Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070508_C265002_51_265002.OPN.PDF
Underlying case or transaction: Medical malpractice litigation
Key Concepts: (1) respondeat superior; (2) duplicative claims; (3) causation
On January 11, 2000, Fleischmann, an attorney employed by defendant Brookover, Fleischmann & Carr ("Brookover"), agreed to represent plaintiff is a medical malpractice action against Dr. R.S. Nair. Although Fleischmann sent Dr. Nair a notice of a claim pursuant to MCL 600.2912(b), Fleischmann never filed a malpractice complaint in court.
From January 2000 to September 2003, Fleischmann led plaintiff to believe that a lawsuit was pending in circuit court. In March 2002, Fleischmann joined defendant Secrest Wardle. While employed at Secrest Wardle, Fleischmann continued to mislead plaintiff. In October 2003, plaintiff discovered that no malpractice suit had ever been filed on his behalf. Plaintiff subsequently filed an action against Fleischmann, Brookover and Secrest Wardle for malpractice, breach of fiduciary duty, fraud, and intentional and negligent infliction of emotional distress. The claims against Fleischmann were dismissed because any debts that he may have owed to the plaintiff were discharged during Fleischmann's bankruptcy.
The lower court also dismissed plaintiff's claims against Brookover and Secrest Wardle. On appeal, the plaintiff argued that the lower court erred in dismissing the claims against Secrest Wardle. The court of appeals disagreed finding that Secrest Wardle could not be liable for Fleischmann's actions under the doctrine of respondeat superior.
Under that doctrine "an employer may be vicariously liable for the acts of an employee committed within the scope of his employment." Helsel v Morcom, 219 Mich App 14, 21 (1996). Conversely, an employer cannot be held liable for an act committed by the employee that is beyond the scope of his or her employment. Borsuk v Wheeler, 133 Mich App 403, 410 (1984). "Intentional and reckless torts are generally held to be beyond the scope of employment." Id. An employer may be held liable under the doctrine of respondeat superior where the employee was promoting or furthering the employer's business in some way, or if the employee committed a tort while involved in a service of benefit to the employer. Kester v Mattis, Inc, 44 Mich App 22, 24 (1972). But no vicarious liability exists if the employee steps aside from his employment in order to accomplish some purpose of his own or acts outside the scope of the employee's authority. Bryant v Brannen, 180 Mich App 87, 98-99 (1989).
Here, Secrest Wardle was not vicariously liable for Fleischmann's acts because (1) Fleischmann entered into an attorney-client relationship with plaintiff while he was employed by Brookover; (2) there was no evidence that Secrest Wardle was a party to the contingency fee agreement between plaintiff and Fleischmann; (3) Fleischmann never notified anyone at Secrest Wardle that he was representing plaintiff in a lawsuit; and (4) Secrest Wardle never gave Fleischmann authority to represent Fleischmann.
Next, plaintiff argued that the trial court erred in holding that his causes of action for intentional torts in this case were merely duplicative of his legal malpractice claims. The court of appeals agreed in part, but held that the error was harmless.
Plaintiff claimed that his claims for breach of fiduciary duty, fraud and intentional infliction of emotional distress should not fail because they merely reiterated his legal malpractice claim. Defendants argued otherwise relying on Aldred v O'Hara-Bruce, 184 Mich App 488 (1990) and Barnard v Dilly, 134 Mich App 375 (1984). The court of appeals explained that those case do not stand for the proposition that claims arising out of an attorney-client relationship can only sound in negligence. Rather, they merely provide that the applicable period of limitations depends on the theory actually pleaded where the same facts support either of two different causes of action.
Generally, when characterizing potentially duplicative claims in a legal malpractice context, a court should read a plaintiff's complaint as a whole and determine the type of interest allegedly harmed and how this is claimed to have occurred. Aldred at 490. When a plaintiff alleges negligent legal representation, the claim is one of legal malpractice. Id. But, when the interest involved in a claim for damages differs from the interest involved in a legal malpractice case, they may stand as separate claims. See e.g., Brownell v Garber, 199 Mich App 519, 532 (1993).
For example, the plaintiff claimed that Fleischmann breached his fiduciary duty to him. A breach of fiduciary duty claim differs from a legal malpractice claim because '[t]he conduct required to constitute a breach of fiduciary duty requires a more culpable state of mind than the negligence required for malpractice." Prentis Family Foundation, Inc v Barbara Ann Karmanos Cancer Institute, 266 Mich App 39, 47 (2005). Here, plaintiff had alleged that Fleischmann had "intentionally misled . . . [plaintiff] into believing that he had a case pending against Dr. Nair." The allegation that Fleischmann misled him into believing he had a pending case "appears to satisfy the requirement of a culpable state of mind that is sufficient to support a cause of action for breach of fiduciary duty." Id. Under the facts in this case, the court held that plaintiff's claim for breach of fiduciary duty was not duplicative of his legal malpractice claim.
The court of appeals also held that the plaintiff stated a claim for intentional fraud and that "the interest involved in a claim for damages arising out of fraudulent misrepresentation differs from the interest involved in a case alleging that a professional breached the applicable standard of care." Brownell, supra at 532.
Similarly, the court of appeals held that plaintiff's claim for intentional infliction of emotional distress was not duplicative of his malpractice claim because the interest protected -- relief from a defendant's outrageous conduct -- appears to differ from the interest involved in a legal malpractice case. Therefore, the trial court erred in granting Brookover's motion on this ground.
Although the trial court had erred in holding that plaintiff's breach of fiduciary duty, fraud, and intentional infliction of emotional distress claims were duplicative of his malpractice claim, summary disposition was still proper because, as a matter of law, Brookover was not vicariously liable for Fleischmann's intentional torts.
As explained above, an employer is generally not liable for the intentional torts of its employees. Moreover, there was no evidence that Brookover benefited in any way from Fleischmann's actions.
Finally, the malpractice claims were appropriately dismissed because the plaintiff did not allege a valid underlying medical malpractice claim. Where the alleged malpractice results from the failure to diligently pursue or timely file a client's claim, a plaintiff seeking to establish proximate cause and injury in fact, must show that but for the attorney's alleged malpractice he would have been successful in the underlying suit. Estate of Mitchell v Doughtery, 249 Mich App 667, 676 (2002).
Monday, August 6, 2007
Thursday, August 2, 2007
Kandalaft v John M. Peters, PLC, unpublished per curiam opinion of the court of appeals, issued April 17, 2007 (Docket No. 267497)
Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070417_C267471_85_267471.OPN.PDF
Underlying Case or Transaction: Appellate litigation
Key Concepts: (1) causation; (2) attorney-judgment rule; (3) failure to present expert testimony
Plaintiff appealed the grant of summary disposition in favor of defendant Peters on plaintiff's malpractice claims. Those claims arose from a matter involving a property dispute between Plaintiff and Cvetko Zdravovski pertaining to an alleged encroachment of Plaintiff's building onto a property owned by Zdravovski (the "underlying litigation"). Peters filed a motion for summary disposition on plaintiff's behalf in the underlying litigation, which was granted. On appeal, the trial court's ruling was reversed.
