Justia Professional Malpractice & Ethics Opinion Summaries

Defendants, two of three lawyers who represented several hundred Kentucky clients in a mass-tort action against the manufacturer of the defective diet drug "fen-phen," settled the case for $200 million, which entitled them under their retainer agreements to approximately $22 million each in attorney fees. By visiting clients and obtaining their signatures on "confidential settlements," for lesser amounts, the two actually disbursed slightly more than $45 million, less than 23 percent of the total settlement. The lawyers kept the remainder for themselves and associated counsel, transferring much of it from the escrow account to various other accounts, including out-of-state accounts. The scheme was discovered; the lawyers were disbarred and convicted of conspiracy to commit wire fraud, 18 U.S.C. 1343, 1349. One was sentenced to 240 months, the other to 300 months. They were ordered to pay more than $127 million in restitution. The Sixth Circuit affirmed, rejecting a variety of challenges to the sufficiency of the evidence and trial procedures. View "United States v. Cunningham" on Justia Law

The attorney, purporting to represent the guardian of Cristina’s financial interests, filed suit in state court, alleging that Cristina, a minor, had been abused by six defendants. Her general guardian had discharged the attorney. The attorney dismissed the suit. The defendants sought sanctions. The attorney filed a notice of removal to federal court. Within a month, and following a "deluge of motions" from the attorney, the federal court remanded the proceeding to state court. The defendants requested an award of attorneys' fees for wrongful removal, 28 U.S.C. 1447(c). The district judge concluded that the attorney had vexatiously multiplied the proceedings, 28 U.S.C. 1927 and ordered him to pay $10,155 to one defendant and $2,432 to another. The Seventh Circuit affirmed under 1447(c). The removal "was worse than unreasonable; it was preposterous."View "MB Financial, N.A. v. Novoselsky" on Justia Law

This putative class action was before the court on an application for the approval of settlement of the class's claims for, among other things, breaches of fiduciary duty in connection with a merger of two publicly traded Delaware corporations. The target's largest stockholder, which acquired the vast majority of its shares after the challenged transaction was announced, objected to the proposed settlement. In addition, defendants' and plaintiffs' counsel disagreed about the appropriate level of attorneys' fees that should be awarded. The court certified the class under Rules 23(a), (b)(1), and (b)(2) with NOERS as class representative; denied BVF's request to certify the class on only an opt out basis; approved the settlement as fair and reasonable; and awarded attorneys' fees to plaintiffs' counsel in the amount of $1,350,000, inclusive of expenses. View "In re Celera Corp. Shareholder Litigation" on Justia Law

Landmark invented an LED billboard and retained Kohler to file a patent application. Kohler filed the 096 application. USPTO indicated that the application contained multiple inventions. Kohler pursued two claims and withdrew others, intending that withdrawn claims would be pursued in divisional applications, to benefit from the 096 filing date. Kohler submitted an incomplete (916) divisional application, not using a postcard receipt to enable prompt notification of deficiencies. Months later, PTO issued notice of incomplete application. Kohler had changed firms. The anniversary of the 096 application’s publication passed; the 096 application became prior art against the 916 application under 35 U.S.C. 102(b). The attorneys did not immediately notify Landmark. Their petition to grant the 916 application an earlier filing date was dismissed. Landmark eventually filed suit alleging malpractice, negligence, and breach of fiduciary duty and reached a partial settlement. The state court dismissed remaining claims for lack of subject matter jurisdiction. Landmark filed the same claims in federal court, adding claims for breach of contract and fraud. The district court dismissed all except the fraud claim under a one-year limitations period and later dismissed the fraud claim under a three-year limitations period. The Federal Circuit reversed. Under California equitable tolling law, the state law fraud claim was timely filed. View "Landmark Screens, L.L.C. v. Morgan, Lewis & Bockius, L.L.P" on Justia Law

In 2000, husband and wife, with an estate valued at $3 to $4 million, revised their estate plan with the assistance of their Illinois lawyer, a Minnesota lawyer, and a law partner of their son-in-law. The plan included a trust that treated their son and his daughter, India, less favorably than their two daughters and other grandchildren. When they died within a month of each other in 2004, their son and India sued the three lawyers, alleging malpractice and breach of fiduciary duty. The district court rejected a conflict-of-interest argument and dismissed most of the claims as untimely or barred. India's minor status tolled the limitations period, but the court dismissed her claim as premature. The Seventh Circuit affirmed and held that India's claim should have been dismissed with prejudice. The district court properly chose Illinois's statute of limitations over Minnesota's; and properly rejected waiver and equitable-tolling arguments. The court properly dismissed the fiduciary-duty claims as barred by res judicata; there had been state court litigation concerning sale of the family home. There was no evidence to support India’s contention that her grandparents intended her to receive more than the documents provide. View "Ennenga v. Starns" on Justia Law

