Ch. 6 Remedies for Legal Malpractice
Compensatory Damages can be
direct or consequential
Direct & Consequential Damages
Defined Mallen & Smith §21:1
Direct damages are those damages for injuries that are
the immediate, natural & anticipated consequences of
the wrong, e.g., compensation for the loss of expected
benefits from L’s services and expenses incurred due to
L’s failure to achieve those benefits.
Consequential damages are compensation for injuries
that proximately result from the negligence, but do not
flow directly from or concern the objective of
representation, e.g., mental distress & related personal
injuries to body or reputation, economic losses and
expenses incurred in bringing malpractice suit.
A. Compensatory Damages: Basic
Rules
1. Fact of harm: not speculative
(must have harm-in-fact)
2. Amount of damages: proved w/
“reasonable certainty”
(preponderance of evidence)
3. Damages must be proximately
caused by the specific breaches of
duties
A. Compensatory Damages Basics
3. Proving proximately caused losses: what did P lose
because of L’s malpractice?
·Unsuccessful in underlying litigation
-Losing P, now LM P must re-try underlying case to prove
that but for LM, would have recovered $X, which amount
would have been collectable from original D.
-Losing D, now LM P must also retry underlying case,
prove that but for LM, verdict would have been for $ (Y-Z)
(amount by which judgment exceeded correct amount)
·loss of control damages (where P lost control of closely-held
corp. because of D’s LM)
Mitigation Expenses
M&S §21:10
Reasonable expenses incurred to mitigate
the adverse effects of D’s LM
Must be incurred in good faith, with
reasonable care and bear reasonable
relation to damages sought to be
avoided or mitigated
May recover attorney’s fees incurred in
mitigation
Consequential Damages: Emotional
Distress
• Rstmt §53 cmt. g. (generally not recoverable
b/c unforeseeable)
– E.g., ordinary negligence
– E.g., breach of contract (not unless accompanied
by independent and willful tort)
• But recoverable if fraud, intentional tort,
willful fiduciary breach or physical contact.
– M&S §20.11; e.g., sexual assault
Emotional Distress Damages
Worsham v. Nix, 2006 OK 67, 145 P.3d
1055 (2006)
Facts: Mr. & Mrs. Worsham retained L to stop
alleged workplace harassment of Mr., paid $650
nonrefundable retainer, $75 ct costs & signed
contingent fee agreement. Tho complaint
prepared & verified by Mr., suit not filed, nor
formal notice to employer of problem for 5
months. Mr. committed suicide, allegedly as
consequence of workplace stress.
Mrs./administratrix sued L for wrongful death of
Mr., and for his & her emotional distress, and
other claims. Tr. Ct.: at non-jury trial, after P’s
case-in-chief, granted sum. jdgmt for D.
Worsham v. Nix, 2006 OK 67, 145 P.3d
1055 (2006)
1. Wrongful death precluded by “law of case”
doctrine (i.e., might be raised again in different
lawsuit, where suicide is foreseeable from
breach of duty)
2. Tr. Ct. d/n err in excluding P’s EW (that filing of
suit would have stopped alleged harassment),
Daubert/Kumho
3. Tr. Ct. erred in dismissing Widow’s claim for
emotional distress damages allegedly suffered
after learning of apparent fraudulent conduct
concerning the legal representation.
Consequential Damages: Harm to
Reputation
• Legal principles similar to emotional distress
damages
– E.g., recoverable if reputational harm foreseeable
& probable result of LM, especially if intentional
wrong by L (rarely proven).
– But, reputational harm recoverable where L’s
negligent defense of medical malpractice case
Adjustments to Damage Calculations
• Discount future damages to present
value
• Prejudgment interest for recoverable
damages accrued and fixed in
amount before time of trial
[Determined by state statute]
Problem 6-1 The Structured
Settlement
L in p.i. action advised C to enter $3M structured settlement using
UKR. Not disclosed that UKR owned by close friend of L’s or that
payments not secured by collateral or insurance. 5 years later, UKR
went bust.
