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Developments in South Carolina Legal Malpractice

By David W. Overstreet Amanda K. Dudgeon

Gone are the days when lawyers refused to sue other lawyers. The recent increase in legal malpractice claims in South Carolina1 along with the court and legislature’s attempts to prevent frivolous suits calls to question: What does it take these days to sue a South Carolina lawyer? More importantly for those of us who defend fellow lawyers, will the attempts to decrease frivolous claims actually limit their filing and result in appropriate dismissals? CURRENT STATE OF S.C. LEGAL MALPRACTICEThe majority of current South Carolina legal malpractice claims and related disciplinary actions involve real estate transactions.2 Many of these involve properties that are now in foreclosure.

Claimants focus on failures to procure written conflict waivers, rushed closings, improperly and untimely witnessed closing documents, inaccurate HUD statements, witness-only closings, two- transaction flips, inappropriate commissions, and failure to supervise assistants.

Reported legal malpractice cases in South Carolina over the past few years are limited but significant. In 2006, the South Carolina Supreme Court rendered decisions in Brandt v. Gooding, 368 S.C. 618, 630 S.E.2d 259 (2006) and Pye v. Estate of Fox, 369 S.C. 555, 633 S.E.2d 505 (2006). The Pye opinion was especially noteworthy because the Court held that an attorney is immune from liability to third parties arising from the attorney’s representation on behalf of and with the knowledge of his client. Likewise, in 2007, the South Carolina Court of Appeals rendered a decision in Moore v. Weinberg, 377 S.C. 209, 644 S.E.2d 740 (Ct. App. 2007) in which the Court held that failure to comply with the Rules of Professional Conduct is not a per se breach of the standard of care, but may be considered along with other factors to determine whether the attorney met the applicable standard of care. EX PARTE GREGORYMost recently, the South Carolina Supreme Court affirmed sanctions for filing a frivolous legal malpractice suit in its decision Ex Parte Gregory: In re Melton v. Malloy, 378 S.C. 430, 663 S.E.2d 46 (2008). The Court held that a reasonable investigation of the facts is required before bringing a conversion claim against an attorney for misappropriation of client funds or legal malpractice. In the underlying case, Attorney Malloy represented a client who was injured in a

May 1999 automobile accident. Upon the resolution of the case in 2001, the client endorsed a settlement check at Malloy’s office. Malloy was not present at the time, but his assistant indicated to the client that he would receive another check later. Over the course of the following months, the client and his mother called and visited Malloy’s office to inquire about the check, but were unable to reach him.

The client then contacted another attorney, Mr. Gregory, in June 2004. Attorney Gregory contacted the insurance carrier that had issued the proceeds and obtained copies of the settlement documents. Gregory then advised the client to file a grievance against Malloy with the South Carolina Supreme Court Office of Disciplinary Counsel (ODC) and drafted the letter to the ODC for the client. The client then retained Gregory on a contingency basis to make claims against Malloy for wrongfully holding settlement proceeds. Gregory did not contact Malloy or review his file before filing the suit.

The client filed an action against Malloy for negligence, conversion, breach of contract, breach of contract accompanied by a fraudulent act, and constructive trust. After suit was filed, Malloy immediately transferred the settlement proceeds to his client’s new attorney. He likewise answered and counterclaimed that the suit was frivolous and in violation of Rule 11, SCRCP, and the South Carolina Frivolous Proceedings Sanctions Act.3 Once discovery began, Gregory and his co-counsel were able to tell from reviewing the file that Malloy had been in touch with Medicaid regarding compromising the liens and bills on the underlying case and had therefore been working towards a final resolution for the

1 | Developments in South Carolina Legal Malpractice

3 | Firm Announcements

4 | 2009 Partner and Of Counsel Announcement

4 | Covering Your Assets with High/Low Agreements

5 | The Amendments to the Americans with Disability Act 6 | Beware of System Failure

7 | Speaking Engagements and Recent Victories

Volume VI | Issue 1 | Winter 2009

client. After the deposition of the Medicaid agent, the client voluntarily dismissed the suit against Malloy with prejudice (7 weeks after filing).

Malloy then filed a Motion for Sanctions against the client and against Gregory pursuant to the South Carolina Frivolous Proceedings Sanctions Act. Malloy testified that he had been representing the client for free and likewise felt obligated to hold the settlement funds until the disputes between the lien holders and his client were resolved. The trial court concluded that the conversion cause of action was frivolous, granted Malloy’s Motion for Sanctions against Gregory (but not the client), and awarded Malloy $27,364.00 in attorneys fees and costs associated with defending the action and pursuing the claim for sanctions. The appeal followed.

