How a Legal Malpractice Case Value is Determined
Factors Affecting the Value of a Legal Malpractice Case
The factors that affect the value of a legal malpractice case include the quality of the legal work, the amount of damages suffered by the client, as well as any factors that reduce or enhance the damages. A portion of the value is a function of the legal work, the other portion relates especially to the timing of the submission of the case. Non-economic damages may be claimed, for instance emotional distress. See, for instance Seigel v. Tucker, Mastrandrea & Connerton, LLP 101 AD3d 1449; 4th Dept, 2010 Oct 15, 2010; 2010 NY Slip Op 07012. There, plaintiff alleged that defending a criminal case led him to be incarcerated with charges of assault and robbery. Plaintiff’s complaint alleging legal malpractice states a cognizable cause of action since it has sufficiently stated a valid cause of action to recover damages for legal malpractice (see AmBase Corp. v Davis Polk & Wardwell, 8 NY3d 428, 434 [2007]; see also Roni LLC v Archer & Greiner, P.C., 12 NY3d 315, 318-319 [2009]). We note that this case is not here for determination of whether plaintiff’s allegations were established, but only to determine if they are good enough to get them into court. Thus, since plaintiff alleges the existence of an attorney-client relationship, the failure to procure a favorable result, litigation expenses, and damages which flow from the alleged legal malpractice, he has sufficiently stated a claim . But see Purificacion Realty Group, LLC v Kasowitz, Benson, Torres & Friedman, LLP, 43 AD3d 493, 843 N.Y.S.2d 224, (2nd Dept. 2007) where the history of the case litigation led to dismissal, not to a result. However, the damages issue is one of valuation. Ascertaining the damages or value may be a difficult task in legal malpractice. It is probably best to deal with each separately. For instance, plaintiff in Dombrowski v Markham 101 AD3d 1531; 4th Dept, 2010 November 5, 2010 is awarded $180,000. However, when the court attaches that number to the "value" of a legal malpractice case, it shows that the damages in that case were $180,000, but the value was $900,000. The award of lost rents, totaling $180,000, is against the weight of the evidence. The evidence indicates that, in addition to the delinquent taxes owed on the subject property, plaintiff was liable for a mortgage foreclosure action brought by the CMBS Trust, for a total judgment of $955,000. Assuming that defendant [*2]was negligent in permitting the collateral for this loan to be sold without notice to plaintiff and plaintiff’s counsel, the $180,000 award for lost rents for the five-month period between payment of the delinquent taxes and defendant’s discovery of the sale of the subject property is speculative and lacks an adequate evidentiary basis, especially in light of plaintiff’s own ineffectual attempts to preserve its interest in the collateral for the CMBS Trust loan.
How Economic Damages are Valued in a Malpractice Action
There are also economic damages, for legal malpractice these damages are assessed in dollars. It is not enough to have the jury ‘think big’ about how bad it all was. The amount of money that plaintiff has lost must be given them by plaintiff, and it has to be a reliable basis, that is close to the truth as possible, from which the jury can calculate the damages. It is not enough that there was a legal error which took away some rights, plaintiff has to show what was lost by relying upon the negligent conduct of the attorney.
Lost earnings, lost future earnings, the legal expenses of the defense lawsuit or appellate litigation are all factors. Sometimes there is the loss of other business opportunities. These are usually expert witness determined values. They are not easily calculated and often require extensive study of the financial affairs of the parties before the malpractice and how the malpractice negatively affected the business or personal finances of plaintiff.
How Non-Economic Damages are Valued
Assessing Non-Economic Damages: Valuing the Less Tangible in Legal Malpractice
Attorneys involved in a legal malpractice matter understand that quantifying the exact value of an outcome where the primary issue is whether the lawyer had committed malpractice can be difficult. Is there an objective method of determining whether our client is better off with the sought after result achieved?
Once the legal malpractice has happened, the client is left to try to quantify the impact of the wrongful act. Personal Injury cases are easily quantified. If the injury had been alleged and the attorney had been able to obtain it, a $100,000.00 demand becomes what it would have been worth after the accident, clearly giving the jury a tangible figure upon which to consider the "correct" outcome. When the case amounts to that of a lost business opportunity, however, the damages becomes harder to quantify.
The damages are even more difficult to quantify when the subject of the case becomes the intangible. When the focus of the case is self-esteem, or a damaged reputation, what does the jury do in their deliberation room to assign value to the damage which our client has suffered? How does the wrongfully-convicted man find value in the years his reputation has been ruined as the jury deliberates?
