2017 Marshall Dennehey. Warner Coleman & Goggin, P.C. All rights reserved. Pennsylvania Legal Malpractice Handbook Edition

Transcription

1 Pennsylvania Legal Malpractice Handbook 2017 Edition Edwin A.D. Schwartz, Esq. Nicole M. Ehrhart, Esq. Sarah S. Kleinman, Esq. Aaron E. Moore, Esq. Charlene S. Seibert, Esq. Alesia S. Sulock, Esq.

2 This handbook was prepared by Marshall Dennehey Warner Coleman & Goggin to provide information of interest to our clients. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. The opinions summarized may be revised, withdrawn or overruled by the courts, and the authors and our firm make no representation and undertake no obligation regarding their official or unofficial status. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright Warner Coleman & Goggin.. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, contact tamontemuro@mdwcg.com.

3 Legal Malpractice Department Pennsylvania 10 N. Main Street, 2 nd Floor Doylestown, PA Phone: (267) R. Anthony Michetti, Esq. 100 Corporate Center Drive, Suite 201 Camp Hill, PA Phone: (717) Nicole M. Ehrhart, Esq. Timothy J. McMahon, Esq. Edwin A.D. Schwartz, Esq. Attorney Advertising pursuant to NY RPC State Street, Suite 701 Erie, PA Phone: (814) G. Jay Habas, Esq. 620 Freedom Business Center, Suite 300 King of Prussia, PA Phone: (610) Maureen P. Fitzgerald, Esq Market Street, Suite 2300 Philadelphia, PA Phone: (215) Gregory W. Fox, Esq. Stephen G. Keim, Esq. Sarah S. Kleinman, Esq. Aaron E. Moore, Esq. Alesia S. Sulock, Esq. Union Trust Building 501 Grant Street, Suite 700 Pittsburgh, PA Phone: (412) Dennis J. Roman, Esq. Charlene S. Seibert, Esq. Timothy R. Stienstraw, Esq.

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5 TABLE OF CONTENTS Page A. THE ATTORNEY-CLIENT RELATIONSHIP The Practice of Law and Legal Malpractice Claims Generally Establishing the Attorney-Client Relationship Establishing the Fee Limiting or Declining the Scope of Representation Defense Attorneys Handling Affirmative Claims The Attorney s Duty to Non-Clients... 4 B. THE DUTY OF CARE Fiduciary Relationships Defining the Attorney s Duty Lawyer s Duty to Be Informed Keeping the Client Informed The Duty to Report Misdeeds Lawyer s Duty to Supervise... 7 a. Supervising Subordinate Lawyers... 7 b. Supervising Non-Lawyers Settlement of Claims Organizational Attorney s Duties... 8 a. Duty to the Company... 8 b. Duty to Shareholder(s) Examination of Title and Real Estate Matters Wills, Trusts and Estates Claims by Beneficiaries Burden of Proof Medical Malpractice Claims Workers Compensation Liens Fair Debt Collection Practices Act Claims...13 a. The Requirements of the Claim...13 b. Attorneys as Debt Collectors Unfair Trade Practices Consumer Protection Law Union Attorneys Liability Claims Against Defense Counsel Arising Out of Criminal Cases...14 C. PROVING LEGAL MALPRACTICE THE CASE WITHIN THE CASE...15 i

6 1. Plaintiff s Proofs Causation Use of Speculation and/or Conjecture Are Improper to Prove Causation Actual Damages The Rules of Professional Conduct as a Basis of Liability Contributory Negligence of the Client Exercise of Professional Judgment...21 D. PROVING DAMAGES THE PLAINTIFF S BURDEN Proving the Case Through an Expert Use of Expert Testimony Establishing the Viability of the Claim Establishing the Value of the Claim Lost Opportunities and/or Lost Profits Damages for Emotional Distress Punitive Damages Settlements Barring Malpractice Actions Settlements to Avoid Litigation Catastrophes Attorney Fees...28 E. THE CERTIFICATE OF MERIT The Requirement The Procedure in Pennsylvania State Court Procedure in Pennsylvania Federal Court Effect of Judgment of Non Pros, Remedies and Relief...31 F. THE STATUTE OF LIMITATIONS IN LEGAL MALPRACTICE Applicable Statutory Period The Occurrence Rule, Discovery Rule and Fraudulent Concealment...36 G. THIRD PARTY CLAIMS AGAINST ATTORNEYS AND THE LITIGATION PRIVILEGE Privity Requirements for Negligence Claims The Doctrine of Judicial Privilege Federal Statutory Claims Against Attorneys Civil Conspiracy and Aiding and Abetting Claims Brought Against Attorneys Wrongful Use of Civil Proceedings and Abuse of Process Claims...40 H. THE DOCTRINE OF JUDICIAL ESTOPPEL IN LEGAL MALPRACTICE ACTIONS...41 I. End Notes...42 ii

