Opinion ID: 2486558
Heading Depth: 2
Heading Rank: 1

Heading: MBI's Failure to Appeal the Underlying Judgment

Text: As a threshold question, we must decide whether MBI waived its right to bring a legal malpractice suit by not timely appealing the underlying judgment against it. Defendants argue, under the principles of equitable estoppel, a defendant who fails to perfect an appeal effectively waives his right to seek a remedy in malpractice. [5] Although defendants cite several court of appeal decisions supporting this theory, the issue is res nova for this Court. Murphy v. Gilsbar, 02-205 (La.App. 1 Cir. 12/31/02), 834 So.2d 669, writ denied, 03-676 (La.5/30/03), 845 So.2d 1057, is a state court legal malpractice proceeding arising out of the alleged mishandling of a federal employment discrimination action. During a status conference in the underlying federal case, the magistrate judge informed attorney Denise Vinet that her client's claim was untimely under federal law. Id. at 670. The defendant filed a motion for summary judgment based on this apparent untimeliness, which was granted. Murphy responded by filing a malpractice suit against Vinet in state court. Meanwhile, additional legal research revealed Murphy's original claim had actually been timely filed, and the defendant openly admitted its motion for summary judgment was ill-founded. In response, Vinet filed a motion for relief from judgment under Fed.R.Civ.P. 60(b). Despite numerous requests from Vinet, Murphy refused to participate in the motion for relief from judgment. The federal court found Vinet lacked standing to bring a motion for relief on Murphy's behalf without her consent, [6] and thus refused to set aside the summary judgment. Id. at 671. Vinet then moved for summary judgment on Murphy's malpractice claim. The trial court granted the motion, finding Murphy's refusal to participate in the motion for relief from judgment acted as absolute estoppel to any malpractice claim. The court of appeal agreed, holding the trial court did not err in concluding that, by refusing to participate in the hearing that could have resurrected her discrimination suit, Murphy waived her right to proceed with her malpractice suit. Id. at 672. In Gross v. Pieno, 04-820 (La.App. 5 Cir. 12/28/04), 892 So.2d 662, writ denied, 05-218 (La.4/22/05), 899 So.2d 582, the court applied the basic principle set forth in Murphy v. Gilsbar to a different set of facts. Attorney Larry Pieno was hired to represent the Gross family in a lawsuit, but performed no work on the case for over three years. Shortly thereafter, the defendants filed a successful motion for dismissal based on abandonment. [7] Pieno filed a motion to set aside the dismissal and requested a hearing. Before the motion was set for hearing, the Gross family fired Pieno and hired a new attorney who negotiated a settlement on the underlying tort suit and filed a malpractice suit against Pieno. Id. at 663. The trial court entered summary judgment for Pieno, finding the settlement estopped the Gross family from pursuing a malpractice claim. Plaintiffs appealed, arguing they settled in an attempt to recover something from the lawsuit and thereby mitigate the damages caused by Pieno's malpractice. Id. at 665. The court of appeal nonetheless affirmed, as it found Pieno's motion to set aside the judgment raised valid arguments which may have justified granting the requested relief. By settling the suit, plaintiffs effectively waived those potentially meritorious claims. Id. The parties also cite American Reliable Ins. Co. v. Navratil, 445 F.3d 402 (5th Cir.2006). [8] American Reliable hired Boris Navratil to defend its insured, Eli Prudhomme, in a lawsuit in state court. The case resulted in an unfavorable jury verdict against American Reliable in the full amount of the $25,000 policy limit and an additional judgment of more than $420,000 against Prudhomme alone. Navratil advised American Reliable there were valid grounds for an appeal. American Reliable instead settled the claim for $550,000 (over $100,000 more than the jury verdict) and filed a malpractice lawsuit against Navratil in federal court. The trial court granted Navratil's motion for summary judgment, citing Gross v. Pieno for the proposition that American Reliable's voluntary settlement barred its malpractice suit. Id. at 403-04. The Fifth Circuit reversed, holding the settlement of the underlying claim did not have the preclusive effect of barring the client from bringing an independent action for