August 22, 2017

Colorado Court of Appeals: Attorney in Malpractice Case Must Raise Collectibility as Affirmative Defense

The Colorado Court of Appeals issued its opinion in Gallegos v. LeHouillier on Thursday, March 23, 2017.

Legal MalpracticeBurden of ProofCollectabilityAffirmative Defense.

Plaintiff Gallegos sued defendants LeHouillier, an attorney, and his law firm, LeHouillier & Associates, P.C. (collectively, LeHouillier), for legal malpractice. The jury found that LeHouillier had negligently breached his duty of professional care when handling an underlying medical malpractice case for Gallegos. The trial court placed the burden on Gallegos to prove that any judgment in the underlying case was collectable, and it ruled that Gallegos had provided sufficient evidence to prove that point, entering judgment in her favor.

On appeal, LeHouillier contended that the judgment must be reversed because collectibility is an element that a plaintiff must prove in a legal malpractice case, and Gallegos did not prove that any judgment that she would have received in the underlying malpractice case would have been collectible. Gallegos countered that the issue of collectibility is an affirmative defense and the court should have required LeHouillier to prove that the judgment was not collectible. The Court of Appeals determined that the record did not contain sufficient evidence that the judgment was collectible. In addition, the trial court erred when it placed the burden on Gallegos to prove that any judgment in the underlying medical malpractice case would have been collectible; it should have required LeHouillier (1) to raise the question of collectibility as an affirmative defense and (2) to prove that any judgment Gallegos would have received would not have been collectible.

The judgment was reversed and the case was remanded for a new trial.

Summary provided courtesy of The Colorado Lawyer.

Colorado Court of Appeals: Proof of “Case Within a Case” Not Required in All Legal Malpractice Actions

The Colorado Court of Appeals issued its opinion in Boulders at Escalante LLC v. Otten Johnson Robinson Neff & Ragonetti PC on Thursday, June 18, 2015.

Legal Malpractice—Negligence—Statute of Limitations —Legal or Proximate Causation—Case Within a Case.

Plaintiff is a real estate development company formed to develop townhomes in a subdivision in Durango. Defendant is a law firm that was hired to represent plaintiff in a lawsuit against it by its general contractor to foreclose the contractor’s mechanic’s lien. Defendant filed several compulsory counterclaims on behalf of plaintiff for breach of contract and negligence. Plaintiff was concerned the contractor would not be able to pay a judgment if plaintiff succeeded on the counterclaims and asked defendant to review the insurance policies it had obtained for the project to determine whether the policies would pay a judgment against the contractor.

In 2006, defendant told plaintiff there was $2 to $4 million of coverage to pay a judgment against the contractor. In 2009, after plaintiff had obtained new representation, plaintiff learned that the policies contained an exclusion precluding payment to plaintiff if it succeeded on its claims against the contractor. Plaintiff and the contractor eventually settled, dismissing the claims against each other with prejudice. No payments were made by either party.

In 2011, plaintiff filed this action, asserting defendant was negligent in incorrectly advising regarding the insurance coverage, leading to extensive losses, including legal fees and expenses in continuing the litigation. The jury found defendant was negligent and its negligence caused 82.5% of the damages suffered by plaintiff. Judgment entered for approximately $2.7 million, plus pre- and post-judgment interest.

On appeal, defendant argued the claim was barred by the two-year statute of limitations set forth in CRS § 13-80-102. Defendant argued that plaintiff’s claim accrued no later than February 2009, when plaintiff learned defendant’s advice regarding insurance coverage might be wrong, and the action wasn’t filed until April 1, 2011. The Court of Appeals disagreed. A cause of action for negligence accrues on the date both the injury and its cause are known or should have been known to the plaintiff by the exercise of reasonable diligence. Under the circumstances here, the question of when plaintiff knew or should have known that the advice was incorrect and that it was injured by that advice was properly a question resolved by the jury.

Defendant argued that in a legal malpractice action based on negligence, the plaintiff must prove a case within a case; namely, that the claim underlying the malpractice action would have been successful but for the attorney’s negligence. The Court disagreed. Here, the claimed injury does not relate to the outcome of the underlying matter, and therefore plaintiff did not need to prove a case within a case.