7 A. THE ATTORNEY-CLIENT RELATIONSHIP 1. The Practice of Law and Legal Malpractice Claims Generally The practice of law in Pennsylvania is guided by the Pennsylvania Rules of Professional Conduct. 1 Pursuant to the Pennsylvania Rules of Civil Procedure, [a] lawyer, as a member of the legal profession, is a representative of clients, an officer of the legal system and a public citizen having a special responsibility for the quality of justice. 2 The Rules of Professional Conduct provide guidance on how attorneys in Pennsylvania should practice law and their duties and obligations to clients and others. However, a violation of the Rules of Professional Conduct does not give rise to legal malpractice liability. 3 Thus, a violation of these rules, alone, does not form the basis for a legal malpractice claim. 4 In Pennsylvania, a client may bring a legal malpractice claim in the form of breach of contract or negligence. The statute of limitations for a legal malpractice claim sounding in breach of contract is four years; 5 the statute of limitations for a legal malpractice claim sounding in negligence is two years. 6 Factual and proximate causation are necessary elements of a plaintiff s legal malpractice claim, whether in the form of breach of contract or negligence. In order to show that the attorney s conduct was the cause in fact of the plaintiff s alleged damages, the plaintiff must prove, by a preponderance of the evidence, that her alleged damages would not have occurred but for the negligent conduct of the attorney. 7 It is not enough to show that the attorney may have increased the risk of harm to the plaintiff. Rather, a plaintiff must prove that he would have prevailed in his underlying cause of action. 8 In order to show that the attorney s conduct was the proximate cause of the plaintiff s alleged damages, the plaintiff must prove, by a preponderance of the evidence, that the attorney s failure to adhere to the standard of care was a substantial factor in bringing about the plaintiff s alleged harm. It is not sufficient that the attorney s acts may be viewed, in retrospect, to have been one of the happenings in the series of events leading up to the alleged damages. 9 Rather, the plaintiff must produce evidence which, upon the whole, shows that it is more likely than not that his alleged damages were caused by the attorney s alleged negligence. 10 Importantly, [a]n attorney at law is not liable to his client for a failure to succeed, resulting in loss to the client, unless this is due to his mismanagement of the business entrusted to him through bad faith, inattention, or want of professional skill There is no presumption that an attorney has been guilty of a want of care, arising merely from a bad result. To the contrary, an attorney is presumed to have discharged the duties of his representation until the opposite has been made to appear. 12 An attorney does not ordinarily guarantee the soundness of his opinions, and accordingly is not liable for every mistake he may make in his practice. He is expected, however, to possess knowledge of those plain and elementary principles of law which are commonly known by well-informed attorneys, and to discover those additional rules of law which, although not commonly known, may readily be found by standard research techniques Edition 1

8 2. Establishing the Attorney-Client Relationship To state a claim for legal malpractice in Pennsylvania, absent very narrow exceptions discussed elsewhere in this handbook, the plaintiff must be a client of the attorney defendant. 14 The first element to state a claim for legal malpractice is the employment of the attorney or other basis for a duty. 15 Privity (an attorney-client or analogous professional relationship, or a specific undertaking) is an element of proof necessary to state a legal malpractice claim. 16 The existence of an attorney-client relationship may be proven through a contractual agreement for representation or through the existence of an implied attorney-client relationship. 17 Absent an express contract, an implied attorney-client relationship will be found if (1) the purported client sought advice or assistance from the attorney; (2) the advice sought was within the attorney s professional competence; (3) the attorney expressly or impliedly agreed to render such assistance; and (4) it is reasonable for the putative client to believe the attorney was representing him. 18 In order to meet the last, reasonable belief requirement, the plaintiff must prove not only that he believed the attorney was representing him, but also that such belief was objectively reasonable. Thus, whether the plaintiff personally believed that the attorney was representing him does not matter if his belief was not objectively reasonable Establishing the Fee The fee owed by a client for legal representation is generally established by the engagement letter or representation agreement. Pursuant to the Pennsylvania Rules of Professional Conduct, absent a preexisting relationship between attorney and client, the fee must be communicated, in writing, to the client before or within a reasonable time after commencing the representation. 20 An attorney may be paid on a flat fee or hourly basis, or the fee may be contingent (except in cases where a contingent fee is prohibited). A contingent fee agreement must always be in writing. 21 The written contingent fee agreement [s]hall state the method by which the fee is to be determined, including the percentage or percentages that shall accrue to the lawyer in the event of settlement, trial or appeal, litigation and other expenses to be deducted from the recovery, and whether such expenses are to be deducted before or after the contingent fee is calculated. 22 With a contingency agreement, an attorney will evaluate the risks related to a recovery in a case and what percentage of an award will best compensate the attorney and the firm for their labors. The attorney accepts the risk that, if there is no recovery, then the attorney receives no compensation. 23 Following the conclusion of a contingent matter, the lawyer must provide to the client a written statement stating the outcome of the matter, any remittance to the client, and the method of calculating the amount owed the client. 24 When a client terminates an attorney, that does not relieve the client of the obligation to pay the attorney s fee. 25 In the event of a contingency fee agreement, the attorney generally has a claim in quantum meruit to recover his fees. 26 Quantum meruit is an equitable remedy Edition 2

