Editor’s note: this post was originally published on 10/24/2016. It has been updated to reflect further developments.

Law360 reported that the Texas Supreme Court affirmed an appeals court’s dismissal of a legal malpractice claim against Am Law 200 member Andrews Kurth Kenyon LLP, whose clients incurred a $3 million judgment in a suit filed by the sellers of a home health care agency that they purchased.

Background

According to the appeals court’s decision and a synopsis of the malpractice complaint, entitled Rogers v. Zanetti, James Rogers hired Andrews Kurth attorney Victor Zanetti to represent him in his acquisition of 80% of Accent Home Health from its owners, Daniel and Leslie Alexander.

After the deal concluded, Rogers was added as a signatory to Accent’s bank account, and opened new bank accounts for Accent. Further, his colleague and co-plaintiff, William Burmeisterer, handled Accent’s accounts payable.

A dispute soon arose between Rogers/Burmeister and the Alexanders, who alleged that Rogers had misallocated funds from Accent’s bank account. The Alexanders sued to void the Investment Agreement as unconscionable, unenforceable, illusory and void, and also brought claims for fraud and breach of fiduciary duty.

Rogers/Burmeister asked Attorney Zanetti to refer them to a lawyer to defend them; he recommended his colleague, Charles Perry, of Andrews Kurth, who accepted the case.

The matter was tried in 2004. The jury found that the Rogers/Burmeister defendants had committed fraud and breached their fiduciary duties, and awarded the Alexanders over $3 million in damages. Further, the trial court ruled that the Investment Agreement was void.

The defendants appealed the judgment, and the Dallas 5th Court of Appeals affirmed.

Malpractice Complaint

Texas Lawyer reported  that in 2012 – eight years after the trial – the Rogers/Burmeister defendants sued Andrews Kurth, and attorneys Zanetti and Perry for negligence and breach of fiduciary.

Their counsel stated that his clients had paid the Alexanders’ about $100,000 of the judgment, which by then had increased to about $5 million.

The primary allegations against the Andrew Kurth defendants were::

• Zanetti had a fiduciary duty to recommend an outside lawyer, since the contract that he had drafted was at the center of the litigation, but instead recommended a co-worker, whose fiduciary duties were split between his clients and his firm. “This irreconcilable conflict of interest compromised the entire strategy for defending the case…Perry and Andrews Kurth LLP found themselves in the untenable position of choosing between defending the work product of Zanetti that had sparked the litigation and acting as zealous and competent advocates for the plaintiffs, who were the firm’s clients.”
• Perry didn’t hire an expert to counter the Alexanders’ expert’s valuation of their business, and thus failed to rebut their damages claim.
• Perry advised his clients to prepare documents detailing the services that they were providing to Accent, which were to be used in deposition, but he allegedly tried to “hoodwink” the court by pretending the documents were old invoices, rather than having been prepared for litigation purposes. Rogers was forced to pay $25,000 in sanctions when the court discovered the truth. (Following the sanction, Andrews Kurth suggested that their clients find new counsel, which they did.)
• Perry failed to tell his clients that he had received a $450,000 settlement offer from the Alexanders before trial, which “would have released the [Clients] from liability and given them control over Accent.”

Rogers/Burmeister seemed to believe that this was their strongest claim.

According to the Appeals court decision, they elicited deposition testimony from the Alexanders’ attorney (Marketos) that

“he sent a settlement demand to (Rogers/ Burmeister) soon after the (Alexanders)… filed (suit) and got no response. The record contains the settlement offer itself, which was dated August 6, 2003. The Alexanders offered to let Rogers continue using the Accent name and to execute mutual releases of all claims if Rogers paid them $450,000…Marketos said the demand was a “starting point,” but he could not remember how much authority he had to go below $450,000.

Rogers testified by affidavit that the Lawyers did not communicate the settlement offer to him and that he did not learn about it until 2013…

Rogers further said, “Had I known that I could have settled the case with the Alexanders and Pucci and received control of Accent for $450,000, I would have instructed my attorneys to negotiate the best possible resolution and release without incurring the time or expense of litigation.”

