Outlook for Malpractice Defendants Improves after Recent Court Decisions
by Wendy Gordon Carroll
(County Bar Update, October 2003, Vol. 23, No. 9)


Outlook for Malpractice Defendants Improves after Recent Court Decisions


By Wendy Gordon Carroll, Esq., senior vice president, Aon Direct Insurance Administrators. Carroll recently joined Aon Direct Insurance Administrators but has been with Aon for 14 years. During that time, she was responsible for managing the claims activity of the Attorneys’ Advantage program and the Los Angeles County Bar Association program, as well as other E&O programs.


The perception in California among defense attorneys in the legal community is that the long-term outlook on defending legal malpractice claims is getting better than ever, based upon recent case law developments. In fact, the improved judicial atmosphere in California has provided the defense with even greater tools to effectuate early disposition of legal malpractice claims, with most cases rarely proceeding to trial. Now, it may be even more difficult to win a malpractice case in the following areas:


Malicious Prosecution Cases -- In the October 2000 edition of County Bar Update (Vol. 20, No. 9), Wendy Gordon Carroll wrote that the California Anti-SLAPP statute (California’s Anti-Strategic Lawsuit Against Public Participation, California Code of Civil Procedure 425.16) was the "New Assault Against Malicious Prosecution." A major victory occurred for attorney defendants in these cases when, on August 18, 2003, the California Supreme Court ruled in Jarrow Formulas, Inc. v. LaMarche (2003) Daily Journal D.A.R 9295 that malicious prosecution actions are not exempt from scrutiny under California’s Anti-SLAPP statute. This decision will have a significant impact on malicious prosecution cases, making them difficult to prosecute and possibly curtailing the filing of malicious prosecution actions altogether.


Malpractice Claims Involving Transactional Matters -- The California Supreme Court unanimously rejected a district court of appeal decision, California State Auto. Assn. Inter-Ins. Bureau v. Parichan, Renberg, Crossman & Harvey (2000) 84 Cal.App.4th 702, 101 Cal.Rptr.2d 721 by holding recently in Viner v. Sweet (2003) 30 Cal.4th 1232, 70 P.3d 1046, 135 Cal.Rptr.2d 629 that the "but-for" causation requirement for attorney malpractice claims involving transaction cases applies just as in litigation matters. Plaintiffs must prove the causation element of negligence that "but for" the attorney’s alleged malpractice, the harm or loss would not have occurred. In Parichan, the court took the position that underlying "transactional" cases differed from "litigation" cases and that the causation analysis was inapplicable. The Viner Supreme Court disagreed, holding that "[i]n both litigation and transactional malpractice cases, the crucial causation inquiry is what would have happened if the defendant attorney had not been negligent."


Lost Punitive Damages Not Recoverable -- Recently, the California Supreme Court held in Ferguson v. Lieff, Cabraser, Heimann & Bernstein (2003) 30 Cal.4th 1037, 69 P.3d. 965, 135 Cal.Rptr.2d 46 that lost punitive damages are not recoverable as compensatory damages from attorney defendants in a malpractice action. Until this case, there had been a split of authority in the California courts of appeal on the issue. The California Supreme Court disapproved of Merenda v. Superior Court (1992) 3 Cal. App.4th 1, 4 Cal.Rptr.2d 87, and agreed with Piscitelli v. Friedenburg (2001) 87 Cal.App.4th 953, 105 Cal.Rptr.2d 88. The Ferguson court found that to permit such recovery would violate public policy because punitive damages are meant to punish the tortfeasor, not to reward the injured party; the lost punitive damages bear no relationship to the gravity of the attorney’s misconduct or personal wealth; and recovery would violate the public policy against speculative damages.


Causation/Failure to Adequately Settle Cases -- This is a growing area of malpractice, but the following cases will help defeat these claims:


In Jalali v. Root (2003) 109 Cal.App.4th 1768, 1 Cal.Rptr.3d 689, the appellate court reversed a jury award of $310,000 and found that failure to give proper advice regarding the taxability of a client’s settlement is not malpractice where the client does not claim that she would have done better if she had not accepted the settlement.


In Orrick Herrington & Sutcliffe, LLP v. Superior Court (Malcolm) (2003) 107 Cal.App.4th 1052, 132 Cal.Rptr.2d 658 (review denied: July 30, 2003), the court of appeal held that where a client does not contend that a judgment more favorable than a settlement would have been obtained, but only claims as damages the legal fees spent in an unsuccessful attempt to overturn the settlement, the case is a fee dispute and not a claim for legal malpractice.


In Barnard v. Langer (2003) 109 Cal.App. 4th 1453, 1 Cal.Rptr.3d 175, the court of appeal held that a plaintiff in a legal malpractice case could not recover damages based on an inadequate settlement of the underlying action because the claim was too speculative.


Duty Limited in Estate Planning re Testamentary Capacity -- Under the recent court of appeal case Moore v. Anderson Ziegler Disharoon Gallagher & Gray (2003) 109 Cal. App. 4th 1287, 135 Cal.Rptr.2d 888, an attorney has no duty to beneficiaries under a will to evaluate and ascertain the testamentary capacity of a client seeking to amend the will or to preserve evidence of that evaluation.


The impact of the above cases promises to reduce the cost of defending legal malpractice cases and ultimately lower the cost of insurance for attorneys.


This article is intended to inform the reader of potential liability exposures for attorneys. This article reflects general principles only and does not render legal advice. Readers should consult legal, financial, insurance and other advisors if they have specific concerns. Neither the Los Angeles County Bar Association nor Aon and its affiliates assumes any responsibility for how the information in this article is applied in practice or for the accuracy and completeness of the information.  Reproduction without written permission is prohibited. This article is made available to the County Bar Update by Aon Direct Insurance Administrators, administrators of the Aon Attorneys’ Advantage Program, part of the LACBA Sponsored Aon Insurance Solutions Program. The Aon Attorneys’ Advantage Program provides a wide variety of benefits and products exclusive to LACBA members. For information or to contact a representative, visit www.aonsolutions.com.

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