By: Howard Jacobowitz Esq. and Diane Kanca, Esq.
In a case of first impression the New York Court of Appeals in Grace v. Law held that failure of the plaintiff to appeal an underlying adverse ruling does not bar a subsequent legal malpractice claim, unless the attorney-defendant can prove that plaintiff would have been “likely to succeed” in his appeal.[i] The Court of Appeals’ ruling, according to Judge Sheila Abdus-Salaam who wrote the unanimous decision, brings New York in accord with the majority of other states’ highest courts which have addressed the issue.
In response to the appellants’ contention that the “likely to succeed standard” would require a lay jury to predict an appellate outcome, Justice Abdus-Salaam wrote that this is the same type of analysis a jury must engage in to determine whether a malpractice plaintiff would have succeeded in the underlying action “but for” the attorney’s malpractice.
To understand how the decision in Grace v. Law will impact the legal malpractice landscape, we need to examine the facts of the case, the contentions of the parties and the trial and appellate court decisions.
In October 2002 plaintiff, John W. Grace sought treatment for an eye condition at the Veteran Administration Rochester Outpatient Clinic (the “VA) from an ophthalmologist named Dr. Shoba Boghani. Mr. Grace’s July 2003 appointment with Dr. Boghani was canceled by the VA and inexplicably not re-scheduled for approximately one year. At that appointment Dr. Boghani diagnosed Mr. Grace with neovascular glaucoma, which ultimately caused blindness in his right eye.
In June 2006 Mr. Grace retained Brenna Brenna & Boyce (“Brenna”) to prosecute a medical malpractice claim against the VA for the alleged failure of Dr. Boghani to timely diagnose his eye condition. Phillips Lytle LLP (“Phillips Lytle”) was later substituted as counsel.
In January 2008 Phillips Lytle commenced an action in the United States District Court for the Western District of New York (“WDNY”) against the VA for Dr. Boghani’s alleged malpractice. Shortly thereafter, counsel learned that Dr. Boghani was actually employed by the University of Rochester (the University”) and was “on loan” to the VA six (6) days a month when she treated Mr. Grace.
The VA obtained leave to commence a third party action against the University and Dr. Boghani, which in turn prompted plaintiff to amend the complaint to assert a direct claim against the third party defendants. The VA moved for summary judgment to dismiss the complaint on the grounds that Dr. Boghani was an independent contractor, not its employee. The University and Dr. Boghani then moved for summary judgment to dismiss the complaint against them as time barred. The WDNY granted both motions.
MALPRACTICE SUIT IN NEW YORK SUPREME COURT
Plaintiff chose not to appeal the WDNY’s decision, but instead commenced a legal malpractice action in the Supreme Court, Erie County against Brenna and Phillips & Lytle for their failure to timely commence suit against Dr. Boghani and the University — her alleged employer. Defendants promptly moved for summary judgment, contending that plaintiff had waived her right to sue for legal malpractice by failing to appeal the WDNY’s ruling that Dr. Boghani was employed by the University, not the VA. The Supreme Court, Erie County (Troutman, J.) denied defendants’ motions for summary judgment, which resulted in an appeal to the Appellate Division, Fourth Department.
THE APPELLATE DIVISION DECISION
The Fourth Department, with Judge Whalen dissenting, affirmed the trial court’s decision:
Initially, we reject defendants’ contention that plaintiff waived or abandoned his legal malpractice claim by voluntarily discontinuing what remained of his medical malpractice action and failing to take an appeal from District Court’s November 2010 order dismissing the bulk of his claims.
Although the precise question presented herein appears to be an issue of first impression in New York, we note that several of our sister states have rejected the per se rule advanced by defendants herein (see e.g. MB Indus, LLC v CAN Ins. Co., 74 So 3d 1173, 1176 ; Hewitt v. Allen, 118 Nev 216, 217-218, 43 P3d 345, 345-346 ; Eastman v. Flor-Ohio, Ltd., 744 So 2d 499, 502-504 ; Segall v. Segall, 632 So 2d 76, 78 ). As has been noted, such a rule would force parties to prosecute potentially meritless appeals to their judicial conclusion in order to preserve their right to commence a malpractice action, hereby increasing the costs of litigation and overburdening the court system (see Eastman, 744 So 2d at 504). The additional time spent to pursue an unlikely appellate remedy could also result in expiration of the statute of limitations on the legal malpractice claim (see MB Indus., 74 So 3d at 1181). Further, requiring parties to exhaust the appellate process prior to commencing a legal malpractice action would discourage settlements and potentially conflict with an injured party’s duty to mitigate damages (see Crestwood Cove Apts. Bus. Trust v. Turner, 164 P3d 1247, 1254 ; Eastman, 744 So 2d at 504).[ii]
In his dissent Judge Whalen wrote that plaintiff should be precluded from suing his lawyers because he had failed to exhaust his appellate remedies. Judge Whalen argued that had Mr. Grace appealed, he had a meritorious argument under the Federal Tort Claims Act that Dr. Bohgani was under the VA’s “control” while providing care in its clinic and, as a result, should be considered the VA’s employee.
