Prande v. Bell

ALPERT, Judge. In this case of first impression, we are asked to decide whether an attorney may be held liable for malpractice because of allegedly inadequate settlements of personal injury claims. On September 21, 1993, Luisa Prande, appellant, filed a complaint in the Circuit Court for Montgomery County, alleging legal malpractice against John T. Bell and Elbert R. Shore, appellees. The alleged malpractice arose out of two personal injury lawsuits in which appellees had represented appellant as her attorneys.

Appellees filed a general denial answer, raising several affirmative defenses. On February 7, 1994, appellant filed an Amended Complaint, naming the law firm of Bell, Cornelius & Shore and Frank S. Cornelius, a partner in the firm, as additional party defendants. On March 31, 1994, appellees Bell and Shore ⁶⁴⁰ filed a motion for summary judgment. Appellee Cornelius filed his own motion for summary judgment on May 10, 1994, including therewith an affidavit indicating that he had withdrawn from the partnership prior to some of the acts alleged to be malpractice.

The circuit court held a hearing on both motions for summary judgment on July 21, 1994. Both motions were granted and summary judgment was entered in favor of appellees. This appeal followed, wherein appellant asks this Court to address the following three issues: I. Whether the trial court erred in ruling that appellant was barred by the doctrine of collateral estoppel from suing her previous attorneys for legal malpractice in two personal injury cases, due to appellant’s having signed a release upon settlement of the first such case and her failure to contest an alleged settlement of her second personal injury claim.

II

Whether the trial court erred in ruling that appellee Cornelius cannot be held liable for the alleged negligence of his partners because he withdrew from the partnership after one incident of alleged negligence but before the second incident.

III

Whether appellant’s Amended Complaint is barred by the applicable statute of limitations whe[n] one of the two acts of alleged malpractice occurred more than three years before the filing of the Amended Complaint, but the Amended Complaint was filed less than three years after appellant discovered the basis for her cause of action. We hold that the trial court erred in finding that appellant was collaterally estopped from bringing her legal malpractice claim and in granting summary judgment for appellee Cornelius based on the statute of limitations. Facts and Proceedings On April 24, 1988, in Gaithersburg, Maryland, appellant was involved in a motor vehicle accident with Susan Spillman (the ⁶⁴¹ “Spillman accident”). Appellant retained John T. Bell and the firm of Bell, Cornelius & Shore to represent her in her claim against Ms. Spillman for personal injuries and damages arising out of this accident.

Appellant claimed that the accident was solely and exclusively due to Ms. Spillman’s negligence and that she was not in any way contributorily negligent. She also alleged that, as a direct and proximate result of the Spillman accident, she suffered permanent and extensive injuries, including a severely ruptured disc in her neck for which she underwent surgery on April 2, 1990. In addition, appellant claimed loss of income and pain and suffering. On September 26, 1988, appellant was involved in another automobile accident in Montgomery County, this time with Lance J. Wishart (the “Wishart accident”).

On December 7, 1988, appellant entered into another agreement with John T. Bell and the firm of Bell, Cornelius & Shore, for representation in her case against Wishart for personal injuries and damages resulting from the accident. Appellant contended that Mr. Wishart was solely and exclusively negligent and that she was not in any way contributorily negligent in the accident. She further alleged that, as a direct and proximate result of the accident, she suffered an exacerbation of the injuries she received in the Spillman accident, as well as additional pain and suffering and loss of income. The firm filed suit against Wishart in the District Court of Maryland for Montgomery County on appellant’s behalf in June, 1989. 1 The case against Wishart was subsequently refiled in the Circuit Court for Montgomery County, case # 65298, and trial was set for May 26, 1992.

In August, 1989, the firm filed suit on appellant’s behalf in the Circuit Court for Montgomery County against Spillman. 2 Trial was scheduled for September 25, 1990. Elbert R. Shore handled both of appellant’s cases for the firm. ⁶⁴² Prior to the scheduled trial date for the Spillman accident, Shore advised appellant that she should settle her claim for $7,500. At that time, Ms. Prande’s total medical bills exceeded $20,000 and she had continuing symptoms for which the doctors had recommended additional surgery. According to an affidavit filed by Shore, he recommended this settlement based on his consultation with Dr. Bernard Stopak, appellant’s doctor, about the nature and cause of her injuries.

