience.

        Water lawyer; no causation. USA Power, LLC v. PacifiCorp, 2016 WL 2866139 (Utah May 16, 2016). Water lawyer case (also a first). This is litigation between two power companies over competing plans for a power plant in Utah. Among other claims was USA’s claim that Lawyer, USA’s “water attorney,” breached her fiduciary duty to USA by also assisting the PacifiCorp on water issues. The jury returned a verdict against Lawyer of several million dollars. The trial judge granted Lawyer a JNOV. In this appeal the Utah Supreme Court affirmed. Basically, the court held that the claim against Lawyer failed because USA could not show that Lawyer was the only lawyer who could have helped the PacifiCorp on water issues. Thus, no causation.

        Conflict, but no causation. Greene v. Frost Brown Todd, LLC., 2016 WL 6877746 (W.D. Ken. Nov. 21, 2016). Because of a lateral movement, Law Firm wound up representing Employer in an employment termination proceeding adverse to Employee, while, at the same time, representing Employee in a state income tax dispute. This is Employee’s malpractice case against Law Firm. In this opinion the court granted Law Firm summary judgment. The court found there was a conflict but also found that Employee could not prove that he was terminated as a result of the conflict. Employee claimed that he was terminated because of the tax dispute and that Employer was aware of it because of the conflict. The court found no causation because an arbitration panel, after a three-day hearing, had found that Employee was terminated for insubordination for failure to submit to a physical examination. Thus, the arbitration finding had “preclusive effect” in this malpractice case.

        Bahoda v. Kaplan, 2017 WL 3090774 (Mich. App. Unpub. July 20, 2017). Legal malpractice case brought by Plaintiff against Lawyer. Lawyer had represented Plaintiff in a criminal case and lost. Plaintiff sought to overturn his conviction, alleging ineffective assistance of counsel. Among Lawyer's alleged deficiencies were conflicts of interest. The court refused to overturn the conviction. In this opinion the court dismissed the malpractice case on grounds of collateral estoppel (preclusion). The finding of effective assistance of counsel in the criminal case amounted to adjudication of no malpractice in this civil case.

        Knutson v. Foster, 2018 WL 3751724 (Cal. App. Aug. 8, 2018). Plaintiff was an outstanding swimmer in high school. At one point she hired Lawyer to negotiate a professional swimming contract with USA Swimming. The whole matter ended badly. When Plaintiff learned that Lawyer had conflicts, she sued Lawyer for fraudulent concealment and breach of fiduciary duty. The jury returned a verdict of $617,000 for Plaintiff. The trial judge granted a new trial. In this opinion the appellate court reversed and remanded for reinstatement of the verdict and judgement. Much of this opinion deals with causation, damages, burdens of proof, and the like. Of special interest was Lawyer's astonishing insensitivity to his conflicts. He was active in the professional swimming world, and had many relationships with USA Swimming and its high-ranking officials and lawyers. He concealed all these relationships from Plaintiff while making disclosures to USA Swimming personnel, unbeknownst to Plaintiff, that prejudiced Plaintiff's negotiating position. On November 20, 2018, the California Supreme Court summarily denied Lawyer's petition for review of the appellate court's ruling. On March 16, 2020, the California State Bar Review Department affirmed a hearing judge's finding that Lawyer should be suspended for 60 days.

        Cannot use disqualification presumption to show use of confidences. USA Satellite & Cable, Inc. v. Mac Naughton, 2018 WL 4110745 (N.D. Ill. Aug. 28, 2018). This is a legal malpractice case, including a claim for breach of fiduciary duty. Lawyer formerly represented Plaintiff. Plaintiff claims, among other things, that Lawyer used Plaintiff's confidences in subsequent litigation (not this case) against Plaintiff. In this opinion the court granted Lawyer summary judgment. First the court found that Lawyer did not use Plaintiff's confidences in the other litigation. In response, Plaintiff claimed that use of confidential information should be presumed, relying upon disqualification law, in which a lawyer is presumed to possess a former client's confidences where matters are substantially related. In this opinion the court rejected that analysis. "It is a prospective analysis. . . . But, here, the issue is liability, a retrospective analysis."

        Kalra v. Adler Pollock & Sheehan, 2019 WL 319397 (D. Conn. Jan. 24, 2019). Law Firm had represented Plaintiffs in commercial litigation. Evidently, the litigation did not go well, and Plaintiffs sued Law Firm for malpractice and breach of fiduciary duty. The latter claim was based, in part, on Law Firm having a conflict of interest. The conflict claim was that Law Firm made decisions about commencing actions and conducting them, which were motivated by a desire to maximize Law Firm's own fees. In this opinion the court denied a motion to dismiss that claim and said that it "should proceed to discovery."

        Estate; Who Can Sue for Malpractice? Estate of Hudson v. Tibble, 2018 IL App (1st) 162469 (Ill. App. Feb. 16, 2018). Lawyer represented the original administrator of Estate. A successor administrator, who did not hire Lawyer, sued Lawyer for malpractice, on behalf of Estate. The trial court granted summary judgment for Lawyer on the basis that Lawyer never represented Estate, just the original administrator. In this opinion the appellate court reversed, holding that Estate could sue Lawyer.