He also said that the Alexanders… made settlement demands of over a million dollars after the trial court sanctioned him.”

Law Firm Response

Andrew Kurth filed a motion for summary judgment that argued “(1) no evidence of causation, (2) collateral estoppel, (3) the unlawful-acts doctrine, (4) the statute of limitations, and (5) impermissible fracturing of negligence claims into fiduciary breach claims.”

The trial court granted the motion.

Appeals Court

Plaintiffs appealed, and the Fifth Court of Appeals upheld the lower court’s dismissal in June, 2015.

Regarding the settlement offer, the court ruled:

“…the clients contend that they would have avoided a much larger liability and acquired Accent as well if they had known about the settlement offer. For this to be true, they would have had to both reach a settlement and perform its term…But they adduced not evidence that they could pay the Alexanders $450,000, as the actual settlement offer demanded, or any lesser amount that the Alexanders would have accepted. Without such evidence, there is a fatal gap in the but for cause evidence.”

Supreme Court Appeal

Rogers/Burmeister appealed the dismissal to the Supreme Court, arguing that the lower courts erred by applying the “but for” legal malpractice causation evidence standard to their claims.

That standard requires that plaintiffs prove that they would have prevailed at trial “but for” their attorney’s alleged legal malpractice. Instead, plaintiffs argued that their claims should have been evaluated on the basis of whether the Andrew Kurth defendants’ alleged wrongdoing was a substantial factor in bringing about their complained-of injuries — not the “case within a case” test that asks whether the clients would have prevailed “but for” the firm’s alleged errors.

According to Texas Lawyer, Rogers/Burmeister’s lawyer said the review of the case — and whether the “but for” legal malpractice causation evidence should be applied to it — is important.

“The standard that should have been applied is the substantial factor causation test. It means I don’t have to prove I would have won this case, but the lawyer’s negligence was substantial in causing some quantifiable harm…Had the trial court and the Dallas Court of Appeals applied the correct standard, there is absolutely no question that this case should have been decided by a jury and not a court in a one-page order,” he said.

The Supreme Court accepted the case for review, and scheduled oral argument for Jan. 11, 2017.

Defendants Brief

Texas Lawyer reported Andrews Kurth argued in its Supreme Court brief, that its former clients reliance on the “substantial factor” causation standard should fail, and their alleged damages due to the lost settlement opportunity are “sheer speculation”.

“For example, there is no evidence in the summary judgment record that plaintiffs had the financial capacity or desire to settle the case at any amount — much less the (as of yet, hypothetical and unspecified) amount acceptable to Accent… Instead, plaintiffs ask the court to reverse summary judgment based on their sheer speculation that an agreement would have been reached. But plaintiffs’ assertions of ‘possibility, speculation, and surmise’ are ‘no evidence of causation’…Plaintiffs’ lost settlement opportunity thus fails as a matter of law.”

Further, because the investment agreement at issue was procured by fraud perpetrated by Rogers, one of the plaintiffs, and any negligence in drafting a contract is irrelevant if a party’s intentional fraud voids it.

Oral Argument

Andrews Kurth reiterated during oral argument before the Supreme Court that Rogers/Burmeister presented no proof that they would’ve accepted the Alexanders’ settlement offer, or had the money to pay it.

Thus, even if Andrews Kurth had breached its duty by not relaying the settlement offer, the plaintiffs didn’t prove that the case would’ve settled.

Supreme Court Ruling

The court concluded that the lower court had correctly pointed out there was no evidence in the record that Rogers could have paid the $450,000, or that the case would have settled for that amount.

“A plaintiff need not prove causation with absolute certainty, but the evidence must establish causation beyond mere possibility or speculation,” the court wrote, explaining it the appellate court didn’t err in applying the “but-for” causation to the malpractice allegations. “Moreover, the court did not err in affirming the summary judgment because Rogers’ summary-judgment evidence fails to raise a material fact issue as to the causation element of Rogers’ negligence claims.”

