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Ch. 7 Defenses & Obstacles to Recovery

Ch. 7 Defenses & Obstacles to Recovery

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Ch. 7 Defenses & Obstacles to Recovery

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  1. Ch. 7 Defenses & Obstacles to Recovery Contributory Negligence, Comparative Negligence & Comparative Fault

  2. Flyover Review of Evolving Tort Law • Contributory Negligence: bars recovery, but limited application to negligence cases. Reforms since 1970s: abandoned everywhere but Ala., N.C., Va., Md. • Comparative Negligence (‘70s) a. Pure regimes: reduced recovery corresponds exactly to P’s % of total negligence • Modified regimes, local variations: i. Bar recovery if P’s negligence ≥ (“greater than or equal to) to D’s, or ii. Bar recovery if P’s negligence > (“more at fault than”) D’s. c. 12 O.S. §§13-14 combined: interpreted as modified comparative where recovery allowed if D more at fault than D and any recovery reduced by amount of P fault. (Professor Meazell) • Comparative Fault (‘80s-90s): broadened reach (negligence, recklessness, strict-liability, failure to mitigate, but not intentional torts)

  3. 1. Conduct Contributing to P’s Harm Arnov. Indus., Inc. Retirement Trust v. Brown, Raysman, et. al. (NY 2001)(client’s failure to read carefully document before signing did notbar recovery, where L erroneously stated final document only changed to correct one typo; client’s “culpable conduct” is affirmative defense that must be pled and proven by D L) N.B. 2 serious errors by L: misstatement on extent of changes from prior draft ($$$M loss); jurisdictional filing error ($100K loss, voidable preference in bankruptcy)

  4. Problem 7-1 The Lawyer as Client ·What issues must be resolved to predict success of LM action? ­What liability regime? (C.N., Comparative, fault or modified C.N.) ­What impact that Cortez “knew or should have known” that his LM defense L d/n raise “complete defense”? ·Is sophistication of Cortez, as L in LM action, relevant in assessing comparative fault? (reasonable care “under the circumstances”?)

  5. 2. Avoidable Consequences & Failure to Mitigate • Mitigation principle: recovery reduced by losses that could have been avoided by exercise of reasonable care after the breach • Borley Storage & Transfer v. Whitted (Neb. 2006) Facts: Installment contract to sell business included both perfected security interest (lapsed after 5 years) and personal liability of buyers. B’s defaulted; in bankruptcy junior lienholder prevailed b/c no timely filing of continuation statement) Holding: affirmed defense verdict; no tr. ct. error (B’s personally liable on promissory note; S’s failure to mitigate; admission of financial statements showing B’s ability to pay judgment)

  6. Borley Storage & Transfer, Inc. v. Whitted • When did L/Cl relationship end? Whose responsibility was it to address need for filing of continuation statement before end of 5 yrs? • Significance of payments extending over 10 yrs? • If C informed before closing of sale, does L have duty to remind former C as 5 yr deadline approached? • Preventive: termination letter from L w/ clear notice • Why did S’s NOT seek to enforce B’s personal liability on promissory note?

  7. Problem 7-2 The Flawed Trust Joint estate plan (A&B Trusts). Drafting error precluded widow Claire from accessing Trust B (life estate, remainder interests) Mitigation principle & possible reformation: Time frame: 6 months after Chase’s demise? Vs. later, when C replaced L with Newly? LM burden of proof on failure to mitigate?? Relevant evidence? Malpractice prevention lessons at time of drafting? Loss prevention lessons when realize mistake?

  8. B. Unlawful Conduct Defense1. In General • Rstmt of Torts (2d, 1979) §889: one is notbarred from recovery for an interference with his legally protected interests merely because at the time of the interference he was committing a tort or a crime. [Rejects so-called “Outlaw Rule”] • Barker v. Kallash (NY 1984): recovery barred if P injury is 1) direct result 2) of knowing participation 3) in a serious criminal act 4) involving prohibited (not merely regulated) conduct.