In its opinion affirming the sanctions award, the South Carolina Supreme Court noted that, had Gregory conducted a reasonable investigation, he would have known there was no basis for the lawsuit. He never contacted Malloy and never reviewed let alone requested his file. He even reported to a local newspaper that Malloy was commingling funds and keeping settlement money “in his pocket” while collecting interest on it. The Court focused on the fact that a simple phone call could have avoided the grievance and suit from being filed and held, “We find that while an attorney or a pro se litigation does not have a duty to consult with a potential defendant prior to filing suit, before alleging conversion against an attorney for misappropriation of funds or legal malpractice, a reasonable investigation is necessary.” Ex parte Gregory, 378 S.C. 430, 439, 663 S.E.2d 46, 51 (2008)(emphasis added). The Court specified that the reasonable investigation must be beyond the information relayed to the attorney by his client. The reasonable investigation standard set forth by the Court is one that was welcomed by those of us who regularly defend lawyers in South Carolina.

EXPERT AFFIDAVIT REQUIREMENTThe Ex Parte Gregory decision coincides with South Carolina’s 2005 enactment of

filing a legal malpractice suit. This due diligence includes (1) retaining an expert to review the facts of the case and render an opinion that the defendant attorney breached the applicable standard of care and (2) performing a “reasonable investigation” into the facts rather relying solely on the client’s allegations, which may involve reviewing the attorney’s file or even contacting the attorney first. Failure to do either could and should result in a dismissal of the malpractice suit with prejudice as well as possible sanctions. Hopefully, the courts will enforce these basic statutory and common law requirements for commencing a valid lawsuit against a lawyer in South Carolina. Such enforcement is clearly necessary to avoid frivolous claims and protect all professionals from litigants who file cases without a sound basis or proper due diligence

RESOURCES

1 “According to a recent ABA report, real estate practice is the fastest-growing source of malpractice claims against lawyers over the past four years and could soon supplant plaintiffs personal injury work in the top spot.” Malpractice Minefield: 5 top traps—and how to avoid them, ABA Journal– Law News Now, December 2008.2 Gregory Froom, S.C. Supreme Court disciplines five attorneys over real estate issues, South Carolina Lawyers Weekly, December 17, 2007.3 S.C. Code Ann. 15-36-10, et seq. (2005).4 The plaintiff may then allege that an expert affidavit could not be prepared in a timely manner and then has 45 days after the filing of the complaint to supplement the pleadings with the affidavit or to seek an extension from the trial court.

South Carolina Code Annotated § 15-35-100. S.C. Code Ann. § 15-35-100 requires that a supporting expert affidavit be filed contemporaneously with a Complaint alleging professional negligence. The statute is essentially identical to Georgia’s expert affidavit statute. Pursuant to the statute, an expert affidavit must be filed as part of the Complaint, and the expert must identify therein the negligent act or omission and the factual basis for the claim. Limited exceptions include instances where the statute of limitations will expire within 10 days of the filing of the Complaint4 as well as instances where the alleged attorney negligence involves subject matter that lies within the “ambit of common knowledge and experience” such that no “special learning” is needed to analyze the defendant attorney’s conduct. Nevertheless, recently South Carolina statecourts, unlike Georgia courts, have unfortunately been willing to broaden the

exceptions beyond what is included in the actual statutory language. For instance, some judges are not inclined to follow the dismissal requirement of the expert affidavit statute when the Plaintiff amends his complaint to include the expert affidavit before the actual hearing on the Defendant’s Motion to Dismiss. As a defense lawyer, this can be frustrating when the Court refuses to dismiss the case even though the statutory language calls for it. Furthermore, there is unfortunately no South Carolina state case law to date which discusses the expert affidavit statute.

SUMMATIONToday the question remains whether the efforts to prevent frivolous lawsuits will actually translate into better defenses in legal malpractice cases. In sum, pursuant to the South Carolina Supreme Court’s holding in Ex parte: Gregory and S.C. Code Ann. § 15-36-100, Plaintiff’s counsel must now perform their due diligence before

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Amanda K. DudgeonAssociate, Charleston OfficeCommercial LitigationGeneral LiabilityConstruction Litigation

843.266.8207adudgeon@carlockcopeland.com

David W. OverstreetPartner, Charleston OfficeCommercial LitigationGeneral LiabilityHealth Care Litigation

843.727.0307doverstreet@carlockcopeland.com

Today the question remains whether the efforts to prevent

frivolous lawsuits will actually translate into better defenses in

legal malpractice cases.

