Opinion
CIVIL ACTION No. 02-1235 SECTION: E/4.
August 1, 2005
ORDER and REASONS
Two motions for summary judgment are before the Court: (1) motion by Clare W. Trinchard, Leigh Ann Schell, Trinchard Trinchard L.L.C., and Clarendon National Insurance Company (hereinafter "the Trinchard defendants") for summary judgment on the bankruptcy issues (document 242); and, (2) motion by the Trinchard defendants for summary judgment on peremption and liability issues (document 246). The matter was taken under submission after oral argument was heard on July 6, 2005. After considering the record, the motions and memoranda, the evidence, the parties oral argument and the law, and for the following reasons, the motion for summary judgment on bankruptcy issues is DENIED, and the motion for summary judgment on peremption and liability issues is GRANTED.
The Trinchard defendants' malpractice insurer.
BACKGROUND
The following facts are uncontested. In 1991, Gerald Burge filed a civil rights action ("the Burge litigation") against the St. Tammany Parish Sheriff, Jack Strain at the time of trial ("Sheriff Strain"), former Sheriff's Deputy Gary Eugene Hale ("Hale") and their insurer, Northwestern National Insurance Company of Milwaukee, Wisconsin ("NNIC"). From 1991 to May of 1995, NNIC, Sheriff Strain and Hale were all represented by the defendants herein. In May, 1995, NNIC appointed the Trinchard defendants to represent Sheriff Strain and Hale, and NNIC secured other counsel to represent its interests in theBurge litigation. Several months prior to trial in this matter, the Trinchard defendants and counsel for NNIC negotiated a settlement with Burge that fully released NNIC, but only partially released Sheriff Strain and Hale from liability for Burge's claims against them. Pursuant to the terms of NNIC's insurance contract, the Trinchard defendants thereafter terminated their representation of Sheriff Strain and Hale. Sheriff Strain had previously employed additional independent counsel to represent him, but Hale did not. On May 10, 2001, after a jury verdict in favor of Burge, the Court entered judgment in favor of Burge and against Sheriff Strain and Hale for total of $4,075,000.00. Gerald Burge v. St. Tammany Parish Sheriff's Office et al, C.A. No. 91-2321, E.D.La., rec. doc. 504. Sheriff Strain appealed; Hale, who appeared at the trial in pro se, did not. The judgment against Hale became final in September, 2001.
Gary Hale was employed as a St. Tammany Parish Sheriff's Deputy during 1980 and the early part of 1981. He left the department sometime in the spring of 1981.
The jury awarded damages as follows:
Loss of freedom and imprisonment: $2,000,000.00 Physical/mental pain suffering, emotional distress/anxiety: $2,000,000.00 Economic loss during imprisonment: $ 250,000.00 Legal expenses: $ 50,000.00 _____________ Total: $4,300,000.00
The defendants were given credit for amounts paid prior to trial when Burge reached two settlements with various defendants, including the partial settlement between him, Hale and Sheriff Strain and NNIC for $75,000.00.
On October 15, 2001, Burge forced Hale into involuntary bankruptcy in the State of Mississippi in an attempt to collect his entire judgment against Hale. The plaintiff herein, H.S. Stanley, Jr. ("Stanley"), the trustee of Hale's bankruptcy estate, filed this suit in federal court on April 25, 2002, on behalf of Hale's bankruptcy estate. The lawsuit alleges malpractice in defendants Clare Trinchard's and Trinchard Trinchard L.L.C.'s representation of Hale during the Burge litigation which exposed Hale to liability for the multimillion dollar judgment. On Hale's behalf, Stanley alleges various acts of legal malpractice against the Trinchard defendants, beginning in May of 1995, the gist of which is that the Trinchard defendants continued to protect NNIC throughout their representation of Hale, to his detriment. As damages, the complaint seeks to recover the amount of the judgment against Hale, plus interest, costs and fees, from the Trinchard defendants. In his First Amended Complaint, filed on February 11, 2004, Stanley added Leigh Ann Schell, an attorney employed by Trinchard Trinchard during the Burge litigation, as a party defendant.
The Stanley lawsuit also alleges bad faith of Northwestern National Insurance Company of Milwaukee, Wisconsin (NNIC). This claim is not at issue here.
These unliquidated claims are the only assets of Hale's bankruptcy estate, and the only claim against the estate is Burge's claim for payment of his entire judgment against Hale. Hale was discharged in the bankruptcy proceeding on December 18, 2002. Neither Stanley nor Burge contested Hale's discharge. On June 25, 2003, the Fifth Circuit reversed the judgment against Sheriff Strain. On January 12, 2004, the United States Supreme Court denied Burge's request for certiorari.
The Trinchard defendants moved for summary judgment on three grounds: (1) that the malpractice action is moot because Hale's discharge by the bankruptcy court extinguished the debt; (2) that the legal malpractice claims are perempted pursuant to L.S.A.-R.S. 9:5605; and (3) that as a matter of law the partial settlement reached with Burge on behalf of Hale was reasonable and the Trinchard defendants did not breach their duty to Hale, or alternatively, that Stanley cannot prove that Hale suffered any damages or loss as a result of any malpractice on the part of the defendants.