Rogers/Burmeister’ attorney said he was disappointed by the court’s ruling, and called it  a “giant step backwards for the rights of clients who are unfairly harmed by mistakes of their lawyers that easily could have been prevented.”

“The bottom line is this is a big victory for careless lawyers whose clear mistakes have harmed their clients at the expense of people who depend on lawyers for fair and honest legal services,” he said.

 

About the author: Curtis Cooper is Managing Principal of Lawyers Insurance Group, a legal malpractice insurance brokerage, whose mission is to obtain the best terms that are available in the market for every law firm. Apply on-line to obtain no-cost, no-obligation quotes from “A+”-rated insurers.

The Connecticut Law Tribune reported that a jury ruled in favor of the mother of a deceased young man, who sued the estate of the attorney  who allegedly mishandled her son’s medical malpractice claim.

Background

Peter Gonzalez, 25, sought medical attention from Med-Help, a walk-in center based in Bristol, CT in July, 2010.

He later was admitted to Bristol Hospital, and died from complications of a perforated appendix that had been left untreated.

His mother, Tina Gonzalez, retained Enfield, CT attorney David E. Marmelstein to file a medical malpractice claim, even though Marmelstein reportedly had little, if any experience handling such matters.

Marmelstein allegedly “failed to timely and properly investigate and prepare the medical negligence claim to comply with Connecticut legal requirements.” As a result, the two-year statute of limitation expired before suit was filed.

Marmelstein died of a heart attack in October 2013, about 14 months after the statute of limitations expired.

Lawsuit and Outcome

Tina Gonzalez sued Marmelstein’s estate in Hartford Superior Court.

A six-person jury deliberated for two hours, before finding in her favor.

She and Marmelstein’s estate had reached a confidential settlement agreement prior to trial, payment of which was presumably contingent on the jury ruling in her favor.

It’s not known if Marmelstein had a legal malpractice insurance policy that defended and indemnified his estate for this matter.

Reaction

Gonzalez’ attorney told the Connecticut Law Tribune “This was a very unique case…Legal malpractice is somewhat of a rare claim. But, underneath this is a case within a case. We actually had to put on two cases: medical malpractice and a legal malpractice case.”

He added that the jury agreed that Gonzalez would’ve won the medical malpractice case, if it went to trial, and that Marmelstein was at fault for not filing a claim prior to the statute of limitations expiring.

“He [Marmelstein] got involved in a case that would have been better served by another attorney.”

The attorney also stated that Tina Gonzalez “should not have had this drag on for six years without a resolution. The fact that this is over and there is closure to her son’s death is satisfying to her and the rest of her family.”

Comment

Risk Management Rule #1 for every attorney should be “don’t dabble” in cases that are outside of your area of expertise. This is especially true for litigated matters like this one, because it’s easy to miss an SOL, as happened here, or commit another error, due to lack of understanding of the relevant rules of civil procedure.

The Lawyer.com profile of attorney David E. Marmelstein of Enfield, CT, who’s likely the same attorney that handled this matter, lists his practice areas as Construction, Consumer Protection, Environmental Law, Mental Health, and Land Use & Zoning.

None of these are remotely related to medical malpractice, which is one of the most complex practice areas. These cases generally take a long time and great expense to litigate, and are difficult to win, even if the fact pattern favors the plaintiff. Firms that specialize in Plaintiff Med. Mal. cases are best equipped to handle them

Every attorney should recognize his or her limitations, and refer matters outside of their expertise to local counsel who’s competent in such matters. Such counsel will often pay a referral fee, especially for matters like this one, where the damages are significant.

Referral is thus in the best interests of the referring attorney and the client.  

Wrong Word in Contract Leads to $2M Malpractice Suit

Daily Report Online reported that Taylor English Duma, a 133-lawyer firm based in Atlanta, and one of its partners, have been sued for malpractice for allegedly mis-drafting a purchase agreement.

Background

Alpharetta, GA-based Opsolve, LLC provides support services to energy companies.

