The Massachusetts Supreme Judicial Court has reversed a Superior Court decision in favor of a law firm in a legal malpractice suit.
The plaintiff, Kiribati Seafood Company LLC, brought the legal malpractice claim against its former law firm, Dechert LLP, alleging that Dechert negligently failed to provide a French appellate court with the evidence it needed for Kiribati to prevail on a claim. Instead, the claim was denied.
A judge of the Superior Court initially granted summary judgment to Dechert and denied partial summary judgment to Kiribati. The judge determined that the French appellate court committed an error of law by requiring certain evidence and that, even if Dechert were negligent in failing to provide the needed evidence to the court, Kiribati could not recover damages for Dechert’s negligence because the court’s legal error was a superseding cause of the adverse decision.
The Massachusetts Supreme Judicial Court, however, concluded that an error of law under these circumstances is a concurrent, not a superseding, proximate cause and that the Superior Court judge erred in granting summary judgment to Dechert and denying partial summary judgment to Kiribati.
This case comes after Kiribati purchased a fishing vessel known as the Madee and chartered it to Olympic Packer LLC and Dojin Co. Ltd. to fish for tuna in the Pacific Ocean, according to the Massachusetts SJC decision document.
After the ship sustained damage to its rudder, it was placed in a dry dock in the Autonomous Port of Papeete in Tahiti to receive repairs. When the dry dock collapsed, the ship sustained damages so severe that it was deemed a constructive total loss by Kiribati’s port risk insurer, Certain Underwriters of Lloyd’s of London, according to the SJC decision document.
Kiribati then obtained two attorneys from Coudert Brothers LLP’s Paris office to file a lawsuit for damages against the port in the Commercial Court of Papeete. When these two attorneys left Coudert to join Dechert, Kiribati continued to retain them and transferred the representation to Dechert.
Lloyd’s paid Kiribati $1,763,803.71 on its insurance claim regarding the loss of the ship, which compensated Kiribati for some, but not all, of its losses, according to the SJC decision document. Lloyd’s then had a right of subrogation to recover that amount from the port.
In April 2004, Lloyd’s and Kiribati entered into a written agreement to prosecute Kiribati’s litigation in the commercial court. Kiribati sought to recover its losses that were not compensated by Lloyd’s, and Lloyd’s sought to recover through subrogation the amount it paid to Kiribati. As part of the agreement, Lloyd’s agreed to pay half of the attorney’s fees and costs associated with the litigation.
However, Kiribati contended that it was paying substantially more than its fifty per cent share of the legal fees in the litigation, and Lloyd’s was failing to pay its equal share. Kiribati also claimed Lloyd’s failed to pay it in full for the sue and labor and mitigation expenses it was entitled to under its policy.
To settle these and other disputes, in December 2004, Kiribati and Lloyd’s entered into a new agreement in which Kiribati released Lloyd’s from all outstanding claims, including its claims for unpaid attorney’s fees and sue and labor and mitigation expenses. In return, Lloyd’s assigned its subrogation claim to Kiribati.
In January 2008, the commercial court issued a judgment in favor of Kiribati and against the port. As part of the judgment, the court found that the assignment of the subrogation claim was signed abroad by two foreign registered entities without any specific agreement that French law would apply, so the validity of the assignment could not be determined under French law. The court concluded that it was valid under foreign law, and therefore, awarded Kiribati the full amount of the subrogation claim assigned to it by Lloyd’s – approximately $1.76 million. The port appealed from the decision to the Court of Appeals of Papeete.
Court of Appeals Decision
In its first appellate decision, issued in April 2010, the court of appeals affirmed most of the judgment of the commercial court but deferred a decision regarding its enforcement of the assignment of the subrogation claim. While the port claimed Kiribati was seeking a double compensation for the damages and an unjust enrichment, the court of appeals decided to defer any decision regarding this claim for compensation to allow Kiribati to prove the amount paid in consideration for the assignment by showing the actual price of the transfer.
After the first appellate decision, a Dechert attorney, Xavier Nyssen, advised Dennis Moran, an attorney in another law firm who was acting as Kiribati’s general counsel, that he needed evidence of the consideration paid by Kiribati for the assignment to address the court of appeals’ concern about double compensation.
On two separate occasions, Moran provided various documents to Dechert as evidence. This included a 2004 letter from Moran to Lloyd’s counsel demanding payment of Lloyd’s equal share of Coudert’s legal fees with attached payment records that demonstrated Kiribati had paid more of the attorney’s fees than Lloyd’s. It also included the December 2004 agreement between Kiribati and Lloyd’s with Kiribati’s release of all further claims on its Lloyd’s policy, correspondence identifying the various claims against Lloyd’s that Kiribati had released and an unsworn written statement by a Lloyd’s representative that declared the assigned subrogation rights.