This set the stage for defendants’ application for leave to appeal to the Court of Appeals, which was granted.
THE PARTIES’ CONTENTIONS BEFORE THE COURT OF APPEALS
Before the Court of Appeals, defendants’ counsel argued that an attorney should not be exposed to a malpractice suit until every effort — including appeals — had been made by the client to vindicate his position.[iii] It is only in this manner that the client can meet New York’s strict “but for” standard in legal malpractice cases.
Defendants also pointed to the futility of having a lay jury predict what an appellate panel might have held. At best, the jury would be left with a battle of the experts, involving former appellate judges opining on what another appellate panel would have “likely held.” At worst, the jury would be unable to resolve the dispute of dueling experts and base its verdict on speculation.
Defendants’ counsel also argued that if the court were to reject a per se rule, the proper standard should be whether the appeal would have had merit, i.e., an appeal that a reasonable lawyer would pursue, and not a frivolous appeal.
Plaintiff’s counsel, on the other hand, argued against a per se rule prohibiting a legal malpractice suit unless the client had exhausted his appellate remedies. Instead, plaintiff urged the court to adopt the “likely to succeed” standard, whereby the attorney must prove the likelihood of the appeal overturning the adverse decision, in order to defeat the malpractice suit. A per se rule, plaintiff’s counsel argued, would force the client to take (and fund) every appeal before he could sue his lawyer.
Plaintiff’s counsel also argued that a jury’s determination as to the likely appellate outcome is no different than having the jury determine the likelihood of success in the underlying action to meet the “but for” standard in a typical legal malpractice case.
THE COURT OF APPEALS DECISION
Writing for a unanimous Court of Appeals, Judge Abdus-Salaam affirmed the Fourth Department’s decision, siding with the majority of sister state courts adopting the “likely to succeed on appeal standard.”
On balance the likely to succeed standard is the most efficient and fair for all parties. This standard will obviate premature legal malpractice actions by allowing the appellate courts to correct any trial court error and allow attorneys to avoid unnecessary malpractice lawsuits by being given the opportunity to rectify their clients’ unfavorable result. Contrary to defendants’ assertion that this standard will require courts to speculate on the success of an appeal, courts engage in this type of analysis when deciding legal malpractice actions generally (see Davis v. Klein, 88 NY2d 1008, 1009-1010 .
We reject the non-frivolous/meritorious appeal standard proposed by defendants as that would require virtually any client to pursue an appeal prior to suing for legal malpractice.
Based upon the “likely to succeed on appeal” standard, the Court of Appeals sent the case back to the trial court to determine whether Dr. Boghani was sufficiently under the VA’s control to be considered an “employee” under the Federal Torts Claims Act.
While the jury in a typical legal malpractice case often must decide whether the plaintiff would have prevailed in the underlying action before imposing liability, what the Court of Appeals asks the jury to do in Grace v. Law goes a step beyond.
The Court of Appeals would require lay jurors to determine what an appellate court would have held had it been called upon to review the adverse ruling. Even with the aid of expert testimony this is a daunting task. How can the jury break the deadlock between two (2) retired appellate judges, each prognosticating what a completely different appellate panel would have held. This inquiry would in most instances lead the jury into the realm of pure speculation.
Finally, this decision appears to undercut the long standing “but for” causation that has been established as the requisite element of proof in legal malpractice actions. It is concerning that the Court of Appeals would adopt a different standard applicable to appeals than to another legal malpractice claim. In New York, up to this point, “but for” causation has provided a very real and much needed safeguard against unwarranted legal malpractice claims.
Now that safeguard has been called into question, requiring counsel on both sides in a legal malpractice trial to engage in a speculative debate of what a hypothetical appellate panel would have held, had it been called upon to decide a never filed appeal. Time will tell how the Court of Appeals’ ruling in Grace v. Law will play out in our trial courts.
[i] Grace v. Law, 2014 N.Y. Slip Op. 07089 (2014).
[ii] Grace v. Law, 108 A.D.3d 1173, 1175-76 (4th Dep’t 2013)
[iii] Grace 2014 N.Y. Slip Op. 2903 at 6.