9 [which] is defined as as much as deserved and measures compensation under an implied contract to pay compensation as reasonable value of services rendered. 27 Quantum meruit recovery [s]hould be based on a fair assessment of the contributions of the discharged attorney to any eventual award in the case. 28 In particular cases, court approval of counsel fees may be required. For example, in determining the appropriate fee owed an estate attorney, the court considers the following facts and factors: [t]he amount of work performed; the character of the services rendered; the difficulty of the problems involved; the importance of the litigation; the amount of money or value of the property in question; the degree of responsibility incurred; whether the fund involved was created by the attorney; the professional skill and standing of the attorney in his profession; the results he was able to obtain; the ability of the client to pay a reasonable fee for the services rendered; and, very importantly, the amount of money or the value of the property in question. 29 Pennsylvania follows the American Rule with respect to payment of attorney s fees. Under the American Rule, a party may not recover attorneys fees from its adversary absent an express statutory authorization, a clear agreement by the parties or some other established exception allowing for such a recovery. 30 With respect to legal malpractice liability, disgorgement of fees paid or forfeiture of fees owed may be an appropriate remedy Limiting or Declining the Scope of Representation It is old, settled law that persons may alter by express agreement the legal relationship they would normally have had by operation of law. 32 The Pennsylvania Rules of Professional Conduct specifically provide that [a] lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent. 33 The comment to the rule further provides: [t]he scope of services to be provided by a lawyer may be limited by agreement with the client or by the terms under which the lawyer s services are made available to the client. 34 Oftentimes, [t]he primary issue in a legal malpractice suit is not the existence of a duty but the extent of that duty, and the extent of the duty derives from the circumstances, being the subject matter of the retention and the parties agreement. 35 There are few cases in Pennsylvania which address the duty imposed on a lawyer who restricts the scope of his representation in writing. However, it is abundantly clear that a lawyer may be found to have undertaken implied duties that are collateral to the subject matter for which he was initially retained. To avoid this outcome, engagement letters that expressly, in writing, limit the scope of the representation may be used. Likewise, when an attorney declines to represent a potential client, a non-engagement letter may be sent that refer[s] in general to statutes of limitations Edition 3

10 5. Defense Attorneys Handling Affirmative Claims As in all cases, a defense attorney raising counter claims or cross claims is required by the Rules of Professional Conduct to provide competent representation to the client. 36 Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation. 37 A lawyer may accept representation where the requisite level of competence can be achieved by reasonable preparation. 38 Although the Rule on competence may not be a source of liability, an attorney who provides representation in affirmative claims that falls below the standard of care may be liable for legal malpractice. 6. The Attorney s Duty to Non-Clients Generally speaking, an attorney only owes duties to his clients. It is axiomatic that an attorney who undertakes representation of a client owes that client both a duty of competent representation and the highest duty of honesty, fidelity, and confidentiality. 39 This duty demands undivided loyalty and prohibits the attorney from engaging in conflicts of interest. 40 Thus, the duty an attorney owes to his client prohibits the attorney from undertaking any duties which may be adverse to his client s interests, including many duties to non-clients. In certain limited circumstances, an attorney may owe duties to third party beneficiaries of the attorney-client relationship. This will be discussed more thoroughly below, but only specifically named beneficiaries have standing to bring a legal malpractice claim as a third party beneficiary to the attorney-client contract. 41 The Pennsylvania Rules of Professional Conduct also impose various duties on attorneys, many of which may implicate non-clients, including the duty of candor to the tribunal (RPC 3.3), the duty of fairness to opposing party and counsel (RPC 3.4), duties in connection with dealing with unrepresented persons (RPC 4.3), and respect for rights of third persons (RPC 4.4). B. THE DUTY OF CARE 1. Fiduciary Relationships The Pennsylvania Supreme Court specifically recognized that an attorney owes a fiduciary duty to his or her client. 42 Such duty demands undivided loyalty and prohibits the attorney from engaging in conflicts of interest, and breach of such duty is actionable. 43 An attorney who undertakes representation of a client owes that client both a duty of competent representation and the highest duty of honesty, fidelity, and confidentiality. 44 An attorney must place the interests of the client above the interests of the attorney; the attorney must make full and fair disclosure about the representation; and the attorney cannot take advantage of his position to gain a profit at the expense of his client Edition 4

