Ch. 7 Defenses & Obstacles to
Recovery
A. Contributory Negligence,
Comparative Negligence &
Comparative Fault
Flyover Reviewof Evolving Tort Law
pp. 205-07
1.
2.
Contributory Negligence: bars recovery, but limited application to
negligence cases. Reforms since 1970s: abandoned everywhere
but Ala., N.C., Va., Md.
Comparative Negligence (‘70s)
a. Pure regimes: reduced recovery corresponds exactly to P’s % of total
negligence
b. Modified regimes, local variations:
i. Bar recovery if P’s negligence ≥ (“greater than or equal to) to D’s, or
ii. Bar recovery if P’s negligence > (“more at fault than”) D’s.
c. 23 O.S. §§13-14 combined: interpreted as modified comparative;
recovery allowed if D more at fault than P; any recovery reduced by
amount of P fault. (Professor Meazell) Relation to Legal Malprac.?
3.
Comparative Fault (‘80s-90s): broadened reach of defense to
include negligence, recklessness, strict-liability, failure to mitigate,
but not intentional torts.
FDIC v. Ferguson, 982 F.2d 404 (10th
Cir. 1992)
Held, Contributory negligence principles applied
in legal malpractice action, citing Erwin v.
Frazier, 786 P.2d 61 (Okla. 1989). Affirmed
defense verdict where Home S&L (for which
FDIC was guarantor) was 70% negligent. Lawyer,
who was 15% negligent, hired to draft closing
documents and file after closing; closing agent
15% negligent.
1. Own Conduct Contributing to π’s
Harm
pp. 208-09
Arnov Indus., Inc. Retirement Trust v. Brown,
Raysman, et. al. (NY 2001)(client’s failure to read
carefully document before signing did not bar
recovery, where L erroneously stated final
document only changed to correct one typo;
dicta, client’s “culpable conduct” is affirmative
defense that must be pled and proven by D L)
N.B. 2 serious errors by L: misstatement on
extent of changes from prior draft ($$$$M loss);
jurisdictional filing error ($100K loss, §547 Bank’y
Code avoidable preference)
Problem 7-1 The Lawyer as Client
p. 209
·What issues must be resolved to predict success of
LM action?
What liability regime? (C.N., Comparative or
modified comparative negligence? Comparative
fault?)
·What impact that Cortez “knew or should have
known” that his malprac. defense L d/n raise
“complete defense”? s/ actual knowledge?
·Is sophistication of Cortez, as L in LM action,
relevant in assessing comparative fault?
(“reasonable care under the circumstances”?)
2. Avoidable Consequences & Failure
to Mitigate
pp. 209-13
• Mitigation principle: recovery reduced by losses that
could have been avoided by exercise of reasonable care
after the breach
• Borley Storage & Transfer v. Whitted (Neb. 2006)
Facts: Installment contract to sell business included both
perfected security interest (lapsed after 5 years) and
personal liability of buyers. B’s defaulted; in bankruptcy
junior lienholder prevailed b/c no timely filing of
continuation statement)
Holding: affirmed defense verdict; no tr. ct. error (B’s
personally liable on promissory note; S’s failure to mitigate;
admission of financial statements showing B’s ability to
pay judgment)
Borley Storage & Transfer, Inc. v.
Whitted
• When did L/Cl relationship end? Whose
responsibility was it to address need for filing of
continuation statement before end of 5 yrs?
– Significance of payments extending over 10 yrs?
– If C informed before closing of sale, does L have duty
to remind former C as 5 yr deadline approached?
– Preventive: termination letter from L w/ clear notice
• Why did S’s NOT seek to enforce B’s personal
liability on promissory note?
Other Mitigation Issues
• Possibility of appeal of loss below in
underlying matter? (not if futile gesture)
• Settle vs. appeal of underlying matter?
(settlement d/n preclude malpractice claim;
reasonable to settle?)
• Maj.: d/n reduce malpractice claim by
amount of % fee π would have paid to L in
underlying matter, had it been successful
Problem 7-2 The Flawed Trust
Joint estate plan (A&B Trusts). Drafting error
precluded widow Claire from accessing Trust B
(life estate, remainder interests)
Mitigation principle & possible reformation:
Time frame: 6 months after Chase died?
Vs. later, when C replaced L with Newly?
LM burden of proof on failure to mitigate? Relevant
evidence?
Malpractice prevention lessons at time of drafting?
Loss prevention lessons when realize mistake?
B. Unlawful Conduct Defense
1. In General
p. 215
• Rstmt of Torts (2d, 1979) §889: one is not barred
from recovery for an interference with his legally
protected interests merely because at the time of
the interference he was committing a tort or a
crime. [Rejects so-called “Outlaw Rule”]
• Barker v. Kallash (NY 1984): recovery barred if P
injury is 1) direct result 2) of knowing
participation 3) in a serious criminal act 4)
involving prohibited (not merely regulated)
conduct.
