Every Hurdle Must be Cleared to Win in Legal Malpractice

Hedinger & Lawless, LLC v. Betal Enterprises Inc., 2011 WL 813047, (Super Ct. NJ, App. Div. 2011) is a case which examines the definition of the attorney-client relationship, and specifically how it is instrumental in legal malpractice actions. The determination ... 

Hedinger & Lawless, LLC v. Betal Enterprises Inc., 2011 WL 813047, (Super Ct. NJ, App. Div. 2011) is a case which examines the definition of the attorney-client relationship, and specifically how it is instrumental in legal malpractice actions. The determination of attorney-client relationship was appealed by Betal from a summary judgment decision in the first case. Upon hearing the matter on first review, the court ruled against Betal in finding no relationship existed. It is important then to examine why the appeals court believed the ruling needed to be overturned.

The underlying case was based upon Betal's complaint for negligent representation against Hedinger in relation to a surety claim. Betal first hired Hedinger in 2001 regarding a dispute over insurance coverage with a local municipality. At the time, Betal paid a $2500 retainer fee, and then a monthly invoice based on service rendered. Within the retainer agreement was a termination clause which allowed Hedinger to withdraw representation if Betal was more than 60 days delinquent on payment. On April 6, 2004 the law firm sent notice that Hedinger was looking at possible termination of representation.

As the time for termination grew near, Betal requested a meeting with Hedinger attorneys to discuss a lawsuit filed against the corporation. Over several months, the attorneys outlined a plan to answer the complaint, and how to challenge certain matters. Eventually, a note was prepared on July 27, 2004 which showed the Hedinger attorney notifying Betal that representation would not be granted if the corporate bill were not paid. Prior to this note, Hedinger had prepared the work requested, but had not filed it with the court. Hedinger did not file any paperwork with the court, and a default judgment was entered against Betal on October 7, 2004. On October 12, Hedinger notified Betal of the remaining balance. Finally, on November 30, the Betal parties remitted a payment related to this surety matter.

Betal was sent another invoice with the same admonition February 4, 2005. This letter also contained a large invoice. At the same time however, due to the default judgment against Betal, they were unable to finance a project being worked on. In an attempt to put his client at ease, Hedinger sent a letter to the bank which implied that he would be moving for vacation of the default judgment in the near future. Corporate directors with Betal were later indicted, and the vacation of default judgment was never filed. In the expert report relating to the legal malpractice, the expert stated ""where an attorney gets halfway involved with a new case, or fails to clearly disassociate himself from it, he may become bound to an attorney-client representation by implication, or even by promissory estoppel." The expert believed that "allowing Hedinger to terminate its representation for nonpayment 'put a greater burden on the firm than would otherwise exist, to affirmatively disassociate itself from a subsequent matter such as the Centennial case.' He concluded it was "obvious that this did not occur, because it would have had to be done in writing." The original court dismissed because they believed there was no attorney-client relationship in the surety matter, and furthermore that this opinion was net, meaning it outlined a personal opinion of strategy.

To reiterate a common theme in this blog, a New Jersey legal malpractice action requires the existence of an attorney-client relationship which creates a duty of care upon the attorney; breach of duty by the attorney; and proximate causation of actual damages. An attorney-client relationship may be implied based on several circumstances: when a person seeks advice from an attorney, the advice or assistance sought is within the attorney's professional competence, and the attorney expressly or implicitly agrees to give advice or actually gives the desired advice. Other cases where an attorney-client relationship was shown not to exist included a situation where no bills were submitted.

The matter involved in this case however, did not fall into the above-mentioned category. Rather, the retainer agreement signed between Hedinger and Betal was related to this surety agreement. Additionally, bills were forwarded to Betal based on work done on the surety arrangement. Finally, the court did not believe the assertions that a relationship did not exist because throughout the surety matter, Hedinger forwarded admonishments that representation may be withdrawn if the account continued to be delinquent.

The court also reviewed the net opinion by Betal's expert, and found that it was indeed net. The appeals court believed that an expert's opinion must be based on facts, data, or another expert's opinion. An opinion based on simple conclusions unsupported by factual evidence is inadmissible as a net opinion. In this case, that described Betal's expert opinion offered in the case. The court did not explain the other elements of legal malpractice other than to briefly state they could not be met by the plaintiff.

Most importantly from this case is the matter in which a defense to legal malpractice is structured. A heavy burden is placed on clients who bring legal malpractice actions, which is why it is very important to be aware of agreements signed, and communications exchanged. In this case, Betal and Hedinger had a great number of communications regarding the delinquent account, however, because of the failure to fully detail other issues to the court, Betal was unable to succeed on the claim. An attorney-client relationship seems to be fairly easy to establish, but that is one hurdle in the race to the finish line.

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