11 2. Defining the Attorney s Duty An attorney s duty to his or her client generally derives from the circumstances being the subject matter of the retention and the parties agreement. 45 Rule 1.2(c) of the Rules of Professional Conduct similarly provides that [a] lawyer may limit the objectives of the representation if the client consents after a full disclosure of the circumstances and consultation. 46 The official comment accompanying Rule 1.2 further notes, The objectives or scope of services provided by a lawyer may be limited by agreement with the client or by the terms under which the lawyer s services are made available to the client Lawyer s Duty to Be Informed An attorney cannot be liable so long as he employed such judgment as is expected by the standard of accepted legal practice. In Pennsylvania, an informed judgment on the part of counsel, even if subsequently proven erroneous, is not negligence. 48 In Composition Roofers Local 30/30B v. Katz, 581 A.2d 607 (Pa. Super. Ct. 1990), the union plaintiff asserted a legal malpractice claim against its attorney for negligently advising it that its members legal fees incurred in defense of a criminal matter could be paid from union funds. This advice was subsequently found to be erroneous; however, the trial court, in sustaining the attorney s preliminary objections, held that the attorney s incorrect advice was based on an informed judgment. The Superior Court affirmed. 49 Although a lawyer is not expected to be infallible, he or she is expected to conduct that measure of research sufficient to allow the client to make an informed decision. In order for a lawyer to advise a client adequately, he or she is obligated to scrutinize any contract which the client is to execute, and thereafter must disclose to the client the full import of the instrument and any possible consequences which might arise therefrom. 50 To that point, [t]he lawyer, [] must be familiar with well settled principles of law and the rules of practice which are of frequent application in the ordinary business of the profession Keeping the Client Informed A lawyer owe a duty to communicate with his or her client to enable the client to effectively participate in the representation. Therefore, an attorney should [e]xert his best efforts to insure that decisions of his client are made only after the client has been informed of relevant considerations. 52 Rule of Professional Conduct 1.2 requires lawyers to abide by a client s decisions concerning the objections of representation and to consult with the client as to the means by which they are to be pursued. With respect to consultation, Rule 1.4 provides that a lawyer shall: (1) Promptly inform the client of any decision or circumstance with respect to which the client s informed consent is required; Edition 5

12 (2) Reasonably consult with the client about the means by which the client s objectives are to be accomplished; (3) Keep the client reasonably informed about the status of the matter; (4) Promptly comply with reasonable requests for information; and (5) Consult with the client about any relevant limitation on the lawyer s conduct when the lawyer knows that the client expects assistance not permitted by the Rules of Professional Conduct or other law. Where the Rules require that a particular decision about the representation be made by the client, paragraph (a)(1) requires that the lawyer promptly reach out to the client and secure the client s consent prior to taking action. For example, it is exclusively within the province of the client to accept or reject a settlement. Accordingly, an attorney is required to communicate all settlement offers to the client, and failure to do so can give rise to malpractice. 53 If, however, a lawyer s prior discussions with the client have clarified the actions the client wants the lawyer to take, the lawyer may take such action without first speaking with the client. 54 Rule of Professional Conduct 1.4 further requires that the lawyer provide the client with enough information [s]o that the client can participate intelligently in decisions concerning the objections of the representation and the means by which they are to be pursued, to the extent the client is willing and able to do so. 55 Adequacy of communication is case specific. The guiding principle is that the lawyer should fulfill reasonable client expectations for information consistent with the duty to act in the client s best interests, and the client s overall requirements as to the character of representation. 56 For example, in litigation, a lawyer should explain [t]he general strategy and prospects of success and ordinarily should consult the client on tactics that are likely to result in significant expense or to injure or coerce others. A lawyer is not expected to go into great detail to describe trial or negotiation strategy. 5. The Duty to Report Misdeeds Pursuant to the Pennsylvania Rules of Professional Conduct, a lawyer may not, in the course of representing a client, make a false statement of material fact or law to a third person or [f]ail to disclose a material fact to a third person when disclosure is necessary to avoid aiding and abetting a criminal or fraudulent act by a client, unless disclosure is prohibited by Rule Moreover, an attorney has a duty of candor to the court. 58 Likewise, a lawyer may not unlawfully obstruct another party s access to evidence or unlawfully alter, destroy or conceal evidence. 59 However, again, a violation of the Rules of Professional Conduct does not give rise to legal malpractice liability. 60 Thus, a violation of these rules, alone, does not form the basis for a legal malpractice claim Edition 6

13 6. Lawyer s Duty to Supervise Although there are no Pennsylvania cases addressing an attorney s civil liability for failing to supervise either subordinate attorneys or non-lawyers, a violation of an attorney s ethical obligation to do so can give rise to sanctions. a. Supervising Subordinate Lawyers Lawyers having direct supervisory responsibility over subordinate lawyers assume a duty to make [r]easonable efforts to ensure that the other lawyer conforms to the Rules of Professional Conduct and may be liable for the subordinate attorney s violations if: (1) the lawyer orders or, with knowledge of the specific conduct, ratifies the conduct involved; or (2) the lawyer is a partner or has comparable managerial authority in the law firm in which the other lawyer practices, or has direct supervisory authority over the other lawyer, and knows of the conduct at a time when its consequences can be avoided or mitigated but fails to take reasonable remedial action. 62 Rule 5.2 states, A subordinate lawyer does not violate the Rules of Professional Conduct if that lawyer acts in accordance with a supervisory lawyer s reasonable resolution of an arguable question of professional duty. 63 The Eastern District Court further explained that [w]hen lawyers in a supervisor-subordinate relationship encounter a matter involving professional judgment as to ethical duty, the supervisor may assume responsibility for making the judgment. Otherwise a consistent course of action or position could not be taken.... For example, if a question arises whether the interests of two clients conflict under Rule 1.7, the supervisor s reasonable resolution of the question should protect the subordinate professionally if the resolution is subsequently challenged. 64 b. Supervising Non-Lawyers An attorney who has supervisory authority over a non-lawyer shall make [r]easonable efforts to ensure that the person s conduct is compatible with the professional obligations of the lawyer. 65 Under certain circumstances, a lawyer may be responsible for his paralegal s actions if he directs her to engage in the conduct or, knowing of the conduct, ratifies it. 66 In Penda, a patent holder s attorney directed a paralegal to call the manufacturer to inquire whether the manufacturer s bed lines could be purchased in the Philadelphia area. During that call, the paralegal made misrepresentations, causing the manufacturer to seek sanctions against the patent attorney for violations of Rules 4.2 and 8.4 of the Pennsylvania Rules of Professional Conduct for alleged ex parte communications with a person known to be Edition 7

