Transactional Malpractice
The West Virginia Supreme Court of Appeals reversed the grant of summary judgment to the defendant attorney in a legal malpractice claim and directed that the plaintiff instead be awarded summary judgment.
The issue involved negligent title work that had led to serious repercussions.
Before turning to the arguments of the parties, we note that this case involves malpractice in the performance of transactional work (giving advice or preparing documents for a business transaction) as opposed to litigation malpractice…
The following example illustrates the proximate cause analysis utilized in a transactional legal malpractice claim.
If the client’s position is “my lawyer gave me bad advice that I followed, and it cost me money,” the client in effect is saying, “My lawyer gave me incorrect advice. I acted in reliance on this advice, and as a proximate result, I sustained $ x in damages. But for that advice, I would not have been damaged at all.” At times, the attorney’s negligence does not relate to decisions made in the course of litigation but involves some recommendation or guidance negligently given. Therefore, the “case within a case” will not entail the reconstruction of a trial or appeal; instead, the client must show alternative measures he could have taken “but for” the attorney’s faulty advice.
Richard H.W. Maloy, Proximate Cause: The Final Defense in Legal Malpractice Cases, 36 U. Mem. L. Rev. 655, 676 (2006) (emphasis added). The crux of Rubin’s argument is that the alternative measure here is obvious; had Mr. Morris alerted it to the declaration of pooling, Rubin would have availed itself of the substitution clause in its contract with WVE and avoided the losses at issue.
The court found that damages were established by the undisputed facts and that the plaintiff had mitigated the damages.
Applying this standard to the instant case, it is clear that Rubin took reasonable steps under the circumstances to mitigate its damages. After discovering the title defect, Rubin took responsible actions to minimize the liabilities arising from the problem, which is the essence of mitigation of damages. Rubin weighed the consequences to be avoided and assessed its overall exposure to liability at approximately $147,000 arising from Mr. Morris’s failure to alert it to the title defect.9 By contrast, Rubin negotiated a settlement with CNX that was much less expensive. Based on these facts, we find that Rubin’s decision to settle the matter with CNX instead of pursuing litigation on what it believed to be an unmeritorious affirmative defense of adverse possession was mitigation of damages. “Many settlements are a reasonable response to a difficult situation created by another’s negligence.”
The court also held that the plaintiff was entitled to damages for lost profits.
Application of these principles in a legal malpractice action does not make an attorney an insurer of pie-in-the-sky expectations of the client. Rather, this tenet simply operates to restore the client to the economic position that he or she would be in but for the attorney’s negligence.
(Mike Frisch)