Equitable defense: in pari delicto &
unclean hands
Mosier v. Callister, Nebeker & McCullough PC, 546
F.3d 1271 (10th Cir. 2008)(Ponzi scheme left many
victims; wrongdoer’s bankruptcy trustee sued law
firm & attorneys who facilitated; doctrine barred
recovery because of client’s fraud or misconduct)
Actions of corp. officers & directors imputed to
corporation.
See also, Kirschner v. KPMG, et al., 590 F.3d 186 (2d
Cir. 2009)
In pari delicto
• Evaluate whether wrongdoing primarily
benefitted or harmed the corp.
• Is there argument that corp. wrongdoer was alter
ego of corp. or were there other uninvolved
decision makers who could have prevented?
• Imputed knowledge of wrongdoing to corp. (cts
split on adverse int. exception)
• Public policy ramifications of using to bar claim?
Stay tuned….
B. Unlawful Conduct Defense
1. Recovery of unpaid fees may be barred by state
law on Unauthorized Practice of Law (UPL)
a. N.B. Lawyer/firm action to collect unpaid fee often
prompts LM counterclaim.
i.
Birbrower (CA 1994) BROADLY interpreted UPL (NY L’s who
participated in arbitration engaged in UPL; barred from
recovering unpaid fees).
ii. Caused shockwaves throughout U.S., prompting
nationwide reforms. See ABA RPC 5.3 (multijurisdictional
practice)
iii. Globalization of LP: pending Ethics 20:20 considering
international crossborder practices & UPL
Problem 7-3 Client Fraud on Investors
p. 221
(a) LM defense arguments that C’s unlawful conduct bars
recovery?
-Does any state law (statutory or common law) bar recovery on
facts? E.g., Saks v. Sawtelle (Tex. App.—San Antonio 1994) p.
215
**See, Heyman v. Gable Gotwals, et al., 994 P.2d 92 (Okla. Civ.
App. 1999) cert. den’d (as matter of law, clients’ fraud
independent of alleged negligence in underlying transaction
barred their malpractice claim)
-Is C’s conduct criminal under securities law (fed. or state?)
-Policy: should unlawful conduct rule extend to cases where C
engaged in civil fraud (not crime)?
- Did L recommend or actively participate in fraudulent conduct
serving basis for C’s liability to investors?
Problem 7-3 (cont’d)
(b) Impact of C’s settlement of underlying c.l. fraud
claim w/ investors? Pp. 212-13, on mitigation
Duty to appeal rather than settle? Likelihood of
success?
Hewitt v. Allen (Nev. 2002)(not if appeal would
be futile gesture; failure to appeal as affirmative
Defense, BOP on D L; likelihood of success Q of
law for ct)
American Reliable Ins. Co. v. Navratil (5th Cir.
2006)(no per se bar from settlement)
Problem 7-3 (cont’d)
(c) Importance of whether C’s LM complaint alleges
L recommended or participated in underlying
fraudulent conduct on which jury verdict based?
- in pari delicto? Were C & L equally at fault?
- Cf. Rstmt LGL §51(2), Vanguard Production v.
Martin (10th Cir. 1990)(under Okla. Law, L risks
liability to non-client investors who foreseeably
rely on L’s opinion letter). Q: does L’s risk of
liability to nonclients affect L’s LM liability to C?
2. Exoneration or Innocence Reqt in
Criminal Defense LM
pp. 216-18
• Caanan v. Barte (Kan. 2003) follows strong Maj. Rule: successful
postconviction relief as prerequisite to recovery; some juris. also require
showing of actual innocence. Rstmt LGL §53 Cmt. d. rejects need for actual
innocence.
– Policy justifications: equitable; practical difficulties re causation & damages;
judicial economy; chilling effect on defense counsel (defensive lawyering)
• Stat. of limitations:
– One track: first set aside conviction, then file LM
– Two track: simultaneously pursue postconviction relief & LM
· Min. View does not require exoneration (Ala., Ind., Mich., N.M., Oh., N.J.)
·Criticisms, basis for current challenges to exoneration rule?
Inroads on Exoneration or Innocence
Requirement
Drollinger v. Mallon (Oregon S.Ct. 9/1/11) (not
applicable to malpractice claim v. lawyers
handling state post-conviction petitions; took $,
did little & withdrew at 11th hour; π dropped
PCR petitions rather than go pro se; sued
lawyers) Held, exoneration requirement n/a
when alleged negligence is in post-conviction
proceedings.
