More than Malpractice

In Tower Investments Inc. v. Rawle & Henderson LLP, 3291 MAYTERM 2007, 2008 WL 1923170 (Pa. Com. Pl. 2008), a Philadelphia court heard a complaint of legal malpractice alleged against attorneys hired by the insurance company to defend the policy holder. The trial court was considering whether or not the claims could move on to trial. Tower Investments alleged that as part of the settlement in the lawsuit, the attorneys for Rawle and Henderson executed a release contrary to the wishes of the plaintiffs. The plaintiffs brought 4 counts; professional negligence, breach of contract, breach of fiduciary duty, and punitive damages.

The breach of contract claim was the first matter decided by the Court. There was an issue as in many legal malpractice cases concerning whether there was a relationship between Tower Investments, and R & H sufficient to find liability. The relationship found was such that if there was a contract, which was unclear, then Tower would have been the beneficiary. As such, the Court allowed the allegation to move to trial, on a theory that the attorneys breached the contract by failing to carry out legal services in accordance with the contract.

The second count was for breach of fiduciary duty. This count was alleged by Tower based on a conflict of interest which would have required R & H to withdraw representation during the settlement phase of the initial action. An attorney owes a duty to their client requiring undivided loyalty and prohibits attorneys from engaging in conflicts of interest, and breach of such duty is actionable. In Pennsylvania, if a conflict arises between an insurer, and the insured party, as alleged in this case, then the attorney representing the insured must act exclusively, and in the best interest of the insured. In this case, the Court believed that if the facts alleged were true, then there was a breach of fiduciary duty when the insurance company wanted to settle the first matter, and Tower investments did not.

The next matter addressed was the violation of professional rules of conduct by R & H. In the pleading, Tower alleged gross negligence partly based on violation of Pennsylvania Rules 1.3, 1.4, and 1.7. These rules respectively outline diligence in work, communication with clients, and conflicts of interests with current clients. R & H argued correctly, that violation of these rules cannot give rise to a cause of action. However, the Court believed these rule violations formed only a part of the allegations, and thus allowed the complaint to move forward.

Finally, the Court heard arguments concerning the claim for punitive damages. The award of punitive damages is usually reserved for outrageous conduct; however, breach of fiduciary duty by an attorney can also suffice in Pennsylvania to provide punitive damages. The Court cited a quote which fits with the articles of this blog.

"An attorney at law has been said to be a public officer. He is an officer of the court sworn to aid in the administration of justice and to act with all good fidelity both to his clients and to the court. The public have a deep and vital interest in his integrity. It is a matter of profound importance from every point of view that members of the bar be men of probity and rectitude, zealous to maintain relations of utmost honesty with their clients and solicitous to protect them against legal wrong. Unflinching fidelity to their genuine interests is the duty of every attorney to his clients. Public policy can hardly touch matters of more general concern than the maintenance of an untarnished standard of conduct by the attorney at law toward his client. The attorney and client do not deal with each other at arms' length. The client often is in many respects powerless to resist the influence of his attorney. If that influence be vicious, untoward, criminal, the relation of trust is abused and becomes a source of wrong."

This is not to say R & H was guilty, but did provide why the case should be allowed to go forward on punitive damages. This case is more exceptional than anything in showing that legal malpractice is not just a claim sounding in legal malpractice. Rather, when an attorney makes a mistake, it may well be breach of fiduciary duty, breach of contract, and any number of other actions aside from the typical legal malpractice model.

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