Dr. Stopak had examined Ms. Prande in March of 1990, and had filed a report stating that she told him she had experienced neck and arm pain after the Spillman accident. The report also stated that Ms. Prande told him that she had been involved in another accident three months after the Spillman accident, but that she had not sought medical attention for that accident. According to Dr. Stopak, Ms. Prande told him that her injuries were incurred in the Spillman accident; she had not suffered any injuries in the Wishart accident. Based on this information he received from Ms. Prande, Dr. Stopak was prepared to testify that the Spillman accident had more likely than not caused Ms. Prande’s neck injuries.

During her deposition taken in the case against Spillman, Ms. Prande admitted that the Wishart accident had not worsened her condition. She further stated that Dr. Nichols, her chiropractor, had told her that the Wishart accident did not cause any aggravation of her condition. Additionally, Ms. Prande told Dr. Ramon Jenkins, a physician who examined her at the request of Spillman’s attorney, that as a result of the Wishart accident, “My nerves were wrought, I was not hurt.” Despite these statements that she was not injured in the Wishart accident, Ms. Prande informed Dr. Nichols that she had in fact been injured in the Wishart accident. Once Shore made Dr. Stopak aware of this information, Dr. Stopak relayed that he could no longer testify on Ms. Prande’s behalf.

Dr. Stopak said he could not now testify to a reasonable degree of medical probability that the Spillman accident caused the injuries because his previous opinion had been based on the belief that Ms. Prande had not been injured in the Wishart accident. ⁶⁴³ In Shore’s opinion, without Dr. Stopak’s testimony and given Ms. Prande’s inconsistent statements concerning which accident caused her injuries, there were severe problems in establishing liability against Spillman for her injuries. Shore stated in his affidavit: Without Dr. Stopak’s testimony Ms. Prande did not have expert testimony that her neck injuries were proximately caused by the Spillman accident. In addition, I felt that Ms. Prande’s credibility was severely undermined by her conflicting statements as to whether she had been hurt in the [Wishart] accident. The physical evidence did not help either—the accident had occurred in a condominium drive way [sic] at moderate (15-25 mph) speed.

Finally, causation and damages was [sic] further complicated because Ms. Prande had been involved in a third automobile accident in August of 1990. Based on this, Shore concluded that Ms. Prande’s case with respect to liability was weak, and he recommended that she settle her claim for $7,500. In reliance on Shore’s advice that she had no other choice, Ms. Prande agreed to settle her claim against Spillman. 3 ⁶⁴⁴ On March 26, 1992, Shore advised Ms. Prande to settle her suit against Wishart for $3,000. At that time, appellant’s hospital and medical expenses were reaching $30,000 and she needed additional surgery.

Shore’s recommendation was based on the fact that Ms. Prande had already testified under oath in the Spillman case that she suffered no injury in the Wishart accident. Further, she testified at the deposition that she suffered her neck injuries in the Spillman accident, so it would have been difficult to prove that the injuries had been caused by the Wishart accident. Additionally, liability was contested by Wishart and Ms. Prande had even testified that Wishart had the green arrow when he struck her car and that she had entered the intersection under a yellow light. This, coupled with the fact that there were no witnesses to support Ms. Prande’s claim that Wishart had been negligent, left Ms. Prande with a weak case for liability.

Finally, in contravention of her fee agreement, Ms. Prande refused to pay for either Dr. Nichols or Dr. Stopak to testify. In light of these facts, Shore felt that Ms. Prande’s chances at trial were slim. Thus, he recommended the settlement, and after discussing his concerns with Ms. Prande, Shore believed he had obtained her consent over the telephone to accept the offer of $3,000. Shore communicated Ms. Prande’s acceptance of the settlement to Wishart’s attorneys, but Ms. Prande subsequently refused to accept the settlement offer.

Wishart then filed a Motion to Enforce Settlement Agreement. This motion was accompanied by an affidavit by Shore in which he stated that Ms. Prande had authorized him to accept the settlement offer on her behalf. By letter dated May 1, 1992, Shore informed Ms. Prande of the motion and advised her that a hearing on the motion had been scheduled for May 19,1992 and that she should attend “in the event that you seek or wish to contest the matter of whether we had your authorization to accept a settlement. Please recall that you ⁶⁴⁵ did reconfirm with me in the presence of Mr. Bell that you had given us full authorization to settle the case for that figure.” Notwithstanding Ms. Prande’s receipt of this letter, she failed to appear at the hearing on May 19th to contest the Motion to Enforce Settlement Agreement.