        Pence v. Slate, 2019 WL 1560059 (Wis. App. April 11, 2019). Lawyer prepared Decedent's estate plan, including a trust to be funded by a life insurance policy. The Decedent appointed Lawyer's wife trustee. Prior to Decedent's death the trustee allowed the policy to lapse. The intended beneficiaries brought this case against Lawyer, Lawyer's wife, and several other defendants. Because the beneficiaries were not Lawyer's clients, the trial court granted summary judgment to Lawyer. In this opinion the appellate court affirmed. The court noted Wisconsin precedent holding that, with certain exceptions, non-clients may not sue lawyers. Two exceptions are fraud-related. An additional estate planning exception is where a non-client is harmed by lawyer negligence that "thwarted the intent of the . . . client." No exception applied to this case. As to the plaintiffs' claims that Lawyer had a conflict of interest, the court said that Decedent must have known about Lawyer's spousal relationship with the trustee. Plus, this was not a "meaningful conflict of interest for purposes of this case."

        Wagner v. Gould, 2019 WL 2524600 (Pa. App. June 19, 2019). Lawyer represented both Buyer and Seller in a sale of a "residential investment property." Because Lawyer caused Seller to lose security in the transaction, Seller sued Lawyer. In a bench trial the trial court found for Seller and entered judgment against Lawyer in the amount of security lost, $500,000. In this opinion the appellate court affirmed. The court really did not focus on Lawyer's conflict of interest, but rather on Lawyer's ineptitude in dealing with the security. Nevertheless, the case is an illustration of the hazards to a lawyer who attempts to represent both parties in a real estate sale of any complexity.

        Amer. E Group PLLC v. Livewire Ergonomics Inc., 2020 WL 209903 (S.D.N.Y. Jan. 14, 2020). AEG is suing Livewire on a note. Livewire brought a third-party complaint against the Barkats law firm because Barkats represented Livewire in obtaining the financing and preparing the note. Livewire is claiming that that the terms of the note were unfavorable to Livewire and that Barkats had a conflict of interest, thus breaching its fiduciary duty to Livewire. Livewire has also joined Elana Hirsch, a principal at AEG, as a third-party defendant, claiming she aided and abetted Barkats' breach. Hirsch moved to dismiss the third-party complaint against her. In this opinion the court denied the motion. The problem is that AEG is related to the Barkats law firm, including the fact that Hirsch is married to Sunny Barkats, the firm's named partner. The engagement agreement between Barkats and Livewire said that Livewire was waiving any conflict that might arise out of the financing being with an entity related to Barkats. However, the court said that this reference to a possible future, "hypothetical," conflict falls far short of Rule 1.7's requirement for an informed consent (see, especially, footnote 4). [Our note: The opinion contains a helpful discussion of lawyers' breach of fiduciary duty and of a third party's aiding and abetting such a breach. The opinion also discusses the applicability of New York's versions of Rules 1.7 and 1.8(a).]

        The Atlantic Channel, Inc. v. Solomon, No. 15-1823 (RC) (D.D.C. July 23, 2020). Henry Solomon, with the Haley, Bader firm, representing Atlantic Channel ("ACI"), filed with the FCC an allegedly defective application for a Class A license for a Low Power Television Station. He filed the application in December 1999. In June 2000 the FCC's Mass Media Bureau rejected the application. Also in June 2000 Solomon filed a Petition for Reconsideration. The Bureau denied reconsideration in November 2000. In December 2000 Solomon filed an Application for Review with the FCC. That was denied in November 2012. Solomon started at the Garvey firm in 2000. In 2012 ACI retained Melodie Virtue of the Garvey firm to resurrect and complete the Class A license proceeding. At some point ACI sued Solomon for his failure to obtain the license. Two years later ACI added Virtue and Garvey firm as defendants. ACI claims that as part of obtaining the license Virtue should have addressed Solomon's earlier malpractice, the statute of limitations for that claim, a conflict of interest, and the need to consult with independent counsel. Virtue and the Garvey firm moved for summary judgment. In this opinion the court denied the motion. The court said a jury might find Virtue's failure to address those issues (Solomon's malpractice, etc.) fell below the standard of care. The jury would need to hear from expert witnesses on the standard of care.

        Unique California Issue (posted July 30, 2020) Fields v. Fox Rothschild LLP, No. B295928 (Cal. App. Unpub. July 22, 2020). This opinion deals with California Civil Code § 1714.10, which requires plaintiffs to secure a court prefiling order before suing a lawyer for conspiring with a client. The issue in this case was whether a plaintiff could proceed in a case against a law firm without a prefiling order. The court said the case could proceed because the claim was a breach by the law firm of a duty that the law firm "independently owed to" the plaintiff. Such a claim is an exception to the prefiling order requirement under § 1714.10 (c)(2). [Our note: We will not bother you with more because the opinion was unpublished. However, California legal malpractice lawyers may want to take a look.]

