GRACE V. LAW: THE COURT OF APPEALS ADOPTS THE “LIKELY TO SUCCEED ON APPEAL” STANDARD IN LEGAL MALPRACTICE CASES
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.
THE RIGHT TO CONDUCT EXPERT DEPOSITION
By: Diane K. Kanca and Howard S. Jacobowitz
New York is one of the very few states that do not permit expert depositions without a showing of Aspecial circumstances.@ The federal courts and 44 other states= courts permit the depositions of testifying experts as a matter of right. This places New York courts at a decided disadvantage in adjudicating the types of cases that dominate our courts today.
Under N.Y. C.P.L.R. 3101(d), parties often get by with barebones written disclosure of their expert=s opinions and the facts upon which they are based. Because these responses are prepared by counsel, they tend to be purposely vague, especially on the methodology employed by the expert to arrive at his opinions. A deposition of a party=s testifying expert, which might clarify the basis of the expert=s opinion, can only be obtained upon a showing of Aspecial circumstances.@
The courts have narrowly construed the Aspecial circumstances@ requirement to apply in cases where the expert has examined evidence that no longer exists or where the information sought to be discovered Acannot be obtained from any other sources.@ Brooklyn Floor Maintenance Co. v Providence Washington Ins. Co.,[i] represents the rare case where a court granted a deposition of plaintiff=s expert accountant, based upon the fact that the corporate principal disclaimed knowledge of the relevant financial data and repeatedly referred all questions concerning his company=s finances to the accountant.
Brooklyn Floor involved an insurance coverage dispute.[ii] The defendant, Providence, disclaimed coverage on the grounds that damage to the insured=s property was caused by arson at the insured=s direction.[iii] The insured, Brooklyn Floor, sued for coverage and the issue of the its financial health was central to the dispute.[iv]
When the principal of Brooklyn Floor was deposed, he possessed no knowledge of the records and affairs of the business and repeatedly said his accountant had the information.[v] Providence issued a subpoena to depose the accountant, but Brooklyn Floor designated the accountant as an expert and moved to quash the subpoena.[vi]
The Appellate Division, Second Department modified the decision of the trial court, which had granted the motion, and ordered that the accountant could be deposed.[vii] The court explained that Aspecial circumstances exist where physical evidence is >lost or destroyed= or >where some other unique factual situation exists . . . such as proof Athat the information sought to be discovered cannot be obtained from other sources.@[viii]
The Second Department held that special circumstances existed in Brooklyn Floor because Athe plaintiff=s principal was unable to answer basic inquiries into [Brooklyn Floor=s] bookkeeping practices, or regarding specific entries in the corporation=s financial records and identified Eisner as the sole person who could respond to those inquiries.@[ix] Thus, deposing the expert was appropriate.
However, the courts will not find the existence of special circumstances merely because the expert is advancing an opinion that is Anovel, unorthodox and unsupported in published scientific literature or studies.@[x] A desire to show that the expert=s Atheories of causation are bunk and should be exposed as such at the earliest possible juncture,@ is simply not sufficient to establish that special circumstances exist.[xi]
In sum, an expert can only deposed in the limited situations where the evidence sought cannot be obtained elsewhere. This narrow application hamstrings the ability to thoroughly prepare a litigation strategy and even works against early disposition of a case.
Conducting a deposition of the expert witness is the only way to truly analyze and take the measure of an adversary=s trial expert. Expert depositions allow counsel to challenge the bases for the expert=s opinion and ascertain his actual position on the key trial issues. Armed with this information, counsel would be better prepared to (a) file an effective Frye motion or motion for summary judgment,[xii] (b) engage in more meaningful settlement negotiations, and (c) conduct more effective cross examinations of the expert at trial. The general prohibition against taking an expert=s deposition in New York State practice is counterproductive, and frankly makes little sense in light of otherwise broad discovery parameters.
In fact, when you look at the types of cases commonly tried in our courts, it becomes apparent how critical the expert deposition could be. In a products liability case, for example, the expert=s theory as to how the machine might have been designed in a safer manner can often be more valuable than plaintiff=s testimony on how the accident occurred. In a legal malpractice case, expert testimony as to whether an attorney=s representation fell below the accepted standards in the legal community may prove more important than the client=s recitation of facts of the representation. In a commercial case, the financial expert=s projection of anticipated lost profits arising from an alleged breach often has a critical impact on the amount of damages recoverable.