The Circuit Court for Montgomery County granted the motion and dismissed with prejudice Ms. Prande’s lawsuit against Wishart. In August of 1993, Ms. Prande was unable to pay her hospital and medical bills and filed for bankruptcy. She was also unable to pay for additional medical treatment, including the additional surgery that her surgeons had recommended. Ms. Prande then filed a legal malpractice action against appellees Bell and Shore on September 22, 1993, alleging, inter alia, that during the course of their representation of plaintiff, ... defendants failed to exercise such reasonable and ordinary skill, care, and diligence as would be reasonably necessary to fulfill the objectives of their employment.

Specifically, defendants: ... negligently advised plaintiff to accept unreasonable and inadequate settlements of her claims arising out of the April and September accidents---- An Amended Complaint was filed on February 8,1994, wherein Frank Cornelius, a former member of the law firm, and the firm of Bell, Cornelius and Shore were added as defendants. Appellees Bell and Shore filed a motion for summary judgment on March 31, 1994, arguing that the doctrine of collateral estoppel barred Ms. Prande from relitigating the issue of whether she failed to receive an adequate settlement in the Wishart and Spillman claims. Appellee Cornelius also moved for summary judgment on collateral estoppel grounds, and argued additionally that Ms. Prande’s claims against him were barred by the statute of limitations, since suit was filed against him more than four years after the date of the alleged malpractice. Further, Cornelius contended that he could not be held liable for any negligence resulting from the Wishart suit because he had withdrawn from the firm prior to the occurrence of any alleged negligence in that action. ⁶⁴⁶ On July 21, 1994, the parties presented oral argument on the summary judgment motions.

Shore and Bell argued that the doctrine of nonmutual collateral estoppel prevented Ms. Prande from relitigating the value of her claim and the question of Shore’s authority to settle the suit. Cornelius argued that the statute of limitations and his withdrawal from the firm barred suit against him. The circuit court granted all of the defendants’ summary judgment motions, stating: For the reasons set forth and argued by the defendants and the case law as I understand it, Pm going to grant all the motions for summary judgment. I believe that the plaintiff knowingly and voluntarily agreed to settle her first case.

She signed a release, dismissed her case, got the money, and in the second accident there was some dispute about it. She was offered an opportunity to appear in Court for a hearing. She choose [sic] not to appear. * * * * * * ... [S]he wants to relitigate the matters that have already been decided and resolved, and I agree that the principle of peril [sic] evidence does apply; otherwise, we would never have an end to litigation. People could just raise the issue of duress, and it would send our system into choas [sic].

So I think that her action was filed belatedly, and ... from the evidence and the file that’s reflected here, she knew what she was doing at the time she was doing it. This appeal followed. Nonmutual Collateral Estoppel The first issue raised by appellant is whether the trial court erred in ruling that appellant was barred by the doctrine of collateral estoppel from suing her previous attorneys for legal malpractice in two personal injury cases. We hold that the trial court did err in finding that nonmutual collateral estoppel precluded appellant from suing her attorneys in this case. ⁶⁴⁷ The doctrine of nonmutual collateral estoppel has been discussed at length by the Court of Appeals in two cases: Leeds Fed. Savings & Loan Ass’n v. Metcalf, 332 Md. 107 , 630 A.2d 245 (1993) and Welsh v. Gerber Products, Inc., 315 Md. 510 , 555 A.2d 486 (1989).

Nonmutual collateral estoppel can be invoked either offensively or defensively. Welsh, 315 Md. at 517 -18 n. 6, 555 A.2d 486 . It is used defensively when a defendant seeks to prevent a plaintiff from relitigating an issue which the plaintiff previously litigated unsuccessfully in another action against a different party. 4 Id. In the case sub judice, appellees, lawyers being sued for malpractice, invoked the doctrine of nonmutual collateral estoppel defensively.