  9. 2. Exoneration or Innocence Reqt in Criminal Defense LM • Caanan v. Barte (Kan. 2003) follows strong Maj. Rule: successful postconviction relief as prerequisite to recovery; some juris. also require showing of actual innocence. Rstmt LGL §53 Cmt. d. rejects need for actual innocence. • Policy justifications: equitable; practical difficulties re causation & damages; judicial economy; chilling effect on defense counsel (defensive lawyering) • Stat. of limitations: • One track: first set aside conviction, then file LM • Two track: simultaneously pursue postconviction relief & LM · Min. View does not require exoneration (Ala., Ind., Mich., N.M., Oh.) ·Criticisms, basis for current challenges to exoneration rule?

  10. B. Unlawful Conduct Defense • Recovery of unpaid fees may be barred by state law on Unauthorized Practice of Law (UPL) • N.B. Lawyer/firm action to collect unpaid fee often prompts LM counterclaim. • Birbrower (CA 1994) BROADLY interpreted UPL (NY L’s who participated in arbitration engaged in UPL; barred from recovering unpaid fees). • Caused shockwaves throughout U.S., prompting nationwide reforms. See ABA RPC 5.3 (multijurisdictional practice) • Globalization of LP: pending Ethics 20:20 considering international crossborder practices & UPL

  11. Problem 7-3 Client Fraud on Investors • LM defense arguments that C’s unlawful conduct bars recovery? -Does any state law (statutory or common law) bar recovery on facts? E.g., Saks v. Sawtelle (Tex. App.—San Antonio 1994) **See, Heyman v. Gable Gotwals, et al., 994 P.2d 92(Okla. Civ. App. 1999) cert. den’d(as matter of law, clients’ fraud in underlying transaction barred LM claim) -Is C’s conduct criminal under securities law (fed. or state?) -Policy: should unlawful conduct rule extend to cases where C engaged in civil fraud (not crime) Importance of C MP complaint alleged L recommended or participated in fraudulent conduct serving basis for C’s liability to investors?

  12. Problem 7-3 (cont’d) (b) Impact of C’s settlement of underlying c.l. fraud claim w/ investors? Duty to appeal rather than settle? Likelihood of success? Hewitt v. Allen (Nev. 2002)(not if appeal would be futile gesture; failure to appeal as affirmative Defense, BOP on D L; likelihood of success Q of law for ct) American Reliable Ins. Co. v. Navratil (5th Cir. 2006)(no per se bar from settlement)

  13. Problem 7-3 (cont’d) (c) Importance of whether C’s LM complaint alleges L recommended or participated in underlying fraudulent conduct on which jury verdict based? - in paridelicto? Were C & L equally at fault? • Cf.Rstmt LGL §51(2), Vanguard Production v. Martin (10th Cir. 1990)(under Okla. Law, L risks liability to non-client investors who foreseeably rely on L’s opinion letter). Q: does L’s risk of liability to nonclients affect L’s LM liability to C?

  14. C. Malpractice Statutes of Limitations • Matter of state substantive law. Time bar depends on nature of claim. See, e.g., 12 O.S. § 95: ·action on written K: 5 years ·action on unwritten K, or statutory liability o/than forfeiture or penalty: 3 years ·most tort actions: 2 years after accrual (but fraud d/n accrue until discovery) ·libel, slander, assault, batter or malicious prosecution: 1 year N.B. Must research caselaw interpretations of statute

  15. C. Statutes of Limitations 1. In General Accrual: C/a accrues and s. of l. begins to run when litigant first could have maintained action to successful conclusion (i.e., fact of injury becomes certain). Distinction between occurrence & discovery. See, Marshall v. Fenton, Fenton, Smith, et al., 899 P.2d 621 (OK. 1995)(same); Stephens v. GMC, 905 P.2d 797 (Ok. 1995)(inj. complete after final appeal of underlying case); Smith v. Layton, 170 P.3d 1046 (Ok. Civ. App. 1046 2007)(date of settlement & release in underlying action)

  16. C. Statutes of Limitations 2. Tolling Discovery Rule: When did client know or reasonably should have known/been aware of facts sufficient to put reasonable person on notice of injury? Humphreys v. Argabrite(6th Cir. 2006)

  17. C. Statutes of Limitations 2. Tolling • Continuous Representation Rule (to soften harsh effects of occurrence rule) • DeLeo v. Nusbaum(Ct. 2003)(P shows 1) continued repre’n on same matter AND 2) either P d/n know of facts > alleged LM or L could still mitigate harm) • General relationship v. specific matters (courts vary; rsnble C expectations?)