Because of the difficulty involved in assigning value to the less quantifiable damages (such as continued humiliation, emotional distress, lost opportunities due to damaged reputation etc.), the jury relies on the expert testimony of the plaintiff’s lawyer to define the extent of the damages for them. The jury needs to hear exactly how the alleged legal malpractice has impacted the client’s life, and how it has affected the damaged clients’ ability to be fulfilled and successful in personal and career goals.
Insurance and its Role in Legal Malpractice Actions
Malpractice insurance policies will either significantly influence the Outcome of the case, or determine the case in its’ entirety. Usually, carrier policies will limit the total value of the malpractice case to the policy limit; that amount is commonly the highest amount the carrier will pay to settle the case, and/or the lowest amount they will agree to be responsible for if a verdict is entered. The policy limits are significant Threshold amounts, as all of the negotiations will gravitate towards this number as the "Starting Point". Thereafter, the insurance carrier and their adjuster will attempt to lock in settlement amounts that are much lower than policy limits; those amounts are lower than the full value of the case, but much higher than what the plaintiff attorney may consider, and thus, the "negotiation" begins . The very first thing a plaintiff attorney who has filed a legal malpractice case should do is to identify whether or not the defendant attorney is insured. That information along with the policy number should be sent to the carrier or to the defense attorneys for notice under the policy in order to protect the client’s interest. If the policy has been issued by an independent insurance carrier, and if a plaintiff has filed a lawsuit against a defendant attorney then that carrier cannot force the defendant to accept defense counsel of its choosing. The defendant has the right to choose his/her own attorney, and the carrier cannot prevent him/her from doing so. Any agreement that the carrier made with its insured does not interfere with the plaintiff’s claims and the plaintiff’s rights do not depend upon the rights of the defendant.
Examples of Legal Malpractice Settlements
The cases below illustrate the range of settlements and judgments available in legal malpractice cases. Often, the value of the case turns on the negligence involved. There are aberrant cases, but more often, the circumstances for recovery fit into the pattern set by these examples.
$75,000
In the case against the attorney who failed to disclose an experimental Dalkon Shield birth control device which caused economic and emotional damage.
$100,000 Payment to settle an action against a law firm that filed an administrative action, thus eliminating the client’s right to a jury trial in an employment matter.
Plaintiff brought suit against her former employer in federal court for sex and religious discrimination. Defendants’ attorney failed to file a properly verified complaint and an anti-SLAPP motion within the statute of limitations. Plaintiff later discovered her attorney’s errors and sued him for malpractice. A jury returned a verdict for plaintiff for $368,000 compensatory damages and $550,000 punitive damages. The court denied defendant’s motion for JNOV and denied plaintiff’s motion for prejudgment interest. Plaintiff filed an appeal challenging the denial of prejudgment interest, and defendant filed a cross-appeal challenging the award of punitive damages.
$300,000 cash settlement and dismissal of action to recover proceeds from national class action litigation alleging defects in Toyota Prius braking system and cases alleging national environmental impact, and wrongful denial of insurance under long term care policies, and failure to provide continuing coverage for long term care services.
$400,000 and dismissal of action. Suit against attorney who represented client in action against his partners for partner "buy-out" and over-payment of a large bonus.
What Should You Do if You Think You Have a Legal Malpractice Case
If you have a problem with a law firm or a sole practitioner, the first step is to obtain your client file and study it. You should ask for all correspondence in and out, all pleadings, a copy of the retainer agreement and any bills which are outstanding. Many times clients find what they consider to be errors in billing and then must conduct their own detailed review of the file to see if they are being over charged or if time entries are actually duplicating efforts. After that, a review of the facts of the underlying matter should occur. Was the case handled timely with respect to the Statute of Limitations? Was the underlying matter done with skill and care provided formally by a litigation, appellate and trial attorney , or whether the work was done by a junior associate? Is there evidence of negligence, and was the negligence the cause of the loss? It is often helpful to copy experts who can provide advice on the issue of negligence (an experienced attorney in the same field who can compare the work and practice at the time with that which the attorney exercised). Also, a malpractice attorney could be invaluable in addressing the issue with an experienced eye. Marshall Dennehey attorney David DeStefano will be discussing these issues at the New Jersey Association for Justice Convention and Education seminars in Atlantic City next week. His lecture is entitled "Assessing the Value of a Legal Malpractice Matter."