Kim M. Ruder is a trial attorney counselling clients on a wide variety of litigation matters. Her practice focuses on medical malpractice, and serious personal injury including premise liability and automobile and trucking litigation. Kim also assists in the defense of employment related matters, including representing both public and private entities before the EEOC

Ann H. Bracco is a senior attorney who handles a variety of litigation matters in both State and Federal Courts. Her practice focuses primarily on commercial litigation including insurance coverage and bad faith actions, construction defects, premises liability, and products liability. Ann has obtained Summary Judgment in several multi-million dollar bad faith cases,

Covering Your Assets With High/Low Agreements

By: D. Gary Lovell, Jr.

The trial of a motor carrier case presents the risk manager, insurance adjuster, and attorney with a volatile mix of jury bias, severe injuries, and potential run-away verdicts. Plaintiff’s attorneys play upon bias and fear of tractor-trailers to whip jurorsinto a frenzy of generosity with their verdicts. In many states, the insurance carrier is named with the motor carrier as a defendant in the lawsuit. Punitive damages, sometimes unlimited by statute, are frequently issues presented to the jury in the motor carrier trial. The insurance limits, although substantial, may be insufficient given the severity of injuries in the close liability case. High/low agreements offer the risk manager, insurance adjuster, and attorney with a means of reducing exposure to excessive verdicts.

WHAT IS A HIGH/LOW AGREEMENTA high/low agreement is simply an

cases or “within the comfort zone” in self-insured cases.

In cases involving clear liability but questionable injuries and damages, high/low agreements are useful in avoiding excess exposure to the insurer or self-insured. In those cases, settlement negotiations have usually led to the parties establishing their parameters of evaluation of the case’s worth. The high/low agreement can allow the parties to compromise their positions somewhat, while still enjoying the possibility of achieving relative success. In these cases, plaintiff’s desire a “low” in the range to guarantee adequate compensation for their injuries, while the defense wants to avoid the runaway verdict or verdict in excess of insurance limits

agreement in which the plaintiff’s agree to place a maximum limit upon their recovery in exchange for a guaranteed minimum payment by the defense. If a verdict is rendered that is higher than the agreed maximum limit (the “high”), then the plaintiff’s recovery is written down to the agreed maximum amount. If a defense verdict is returned, or a verdict less than the minimum guarantee (the “low”), then plaintiff recovers the minimum payment guaranteed. If the verdict is betwen the “low” and “high”, then that amount is paid.

TYPES OF CASES FOR HIGH/LOW AGREEMENTS While any case may be a candidate for these types of agreements, there are two frequently used categories. High/low agreements are often used in cases of little or no liability, but severe injuries. In those cases, the “low” is usually sufficient to reimburse the plaintiff’s expenses and put some nominal amount of money in plaintiff and his attorney’s pockets. The “high” cap is usually below policy limits in insurance

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Renee Y. Little focuses her practice in the area of Insurance Coverage Defense. In her practice she engages in coverage analysis and litigation, representing interstate and intrastate motor carriers in disputes involving federal and state transportation laws, catastrophic injuries and wrongful death. She also defends individuals and corporations in cases involving premises

Peter Werdesheim focuses his practice in the area of professional liability and real estate. In the professional liability arena, he represents lawyers faced with legal malpractice claims or lawsuits and disciplinary proceedings before the State Bar. He advises and defends accountants and insurance agents/brokers faced with E&O disciplinary, and

2009 PARTNER AND OF COUNSEL ANNOUNCEMENT

D. Gary Lovell, Jr.Partner, Atlanta and Charleston OfficesTrucking & Transportation LitigationHealth Care Litigation

404.221.2337 Atlanta843.266.8213 Charleston404.547.9573 Cellglovell@carlockcopeland.com

Carlock, Copeland and Stair is pleased to announce Renee Y. Little and Peter Werdesheim have been named Partners in the Atlanta office. Additionally, Kim M. Ruder and Ann H. Bracco have been named Of Counsel.

liability and commercial transactions. She received her J.D. from The University of Georgia School of Law, and her B.A. in Political Science and English Composition from DePauw University.

subpoena-compliance issues. In his real estate litigation practice, he is often called upon to help resolve disputes involving title insurance and mortgage fraud. He received his J.D. from The University of Georgia School of Law, and his B.S. from The University of Florida.

and in the defense of employment discrimination and harassment litigation. She received her J.D. from Mercer University Walter F. George School of Law, and her B.A. from The University of Florida.

all of which have been affirmed on appeal. Ann also handles the defense of serious injury and wrongful death actions. She received her J.D. from New York Law School, and her B.A. from Western Maryland College.