In the subsequent malpractice action, Plaintiff claimed Peters committed malpractice by (1) failing to submit important documentary evidence to both the trial court and the court of appeals; (2) failing to present arguments that were successful in the trial court to the court of appeals; and (3) failing to ask the court of appeals for reconsideration.
The trial court granted summary disposition on these claims and the court of appeals affirmed. First, the court of appeals explained that a plaintiff in a legal malpractice action asserting negligence in an appeal must prove two aspects of causation in fact: "whether the attorney's negligence caused the loss or unfavorable result of the appeal, and whether the loss or unfavorable result of the appeal in turn caused a loss or unfavorable result in the underlying litigation." Charles Reinhart Co v Winiemko, 444 Mich 579, 588; 513 NW2d 773 (1994). The question of whether an underlying appeal would have been successful is reserved to the court "because whether an appeal would have been successful intrinsically involves issues of law with the exclusive province of the judiciary." Id. at 608.
Here, since there was no "magic bullet" argument or document that Peters could have presented on Plaintiff's behalf that would have changed the outcome on the appeal in the underlying litigation, it was logical to infer that Plaintiff's alleged injury -- the reversal of the grant of summary disposition -- was not based on Peters' negligence or malpractice, but rather on the legal insufficiency of Plaintiff's claims in the underlying litigation.
Next, the court of appeals found that Peters had presented all of the arguments to the court of appeals that had been presented to the trial court. Plaintiff failed to comprehend that all of the arguments, as set forth in the lower court record and the brief on appeal, were all before the court of appeals for consideration and review pursuant to MCR 7.210(A)(1). Moreover, an appellate attorney's decision pertaining to which issues to raise is a matter of judgment and generally does not comprise grounds for claiming malpractice if the attorney acts in good faith and exercises reasonable care. Simko v Blake, 448 Mich 648, 658; 532 NW2d 842 (1995). An appellate attorney is not required to raise every claim of arguable legal merit in order to be an effective counsel. People v Reed, 449 Mich 375, 382; 535 NW2d 496 (1995).
Similarly, Peters' decision to appeal the court of appeal's decision to the supreme court rather than seek reconsideration fell squarely within the attorney-judgment rule. That rule recognizes that decisions involving trial tactics or litigation strategy may avoid the issue of legal liability. An attorney is responsible for fashioning a strategy or representation that is consistent with the law, but does not have to insure the most favorable possible outcome.
Finally, Plaintiff contested the trial court's dismissal of his claims based on his failure to present expert testimony that malpractice was committed and the interplay of the attorney-judgment rule. However, a plaintiff's claim that a lawyer breached the standard of care must generally be supported by expert testimony. Law Offices of Lawrence J. Stockler, PC v Rose, 174 Mich App 14, 48; 436 NW2d 70 (1989). As such, the trial court did not err when it concluded that expert testimony would be required to establish a prima facie case of legal malpractice under the factual circumstances presented.
Underlying Case or Transaction: Appellate litigation
Key Concepts: (1) causation; (2) attorney-judgment rule; (3) failure to present expert testimony
Plaintiff appealed the grant of summary disposition in favor of defendant Peters on plaintiff's malpractice claims. Those claims arose from a matter involving a property dispute between Plaintiff and Cvetko Zdravovski pertaining to an alleged encroachment of Plaintiff's building onto a property owned by Zdravovski (the "underlying litigation"). Peters filed a motion for summary disposition on plaintiff's behalf in the underlying litigation, which was granted. On appeal, the trial court's ruling was reversed.
In the subsequent malpractice action, Plaintiff claimed Peters committed malpractice by (1) failing to submit important documentary evidence to both the trial court and the court of appeals; (2) failing to present arguments that were successful in the trial court to the court of appeals; and (3) failing to ask the court of appeals for reconsideration.
The trial court granted summary disposition on these claims and the court of appeals affirmed. First, the court of appeals explained that a plaintiff in a legal malpractice action asserting negligence in an appeal must prove two aspects of causation in fact: "whether the attorney's negligence caused the loss or unfavorable result of the appeal, and whether the loss or unfavorable result of the appeal in turn caused a loss or unfavorable result in the underlying litigation." Charles Reinhart Co v Winiemko, 444 Mich 579, 588; 513 NW2d 773 (1994). The question of whether an underlying appeal would have been successful is reserved to the court "because whether an appeal would have been successful intrinsically involves issues of law with the exclusive province of the judiciary." Id. at 608.
Here, since there was no "magic bullet" argument or document that Peters could have presented on Plaintiff's behalf that would have changed the outcome on the appeal in the underlying litigation, it was logical to infer that Plaintiff's alleged injury -- the reversal of the grant of summary disposition -- was not based on Peters' negligence or malpractice, but rather on the legal insufficiency of Plaintiff's claims in the underlying litigation.
Next, the court of appeals found that Peters had presented all of the arguments to the court of appeals that had been presented to the trial court. Plaintiff failed to comprehend that all of the arguments, as set forth in the lower court record and the brief on appeal, were all before the court of appeals for consideration and review pursuant to MCR 7.210(A)(1). Moreover, an appellate attorney's decision pertaining to which issues to raise is a matter of judgment and generally does not comprise grounds for claiming malpractice if the attorney acts in good faith and exercises reasonable care. Simko v Blake, 448 Mich 648, 658; 532 NW2d 842 (1995). An appellate attorney is not required to raise every claim of arguable legal merit in order to be an effective counsel. People v Reed, 449 Mich 375, 382; 535 NW2d 496 (1995).
Similarly, Peters' decision to appeal the court of appeal's decision to the supreme court rather than seek reconsideration fell squarely within the attorney-judgment rule. That rule recognizes that decisions involving trial tactics or litigation strategy may avoid the issue of legal liability. An attorney is responsible for fashioning a strategy or representation that is consistent with the law, but does not have to insure the most favorable possible outcome.
Finally, Plaintiff contested the trial court's dismissal of his claims based on his failure to present expert testimony that malpractice was committed and the interplay of the attorney-judgment rule. However, a plaintiff's claim that a lawyer breached the standard of care must generally be supported by expert testimony. Law Offices of Lawrence J. Stockler, PC v Rose, 174 Mich App 14, 48; 436 NW2d 70 (1989). As such, the trial court did not err when it concluded that expert testimony would be required to establish a prima facie case of legal malpractice under the factual circumstances presented.