14 represented. Although the court explained that the paralegal may have engaged in misrepresentation when she failed to identify herself as an agent for the plaintiff and suggested that she was a potential customer, the attorney was not in violation of Rule 8.4 because the lawyer did not direct the paralegal to engage in misrepresentation. 7. Settlement of Claims An attorney has an obligation to inform his or her client of any settlement offer and must have express authority to settle a cause of action on behalf of the client. 67 Failure to communicate a settlement offer, or accepting a settlement without authorization, can give rise to a claim for malpractice. 68 Additionally, an attorney has a duty to inform himself or herself of the manner in which a proposed settlement affects the client and to inform the client regarding the consequences thereof. 69 Likewise, during settlement negotiations, a lawyer owes his or her client a duty not to commit fraud Organizational Attorney s Duties a. Duty to the Company An attorney representing an organization generally owes his or her duty to that organization, not necessarily to any individual shareholder. 71 Pennsylvania Rule of Professional Conduct states, A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents. 72 This makes it clear that an attorney representing a corporation generally represents the corporation and not the corporation s shareholders, officers or directors. There are times when the organization s interests may be or become adverse to those of one or more of its constituents. In such circumstances, the lawyer should advise any constituent, whose interest the lawyer finds adverse to that of the organization, of the conflict or potential conflict of interest, that the lawyer cannot represent such constituent, and that such person may wish to obtain independent representation. The organization s attorney has a duty to ensure that the individual understands that he or she cannot provide legal representation for that constituent individual and that discussions between the lawyer for the organization and the individual may not be privileged. b. Duty to Shareholder(s) In certain circumstances, a personal attorney-client relationship between corporate counsel and a shareholder may be established. In First Republic Bank v. Brand, the court utilized the following ten factors to determine whether an attorney-client relationship had been formed between the corporation s attorney and one of the corporation s shareholders: Edition 8

15 1. Whether the shareholder was separately represented by other counsel when the corporation was created or in connection with its affairs; 2. Whether the shareholder sought advice on whether the attorney represented the shareholder in particularized individual matters, including matters arising prior to the attorney s representation of the corporation; 3. Whether the attorney had access to the shareholder s confidential or secret information that was unavailable to other parties; 4. Whether the attorney s services were billed to and paid by the corporation or the shareholder; 5. Whether the corporation is closely held; 6. Whether the shareholder could reasonably have believed that the attorney was acting as his individual attorney rather than as the corporation s attorney; 7. Whether the attorney affirmatively assumed a duty of representation to the shareholder by either express agreement or implication; 8. Whether the matters on which the attorney gave advice are within his or her professional competence; 9. Whether the attorney entered into a fee agreement; and 10. Whether there was evidence of reliance by the shareholder on the attorney as his or her separate counsel, or of the shareholder s expectation of personal representation. 73 In applying that test, the Philadelphia Court of Common Pleas, in Del Borello v. Del Borello, held that a director of a close corporation could have reasonably believed that the corporation s attorney represented him because: (1) the director privately met with the corporate lawyer to discuss disputes with other directors and officers of the corporation; (2) the director discussed non-corporate matters with the corporate attorney; (3) at no time did the corporate attorney tell the director that any of the information exchanged could be used against him; (4) the corporate attorney never told the director that his position precluded him from meeting or representing the director or that there was any potential conflict; and (5) the corporate attorney represented three partnerships in which the director was a partner and performed legal services for other members of the director s family. 74 That court did not hold Edition 9

