When is client’s instruction or position in prior proceeding a defense to a legal malpractice claim?

by Christopher Graham and Joseph Kelly

Illinois

You’re an attorney. Successful groom asks you to draft a pre-nuptial agreement. He likes bride. But he wants protection – just in case. Groom sends you a “basic framework”: in a divorce, wife gets $100,000/year for seven years, 50% of the value of primary residence, and 50% of marital assets; but she doesn’t get groom’s many pre-marital assets. You draft agreement according to framework. Bride and groom acknowledge terms are reasonable and voluntary assent. Bride consults her lawyer. Bride and groom sign. They get married. And they live happily ever after.

Not quite. Just over three years after the honeymoon wife sues for divorce. She pulls out her pre-nuptial and says, “We had a deal. No kids either. So this should be easy.”

Husband says to wife, “Not so fast.” And he says to you, “You mean I have to pay her $100,000 per year for seven years? Plus give her half the value of our house and half of the marital assets? And all of that just for a little over three years of not-so-wedded-bliss?” You say, “Well that’s what the agreement says. And you gave me the ‘framework,’ remember?”

Husband hires new lawyer. Husband challenges the validity of the pre-nuptial agreement. Wife seeks a declaratory judgment that agreement is enforceable.

Husband testifies by deposition. He says wife entered into the agreement in bad faith. She did not uphold her “side of the bargain” (Curious what that “side” was – but no details in opinion!) He was under extreme emotional distress when he signed. And the agreement resulted from fraud. But he doesn’t raise your negligence.

Eventually husband and wife settle. Both waive any maintenance claim. Husband pays wife $500,000 and $15,000 toward her lawyer fees. Wife gets the marital assets. The pre-nuptial agreement is revoked. Husband testifies at prove-up hearing that the settlement resolves all issues, he’s satisfied with and understands the terms, and they’re fair and equitable. The court enters a judgment dissolving the marriage.

Then husband sets his sights on you. A few months after the divorce judgment he sues you. You should’ve told him that signing the agreement was bad news! What kind of lawyer would let a guy agree to pay his wife $100 G’s for 7 years if they’re only married for a year or even 3 years? Not to mention the half the house and half the marital assets part of the deal. You should have raised adjusting the pay-out depending on duration of marriage.

You say you followed his instructions from his detailed framework. He’s a sophisticated guy. You’re entitled to rely on them. This is unfair. He’s equitably estopped from suing you for malpractice.

You also say in the pre-nuptial agreement he acknowledged the terms were reasonable and understood. He also acknowledged the divorce settlement and judgment were reasonable. And he failed to raise your alleged negligence in the divorce action. So he’s “judicially estopped” from claiming your negligence.

You also say it’s too late to sue. Wife sued for divorce in late 2008. He started his malpractice case in Spring 2011. There’s a two-year limitations period for suing Illinois lawyers. We’re done!

That sort of scenario generally played out in Palmich v. Kirsner, et al, 2014 IL App (1st) 122230-U (Jan. 21, 2014). Who wins?

Well, the trial court citing “judicial estoppel” said attorney wins. But the appeals court had another idea. And it’s not over yet. But client gets a chance to prove his case.

According to the appeals court, that client provided attorney the “basic framework” and signed the agreement didn’t mean attorney was off the hook. Nor did it matter that client failed to raise counsel’s negligence in the divorce action and agreed to a divorce settlement and judgment.

The “framework” didn’t negate any duty attorney had to advise client about the consequences of entering into the pre-nuptial agreement. Nor did client’s assent to the agreement bear on whether attorney fully advised client about whether the agreement as drafted was proper. Nor, as required for judicial estoppel, was the “framework” or client’s assent to the agreement a position taken in “judicial or quasi-judicial proceedings.”

Nor was client’s deposition testimony in the divorce proceeding, about why the agreement was invalid, totally inconsistent with client’s malpractice claim, as required for judicial estoppel. In the divorce action, client didn’t identify counsel’s negligence as a ground for invalidating the pre-nuptial agreement. But client also didn’t testify counsel properly advised him. So client said nothing in the divorce case that was inconsistent with claiming attorney malpractice in the malpractice case. It wasn’t even clear client knew of counsel’s “negligence” until after the divorce proceeding. Nor, in any event, was counsel negligence a legally sufficient ground for invalidating the agreement.

That client agreed to the divorce settlement and judgment including in his prove-up testimony didn’t judicially estop client from suing attorney for malpractice either. Judicial estoppel doesn’t apply because there was nothing inconsistent about client agreeing to the settlement and judgment and then claiming malpractice by counsel in failing to advise him properly about the pre-nuptial agreement.

This isn’t a case like Larson v. O’Donnell, 361 Ill. App. 3d 388 (1st Dist. 2005), overruled on other grounds by Vision Point of Sales, Inc. v. Haas, 226 Ill. 2d 334, 352 (2007), where husband was judicially estopped from claiming malpractice by attorney in misinforming him about obligations under a marital settlement agreement. Husband testified in the divorce proceeding that he understood his obligations under that agreement. In the malpractice case he claimed the opposite. So his positions in the malpractice and divorce cases were totally inconsistent. Judicial estoppel thus applied.

That client provided attorney the agreement framework also didn’t mean counsel escapes liability under an equitable estoppel defense. “To say that any duty [counsel] owed [client] in the course of his legal representation could be obviated by [client] detailing his wishes in the ‘basic framework’ document, would reduce [counsel’s] role to merely that of a scribe.”

That client sued counsel for malpractice more than two years after wife sued client for divorce didn’t matter either. Per the court, the malpractice limitations period began only upon the divorce judgment, just months before the malpractice suit. “[Wife’s] filing of the underlying divorce action in November 2008 was insufficient to compel a finding that [client] knew or should have known of [attorney’s] purported negligence at that time.”

Finally, that client’s allegations of duty, proximate cause, and damages were general didn’t mean client failed to allege a legally sufficient claim. The general allegation of duty was enough, though “barely” so:

[Client] specifically pled a general duty in that “[attorney] was required to exercise a reasonable degree of care and skill in the representation of his client.” Taking the allegation as true and viewing it in a light most favorable to [client], we find that the general element of duty was sufficiently pled. Thus, dismissal with prejudice was erroneous. By acknowledging that [client] sufficiently pled the existence of a general duty, we make no finding regarding the existence of a specific duty related to the duration of marriage. That determination will be made after the parties have been put to their proofs.

The allegations of proximate cause and damages similarly were “minimally sufficient”–but that was enough.

The appeals court decision may not be cited as precedent except in very limited circumstances. But it does include some useful lessons. There may be circumstances where a client can’t pursue a malpractice claim because of an inconsistent position in an earlier proceeding. But this wasn’t that circumstance. And just because a client provides drafting instructions, an attorney can’t simply follow them and expect he or she has nothing further to do. This client was unhappy because he thought his lawyer should have explained the consequences of this pre-nuptial agreement more thoroughly including other options. We don’t know the outcome. But if there’s a reasonable alternative option, it’s best to make sure the client knows about it.

Tags: Illinois, pre-nuptial agreement, family law, divorce, settlement agreement, legal malpractice, attorney malpractice, judicial estoppel, equitable estoppel, statute of limitations, duty, pleading duty, pleading proximate cause, 2-615, 2-619

Category: Lawyers Malpractice Digest Comment »


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