Stanley argues (1) that Hale's discharge in the bankruptcy case does not extinguish the judgment debt that Stanley is attempting to collect from other available sources for the benefit of Burge, as judgment creditor; (2) that his claims against the Trinchard defendants were not prescribed because § 108 of the Bankruptcy Code tolls the running of prescription, or alternatively, because the date on which prescription began to run is disputed; and (3) that the facts surrounding the Trinchard defendants' representation of Hale are disputed, or alternatively, that Hale suffered general damages as a result of the Trinchard defendants' malpractice.
ANALYSIS
A motion for summary judgment is properly granted only if there is no genuine issue as to any material fact, and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c);Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L. Ed. 3d 265 (1986). An issue is material if its resolution could affect the outcome of the action. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). In deciding whether a fact issue has been created, we must view the facts and the inferences to be drawn therefrom in the light most favorable to the nonmoving party. See Olabisiomotosho v. City of Houston, 185 F.3d 521, 525 (5th Cir. 1999). However, once a moving party properly supports a motion for summary judgment, the nonmoving party "must go beyond the pleadings and designate specific facts in the record showing that there is a genuine issue for trial." Lawrence v. Univ. of Tex. Med. Branch at Galveston, 163 F.3d 309, 311-12 (5th Cir. 1999), quoting Wallace v. Texas Tech. Univ., 80 F.3d 1042, 1047-48 (5th Cir. 1996). The nonmoving party cannot satisfy its burden with "unsubstantiated assertions" or "conclusory allegations." Id.
I.
Federal bankruptcy law determines the scope of a debtor's bankruptcy estate. In re: Segerstrom, 247 F.3d 218, 223 (5th Cir. 2001), citing United States v. Whiting Pools, Inc., 462 U.S. 198, 204-05; 103 S.Ct. 2309, 76 L.Ed.2d 515 (1983). A debtor's bankruptcy estate consists of all "legal or equitable interests . . . in property as of the commencement of the case", which includes any "causes of action belonging to the debtor at the time the case is commenced." Segerstrom at id., citing 11 U.S.C. § 541(a) (1993) and Louisiana World Exposition v. Federal Ins. Co., 858 F.2d 233, 245 (5th Cir. 1988). However, "[a] debtor's pre-petition rights in property, such as a cause of action, are determined according to state law." Segerstrom, at 224, citing Butner v. United States, 440 U.S. 48, 55, 99 S.Ct. 914, 918, 59 L.Ed.2d 136 (1979).The Trinchard defendants argue that they are entitled to summary judgment because Hale's discharge in the bankruptcy proceeding renders Stanley's malpractice claims against them moot since Hale no longer suffers any damages caused by the alleged malpractice. They argue that this Court should look to McClarty v. Gudenau, 176 B.R. 788 (E.D. Mich. 1995) for guidance.
The McClarty court held that a chapter 7 trustee could not recover an excess judgment against the debtor's former attorney through a legal malpractice action because the debtor's personal liability for the debt had been discharged.Segerstrom, at 225, n. 4.
Stanley argues that in Segerstrom, the Fifth Circuit expressly rejected McClarty, and the Bankruptcy Court's post-commencement discharge of Hale's debt to Burge does not render the malpractice action moot. He argues that theSegerstrom Court followed its earlier decision in In re Edgeworth, 993 F.2d 51, 53 (5th Cir. 1993), which held that a debtor's discharge does not extinguish the debtor's debt, and that whatever causes of action existed at the time the bankruptcy case was commenced became the property of the trustee. The Court agrees, although the Fifth Circuit did not expressly reject McClarty in its Segerstrom decision.
The factual basis of Segerstrom is on all four corners with this case. See generally 247 F.3d at 221-22. Pursuant to a judgment against her in an underlying tort action, Segerstrom was liable for a multi-million dollar excess judgment after the non-settling insurer tendered the limits of its policy coverage. Segerstrom's attorney in the underlying tort litigation had been provided by her insurer. After the judgment creditors forced Segerstrom into involuntary bankruptcy, the trustee initiated a legal malpractice action against her attorney seeking to collect the amount of the excess judgment as damages. Ultimately, the judgment creditors were the only claimants against the bankruptcy estate. Nine months after the malpractice action was filed, Segerstrom's personal liability for the excess judgment was discharged. Thereafter, the parties filed cross motions for summary judgment. The district court granted summary judgment against the bankruptcy estate on all claims. The district court's decision was based on two grounds: (1) the estate did not include a legal malpractice claim against Segerstrom's attorney because Segerstrom had denied any such claim in an affidavit she signed shortly after the malpractice action was filed; and (2) any negligence by her attorney did not cause her any injury because her personal liability on the underlying judgment had been discharged. Id. at 223. For the second ground, the district court relied on McClarty.
The trustee hired the attorneys who represented the judgment creditors in the underlying tort suit to prosecute the malpractice action.
See note 5, supra.
