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Archive for the tag “malpractice”

The Secret Defense to Debt Collection Matters

Unfortunately, many people find themselves in a situation where they get behind on paying their bills and, due to lack of funds, wind up not paying some of them.  Not paying one’s bills will more often than not result in that debt being sold to a collections agency and that agency suing the debtor for payment (and adding on all kinds of things, like interest, attorney’s fees, penalties and the like to boot).

Selling one’s debt to a collection agency is an important step in the process that directly affects the subsequent lawsuit against the debtor.  Typically, large lenders – especially lenders like credit cards companies – have a fair amount of debtors who stop paying (for whatever reason) on the debt owed to the lender which results in their debts being sent to collections.  When these lenders send debts to collections, they do so by selling the debts to a collection agency.  When they sell the debts to a collection agency, they will often sell the debts in bulk, often for pennies on the dollar.  The transaction benefits the creditor as it gets something for the debts owed without having to pursue costly and time consuming litigation.  The transaction benefits the collection agency because it can pursue collection (including law suit) against a debtor for the full amount despite having bought the debt for far less than its principal value, let alone its value inflated by interest and such.

More often than not, when debts are sold to collection agencies, the initial creditor (e.g.: a credit card company) simply provides an affidavit to the collection agency regarding the amount of the debts and the names of those who owe the debts.  Typically, no other document is supplied by the initial creditor to the collection agency, including any contracts with the debtor or anything bearing the signature on the debtor.  Once the collection agency assumes the debt, it has the right to bring suit against the debtor for the unpaid debt.

The lack of documentation of the contract with the debtor is absolutely key to any defense to the collection of the debt.  If the creditor brings suit against the debtor in the Court of Common Pleas and does not attach the contract between the debtor and the creditor which underlies the alleged debt, the debtor can file objections to the complaint (the document which initiates the law suit) asking for it to be dismissed due to the lack of a contract.  I can say, from personal experience, that such a tactic works as, very often, the collection agency pursing the debtor simply does not have the underlying contractual documentation to prove its case against the debtor.

If the case is brought in small claims court, the creditor does not have the obligation to include a copy of the contract to the complaint, so successfully defending against a collections law suit takes some shrewd strategy.  The lack of documentary evidence is still a huge problem for the creditor, but the small claims aspect of this matter makes the approach different and much trickier.  As the complaint does not require the contract to be appended to it, and the primary place for these matters to be resolved is at a hearing before a judge, the creditor has the procedural advantage.  At the hearing, the collection agency, armed with an affidavit from the initial creditor (as described above), secures almost all of the other evidence it needs to win against the debtor through the debtor’s testimony.

Here is how the hearing would play out: the creditor describes the claim to the judge, which is that the debtor had a contract with a credit card company (for example), he did not pay the debt owed, and is now in collections and all of this is supported by the affidavit.  Now, the affidavit, taken alone, is insufficient to win the case as there is no evidence that the debtor actually contracted with the creditor.  So, at the appropriate time during the trial, the creditor will ask the debtor some questions (i.e.: cross-examination).  These questions will be something like: “did you have a credit card from XYZ company on these dates”?  “Did you make charges on it?” “Did you make all the payments on it?”  “Do you owe $XYZ on the credit card?” And other questions like it.  At the end of the examination, the debtor himself provides all of the evidence against himself that the creditor needs to win the case against him.   As a result, the creditor will win the case against the debtor thanks to the debtor supplying all of the evidence, via his testimony, need by the creditor.

So, how does a debtor avoid the fate of the debtor in the above scenario?  That is where a good lawyer comes into play.

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The Gist of a Legal Malpractice Action

There are times when a disgruntled client believes his case was mishandled by his attorney to such an extent that he needs to bring suit against the attorney to make him whole. When bringing such a suit, a client can bring an action against his attorney sounding in tort for legal malpractice and/or an action sounding in breach of contract.

A malpractice claim addresses whether an attorney performed his duties according to the accepted standards of practice and is subject to a two year statute of limitations. A breach of contract claim addresses whether the attorney fulfilled his duties according to the contract that an attorney has with his client and is subject to a four year statute of limitations. According to the so-called “gist-of-the-action” rule, a litigant may not bring a tort claim (e.g.: legal malpractice) against someone if the legal duty that is claimed to have been breached by the opposing party is created by the terms of a contract.