What are C’s damages in malpractice action v. L?
1. Value of remaining 180 monthly payments of $12K + $3M lump
sum payable at end of 20 years
a. Prejudgment interest for monthly payments accrued to time of
trial.
b. Discount to present value all sums that were not accrued by
time of trial.
2. Compensate for loss of tax-free nature of structured settlement.
3. Emotional distress damages? Nondisclosure of relationship willful
breach of fiduciary duty?
B. Punitive Damages (a/k/a exemplary
or “enhanced compensatory”)
text pp. 188-203
1. Substantive state law variations; “tort reforms”
See, e.g., Okla. Stat. Ann., tit. 23 §23 9.1: requires “clear & convincing”
evidence. Relevant factors: seriousness of public hazard; profitability
of misconduct to D; duration & concealment; D’s awareness of hazard;
D’s attitude & conduct after discovery; number & level of corp.
employees that caused or concealed; D’s financial condition
Category I: reckless disregard, greater of $100K or amount of actual
damages;
Category II: intentional & malicious, greater of $500K or 2x actual
damages or increased $ benefit derived by D from conduct injuring P
and others; determined after jury fixed actual damages
Category III: Intentional & malicious, but not in Category II: bifurcated
proceeding after jury fixed actual damages
B. Punitive Damages
2. Constitutional Limitations
text pp. 191-99
a. 14th Amendment Due Process Clause
State Farm v. Campbell (U.S. 2003), and BMW v. Gore
(U.S.) (1996) Guideposts:
1. Degree of reprehensibility of D’s misconduct (factors,
including V’s $ vulnerability, repeat or isolated;
culpability; state’s legitimate objectives text at p. 193);
2. Disparity between actual or potential harm to P and
amount of punitive damage award (ratios instructive;
refused to set bright-line test; single digit multipliers);
3. Difference between instant award and that upheld in
comparable cases.
B. Punitive Damages
2. Constitutional Limitations
text pp. 191-99
Philip Morris USA v. Williams (U.S. 2007): State
forbidden from allowing punitive damages based
in any part on desire to punish for harming
nonparties.
Breyer, J.: no opportunity for D to defend against;
“near standardless dimension”; no state power
authorizes.
States must avoid procedure that “unnecessarily
deprives juries of proper legal
guidance…assurance that …are not asking the
wrong question”
B. Punitive Damages
2. Constitutional Limitations
text pp. 191-99
Vicarious liability
respondeat superior: Pacific Mutual v. Haslip
(U.S. 1991)(comports with 14th Am., D.P.;
incentive-based policy rationale)
Partnership law (each partner vicariously
responsible for acts, omissions of all others
within scope of partnership activities) N.B.
Chapter 8
Problem 6-2 Overbilling Clients
text 198-99
1. Culpability: does Lehman’s conduct support
punitive damage award? What are relevant
factors?
2. Firm’s vicarious liability?
3. What substantive & procedural hurdles?
Amount of compensatory damages to C?
Relevance of damage to other firm clients?
How much ($$$$) is “too much” – Due Process?
3. Liability for “Lost Punitive
Damages”?
Majority rule, per Tri-G., Inc. v. Burke et al. (Ill. 2006),
Ferguson (Cal. 2003), NY and Rstmt § 53, cmt. h: Not
recoverable. Policy reasons:
1. Conduct of LM D bears no relationship to underlying
culpable conduct giving rise to potential punitive
damage liability;
2. Speculative; inherently subjective judgment;
3. Societal Cost
Minority view would allow, based on “make whole”
remedy, deter legal malpractice.
Problem 6-3 The Nursing Home
Litigation
Facts distinguishable from Tri-G?
Intentional breach of duty? Identify
Election of remedy: distinguish claims based on
Fraud (punitive damages)
Negligence (compensatory damages, possibility
of “lost punitive damages”
Strategic considerations
Other possible recourse? (Discipline; fee forfeiture)