The Fifth Circuit affirmed on the first ground, but in footnote 4, expressly "d[id] not adopt the district court's holding" on the second ground. Instead, the Court acknowledged its prior holding in Edgeworth "that a discharged debt `continues to exist' and judgment creditors `may collect from any other source that may be liable.'" Segerstrom, at 225, n. 4, citing Edgeworth, 993 F.2d at 53. The Fifth Circuit observed thatEdgeworth did not control in Segerstrom because Edgeworth involved a nominal suit against the debtor for his own alleged medical malpractice and against his insurance company for its liability for its insured's negligence. Id. Instead, it looked to Texas law and concluded that under Texas law, the estate could not succeed on the merits of its malpractice action because Segerstrom had disavowed any malpractice claim she might have against her attorney.
This Court finds the Edgeworth and Segerstrom decisions — that the debtor's discharge in bankruptcy discharges only the debtor's personal liability for his discharged debts but does not extinguish the debt itself — mandates denial of the Trinchard defendants' motion for summary judgment based on Hale's discharge. The estate may still attempt to collect that debt on behalf of the estate's creditor from any other source that may be liable. The Court must now determine whether the Trinchard defendants are entitled to summary judgment pursuant to Louisiana law.
II.
"When a trustee prosecutes a right of action derived from the debtor, the trustee stands in the shoes of the debtor. The trustee is subject to all defenses available against the debtor, and must prove all elements that the debtor herself would be required to prove." Segerstrom, at 224 (citations omitted).
A.
The Trinchard defendants argue that Stanley's malpractice claims against them are perempted under Louisiana law. The limitation periods for an action for legal malpractice, whether based on tort or breach of contract, are set out in L.S.A.-R.S. 9:5605. A legal malpractice action must be filed:
within one year from the date of the alleged act, omission, or neglect, or within one year from the date that the alleged act, omission or neglect is discovered or should have been discovered; however, even as to actions filed within one year of the date of such discovery, in all events such actions shall be filed at the latest within three years from the date of the alleged act, omission, or neglect.
L.S.A.-R.S. 9:5605A.
The one-year and three-year periods of limitation provided in Subsection A of this Section are peremptive periods within the meaning of Civil Code Article 3458 and, in accordance with Civil Code Article 3461, may not be renounced, interrupted, or suspended.
L.S.A.-R.S. 9:5605B.
"Peremption is a period of time fixed by law for the existence of a right. Unless timely exercised, the right is extinguished upon the expiration of the peremptive period." La.C.C. Art. 3458. Although prescription prevents the enforcement of a right by legal action, it does not terminate the natural obligation. La. Civ. Code art. 1762(1). Because peremption extinguishes or destroys the right, unlike prescription, peremption "may not be renounced, interrupted, or suspended." La.C.C. Art. 3461;Reeder v. North, 701 So.2d 1291, 1298 (La. 1997). "Public policy requires that rights to which peremptive periods attach are to be extinguished after passage of a specified period. Accordingly, nothing may interfere with the running of a peremptive period." Reeder at 1298, citing Hebert v. Doctors Memorial Hospital, 486 So.2d 717, 723 (La. 1986); Marsh Engineering, Inc., v. Parker, 883 So.2d 1119, 1125-26 (La.App. 3 Cir. 2004), writ denied, 893 So.2d 73 (La. 2005). The only statutory exception to the three year peremptive period for a legal malpractice claim is a claim of fraud on the part of the attorney. L.S.A.-R.S. 9:5605E.
1.
Stanley first argues that his claims against the Trinchard defendants are timely based on 11 U.S.C. § 108(a), which provides as follows:
If nonbankruptcy law . . . fixes a period within which the debtor may commence an action, and such period has not expired before the date of the filing of the petition, the trustee may commence such action only before the later of —
(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or
(2) two years after the order for relief.
Stanley argues that the partial settlement between Burge, NNIC, Sheriff Strain and Hale, the core "act" in the legal malpractice claim, was not signed by Burge until November 15, 2000, after which the Trinchard defendants "abandoned" Hale, so prescription could not have begun to run prior to that time. He claims that the involuntary bankruptcy petition was filed on October 16, 2001, within one year of that act, therefore prescription was tolled for another two years pursuant to § 108(a).
The Trinchard defendants argue that 11 U.S.C. § 108 applies only to prescriptive periods, not to the peremptive periods spelled out in L.S.A.-R.S. 9:5605, citing Spears Carpet Mills, Inc. v. Century National Bank of New Orleans, 85 BR 86 (W.D.Ark. 1988) in support of the argument. The Court agrees.
In Segerstrom, the Fifth Circuit explained that "Butner espouses the principle that property rights within a state should remain the same within and outside of bankruptcy." Segerstrom, 474 F.3d at 224, citing Louisiana World Exposition, 858 F.2d at 252 ("Butner . . . stresses that federal bankruptcy law should not be used to work a substantive change in the ordering of property interests under state law.") Pursuant to Louisiana law, the rights to which a peremptive period are attached are extinguished upon the expiration of that period, and that peremptive period cannot be interrupted or suspended. See La.C.C. Arts. 3458 and 3461; Reeder, 701 So.2d at 1298. The language in § 108 of the Bankruptcy Code referring to "a period within which the debtor may commence an action" describes a prescriptive period, not a peremptive period. To conclude otherwise would be to substantively alter property rights as defined in Louisiana law — it would allow a trustee to exercise a right to commence an action within the bankruptcy because that the debtor would not have outside of the bankruptcy because that right had been extinguished by operation of law.