It is not uncommon for both legal malpractice and breach of contract claims to be raised simultaneously by disgruntled clients against their attorneys, and the recent matter of New York Central Mutual Insurance Company and St. Paul Mercury Insurance Company v. Margolis Edelstein and Michael T. Savitsky, United States Court of Appeals for the Third Circuit, Case No. 15-1541 helps provide guidance regarding which is the more appropriate claim.

The New York Central matter centered on an attorney’s representation of an automobile insurance company with regard to the coverage it elected to provide (or lack thereof) for an automobile accident. At the conclusion of the case, the insurance company believed it received poor, indeed substandard, legal advice from its attorney which, as a result, led to its suing its attorney for breach of contract. The defendant attorney filed a motion to dismiss (which was granted, leading the insurance company to appeal to the Third Circuit) based on the “gist-of-the-action” rule. The successful argument proffered by the attorney was that, regardless of the labeling provided by the insurance company, its claim was actually a malpractice claim. The impact of a breach of contract claim being construed as a malpractice claim is that it shortens the applicable statute of limitations from four years (for contracts) to two years (for torts), which would lead to the dismissal of the insurance company’s claims as they were filed more than two years after the incident giving rise to its case against its attorney.

The Court indicated that a claim for breach of contract must arise from the duties created by a contract and not duties created through a “broader social duty.” The duty at issue under a contract claim must be one which a party would not otherwise have been obliged to do but for the terms of the contract.

According to the Court, the obligation for an attorney to perform his duties competently is one which looks to “broader social duties” and not simply the specific terms of a contract. According to the contract at issue, the attorney in this case was tasked with researching, drafting, and communicating a legal opinion to the insurance company regarding exposure to civil liability flowing from a specific automobile accident. To that end, the Court observed that the attorney did research, draft, and communicate the aforesaid legal opinion to the insurance company. Consequently, the attorney did not breach the contract. The insurance company’s claim is, more-or-less, that the attorney did a poor job in researching, drafting, and communicating the legal opinion, which is distinct from claiming the attorney did not perform the tasks he was contracted to do. In other words, as the Court pointed out, the insurance company’s claim “arises from [the attorney’s] negligent performance of his contractual duty obligations and, therefore, sounds in tort.”

Due to the above, the Court construed the breach of contract claim against the attorney as a malpractice claim, and, therefore, applied the two year statute of limitations for a malpractice claim to the insurance company’s claims, which resulted in the dismissal of those claims due to being time barred.

The decision above is beginning to be adopted generally as it has already been applied in the matter of Rinker v. Amori, Case No.: 3:15-1293, 2016 US Dist. Lexis 36712 at 19-20 (M.D. Pa. Mar. 22, 2016) and is consistent with the Pennsylvania Supreme Court case Bruno v. Erie Insurance, 106 A.3d 48 (Pa. 2014).

So, practitioners should be aware and vigilant to ensure they are compliant with the “gist-of-the-action” rule, and remember that, regardless of how a case is labeled, a court will look to the substance of the claims made to determine whether it sounds in contract or in tort.

Originally published on September 26, 2016 in Upon Further Review and can be seen here.

Limiting Legal Malpractice Claims: Applying the Glenbrook Analysis

The statue of limitations for a legal malpractice action in Pennsylvania is two years from the date of the malpractice; however that time period may be extended under certain circumstances.  In Glenbrook Leasing Co. v. Beausang, 839 A.2d 437 (Pa. Super. 2003), affirmed, 881 A.2d 1266 (Pa. 2005), the Pennsylvania Superior Court explored the viability of various ways to potentially extend that two year period.

Plaintiff in Glenbrook is a real estate partnership which purchased office space in a condominium development to be used as medical offices.  The agreement of sale for the office space included language granting Plaintiff use (and alleged ownership) of 35 parking spaces.  Nothing was placed in the deed regarding Plaintiff’s ownership of the aforesaid parking spaces.

About six years later, the condominium association took action to limit Plaintiff’s use of the aforesaid 35 parking spaces.  Unsurprisingly, a dispute arose between Plaintiff and the condominium association regarding the ownership and use of the parking spaces, which eventually evolved into litigation.  The litigation culminated in a ruling in favor of the condominium association.  The ruling was based on the merger doctrine, which generally states that any guarantee to be granted in a real estate transaction must be stated in the deed to the subject property.  As applied to the instant matter, Plaintiff was considered not to have any ownership rights over the parking spaces as they were not memorialized in the deed to the property.