  18. C. Statutes of Limitations 2. Tolling • Continuous Representation Rule: hidden danger of attempting mitigation: lawyer’s ongoing efforts to cure may trigger continuous representation rule, extend running of limitations period. • Fraudulent concealment: where P presents some evidence of secretive, furtive, or deceptive action designed to conceal existence of a fraudulent act. (e.g., cut & paste court date-stamp onto document never filed; L engaged in cover-up). Subj. to discipline + LM claim + tolling.

  19. C. Statutes of Limitations 2. Tolling • Ranier v. Stuart & Freida, 887 P.2d 339 (Ok. Civ. App. 1994)(matter of 1st impression, applying continuous representation rule; under particular facts, C had no knowledge of any harm suffered until underlying judgment affirmed on appeal; 2 year limitations period then began to run)

  20. C. Statutes of Limitations 15. O.S. §95(A)(1): 5 years for action on written contract Great Plains Federal S & L & Loan Ass’n v. Dabney, 846 P.2d 1088, 1092 (OK. 1993) “[W]here the parties have spelled out the performance promised by D & D commits [to same w/o reference] to general standard, a contract theory [is viable, regardless of negligence]. Ok Civ. App. Unpublished opinion (4/10) found case factually indistinguishable.

  21. Cf. LM based on Written Contract • Abramson v. Wildman, 184 Md. App. 189, 964 A.2d 703 (2009)(allowing restitution for legal fees based on written provision in retainer to “be both sensitive and professionally responsive to the client’s situation in a custody dispute.”

  22. C. Statutes of Limitations 2. Tolling • Cline v. Geary, Case No. 105,430 (Ok. Civ. App. 2008), pending on appeal Facts: Underlying claim voluntarily dismissed w/o prejudice 10/12/99; 12 O.S. 2001, §100 allowed 1 year to re-file. Change in counsel; Geary retained 9/8/2000, re-filed suit 10/13/2000 (1 day late). Tr. Ct. dismissed 2/4/03, Ok. S.Ct. denied cert., mandate issued 2/23/04. LM filed 4/22/05.

  23. Cline v. Geary (pending on appeal) • Civ. App.: S. of L. began to run when C 1st knew, or should have known, it had been damaged by L’s actions (3/21/03). LM filed 4/22/05 filed more than 2 years after than date, and is time barred. No basis to toll running of limitations period when C KNEW tr. Ct dismissed underlying claim.

  24. D. Non-Assignability of Legal Malpractice Claims • General c.l.: c/a assignable if it survives death of P. • Common: p.i., large P verdict; D assigns to P c/a bad faith claim v. insurance carrier (refusal to settle w/in policy limits). Assignment enables successful p.i. claimant to seek recovery v. carrier.

  25. D. Non-Assignability of Legal Malpractice Claims Legal Malpractice: strong plurality of modern courts find these claims are not assignable. Rationale: 1. Duty of loyalty: remove incentive for P in underlying action to offer cheap settlement w/ assignment of potential LM claim (drive wedge between D & L in underlying action).

  26. D. Non-Assignability of Legal Malpractice Claims 2. Assignment would impair L’s duty of confidentiality owed to C. Assignment would transfer to assignee control over confidential or privileged information, while L’s self-defense exceptions to RPC 1.6 and ACP survive. (C loses personal choice to drop LM claim in order to protect confidential or privileged info.)

  27. D. Non-Assignability of Legal Malpractice Claims • Financial incentives of assignee may erode public confidence in legal system? Gamesmanship. • Kommavongsa(Wa. 2003) Maj. non-assignable; better for C to pursue LM and then assign judgment. Dissent: hypocritcal decision immunizes lawyers (but not other professionals) under false rubric about access to justice.