Inroads on Exoneration or Innocence
Requirement
Marrero v. Feintuch (N.J. Super. 1/25/11) (π’s
robbery conviction reversed on appeal b/c trial
ct errors, then sued defense counsel for alleged
negligence at trial)
Ct interpreted N.J. S.Ct. precedent (s. of l. starts
when exonerated) to find π needn’t prove actual
innocence as prerequisite to LM claim, BUT LM Δs
entitled to depose to find evidence of guilt, to show
no breach of duty, or that any negligence was not
proximate cause of conviction.
C. Malpractice Statutes of Limitations
1. Matter of state substantive law. Time bar depends on
nature of claim. See, e.g., 12 O.S. § 95:
·action on written K: 5 years
·action on unwritten K, or statutory liability o/than forfeiture
or penalty: 3 years
·most tort actions: 2 years after accrual (but fraud d/n accrue
until discovery)
·libel, slander, assault, batter or malicious prosecution: 1 year
N.B. Must research caselaw interpretations of statute
C. Statutes of Limitations
1. In General
pp. 221-23
Accrual: C/a accrues and s. of l. begins to run when
litigant first could have maintained action to
successful conclusion (i.e., fact of injury becomes
certain). Distinction between occurrence &
discovery. (Maj. View)
See, Marshall v. Fenton, Fenton, Smith, et al., 899
P.2d 621 (OK. 1995)(same); Stephens v. GMC, 905
P.2d 797 (Ok. 1995)(inj. complete after final
appeal of underlying case); Smith v. Layton, 170
P.3d 1046 (Ok. Civ. App. 1046 2007)(date of
settlement & release in underlying action)
C. Statutes of Limitations
3. Tolling
pp. 225-36
Discovery Rule: When did client know
or reasonably should have
known/been aware of facts
sufficient to put reasonable person
on notice of injury? Humphreys v.
Argabrite (6th Cir. 2006)(1 yr. s. of l.
began to run when divorce granted)
C. Statutes of Limitations
3. Tolling: Recent Cases
• Reverse trial court dismissal for failure to state
claim as time-barred, where complaint d/n not
reveal when π, as reasonably prudent person,
was on notice of potentially actionable injury.
Joyce v. Armstrong Teasdale, LLP, 635 F.3d 364
(8th Cir. 3/29/11)
• Or reversal of tr. ct summary jdgmt where
genuine issues mat’l fact re when π shd have
known of inj., per state’s discovery rule. Knopick
v. Connelly, 639 F.3d 600 (3d Cir. 4/13/11)
C. Statutes of Limitations
3. Tolling: Recent Cases
Cf., Wing v. Lorton, M.D., ___P.3d___, 2011 WL
1878353, 2011 OK 42 (5/15/11)(medical
malpractice, OK discovery rule recognizes that
sometimes injury manifested after occurrence of
wrongful act or omission; s. of l. starts to run
when π knew/shd have known, thru exercise of
rsnble diligence, sufficient information which, if
pursued, would lead to true condition of [injury
caused by alleged malpractice]).
C. Statutes of Limitations
2. Tolling
b.
Continuous Representation Rule (to soften
harsh effects of occurrence rule)
i.
DeLeo v. Nusbaum (Ct. 2003)(tolled if P
shows 1) continued representation on
same matter AND 2) either P d/n know
of facts > alleged LM or L could still
mitigate harm)
ii. General relationship v. specific matters
(courts vary; reasonable C
expectations?)
C. Statutes of Limitations
2. Tolling
pp. 233-36
b. Continuous Representation Rule: hidden danger of
attempting mitigation: lawyer’s ongoing efforts to
cure may trigger continuous representation rule,
extend running of limitations period.
c. Fraudulent concealment: where P presents some
evidence of “positive acts of fraud that were furtively
planned & secretly executed, & statements concealed
or perpetrated in a manner that concealed itself.”
i. (e.g., cut & paste court date-stamp onto document
never filed; L engaged in cover-up). Subj. to discipline + LM
claim + tolling.
C. Statutes of Limitations
2. Tolling
• Ranier v. Stuart & Freida, 887 P.2d 339 (Ok. Civ.
App. 1994)(matter of 1st impression, applying
continuous representation rule; under particular
facts, C had no knowledge of any harm suffered
until underlying judgment dismissing on s. of l.
grounds was affirmed on appeal; 2 year
limitations period then began to run)
• (D. D.C. 2008)(long representation from creation
of off-shore trusts through extended litigation
about validity)
C. Statutes of Limitations
2. Tolling
• Cline v. Geary, Case No. 105,430 (Ok. Civ. App.
2008), cert. granted, after oral arguments, ~
11/1/10, dismissed as improvidently granted)
Facts: Underlying claim voluntarily dismissed w/o
prejudice 10/12/99; 12 O.S. 2001, §100 allowed 1
year to re-file. Change in counsel; Geary retained
9/8/2000, re-filed suit 10/13/2000 (1 day late).