In 1999 Beasley filed a patent application for personalized postage stamps. In 2001 the PTO issued notice of allowance. Beasley then entered into a licensing agreement with Avery, specifying that Avery would assume responsibility for prosecution of the patent application and would pay patent prosecution expenses. Beasley appointed Renner to prosecute his application. A Renner attorney filed a supplemental information disclosure statement concerning prior art references. The PTO issued a second notice of allowance. Beasley transferred ownership USPPS. USPPS and Avery entered into an agreement. Later, the PTO vacated its notice of allowance and issued final rejections. Beasley and USPPS alleged that Avery mismanaged the application. Beasley’s suit for was dismissed for lack of standing. USPPS filed suit, alleging breach of fiduciary duty and fraud, based on Avery’s alleged representation that Beasley was the client of Renner. The district court granted summary judgment for defendants. The Fifth Circuit transferred to the Federal Circuit, finding that jurisdiction was based, in part, on 28 U.S.C. 1338 and that the alleged malpractice involves a question of patentability, even if no patent actually issued. The Federal Circuit affirmed, holding that it had jurisdiction and that the complaint was untimely. View "USPPS, Ltd. v. Avery Dennison Corp." on Justia Law

The attorney represented more than 400 plaintiffs in a class action related to the diet drug Fen-Phen. Lawyers’ fees were to be limited to 30 percent of the clients' gross recovery. The case settled for almost $200 million. Plaintiffs together received $74 million, 37 percent of the settlement; $20 million was used to establish Kentucky Fund for Healthy Living. The attorney served on the Fund’s board, for which he received $5,350 monthly. The attorney knew that the Kentucky Bar Association was investigating fee division in the case and possible unauthorized practice of law by his paralegal. The attorney subsequently applied to renew his malpractice insurance and answered "no" to questions about possible pending claims and investigations. The policy excluded coverage for dishonest acts and omissions. Members of the class subsequently filed malpractice claims and were awarded $42 million. The insurer sought a declaration that it was entitled to rescind the policy. The district court granted the insurer summary judgment and awarded $233,674.49 for its outlay on defense costs. Class members intervened to protect their ability to recover. The Sixth Circuit affirmed. Disbarment constituted a sufficient "regulatory ruling" under the dishonesty exclusion clause and there were material misrepresentations on the application. View "Continental Cas. Co. v. Law Offices of Melbourne Mills" 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

In a disciplinary proceeding, the South Dakota Real Estate Commission found that Cheri St. Pierre, a licensed broker associate, had engaged in unprofessional conduct involving dishonesty. The Commission suspended her license for one year, but held the suspension in abeyance on conditions, including the payment of a penalty and repayment of the Commission's attorney's fees. The circuit court reversed the Commission's conditional suspension. The Supreme Court reversed the circuit court and reinstated all terms of the Commission's conditional suspension except the provision requiring the repayment of the Commission's attorney's fees, holding (1) St. Pierre engaged in unprofessional conduct within the meaning of S.D. Codified Laws 36-21A-71(15); (2) the Commission was without authority to conditionally order St. Pierre to reimburse the Commission for its attorney's fees expenses as part of its discipline; and (3) the Commission had authority to order St. Pierre to pay a $1,000 penalty as a condition of avoiding a suspension. View "St. Pierre v. State ex rel. S.D. Real Estate Comm'n" on Justia Law

After an error resulted in omission of a will's residual clause, litigation between the decedent's son and a charitable trust settled with the son receiving $5,600,000 and property and the trust receiving $11,721,141. The Estate filed a claim for federal estate tax charitable deduction. The IRS disallowed the deduction, finding that the contribution was made by the son via the settlement. The district court granted the Estate summary judgment, but found the government's position substantially justified and did not award fees or costs. The Third Circuit affirmed. The award for prevailing parties under 26 U.S.C. 7430 incorporates the Equal Access to Justice Act, 28 U.S.C. 2412(d)(1)(B), under which recovery of fees is barred if a party’s net worth exceeds the statutory amount. Parties seeking to recover under either the prevailing party provision or the qualified offer provision must satisfy the net worth requirements. Although the trust satisfied the net worth requirements as a tax-exempt charitable organization with fewer than 500 employees, the court rejected an argument that it was the real party in interest. View "Estate of Palumbo v. United States" on Justia Law