Legal Malpractice Claim Wrongly Dismissed, Fees Improperly Awarded To Lawyer & Firm

In this legal malpractice action, the Michigan Court of Appeals ruled the trial court: 1) should not have summarily dismissed the malpractice claim against the lawyer and her firm and 2) wrongly awarded the lawyer fees for representing herself and her law firm in the matter.

The plaintiff, Elizabeth Silverman, is a Farmington Hills attorney who operates her own firm, Elizabeth A. Silverman, PC. She filed a breach of contract suit against the defendant, Lawrence Korn, because he refused to pay for legal work that she had performed in his divorce case. The defendant, who said he did not pay because he was dissatisfied with the outcome, counterclaimed by filing a legal malpractice action against the plaintiff and her law firm.

The Oakland County Circuit Court summarily dismissed the defendant’s legal malpractice claim. The trial court later awarded more than $78,000 to the plaintiff - a figure that reflected the amount owed to the plaintiff and her firm in the underlying divorce case, plus the plaintiff’s attorney fees for representing herself and her firm in the efforts to recover from the defendant.

The Court of Appeals reversed in Silverman v Korn (Docket Nos. 349331 and 350830). Judges Jonathan Tukel, Deborah A. Servitto and Jane M. Beckering were on the panel that issued the unpublished opinion.

“[T]his is one of those cases where the ‘suit within a suit’ concept does not strictly apply because the alleged actions that constituted malpractice were not procedural or administrative in nature,” the Court of Appeals explained. “Thus, to the extent the trial court believed that the ‘suit within a suit’ concept did strictly apply, it erred. When the suit with a suit standard does not apply, ‘the attorney’s liability, as in other negligence cases, is for all damages directly and proximately caused by the attorney’s negligence. … Thus, Korn was only required to show by a preponderance of the evidence that he would have received a more favorable outcome in his underlying divorce case but for the alleged legal malpractice of Silverman and the firm.”

On remand, the Court of Appeals instructed the parties and the trial court to specifically address each of the defendant’s legal malpractice allegations individually, rather than addressing them as one claim. “In doing so, the parties and the trial court will be better-situated to address specific arguments that come with those allegations, such as when and whether the attorney-judgment rule applies.”

Regarding the trial court’s award of attorney fees to the plaintiff, the Court of Appeals said the fee award went against two recent Michigan Supreme Court rulings– Omdahl v West Iron County Board of Education, 478 Mich 423 (2007), and Fraser Trebilcock Davis & Dunlap PC v Boyce Trust 2350, 497 Mich 265 (2015) – both of which held that attorneys may not recover fees when representing themselves.

Refusal To Pay

The defendant hired the plaintiff to represent him in his divorce. During the proceedings, he alleged that his ex-wife took advantage of him financially because of his alleged mental disability. In its final order, the trial court declined to award attorney fees and costs to either party because it was “not impressed with either party as a witness and did not find either party to be credible.” The trial court also declined to find that the defendant’s ex-wife had committed fraud or conversion, thereby denying the defendant’s request for treble damages.

When the defendant refused to pay the plaintiff for the legal work she performed, the plaintiff filed a lawsuit to collect payment. The defendant counterclaimed, alleging the plaintiff committed legal malpractice and asserting numerous professional shortcomings on the plaintiff’s part.

Both the plaintiff and the defendant filed motions for summary disposition. At a hearing on the motions, the defendant relied on the deposition testimony of his expert witness, Charles Kronzek. The expert testified the plaintiff’s conduct fell below the acceptable standard of care and the outcome would have been better for the defendant had the plaintiff adequately represented him.

The trial court granted summary disposition to the plaintiff on the legal malpractice claim and, over the defendant’s objection, awarded the plaintiff and her firm $78,653.95 in attorney fees. The award reflected the amount owed for the plaintiff’s work in the underlying divorce case ($47,976.17), as well as costs and fees incurred in the legal malpractice action based on a provision in the retainer agreement that provided for “all fees, costs, and attorney fees for [Silverman’s] actual time expended” in the event that she had “to commence litigation against [Korn] to collect outstanding fees.”

The defendant appealed.

Sufficient Evidence

On appeal, the Court of Appeals agreed with the defendant that the trial court erroneously dismissed his legal malpractice claim.

At the outset, the Court of Appeals rejected the plaintiff’s argument that summary disposition was appropriate based on the doctrine of judicial estoppel. “… Silverman and the law firm have presented no evidence or legal authority to establish that Korn’s alleged mental disability, which he argues that Silverman should have addressed in greater detail in his divorce case, is necessarily inconsistent with his being mentally competent. Because the two arguments are not inherently contradictory, judicial estoppel does not apply in this case.”