  28. Problem 7-6 A Deal With One of the Defendants Top (clerk for LM plaintiff firm) suggests: offer A sweet deal in exchange for testimony against B. Sweet deal: after litigation ends, 1) A to pay P/C $10K; 2) C agrees not to collect any jdgmt rendered v. A and to refund 50% of any sums over $25 K collected on jdgmt v. B. WHAT IS WRONG WITH THIS PICTURE?

  29. Problem 7-6 A Deal With One of the Defendants • Is this prohibited assignment? “Mary Carter” agreement (seen in torts, securities?) When P settles w/ 1 D & goes to trial v. remaining D(s). Although settling D remains a party and guarantees P a minimum payment, amount m/b offset by excess jdgmt at trial. Prob.: Great incentive for settling D to ensure P obtains large recovery. 2. Repeat, WHAT’S WRONG WITH THIS PICTURE? (illegal inducement to fact W; suborning perjury?)

  30. E. Joint Liability & Reimbursement • Traditional joint & several liability would allow collection efforts v. each tortfeasor for full amount of liability, provided that P c/n collect more than total liability. Recovery v. one tortfeasor allows that D right of contribution or reimbursement against others. • Text: Comparative liability principles have made much more complicated. Prof. Meazell agrees. Maute hypothesis: real issue in states w/ many lawyers, developed LM law (bicoastal: NY, CA; and TX).

  31. F. Releases & Covenants Not to Sue Distinction: Release (as part of settlement agreement): gives up right to sue for any claims described in release, v. any potential D’s named therein. RT2d § valid release of one tortfeasor d/n discharge others liable for that harm, unless o/w agreed. Covenant not to sue: contractual promise, breach of which may be actionable.

  32. Problem 7-7 The Wrongful Incarceration Release • Were State and Lang joint tortfeasors? Traditional tort rules find joint & several liability if indivisible harm caused by multiple tortfeasors; concerted action or vicarious liability) • State: false imprisonment • Lang: allegedly negligent representation Modern revisions take into account comparative negligence or fault. Problem silent on state law.

  33. Problem 7-7 The Wrongful Incarceration Release • Did release signed by Cox also forfeit his rights v. Lang, appointed criminal defense counsel? Rstmt Torts (2d) §885 “valid release of one tortfeasor …does not discharge others liable for the same harm unless it is agreed that it will discharge them.” McMillin (Tex. 1971)(release extends only to tortfeasors named or o/w specifically identified in document)

  34. Problem 7-7 The Wrongful Incarceration Release • If Lang held liable for LM, his liability is subject to credit for amounts paid by state, if State is treated as joint tortfeasor. • Possible immunity of Lang as either Public Defender or Court-Appointed Counsel. Cases split on both P.D. & Ct-apptd. • Absolute immunity for P.D.: Tenn., Conn., W. Va. But not Cal. • Okla.: unclear. 22 O.S. §1355 11th Am. Immunity for OIDS; 19 O.S. §215.1 may confer absolute prosecutorial immunity under 11th Am. McDonald, 2009 WL 884569 (E.D. Okla.)(unpublished; dismissed vague complaint)

  35. H. Pre-Dispute Arbitration Agreements ABA F. Op. 02-425 (2002) permissible in retainer, provided C fully apprised of advantages & disadvantages of arbitration & given informed consent to its inclusion in retainer. N.B. No binding effect; worth paper it’s written on & quality of reasoning. What clients are capable of giving informed consent, REALLY?

  36. H. Pre-Dispute Arbitration Agreements Courts split on enforceability. Compare, e.g., LaFleur v. Buzbee(LA. Ct. App. 2007)(unenforceable contract of adhesion, lacked mutuality of obligation – binding on C/injured maritime worker, but not L) and In re Akin Gump Strauss Hauer, 252 S.W. 3d480(Tex. App.-Hous. 2008)(affirmed tr. ct confirmation of arbitration award btween firm & sophisticated corporate client)