Virginia Legal Malpractice:  The burden of proving non-collectibility is on negligent attorney

In Shevlin Smith v. McLaughlin, the Virginia Supreme Court considered the issues of: (1) whether an attorney breaches the duty to a client by failing to correctly anticipate a judicial ruling on an unsettled legal issue; (2) whether collectibility is relevant to a legal malpractice claim when the alleged injury is the loss of an otherwise viable claim; and (3) whether non-pecuniary damages are recoverable in a legal malpractice claim.

Among other things, the Court held that the burden of proving that a judgment in the underlying case would have been uncollectible is on the negligent attorney.

This case involve an allegation of legal malpractice in an underlying legal malpractice claim, which in turn arose from alleged malpractice in a criminal case.

The alleged malpractice in the original criminal matter was that the criminal defense attorneys negligently failed to obtain the taped interview of the alleged victims and compare those tapes with the inaccurate written transcripts used during the first criminal trial.  In that trial, the accused had been represented by two separate law firms.

The first criminal trial resulted in a conviction, and the accused served four years in prison before the conviction was overturned in a habeas proceeding.  After that, the accused was found not guilty in a second prosecution.

The accused hired the firm of Shevlin Smith to represent him in a criminal malpractice case.  Shevlin Smith negotiated a settlement and release with law firm #1 in order to settle the criminal malpractice claim against it. The release did not discharge the criminal malpractice claim against law firm # 2.

Four months later, a Virginia Supreme Court opinion was issued in an unrelated matter, Cox v. Geary.  Based on that decision, law firm # 2 filed a plea in bar, arguing that the criminal malpractice claim against it must be dismissed because under the new decision, the settlement and release of some co-defendants to the legal malpractice claim was a release of all co-defendants.  The trial court agreed, and sustained law firm # 2's plea in bar.

The plaintiff then filed a second legal malpractice claim against Shevlin Smith, based on two theories of liability.  First that Shevlin Smith breached its duty be failing to foresee how the Court's holding in Cox v. Geary would impact the Release Agreement.  Second, that Shevlin Smith breached its duty to the plaintiff by failing to take various actions with respect to law firm # 1, and failing to fully advise the plaintiff about the alternative of refusing the settlement and continuing to proceed against law firm # 1.

Here, the court noted that since the alleged negligence occurred in a criminal proceeding, the legal malpractice plaintiff "must prove post-conviction relief and innocence entitling him to release."

Concerning the issue of judgmental immunity, the Virginia Supreme Court declined to adopt a per se judgmental immunity doctrine.  Instead, the Court held that, if an attorney exercises a reasonable degree of care, skill, and dispatch while acting in an unsettled area of the law, which is to be evaluated in the context of the state of the law at the time of the alleged negligence, then the attorney does not breach the duty owed to the client.  While this determination is ordinarily a question of fact for a jury, it becomes an issue of law when reasonable minds could not differ on the issue.

Further concerning the issue of whether collectability is relevant to a legal malpractice claim, the court held that collectibility is implicated when the injury claimed by the legal malpractice plaintiff is the loss of an otherwise viable claim.  That is, collectibility limits the measure of the legal malpractice plaintiff's damages as to how much the legal malpractice plaintiff could have actually recovered from the defendant in the underlying litigation, absent the attorney's negligence.

The client must prove that the attorney's negligence proximately caused the damages claimed.  As to who must prove that a judgment in the underlying case was collectible, the Court said the following:

"Consequently, collectibility is relevant because a legal malpractice plaintiff's damages for a lost claim can only be measured by the amount that could have actually been collected from the defendant in the underlying action in the absence of the attorney's negligence. Entry of judgment against the defendant in the underlying claim does not guarantee collection of the entire award. Instead, successfully prosecuting a claim to judgment is only half of the marathon that is redressing an injury in our judicial system. Once armed with a judgment, a plaintiff then has 20 years to collect that award . . ."

However, while collectibility is relevant, it is not an element of a legal malpractice plaintiff's prima facie case.  The Virginia Supreme Court held that "we do not place the burden on a legal malpractice plaintiff to also prove the value of the underlying judgment that he would have been able to collect absent the attorney's negligence."

Instead, Virginia joined the growing trend of jurisdictions that place the burden of pleading and disproving collectibility on the negligent attorney as an affirmative defense.

Finally, the court held that a plaintiff cannot recover non-pecuniary damages in a legal malpractice action. The question of what damages are recoverable in a legal malpractice claim is governed by Virginia law pertaining to what damages are recoverable in a breach of contract claim. Regardless of the foreseeability of non-pecuniary injury incident to a breach of contract, however, "[a]s a general rule, damages for breach of contracts are limited to the pecuniary loss sustained."

The "rule," then, is clear: "tort damages" — including non-pecuniary damages such as mental anguish, emotional distress, and humiliation — "are not recoverable for breach of contract."  As this principle holds true for all non-pecuniary, non-economic injury caused by the attorney's malpractice, such loss is not recoverable as damages in a legal malpractice claim.

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To discuss these holdings or the defense of a Virginia legal malpractice claim, contact Carol T. Stone of Jordan Coyne LLP at 703-246-0900.