16 that an implied attorney-client relationship existed but, rather, directed the parties to conduct discovery on issues related to the plaintiff s motion to disqualify the defendants attorneys. 9. Examination of Title and Real Estate Matters In connection with real estate matters, attorneys serve many roles. Lawyers may represent a buyer or seller of a property, may be involved in examining title for the purpose of issuing title insurance, or may represent a lender or borrower in connection with a foreclosure. In all cases, the attorney s duties arise from the representation agreement between the attorney and his client and from the ordinary skill and knowledge expected of attorneys. As with other areas of law, only the lawyer s client may bring a suit alleging legal malpractice. However, there may be other areas of liability to non-clients, including claims under the Fair Debt Collection Practices Act (Section 2.27) and/or the Unfair Trade Practices Consumer Protection Law (Section 2.28), discussed elsewhere herein. With respect to title examinations and issuance of title insurance, attorneys may act as approved attorneys in examining title. The Pennsylvania Title Insurance Act defines an approved attorney as [a]n attorney at law in good standing upon whose examination of title and report of title thereon a title insurance company may issue a policy of title insurance. 75 No policy of title insurance, excluding reinsurance, shall be written unless and until the title insurance company, either through its own employees, agents or approved attorneys, has conducted a reasonable examination of the record title or has caused a reasonable examination of title to be conducted. 76 The title abstract must be retained in writing or a copy must be retained. 77 In connection with foreclosure proceedings, an attorney representing a mortgage lender should be aware of the requirements of the Pennsylvania Loan Interest and Protection Law, which limits the attorney s fees that a residential mortgage lender shall contract for or receive from a residential mortgage debtor. 78 The Pennsylvania Loan Interest and Protection Law provides that: [N]o residential mortgage lender shall contract for or receive attorney s fees from a residential mortgage debtor except as follows: (1) Reasonable fees for services included in actual settlement costs. (2) Upon commencement of foreclosure or other legal action with respect to a residential mortgage, attorney s fees which are reasonable and actually incurred by the residential mortgage lender may be charged to the residential mortgage debtor Edition 10

17 (3) Prior to commencement of foreclosure or other legal action attorneys fees which are reasonable and actually incurred not in excess of fifty dollars ($50) provided that no attorneys fees may be charged for legal expenses incurred prior to or during the thirty-day notice period provided in section 403 of this act. 79 Pursuant to Section 502 of the Act, [a] person who has paid a rate of interest for the loan or use of money at a rate in excess of that provided for by this act or otherwise by law or has paid charges prohibited or in excess of those allowed by this act or otherwise by law may recover triple the amount of such excess interest or charges in a suit at law against the person who has collected such excess interest or charges[.] 80 The Pennsylvania Supreme Court held that [a] borrower may recover under Section 502 from any entity not solely the residential mortgage lender that collects excessive attorney s fees in connection with a foreclosure. 81 Thus, a lawyer or law firm, representing a mortgage lender, may be liable to a mortgage debtor for excessive attorney s fees charged to the debtor Wills, Trusts and Estates Generally, [a]n attorney is obligated to draft documents which carry out the testator s plan regardless of the effects or consequences on any potential beneficiaries. 83 A testator must be at least 18 years of age and of sound mind in order to have sufficient testamentary capacity to execute a will or similar document. 84 The test for determining the existence of testamentary capacity, a quality every person sui juris is presumed to possess, is whether a man [or woman] has an intelligent knowledge regarding the natural objects of his bounty, the general composition of his estate, and what he desires done with it, even though his memory may have been impaired by age or disease. 85 Testamentary capacity need not rise to the level required to conduct business affairs. 86 Testamentary capacity is ascertained as of the date of execution of the contested document. 87 Implicit in a lawyer s oath of fidelity to the court is his duty not to draw, or to countenance the execution of a will by a person who he knows lacks testamentary capacity. 88 A holographic will is one that is entirely in the testator s handwriting and has no attesting witnesses. Thus, a holographic will is one that was not prepared by a lawyer but may nonetheless be valid. A valid holographic will can be found where the extrinsic evidence otherwise supports the conclusion that the writer intended that the paper should take effect only after death Claims by Beneficiaries Burden of Proof In a plurality opinion, the Pennsylvania Supreme Court held that a named beneficiary in a will has standing to bring a legal malpractice claim against the drafting attorney. 90 The Pennsylvania Supreme Court developed a two-part test for determining whether one is an intended third party beneficiary: (1) the recognition of the beneficiary s right must be Edition 11