They argued that, by settling the Spillman case and having a default judgment entered against her in the Wishart case, Ms. Prande is estopped from now claiming that she did not receive full compensation for the value of both claims and that she did not agree to the Wishart settlement or authorize Shore to accept it on her behalf. Maryland law provides a four-part test for the application of the doctrine of nonmutual collateral estoppel: 1. Was the issue decided in the prior adjudication identical with the one presented in the action in question? 2. Was there a final judgment on the merits? 3.

Was the party against whom the plea is asserted a party or in privity with a party to the prior adjudication? 4. Was the party against whom the plea is asserted given a fair opportunity to be heard on the issue? Leeds, 332 Md. at 117-18 , 630 A.2d 245 (quoting Washington Suburban Sanitary Comm’n v. TKU Assocs., 281 Md. 1, 18-19 , 376 A.2d 505 (1977)). All four elements must be answered in the affirmative in order for nonmutual collateral estoppel to bar a subsequent claim.

As the Court of Appeals noted in ⁶⁴⁸ Welsh, 315 Md. at 517 , 555 A.2d 486 , “there are many situations where application of the doctrine of nonmutual collateral estoppel would be manifestly unfair.” There have been no cases in Maryland wherein a defendant in a legal malpractice action has sought to invoke the doctrine of nonmutual collateral estoppel defensively, although our research has uncovered such cases from other jurisdictions. These jurisdictions have addressed the issue of whether collateral estoppel bars a client from bringing action against former counsel for legal malpractice allegedly committed with respect to an underlying action when the client settled the underlying action with the original defendant. In Cohen v. Lipsig, 92 A.D.2d 536 , 459 N.Y.S.2d 98 (1983), a New York intermediate appellate court held that a cause of action for legal malpractice was viable despite the plaintiffs settlement of the underlying action where the settlement was compelled because of mistakes made by plaintiffs former counsel. 5 See also Titsworth v. Mondo, 95 Misc.2d 233 , 407 N.Y.S.2d 793, 797-98 (Sup.Ct.1978) (holding that a client is not precluded from bringing a malpractice action even though the personal injury claims were settled and a general release was executed); Becker v. Julien, Blitz & Schlesinger, P.C., 95 Misc.2d 64 , 406 N.Y.S.2d 412, 413 (Sup.Ct.1977) (holding that a malpractice action brought against attorneys on theory that the settlement reached in the contract action was improvidently made due to attorneys’ malpractice was not barred due to plaintiffs voluntary agreement to enter into stipulation of settlement). ⁶⁴⁹ In addition to the New York courts, other jurisdictions have also held that collateral estoppel is not a bar to a legal malpractice action against an attorney who handled an earlier settlement. In Ziegelheim v. Apollo, 128 N.J. 250 , 607 A.2d 1298 (1992), the Supreme Court of New Jersey held that a dissatisfied litigant may recover from an attorney for malpractice in negotiating a settlement which the client has accepted, even in the absence of a showing of actual fraud.

In Ziegelheim , the client voluntarily accepted a property settlement and later asserted that her attorney’s advice was incompetent and she would not have accepted the settlement had she been advised competently. Id. 607 A.2d at 1301 . The court held that the lawyer could not use the fact that the client knowingly accepted the settlement to collaterally estop her from pursuing the legal malpractice action. Id. 607 A.2d at 1305 .

Because “[t]he earlier ruling did not implicate the competence of counsel and, indeed, was premised on the presumptive competence of counsel[,] ... defendant [could not] invoke that ruling now to bar a challenge to his competence.” Id. 607 A.2d at 1306 . In Lowman v. Karp, 190 Mich.App. 448 , 476 N.W.2d 428 (1991), the Court of Appeals of Michigan held that a plaintiff who signed a settlement agreement and release in an earlier action was not precluded from bringing a legal malpractice case in which she maintained that her attorney intimidated and coerced her into signing the settlement agreement. Id. 476 N.W.2d at 429 . Similarly, in Cook v. Connolly, 366 N.W.2d 287, 289 (Minn.1985), a client sued her attorney for obtaining an inadequate personal injury settlement.