Defendant challenged whether its negligence caused plaintiff’s damages. The Court determined that the evidence was sufficient to establish that plaintiff proved its malpractice claim for damages based on the legal expenses it incurred because of defendant’s incorrect advice. But for this advice, plaintiff would not have continued incurring legal expenses in an attempt to prove its counterclaims. However, plaintiff should not have recovered damages based on the business losses it sustained. As a matter of law, defendant’s advice regarding the insurance coverage was not the legal, or proximate, cause of plaintiff’s claimed business losses. Although defendant could have reasonably foreseen that plaintiff would make business decisions based on defendant’s advice, the actual harm plaintiff suffered because of those business decisions was not within the scope of the risk created by defendant’s negligence. The case was remanded for a new trial, limited to determining the amount of damages plaintiff incurred in continuing to pursue its counterclaims against the contractor after receiving incorrect advice from plaintiff.

Summary and full case available here, courtesy of The Colorado Lawyer.

Frederick Skillern: Real Estate Case Law — Lawyers and Professional Liability

Editor’s note: This is Part 14 of a series of posts in which Denver-area real estate attorney Frederick Skillern provides summaries of case law pertinent to real estate practitioners (click here for previous posts). These updates originally appeared as materials for the 32nd Annual Real Estate Symposium in July 2014.

frederick-b-skillernBy Frederick B. Skillern

Gibbons v. Ludlow
Colorado Supreme Court, July 1, 2013
2013 CO 49

Professional negligence; transactional “case within the case”; causation of damage; “better deal” test.

This case was mentioned in last year’s “supplement” to our outline, and is repeated here for convenience, as it is an important case in the professional liability circles. It involves liability claims against both brokers and transactional attorneys, and the key element of causation. If one is negligent in advising a client in a transaction, and the client gains less from a deal than is anticipated, must the plaintiff prove that a “better deal” could be had? The court is required to find the analog to the “case within a case” that is tried in legal malpractice actions arising out of the litigation process. Although the case addresses the liability of a seller’s broker, the same principles apply to a claim against a seller’s attorney.

The trial court answered the presented question affirmatively, and dismissed a negligence claim against the seller’s broker on summary judgment. The court of appeals reversed, but the supreme court reverses and reinstates the summary judgment ruling. To sustain a professional negligence claim against a transaction real estate broker (or attorney), a plaintiff must show causation of damage, in addition to negligence. That is, it must be shown that but for the alleged negligent acts of the broker, the seller either (1) would have been able to obtain a better deal in the underlying transaction, or (2) would have been better off by walking away from the underlying transaction. In the court’s view, the sellers failed to present evidence that any negligence of the broker caused the seller to suffer damage. They did not establish beyond mere possibility or speculation that they suffered a financial loss as a result of the transactional broker’s professional negligence. Because no injury could be shown, the trial court properly granted summary judgment as a matter of law.

The underlying deal was documented in a contract with a set price, with adjustments for construction of infrastructure and cost-sharing with other developers. The sellers claim that the brokers failed to explain that the net income from the transaction could be substantially less than the stated purchase price as a result of the cost-sharing provisions. The brokers argued that their sellers submitted no evidence that they could have sold the property to someone else for more. This is termed the “better deal” test. The sellers respond that they presented evidence that the property was worth the contract price, or $1.6 million more than the net proceeds of the deal. They argue that they can recover in negligence for this “no deal” scenario. The court of appeals agreed and held that the general measure of damages for a total loss of property is the fair market value of the property at the date of loss. In effect, the Supreme Court says — you must prove you could have sold the property for more, or that you would have made more had you walked away from the deal.

 

Baker v. Wood, Ris & Hames

Petition for Writ of Certiorari GRANTED February 3, 2014.

Summary of the Issues:

  • Whether the court of appeals erred in determining that third-party intended beneficiaries of a deceased testator’s estate plan lack standing to pursue a claim for professional malpractice against the testator’s estate planning attorneys based on either breach of contract or professional negligence.
  • Whether the court of appeals erred in confusing petitioners’ claim for fraudulent concealment with the distinct tort of fraudulent misrepresentation in applying the heightened pleading requirements of C.R.C.P. 9(b) to petitioners’ concealment claim as if it were a claim for fraudulent representation.
Frederick B. Skillern, Esq., is a director and shareholder with Montgomery Little & Soran, P.C., practicing in real estate and related litigation and appeals. He serves as an expert witness in cases dealing with real estate, professional responsibility and attorney fees, and acts as a mediator and arbitrator in real estate cases. Before joining Montgomery Little in 2003, Fred was in private practice in Denver for 6 years with Carpenter & Klatskin and for 10 years with Isaacson Rosenbaum. He served as a district judge for Colorado’s Eighteenth Judicial District from 2000 through 2002. Fred is a graduate of Dartmouth College, and received his law degree at the University of Colorado in 1976, in another day and time in which the legal job market was simply awful.