When the initial real estate transaction took place, Plaintiff was represented by Defendant, a real estate law firm.  Plaintiff believed that its loss in the litigation against the condominium association, and the resulting loss of the 35 parking spaces, was a direct result of the legal malpractice of Defendant in failing to take into consideration the merger doctrine, and by failing to include language regarding the parking spaces in the deed to the property at issue.  About a year after the conclusion of the litigation against the condominium association, and about six years after the association first presented the issues regarding the deed, and its lack of language dealing with the parking spaces to Plaintiff, the company brought suit against Defendant law firm, claiming it committed legal malpractice.

Defendant ultimately filed a motion for summary judgement, claiming that Plaintiff brought suit far beyond the two year statute of limitations.  The trial court ruled in favor of Defendant.  On appeal, the Superior Court affirmed the trial court’s ruling, and the Supreme Court issued a per curiam order affirming the Superior Court’s ruling.  It is the Superior Court’s opinion that is the subject of this article.

While the statue of limitation in a legal malpractice claim is two years, that period can be extended via the equitable discovery rule which sates that the two years is initiated not at the occurrence of the malpractice, but when it was, or should have been, discovered.  The Court ruled that Plaintiff discovered, or should have discovered, that there may have been legal malpractice six years before it initiated suit against Defendant (or four years longer than the two year statute allows) when the dispute with the condominium association first arose.

Plaintiff then argued that the Court should apply the “continuous representation rule” which states that the limitations period would not begin to run until plaintiff terminated Defendant’s services.  The Court was unmoved by Plaintiff’s argument to extend the legal malpractice statute of limitations based on the continuous representation rule.  The Court noted that the rule was not the law of Pennsylvania (although it is in other jurisdictions) and it is not the place of the Superior Court to adopt new rules without authority to do so.

Plaintiff next argued that the limitations period should be extended through estoppel, asserting that the “special relationship” between a lawyer and his client lulled Plaintiff into a false sense of security, through fraud, or deception, or concealment, to trust Defendant beyond when it would have been prudent to do so.  This sort of argument has traction among physicians and patients and Plaintiff attempted here to apply it to attorneys and clients.  The Court rejected this argument as well, as it found Defendant was completely candid with Plaintiff regarding the claims made by the condominium association, including providing Plaintiff with the first allegation of their own malpractice nearly six years prior to Plaintiff’s bringing suit.

Finally, Plaintiff argued that the question of precisely when it discovered the malpractice is a question of fact that should have been decided by a jury, not via a motion for summary judgement.  The Court rejected this argument as well, ruling that the facts in this matter were abundantly clear as to when Plaintiff discovered the malpractice.

The statute of limitations is critical to be aware of when considering bringing suit.  Although the Court made a variety of rulings, as described above, it is significant and useful in that it lays out some guidelines as to how to apply the various means to extend the statute of limitations and notably refuses to adopt and apply the continuous representation rule.

Originally published in Upon Further Review on September 24, 2015 and can be seen here.

Claim for Ineffective Counsel is Ineffective

The United States District Court for the Eastern District of Pennsylvania reviewed the Constitutional standard for the Sixth Amendment to the United States Constitution´s guarantee of counsel for criminal matters in the recent matter of U.S. v. Keller, 2013 WL 6409360.

Keller, an attorney, was a defendant in a criminal case where he was convicted of wire fraud consequent to misappropriating his clients´ money which he held in escrow for them. After his conviction, Keller moved to vacate his conviction on the basis of having ineffective defense counsel pursuant to the Sixth Amendment, which is the subject of the above-cited case. In order to warrant a reversal of a criminal conviction on the basis of ineffective counsel, Keller had to demonstrate that his attorney´s performance was deficient and that his attorney´s deficient performance prejudiced his defense.

In order to demonstrate that his attorney´s performance was deficient Keller had to show that his attorney´s conduct was not just deficient, but below an objective standard of reasonableness. An objective standard of reasonableness means that the lack of success of a particular tactical decision is not necessarily evidence of deficient performance. The court will not engage in hindsight to evaluate an attorney´s decisions. To demonstrate prejudice, one must apply a “but for” analysis where one must show that the negative result of a trial (e.g., the conviction) would not have occurred but for the deficient representation.