This conclusion is supported by the Fifth Circuit's decision inIn re: Phillips, 948 F.2d 985 (5th Cir. 1991), stating:
We construe the language of § 108 to extend the prescription period for prepetition claims to two years after entry of the order for relief, if prescription otherwise would run before that date. Accord Northern Specialty Sales, Inc. v. INTV Corp. (In re Northern Specialty Sales, Inc., 57 B.R. 557, 559 (Bankr.D.Or. 1986).Id. at 987 (emphasis supplied). The issue in Phillips was whether § 108 extended the time for filing an action that accrued after a Chapter 11 case was filed, but before the matter was involuntarily converted to a Chapter 7 case. While that case did not address whether § 108 applied to a peremptive period, the Court's construction of that section of the Bankruptcy Code as a prescriptive period is instructive and persuasive. See also Spears Carpet Mills, Inc. v. Century National Bank of New Orleans, 85 B.R. 86, 88-89 (W.D.Ark. 1988) (bankruptcy court refused to apply § 108 to the Louisiana version of U.C.C. § 4-406(4), which Louisiana courts had construed as a "statute of peremption", citing William M. Barnett, Inc. v. First Nat'l Bank, 191 La. 945, 186 So. 741 (1939)); and In re Williams, 276 B.R. 394, 397 (E.D.Penn. 2002) (bankruptcy court refused to apply § 108 to 15 U.S.C. § 1635(f) (the Truth in Lending Act) which provides that "the `right of rescission [under the Act] shall expire' at the end of the time period", finding that the provision "talks not of a suit's commencement but of a right's duration", citing Beach v. Ocwen Federal Bank, 523 U.S. 410, 417, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998)).
2.
The next question the Court must determine is whether Stanley's claims are perempted pursuant to § 9:5605. Considering the conclusion that § 108(a) of the Bankruptcy Code does not toll peremption, the date on which each malpractice defendant was sued is the date against which the parties' peremption arguments must be judged. Pursuant to the express language of § 9:5605, Stanley's malpractice claims against the Trinchard defendants are timely if suit was filed within one year after the date of Hale's discovery of the alleged act, omission or neglect, providing suit was filed within three years of the date the alleged act, omission or neglect occurred.
a.
Clare W. Trinchard and Trinchard Trinchard L.L.C. were named as malpractice defendants in Stanley's first Complaint on April 25, 2002. Both parties argue that Stanley's malpractice claim is a "single tort" for purposes of the peremptive period. The Trinchard defendants argue that pursuant to the "continuous representation" rule, the claims against them are perempted because the acts, omissions or neglect complained of occurred beginning in May of 1995, when NNIC appointed them to represent Hale in the Burge litigation. Alternatively, they argue that any acts occurring prior to April 25, 1999, are perempted. They claim that Hale knew as early as September of 2000 that a settlement was being negotiated based on Burge's offer of settlement, and that after a settlement was reached, they would no longer represent him. They assert that Clare Trinchard and Leigh Ann Schell discussed the matter with Hale on more than one occasion, and that he understood the terms and implications of the proposed partial settlement. They finally claim that Hale discovered, or more accurately, was informed of their alleged malpractice when Mark Smith met with him on March 14, 2001, prior to the trial, to try to persuade him to implicate the sheriff's department in the claimed violations of Burge's civil rights and told him that he believed Hale had a malpractice claim against his attorneys. In support of their position, the Trinchard defendants produced the affidavits of Leigh Ann Schell and Clare Trinchard, copies of the partial settlement agreement signed by Burge on November 15, 2000 and of a release of NNIC signed by Hale on January 13, 2001, copies of letters from Mark Smith to Hale dated August 24, 2001 and September 20, 2001. See Trinchard Memorandum on Peremption and Liability Issues, Exs. A, B and C.
Mark Smith is Burge's attorney in this litigation, and represented Burge in the underlying litigation, beginning in 1991.
Stanley argues that any acts, omissions or neglects that occurred after April 25, 1999, are neither prescribed nor perempted. He argues that the partial settlement agreement, signed by Burge on November 15, 2000, and the Trinchard defendants' subsequent abandonment of Hale's representation, are the ultimate results of the single tort of their negligent representation of Hale. Stanley asserts that Hale had no actionable malpractice claim prior to November 15, 2000. Opposition Memorandum on Peremption and Liability Issues, p. 15. He further claims that consideration of the ongoing professional relationship between Hale and the Trinchard defendants "argues in favor of a later rather than an early date as to the initiation of the tolling period." Stanley Opposition to Peremption and Liability Issues, p. 13. He finally argues that Hale did not discover his attorneys' alleged malpractice until September 11, 2001, when Smith again met with him to urge him to file a legal malpractice suit against his attorneys. In support of his arguments, Stanley produced excerpts from Smith's deposition and Hale's deposition, and Hale's affidavit dated August 20, 2002. See id., Ex. 1, Smith deposition, pp. 59-66; Ex. 2, Hale deposition, pp. 55-56.