1) Clearly define and articulate the duty of care, if any, that your client owes the plaintiff.

2) Use reputable experts to bolster the argument of the duty of care owed. These experts are particularly useful if the plaintiff is trying to impute liability of another to your client. Your expert can provide supportive testimony that your client is not responsible for someone else’s acts or omissions. Additionally, your expert can help to define your client’s role and responsibility.

3) If possible, find a way to distinguish the involvement and conduct of your client without confusing his/her involvement with that of other co-defendants and muddying the defense water. 4) Be careful that in defending your client you do not do anything to promote the plaintiff’s team approach/system failure theme. Carefully preparing your client to respond to questions about known policies and procedures will help you to avoid this pitfall.

5) Make sure your client is prepared to deal with questions on cross examination that will diffuse the team approach to liability.

Overall, you are charged with the responsibility of representing the best interest of your client. While you don’t want to point fingers at other co-defendants because this does not encourage a cooperative defense at trial, you must be aware of the nuisances that plaintiffs may infuse in the case that might get your client caught in the plaintiff’s “team” net

*The Voice is a Newsletter published regularly by the Defense Research Institute.

specialties that also see and treat the patient and oftentimes a healthcare entity. In this same context, one or more of the defendant physicians may be liable for an injury to the plaintiff but the admitting physician is called the “Captain of the Ship” and the plaintiff will argue a system failure to include this captain so that all of the defendants go down with the ship.

However, courts have rejected the notion that a physician is liable under the doctrine of respondeat superior for the negligence of another physician, over whom that physician has no right to exercise supervision and control, reasoning that these independent specialists are in charge of themselves.

The system failure argument is also seen in the premises liability arena. For example, in apartment shooting cases, plaintiffs argue the team approach by making joint allegations of liability against the apartment complex owner, security company, security system manufacturer, and any involved personnel.

The team approach can be appealing to a jury of lay people because it is an easy concept to grasp that those who are supposed to be part of a “team,” be it medical professionals at a hospital or employees, owners, and security at an apartment complex, had joint responsibility as a team to keep the plaintiff from harm.

NO SYSTEM FAILURE HEREOverall, the best way to combat the system failure argument that the “team” failed the plaintiff is to dismantle the argument. Here are some helpful tips:

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Asha F. JacksonPartner, Atlanta OfficeHealth Care LitigationGeneral LiabilityCommercial Litigation

404.221.2327ajackson@carlockcopeland.com

Every attorney needs a theme for his or her case, right?....

The theme will ultimately help the jury to reach a decision

during deliberations and if the theme is a “system failure,” you should be on guard because it could be your client who gets

caught in the fray.

Every attorney needs a theme for his or her case, right? After all, it’s the glue that holds the case together and gives the jury a way to bridge the law and the facts. The theme will ultimately help the jury to reach a decision during deliberations and if the theme is a “system failure,” you should be on guard because it could be your client who gets caught in the fray.

Most often, the system failure argument is used in cases where there are multiple defendants and the plaintiff is attempting to argue that there was a system in place, the defendants knew the system, and that ultimately the system failed. Plaintiff’s counsel will take the opportunity to highlight all of the bad facts in a case and particularly any facts that pertain to a breakdown in communication, failure to comply with a policy, or procedure gone wrong to make a case of liability against all of the defendants. BEWARE of this tactic.

Plaintiffs can often make defendants look like they are “part of the system” either because they were present when an alleged incident occurred, or because they have some level of knowledge which the plaintiff will argue should have prevented the incident from occurring. Being present or having requisite knowledge alone does not necessarily mean that the individual defendant is subject to liability. Increasingly, when there are multiple defendants at the defense table, Plaintiffs have argued that the defendants were a “team,” that the “team” failed, and therefore, the “system failed” which makes the path to a finding of liability against all of the defendants very easy.

For example, this is often seen in the context of medical malpractice lawsuits where an admitting physician stands trial with multiple defendant physicians of various

Beware of System Failure: A Common Theme for Plaintiffs

Who Want to Blurry the Line of Liability

Originally Published in The Voice - November 12, 2008*

By Asha F. Jackson

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Adam Appel, Partneraappel@carlockcopeland.com

Sarah Redwine, Marketing Managersredwine@carlockcopeland.com

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