Monday, July 30, 2007
Shefman v Law Office of Ernst Assoc, PLC, et al, unpublished per curiam opinion of the court of appeals, issued March 27, 2007 (Docket No. 269757)
Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070327_C269757_69_269757.OPN.PDF
Underlying Case or Transaction: litigation
Key Concepts: (1) release and (2) frivolous claims
Shefman retained the Ernst firm to represent him in two legal actions. A dispute arose over fees. The Ernst sued for unpaid fees and Shefman counterclaimed for malpractice. On the eve of trial, Shefman's attorney withdrew and the court declared a mistrial. Shefman then retained new counsel and subsequently, the parties put a settlement agreement on the record releasing each other from all claims against each other that occurred before that date. Later, Shefman refused to sign a settlement agreement. Nevertheless, the court entered an order settling the case based on the settlement and release of claims that had been put on the record.
Shefman, representing himself, then sued the Ernst firm and two of its lawyers over their representation of him in the two legal actions. The defendants moved for summary disposition based on the release and for sanctions under MCR 2.114 and MCL 600.2591. The trial court granted the motion for summary disposition based on the settlement and release that was placed on the record. The trial court also awarded sanctions reasoning that Shefman's position was devoid of arguable legal merit.
The court of appeals upheld the sanction award and noted that Shefman's legal position was "devoid of legal merit because any claim that he had against defendants in this case was released in the settlement that he approved on the record and the subsequent settlement order entered in the district court, which was affirmed on appeal in the circuit court, and which was not further appealed to this Court. An agreement between the parties or their attorneys made in open court is binding upon the parties. Michigan Bell Telephone Co v Sfat, 177 Mich App 506, 515; 442 NW2d 720 (1989); see also MCR 2.507(G)."
Underlying Case or Transaction: litigation
Key Concepts: (1) release and (2) frivolous claims
Shefman retained the Ernst firm to represent him in two legal actions. A dispute arose over fees. The Ernst sued for unpaid fees and Shefman counterclaimed for malpractice. On the eve of trial, Shefman's attorney withdrew and the court declared a mistrial. Shefman then retained new counsel and subsequently, the parties put a settlement agreement on the record releasing each other from all claims against each other that occurred before that date. Later, Shefman refused to sign a settlement agreement. Nevertheless, the court entered an order settling the case based on the settlement and release of claims that had been put on the record.
Shefman, representing himself, then sued the Ernst firm and two of its lawyers over their representation of him in the two legal actions. The defendants moved for summary disposition based on the release and for sanctions under MCR 2.114 and MCL 600.2591. The trial court granted the motion for summary disposition based on the settlement and release that was placed on the record. The trial court also awarded sanctions reasoning that Shefman's position was devoid of arguable legal merit.
The court of appeals upheld the sanction award and noted that Shefman's legal position was "devoid of legal merit because any claim that he had against defendants in this case was released in the settlement that he approved on the record and the subsequent settlement order entered in the district court, which was affirmed on appeal in the circuit court, and which was not further appealed to this Court. An agreement between the parties or their attorneys made in open court is binding upon the parties. Michigan Bell Telephone Co v Sfat, 177 Mich App 506, 515; 442 NW2d 720 (1989); see also MCR 2.507(G)."
Tuesday, July 24, 2007
Gibbons v Thompson, O'Neil & Vanderveen, et, al., unpublished per curiam opinion of the court of appeals, issued March 27, 2007 (Docket No. 271628)
Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070327_C271628_37_271628.OPN.PDF
Underlying Case or Transaction: Medical Malpractice
Key Concepts: (1) Attorney-Judgment Rule (2) Use of experts
In this case, Dr. Hartzler performed surgery on plaintiff for a strangulated hernia. During the procedure, plaintiff's small bowel ruptured. A general surgeon, Dr. Lee Britton, took over plaintiff's post-operative care. Plaintiff became hypotensive and went into septic shock and later suffered a heart attack and stroke.
Plaintiff hired defendants to pursue any medical malpractice claims he had against Hatzler, Britton, and the Alpena General Hospital nursing staff. After defendants consulted with Dr. McDonell, a general surgeon, Dr. VanHoutzen, an internist, and a nurse, defendants decided to file a notice of intent only against Hartzler. Plaintiff's case against Hartzler went to trial and plaintiff received a $600,000 judgment.
Plaintiff then sued defendants for malpractice. Plaintiff claimed that defendants failed to sufficiently investigate his potential malpractice claims against Britton and the nursing staff. Plaintiff also claimed that defendants failed to inform him of the limitation period and the fact that they had not filed a notice of intent against Britton and the nursing staff before the limitation period expired. Defendants moved for summary disposition on the basis that their decision not to pursue claims against Britton and the nursing staff was protected by the attorney-judgment rule. The trial court agreed and granted summary disposition.
The court of appeals began by explaining the attorney-judgment rule: "An attorney has an implied duty to exercise reasonable skill, care, discretion, and judgment in representing a client. Further, an attorney is obligated to act as an attorney of ordinary learning, judgment, or skill would under the same circumstances. However, an attorney is not a guarantor of the most favorable possible outcome, nor must an attorney exercise extraordinary diligence or act beyond the knowledge, skill, and ability ordinarily possessed by members of the legal profession. Further, where an attorney acts in good faith and in honest belief that his acts and omissions are well founded in law and are in the best interest of the client, the attorney is not answerable for mere errors in judgment." [Citations and internal quotes omitted] [Generally citing Mitchell v Doughtery, 249 Mich App 668, 677; 644 NW2d 391 (2002) and Simko v Blake, 448 Mich 648, 655-656; 532 NW2d 842 (1995)].
Plaintiff claimed that defendants should not have relied on opinions from experts who were not willing to testify at trial. The court of appeals held that "there is no requirement either in law or in logic that the experts used to determine whether plaintiff has a potential claim must be the experts called at trial." In fact, the Michigan Supreme Court has recognized that, depending on the stage of the litigation, plaintiffs will likely use different experts in the course of establishing their medical malpractice claims. Grossman v Brown, 470 Mich 593, 598-599; 685 NW2d 198 (2004).
Next, plaintiff claimed that defendants conducted an unreasonable investigation because MCL 600.2961(1) requires a medical professional who is testifying regarding the standard of care to be a specialist in the same area as the person against whom the malpractice claim is made and VanHouzen was not qualified to testify about the standard of care for a general surgeon and neither VanHouzen or McDonnell were qualified to testify about the standard of care for the hospital nursing staff. The court of appeals held that the requirements of 600.2961(1) do not apply to experts who testify to causation and both VanHouzen and McDonell opined that, even if they breached the standard of care, neither Britton nor the nursing staff caused plaintiff's injuries. Since the experts did not believe that Britton or the nursing staff caused plaintiff's injuries, the defendants did not act unreasonably when they failed to obtain additional standard of care witnesses under MCL 600.2169(1).
Finally, plaintiff claimed that defendants breached a duty to him when they failed to timely inform him and his family that they would not serve a notice of intent to Britton or the nursing staff. However, plaintiff testified that defendants told him when the limitation period would expire for his malpractice claims. Further, plaintiff testified that defendants told him that a notice of intent had to be filed against each person they intended to sue before the limitation period expired. Plaintiff could not create a genuine issue of material fact by arguing that defendants had a duty to inform his family about the limitations period when his own testimony makes clear that he, the client, knew the limitation period and understood that all notices of intent had to be served within the limitation period.