Stanley also argues that Hale did not have a cause of action until the judgment against him was final in September of 2001. In Reeder, the Louisiana Supreme Court expressly held that pursuant to L.S.A.-R.S. 9:5605, a legal malpractice cause of action is extinguished three years after the "act, omission or neglect", regardless of when the malpractice is discovered, or whether the cause of action has accrued. 701 So.2d at 1297.
The Court concludes that there are genuine factual issues as to when the peremptive periods (one year and three years) began to run regarding the malpractice claims against Clare Trinchard and Trinchard Trinchard, L.L.C.
b.
Stanley first added claims against Leigh Ann Schell on February 11, 2004. The Trinchard defendants argue that the legal malpractice claims against Schell are clearly perempted because Stanley first brought his claims against her more than three and a half years after she left the Trinchard firm's employ on October 1, 2000. Stanley argues that for purposes of prescription, the amended complaint relates back to the original complaint so that prescription was interrupted as to his claims against Schell because she is a joint tortfeasor and therefore solidarily liable with the Trinchard defendants. See id., pp. 20-21. The Court disagrees.
In Marsh Engineering, the plaintiff, Barnett, sued his former business partner and attorney, Parker, on November 22, 1991. 883 So. 2d at 1121. In April of 1993, plaintiff amended his petition to add as defendants Bean and Parker, L.L.P., its malpractice insurer, and the Estate of James Bean (Parker's late law partner) and the three heirs of the Bean estate. The trial court granted the malpractice insurer's exception of no cause of action and dismissed all six defendants. On appeal, Barnett argued that the Bean defendants were solidarily liable with Parker, therefore his timely suit against Parker interrupted prescription against them. The appellate court first observed that Bean's alleged acts of legal malpractice are separate causes of action from Parker's alleged acts of legal malpractice. Id. at 1125. It also observed that, as in this case, the issue was peremption, not prescription. The appellate court held that the Louisiana Civil Code articles regarding interruption of prescription as to solidary obligors did not apply to interrupt peremption. Id. at 1125, quoting La. Civ. Code art. 3461.
In his First Amended Complaint adding Schell, Stanley alleges virtually identical "negligent acts and breaches of professional and fiduciary duty" by Clare Trinchard and Schell. See First Amended Complaint, part XI, ¶ 33, items a — n, p (Trinchard) and part XII, ¶ 34(A), items a — o (Schell). His factual allegations against Schell are that she was an attorney employed as an associate by Trinchard Trinchard, L.L.C., that she assisted Clare Trinchard and did substantial work in the representation of Hale, that she and Clare Trinchard failed to oppose NNIC's motion for summary judgment in 1997, and that on July 21, 2000, Schell co-authored with Michelle Gaudin, NNIC's attorney in the Burge litigation, a coverage opinion letter regarding the Burge litigation to an employee of NNIC, Scott Schafer. Id. at ¶¶ 19B, 22, 22(A)-(D), and 25.
Schell could not have done or participated in any act, omission or neglect vis-a-vis her representation of Hale after October 1, 2000, when she left the Trinchard firm's employ. Peremption ran on any legal malpractice claim Hale might have had against her at the latest on October 1, 2003. Stanley filed his action against her April 25, 2004, seven months after the peremptive period expired, and two and a half years after Hale's involuntary bankruptcy was initiated.
For the first time, in his Opposition at page 16, Stanley argues that the Trinchard defendants, including Schell, "engaged in fraudulent conduct", which tolls the peremptive period under L.S.A.-R.S. 9:5605E. The gravamen of his allegation of fraud is that the Trinchard defendants failed to inform Hale of their alleged conflict of interest, that is, their representation of Hale and Sheriff Strain, who Stanley alleges were parties with adverse interests in the Burge litigation, and of their ongoing business relationship with NNIC during their representation of Hale, and failed to inform him of the insurance coverage dispute. Opposition, p. 17.
"Fraud is a misrepresentation or a suppression of the truth made with the intention either to obtain an unjust advantage for one party or to cause a loss or inconvenience to the other. Fraud may also result from silence or inaction." La. Civ. Code Art. 1953.
In Andre v. Golden, 750 So.2d 1101 (La.App. 5 Cir. 1999), writ denied, 757 So.2d 643 (2000), the appellate court considered whether the plaintiffs' allegation of fraud in a malpractice suit against their former attorney was sufficient to toll the three year peremptive period pursuant to § 9:5605E. The malpractice claim was based on Golden's undisclosed conflict of interest. Golden was employed as an attorney for Jefferson Parish during the time he represented the Andres in a tort suit against Jefferson Parish, and during that representation he negotiated a settlement which the Andres later claimed was for an inadequate sum. The appellate court affirmed the trial court's conclusion, finding that all of the allegations of fraud "stem from the failure to disclose, which sounds in negligence, rather than fraud." Id. at 1105. Its opinion quoted from the trial judge's oral reasons for his ruling as follows:
"All of the allegations of fraud are essentially based on one foundation, and that was failure to disclose. All of them start from the failure to disclose.
