Six months after a three-judge panel of the Delaware Supreme Court said an insurance agency deserved another shot at proving its claims of professional negligence against a law firm, the full state high court has agreed.
On October 8, the Supreme Court en banc agreed with the panel that the Superior Court erred in granting summary judgment to the law firm Margolis Edelstein because there are questions of fact concerning whether the lawyers breached the standard of care for a Delaware attorney as alleged by its former client GMG Insurance Agency.
GMG has alleged since 2021 that Margolis Edelstein was negligent in representing it in a noncompete dispute with another insurance agency. The other agency maintained that a former employee violated a noncompete agreement that was still in effect at the time GMG hired him. The other agency brought multiple claims against the former employee and GMG including aiding and abetting, unjust enrichment, and tortious interference with contract and prospective economic relations.
GMG claims that because the Margolis law firm failed to have one of the claims— the tortious interference claim— against it dismissed in the Court of Chancery, GMG incurred significant costs including a $1.2 million settlement, which, but for Margolis’s negligence, it would not have incurred.
As to the tortious interference claim, the Court of Chancery held that “the factual record was not sufficiently developed as to whether GMG’s actions satisfied the remainder of the tortious interference requirements.” That claim was then flagged to go to trial.
After that proceeding, GMG fired the Margolis firm and hired new counsel. GMG said it then uncovered important additional evidence that it maintains would have defeated the tortious interference claim had Margolis uncovered it. GMG sued Margolis.
GMG lost the first round of its malpractice argument against the law firm in 2023 when the Superior Court granted Margolis Edelstein summary judgment, finding that Margolis’s representation did not fall below the standard of care and that, in any event, an employee’s eleventh-hour affidavit recanting prior testimony was a “superseding cause that broke the causal chain” linking Margolis’s alleged negligence and GMG’s claimed damages. The Superior Court did not squarely address the newly revealed evidence.
GMG appealed the Superior Court’s summary judgment decision in June, 2023. On April 19, 2024, a three-judge panel of the state Supreme Court said that the Superior Court erred and reversed the summary judgment, giving GMG another chance. On May 3, 2024, Margolis filed a motion for rehearing en banc of the case before the full Supreme Court.
This week the full Supreme Court majority followed its panel of three judges in reversing the Superior Court. The high court held that the Superior Court’s summary judgment decision was in error because there are material disputed facts as to whether Margolis deviated from the standard of care. The high court found the lower court also erred by failing to address GMG’s contention that GMG would have prevailed on all claims in its noncompete litigation in the Court of Chancery litigation if it were not for Margolis’s negligence.
The Supreme Court found that GMG offered evidence supporting a finding that Margolis breached the standard of care by failing to produce certain documents, or adequately develop the record in the Chancery litigation, or failing to adequately brief the tortious interference claim.
The high court added that the Superior Court erred by concluding that the affidavit by the former employee who changed his testimony to disadvantage GMG was a superseding cause as a matter of law.
Accordingly, the Supreme Court reversed the judgment of the Superior Court and remanded the case for further proceedings.
For its part, Margolis asserts that it “fulfilled its discovery obligations to produce all responsive and non-privileged documents provided by GMG” and that, in any case, “any deficiency” did not “proximately cause any harm as alleged by GMG.
Topics Lawsuits
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