18 appropriate to effectuate the intention of the parties, and (2) the performance must satisfy an obligation of the promisee to pay money to the beneficiary or the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance. 91 In accordance with this two-part test, Pennsylvania courts recognized a narrow class of third party beneficiaries to attorney-client contracts. 92 Case law since Guy was, for a long time, unclear on whether the beneficiary must be specifically named in order to have standing. Recently, the Pennsylvania Supreme Court has clarified its position, holding that only specifically named beneficiaries have standing to bring a legal malpractice claim as a third party beneficiary to the attorney-client contract. 93 To the extent the attorney has drafted testamentary documents, which have been fully executed by the testator, such documents are conclusive evidence the testator intended to benefit the named beneficiaries[.] Medical Malpractice Claims In order to state a claim for medical malpractice, a plaintiff must [e]stablish that the care and treatment of the plaintiff by the defendant fell short of the required standard of care and that the breach proximately caused the plaintiff s injury. 95 A medical malpractice plaintiff [g]enerally must produce the opinion of a medical expert to demonstrate the elements of his cause of action. 96 The Pennsylvania Supreme Court [h]as reaffirmed, in the context of medical malpractice claims, the need for detailed expert testimony because a jury of laypersons generally lacks the knowledge to determine the factual issues of medical causation 97 The plaintiff must [p]resent an expert who would testify to a reasonable degree of medical certainty that [defendant s] alleged acts or omissions deviated from the applicable standard of care and that such deviation was the proximate cause of [plaintiff s] injuries. 98 Thus, an attorney handling a plaintiff s medical malpractice claim must be cognizant of the expert witness requirement and must obtain and produce an appropriate expert report. In the context of a legal malpractice case arising from an underlying medical malpractice claim, the legal malpractice plaintiff will be required to produce expert testimony both on the alleged legal malpractice and on the underlying alleged medical malpractice. 13. Workers Compensation Liens An attorney may be held liable for malpractice arising out of a workers compensation matter, however, proceeds from the malpractice action are subject to subrogation under the Workers Compensation Act. In Poole v. Workers Compensation Appeal Board, 99 the claimant fell on ice outside his workplace and received workers compensation benefits for his injury. The claimant attempted to file a tort claim against the owner of the property where he fell; however, his attorney named the wrong defendant. His attempt to re-file against the proper defendant failed because the statute of limitations had run. The claimant sued his attorney for legal malpractice and received a settlement. The employer asserted a subrogation lien against Edition 12

19 the settlement. The claimant responded that legal malpractice was separate and unrelated to the cause of his work injury. Our Supreme Court held that the employer was entitled to subrogation. 100 The court reasoned that, unlike a medical malpractice claim, a legal malpractice claim is unique in that it requires a claimant to [d]emonstrate not merely an injury as a result of the malfeasance of his previous counsel, but also the malfeasance of the original tortfeasor which resulted in the underlying injury. 101 The settlement of the legal malpractice claim demonstrated that the claimant s compensable injury was caused by the third party. 102 The court held that the rationale behind subrogation mandated the reimbursement of the employer s subrogation lien for the following reasons: The employee is made whole for his injury while not receiving a double benefit. The employer is not compelled to make compensation payments for the negligence of a third party. Finally, while the underlying tortfeasor may have escaped liability due to the statute of limitations and the actions of employee s previous counsel, the legal malpractice action places this liability on the proper party Fair Debt Collection Practices Act Claims a. The Requirements of the Claim In order to bring a claim under the FDCPA, a plaintiff must demonstrate that as a consumer he received a communication from a debt collector in an attempt to collect a debt. 104 A debt collector is [a]ny person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. 105 The term debt collector also includes [a]ny person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests. 106 If an attorney s conduct falls within those definitions, then he or she must adhere to the rules and regulations under the FDCPA. In Daniels v. Baritz, the District Court for the Eastern District of Pennsylvania held that [a]ttorneys who regularly engage in debt collection practices, apart form their legal representation, are covered under the FDCPA. 107 b. Attorneys as Debt Collectors Under the FDCPA, an attorney has a duty to avoid using false or deceptive communication and unfair or unconscionable means of collecting debt. Section 1692e(3) prohibits the [f]alse representation or implication that any individual is an attorney or that any Edition 13

20 communication is from an attorney. 108 Section 1692f(1) prohibits the use of unfair or unconscionable means to collect any debt, and it specifically prohibits the collection of any debt amount unless that amount is expressly authorized by the agreement creating the debt or permitted by law. 109 A communication is deceptive for purposes of the FDCPA if [i]t can be reasonably read to have two or more different meanings, one of which is inaccurate, viewed from the perspective of the least sophisticated consumer. 110 Thus, a district court is required to analyze the statutory requirements of the FDCPA from the perspective of the least sophisticated consumer. 111 The Third Circuit further noted that, [a]lthough established to ease the lot of the naive, the [least sophisticated debtor] standard does not go so far as to provide solace to the willfully blind or non-observant. Even the least sophisticated debtor is bound to read collection notices in their entirety Unfair Trade Practices Consumer Protection Law The Unfair Trade Practices and Consumer Protection Law (UTPCPL), 73 Pa. Stat. Ann et seq., does not apply to claims of attorney misconduct in the context of practicing law Union Attorneys Liability Pennsylvania courts have not yet addressed whether a union member may sue the union attorney for legal malpractice allegedly committed during the grievance process in which the attorney is retained to represent the union. 114 However, Pennsylvania courts have considered similar issues and generally found that a union member s sole remedy is a claim against the union for a breach of the duty of fair representation. A union member cannot assert third party rights to a collective bargaining agreement where the union has the exclusive right to pursue the member s claims to arbitration. 115 This is because to allow a union member to assert third party rights [w]ould lead to chaos and a breakdown in the entire scheme of collective bargaining for which the parties have provided and contracted. 116 Thus, the only remedy available to a union member is a claim for an alleged breach of the duty of fair representation against the union. 117 Likewise, a union member cannot assert claims against union representatives arising from the collective bargaining agreement. 118 Officials of the Union, acting in their authorized capacities, cannot be held individually liable in damages to a member-employee for failure to process a grievance since they are but agents responsible only to the Union itself[.] 119 These cases may be instructive as to whether a union attorney may be liable to a union member for legal malpractice. 17. Claims Against Defense Counsel Arising Out of Criminal Cases In order to state a claim for legal malpractice in the criminal context, a criminal defendant plaintiff must establish the following elements: (1) the employment of the attorney; (2) reckless or wanton disregard of the defendant/plaintiff s interest on the part of the Edition 14