It agreed to purchase all of the stock of software company Enercom, in 2013. Taylor English partner Jeff Woodward represented OpSolve in the acquisition.

OpSolve claims that the agreed purchase price was Enercom’s 2013 revenue minus a guaranteed payment of $275,000, with the total payment capped at $730,000.

Enercom’s 2013 revenue was about $513,000, so under the agreed-upon formula, the purchase price should have been about $238,000.

However, OpSolve alleges that the agreement drafted by Woodward called for a purchase price of Enercom’s 2013 revenue plus $275,000, again capped at $730,000.

As a result, Enercom’s shareholders demanded $455,000 plus the guaranteed payment—a difference of $217,000. (It’s unclear where the $455,000 figure comes from: $513,000 + $275,000 =$788,000, which would be reduced to $730,000, per the cap. This is the amount Enercom should’ve demanded, if the contract was for revenues plus $275,000, adjusted for the cap).

Litigation

OpSolve alleges that “rather than admitting his negligence and mistake, (Woodward) instead chose to influence his client OpSolve in a manner which required OpSolve to pursue litigation,” against Enercom.

Enercom presented OpSolve with a demand letter, which was rejected, and then sued OpSolve in May 2014, in Fulton County Superior Court.

OpSolve’s defense strategies included that a “mutual mistake” was made by both parties in drafting the agreement, and that it contained “ambiguities” that should allow it to be reformed under Georgia law.

“Predictably, however, the litigation strategy was disastrous,” OpSolve claimed, and cost it “substantial and completely unnecessary legal fees on top of the additional amounts it already owed to Enercom under the clear and unambiguous terms” of the agreement.

OpSolve alleges that two other Taylor English partners, Patton and Weber, reviewed the agreement and Enercom’s demand letter at Woodward’s request; Woodward then advised OpSolve to reject it.

Three months later, Weber sent a memo to Patton, warning that Enercom’s court filings provided “ample support for their legal argument” that the purchase agreement was “unambiguous on its face.”

She also asked whether Enercom had “raised the issue” of Georgia’s frivolous litigation statute. “I think we need to be cautious of how we proceed given the arguments we are
attempting to raise potentially lack both legal and actual authority.”

A  few days later, Patton advised OpSolve’s managing partner via email, that “absent clear evidence” that Enercom “understood the deal the same way we did, we will not win” on the issue.

Patton also advised Woodward in a private email that, “At this point, my opinion is that we are throwing good money after bad” defending the case, and “allowing opposing counsel to run up their legal fees.”

OpSolve claims that Woodward never told it that his colleague Patton had recommended that OpSolve honor the agreement as written and get out of the suit, and that “Woodward persisted in the position that his work was correct and that OpSolve could prevail in the litigation, contrary to the advice” of his colleagues.

In October 2014, Enercom issued a settlement demand for $600,000: $455,000 owed under the contract plus $150,000 in attorney fees and expenses.

OpSolve rejected the demand on the advice of its counsel.

In September 2015, the Court granted Enercom summary judgment on all of its claims.

The parties then agreed to a mediation, at which the matter was settled.

OpSolve alleges that Woodward’s “disastrous” advice to litigate the matter threatened to drive it into bankruptcy.

Aftermath

OpSolve claims that Woodward emailed its managing partner Carr after the settlement, offering to “touch base tomorrow on how [Taylor English] can help with the costs.”

OpSolve then “communicated with [Taylor English] in an attempt to recoup their damages…However, despite Woodward’s tacit admission to committing malpractice and causing harm to OpSolve”, no assistance was forthcoming.

OpSolve’s malpractice counsel said that Taylor English neither offered assistance nor responded to his efforts to discuss the case. “They in essence forced this issue…They never offered anything. They never responded to the demand letter” that he sent in December, 2015.

Malpractice Claim

OpSolve sued Taylor English and Woodward in January, 2017 in Fulton County Superior Court, for legal malpractice, breach of fiduciary duty, breach of contract, and punitive damages, as well as a claim under a Georgia statute that permits the recovery of fees from a party that has been “stubbornly litigious”, and acted in bad faith.

