Novel Thinking

Bayview Loan Servicing, LLC v. Law Firm of Richard M. Squire & Associates, LLC, CA 10-1451, Dec. 14, 2010, 2010 WL 5122003 (E.D. Pa. 2012) is a legal malpractice case concerned with when damages occur, and whether an attorney's actions rise to a legal wrong which requires a lawsuit. This case involves the intersection of a foreclosure sale with legal malpractice. It also speaks to the importance of knowing a little of the law as a client, because without such knowledge, the plaintiff would not have been able to bring a case.

In the case, Bayview acquired a note and mortgage from MetWest Commercial lender. The mortgage note was taken out against an individual for $262, 500.00 and granted the note holder a lien on the property if this amount were not paid. The individual defaulted on the mortgage in July, 2007, so the owners retained Squire to represent them in a foreclosure action, which they won in January, 2008. The plaintiff subsequently purchased the property at a sheriff's sale, and then sold it to a 3rd party.

In December, 2008, Bayview instructed Squire to get another judgment against the individual. Squire filed the lawsuit in March, 2009; however they failed to file a petition to fix fair value within 6 months of the foreclosure sale, as required by Pennsylvania law. The six month period ended shortly before the suit was initiated.

In April 2009, the individual's wife sought to have the judgment satisfied, based on the failure to fix the fair value of the house within the appropriate time. A Judge approved the satisfaction in June, 2009. Despite the satisfied judgment, a default judgment was served on the individual. He recognized however, that his judgment was already satisfied, and his motion to dismiss the default judgment was granted. The plaintiffs moved to open the judgment in December, 2009, but the Judge denied it. The plaintiff's subsequent appeal was also recommended to be denied by the judge. The plaintiffs then filed this suit.

The defendants sought to have all claims against them dismissed. The court then analyzed each count in turn. The first was the breach of fiduciary duty, which is a claim commonly, utilized in legal malpractice cases. The breach of fiduciary duty was based on both negligence, and disloyalty. Under Pennsylvania law, fiduciary duty is proven when the plaintiff proves employment of an attorney which would provide a basis for duty, the failure of the attorney to exercise ordinary skill and knowledge, and that such knowledge was the proximate cause of damage to the plaintiff. To actually recover requires the plaintiff to show they would have won on the underlying claim but for defendant's negligence. This was a summary judgment stage, but the Court believed based on the facts plead; it was reasonable that defendant's misconduct was to blame. In this case, the court deferred to the fact of forgetting the petition, along with the duty as providing cause.

Next, the court analyzed the action for disloyalty. InPennsylvania, an attorney who takes on client representation much give the client undivided loyalty, and must not engage in conflicts of interest. Doing so provides a basis for malpractice. In establishing the disloyalty associated with a breach of fiduciary duty, a plaintiff must show that the attorney negligently or intentionally failed to act in good faith and solely for the benefit of the plaintiff in all matters for which they were employed, that the plaintiffs suffered injury, and that the failure to act in plaintiff's interest was a real factor in bringing about the plaintiff's injuries. The failure to act in good faith in this case arose form the failure of the defendants to notify the plaintiffs that the Judge had marked the foreclosure action satisfied. The court suggested that if there was no way to recover the lose judgment once it was marked satisfied, and then it was actionable.

The contract based claim was upheld as actionable, but the court noted that in Pennsylvania, there is a definitive split. Some courts only allow damages to equal what was actually paid to the attorneys, while others believe the damages can include the amount lost by the attorneys lack of good conduct. The court did not define which approach they endorsed.

The claim which is not common in legal malpractice actions was negligent supervision. This claim is usually based on an employee's misconduct outside the scope of employment. However, in Pennsylvania, the law of agency may provide an actionable claim. Whether or not an employee is liable, an employer may be liable for negligent instructions and directions. In this case, the plaintiff was imputing liability on Squire for the poor work of the attorney employed by the firm. It is interesting to note this action, since it would seem that it should be commonly plead with typical professional negligence cases. This does not happen often however.

Finally, the court looked to the request for punitive damages. Punitive damages are available in Pennsylvania, only when conduct is outrageous based on evil motive or recklessness. To support the claim, the plaintiff must show a defendant had a subjective appreciation of the risk of harm to which the plaintiff was exposed, and that the defendant failed to act in conscious disregard of that harm. While the original conduct may not have provided a basis for punitive damages, there is a chance that because of the attempt to conceal the wrongdoing, Squire actually exposed themselves to punitive damages.

This is an interesting case from the standpoint of companion actions. If nothing else, even if some of the actions are knocked down early in the trial, it still provides an extra opportunity for a plaintiff to recover. In this case, the plaintiff's attorney was able to find several alternative theories which seemed to defeat the arguments of the defense against those actions. In the field of law, it is easy to be stale, thus novel thinking should always be appreciated.


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