21 attorney; (3) but for the attorney s culpable conduct, the defendant/plaintiff would have obtained an acquittal or complete dismissal of the charges; (4) as a result of the injury, the defendant/plaintiff suffered damages; and (5) the plaintiff has pursued post-trial remedies and obtained relief which was dependent upon attorney error. 120 This means that the plaintiff [m]ust prove by a preponderance of the evidence that he did not commit any unlawful acts with which he was charged as well as any lesser offenses included therein. 121 If the plaintiff cannot establish his innocence, he cannot prevail on a legal malpractice case arising from his criminal defense. 122 However, even if the plaintiff proves that he is innocent, that [s]hall not be dispositive of the establishment of culpable conduct in the malpractice action. 123 It is important to note that a public defender owes the same duties and obligations to his client as any privately retained attorney. Once the appointment of a public defender in a given case is made, his public or state function ceases and thereafter he functions purely as a private attorney concerned with servicing his client. 124 His professional relationship with his client takes on all the obligations and protections attendant upon a private attorney-client relationship except one: the public pays his fee. 125 Likewise, a public defender is, therefore, not immune from liability for tortious conduct. 126 C. PROVING LEGAL MALPRACTICE THE CASE WITHIN THE CASE 1. Plaintiff s Proofs A plaintiff may bring a claim of legal malpractice in both tort and contract. 127 In order to prevail in a claim for legal malpractice sounding in negligence, a plaintiff must plead and prove the following: (a) employment of the attorney or other basis for duty; (b) the failure of the attorney to exercise ordinary skill and knowledge; and (c) that such negligence was the proximate cause of the actual damages. 128 It is very difficult to provide evidence sufficient to meet each and every element. The case within a case doctrine requires a plaintiff to demonstrate, by a preponderance of the evidence, that they would have prevailed in the underlying action had it not been for the defendant attorney s negligence. 129 It is insufficient for a plaintiff to speculate as to whether he or she would have prevailed in the underlying matter. A plaintiff bears the burden of establishing, by a preponderance of the evidence, that he or she has sustained actual loss as a proximate result of the defendant attorney s negligence. 130 This obligation is not fulfilled simply by seeding doubt as to what might have occurred in the absence of defendant-attorney s alleged negligence; rather, the plaintiff must establish, with competent evidence, that he or she sustained an actual loss as a proximate result of the defendant-attorney s acts or omissions Edition 15

22 Our Supreme Court has stated: An essential element to this cause of action is proof of actual loss rather than a breach of a professional duty causing only nominal damages, speculative harm or the threat of future harm. Damages are considered remote or speculative only if there is uncertainty concerning the identification of the existence of damages rather than the ability to precisely calculate the amount or value of damages. In essence, a legal malpractice action in Pennsylvania requires the plaintiff to prove that he had a viable cause of action against the party he wished to sue in the underlying case and that the attorney he hired was negligent in prosecuting or defending that underlying case (often referred to as proving a case within a case ). 132 It is important to remember that it is the practice of law, not the perfection of law. To state a claim of legal malpractice based upon a theory of breach of contract, a plaintiff must allege: (1) the existence of a contract, including its essential terms; (2) a breach of a duty imposed by the contract; and (3) resultant damages. 133 The plaintiff is not relieved of his burden to prove the case within a case simply by recasting the negligence claim as a breach of contract claim. A party seeking damages for breach of contract is required to prove their alleged damages with reasonable certainty. Damages may not be awarded on the basis of speculation or conjecture. 134 Where a plaintiff brings a legal malpractice claim sounding in breach of contract, the salient inquiry focuses upon whether an attorney breached a specific contractual term, made and breached a specific promise upon which the plaintiff reasonably relied to his or her detriment, or failed to follow specific instructions from the client. 135 An attorney who agrees for a fee to represent a client is by implication agreeing to provide that client with professional services consistent with those expected of the profession at large. 136 In the narrow realm of legal malpractice claims based on an alleged breach of contract between an attorney and a client, the appellate courts of this Commonwealth have jurisprudentially established, and refined through time, the specific facts which a plaintiff is required to demonstrate in order to establish that a breach of a contractual duty on the part of the attorney has occurred. 137 [A]n assumpsit claim based on breach of the attorney-client agreement is a contract claim and the attorney s liability in this regard will be based on terms of that contract. Thus, if an attorney agrees to provide his or her best efforts and fails to do so, an action will accrue. Of course an attorney who agrees for a fee to represent a client is by implication agreeing to provide that Edition 16