Keller listed a multitude of issues which he believed demonstrated deficient representation to warrant setting aside his conviction; the Court disagreed with each one and each will be briefly described below.

First, Keller claimed that an agreement between the prosecutor and his attorney regarding certain evidentiary issues demonstrated a conflict of interest as Keller claimed his attorney wanted to “go easy” on the trial judge in order to curry favor with the trial judge in a concurrent civil case his attorney coincidentally also had with the trial judge. The Court rejected this argument, pointing to a lack of evidence and the fact that the evidentiary issues were not really in dispute.

Second, Keller took issue with the fact that his attorney did not oppose the prosecutions´ admission of recorded conversations as evidence. The Court rejected this argument on the basis that no viable argument for their inadmissibility could be articulated, nor did Keller attempt to make one in his motion. The Court made it clear that failing to raise non-meritorious arguments does not amount to deficient legal representation. Keller subsequently argued that these recordings were obtained through duress and/or were unfairly prejudicial or coercive. He also claimed that the transcripts for the recordings were flawed. These arguments were rebuffed by the Court, which indicated that pressure to reach agreements is not necessarily duress and there was no prejudice as an undercover investigation is, under applicable law, explicitly not prejudicial or coercive. Regarding the transcripts, the trial judge specifically instructed the jury to give weight to the recordings over the transcripts for the same if discrepancies were found between the two; regardless, Keller never identified which portions of the transcript were inaccurate. Indeed, Keller offered testimony to explain the above during the trial so the jury which convicted him was completely aware of the issues at play. Therefore, Keller´s attorney electing not to object to the above was not deficient.

Third, Keller was critical of his attorney´s handling of witnesses. The Court noted that Keller did not demonstrate that his attorney´s decisions regarding witnesses had any effect on the outcome on his trial. Further, the additional witnesses Keller wanted to be called (who his attorney did not call) did not amount to deficient counsel as the Court believed their testimony would only have amounted to cumulative evidence anyway. Besides, the Court noted, the witnesses his attorney elected not to call had their own set of credibility issues (e.g., one uncalled witness was Keller´s fiancée) to make the decision not to call them tactically justified. The trial judge also gave Keller´s attorney significant deference in how aggressively he examined the witnesses especially considering the tactical options open to him.

Fourth, Keller then complained that his attorney did not make an issue of the fact that one of the jurors audibly complained of the length of deliberations and that another juror held the hand of the victim during sentencing. According to the Court, even if both of the above were true, neither action evidenced enough prejudice to warrant setting aside the conviction. Moreover, Keller does not make any allegation that the above actually resulted in prejudice, confirming the trial judge´s ruling on the matter.

Fifth, Keller lists a variety of times he believed his attorney should have objected to testimony on the basis of hearsay. However, the Court rejected this argument as well as Keller failed to demonstrate that the testimony at issue was actually inadmissible. Indeed, the Court found that the testimony highlighted by Keller was either admissible or was strategically allowed to be entered in as evidence to help his case; regardless, Keller did not demonstrate that the admission of the testimony at issue led or contributed to his conviction.

Sixth, Keller took issue with his attorney not raising the issue of alleged false grand jury testimony. However, the Court was not persuaded by this argument noting the extremely high standard (which is unlikely to be met) to successfully make an issue of testimony before a grand jury and that, even if Keller is correct, it would have had no effect on his indictment.

Finally, Keller raised complaints about his attorney´s performance during sentencing. Keller´s initial argument regarding his attorney´s alleged failure to object to the amount calculated as damages was simply factually wrong as, according to the Court, he did object. His subsequent argument claiming the lack of character witnesses called by his attorney was rejected by the Court as Keller´s own testimony conflicted with the testimony he claimed he wanted elicited from his potential witnesses. He concluded by criticizing his attorney´s failure to raise an argument regarding the alleged insufficiency of evidence at the trial to prove his criminal intent, but the Court was not persuaded by this argument either as the Court ruled that any arguments to that effect were not meritorious anyway.

As can be seen above, the standard to successfully prove one had ineffective counsel sufficient to meet Sixth Amendment scrutiny is extremely high, which should be of some comfort to practitioners. Ultimately, regardless of the multitude of arguments presented by Keller, none could meet the basic two prong test his arguments had to pass, namely that: (1) an attorney´s representation must be objectively below standards and (2) the poor representation must result in a negative outcome.

Originally published in Upon Further Review on June 16, 2014 and can be seen here.

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