        Res Judicata. McCormick, Inc. v. Fredericks, No. 20190254 (N.D. July 22, 2020). Plaintiff, Corp. 1, a 49% shareholder of Corp. 2, sued Defendant, a 51% shareholder of Corp. 2, claiming breach of contract and breach of fiduciary duty to Corp. 2. The suit includes claims by Corp. 1 directly, and derivatively on behalf of Corp. 2. Law Firm represented Corp. 1 in the trial of this case. Defendant, claiming he is a former client of Law Firm, moved to disqualify Law Firm. The trial court denied the motion. In this opinion the N.D. Supreme Court affirmed. First the court said that Law Firm never represented Defendant. Second, the court, assuming arguendo that Defendant had been a client, found that what Law Firm did for Defendant was not substantially related to this case. Quoting the trial judge, "[Law Firm] only reviewed Master Service Agreements between [Corp. 2] and other oil companies." Those agreements "are [not] at issue in this case." Plus, there was no showing that Law Firm had confidential information about Defendant from that earlier supposed representation. A companion case is Fredericks v. Vogel Law Firm, No. 2019-272 (N.D. July 22, 2020). There, the defendant in the above case attempted to sue Law Firm, based upon the alleged conflict. In this opinion the N.D. Supreme Court affirmed the trial court's ruling that res judicata bars this action, based upon the earlier finding of no conflict.

        Need for Expert. Mittelstaedt v. Henney, 954 N.W.2d 852 (Minn. App. Jan. 4, 2021). Plaintiff Mittelstaedt and Defendant Prosser had several business relationships. Complicating things, Lawyer Henney, primarily Prosser's lawyer, had several business relationships with Mittelstaedt and Prosser, and, arguably, represented Mittelstaedt on occasion. The businesses struggled, and Mittelstaedt sued everybody, including Henney, the latter for breach of fiduciary duty. The trial judge granted Henney summary judgement. The others went to trial with mixed results. We will discuss only the claim against Henney. In this opinion the appellate court affirmed the summary judgement. We will spare you the details about the businesses and hit a couple of high points. First, the court held that elements of a breach-of-fiduciary claim are the same as a legal malpractice claim. Only the remedies may vary. The reason the claim against Henney failed was that Mittelstaedt failed to comply with Minnesota Statutes §544.42, which requires certain filings by, and about, standard-of-care expert witnesses. Mittelstaedt did not have such a witness. The court noted that cases against lawyers not requiring expert testimony are "rare and exceptional," such as blowing the statute of limitations or stealing client money. The claims here include violations of Rules 1.7 and 1.8, which involve concepts not within "'the common knowledge' of most jurors."

        Salomon v. Matte-Thompson, 2019 SCC 14 (CanLII) (S. Ct. February 28, 2019). Plaintiff sought investment advice from her lawyer ("Lawyer"). Lawyer referred Plaintiff to an investment advisor ("Advisor"). During a four year period Plaintiff and her company invested $7.5 million with Advisor. During that period Lawyer remained supportive of Advisor, despite misgivings expressed by Plaintiff. In 2007 it became clear that the investments were fraudulent, and Plaintiff's money was lost. Plaintiff sued Advisor, Advisor's business associate, Lawyer, and Lawyer's firm. This appeal involves Plaintiff's claim against Lawyer (and his law firm). The trial court found for Lawyer. The Quebec Court of Appeal reversed outright, finding Lawyer and his firm owed Plaintiff for all her losses. In this opinion the Supreme Court affirmed the Court of Appeal. The principal issue was what a client would have to show to claim wrongful referral. We will spend little space on that. Part of the ruling found Lawyer in a conflict of interest. The factors leading to that finding included: (1) Lawyer and Advisor had been friends for many years; (2) Lawyer made disclosures about Plaintiff to Advisor; (3) Lawyer and Advisor worked together to convince Plaintiff not to withdraw her money; and (4) there were a series of payments back and forth between Lawyer and Advisor, including gifts to Lawyer, that had not been fully explained.

        Am. Zurich Ins. Co. v. Palmer, 529 F. Supp. 3d 1023 (D.S.D. 2021). Joseph Leichtnam sued InsCo. for bad faith arising out of his workplace injuries and claim for workers' compensation benefits. InsCo hired Law Firm to defend. Law Firm filed an answer in April 2015. The court set August 31, 2015 as the deadline for amendments. Law Firm moved to add defenses on September 7, 2018. On August 28, 2019, the court denied the motion to amend, making highly critical remarks about InsCo's delay. (Law Firm had moved to withdraw in February 2019. The opinion does not say who was defending InsCo when the court denied the motion to amend.) In this case InsCo sued Law Firm for one count of breach of fiduciary duty, for failing to disclose its malpractice to InsCo. Law Firm moved for judgment on the pleadings. In this opinion the court denied the motion. The opinion contains a discussion of whether a law firm breaches its fiduciary duty for failing to disclose its malpractice to its client. It discusses when the law firm has conflict of interest, thus raising such a duty. The court found such a duty in this case. The wrinkle here was that Law Firm did disclose its malpractice, but not until 2018. Thus, the court found the disclosure untimely and denied the motion for judgment on the pleadings.