OpSolve seeks more than $600,000 in damages on each of three counts, litigation expenses of at least $150,000, the disgorgement of more than $182,000 in fees it paid Taylor English, and punitive damages of more than $500,000.

Firm’s Response

Taylor English’s general counsel, John Gross said “We are confident that the legal work we provided to OpSolve far surpassed what it has alleged, and we intend to defend this baseless claim vigorously on behalf of our firm and our lawyers.”

Analysis

Assuming OpSolve’s allegations are correct, then there was an obvious risk management failure on Atty. Woodward’s part in not catching the error in the contract.

This wasn’t a misspelling, etc., so it’s not something that a proofreader would likely have caught. It was thus incumbent on Woodward, as the contract drafter, to review the document, and ensure that it reflected his intent.

Further, if he did make the mistake as alleged, he should’ve admitted it. Instead, he apparently compounded his error by not admitting it, and instead encouraging OpSolve to litigate Enercom’s lawsuit, and raise meritless defenses, i.e., “mutual mistake” and “ambiguities” in the contract.

On the other hand, Enercom’s attorney presumably reviewed the contract before Enercom signed it, and discovered the error. If so, wasn’t he or she ethically obligated to point it out? And if not obligated, how about doing it anyway, as a matter of honesty? Instead, Enercom appears to have played “gotcha” with OpSolve.

Also, Woodward’s colleague Patton emailed OpSolve’s managing partner that “absent clear evidence” that Enercom “understood the deal the same way we did, we will not win” on the issue. However, Enercom must have understood the deal the same way OpSolve did, i.e., the agreed-upon price was “revenues minus” , not “revenues plus”, otherwise, Woodward didn’t make a mistake, and there’d be no grounds to sue him for malpractice.

There presumably was a paper trail of emails, letters, phone call notes, contract drafts, etc., stating that the terms were ‘minus’, not ‘plus’. Why not use that to seek rescission of the contract, i.e., present it to the court in response to Enercom’s suit, as proof that the wording in the contract was due to a unilateral error by OpSolve’s counsel, and didn’t reflect the parties’ intent?

If the answer to that is that the courts are reluctant to void a contract due to one party’s mistake, especially when that party was represented by counsel, then Woodward and Taylor English should’ve advised OpSolve to pay Enercom before Enercom filed suit.

The firm should also have considered paying for its mistake, including involving its legal malpractice insurer, many of which offer pre-claim assistance to head off the possibility of a malpractice claim being filed.

By not doing those things, Taylor English invited a malpractice claim, and it got one.

Editor’s note: this post was originally published on 10/26/2015. It has been updated to reflect recent developments, and divided into three parts for easier reading. This is part I. Part II  Part III

In what may be the final chapter in a saga that has spanned more than 16 years and courts from New York to Minnesota, a Second Circuit appellate panel upheld a start-up’s $9 million legal malpractice verdict against an IP law firm, for failing to obtain a patent for the start-up’s ad-targeting technology.

I. Background

A. The Inventors

Peter Faulisi and Courtland Shakespeare, co-founders and principals of Protostorm, LLC, in New York City.

B. The Invention

An online game that required players to interact with simulated pages of advertisers’ websites that were placed in the game, in order to advance in game play. Players had to complete tasks, i.e., use tools to uncover hidden messages and “clean up” the pages, in return for which the advertiser would send them coupons or gifts.

The game enabled dynamic tracking of player activity, real-time delivery of targeted ads based on a player’s interaction with an advertiser’s simulated web pages, and tracking and reporting of those ads’ effectiveness.

By having players interact with sponsor content during game play, the game sought to overcome banner and static ads’ low click-through rates, and the fact that when players did click on ads, they left the host site.