The Court of Appeals then turned to the defendant’s legal malpractice allegations, noting there are four elements to such a claim: 1) the existence of an attorney-client relationship (duty); 2) negligence in the legal representation of the plaintiff (breach); 3) the negligence was a proximate cause of an injury (causation); and 4) the fact and extent of the injury alleged (damage). “In some cases, the causation element requires that ‘a plaintiff … show that but for the attorney’s alleged malpractice, he would have been successful in the underlying suit,’” the appellate panel said. “In other words, the client seeking recovery from his attorney is faced with the difficult task of proving two cases within a single proceeding.”

This “suit within a suit” rationale, however, did not apply in the present case, the Court of Appeals observed, because the alleged actions that constituted legal malpractice were neither procedural nor administrative in nature. As a result, the defendant only had to show by a preponderance of the evidence that he would have received a more favorable result in his underlying divorce case but for the alleged malpractice of the plaintiff and her law firm.

“The mere fact that the ‘suit within a suit’ concept does not apply here, however, does not relieve … the requirement that [the defendant] prove that Silverman’s alleged shortcomings were the proximate cause of any alleged damages,” the Court of Appeals explained. “With respect to these elements, Korn relies primarily on Kronzek’s testimony that he believed Korn may have done better in the divorce case but for Silverman’s conduct. … The question before this Court is whether Kronzek’s testimony was sufficient to create a genuine issue of material fact with respect to causation and damages. We conclude that it is.”

According to the Court of Appeals, the trial court did not view the evidence before it, including Kronzek’s expert testimony, in a light most favorable to the defendant as required by MCR 2.116(C)(10). “Viewing th[e] testimony in the light most favorable to Korn, it does not appear that Kronzek’s testimony that he had not ‘examined any evidence at all’ demonstrated that his opinion was completely baseless. Instead, it simply appears that Kronzek believed, based on his review of the documents …, ‘that any fair and reasonable judge would have ruled much more in favor of Mr. Korn if the Court had before it the information that I indicated.’”

Looking at the defendant’s legal malpractice claim as a whole, “it is hard to imagine what further evidence of causation [the defendant] could have provided,” the Court of Appeals said. “Because Korn presented sufficient evidence to create a genuine issue of material fact regarding whether Silverman’s alleged breaches of the relevant standard of care caused damages, we reverse the trial court’s dismissal of the counterclaim and third-party claim.”

However, this did not mean there was sufficient evidence of causation and damages with respect to the alleged breaches identified by the defendant, the Court of Appeals cautioned. “Here, practically all of Silverman’s alleged breaches focused on purported malpractice during litigation in the divorce case. The trial court failed to identify which claims focused on purported malpractice during litigation and we decline to do so in the first instance here. Rather, on remand, we direct the trial court to consider each of Korn’s numerous individual claims of legal malpractice separately.”

Moreover, certain allegations that the plaintiff’s conduct fell below the relevant standard of care did not focus on malpractice during litigation, the Court of Appeals observed. “Additionally, some of Korn’s criticisms focus on conduct that has not been tied by any evidence to any damages. … Accordingly, we reverse the trial court’s decision granting summary disposition in favor of the firm and Silverman on Korn’s legal-malpractice counterclaim and third-party claim and remand this matter for further proceedings with respect to those specific claims.”

No Fee Award

The Court of Appeals also agreed with the defendant that the trial court improperly awarded attorney fees to the plaintiff and her law firm.

The trial court’s decision to award fees to the plaintiff “conflicts with two recent decisions by the Supreme Court holding that attorneys may not recover attorney fees when representing themselves,” the Court of Appeals said, citing Omdahl and Fraser Trebilcock. “In our view, there is no reason in this case to depart from the reasoning set forth in Omdahl and Fraser Trebilcock. Here, the firm sought, and the trial court awarded, ‘attorney fees’ under the retainer agreement based on Silverman’s representation of herself and the firm. Under Omdahl and Fraser Trebilcock, however, the firm did not actually incur any attorney fees for Silverman’s representation of it, because she was a member of the firm. The firm argues that neither of those decisions control the outcome in this case because it sought ‘attorney fees’ under a contract, not a statute or a court rule. Yet the firm offers no persuasive rationale to support its request that this Court treat the term ‘attorney fee’ differently for purposes of a contract than it must for purposes of a statute or a court rule. To the contrary, all three - contracts, statutes, and court rules - if unambiguous, are interpreted and applied according to their plain and ordinary meanings.”

Accordingly, the law firm is not entitled to recover “attorney fees” for the plaintiff’s representation of herself or the firm, the Court of Appeals concluded, vacating the judgment and remanding the matter.