. . . .
. . . Even though fraud is alleged, the underlying facts for that fraud are the malpractice claims for failure, the misrepresentation for failure, . . . the intentional failure to disclose, the intentional failure to properly pursue zealously, the intentional failure to properly communicate. All of that's a failure. That, even though its called fraud, it strikes a negligence, which 9:5605 does apply to.Id. at 1103.
Like the claims in Andre, Stanley's fraud claims, as least regarding Schell, merely allege, at most, an intentional failure to disclose and to properly communicate, which sound in negligence, not an intentional effort to defraud Hale. The three year peremptive period applies to Stanley's claims against Schell, and his claims against her are perempted.
B.
Whether the claim is based on breach of contract or tort, to establish a claim for legal malpractice in Louisiana, "a plaintiff must prove: 1) the existence of an attorney-client relationship; 2) negligent representation by the attorney; and 3) loss caused by that negligence." Costello v. Hardy, 864 So.2d 129, 138 (La. 2004) (citations omitted). The failure to prove any one of these elements is fatal to the claim. "A plaintiff can have no greater rights against attorneys for the negligent handling of a claim than are available in the underlying claim." Id. In a typical legal malpractice claim, damages would be measured by the amount which the client would have recovered but for the attorney's negligence. Jarrel v. Miller, 882 So.2d 639, 644 (La.App. 2 Cir.), writ denied, 888 So.2d 868 (La. 2004). A plaintiff may also receive an award for general damages arising out of the actions or inactions of their attorney. Chatelain v. Rabalais, 877 So.2d 324, 329 (La.App. 3 Cir. 2004).
This malpractice claim is not typical. It is different from most malpractice claims wherein the allegation of malpractice is based on an attorney's failure to adequately assert a claim or a legal right on behalf of the client, and damages are measured by the value of the lost claim or right. In this case, the malpractice claim is based on the attorneys' alleged failure to adequately defend Hale from Burge's claims against him in the underlying Burge litigation. According to Stanley, "In fact, the sole cause of damage to Mr. Hale was the rendering of the judgment against him; without that judgment, Mr. Hale would have no cause of action against the Trinchard Defendants." Opposition on Peremption and Liability Issues, p. 15. Stanley seeks a damage award that will completely satisfy the multi-million dollar judgment debt against Hale. Opposition on Bankruptcy Issues, p. 29. He also seeks to recover general damages Hale allegedly suffered as a result of the Trinchard defendants' alleged malpractice: the physical and emotional stress of having to defend himself at trial; the shock of having a multi-million dollar judgment rendered against him; and the humiliation of being forced into bankruptcy. Id. at p. 27.
For purposes of this motion, the Court finds that Hale and the Trinchard defendants had an attorney-client relationship, and that Stanley is entitled to bring this legal malpractice action on Hale's behalf as trustee of Hale's bankruptcy estate. The Court also finds that there are genuine issues of material fact as to whether the Trinchard defendants' representation of Hale was negligent. Nevertheless, even assuming that the that the Trinchard defendants' representation of Hale was negligent, Stanley cannot show that their representation caused Hale any loss or damage.
1.
Stanley alleges that Hale's economic loss should be measured by the amount of the judgment against him, just over $4,000,000.00, plus interest, which, according to the Involuntary Petition Burge filed against Hale on October 15, 2001, and Burge's Proof of Claim filed on December 23, 2002, amounts to approximately $7,600,000.00. See Memorandum on Bankruptcy Issues, Ex. B, the record of the bankruptcy proceeding, No. 01-015539, United States Bankruptcy Court, Southern District of Mississippi.In Costello v. Hardy, the plaintiff was the mother of Hardy's client, Joseph Costello. 864 So.2d at 133. In the malpractice claim filed in Jefferson Parish, she alleged that the defendant attorneys failed to properly draft her late son's will to reflect his desire to provide her with $25,000.00 a year in living expenses. She had previously sued in Orleans Parish to set the will aside, naming as defendants the co-executors, including Hardy, and the legatees, which included The Mary Joseph Residence for the Elderly, Loyola University, and the Greater New Orleans Foundation (collectively "Succession"). Shortly after the malpractice lawsuit was filed, the Costello family settled the nullity action pending in Orleans Parish. They dismissed their challenge to the will in exchange for the Succession's agreement to provide Mrs. Costello with a $25,000.00 annual stipend from her late son's estate.Id. at 134-35. Ultimately, the trial court in the malpractice action in Jefferson Parish granted a motion for partial summary judgment filed by the defendants, and dismissed the malpractice claim. Id. at 135.