C. The Attorneys 

• Duval & Stachenfeld (D&S) LLP, and John Ginley, corporate counsel to Protostorm.
• Kathy Worthington, a non-patent attorney said to be knowledgeable about IP matters.
• Antonelli, Terry, Stout & Krauss, LLP (ATS&K), an Arlington, VA IP law firm.
• Dale Hogue, Of Counsel to ATS&K, and later, a solo practitioner.

 D.  The Patent Application

Timeline

2000

February-March: Protostorm’s principals told D&S that they wanted to obtain a patent for their invention. John Ginley advised them to retain patent counsel, and referred them to Worthington, who they retained.

May: following an introduction by Worthington, the principals retained ATS&K and Dale Hogue. According to Peter Faulisi, “[n]o specific limits” on their roles were discussed. “We understood that…we would be relying primarily on Mr. Hogue and…ATS&K to prepare and file any patent applications and to oversee the process to completion”.

June 27th: Fred Bailey, associate at ATS&K, submitted the first provisional patent ap-plication to the USPTO. This enabled the principals to secure their priority as inventors, and gave them until 6/27/01 to submit a final application.

2001

April: attorney Worthington filed a second provisional patent application that covered new features of the invention.

May 8: she advised the principals and D&S that the final application was due on 6/27/01, and they would lose their 6/27/00 priority date if they missed it.

May 17: Hogue, who was no longer ‘of counsel’ to ATS&K, and had opened a solo prac-tice, signed a retainer with Protostorm stating that he would “perform the work necessary to prepare and file the application”, but “the application may be physically filed by” ATS&K.

Peter Faulisi testified that the retainer “simply reaffirmed (Protostorm’s) prior working relationship with Hogue and ATS&K”, with no change in ATS&K’s role.

June 20: Hogue emailed ATS&K the documents necessary to prepare the final patent application, and stated that Worthington would instruct ATS&K “separately on foreign filing”. He testified that he expected ATS&K to “prepare and file the application and prosecute it”, and believed that he had no further responsibilities.

June 21-22, 25: Worthington, upon instruction from D&S, told ATS&K to file an inter-national patent application under the Patent Cooperation Treaty (PCT), instead of a do-mestic application, and to designate every PCT signatory country for patent protection.

June 25: Attorney Bailey of ATS&K filed the final PCT patent application. The box next to every signatory country was checked, i.e., designated for patent protection, except for Mongolia, Zimbabwe, and the United States.

Bailey testified that he knew the US was meant to be included as one of the designated PCT jurisdictions, but didn’t recall whether he had checked if that had been done.

June 27: Bailey sent a copy of the completed PCT application “as filed” to attorneys Worthington, Hogue, and Ginley, and wrote “if any amendments are necessary, we’ll make them”. (Plaintiffs, Worthington, and D&S all stated that the application was missing the page that showed that the box for the United States had not been checked.)

July 2: Worthington emailed Protostorm’s principals that a filing for patent protection in Europe was due on 2/27/02, so they should decide which countries they want protection in.

July 23: the US Receiving Office, to which the patent application had been sent, notified ATS&K of two defects in it. One involved page numbers, which Bailey fixed. The other was that Protostorm hadn’t submitted a Power of Attorney (POA) form, appointing Fred Bailey or partner Carl Brundidge of ATS&K as its representative. Bailey obtained a 30-day extension for it to do so.

August 21-22: ATS&K sent the POA to Kathy Worthington, and she advised Protostorm’s principals and D&S of it, but said she wouldn’t do any more work on the matter until they paid her bill.

August 27: one of Protostorm’s principals signed the POA, and returned it to ATS&K, although the firm claimed that it never received it.

September 25: attorney Brundidge of ATS&K emailed Worthington “we can not perform any further work for Protostorm” until it pays its bill.

October 1: Brundidge wrote to Protostorm’s principals and D&S that the POA was “now due”, and if it wasn’t provided, the “application will become ABANDONED”. Further, be-cause ATS&K hadn’t received the POA and hadn’t been paid, “no further action will be taken” on the matter. Peter Faulisi testified that he didn’t see the letter until June, 2007.