        Preovolos v. Preovolos, No. D078796 (Cal. App. Unpub. 4th Dist. Feb. 24, 2022). Plaintiff sued Lawyer (Plaintiff's son) for malpractice and breach of fiduciary duty, including claims of conflict of interest. At some point Plaintiff managed to persuade the trial court to enter an order enjoining Lawyer from handling anything "adverse" to Plaintiff. In this unpublished opinion the appellate court reversed the trial court's injunction, finding it was "untethered" to this case's claims and was "unreasonably vague" and "overbroad."

        Mehra v. Morrison Cohen LLP, 2022 WL 618995 (N.Y. App. Div. 1st Dept. March 3, 2022). This case involves a business relationship between Plaintiffs, Mr. and Mrs. Mehra, and Jonathan Teller. In 2014 Defendant Law Firm advised the Mehras and Teller how to reorganize their relationship. In 2019 Law Firm allegedly turned on the Mehras and assisted Teller in disadvantaging the Mehras. In this case the Mehras are suing Law Firm (1) for malpractice in negligently advising the Mehras about the reorganization in 2014, and (2) for breach of fiduciary duty in 2019 (harming the Mehras being a conflict). The trial court granted Law Firm's motion to dismiss, holding that the malpractice claim was filed too late, and that the conflict claim failed because the Mr. Mehra had signed an advance waiver, 2020 WL 5874858 (N.Y. Cty. Oct. 2020). The Mehras appealed the second holding. In this opinion the appellate court reversed the dismissal of the fiduciary duty claim, holding, in effect, that the efficacy of the waiver was a fact issue. [Our comment: We have always been confused by the interplay of malpractice claims and breach of fiduciary duty claims in New York courts (and in a few other states). These opinions don't help.]

        Nichols v. Swindoll, 203 Ark. 97 (Ark. June 8, 2023). Nichols hired lawyers ("Original Lawyers") to sue certain defendants for Nichols' injuries. Original Lawyers arguably botched the Statute of Limitations, depriving her of any recovery. She brought this suit against Original Lawyers for malpractice. The trial court dismissed this suit because she filed it late. The court found Nichols failed to plead adequately that fraudulent concealment by Original Lawyers tolled the Statute of Limitations. The appellate court affirmed. In this split opinion the majority affirmed the courts below. In a strong dissent three justices disagreed, finding, in effect, that Original Lawyers' silence regarding their potential malpractice was sufficient to show fraudulent concealment. The dissent cited Restatement Section 20, Comment c, Arkansas Rule 1.4, and the conflict of interest of Original Lawyers possibly requiring them to withdraw.

        810 Woodward Ave., LLC v. Bolton, 2023 WL 5926945 (Super. Ct. Conn. New Haven Sept. 7, 2023). Landlord sued Tennant for overdue rent. They settled. Tennant gave check to Tennant's lawyer to hold in trust account for Landlord. Before Tennant's lawyer could give the funds to Landlord, Tennant had a change of heart and ordered Tennant's lawyer to return the funds to Tennant, which he did. Landlord brought this case against Tennant's lawyer for breach of fiduciary duty, conversion and theft. After a bench trial the court found for Tennant's lawyer, as set forth in this opinion. The essence of the ruling is that Tennant's lawyer's duty was to follow his client's directions and return the money to his client. To find a duty to the opposition party in this circumstance "would create a conflict of interest. The law ought not proceed in this direction."

        Health Care Serv. Corp. v. Walgreen Co., 2023 IL App (1st) 230020-U (Ill. App. Sept. 29, 2023). We have under-covered this major battle between Walgreens and its former law firm, Crowell & Moring. The battle is being waged on multiple fronts, the Illinois state courts being one of them. Thus, this opinion can serve as a beginning of the discussion. Here, health insurer, HCSC, has sued Walgreens for misconduct in its prescription drug pricing. Walgreens has counterclaimed against HCSC for aiding and abetting Crowell's breach of fiduciary duty to Walgreens. This is because, in 2008-2009, Crowell had advised Walgreens on drug pricing issues, and is now representing HCSC against Walgreens. That earlier advice to Walgreens, and the issues in this case, are arguably related, resulting in an alleged former-client conflict. HCSC moved to dismiss Walgreen's counterclaim. The trial court granted the motion. In this opinion the appellate court reversed. The opinion is an extended discussion of aiding-and-abetting law as applied to a law firm's alleged conflict of interest. In 2022 a federal judge made a similar ruling involving essentially the same parties and facts, BCBSM Inc. v. Walgreen Co., 2022 WL 393596 (N.D. Ill. 2022). Another facet of this battle is HCSC's winning an arbitration award against Walgreens for some $460 million, involving the same batch of pricing issues. That award is now the subject of a proceeding in the D.C. Superior Court. The beat goes on.

