Conventional Wisdom

By David M. Saperstein

They say don’t wear white after Labor Day.  They say don’t count your chickens before they hatch.  They say that the early bird gets the worm.

In the world of legal malpractice litigation, they also say things.  They say that a lawyer who is self-represented has a fool for a client.  They say not to agree to arbitration unless you want a result that will “split the baby.”  They say that a legal malpractice defendant cannot win a case on damages.

While the first of these legal malpractice aphorisms may be true, a recent arbitration experience suggests that the latter two pieces of conventional wisdom need revision.  Following a bitterly fought four day arbitration, our client emerged victorious when the arbitrator ruled that there was no basis to prove lost profits, that the Plaintiff could not recover rescissory damages, and that “the fundamental flaw” in the Plaintiff’s case was the inability to prove damages. 

We represented a commercial litigator who had prosecuted the underlying breach of contract case arising out of a New York buy-sell agreement.  Our client had filed the Complaint in federal court in Michigan alleging various contract and tort theories on behalf of the Plaintiff.  However, he later amended the Complaint and removed the separate count of rescission, as well as the request for rescission as a remedy for breach of contract.  Our client also admitted in briefing that lost profits were speculative.  After the trial court dismissed the case, the Plaintiff retained successor counsel who successfully appealed.  However, on remand, the trial court again dismissed the case.  The underlying case was settled for a fraction of the millions of dollars at issue.

The Plaintiff then retained malpractice counsel who filed a Complaint alleging that the underlying case had been fatally compromised by the Amended Complaint, and that although successor counsel did their best to salvage the case, the settlement would have been much larger but for the alleged malpractice of our client.  The Plaintiff’s case was bolstered by the testimony of a standard of care expert and successor counsel, who testified that our client had breached the standard of care. 

The decision to arbitrate arose from many factors, including the difficulty of obtaining a trial date during the COVID pandemic, the logistics of obtaining testimony from more than a dozen fact witnesses from the underlying case who resided out of state, and the cost of a trial.  Fortunately, both sides wanted a single arbitrator who would “call balls and strikes,” and stipulated to removal of the case from the court docket.

The difficult strategic decision was thematic.  While our client’s conduct was supported by our standard of care expert, continued review of the case reinforced the potency of the damages defenses.  How would the Plaintiff prove that it would have recovered lost profits in the underlying case when it was a new business without a track record?  How would the Plaintiff prove that it would have successfully been awarded rescission in the underlying case when it had reaped some benefits from the buy-sell agreement, even if other contractual promises had been admittedly dishonored?  Accordingly, damages became the centerpiece of our presentation of the case, despite the conventional wisdom.

Ultimately, every legal malpractice is unique.  Limiting strategy because of blind adherence to well-worn aphorisms, such as you can’t win a legal malpractice case on damages, does the client a disservice.  Every decision to go to trial (or arbitration) requires an assessment and balancing of risks.  The Plaintiff has the burden of proving that the underlying case would have succeeded.  If the strongest defense in the underlying case was damages, that may be the strongest defense in the legal malpractice case as well.

In this case, appropriate risk calculation by the LPL carrier, our client, and our firm led to a well-supported decision to contest the malpractice claim in arbitration, and to focus on damages as a primary defense.  The happy result was vindication for our client.