The appellate court affirmed, finding that Mrs. Costello failed to establish any of the three elements of a legal malpractice claim. Id. at 136. The Louisiana Supreme Court affirmed on this issue, finding that Mrs. Costello could not prevail on the third element of her malpractice claim, proof of loss or damages. Id. at 138. In support of their motion in the trial court, the malpractice defendants had produced a copy of the settlement agreement between Mrs. Costello and the Succession, and the trust document establishing a life annuity of $25,000.00 a year to Mrs. Costello. The Supreme Court observed that "at th[at] point in the proceedings, the burden shifted to Mrs. Costello to produce factual support sufficient to establish that she will be able to satisfy her evidentiary burden at trial of proving damages sustained as a result of Hardy's alleged malpractice." Id. at 139. That Court found that Mrs. Costello failed to meet her burden because she asserts claims for damages against the attorneys in this malpractice action that were discharged in the settlement of the suit against the Succession. Id.
The Supreme Court reversed the judgment against Mrs. Costello on the malpractice defendants' reconventional demand for damages for defamation.
On August 2, 2002, Hale's statements dated May 25, 2002, were filed into the record of the Chapter 7 proceeding against him as follows: Schedule A-Real Property, showing none; Schedule B-Personal Property, showing $500 cash on hand and a 1975 Dodge pickup valued at $800; Schedule I-Current Income of Individual Debtor(s), showing a monthly Social Security Disability Pension of $660, and a monthly V.A. Pension of $310 for a total monthly income of $970; Schedule J-Current Expenditures of Individual Debtor(s), monthly rent of $270, $300 for food, $40 for clothing, and $80 for medical expenses, leaving a monthly excess income of $280. Memorandum on Bankruptcy Issues, Ex. B. On December 18, 2002, Hale was discharged from the Chapter 7 proceeding against him, extinguishing his personal liability for the judgment debt to Burge. Stanley has offered no evidence that, before the judgment was rendered against him, Hale had any additional assets that he lost, or that he was forced to make any payments to Burge, or anyone else, as a consequence of the judgment against him. In short, he has not shown that Hale suffered any monetary or economic loss at all as a result of the settlement between Burge and NNIC prior to the trial, or Burge's judgment against him as a result of the trial, or the failure to appeal that judgment.
2.
In his complaint, Stanley also requests general damages for Hale's "personal embarrassment, mental distress, loss of enjoyment of life, loss of society, loss of reputation, and loss of earning opportunity." Complaint, ¶ 37. In support of his claim, he offered an excerpt of Hale's deposition testimony given on May 10, 2004, as follows:
Question: Mr. Hale, there came a time when the verdict came down, and you were cast in judgment by the jury in this case. How did you feel?
Answer: The same way it affects me today: Ashamed, disgraced. I cried. I apologized to my wife. I apologized to the sheriff. I sent my wife home. I spoke to no one for three days. It wasn't only my pride but I put a awful lot of effort in the case to serve justice, not me, and no one else. And when I saw Mr. Burge go to prison on people who followed up my initial efforts and presented the exact same case I had to start with, because they had a different district attorney and they won the trial, I thought justice was served, but it was all wiped out because of lies. And there is no way to defend your honor or your reputation once it's there; it's all said on black and white. You are what they say you are. You know, I mean there may be people that you know well, believe in you, many people have told me that, but inside you always wonder, do they really believe me? Because no one else believed me.
Opposition on Bankruptcy Issues, Exhibit 1, Hale Deposition pp. 52-53.
In Jarrell v. Miller, the plaintiff sued his former attorney, alleging that he "suffered immense economic harm as a result of Miller's misconduct and negligence" during Miller's legal representation of him. 882 So.2d at 641. Jarreli claimed special damages for the lose of his job and stock in the company that he and his wife had founded and operated for 27 years, and general damages for emotional distress caused by Miller's malpractice.Id. at 641-42. The jury rendered a verdict for Jarrell awarding $500,000.00 in general damages, $623,110.00 in lost wages, and $227,175.00 for lost value of the stock. Id. at 643.
The appellate court reversed. That court first found that Jarrell had not shown at trial that any of his claimed economic damages were caused by Miller's alleged acts of malpractice.Id. at 644, 646. The court then addressed the award of general damages for emotional distress in a legal malpractice action as follows:
Damages for pain, suffering, anxiety, and humiliation caused by negligence are generally not recoverable in a legal malpractice action. This is because the foreseeable result of an attorney's negligence typically extends only to an economic loss. Obviously, a client will be annoyed and inconvenienced by an attorney's failure, for example, to file suit within the applicable time limits; however, the client can be fully compensated by recovery of the value of the claim the attorney allowed to prescribe. This suffices to return the client to his prior circumstances. The primary interest protected by the general rule is a property right which can be economically measured. Serious emotional distress is not believed to be an inevitable consequence of a purely monetary loss. Richards v. Cousins, 550 So.2d 1273 (La.App. 4th Cir. 1989), writ denied, 552 so.2d 397 (La. 1989); Douglas v. Delp, 987 S.W.2d 879 (Tex. 1999).
