Court Opinion

ID: 4298373
Source: CourtListenerOpinion
Date Created: 2018-07-27 09:07:46.132113+00
Date Added: 2024-06-11T14:41:31.426297
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

DARLENE SMITH,                                                       UNPUBLISHED
                                                                     July 26, 2018
               Plaintiff-Appellant,

v                                                                    No. 337826
                                                                     Oakland Circuit Court
HERTZ SCHRAM, PC and LISA STERN,                                     LC No. 2016-152060-NM

               Defendants-Appellees.

Before: MURPHY, P.J., and JANSEN and RONAYNE KRAUSE, JJ.

JANSEN, J. (dissenting).

       I respectfully dissent.

        To succeed on her legal malpractice claim, plaintiff must establish: (1) the existence of an
attorney-client relationship; (2) negligence in the legal representation of the client; (3) an injury
that was proximately caused by the negligence; and (4) the fact and extent of the injury alleged.
Simko v Blake, 448 Mich. 648, 655; 532 NW2d 842 (1995). There is no question that an attorney
client relationship existed between plaintiff and attorney Lisa Stern and Hertz Schram, PC.
Accordingly, that element is satisfied. Likewise, if plaintiff were able to establish that Stern’s
representation was negligent, plaintiff is able to show that she was injured by that negligence, as
well as the extent of her injury. In other words, but for Stern’s negligent legal representation,
plaintiff would have received the full value of what she was entitled under the property
settlement agreement (PSA).

        With respect to the second element, I take issue with the majority’s conclusion that
Stern’s representation of plaintiff was not negligent. First, in my view, the PSA is drafted
broadly, and does not control or govern future discovery requests of any kind. By failing to
return to family court following mediation to seek more information, Stern was negligent.
Plaintiff had an ongoing interest in various business holdings, and was entitled to have Leider
provide accurate valuations of those holdings before settlement. Stern should have advised
plaintiff to walk away from the $65,000 figure offered by Leider in mediation and to return to
family court to pursue the discovery matter further. Settlement should never have been a serious
consideration, particularly given Stern’s own suspicions that there was something fishy about the
2010 transaction where Leider allegedly sold 600 units, or 480,000 shares, of Destination Media,
LLC stock. Specifically, Stern testified in her deposition that she found that transaction to be
suspicious because Leider turned around and repurchased the 600 units for the same price,

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$60,000, which is unusual given the fact that Destination Media, LLC was a growing company.
Additionally, where Stern had already attempted to file a breach of fiduciary duty action on
behalf of plaintiff, she should have been aware that because Leider held plaintiff’s interest in a
constructive trust, he had a fiduciary duty to continue to disclose information relating to
plaintiff’s interests in the business holdings. Regardless of whether plaintiff’s divorce counsel
neglected to obtain various stock certificates at the time of the divorce, Leider’s fiduciary status
should have compelled him to disclose such information in good faith. Instead, Leider sought to
block plaintiff’s access to pertinent information at every turn. Stern failed to obtain critical
documentary evidence relating to the value of plaintiff’s interests by failing to pursue this matter
further. In my view, this constitutes negligence.

        Additionally, Stern should have noticed that the threat made by Leider to not exercise his
stock options was a red herring, and was intended to dissuade plaintiff from pursuing the matter
further. Such a threat would have been highly suspect given that the parties were engaging in
mediation, and should have tipped Stern off that Leider was attempting to put more pressure on
plaintiff to give in and settle. I believe this also holds true for the threat Leider made that
plaintiff may have had to pay some $320,000 if Leider did exercise his stock options.

         Next, with respect to the forensic CPA’s opinion not to settle, I agree with the majority
that it appears Stern initially indicated to plaintiff that the forensic CPA’s recommendation was
the best course of action: stand in the same shoes as Leider and take a “wait and see” approach.
However, I again remain firm that Stern should have never presented settlement as a viable
option. Moreover, the forensic CPA had advised Stern that numerous financial documents and
various other pieces of documentary information were required to conduct a proper analysis of
the companies and their worth. Although Stern requested this information, she never received it,
due to Leider’s objections to the discovery requests. Leider’s reluctance to disclose information
about the business holdings that plaintiff was entitled to, despite his status as a fiduciary, could
easily be characterized as stonewalling, and should have put Stern on high alert.

        Further, with respect to language in the settlement agreement that acknowledged that
neither party had relied on any “representation, inducement, or condition not set forth in this
agreement,” Stern should never have allowed it. The fact that Stern essentially released Leider
from future liability for any material misrepresentations made in connection with the settlement
agreement was negligent. Further still, Stern was negligent for allowing plaintiff to warrant that
she was not entitled to obtain any information or documents not only from Leider, but also from
the company in which plaintiff held an interest. Despite not being a party to the post-divorce
proceedings, a representative of that company appeared before the discovery master at an in
camera session that neither Stern nor Leider’s counsel were allowed to participate. However,
any oral representations made to the discovery master were never supported by any writings or
other documentary evidence, at least none that was available to plaintiff or Stern, and therefore
were unreliable on their face. In fact, as a non-party, the company was extremely reluctant to
disclose any financial information regardless of the fact that a protective order had been put in
place. That such language was ever proposed should have been a red flag for Stern that
information was being withheld and provided a basis for the non-cooperation regarding
discovery. Essentially, such language immunizes a non-party from fraud, which should have
been suspect to Stern, particularly in light of the 2010 transaction. In my view, advising plaintiff
to agree to that language was negligent.
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       Finally, even if I were to accept Stern’s position that plaintiff simply wanted to settle in
order to move on with her life and not spend any more time and money on litigation, it was
negligent for Stern to present settlement as an option. Such advice was not sound, as it would
have cost plaintiff nothing to “wait and see.” Regardless, even if plaintiff persisted, Stern should
have had plaintiff sign a release, indicating it was her intention to enter into the settlement
agreement despite her counsel’s advice to the contrary.

        I take issue with the majority’s conclusions about what would or would not have
happened in the family court, or what would have happened if Stern had pressed the discovery
issue further, as such conclusions call for too much speculation. I believe that a material
question of fact for the trier of fact continues to exist regarding whether Stern’s representation of
plaintiff was negligent. Accordingly, I would reverse the trial court’s grant of summary
disposition in favor of defendants and remand for further proceedings.

                                                              /s/ Kathleen Jansen

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