What to Do When You’ve Made a Mistake – A Five-Minute Mentor Video

Every week this month, in celebration of Legal Professionalism Month, the Colorado Bar Association will share a tip on professionalism.

This week, attorney and CBA Young Lawyers Division Chair-elect Emma Garrison discusses the inevitability of making a mistake at some point in your career, and, more importantly, once you do err how to correct it.

Colorado Court of Appeals: Employees of State Public Defender’s Office Are Public Employees under the Colorado Governmental Immunity Act

The Colorado Court of Appeals issued its opinion in Wallin v. McCabe on August 18, 2011.

Malpractice—Notice of Claim—Colorado Governmental Immunity Act—CRS § 24-10-109—Public Employees—Public Defender—Subject Matter Jurisdiction—Attorney Fees—C.R.C.P. 12(b)(1).

Plaintiff Oloyea Wallin appealed the trial court’s judgment dismissing his complaint and awarding attorney fees in favor of defendants, deputy state public defenders Janene McCabe and Sean McDermott. The judgment was affirmed.

Following his conviction in January 2004 of second-degree assault, Wallin filed a complaint in April 2008, alleging that his trial counsel, McCabe and McDermott, committed malpractice and negligence while representing him. The trial court dismissed Wallin’s complaint and entered judgment for attorney fees in favor of McCabe and McDermott.

Wallin contended that the trial court erred when it dismissed his complaint for failure to file a notice of claim pursuant to CRS § 24-10-109(1). Employees of the state public defender’s office are employees of a public entity and, therefore, are “public employees” under the Colorado Governmental Immunity Act. Because Wallin did not file a notice of claim pursuant to § 24-10-109(1), the trial court lacked subject matter jurisdiction to hear the case. Accordingly, the trial court did not err when it dismissed Wallin’s complaint for failure to file a notice of claim pursuant to § 24-10-109(1).

Wallin also contended that the trial court erred when it dismissed his claim for a declaratory judgment. Because Wallin’s complaint did not allege a claim arising under any contract, statute, or other written instrument, the trial court properly ruled that declaratory relief was unavailable.

Wallin further contended that the trial court abused its discretion when it awarded attorney fees to McCabe and McDermott, because they did not incur any attorney fees and because the state public defenders are not state employees and did not receive “automatic representation by the attorney general.” The trial court had dismissed Wallin’s tort claims brought against McCabe and McDermott pursuant to C.R.C.P. 12(b)(1) on the ground that the claims were barred by governmental immunity. Because the trial court properly dismissed Wallin’s complaint pursuant to C.R.C.P. 12(b), it did not abuse its discretion in awarding attorney fees to McCabe and McDermott.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on August 18, 2011, can be found here.

Hanging Your Shingle: Turning Your Plan Into Your Practice

You might be going out on your own, but that doesn’t mean you have to do everything solo.

Opening your own law firm can be the most rewarding and most challenging endeavor you’ll encounter in your career. So why go it alone?

The popular CBA-CLE program is back this year, and learning about the ins and outs of going solo has never been easier!

Our experienced faculty is made up of attorneys and professionals who have either been in your shoes or who have helped attorneys just like you, and they will walk you through the process – from deciding to hang your shingle to actually doing it – with valuable ethics lessons and precautions all along the way.

The keynote presentation, Solo by Choice, will be given by Carolyn Elefant, Esq.. Carolyn has been a resource, an advocate, and an inspiration to lawyers around the country who are either currently solo or considering solo. Her blog, My Shingle, is one of the most popular resources for solo lawyers online and she’s grown it while practicing energy law – as a solo, of course!

Topics of the program will include:

  • Setting Up Your Office
  • Choice of Entity
  • Developing a Business Plan
  • Managing Your Malpractice Exposure
  • Ethics
  • Practice Management
  • Marketing
  • Bookkeeping, Record Keeping, and Billing
  • Trust Account Management
  • And a Panel Presentation “From the Trenches” – Let these attorneys tell you what they wish they had known when starting out – benefit from their experience and advice!