        Verein. Lehram Capital Invs, Ltd. v. Baker & McKenzie, 2024 IL App (1st) 230095 (Ill. App. 1st Dist. Feb. 14, 2024). Baker & McKenzie ("Baker") is a verein with many offices and lawyers worldwide. Lehram claims that the Russian office of the verein committed malpractice regarding a Russian transaction. Lehram sued Baker & McKenzie LLP ("B&MLLP") in Chicago. B&MLLP, located in Chicago, is the founder of, and is the "nerve center" (our term) for, the verein. B&MLLP moved to dismiss on forum non conveniens grounds. The trial court denied the motion. In this 2-1 opinion the appellate court affirmed. The bases for the rulings were the usual forum non conveniens grounds such as location of witnesses, ease of discovery, etc. Neither ruling provided a definitive answer to whether the B&MLLP could be liable for the malpractice of one of the distant member firms. The majority opinion said the evidence so far "was sufficient to support, for the limited purposes of the forum non conveniens motion" the liability of B&MLLP for the malpractice of its Russian member. Recall RevoLaze LLC v. Dentons US L.L.P., No. 109742 (Ohio App. 8th Dist. April 28, 2022), review denied, RevoLaze LLC v. Dentons US L.L.P., No. 2022-0708 (Ohio Aug. 30, 2022), where the appellate court held that members of a verein were one for conflict-of-interest purposes.

Fee Forfeitures

        The black letter of Restatement § 37 provides as follows:

A lawyer engaging in clear and serious violation of duty to a client may be required to forfeit some or all of the lawyer's compensation for the matter.  Considerations relevant to the question of forfeiture include the gravity and timing of the violation, its willfulness, its effect on the value of the lawyer's work for the client, any other threatened or actual harm to the client, and the adequacy of other remedies.

        The Reporter's Note to § 37 cites a number of state and federal court opinions upholding the principles contained in the black letter.  Those cases dealing with conflicts of interest appear below, along with more recent cases.  We are not aware of any cases standing for the proposition that a lawyer's fees may never be the subject of forfeiture as the result of a conflict.

        The cases.  Following are cases in which fee forfeitures were upheld because of the punished lawyer's, or law firm's, conflict of interest.  In some cases this occurred even where no harm resulted from the conflict.  In other cases the court ignored the good faith or lack of knowledge of the conflict by the lawyer.  Avco Corp. v. Turner, No. 21-2750 (3d Cir. July 22, 2022) (no harm); Rodriguez v. Disner, 2012 U.S. App. LEXIS 16698 (9th Cir. August 10, 2012) (class counsel denied $7 million fee); Hendry v. Pelland, 73 F.3d 397 (D.C. Cir. 1996) (no harm); In re Eastern Sugar Antitrust Litigation, 697 F.2d 524 (3d Cir. 1982) (failure of opposing law firms to disclose law firm merger negotiations); Silbiger v. Prudence Bonds Corp., 180 F.2d 917 (2d Cir. 1950);  Allapattah Services, Inc. v. Exxon Corp., 454 F. Supp. 2d 1185 (S.D. Fla. 2006) (class counsel's fee was reduced from $21 million to $15 million); Warnell v. Ford Motor Co., 205 F. Supp. 2d 956 (N.D. Ill. June 11, 2002); In re Estate of Brandon, 902 P.2d 1299 (Alaska 1995); Moses v. McGarvey, 614 P.2d 1363 (Alaska 1980) (lawyer's motive irrelevant);  Holmes v. McClendon, 76 S.W.3d 836 (Ark. 2002); Crawford & Lewis v. Boatmen's Trust Co. of Arkansas, Inc., 1 S.W.3d 417 (Ark. 1999); Little Rock v. Cash, 644 S.W.2d 229 (Ark. 1982); A.I. Credit Corp., Inc. v. Aguilar, 2003 6 Cal. Rptr. 3d 813 (Cal. App. 2003); Jeffry v. Pounds, 136 Cal. Rptr. 373 (Cal. App. 1977) (lawyer's knowledge irrelevant); CFFC2, Inc. v. Bergstrom, 2023 WL 2494454 (Cal. App. 4th Dist. Unpub. March 14, 2023); Parkinson v. Bevis, 2019 WL 4266089 (Ida. Sept. 10, 2019) (lawyer revealed client's confidences; no damages, but forfeiture of fees); Newton v. Newton, 2011 Ill. App. LEXIS 715 (Ill. App. June 30, 2011) (conflict in divorce case; forfeited $250,000) Rice v. Perl, 320 N.W.2d 407 (Minn. 1982) (no harm); Lerette v. Howard, 300 Neb. 128 (Neb. June 1, 2018) (malpractice verdict based on conflict caused increase in recovery by fees paid to defendant lawyer); Shelby v. Blakes, 2015 WL 3604439 (N.Y. App. Div. June 10, 2015) (represented driver and passenger); Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker LLP, 843 N.Y.S.2d 749 (N.Y. Sup. Ct. 2007), modified, Ulico Cas. Co. v. Wilson, Elser, Moskowitz, Edelman & Dicker, 2008 N.Y. App. Div. LEXIS 6737 (N.Y. App. Sept. 16, 2008); Keyes v. Johnson, 2012 N.C. App. LEXIS 1020 (N.C. App. Aug. 21, 2012) (suit for fees; lawyer lost because of an earlier finding of conflict); Ivancic v. Enos, 2012 Ohio App. LEXIS 3218 (Ohio App. Aug. 13, 2012) ($50,000; lawyer for decedent's estate); Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) (no harm); Cotton v. Kronenberg, 44 P.3d 878 (Wash. 2002); Eriks v. Denver, 824 P.2d 1207 (Wash. 1992) (no harm); and Behnke v. Ahrens, 2012 Wash. App. LEXIS 2838 (Wash. App. Dec. 10, 2012).