Recovery for such an economic loss requires proof of the viability and worth of the negligently lost claim. This methodology has been characterized as a "suit within a suit". Some courts, however, that follow the general rule that mental anguish is not compensable would permit such damages when the attorney has acted reprehensibly or with heightened culpability.Id. at 646 (other citations omitted). The Jarrell court also recognized the line of cases in which the original claim was not monetary or economic, but concerned, for instance, personal liberty or child custody or visitation rights. "Not to allow mental anguish damages under these limited circumstances, would leave such a client without a remedy and virtually immunize the negligent attorney." Id. at 647. The Jarrell court suggested that the focus should shift from the nature of the attorney's conduct to the nature of the plaintiff's loss. Id.
See Concurring Opinion by Caraway, J., for an insightful analysis of Louisiana law regarding the issue of damages for mental anguish in a tort setting and in a contract setting. Judge Caraway observes that when a jury serves as the trier-of-fact of the multiple ethical violations alleged by the plaintiff in a legal malpractice case, allowing general damages awards by the jury "would have a new regulatory effect on the practice of law", outside of the Louisiana Supreme Court which has exclusive original jurisdiction of disciplinary proceedings against a member of the bar. Id. at pp. 648-50, Caraway, J., Concurring Opinion.
In Jarrell, the appellate court considered the factual circumstances of that case and concluded that general damages were not warranted under those circumstances. The court observed that Miller did use poor judgment and acted improperly during his representation of Jarrell, his wife, and their corporation, but found that the mental anguish and emotional distress Jarrell claims to have suffered was the result of his own actions, not Miller's. Id. at 647.
This case falls somewhere in between the two scenarios discussed in Jarrell. Stanley claims that Hale suffered mental anguish as a result of the Trinchard defendants' malpractice because he was cast in judgment for over $4,000,000.00, and was forced into involuntary bankruptcy as a result. Hale neither lost a viable monetary or economic claim due to the alleged negligence of his attorneys, nor did he suffer a purely personal, emotional loss attributable to his attorneys' negligence. He suffered an adverse judgment against him that resulted in a potentially significant monetary loss.
The Court notes that Sheriff Strain, who was represented by independent counsel in addition to the Trinchard defendants, agreed to the same partial settlement with Burge and NNIC that Stanley now claims was a result of the Trinchard defendants' malpractice in their representation of Hale. Moreover, at the trial on the underlying civil rights claim, the jury rendered the same verdict against Sheriff Strain, who was represented at trial by competent counsel, as it rendered against Hale. Under these circumstances, there is nothing in the record to suggest that the verdict as to Hale would have been any different had he been represented by counsel at trial. While the degree of emotional distress Hale described in his deposition is certainly not unexpected in such a situation, neither is it extreme, and Hale's reaction would have likely been the same even if he had been represented at trial. Any person would likely be distressed at being cast in judgment for any amount, especially if that person, like Hale, believes the judgment to be unfair and unwarranted. But Stanley cannot show that any mental anguish or emotional distress Hale suffered as a result of having the $4,000,000.00 judgment rendered against him was caused by the Trinchard defendants alleged malpractice. Furthermore, there is nothing in the record to suggest that, as a result of the judgment against him, Hale suffered any loss of enjoyment of life, loss of society, loss of reputation, and loss of earning opportunity.
Smith's letters to Hale dated August 24, 2001, and September 20, 2001, and Hale's deposition testimony, indicate that Hale rebuffed Smith's and Burge's repeated attempts to persuade him to file a legal malpractice action against the Trinchard defendants in order to assist Burge in collecting his judgment, and, in Smith's words, gain "some measure of vindication". Memorandum on Peremption and Liability Issues, Ex. A; Exs. C and D to Ex. C, Clare Trinchard's deposition; Ex. E, Mark Smith's deposition, pp. 59-60, Gary Hale's deposition, pp. 101-02, 112-13, 147-48. The involuntary bankruptcy action against Hale was instituted by Burge in anticipation of the Fifth Circuit's ultimate reversal of the judgment against Sheriff Strain, in his attempt to locate any source of funds from which he could collect on his judgment, since Hale, without any significant assets to begin with, was in effect "judgment proof".
CONCLUSION
The Court concludes that Stanley cannot show that Hale suffered any loss or damages as a result of the Trinchard defendants' alleged acts of malpractice, and therefore cannot meet his burden of proving the third element of his claim of legal malpractice against them. There being no genuine factual dispute on that issue, the Trinchard defendants are entitled to summary judgment as a matter of law.
Accordingly,
IT IS ORDERED that the Trinchard Defendants' Motion for Summary Judgment on Bankruptcy Issues is DENIED; and,
IT IS FURTHER ORDERED that the Trinchard Defendants' Motion for Summary Judgment on Peremption is GRANTED as to plaintiff's claims against Leigh Ann Schell and DENIED as to plaintiff's claims against Clare Trinchard and Trinchard Trinchard, L.L.C.; and,
IT IS FURTHER ORDERED that the Trinchard Defendants' Motion for Summary Judgment on Liability is GRANTED as to plaintiff's claims against Clare Trinchard and Trinchard Trinchard, L.L.C.; and IT IS FURTHER ORDERED that the plaintiffs' claims of legal malpractice against defendants Clare Trinchard, Trinchard Trinchard L.L.C., and Leigh Ann Schell be and are hereby DISMISSED WITH PREJUDICE.