Also, back by popular demand is the half-day Saturday session on technology – your first partner in hanging your shingle.

Don’t miss this excellent opportunity to learn not only the fundamentals of going solo, but how to develop your practice into a success!

CLE Program: Hanging Your Shingle

This CLE presentation will take place Thursday, August 18 through Saturday, August 20. Participants may attend live in our classroom or watch the live webcast.

If you can’t make the live program or webcast, the program will also be available as a homestudy in three formats: video on-demand, mp3 download, and audio CD recordings. The course materials will also be available.

Colorado Supreme Court: Initial Consultation with Attorney to Discuss Potential Civil Lawsuit Not Sufficient for Negligent Misrepresentation Claim

The Colorado Supreme Court issued its opinion in Allen v. Steele on May 9, 2011.

Negligent Misrepresentation—Prospective Client—Existence of Attorney–Client Relationship.

The Supreme Court held as a matter of law that an initial consultation with an attorney to discuss a potential civil lawsuit is not sufficient to meet the element of “guidance of others in their business transactions.” Because plaintiffs did not plead sufficient facts to demonstrate that an attorney provided them with false information as guidance in a business transaction, plaintiffs failed to state a claim of negligent misrepresentation for which relief can be granted.

The Court also held that a claim of negligent misrepresentation may not be founded on the requirement in Restatement (Third) of The Law Governing Lawyers, § 15(1)(c) that attorneys owe a duty of reasonable care to prospective clients. Accordingly, the Court reversed the court of appeals’ decision that plaintiffs stated a claim of negligent misrepresentation for which relief can be granted.

Summary and full case available here.

Colorado Supreme Court: Trust Fund Statute Claims May Be Assigned, Except for the Right to Collect Treble Damages

The Colorado Supreme Court issued its opinion in People v. Adams on November 30, 2010.

Assignability of Trust Fund Statute Claims—CRS § 38-22-127—Unauthorized Practice of Law Review by Supreme Court—C.R.C.P. 237—Injunction.

The Supreme Court’s Unauthorized Practice of Law Committee approved the initiation of injunctive proceedings against David Adams in September 2008. After a response from Adams, the Court remanded the matter to a Special Master, the Presiding Disciplinary Judge (PDJ). Following an evidentiary hearing, the PDJ determined that Adams had engaged in the unauthorized practice of law and recommended an injunction, a fine, and imposition of costs. Adams contested the PDJ’s recommendations.

Adams is not licensed to practice law in the state of Colorado. From 2004 through 2007, he operated a collection business and attempted to receive assignments from subcontractors and thereby collect debts the subcontractors were owed by contractors. The subcontractors signed agreements assigning their debts to Adams in exchange for his promise to pay them 50 percent of any recovery. Adams and his clients signed three versions of these agreements.

Using these purported assignments, Adams filed claims pro se on his behalf in several Chapter 7 federal bankruptcy court cases. In each case, Adams asserted claims under the Colorado Trust Fund Statute, CRS §38-22-127, and sought treble damages under the statute’s incorporation of the Civil Theft Statute, CRS §18-4-405. The bankruptcy courts dismissed Adams’s claims, ruling that he was not the real party in interest because the subcontractors’ debts had not been properly assigned to him. In In re Thomas, 387 B.R. 808 (D.Colo. 2008), the U.S. District Court held that claims under the Colorado Trust Fund Statute are not assignable on a contingency-fee basis for collection purposes.

The Supreme Court concluded that Trust Fund Statute claims may be assigned, with one exception: the right to collect treble damages under CRS §38-22-127(5) cannot be assigned. The Court determined that the claims Adams pursued in federal bankruptcy court were not based on valid assignments. Adams engaged in the unauthorized practice of law when he pursued these claims in a representative capacity on behalf of his subcontractor clients. The Court adopted the PDJ’s recommendation that Adams pay costs in the amount of $3,029.91 and permanently enjoined Adams from further practicing law without a license.

Summary and full case available here.

Podcast: Risk Management and Ethical Advice

Each year, we host several day-long programs on preventing legal malpractice. This year, Gawain Charlton-Perrin, a Risk Control Consultant Attorney with CNA Global Specialty Lines, presented on Risk Management and Ethical Advice. It was so popular, we thought we’d share it.

If you’re interested in the full program, it is available for purchase on our website as an MP3, video and CD.

You can download this session here.