Dechert, however, only submitted as evidence to the court of appeals the 2004 letter from Moran, without any of the supporting documentation regarding legal fees, and the unsworn written statement by the Lloyd’s representative, without the policyholder’s release or the correspondence identifying the released claims.
The port noted in its response that Kiribati had provided no proof that it paid attorney’s fees. With this in mind, another Kiribati attorney who was not associated with Dechert re-sent Nyssen the documents Moran had previously provided and informed Nyssen that he needed to submit the attorney’s fee payment records and the policyholder release. Despite this, Dechert did not provide these documents to the court of appeals.
In its May 2011 final decision, the court of appeals reduced the amount of Kiribati’s award by the amount of the assigned subrogated claim because Kiribati had failed to provide evidence of the financial compensation it paid for the assignment.
The court specifically noted Kiribati had failed to provide any evidence that it paid attorney’s fees or that it released Lloyd’s from legal claims.
Superior Court Decision
In July 2013, Kiribati brought this action against Dechert in the Superior Court of Massachusetts. It alleged, among other claims, that Dechert was professionally negligent in its prosecution of the assigned subrogation claim because it failed to present evidence the court of appeals had requested and that Dechert had in its possession, resulting in a loss for Kiribati of approximately $1.76 million.
The superior court judge determined the court of appeals had committed judicial error under French law by not allowing recovery of the $1.76 million assigned subrogation claim for lack of proof that it was not double compensation, according to the SJC decision document.
The judge also determined that, regardless of whether Dechert was negligent in its handling of the appeal and regardless of whether the court’s error of law was foreseeable, Dechert could not be found liable because the error of law by the court of appeals was a superseding cause relieving Dechert of any negligence in its representation of Kiribati.
Kiribati appealed, and the case was transferred to the Massachusetts Supreme Judicial Court on its own motion.
Supreme Judicial Court Decision
The Massachusetts Supreme Judicial Court stated in its decision that attorneys who enter into attorney-client relationships owe their clients “an obligation to exercise a reasonable degree of care and skill in the performance of [their] legal duties.”
Dechert argued that, where a court rules against a client based on a foreseeable error of law, the client’s attorney cannot be liable for failing to take reasonable steps to prevent or mitigate the consequences of that error by offering evidence that would enable the client to prevail even under the court’s erroneous view of the law, the SJC decision document stated. Dechert took the position that this is because in these circumstances, a court’s legal error will always be the proximate cause of the adverse judicial decision.
In the context of this case, Dechert argued that by correctly applying French law, it can be concluded that Kiribati should have prevailed without proof of the consideration paid for the assignment. Therefore, Dechert argued, any negligence in failing to provide that proof cannot be the cause of the lost $1.76 million.
“The fundamental flaw in this argument is that a plaintiff’s loss need not have only one proximate cause; there can be multiple concurrent proximate causes,” the Massachusetts SJC decision document stated.
The Massachusetts SJC added that when determining proximate cause in a legal malpractice action where there is an alleged error of law, it has to be determined whether the court that foreseeably made the error of law would have ruled in the client’s favor had the attorney taken reasonable steps to prevent or mitigate it.
“In the context of this case, where the court of appeals ruled against Kiribati because Dechert failed to submit the evidence it had been given that would have proved Kiribati’s disproportionate payment of attorney’s fees and its release of valuable claims against Lloyd’s, Dechert’s failure to provide the court with this evidence may be found to be the concurrent proximate cause of the court’s adverse decision,” the Massachusetts SJC decision document stated.
Therefore, the Massachusetts SJC decided that the Superior Court judge erred in ruling that Kiribati cannot prevail in this case.
“We conclude that Dechert’s failure to furnish the court of appeals with the documentation was so plainly negligent that no expert testimony is needed to establish it,” the Massachusetts SJC explained in its decision. “Dechert may have believed that the court of appeals was wrong as a matter of law, but Dechert could have enabled Kiribati to win on its claim even if the court of appeals persisted in requiring what Dechert contended was an unnecessary factual showing to justify enforcement.”
As a result of its analysis, The Massachusetts SJC reversed the Superior Court judge’s allowance of Dechert’s motion for summary judgment and his denial of Kiribati’s motion for partial summary judgment on its legal malpractice claim, and remanded the case to the Superior Court for proceedings consistent with its opinion.
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