Justia Professional Malpractice & Ethics Opinion Summaries

Appellant RFT Management Co., L.L.C. (RFT) brought this action against respondents Tinsley & Adams, L.L.P. and attorney Welborn D. Adams (collectively, Law Firm) based on their legal representation of RFT during the closing of its purchase of two real estate investment properties in Greenwood County. RFT alleged claims for (1) professional negligence (legal malpractice), (2) breach of fiduciary duty, (3) violation of the South Carolina Unfair Trade Practices Act1 (UTPA), and (4) aiding and abetting a securities violation in contravention of the South Carolina Uniform Securities Act of 2005 (SCUSA). The trial court granted a directed verdict in favor of Law Firm on RFT's causes of action regarding the UTPA and SCUSA, and it merged RFT's breach of fiduciary claim with its legal malpractice claim. The jury returned a verdict in favor of Law Firm on RFT's remaining claim for legal malpractice. RFT appealed, and the Supreme Court certified the case from the Court of Appeals for its review. Upon review of the matter, the Supreme Court affirmed the trial court with respect to all issues brought on appeal. View "RFT Management Co. v. Tinsley & Adams" on Justia Law

After its property sustained wind damage during Hurricane Katrina, a real-estate developer sued its insurance provider for coverage, and, in the alternative, its insurance agent for professional negligence. The district court decided that the insurance policy covered wind damage, and a jury decided that there had been no "mutual mistake" between the agent and the provider concerning wind coverage. As a consequence, the district court dismissed with prejudice the developer's negligence claim against its agent. The insurance provider appealed, and the Fifth Circuit Court of Appeals reversed, deciding that the policy did not cover wind damage. On remand, the developer moved under Fed. R. Civ. P. 60(b) to set aside the dismissal of its professional negligence claim against the agent in light of the reversal. The district court granted the motion and resurrected the negligence claim against the agent. The Fifth Circuit affirmed, holding that the district court did not abuse its discretion in granting the developer Rule 60(b) relief. View "Lowry Dev., LLC v. Groves & Assocs. Ins., Inc." on Justia Law

The issue before the Supreme Court in this case centered on a binding arbitration clause in an attorney-client retainer agreement and whether that clause was enforceable where the client filed suit for legal malpractice. This case presented two important countervailing public policies: Louisiana and federal law explicitly favor the enforcement of arbitration clauses in written contracts; by the same token, Louisiana law also imposes a fiduciary duty "of the highest order" requiring attorneys to act with "the utmost fidelity and forthrightness" in their dealings with clients, and any contractual clause which may limit the client's rights against the attorney is subject to close scrutiny. After its careful study, the Supreme Court held there is no per se rule against arbitration clauses in attorney-client retainer agreements, provided the clause is fair and reasonable to the client. However, the attorneys' fiduciary obligation to the client encompasses ethical duties of loyalty and candor, which in turn require attorneys to fully disclose the scope and the terms of the arbitration clause. An attorney must clearly explain the precise types of disputes the arbitration clause is meant to cover and must set forth, in plain language, those legal rights the parties will give up by agreeing to arbitration. In this case, the Defendants did not make the necessary disclosures, thus, the arbitration clause was unenforceable. Accordingly, the judgment of the lower courts was affirmed. View "Hodges v. Reasonover" on Justia Law

In this real estate dispute, some of the defendants filed a motion for sanctions, alleging Defendant brought the action to harass, cause unnecessary delay, and needlessly increase the cost of litigation. The district court ordered sanctions against Plaintiff's counsel for $1,000. The court of appeals affirmed the sanctions, ordering them payable to the jury and witness fund. The Supreme Court affirmed in part and vacated in part the court of appeals, holding (1) the district court did not abuse its discretion in fixing the amount of the sanction at $1,000; (2) the court abused its discretion by ordering the sanction be paid to the jury and witness fund; and (3) given Rule 1.413(1)'s preference of compensating victims, the district court should enter an order requiring Plaintiff's counsel to pay the sanction in equal sums to the defendants who sought the sanction as partial reimbursement of the legal fees they incurred in defending against the unfounded claims brought against them. Remanded. View "Rowedder v. Anderson" on Justia Law

This action involved claims of fraud and breach of fiduciary against an individual defendant, a former investment professional accused of having committed a massive fraud related to a quantitatively-based trading program that he allegedly developed to trade futures contracts. Plaintiffs, as a result of their association with defendant and Paron, the firm they founded with defendant, claimed that they have been stigmatized and thus face dismal prospects of finding employment in the financial services industry. The court found that defendant committed fraud and breached his fiduciary duties to plaintiff and Paron by making false statements of fact about his program, his investment track record, and his personal financial situation. As a result, plaintiffs were entitled to extensive damages against defendant based on their lost future earnings and other costs associated with the formation and operation of Paron. The court also awarded plaintiffs limited injunctive relief requiring defendant to destroy or return copies of Paron's trading program and to stop marketing any versions of that trading program. View "Paron Capital Mgmt., LLC, et al. v. Crombie" on Justia Law

Entities affiliated with ASB sued to reform the capital-event waterfall provisions in a series of agreements governing real estate joint ventures managed by affiliates of The Scion Group. The erroneously drafter provisions called for Scion to receive incentive compensation know as a "promote" even if the joint ventures lost money. Scion sought to enforce the agreements as written, and its affiliates advanced counterclaims for breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and breach of contract. The court found that plaintiffs have proven their entitlement to reformation by clear and convincing evidence and entered a judgment in their favor of defendants' counterclaims. View "ASB Allegiance Real Estate Fund, et al. v. Scion Breckenridge Managing Member, LLC, et al." on Justia Law