        Additional California cases discussing fee forfeitures: Huskinson & Brown v. Wolf, 32 Cal. 4th 453 (2004); Mardirossian & Assoc., Inc. v. Ersoff, 153 Cal. App. 4th 257 (Cal. App. 2007); Fair v. Bakhtian, 195 Cal. App. 4th 1135 (Cal. App. 2011); Cal Pal Delivery, Inc. v. UPS, Inc., 52 Cal. App. 4th 1 (Cal. App. 1997).

        No Forfeiture.  Bertelsen v. Harris, 2008 U.S. App. LEXIS 17078 (9th Cir. Aug. 11, 2008).  The court affirmed (2-1) the trial court, which found that the ethical violations did not warrant forfeiture.  Things had turned out well for the clients.  Vigorous dissent.

        No Forfeiture. Price Waicukauski & Riley, LLC v. Murray, 2014 U.S. Dist. LEXIS 130680 (S.D. Ind. Sept. 18, 2014). Where conflict did not cause damage no forfeiture may be appropriate. Cited Restatement §37, cmt d.

        Dewey v. R. J. Reynolds Tobacco Co., 536 A.2d 243 (N.J. 1988), is unique.  It is a tobacco product liability case.  The plaintiffs' law firm hired a lawyer from the defendant's firm and failed to obtain the consent of the defendant.  New Jersey is not a screening state.  The defendant moved to disqualify the plaintiffs' firm.  The court denied the motion because disqualification would have badly prejudiced the plaintiffs.  Instead, the court ordered the plaintiffs' firm to continue but for no fee.

         In Alaska Native Tribal Health Consortium v. Settlement Fund, 84 P.3d 418 (Alas. 2004) the court held that a lawyer may be entitled to fees even though he had a conflict of interest.

        Miess v. Port City Trucking, Inc., 2012 U.S. Dist. LEXIS 15358 (E.D. Mo. Feb. 8, 2012).  Lawyers filed suit on behalf of the driver and passenger of a car that had been rear-ended by a truck.  The passenger dismissed Lawyers and hired new counsel, ultimately settling the case.  In this proceeding Lawyers seek to recover their 1/3 contingent fee.  In this opinion the court found a number of violations of the Missouri Rules.  One violation was the conflict between the driver, who had no license, and the passenger.  Lawyers obtained no waiver of that conflict.  In any event, the court ordered that because Lawyers had benefited plaintiffs, Lawyers should receive 8% of the settlement.  The court refused to award expenses to Lawyers because Lawyers, in their fee agreement, failed to specify whether their fee would be computed after deducting expenses or before.

        Behnke v. Ahrens, 2012 Wash. App. LEXIS 1555 (Wash. App. July 2, 2012).  Lawyer advised trusts on using a "Son of BOSS" tax shelter.  The IRS disallowed all the tax savings, and the trustees sued lawyer for, among other things, having a conflict of interest.  A jury awarded minimal damages.  The court then ordered that Lawyer disgorge fees of a few thousand dollars because of his conflict.  On appeal the appellate court affirmed.  The court noted that in Washington the violation of an ethics rule cannot be the basis for a cause of action for malpractice or evidence of malpractice.

