Default Delay Supports Malpractice Claim

The United States Court of Appeals for the District of Columbia Circuit reversed and remanded the dismissal of a legal malpractice claim

The plaintiffs in this legal malpractice action are the estate and family members of Yael Botvin, who was killed in 1997 by Hamas suicide bombers. In 2005, the plaintiffs sued the Islamic Republic of Iran for helping Hamas orchestrate the attack. They won large default judgments and recovered about $2.8 million from a United States fund for victims of state-sponsored terrorism. But because it took nearly eight years to obtain the default judgments, the plaintiffs were unable to participate in a 2012 agreement that disbursed to victims of Iranian-sponsored terrorism a trove of Iranian assets seized in the United States.

According to the plaintiffs, their recovery would have been much larger had they been able to participate in that agreement. The plaintiffs sued their former lawyers for malpractice. They allege that the lawyers’ negligence delayed their default judgment against Iran and caused them to miss out on the larger settlement. On a motion to dismiss, the district court held the plaintiffs had adequately pleaded that the alleged negligence was a but-for cause of the lower recovery. But in addressing proximate cause, the court held that the plaintiffs had not adequately pleaded the requisite degree of foreseeability. We reverse that decision.

Foreseeability

The district court dismissed the Botvins’ complaint on the ground that, as a matter of law, the harm it alleged was not sufficiently foreseeable. In this procedural posture, the dispositive question is whether a jury could make a rational finding of foreseeability based on the facts as alleged. We do not consider whether the alleged facts would compel a finding of foreseeability, or even whether a wise jury should find foreseeability. We hold only that a jury could rationally find that the plaintiffs’ reduced recovery was a foreseeable result of the alleged negligence of their former lawyers.

Access to source of recovery

Given their actual knowledge of the Bank Markazi account, and their experience in dealing with collection challenges associated with suits against Iran, we think a jury could reasonably find that these lawyers would have “reason to believe that” the delayed entry of default judgments would cause a loss of enforcement opportunities against the attachable Iranian assets in the account. Seed Co., 961 F.3d at 1197.

Causation

this case involves no such speculation about hypothetical outcomes of longshot filings. The Botvin estate and family did obtain large default judgments against Iran, and all other plaintiffs with such judgments did obtain pro rata shares of the Bank Markazi account. Calculating what would have been the Botvin share of that account, had the estate and the family members obtained their default judgments without unusually long delays, is a simple matter of arithmetic. The only but-for question here is whether the complaint plausibly alleged that attorney missteps caused enough delay to make a difference. The district court correctly answered yes to that question. See Estate of Botvin, 2022 WL 4482734, at *10–11. And before this Court, the defendants do not even contest that ruling as to but-for causation.

The opinion authored by KATSAS was joined by PAN, Circuit Judges, and GINSBURG, Senior Circuit Judge. (Mike Frisch)