Legal Malpractice Case Emphasizes Client DutiesBy Teresa Rider Bult, Litigation News Associate Editor – November 9, 2011
A recent legal malpractice case decided by the North Carolina Court of Appeals reopens questions about the scope of an attorney’s duty to anticipate and inform clients of potential contractual or transactional consequences. It also adds to the debate over when the client’s own negligence comes into play.
Contributory Negligence Bars Malpractice Recovery in North Carolina
In Marion Partners, LLC v. Weatherspoon & Voltz, LLP [PDF], Marion Partners, a company owning three commercial properties leased to the drugstore chain CVS sued for malpractice. Marion claimed that its attorney did not expressly warn it about the potential effects of a provision CVS added to its lease agreements shifting property tax burdens from CVS back to Marion.
After the leases were signed, a law went into effect that permitted certain property to be reassessed for tax purposes on sale. Marion attempted to sell the properties and entered into purchase contracts with a buyer. Uncertainty regarding the tax liability, affected by the post-lease change in the law, caused the sale to fall through. Marion claimed the damages resulting from the failed sale should be borne by its lawyer, Weatherspoon.
Marion alleged its “custom and practice” was to rely upon Weatherspoon to advise it of changes or issues with its form lease agreement. It contended Weatherspoon failed to inform Marion of the new provision, the new law, or the potential consequences thereof.
Weatherspoon argued that Marion was a sophisticated client. The court recognized that Marion “would have understood the significance of the tax provision if they read it.” It held Marion had a separate duty to ascertain the contents of the contract it was signing, and its failure to do so constituted contributory negligence. The trial court agreed, and dismissed the case on summary judgment, noting in North Carolina, contributory negligence is a complete bar to recovery.
The North Carolina appeals court upheld the dismissal, stating that although the attorney “had a duty to advise plaintiffs regarding the leases, that [duty] did not relieve plaintiffs from their duty to read the leases themselves.” The court specifically found there was no evidence the client needed Weatherspoon “to explain the legal import of the new tax provisions,” and indeed, the sophistication level of this client implied otherwise.
In Witherspoon’s favor, the record included evidence of emails from Weatherspoon to the client asking them to “review the contract.” The court also questioned the credibility of the affidavits submitted by Marion to show that it was the company’s “custom and practice” to rely on its attorney’s advice carte blanche.
North Carolina Malpractice Unusual
The analysis consistently used by North Carolina to assess legal malpractice in this and prior cases is somewhat of an anomaly. Most other states have found that the client’s negligence may be an affirmative defense, but presents a high burden of proof for such a defense. Moreover, successfully presenting the client’s negligence may reduce, not operate as a complete bar to, recovery.
For example, one 2002 Pennsylvania Superior Court case [PDF] upheld a jury verdict in favor of the plaintiff-client when its attorney failed to include an exit clause in a lease agreement if the seller was unable to secure sewage and other permits for reasons beyond its control. In that case testimony at trial from the client that he instructed counsel to “make an agreement that if anything developed during the [due diligence] period with the approvals . . . [either or both could] just walk away,” created a sufficient record to support the verdict.
The appeals court found the attorney had a “sacred duty” to his client. The client is “under no duty to guard against the failure of the attorney to exercise the required standard of professional care in the performance of the legal services for which the attorney was retained.”
In reaching its decision, the court listed cases from 18 jurisdictions where “principles of comparative negligence are applied to apportion relative percentages of fault between a client and an attorney in legal malpractice actions based on negligence principles.” It also identified 12 others where appellate courts identified contributory negligence as an “affirmative defense to an action for legal malpractice based on negligence.”
Different Approaches, Uncertain Obligations
The discrepancy between the North Carolina and Pennsylvania approaches leaves some lawyers scratching their heads when trying to figure out when they might be liable for a failure to anticipate or inform their clients of potential contractual or transactional consequences. It leaves clients doing the same head scratch to decipher whether they have an obligation to second-guess their attorney’s opinions and/or conduct their own investigation.
Most states allow for some contributory or comparative negligence theory against the client in legal malpractice claims, whether as an affirmative defense or a complete bar. So, besides the classic, “know your jurisdiction” rule, how do attorneys wade through these diverging analyses and find some security in knowing when they might (or might not) be liable for malpractice? When is a client “negligent enough” to divert blame from the attorney?
Some argue that cases like Marion Partners dilute the attorney duty of care and raise questions about the propriety of the contributory or comparative negligence defense in legal malpractice actions. “While the Marion Partners case plainly protects lawyers from liability, it seems to decrease the amount of trust and good will between lawyer and client,” says Michael P. Downey, St. Louis, cochair of the ABA Litigation Section’s Legislation and Rules Subcommittee of the Ethics and Professionalism Committee. “Under North Carolina law, a client who hires a lawyer to review a contract will likely still need to perform a complete check of the document as well, instead of trusting that the lawyer did a thorough job. The benefit of the legal counsel seems severely diminished in that case.”
Others believe the Marion case is more fact-intensive and does not provide particularly wide-ranging commentary on contributory or comparative negligence. “A legal malpractice action is like any other tort action and therefore should be subject to the same [defenses] as other tort actions--there is no need to carve out exceptions,” says James A. Brown, New Orleans, cochair of the Section of Litigation’s Professional Liability Litigation Committee. He suspects the case will not be widely followed.
Despite the Marion Partners case, the standard of care for lawyers is clearly a heightened one, Brown notes. Contributory or comparative negligence makes sense, however, because “the standard of care is defined by the knowledge and sophistication of the client,” he says. “Lawyers should be able to point out to the court in their defense that, e.g., their sophisticated client was well aware of the consequences of their contractual arrangements.”
Keywords: Litigation, Malpractice, North Carolina, Client Responsibility
- » The Section of Litigation’s Professional Liability Committee publishes a Fifty State Survey of Legal Malpractice Law. The surveys have generally been updated within the last two years, and range from five to more 50 pages in length. Most expressly cover the concept of comparative fault/contributory negligence.
- » For a summary of various states’ laws on contributory or comparative negligence in the legal malpractice arena, see Gorski v. Smith, 812 A.2d 683 at footnotes 4 and 5 (Penn. 2002) (also discussed and hyperlinked in text, above).
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