Expert depositions would seem most appropriate in medical malpractice actions, where often the most critical evidence is the plaintiff=s expert=s testimony of how the physician=s treatment deviated from an accepted standard of care and proximately caused plaintiff injury. N.Y. C.P.L.R. 3101(d)(1)(ii) does set forth a procedure whereby a party in a medical malpractice action may identify and make his testifying expert available to be deposed. If such offer is accepted, the adversary=s medical expert shall also be deposed. But this procedure is of little value, in our view, because the adversary can avoid expert depositions by rejecting or simply ignoring the offer.
Given how important expert depositions may prove in the kinds of cases litigated in our courts, it is surprising that expert depositions are rarely permitted in New York practice. In most other states and in the federal courts, a party has the right to depose its adversary=s testifying experts. Rule 26 of the Federal Rules of Civil Procedure requires the parties to make their testifying experts available to be deposed, with the party taking the deposition responsible for payment of the expert=s Areasonable fee for time spent in responding to@ such discovery.[xiii]
To make New York competitive with the federal courts and Delaware=s Chancery Court (where expert depositions are also available) in adjudicating business disputes, the New York State Bar Association=s Commercial & Federal Litigation Section has recommended that the Uniform Rules for the New York State Trial Courts be amended to provide for enhanced expert discovery in all Commercial Division cases. The State Bar=s proposed rule tracks Rule 26 in the federal courts by setting deadlines for written expert disclosure and providing for the depositions of all testifying experts.
Implementation of the Bar Association=s proposed rule on expert disclosure would go a long way toward bringing the Commercial Division in line with the federal courts and most other states= courts on this issue. The Afly in the ointment,@ however, is that N.Y. C.P.L.R. 3101, which contains the Aspecial circumstances@ requirement to obtain an expert=s deposition, was enacted by the New York Legislature. It is doubtful that this legislative requirement can be overcome by the Office of Court Administration=s rule making authority.
It has been suggested that the Commercial Division judges merely need rule that Aspecial circumstances@ exist in all commercial cases so as to warrant expert depositions. This ruse probably would not pass appellate scrutiny. Nor would Aencouraging@ Commercial Division litigants to consent to expert depositions solve the problem; parties have always been free to stipulate to enhanced expert disclosure. The purpose of a uniform rule is to govern the conduct of all litigants, many of whom may be disinclined to stipulate to additional expert discovery. Piecemeal application would likely lead to claims of unfairness or prejudice.
Although not without political complications, the solution to this problem is simple. The Legislature should amend N.Y. C.P.L.R. 3101(d) to permit enhanced expert disclosure rules to be instituted in the Commercial Division. By limiting the amendment to only the Commercial Division, the objections of the plaintiff=s personal injury bar need not be confronted. Commercial litigators are accustomed to conducting expert depositions in the federal courts and are more likely to agree that enhanced expert disclosure is appropriate in the cases they litigate.
Now that we are into the 21st Century it is time to bring New York State expert disclosure rules up to date and in line with the enhanced expert disclosure rules afforded in the federal courts and most other states= courts. The Commercial Division appears to be the best place to start.
296 A.D.2d 520 (2d Dep=t 2002).
[ii] 206 A.D.2d at 521.
[viii] Id. at 521-22, quoting Hallahan v. Ashland Chem. Co., 237 A.D.2d 697, 698 (3d Dep=t 1997) and Dioguardi v. St. John=s Riverside Hosp., 144 A.D.2d 333, 334 (2d Dep=t 1988)
[ix] Id. at 522.
[x] Hallahan, 237 A.D2d at 698; see also, Padro v. Pfizer, Inc., 269 A.D.2d 129 (1st Dep=t 2000) (Aneither the purported novelty of the opinion expressed in plaintiff=s expert notice, nor the claimed flaws underlying the expert=s opinion rise to the level of special circumstances@)
[xi] Hallahan, 237 A.D.2d at 698.
Referring to the standard set forth in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923). While the United States Supreme Court ruled in Daubert v. Merrrell Dow Pharm., 509 U.S. 579 (1993), that the Federal Rules of Evidence supersede the test in Frye, it remains the standard for evaluating experts in New York state courts. Giordano v. Market Am., Inc., 15 N.Y.3d 590 (2011).
[xiii] Fed. R. of Civ. P. 26(b)(4)(E)(ii)