        The bankruptcy cases.  The "Bankruptcy" page of this site discusses the Bankruptcy Code's unique conflict-of-interest rules under 11 U.S.C. § 327(a).  11 U.S.C. § 328(c) authorizes the court to deny compensation to lawyers acting contrary to § 327(a).  That is, if the counsel for the debtor or creditor's committee is not "disinterested" or has an "interest adverse to the estate."  Following are bankruptcy cases in which fees and expenses were denied, reduced, or ordered forfeited, for these types of conflicts: In re Network Cancer Care, L.P., Debtor, 2006 U.S. App. LEXIS 18103 (5th Cir. July 19, 2006) (entire fee of $60,000 forfeited); In re West Delta Oil Co., Inc., Debtor, 432 F.3d 347 (5th Cir. 2005) (failed to disclose intent to invest in debtor); In re Gary Mercury, Debtor, 2004 U.S. App. LEXIS 25481 (2d Cir. Dec. 10, 2004) (not a lot of money, but very ugly conflict); In re Milwaukee Engraving Co., Inc., 219 F.3d 635 (7th Cir. 2000); United States v. Gellene, 182 F.3d 578 (7th Cir. 1999) (this was the lawyer's criminal appeal; however, the court noted that the firm had forfeited $1.8 million in fees); In re Crivello, 134 F.3d 831 (7th Cir. 1998); In re GSC Group, Inc., 2013 Bankr. LEXIS 5204 (S.D.N.Y. Dec. 12, 2013) ($1.5 million; 28% of total fee); In re Jore Corp., 298 B.R. 703 (D. Mont. 2003) ($1.6 million); In re Hot Tin Roof, 205 B.R. 1000 (1st Cir. 1997); Rome v. Braunstein, 19 F.3d 54 (1st Cir. 1994) ($140,000); Electro-Wire Products, Inc. v. Sirote & Permutt, P.C. (In re Prince), 40 F.3d 356 (11th Cir. 1994) ($200,000); In re Futuronics Corp., 655 F.2d 463 (2d Cir. 1981) ($250,000); In re Arlan's Dep't Stores, Inc., 615 F.2d 925 (2d Cir. 1979); In re Matco Electronics Group, Inc., 2008 WL 141908 (N.D.N.Y. Jan. 11, 2008) (partial forfeiture for failing to disclose relationships); In re Congoleum Corp., 03-51524 (D.N.J. Feb. 7, 2006) ($13 million); In re EToys, Inc., 331 B.R. 176 (D. Del. 2005); In re Big Rivers Electric Corp.,  2002 U.S. Dist LEXIS 16174 (W.D. Ken. August 13, 2002) (examiner tried to negotiate special fee with three major creditors); In re Ponce Marine Farm, Inc., 259 B.R. 484 (D.P.R. March 9, 2001); In re Granite Partners, L.P., 219 B.R. 22 (S.D.N.Y. 1998) ($2.7 million); In re Angelika Films 57th, 227 B.R. 29 (S.D.N.Y. 1998); In re Leslie Fay Companies Inc., 175 B.R. 525 (S.D.N.Y. 1994) ($1 million); In re Granite Sheet Metal Works, 159 B.R. 840 (S.D. Ill. 1993); In re EToys, Inc., 331 B.R. 176 (D. Del. 2005; In re M.T.G., Inc., 2009 U.S. Dist. LEXIS 3008 (E.D. Mich. Jan. 14, 2009); In re The Harris Agency, LLC, 2011 U.S. Dist. LEXIS 132638 (E.D. Pa. Nov. 17, 2011); In re Woodcraft Studios, Inc., 2011 U.S. Dist. LEXIS 147495 (N.D. Cal. Dec. 22, 2011); Waldron v. Adams and Reese, LLP, 2011 U.S. Dist. LEXIS 45877 (W.D. La. April 27, 2011); In re Gluth Bros. Construction, Inc., 2011 Bankr. LEXIS 4000 (N.D. Ill. Oct. 19, 2011); In re Lewis Road, LLC, 2011 Bankr. LEXIS 4827 (E.D. Va. Dec. 9, 2011); In re American Int'l Refinery, Inc., 2012 U.S. App. LEXIS 6367 (5th Cir. March 29, 2012) (forfeited 20% of fees); In re Sundance Self Storage-EL Dorado LP, 2012 Bankr. LEXIS 5277 (E.D. Cal. Nov. 6, 2012); In re Arazi, 2013 Bankr. LEXIS 1530 (D. Mass. April 9, 2013) (fee reduced); In re GSC Group, Inc., 2013 Bankr. LEXIS 5204 (S.D.N.Y. Dec. 12, 2013) (fee reduction of $1.5 million); In re Fresh Choice, LLC, 2014 Bankr. LEXIS 916 (N.D. Cal. March 10, 2014); In re Madera Roofing, Inc., 2014 Bankr. LEXIS 4128 (E.D. Cal. Sept. 25, 2014); McGrane v. Howrey, LLP, 2015 WL 6126792 (N.D. Cal. Oct. 19, 2015); In re Fair, 2016 WL 3027264 (N.D. Tex. May 18, 2016); In re Silva Dairy, LLC, 2016 WL 3564361 (D. Idaho June 22, 2016); In re Grimmett, 2017 WL 2437231 (D. Idaho June 5, 2017); In re Grasso, 2018 WL 3036735 (E.D. Pa. June 15, 2018); In re NNN 400 Capital Cir. 16, LLC, No. 16-12728 (JTD) (D. Del. Sept. 4, 2020).

        So v. Suchanek, 2012 U.S. App. LEXIS 1165 (D.C. Cir. Jan. 20, 2012).  This is a suit by Client against Lawyer for breach of fiduciary duty, arising from Lawyer's conflict of interest.  The trial judge ordered Lawyer to disgorge some $450,000 in fees.  In this opinion the D.C. Circuit held that Lawyer should disgorge more and remanded to the district court to determine how much.  The court held that Lawyer's conflict was more wide-ranging than recognized by the trial court.

        In In re Bruno, 327 B.R. 104 (E.D.N.Y. 2005), the court denied fees to a law firm that had attempted to represent the driver and passengers in an auto accident case.

        Niemann v. Niemann, 2010 Mich. App. LEXIS 1643 (Mich. App. Sept. 2, 2010).  Lawyer had been disqualified on former-client/substantial-relationship grounds.  In this opinion the court affirmed the trial court finding that Lawyer's charging lien should not be enforced because of the conflict.

        Bolton v. Crowley, Hoge & Fein, P.C., 2015 WL 687277 (D.C. Ct. App. Feb. 19, 2015). This opinion was, in part, a reversal of a summary judgment below. It contains an interesting discussion of a lawyer’s fiduciary duties to a client and a history of those duties.

        Treatises dealing with fee  forfeitures for conflicts generally.  Hazard, Hodes, & Jarvis §§ 8.21, 10.11 & 13.12; Rotunda & Dzienkowski       § 1.10-7(c).