Underlying Case or Transaction: Medical Malpractice
Key Concepts: (1) Attorney-Judgment Rule (2) Use of experts
In this case, Dr. Hartzler performed surgery on plaintiff for a strangulated hernia. During the procedure, plaintiff's small bowel ruptured. A general surgeon, Dr. Lee Britton, took over plaintiff's post-operative care. Plaintiff became hypotensive and went into septic shock and later suffered a heart attack and stroke.
Plaintiff hired defendants to pursue any medical malpractice claims he had against Hatzler, Britton, and the Alpena General Hospital nursing staff. After defendants consulted with Dr. McDonell, a general surgeon, Dr. VanHoutzen, an internist, and a nurse, defendants decided to file a notice of intent only against Hartzler. Plaintiff's case against Hartzler went to trial and plaintiff received a $600,000 judgment.
Plaintiff then sued defendants for malpractice. Plaintiff claimed that defendants failed to sufficiently investigate his potential malpractice claims against Britton and the nursing staff. Plaintiff also claimed that defendants failed to inform him of the limitation period and the fact that they had not filed a notice of intent against Britton and the nursing staff before the limitation period expired. Defendants moved for summary disposition on the basis that their decision not to pursue claims against Britton and the nursing staff was protected by the attorney-judgment rule. The trial court agreed and granted summary disposition.
The court of appeals began by explaining the attorney-judgment rule: "An attorney has an implied duty to exercise reasonable skill, care, discretion, and judgment in representing a client. Further, an attorney is obligated to act as an attorney of ordinary learning, judgment, or skill would under the same circumstances. However, an attorney is not a guarantor of the most favorable possible outcome, nor must an attorney exercise extraordinary diligence or act beyond the knowledge, skill, and ability ordinarily possessed by members of the legal profession. Further, where an attorney acts in good faith and in honest belief that his acts and omissions are well founded in law and are in the best interest of the client, the attorney is not answerable for mere errors in judgment." [Citations and internal quotes omitted] [Generally citing Mitchell v Doughtery, 249 Mich App 668, 677; 644 NW2d 391 (2002) and Simko v Blake, 448 Mich 648, 655-656; 532 NW2d 842 (1995)].
Plaintiff claimed that defendants should not have relied on opinions from experts who were not willing to testify at trial. The court of appeals held that "there is no requirement either in law or in logic that the experts used to determine whether plaintiff has a potential claim must be the experts called at trial." In fact, the Michigan Supreme Court has recognized that, depending on the stage of the litigation, plaintiffs will likely use different experts in the course of establishing their medical malpractice claims. Grossman v Brown, 470 Mich 593, 598-599; 685 NW2d 198 (2004).
Next, plaintiff claimed that defendants conducted an unreasonable investigation because MCL 600.2961(1) requires a medical professional who is testifying regarding the standard of care to be a specialist in the same area as the person against whom the malpractice claim is made and VanHouzen was not qualified to testify about the standard of care for a general surgeon and neither VanHouzen or McDonnell were qualified to testify about the standard of care for the hospital nursing staff. The court of appeals held that the requirements of 600.2961(1) do not apply to experts who testify to causation and both VanHouzen and McDonell opined that, even if they breached the standard of care, neither Britton nor the nursing staff caused plaintiff's injuries. Since the experts did not believe that Britton or the nursing staff caused plaintiff's injuries, the defendants did not act unreasonably when they failed to obtain additional standard of care witnesses under MCL 600.2169(1).
Finally, plaintiff claimed that defendants breached a duty to him when they failed to timely inform him and his family that they would not serve a notice of intent to Britton or the nursing staff. However, plaintiff testified that defendants told him when the limitation period would expire for his malpractice claims. Further, plaintiff testified that defendants told him that a notice of intent had to be filed against each person they intended to sue before the limitation period expired. Plaintiff could not create a genuine issue of material fact by arguing that defendants had a duty to inform his family about the limitations period when his own testimony makes clear that he, the client, knew the limitation period and understood that all notices of intent had to be served within the limitation period.
Monday, July 23, 2007
Stanke et. al v. Varnum, Riddering, L.L.P, et. al., unpublished per curiam opinion of the court of appeals, issued March 20, 2007 (Docket No. 263446)
Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070320_C263446_36_263446.OPN.PDF
Underlying Case or Transaction: Personal Injury Litigation
Key Concepts: (1) attorney-judgment rule
Plaintiff Isabella Bank & Trust, as trustee of the Jacob S. Stanke Trust (plaintiff) sued the Varnum firm (Varnum) for malpractice arising from personal injury litigation. After the trial court granted summary disposition to Varnum, plaintiff appealed.
Five-year old Jacob Stanke (Jacob) was injured at a "Mini Grand Prix" event. Jacob's mother (Linda) engaged Varnum to pursue a personal injury claim on Jacob's behalf. The case eventually settled. Varnum then moved the circuit court to approve the settlement with the proceeds to be placed in trust for Jacob. Varnum attached a copy of the trust document to the motion, signed by Linda and Jacob's father (Jeffrey). Linda was named in the trust document as the trustee. The circuit court approved the settlement and authorized establishment of the trust.
Varnum then moved in the probate court, with Jeffrey's approval, to have Linda appointed as Jacob's conservator and to have the settlement funds transferred into the trust. The probate court granted the motion, appointed Linda as Jacob's conservator, approved use of the trust as a receptacle for the settlement proceeds, authorized the deposit of the proceeds into the trust, and ordered that an Acceptance of Trust be filed in lieu of a bond.
Subsequently, plaintiff filed this case on Jacob's behalf against Varnum and Linda alleging that Linda had depleted the trust's assets and that Varnum had committed malpractice in the manner in which it drafted the trust and handled matters before the probate court. Specifically, plaintiff alleged that Varnum had committed malpractice by: (1) constructing the trust in a manner that allowed Stanke to misappropriate funds; (2) asking the circuit and probate courts to approve the trust as drafted; (3) allowing Linda to appointed as trustee; and (4) not causing the probate court to pass on the sufficiency of a bond, a bond to be filed, or hearings to be held regarding the approval of the trust in the probate court.
Varnum moved for summary disposition on several different grounds, including that plaintiff's claims were barred by the attorney-judgment rule. The trial court granted Varnum's motion.