December 11-12: Protostorm’s principals called Brundidge and Hogue, and sent a second POA to ATS&K. They testified that they were told their application was fine otherwise, and the attorneys would handle any further administrative details that arose. ATS&K later claimed that it never received the POA.

Late December: the principals ceased operations and closed Protostorm’s office, pend-ing further developments with their patent application, which their attorneys had said would take several years to process. However, they didn’t disband the company, and continued to seek capital.

2006
Early in the year, Faulisi learned that Google was beginning to test ads targeted to Gmail users based on the content of their messages, and thought that infringed on Protostorm’s invention.

He tried to contact the attorneys several times during the year, but couldn’t find Hogue, and never got a reply from ATS&K.

2007
June: Faulisi was told by Schiavelli, ATS&K’s managing partner, that the patent appli-cation had been deemed “withdrawn”, because no POA or “national stage” submissions had been filed.

He then hired attorney Jonathan Moskin to investigate.

Moskin exchanged emails and letters with Schiavelli, who eventually stated that ATS&K  had abandoned Protostorm’s application in September, 2001. 

2008
January 25: Schiavelli wrote to Moskin, revealing for the first time that the ATS&K had failed to designate the United States in the application.

II. Litigation
Complaint

On March 4th, 2008, Protostorm and Faulisi filed a complaint (PACER reg. req’d.; document #1) in US District Court, Eastern District of NY, alleging legal malpractice, breach of contract, and breach of fiduciary duty against ATS&K, its attorneys Bailey, Brundidge, and Schiavelli, and Hogue, the solo.

ATS&K filed a third-party complaint for indemnification and contribution against attorney Worthington, and D&S and its attorney, John Ginley. Worthington and Hogue then each filed a cross-claim against D&S and Ginley, seeking indemnification and contribution.

Protostorm’s claim against Hogue was stayed, due to an arbitration clause in their re-tainer agreement, and Hogue dismissed his cross-claim against D&S and Ginley.

Motion for Summary Judgment

All parties except Hogue filed for summary judgment.

US District Court Judge Garaufis issued his ruling in November, 2011.

He dismissed plaintiffs’ breach of fiduciary duty claim, because it was “duplicative of the) claim for legal malpractice”, and their breach of contract claim, because they didn’t argue for it in their briefs or refer to it in their motion, and thus “abandoned” it.

The primary remaining issues were:

Statute of Limitations (SOL)

ATS&K asserted that the SOL had expired before the complaint was filed, which was more than six years after the final patent application was filed.

The applicable SOL in New York State is three years, and starts to run on “the day an actionable injury occurs”, not the date the plaintiff discovers it; however, under the “continuous representation doctrine,” the SOL is tolled as long as “there is a mutual understanding” between attorney and client “of the need for further representation on the specific subject matter underlying the malpractice claim.”

The court denied the MSJ on SOL grounds, because there was a question of fact as to whether ATS&K was retained to both file and prosecute Protostorm’s patent application, and whether or not the attorney-client relationship was ever terminated.

“A jury could find (it) reasonable”, the court ruled, that Protostorm “relied on ATS&K to shepherd the application to its conclusion”, i.e., continuously represent it, until June, 2007, when the firm told Faulisi that the patent application had been abandoned. The complaint was filed nine months later.

The Merits of the Malpractice Claim

The Court ruled that if a jury were to resolve in Protostorm’s favor the questions of fact regarding whether ATS&K was retained to prosecute the patent application to completion, and whether the attorney-client relationship persisted after September 2001, then

“it would necessarily find that ATS&K failed to exercise ‘ordinary skill’…Plaintiffs’ motion  for summary  judgment on this limited point…insufficient by itself to establish Defendants’ liability—is therefore granted.

 (However), under New York law, ‘it is for the finder of fact to determine’ the existence   of proximate cause, ‘once the court has been satisfied that a prima facie case has been established’…(Further,) the parties…have also created a question of fact as to whether the application would have led to a valid, and valuable, patent.”

Trial

After almost three more years of litigation, a jury trial was held in July and August, 2014.

Continued in Part II.