Role of Conflicts Rules in
Malpractice Litigation

        The "Scope" statement that appears at the beginning of the ABA Model Rules of Professional Conduct provides that the Rules were not designed to create civil causes of action against lawyers. Yet, experience has been that the Rules, including the rules relating to conflicts of interest, are frequently brought into such actions, typically through the testimony of expert witnesses.  Moreover, the Scope statement was amended in 2002 to provide that the violation of an ethics rule can be evidence in a civil liability case against a lawyer.

        Section 52(2) of the Restatement reflects this reality and provides as follows:

 (2) Proof of a violation of a rule or statute regulating the conduct of lawyers:?

 (a) does not give rise to an implied cause of action for lack of care;?
 (b) does not preclude other proof concerning the duty of care in Subsection (1); and?
 (c) may be considered by a trier of fact as an aid in understanding and applying the standard of Subsection to  the extent that;

    (i) the rule or statute was designed for the protection of persons in the position of the claimant and?
    (ii) proof of the content and construction of such a rule or statute is relevant to the claimant's claim.?

        The Reporters’ Note appearing after the Comment to Restatement § 52 reflects that a majority of jurisdictions treat admissibility of the ethics rules in malpractice actions.

        Court May Instruct Jury on Ethics Violation.  Mainor v. Nault, 101 P.3d 308 (Nev. 2004).  The above Reporters' Note cites several cases to the same effect.

        In Azzar v. Tolley, 2004 Mich. App. LEXIS 2979 (Mich. App. Nov. 2, 2004), the court said:

[T]his Court has found a rebuttable presumption that violations of the Code of Professional Conduct constitute actionable malpractice, Beattie v. Firnschild, 394 N.W.2d (Mich. App. 1986).

Another case to the same effect is Hart v. Comerica Bank, 957 F. Supp. 958 (E.D. Mich. 1997).

       Maritrans GP, Inc. v. Pepper, Hamilton and Scheetz, 602 A.2d 1277 (Pa. 1992), is one of the few opinions nationwide that hold that ethics rules are not admissible in malpractice actions.   Meyers v. Sudfeld, 2007 U.S. Dist. LEXIS 7634 (E.D. Pa. Feb. 2, 2007), cites Maritrans for the proposition that mere violation of an ethics rule does not establish a cause of action.

        Pollen v. Comer, 2007 U.S. Dist. LEXIS 46906 (D.N.J. June 28, 2007).  In this legal malpractice case the judge granted the lawyer/defendant summary judgment.  One of the counts dealt with an alleged conflict of interest.  The court said that the plaintiff incorrectly pleaded the count by alleging a violation of ethics rules.  The court acknowledged New Jersey authority that a violation of ethics rules can be evidence of malpractice.  The court said that regardless of the pleading deficiency the plaintiff could show no proximate cause for his alleged losses.

        Relating to the above discussion, see Berkeley Ltd. Partnership v. Arnold, White & Durkee, 118 F. Supp. 2d 668 (D. Md. 2000).  Arnold, White & Durkee represented Berkeley Limited Partnership, plaintiff in patent litigation against IBM.  Berkeley is now suing AWD for malpractice, alleging AWD did not disclose to Berkeley that it represented Intel while it was representing Berkeley against IBM.  Intel made chips for the IBM computers that were the subject of the patent litigation.  Berkeley is claiming that it also had causes of action against Intel that would have enhanced its overall claim, but AWD talked it out of suing Intel.  The cited opinion accompanies several summary judgment rulings.  The key conflict-of-interest ruling gives Berkeley a summary judgment as follows:

Therefore as to the issue of liability only, Defendant's representation of both BLP and Intel constitutes a conflict of interest pursuant to D.C. Bar rule 1.7.

        Legal Malpractice Claim not Assignable.  Taylor v. Saltz Babin, 2009 La. App. LEXIS 724 (La. App. May 8, 2009).  In this opinion the appellate court held that legal malpractice claims are not assignable in Louisiana.  The opinion contains a good survey of state and federal courts around the country.  Claim not assignable under some circumstances, Kenco Enters. N.W., LLC v. Wiese, 2013 Wash. App. LEXIS 6 (Jan. 7, 2013).

        Assignment of Malpractice Proceeds not Effective.  Dank v. Sears Holding Mgm't Corp., 2009 N.Y. App. Div. LEXIS 1248 (N.Y. App. Div. Feb. 17, 2009).  The court denied a motion to certify a class, in part because the class representative wanted also to be class counsel ("inherent conflict of interest").  (The court also said he failed to establish numerosity or establish that he had the financial resources and professional qualifications to to undertake a class action.)

        Davis v. Scott, 2009 Ky. App. LEXIS 26 (Ky. App. Feb. 13, 2009).  The court held that the assignment of the proceeds of a legal malpractice claim, like the assignment of the claim itself, is invalid, where the client also relinquishes control of the claim.

        Eagle Mountain City v. Parsons Kinghorn & Harris, P.C., 2017 WL 2483017 (Utah June 7, 2017). The principal holding of this opinion is that an assignment of a legal malpractice claim does not violate public policy and, ordinarily, will be enforced. The court noted that when the subject of such an assignment “rears its head in settlement talks,” some lawyers may be compelled to send their client(s) to separate counsel for “independent advice.” The court added that such “is a necessary cost of litigating a dispute.”

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