On appeal, the court of appeals affirmed because the attorney-judgment barred plaintiff's claims. First, the court of appeals explained the attorney judgment rule: "our Supreme Court explained that an attorney has an implied duty to exercise reasonable, skill, care, discretion and judgment in representing a client. Further, an attorney is obligated to act as an attorney of ordinary learning, judgment or skill would act under the same or similar circumstances. However, an attorney is not a guarantor of the most favorable possible outcome, nor must an attorney exercise extraordinary diligence or act beyond the knowledge, skill, and ability ordinarily possessed by members of the legal profession. Thus, an attorney is not liable for what, in hindsight, were errors of judgment where the attorney made those judgments in good faith and in the honest belief that the decisions were well founded in the law and made in the best interests of the client. Accordingly, while a gross error in judgment may be actionable, a mere error in judgment made in good faith is not. Therefore, where a plaintiff's allegations cannot support a breach of duty because they are based on mere errors of professional judgment and breaches of reasonable care, summary disposition is appropriate." [Individual citations omitted. Generally citing Simko v Blake, 446 Mich 648, 655-659; 532 NW2d 842 (1995) and Estate of Mitchell v Doughtery, 249 Mich App 668, 677-679; 664 NW2d 391 (2002).
The court then explained that each of plaintiff's allegations of malpractice fell within the attorney-judgment rule. First, Varnum's recommendation to use a trust to manage Jacob's assets in lieu of a bonded conservatorship was a matter of judgment -- a conscious choice made by Varnum in the course of tort litigation. Plaintiff presented no evidence that Varnum's judgment in this regard was motivated by anything other than good faith, with the honest belief that its decisions were well-founded in applicable law and made in the best interest of Varnum's client. Second, plaintiff had not and could not show that Linda was not an appropriate choice for trustee. Indeed, "it is almost routine to appoint parents to manage the interests of their minor children." In re Estate of Powell, 160 Mich App 704, 711; 408 NW2d 525 (1987). Finally, the decision to file the Acceptance of Trust instead of a bond was a pleading judgment and therefore, it too, came within the attorney-judgment rule.
In sum, since plaintiff had not presented any evidence that Varnum's errors, if any, were anything more than mere errors in judgment, there was no genuine issue of material fact regarding defendant's alleged negligence.
Underlying Case or Transaction: Personal Injury Litigation
Key Concepts: (1) attorney-judgment rule
Plaintiff Isabella Bank & Trust, as trustee of the Jacob S. Stanke Trust (plaintiff) sued the Varnum firm (Varnum) for malpractice arising from personal injury litigation. After the trial court granted summary disposition to Varnum, plaintiff appealed.
Five-year old Jacob Stanke (Jacob) was injured at a "Mini Grand Prix" event. Jacob's mother (Linda) engaged Varnum to pursue a personal injury claim on Jacob's behalf. The case eventually settled. Varnum then moved the circuit court to approve the settlement with the proceeds to be placed in trust for Jacob. Varnum attached a copy of the trust document to the motion, signed by Linda and Jacob's father (Jeffrey). Linda was named in the trust document as the trustee. The circuit court approved the settlement and authorized establishment of the trust.
Varnum then moved in the probate court, with Jeffrey's approval, to have Linda appointed as Jacob's conservator and to have the settlement funds transferred into the trust. The probate court granted the motion, appointed Linda as Jacob's conservator, approved use of the trust as a receptacle for the settlement proceeds, authorized the deposit of the proceeds into the trust, and ordered that an Acceptance of Trust be filed in lieu of a bond.
Subsequently, plaintiff filed this case on Jacob's behalf against Varnum and Linda alleging that Linda had depleted the trust's assets and that Varnum had committed malpractice in the manner in which it drafted the trust and handled matters before the probate court. Specifically, plaintiff alleged that Varnum had committed malpractice by: (1) constructing the trust in a manner that allowed Stanke to misappropriate funds; (2) asking the circuit and probate courts to approve the trust as drafted; (3) allowing Linda to appointed as trustee; and (4) not causing the probate court to pass on the sufficiency of a bond, a bond to be filed, or hearings to be held regarding the approval of the trust in the probate court.
Varnum moved for summary disposition on several different grounds, including that plaintiff's claims were barred by the attorney-judgment rule. The trial court granted Varnum's motion.
On appeal, the court of appeals affirmed because the attorney-judgment barred plaintiff's claims. First, the court of appeals explained the attorney judgment rule: "our Supreme Court explained that an attorney has an implied duty to exercise reasonable, skill, care, discretion and judgment in representing a client. Further, an attorney is obligated to act as an attorney of ordinary learning, judgment or skill would act under the same or similar circumstances. However, an attorney is not a guarantor of the most favorable possible outcome, nor must an attorney exercise extraordinary diligence or act beyond the knowledge, skill, and ability ordinarily possessed by members of the legal profession. Thus, an attorney is not liable for what, in hindsight, were errors of judgment where the attorney made those judgments in good faith and in the honest belief that the decisions were well founded in the law and made in the best interests of the client. Accordingly, while a gross error in judgment may be actionable, a mere error in judgment made in good faith is not. Therefore, where a plaintiff's allegations cannot support a breach of duty because they are based on mere errors of professional judgment and breaches of reasonable care, summary disposition is appropriate." [Individual citations omitted. Generally citing Simko v Blake, 446 Mich 648, 655-659; 532 NW2d 842 (1995) and Estate of Mitchell v Doughtery, 249 Mich App 668, 677-679; 664 NW2d 391 (2002).
The court then explained that each of plaintiff's allegations of malpractice fell within the attorney-judgment rule. First, Varnum's recommendation to use a trust to manage Jacob's assets in lieu of a bonded conservatorship was a matter of judgment -- a conscious choice made by Varnum in the course of tort litigation. Plaintiff presented no evidence that Varnum's judgment in this regard was motivated by anything other than good faith, with the honest belief that its decisions were well-founded in applicable law and made in the best interest of Varnum's client. Second, plaintiff had not and could not show that Linda was not an appropriate choice for trustee. Indeed, "it is almost routine to appoint parents to manage the interests of their minor children." In re Estate of Powell, 160 Mich App 704, 711; 408 NW2d 525 (1987). Finally, the decision to file the Acceptance of Trust instead of a bond was a pleading judgment and therefore, it too, came within the attorney-judgment rule.
In sum, since plaintiff had not presented any evidence that Varnum's errors, if any, were anything more than mere errors in judgment, there was no genuine issue of material fact regarding defendant's alleged negligence.
Tuesday, July 17, 2007
Crutcher, et. al. v Clark Hill, P.L.C., et. al., unpublished per curiam opinion of the court of appeals, issued March 20, 2007 (Docket No. 271599)
Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070320_C271599_64_271599.OPN.PDF
Underlying Case or Transaction: Commercial Litigation
Key Concepts: (1) collateral estoppel; (2) attorney-judgment rule; (3) causation
In the underlying litigation, Clark Hill represented Crutcher and others ("Crutcher") who were the defendants in an action seeking the accounting of various partnership dealings. In the subsequent malpractice action, Crutcher claimed that Clark Hill committed negligence in the underlying action by (1) approving or failing to object to an order (the "Clarification Order") which required Crutcher to pay amounts that he was not obligated to pay under the court's rulings; (2) failing to present evidence to rebut a certain exhibit ("Ex. 73"); (3) stipulating to the admission of Ex. 73; and (4) failing to raise a statute of limitations defense.