Precious Martin and Associates, PLLC (Martin) contracted with T. Jackson Lyons & Associates, P.A. (Lyons) to handle appeal work on several of Martin's cases. After Martin stopped paying for the work, Lyons filed a complaint in the County Court alleging breach of contract and claiming $14,543.19 owed on open account. The county court awarded Lyons $14,543.19 in damages and $4,847.73 in attorney's fees. Martin appealed to the Circuit Court claiming that the trial court erred in awarding attorney's fees. The circuit court reversed the county court judgment on the basis that the agreement between the law firms was an oral contract, not an open account, such that attorney's fees should not have been awarded. Aggrieved, Lyons appealed to the Supreme Court. Upon review, the Court found that the circuit court's reversal of the award of attorney's fees was not supported by the evidence. The county court's award of attorney’s fees was supported by the credible evidence and was not an abuse of discretion. The judgment of the Circuit Court was reversed, and the judgment for attorney's fees entered by the County Court was reinstated and affirmed. View "T. Jackson Lyons & Associates, P. A. v. Precious T. Martin, Sr. & Associates, PLLC" on Justia Law

Companion was authorized to license space in Wal-Mart stores to companies that sell durable medical equipment and entered into licensing agreements with defendants. In 2007, defendants shut down operations. Companion sued. Problems arose during discovery, including defense counsel motions to withdraw, allegations of inadequate responses to discovery requests, objections to the scope of discovery, refusal to attend depositions, motions to compel, multiple extensions, and claims of obstruction. After three years, the district judge imposed a default as to all counts, based on discovery violations by the defendants. The court eventually lifted the default except as to Companion's veil piercing claim, allowing the substantive claims to go to trial. A jury found for Companion and awarded more than $1 million in damages. Defendants, personally liable as a result of the default, appealed. The First Circuit vacated the default and remanded, "because the district court imposed such a severe sanction based on a very limited slice of the relevant facts." View "Companion Health Servs, v. Majors Mobility, Inc." on Justia Law

H&H Development, LLC hired Jim Ramlow for legal services. In 2007, H&H filed a pro se complaint in Lake County against Ramlow and his law firm for professional negligence. Eleven days later, H&H, through counsel, filed a complaint in Flathead County against Eagle Bend, seeking damages based on allegations similar to those in the Lake County complaint. H&H settled with Eagle Bend. In 2010, H&H filed an amended Flathead County complaint that named Ramlow and his firm as defendants and included a lawyer's signature. The district court subsequently declared the Lake County complaint null and void after determining that a non-lawyer could not file a complaint on behalf of a limited liability company. Thereafter, the court granted summary judgment to Defendants on the amended complaint based upon the running of the applicable statute of limitations. The Supreme Court reversed, holding that a district court has discretion to determine whether a corporation should be able to relate back to an amended complaint signed by a lawyer, to its original, pro se complaint. Remanded to assess whether Mont. R. Civ. P. 15(c) permitted H&H's amended complaint in Flathead County to relate back to H&H's pro se Lake County complaint. View "H & H Dev., LLC v. Ramlow" on Justia Law

Defendant-Appellant KPMG already was in the process of auditing Papel Giftware's 1998 and 1999 financial statements when merger discussions began with Plaintiff Cast Art. In a November 1999 letter to Papel’s audit committee, KPMG explained that the audit was planned "to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether caused by error or fraud. Absolute assurance is not attainable . . . ." The letter cautioned that there is a risk that "fraud" and "illegal acts may exist and not be detected by an audit performed in accordance with generally accepted auditing standards," and that "an audit is not designed to detect matters that are immaterial to the financial statements." In September 2000, KPMG delivered completed audits to Papel. KPMG's accompanying opinion letter, addressed to Papel's audit committee, stated that the audits were conducted in accordance with generally accepted auditing standards. The letter concluded by observing that as of December 31, 1999, Papel was not in compliance with certain agreements with its lenders, which raised "substantial doubt" about Papel's "ability to continue as a going concern." Three months later, Cast Art and Papel consummated their merger. Soon, Cast Art had difficulty collecting accounts receivable that it had believed Papel had outstanding prior to the merger. Cast Art investigated and learned that Papel's 1998 and 1999 financial statements were inaccurate and that Papel had accelerated revenue. Cast Art sought to recover from KPMG for the loss of its business. Cast Art alleged that KPMG was negligent; that if KPMG had performed a proper audit, it would have uncovered the fraudulent accounting activity that was taking place at Papel; and that Cast Art would not have proceeded with the merger if it had been alerted to the fraud. KPMG argued, among other things, that Cast Art had not retained KPMG and was not its client, and thus Cast Art's claim was barred by the Accountant Liability Act, N.J.S.A. 2A:53A-25. Upon review, the Supreme Court found that because Cast Art failed to establish that KPMG either "knew at the time of the engagement by the client," or later agreed Cast Art could rely on its work for Papel in proceeding with the merger, Cast Art failed to satisfy the prerequisites of N.J.S.A. 2A:53A-25(b)(2).View "Cast Art Industries, LLC v. KPMG LLP" on Justia Law