Tr. Ct. dismissed 2/4/03, Ok. S.Ct. denied cert.,
mandate issued 2/23/04. LM filed 4/22/05.
Cline v. Geary (cont’d)
• Civ. App.: S. of L. began to run when C 1st knew,
or should have known, it had been damaged by
L’s actions (3/21/03). LM filed 4/22/05 filed more
than 2 years after that date, and is time barred.
No basis to toll running of limitations period
when C KNEW tr. ct dismissed underlying claim.
• Takeaway: open issue, Okla. S.Ct. perhaps
awaiting “right case” to consider breadth of
continuous representation rule.
D. Non-Assignability of Legal
Malpractice Claims
pp. 236-38
• Strong majority of state cts find LM claims
non-assignable.
– Risk: Client/Δ (maybe judgment proof, or other
reason to “rollover”) in underlying matter wd
assign LM claim to π.
• Create L/C conflict of interest
• L, as LM Δ has right to reveal otherwise protected
confidences in self-defense, and former C (assignor) has
lost all control to limit disclosures.
– Contra, Kommavongsa dissent: unduly insulates
lawyers from assigned claims
Prob. 7-6 A Deal With one of
Defendants
p. 239
Suggested π strategy?
Evaluate?
E. Joint Liability & Reimbursement
pp. 239-44
• If joint & several liability: joint tortfeasors can be
sued & held liable for same harm, π can collect all
from one (deep pocket), who then can seek
contribution from others.
• Traditionally, under agency theory, employer is
vicariously liable under respondeat superior for
negligence of one acting w/in scope of
employment.
• General partnership law: each partner has joint
& several liability for debts & claims against firm.
2011 Oklahoma Tort Reform
(applicable to actions accruing on or after Nov. 1, 2011)
23 O.S. 2001 Section 15.
A. In any civil action based on fault and not arising
out of contract, the liability for damages caused
by two or more persons shall be several only
and a joint tortfeasor shall be liable only for the
amount of damages allocated to that tortfeasor.
(n/a to actions brought by or on behalf of the state)
Ch. 8: consider implications for LLPs, LLCs,
traditional partnership law. Constitutional
challenge?
G. Immunities & Privileges
pp. 247-49
Public Defenders
Harris v. Champion, 51 F.3d 901, 908 (10th Cir.
1998)(held, as state agency, OIDS entitled to 11th
Am. Immunity on damage claims)
McDonald v. Langley (E.D. Ok. 2009), 2009 WL
884569 Ct-appointed lawyers not state actors for
purposes of §1983, but may risk liability for
conspiracy w/ state actors to deprive crim. Δ of C’l
rts (rare). 2 yr s. of l. runs from date of sentencing
(infer no exoneration reqt?)
G. Immunities & Privileges pp. 247-49
Prosecutors: Absolute immunity for core
prosecutorial functions; other activities: only
qualified immunity
Challenges to Prosecutors’ Qualified
Immunity
McGhee v. Pottawattamie County, Iowa, 547
F.3d 922 (8th Cir. 2008), cert. granted (Apr. 20,
2009); cert. dismissed (Jan. 4, 2010)(U.S. S.Ct. No.
08-1065)(several states contributed to huge
settlement)
Connick v. Thompson, 131 S.Ct. 1350 (March 29,
2011)(5-4)Thomas op. for maj.: trial ct erred in not
dismissing on summary judgment; as matter of law
π could not prove DA deliberately indifferent to
need for more or different Brady training absent
showing of similar pattern of violations.
G. Immunities & Privileges pp. 247-49
Prosecutors: challenges to qualified immunity
• Schneyder v. Smith (3d Cir. 7/29/11)(allowing
suit to go forward; state prosecutor not
entitled to claim immunity from §1983 claim
brought by material witness detained 7 weeks
after case in which she was to testify was
continued)
Prosecutors: challenges to qualified
immunity
Paris Lapriest Powell v. Robert Bradley Miller, in official
capacity and individually, State of Oklahoma, Oklahoma
County & [law firm], Civ.-2010-01294-D, W.D. Okla.,
DiGuisti (mo. to dismiss pending)
§1893 Malicious Pros’n, Unreliable & Fraud’t
Investigatory Techniques, Procurement of Unreliable &
Fabricated Ev., Suppression of Exculpatory Ev., Wrongful
Conviction & Imprisonment; II Negligence/wrongful
imprisonment; III OK Govt’l Tort claim (malicious pros’n &
negl.) [IV & V omitted here]
Future possibilities?
• h/c already granted; ruling on “actual
innocence” requirement to sue prosecutor &
state?
• Wrongful prosecution, incarceration, death
penalty sentence? Stay tuned.