Clark Hill moved for summary disposition and the trial court granted the motion. On appeal, the court first held that Crutcher's claim regarding the Clarification Order was barred by collateral estoppel. "Collateral estoppel precludes relitigation of an issue a subsequent, different cause of action between the same parties when the prior proceeding culminated in a valid final judgment and the issue was actually and necessarily determined in the prior proceeding." Barrow v Pritchard, 2235 Mich App 478, 480; 597 NW2d 853 (1999). Generally, for collateral estoppel to apply three elements must be satisfied: (1) a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment; (2) the same parties must have had a full and fair opportunity to litigate the issue; and (3) there must be mutuality of estoppel. Monat v State Farm Ins Co, 469 Mich 679, 682-684; 677 NW2d 843 (2004). However, the defensive use of collateral estoppel does not require mutuality. Id. at 691-692.
In the underlying action, the accuracy of the Clarification Order was actually litigated and was the subject of a motion for reconsideration by Crutcher in which he argued that the court had made computational errors. Crutcher's motion for reconsideration was denied. Subsequently, Crutcher moved to amend the final judgment, which incorporated the Clarification Order. The trial court denied also denied Crutcher's motion to amend the judgment. Accordingly, because the accuracy of the Clarification Order was (1) a question of fact essential to the underlying judgment that was actually litigated and (2) Crutcher had a full opportunity to litigate the issue, collateral estoppel barred Crutcher's claim in the subsequent malpractice action.
Next, Crutcher claimed that Clark Hill committed negligence when it failed to present the underlying bank records during trial to rebut Ex. 73. In the underlying action, the plaintiff's expert relied on Ex. 73 to establish that the plaintiffs had paid Crutcher $200,000. During cross examination, Clark Hill elicited that the $200,000 entry was written in different ink than the other entries on the document. Clark Hill then presented Crutcher's accountant as a rebuttal witness. She testified that the Ex. 73 was identical to another exhibit, which did not contain the $200,000 entry. Clark Hill did not offer any bank records to show that the $200,000 payment was not made and the trial court found that the plaintiffs had paid Crutcher the $200,000 embodied in Ex. 73.
In the subsequent malpractice action, Crutcher claimed that Clark Hill's decision not to produce the bank records to rebut Ex. 73 constituted negligence. During his deposition, the Clark Hill lawyer who handled the trial indicated that he believed that the accountant's testimony had adequately rebutted Ex. 73 and that the bank records did not detail individual transactions, rather they only showed total monthly disbursements. The court of appeals held that "when an attorney acts in good faith and in the honest belief that his actions are well founded in law and his client's best interest, he is not accountable for mere errors in judgment. Simko v Blake, 448 Mich 648; 658; 532 NW2d 842 (1995). Further, the decision whether to call witnesses at trial is a matter of trial strategy. Id. at 660. Therefore, the court of appeals held that Crutcher had failed to show that Clark Hill's decisions regarding the rebuttal of Ex. 73 and the bank records were more than mere errors in judgment that could rise to the level of negligence.
Next, Crutcher claimed that Clark Hill was negligent in stipulating to the admission of Ex. 73 because it was not admissible. Crutcher contended that without Ex. 73 there would have been no evidence of the $200,000 payment. The court of appeals disagreed because the version of MRE 703 (which governs the bases of expert testimony) that was in effect at the time of the trial in the underlying action allowed experts to base their opinions on evidence that was not contained in the record. Therefore, it was within the trial court's discretion to allow the plaintiffs' expert to testify about the $200,000 payment even if Ex. 73 was not in evidence. Thus, the court of appeals held that Crutcher failed to prove that Clark Hill's stipulation to the admission of Ex. 73 was the proximate cause in the introduction of evidence of that payment.
Finally, Crutcher asserted that Clark Hill should have asserted a statute of limitations defense in the underlying action. The court of appeals disagreed because the statute of limitations applicable to partnership accounting actions does not begin to run until dissolution occurs or there has been a settlement of or accounting of partnership dealings. Reindel v Reindel, 253 Mich 680, 682-683; 235 NW2d 861 (1931). In the underlying action, the evidence showed that the partnerships that were the subject of the action had not been dissolved.
Underlying Case or Transaction: Commercial Litigation
Key Concepts: (1) collateral estoppel; (2) attorney-judgment rule; (3) causation
In the underlying litigation, Clark Hill represented Crutcher and others ("Crutcher") who were the defendants in an action seeking the accounting of various partnership dealings. In the subsequent malpractice action, Crutcher claimed that Clark Hill committed negligence in the underlying action by (1) approving or failing to object to an order (the "Clarification Order") which required Crutcher to pay amounts that he was not obligated to pay under the court's rulings; (2) failing to present evidence to rebut a certain exhibit ("Ex. 73"); (3) stipulating to the admission of Ex. 73; and (4) failing to raise a statute of limitations defense.
Clark Hill moved for summary disposition and the trial court granted the motion. On appeal, the court first held that Crutcher's claim regarding the Clarification Order was barred by collateral estoppel. "Collateral estoppel precludes relitigation of an issue a subsequent, different cause of action between the same parties when the prior proceeding culminated in a valid final judgment and the issue was actually and necessarily determined in the prior proceeding." Barrow v Pritchard, 2235 Mich App 478, 480; 597 NW2d 853 (1999). Generally, for collateral estoppel to apply three elements must be satisfied: (1) a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment; (2) the same parties must have had a full and fair opportunity to litigate the issue; and (3) there must be mutuality of estoppel. Monat v State Farm Ins Co, 469 Mich 679, 682-684; 677 NW2d 843 (2004). However, the defensive use of collateral estoppel does not require mutuality. Id. at 691-692.
In the underlying action, the accuracy of the Clarification Order was actually litigated and was the subject of a motion for reconsideration by Crutcher in which he argued that the court had made computational errors. Crutcher's motion for reconsideration was denied. Subsequently, Crutcher moved to amend the final judgment, which incorporated the Clarification Order. The trial court denied also denied Crutcher's motion to amend the judgment. Accordingly, because the accuracy of the Clarification Order was (1) a question of fact essential to the underlying judgment that was actually litigated and (2) Crutcher had a full opportunity to litigate the issue, collateral estoppel barred Crutcher's claim in the subsequent malpractice action.
Next, Crutcher claimed that Clark Hill committed negligence when it failed to present the underlying bank records during trial to rebut Ex. 73. In the underlying action, the plaintiff's expert relied on Ex. 73 to establish that the plaintiffs had paid Crutcher $200,000. During cross examination, Clark Hill elicited that the $200,000 entry was written in different ink than the other entries on the document. Clark Hill then presented Crutcher's accountant as a rebuttal witness. She testified that the Ex. 73 was identical to another exhibit, which did not contain the $200,000 entry. Clark Hill did not offer any bank records to show that the $200,000 payment was not made and the trial court found that the plaintiffs had paid Crutcher the $200,000 embodied in Ex. 73.