legal malpractice. Id. at 404. While a client has a duty to mitigate damages caused by its attorney's malpractice, the duty does not require the client to undertake measures that are unreasonable, impractical, or disproportionately expensive considering all of the circumstances. Id. at 406. The court noted a strict rule requiring an appeal in every case could cause the client to miss a favorable but fleeting opportunity to make a financially favorable settlement; and settlement may often be a better method of damage mitigation than is appeal. Id. at 406-07. The court found American Reliable had acted reasonably in settling the case rather than filing a risky and speculative appeal and thus had not waived its right to file a malpractice suit. Defendants, following the lead of Murphy v. Gilsbar , couch their arguments in terms of equitable estoppel. Equitable estoppel is a jurisprudential doctrine involving the voluntary conduct of a party whereby he is precluded from asserting rights against another who has justifiably relied upon such conduct and changed his position so that he will suffer injury if the former is allowed to repudiate the conduct. Morris v. Friedman, 94-2808 (La.11/27/95), 663 So.2d 19, 25 (quoting John Bailey Contractor, Inc. v. State, Dept. of Transportation and Development, 439 So.2d 1055, 1059 (La.1983) and American Bank and Trust Co. v. Trinity Universal Ins. Co., 251 La. 445, 205 So.2d 35, 40 (1967)). There are three elements required to establish equitable estoppel: (1) a representation by conduct or work; (2) justifiable reliance thereon; and (3) a change of position to one's detriment because of the reliance. Id. A claim of waiver by failure to appeal is thus not equitable estoppel as the doctrine has been defined by this Court. Strictly speaking, equitable estoppel applies only where a party has made false or misleading representations of fact and the other party justifiably relied on the representation. State v. Mitchell, 337 So.2d 1186, 1188 (La.1976). We must narrowly construe this argument, as estoppel is not favored in our law, Id., and estoppel is a doctrine of last resort. Howard Trucking Co., Inc. v. Stassi, 485 So.2d 915, 918 (La.1986). Because MBI's decision not to pursue an appeal was not a representation of fact which Durio or Weinstein justifiably relied on to their detriment, equitable estoppel does not apply. The issue is more properly framed as a failure to mitigate damages under Civil Code article 2002, [9] which states: An obligee must make reasonable efforts to mitigate the damage caused by the obligor's failure to perform. When an obligee fails to make these efforts, the obligor may demand that the damages be accordingly reduced. Id. If an aggrieved party could have cured the effects of an unfavorable judgment by appeal, its decision not to appeal may be a failure to mitigate under article 2002. The failure to mitigate damages is an affirmative defense, and the burden of proof is on the party asserting the defense. Wooley v. Lucksinger, 09-571 (La.4/1/11), 61 So.3d 507, 607; A Better Place, Inc. v. Giani Investment Co., 445 So.2d 728, 732 (La.1984). The scope of a party's duty to mitigate depends on the particular facts of the individual case, and a party is not required to take actions which would likely prove unduly costly or futile. [10] In Unverzagt v. Young Builders, Inc., 252 La. 1091, 215 So.2d 823 (1968), this Court held a duty to mitigate encompassed only what a reasonably prudent man would have done to lessen his damages, given the facts known to him at the time and avoiding the temptation to view the case through hindsight. Id. at 826. The plaintiff, John Unverzagt, hired Young Builders, Inc. to install a home swimming pool. The pool soon developed cracks, and Unverzagt sued for faulty installation. The defendant countered that Unverzagt should have mitigated his damages by making repairs at an estimated cost of between $1,000 and $1,500. Id. at 825. However, other experts opined that testing would be necessary to find the true cause of the defects in the pool and warned the repairs suggested by the defendant may prove ultimately fruitless. This Court held Unverzagt had no duty to make those repairs because the record does not affirmatively establish that the work mentioned could have been completed for this sum or that it would have averted the ultimate disaster. Id. at 827. Defendants urge this Court to adopt a per se rule requiring an appeal in all cases before a legal malpractice action may be