The Supreme Court of Minnesota held that, even though the client settled her claim in the prior personal injury action, litigation of a legal malpractice suit against the attorney who represented her in that earlier action was not barred by collateral estoppel. Id. at 290 . The court explained that the issue raised in the pending litigation was not the same issue that was adjudicated in the prior proceeding, and the party sought to be estopped did not have a full and fair opportunity to litigate the issue in the prior proceeding. Id. ⁶⁵⁰ The Supreme Court of Oregon also recognized that a release signed in a personal injury action did not preclude a plaintiff from pursuing a legal malpractice claim against the attorneys who represented her in that claim.

King v. Jones, 258 Or. 468, 483 P.2d 815, 818 (1971). Courts in Alabama, Connecticut, Florida, Illinois, Louisiana, Massachusetts, and Missouri have also held that a client is not barred from pursuing a legal malpractice claim when the plaintiff settled the underlying claim. See Grayson v. Wofsey, Rosen, Kweskin and Kuriansky, 231 Conn. 168 , 646 A.2d 195 (1994); Baldridge v. Lacks, 883 S.W.2d 947 (Mo.Ct.App.1994); McCarthy v. Pedersen & Houpt, 250 Ill.App.3d 166 , 190 Ill.Dec. 228 , 621 N.E.2d 97 , appeal denied, 153 Ill.2d 561 , 191 Ill.Dec. 621 , 624 N.E.2d 809 (1993); Bill Branch Chevrolet, Inc. v. Burnett, 555 So.2d 455 (Fla.Dist.Ct.App.1990); Braud v. New England Ins. Co., 534 So.2d 13 (La.Ct.App.1988); Fishman v. Brooks, 396 Mass. 643 , 487 N.E.2d 1377 (1986); Edmondson v. Dressman, 469 So.2d 571 (Ala.1985).

The Supreme Court of Pennsylvania has held that a legal malpractice action was not barred by collateral estoppel even when the underlying action was settled, because the issue in the underlying action was whether the settlement had been authorized but the issue in the legal malpractice case was whether the attorneys were negligent and/or deceitful in their representation. Muhammad v. Strassburger, McKenna, Messer, Shilobod and Gutnick, 526 Pa. 541 , 587 A.2d 1346, 1348 , reh’g denied, 528 Pa. 345 , 598 A.2d 27 , cert. denied, 502 U.S. 867 , 112 S.Ct. 196 , 116 L.Ed.2d 156 (1991). Thus, there were issues in the legal malpractice claim that were not litigated in the previous action. Id.

Even though the action was not barred by collateral estoppel, because of the state’s longstanding public policy encouraging settlements, the court held that a dissatisfied plaintiff could not sue his attorney for malpractice following a settlement to which the plaintiff agreed, unless the plaintiff could show that he was fraudulently induced to settle the original action. Id. That view has been expressly rejected by courts in Connecticut, Missouri, and New Jersey. ⁶⁵¹ Baldridge, 883 S.W.2d at 952 ; Grayson, 646 A.2d at 199 ; Ziegelheim, 607 A.2d at 1304 . In Irby v. Richardson, 278 S.C. 484 , 298 S.E.2d 452 (1982), the Supreme Court of South Carolina addressed the circumstances under which collateral estoppel bars a client from a subsequent legal malpractice suit.

The court held that “[wjhere the plaintiff has had a full and fair opportunity to litigate the question of an attorney’s negligence or effectiveness in a particular case, he should be collaterally estopped to adjudicate the same issue in a subsequent legal malpractice action.” Id. 298 S.E.2d at 454 . In Irby , an earlier proceeding in family court resulted in Mrs. Irby being granted an absolute divorce, custody of the two children, and child support. Id. 298 S.E.2d at 453 . The family court judge indicated that the parties had consented to the wife having custody of the children.

Id. Mr. Irby obtained different counsel to file a motion and petition for a reopening of his child custody case, alleging that he did not understand that he had waived his right to contest the child custody issue when he did not contest the divorce. His petition was denied, the family court finding that appellant was aware that he had waived his right to contest the child custody issue. That order was upheld on appeal.

Mr. Irby also petitioned the family court for custody of his children on seven other occasions, retaining at least six different attorneys and appearing before three different family court judges. All of these petitions were either denied or no order was issued. Mr. Irby then filed a legal malpractice action, alleging that the attorney “willfully failed to prepare his case and forced him to settle a divorce proceeding in which his wife obtained custody of the[ir] two children and a child support award.” Id. 298 S.E.2d at 453 . The trial