In the subsequent malpractice action, Crutcher claimed that Clark Hill's decision not to produce the bank records to rebut Ex. 73 constituted negligence. During his deposition, the Clark Hill lawyer who handled the trial indicated that he believed that the accountant's testimony had adequately rebutted Ex. 73 and that the bank records did not detail individual transactions, rather they only showed total monthly disbursements. The court of appeals held that "when an attorney acts in good faith and in the honest belief that his actions are well founded in law and his client's best interest, he is not accountable for mere errors in judgment. Simko v Blake, 448 Mich 648; 658; 532 NW2d 842 (1995). Further, the decision whether to call witnesses at trial is a matter of trial strategy. Id. at 660. Therefore, the court of appeals held that Crutcher had failed to show that Clark Hill's decisions regarding the rebuttal of Ex. 73 and the bank records were more than mere errors in judgment that could rise to the level of negligence.
Next, Crutcher claimed that Clark Hill was negligent in stipulating to the admission of Ex. 73 because it was not admissible. Crutcher contended that without Ex. 73 there would have been no evidence of the $200,000 payment. The court of appeals disagreed because the version of MRE 703 (which governs the bases of expert testimony) that was in effect at the time of the trial in the underlying action allowed experts to base their opinions on evidence that was not contained in the record. Therefore, it was within the trial court's discretion to allow the plaintiffs' expert to testify about the $200,000 payment even if Ex. 73 was not in evidence. Thus, the court of appeals held that Crutcher failed to prove that Clark Hill's stipulation to the admission of Ex. 73 was the proximate cause in the introduction of evidence of that payment.
Finally, Crutcher asserted that Clark Hill should have asserted a statute of limitations defense in the underlying action. The court of appeals disagreed because the statute of limitations applicable to partnership accounting actions does not begin to run until dissolution occurs or there has been a settlement of or accounting of partnership dealings. Reindel v Reindel, 253 Mich 680, 682-683; 235 NW2d 861 (1931). In the underlying action, the evidence showed that the partnerships that were the subject of the action had not been dissolved.
Wednesday, June 13, 2007
Kelly Trust, et al v Adkinson, Need, et al, unpublished per curiam opinion of the court of appeals, issued March 8, 2007 (Docket No. 268550)
Link: http://courtofappeals.mijud.net/documents/OPINIONS/FINAL/COA/20070308_C268550_51_268550.OPN.PDF
Underlying Case or Transaction: Probate
Key Concepts: (1) judicial estoppel and (2) causation
Petitioners appealed a probate court order granting summary disposition in favor of respondent law firm on the basis of judicial estoppel and the law firm appealed the denial of summary judgment based on causation. The court of appeals affirmed.
Brian Kelly ("decedent") died unexpectedly. He had a complex estate plan including several trusts. Two of the petitioners (Dennis and Sean Kelly) were trustees of the Family Trust ("trust"), which was a contingent beneficiary of an IRA that decedent had opened with Charles Schwab. The IRA was funded by six mutual funds, which were very volatile and the value of the IRA diminished dramatically before the funds could be distributed to the beneficiaries.
The basis of petitioners' claims was that the law firm allegedly delayed in advising or assisting them in effectuating the transfer of the IRA to the petitioners' control. Allegedly, the delay caused a significant diminution in value of the IRA. The complaint alleged that when decedent died on August 20, 2000, the value of the IRA was $675,000, but because of the law firm's delay the petitioners could not obtain access to the IRA until April 2001, by which time the value of the IRA had decreased by approximately $470,000.
The law firm moved for summary disposition on the grounds that petitioners' damages were speculative, the statute of limitations had expired, the petitioners were judicially estopped from asserting a different, higher value for the IRA than the value the petitioners had previously asserted in their First Annual Account of Fiduciary, which had been accepted by the Emmet County Circuit Court, and on the ground that there was no genuine issue of material fact regarding whether the respondents had caused petitioners' damages.
Regarding judicial estoppel, the law firm asserted that the petitioners had previously been sued by their siblings due to the decrease in the value of the IRA. During that proceeding, the petitioners had filed an accounting for the trust. That accounting, which was approved by the circuit court, asserted that the value of the IRA on the date the decedent died was $393,112.22. Therefore, the law firm argued, petitioners were estopped from disputing the value of the IRA as established in the accounting.
The probate court granted the law firm's motion, ruling that the petitioners were judicially estopped from claiming that the value of the decedent's IRA was more than $393,116.22 on the date of his death. This ruling effectively eliminated a large portion of the petitioner's claimed damages. While the probate court granted the portion of the law firm's summary disposition motion based on estoppel, the probate court denied the portion of the law firm's motion based on causation.
On appeal, the court affirmed the probate court's ruling on judicial estoppel. The court first explained the elements and rationale of judicial estoppel: "The purpose of judicial estoppel is to protect the integrity of the judicial process. The doctrine of judicial estoppel is sometimes described as the doctrine against the assertion of inconsistent positions. Judicial estoppel is widely viewed as a tool to be used by the courts in impeding those litigants who would otherwise play fast and loose with the legal system. It is intended to protect the courts from being manipulated by chameleonic litigants who seek to prevail, twice, on opposite theories. Judicial estoppel must be cautiously applied. It is an extraordinary remedy that should only be invoked when a party's inconsistent behavior would otherwise result in a miscarriage of justice. Michigan has adopted the prior success model of judicial estoppel, which prevents a party who has successfully and unequivocally asserted a position in a prior proceeding from asserting an inconsistent position in a subsequent proceeding. The mere assertion of inconsistent positions is not sufficient to invoke judicial estoppel. In order for the doctrine to apply, there must be some indication that the court in the earlier proceeding accepted the party's position as true, and the claims in the earlier proceeding and the subsequent proceeding must be wholly inconsistent." [Citing Opland v Kiesgan, 234 Mich App 352 (1999) and Paschke v Retool Industries, 445 Mich 502 (1994)].
The court then described how the facts of this case warranted a finding that the petitioners were judicially estopped from asserting a higher value for the trust than what they had previously asserted. In the prior action, the petitioners had been sued by their siblings for mismanaging the trust. One of the issues in that case was the value of the IRA on the date of the decedent's death. The petitioners had filed an accounting for the trust placing the value of the IRA on that date at $393,116.22. The siblings filed objections to the accounting, but the court accepted the petitioners' accounting.
The court of appeals explained that judicial estoppel applied here because: (1) the petitioners asserted the lower value for the IRA in the prior action; (2) the court in that action accepted the lower value; and (3) the higher value claimed in this litigation was wholly inconsistent with the lower value claimed in the previous litigation. The result of the court of appeals' ruling was that the damages the petitioners could seek was limited to the difference between the value the petitioners had previously successfully asserted and the subsequent diminution in value.
The court then addressed the law firm's causation argument. The probate court had denied the law firm's motion on this ground. On appeal, the court affirmed the probate court's denial of summary disposition.