pursued. However, the defendants do not cite, and this Court has not found, any reported decision imposing such a per se rule. [11] Instead, the theory of abandonment of a legal malpractice claim has been traditionally narrow, allowed only when an adverse judgment in the underlying action would likely have been corrected on appeal. Steven Witsoski, Appellate Malpractice, 4 J.App. Prac. & Process 577, 585 (2002). We agree with plaintiff that a per se rule would be untenable, as there are many types of malpractice which would effectively preclude any possibility of a successful appeal. [12] For instance, if an attorney neglects to file a petition before the expiration of a prescriptive period, the client would have no remedy on appeal. In this case, MBI argues that Durio failed to elicit necessary testimony at trial, therefore creating an inadequate factual record. If MBI is correct, an appeal would have been pointless because the record on appeal is necessarily limited to facts properly before the trial court. [13] There is no benefit in requiring an aggrieved party to file a frivolous appeal. Moreover, requiring a party to wait until the completion of the appellate process would, in some circumstances, cause peremption to run on the malpractice claim. [14] In American Reliable v. Navratil , the federal Fifth Circuit predicted [15] this Court would adopt a reasonable person standard similar to the one set forth in Unverzagt: Although as a general principle, a client has a duty to mitigate damages caused by its attorney's malpractice, such a duty cannot require the client to undertake measures that are unreasonable, impractical, or disproportionately expensive considering all of the circumstances. American Reliable Ins. Co. v. Navratil, 445 F.3d 402, 406 (5th Cir.2006). Similarly, a leading treatise on legal malpractice states failure to pursue an appeal or other legal review is not a defense unless pursuit of the remedy would have made a difference. Mallen & Smith, Legal Malpractice, § 22.12 (2011 ed.) These authorities are in accord with this Court's holding in Unverzagt v. Young Builders, Inc., 252 La. 1091, 215 So.2d 823 (1968), which applies a reasonably prudent man standard. Id. at 826. We therefore hold a party does not waive its right to file a legal malpractice suit by not filing an appeal of an underlying judgment unless it is determined a reasonably prudent party would have filed an appeal, given the facts known at the time and avoiding the temptation to view the case through hindsight. This analysis is heavily dependent on the specific facts of the case. A court should take into account any relevant factors including, but not limited to, the nature of the alleged malpractice, the likelihood an appeal would have been successful, the likely expense of the appeal, and the possibility the peremptive period on the legal malpractice claim would have expired during the course of the appeal. Having established the failure to appeal is not a impediment to a legal malpractice action, we now address the issue urged by defendants in the present case. As this case arises on a motion for summary judgment, we must give the benefit of the doubt to MBI as the non-moving party and draw any reasonable factual inferences in its favor. Hill v. Shelter Mutual Ins. Co., 05-1783 (La.7/10/06), 935 So.2d 691, 693. We cannot say, as a matter of law, MBI's decision not to appeal was outside the bounds of a reasonably prudent actor. First, MBI had reason to believe the likelihood of reversal on appeal was relatively low. MBI consulted two attorneys, Durio and Love, both of whom advised any appeal was unlikely to be successful. This is especially true where the judgment was entered after a full trial on the merits, meaning the trial judge's ruling would have been reviewed under the strict standard of the manifest error doctrine. Moreover, the very nature of the alleged malpractice was such that an appeal could not provide MBI with an adequate remedy. MBI alleges Durio failed to timely file an amended petition, lost a box of relevant documents, and did not elicit crucial testimony at trial. None of these alleged acts of malpractice could be remedied on appeal. For example, if a box of documents has been lost via an attorney's negligence, filing an appeal will not make those documents reappear. Given these circumstances, we find there is a genuine issue of material fact as to whether MBI acted as a reasonably prudent party in choosing not to pursue a costly and time-consuming appeal.