Petitioners claimed that the law firm's delay in helping them gain access and control over the decedent's IRA caused the decrease in the value of the IRA. The petitioners also claimed that the law firm orchestrated the transfer of the funds in the IRA to the trust in a manner which would have caused a substantial tax liability to the estate.
The court noted that it was clear that the petitioners were relying on the skill and knowledge of the law firm regarding the handling of the decedent's estate and specifically the IRA. Petitioners claimed that they informed the law firm that the mutual funds in the IRA were very volatile on August 21, 2000. The law firm's own records showed that the firm was having discussions with the brokerage for the IRA as early as September 8, 2000. Petitioner's expert testified that within 48 hours of learning that an asset in the estate is volatile, a reasonable and prudent probate lawyer would have undertaken to transfer the funds into more conservative holdings. The funds were not transferred for more than three months after the decedent's death. Viewing the evidence in the light most favorable to the petitioners, the court of appeals held that the law firm knew the funds in the IRA were volatile. The evidence also showed that a reasonable attorney would have taken steps within 48 hours to transfer the funds into safer investments, yet the law firm did not do so. Therefore, the petitioners had established a question of fact regarding causation.
Underlying Case or Transaction: Probate
Key Concepts: (1) judicial estoppel and (2) causation
Petitioners appealed a probate court order granting summary disposition in favor of respondent law firm on the basis of judicial estoppel and the law firm appealed the denial of summary judgment based on causation. The court of appeals affirmed.
Brian Kelly ("decedent") died unexpectedly. He had a complex estate plan including several trusts. Two of the petitioners (Dennis and Sean Kelly) were trustees of the Family Trust ("trust"), which was a contingent beneficiary of an IRA that decedent had opened with Charles Schwab. The IRA was funded by six mutual funds, which were very volatile and the value of the IRA diminished dramatically before the funds could be distributed to the beneficiaries.
The basis of petitioners' claims was that the law firm allegedly delayed in advising or assisting them in effectuating the transfer of the IRA to the petitioners' control. Allegedly, the delay caused a significant diminution in value of the IRA. The complaint alleged that when decedent died on August 20, 2000, the value of the IRA was $675,000, but because of the law firm's delay the petitioners could not obtain access to the IRA until April 2001, by which time the value of the IRA had decreased by approximately $470,000.
The law firm moved for summary disposition on the grounds that petitioners' damages were speculative, the statute of limitations had expired, the petitioners were judicially estopped from asserting a different, higher value for the IRA than the value the petitioners had previously asserted in their First Annual Account of Fiduciary, which had been accepted by the Emmet County Circuit Court, and on the ground that there was no genuine issue of material fact regarding whether the respondents had caused petitioners' damages.
Regarding judicial estoppel, the law firm asserted that the petitioners had previously been sued by their siblings due to the decrease in the value of the IRA. During that proceeding, the petitioners had filed an accounting for the trust. That accounting, which was approved by the circuit court, asserted that the value of the IRA on the date the decedent died was $393,112.22. Therefore, the law firm argued, petitioners were estopped from disputing the value of the IRA as established in the accounting.
The probate court granted the law firm's motion, ruling that the petitioners were judicially estopped from claiming that the value of the decedent's IRA was more than $393,116.22 on the date of his death. This ruling effectively eliminated a large portion of the petitioner's claimed damages. While the probate court granted the portion of the law firm's summary disposition motion based on estoppel, the probate court denied the portion of the law firm's motion based on causation.
On appeal, the court affirmed the probate court's ruling on judicial estoppel. The court first explained the elements and rationale of judicial estoppel: "The purpose of judicial estoppel is to protect the integrity of the judicial process. The doctrine of judicial estoppel is sometimes described as the doctrine against the assertion of inconsistent positions. Judicial estoppel is widely viewed as a tool to be used by the courts in impeding those litigants who would otherwise play fast and loose with the legal system. It is intended to protect the courts from being manipulated by chameleonic litigants who seek to prevail, twice, on opposite theories. Judicial estoppel must be cautiously applied. It is an extraordinary remedy that should only be invoked when a party's inconsistent behavior would otherwise result in a miscarriage of justice. Michigan has adopted the prior success model of judicial estoppel, which prevents a party who has successfully and unequivocally asserted a position in a prior proceeding from asserting an inconsistent position in a subsequent proceeding. The mere assertion of inconsistent positions is not sufficient to invoke judicial estoppel. In order for the doctrine to apply, there must be some indication that the court in the earlier proceeding accepted the party's position as true, and the claims in the earlier proceeding and the subsequent proceeding must be wholly inconsistent." [Citing Opland v Kiesgan, 234 Mich App 352 (1999) and Paschke v Retool Industries, 445 Mich 502 (1994)].
The court then described how the facts of this case warranted a finding that the petitioners were judicially estopped from asserting a higher value for the trust than what they had previously asserted. In the prior action, the petitioners had been sued by their siblings for mismanaging the trust. One of the issues in that case was the value of the IRA on the date of the decedent's death. The petitioners had filed an accounting for the trust placing the value of the IRA on that date at $393,116.22. The siblings filed objections to the accounting, but the court accepted the petitioners' accounting.
The court of appeals explained that judicial estoppel applied here because: (1) the petitioners asserted the lower value for the IRA in the prior action; (2) the court in that action accepted the lower value; and (3) the higher value claimed in this litigation was wholly inconsistent with the lower value claimed in the previous litigation. The result of the court of appeals' ruling was that the damages the petitioners could seek was limited to the difference between the value the petitioners had previously successfully asserted and the subsequent diminution in value.
The court then addressed the law firm's causation argument. The probate court had denied the law firm's motion on this ground. On appeal, the court affirmed the probate court's denial of summary disposition.
Petitioners claimed that the law firm's delay in helping them gain access and control over the decedent's IRA caused the decrease in the value of the IRA. The petitioners also claimed that the law firm orchestrated the transfer of the funds in the IRA to the trust in a manner which would have caused a substantial tax liability to the estate.
The court noted that it was clear that the petitioners were relying on the skill and knowledge of the law firm regarding the handling of the decedent's estate and specifically the IRA. Petitioners claimed that they informed the law firm that the mutual funds in the IRA were very volatile on August 21, 2000. The law firm's own records showed that the firm was having discussions with the brokerage for the IRA as early as September 8, 2000. Petitioner's expert testified that within 48 hours of learning that an asset in the estate is volatile, a reasonable and prudent probate lawyer would have undertaken to transfer the funds into more conservative holdings. The funds were not transferred for more than three months after the decedent's death. Viewing the evidence in the light most favorable to the petitioners, the court of appeals held that the law firm knew the funds in the IRA were volatile. The evidence also showed that a reasonable attorney would have taken steps within 48 hours to transfer the funds into safer investments, yet the law firm did not do so. Therefore, the petitioners had established a question of fact regarding causation.
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