Horn v. Wooser

• Decision Date: 01 August 2007
• Docket Number: No. 06-195.,06-195.
• Citation: 2007 WY 120,165 P.3d 69
• Parties: Robert W. HORN and Robert W. Horn, P.C., Appellants (Defendants), v. Albert WOOSTER and Terrance Duddy, Appellees (Plaintiffs).
• Court: Wyoming Supreme Court

165 P.3d 69

2007 WY 120

Robert W. HORN and Robert W. Horn, P.C., Appellants (Defendants), v. Albert WOOSTER and Terrance Duddy, Appellees (Plaintiffs).

No. 06-195.

Supreme Court of Wyoming.

August 1, 2007.

Representing Appellants: Weston W. Reeves and Anna R. Olson of Park Street Law Office, Casper, Wyoming. Argument by Mr. Reeves.

Representing Appellees: C.M. Aron of Aron & Henning, LLP, Laramie, Wyoming.

Before VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, JJ.

KITE, Justice.

[¶ 1] The federal district court for the District of Wyoming certified two questions to this Court concerning how a negligent attorney's contingency fee in the underlying personal injury action should be accounted for in a subsequent malpractice award to his former client. We conclude that, consistent with our damages jurisprudence in other areas of the law, a malpractice plaintiff is entitled to an award in the net amount he would have received under the contingent fee agreement had the underlying action been successful. We decline, however, to recognize a cause of action by an attorney against his negligent co-counsel. Consequently, the answer to the first question is "yes," and the answer to the second question is "no."

CERTIFIED QUESTIONS

[¶ 2] This Court agreed to answer the following questions certified by the federal district court:

1. Where: (a) Client agrees to a 50% attorney contingent fee in a personal injury [PI] case; (b) Attorney commits malpractice in the PI case, resulting in dismissal of Client's claims prior to trial; (c) Damages are awarded to Client as a result of attorney's malpractice; and, (d) Attorney requests that the damages awarded to Client in the malpractice case be reduced by the 50% contingent fee Attorney would have received in the absence of malpractice in the PI case:

Question: Should Client's malpractice award be reduced by the contingent fee Attorney would have received absent his malpractice in the personal injury case?

2. This question is certified only if the answer to No. 1 is yes.

Where Associated Attorney is entitled to share in a contingent fee earned by Principal Attorney in a PI case, and the malpractice award to Client is reduced by the contingent fee Principal Attorney would have received in the absence of malpractice in the PI case:

Question: Can the Associated Attorney recover the agreed portion of the contingent fee, either as an offset against the contingent fee or as a separate claim against the Principal Attorney?

FACTS

[¶ 3] In accordance with Wyoming Rule of Appellate Procedure 11.01, the federal district court set out the nature of the controversy and the facts relevant to our resolution of its certified questions. On September 18, 2001, Mr. Wooster, who is a resident of Maine, was injured when the tractor-trailer he was driving on Interstate 80 near Rawlins, Wyoming collided head-on with a Carbon County School District No. 1 school bus. The bus driver lost control of the bus and crossed into Mr. Wooster's lane of traffic.

[¶ 4] To recover compensation for his injuries, Mr. Wooster employed Mr. Duddy, an attorney who practiced in Maine. Because Mr. Duddy was not licensed in Wyoming, Mr. Duddy and Mr. Wooster employed Mr. Horn to prosecute Mr. Wooster's claims against the school district in Wyoming. Mr. Wooster and Mr. Horn entered into a contingent fee contract in which Mr. Wooster agreed to pay Mr. Horn fifty percent of any amount he recovered in the personal injury action. In addition, Mr. Horn and Mr. Duddy entered into a separate agreement wherein Mr. Duddy agreed to perform legal services in the personal injury action in return for one-third of Mr. Horn's fifty percent contingent fee.

[¶ 5] Mr. Horn filed the case of Wooster v. Carbon County School District No. 1, in the state district court for Carbon County, Wyoming. The state district court granted summary judgment against Mr. Wooster because Mr. Horn had failed to timely file a notice of claim that complied with the Wyoming Governmental Claims Act, Wyo. Stat. Ann. §§ 1-39-101, et seq. (LexisNexis 2007), and Article 16, § 7 of the Wyoming Constitution. We affirmed the summary judgment in Wooster v. Carbon County School Dist. No. 1, 2005 WY 47, 109 P.3d 893 (Wyo.2005).

[¶ 6] Mr. Wooster and Mr. Duddy subsequently filed a legal malpractice claim in the federal district court for the district of Wyoming against Mr. Horn and his professional corporation. Mr. Wooster sought to recover the damages he would have been awarded in the underlying personal injury action had Mr. Horn performed competently, and Mr. Duddy sought his portion of the contingent fee. The federal district court indicates that our answers to its certified questions may be determinative of some of the parties' claims.

DISCUSSION

Question No. 1 — Should Client's malpractice award be reduced by the contingent fee Attorney would have received absent his malpractice in the personal injury case?

[¶ 7] This Court has never had occasion to address how a negligent attorney's contingent fee should be treated in a subsequent malpractice action brought by the client. Other jurisdictions have, however, adopted various theories to address this issue. See generally, S. Cohen, The Deduction of Contingent Attorneys' Fees Owed to the Negligent Attorney From Legal Malpractice Damage Awards: The New Modern Rule, 24 Tort & Ins. L.J. 751 (1989); John E. Theuman, Measure and Elements of Damages Recoverable for Attorney's Negligence in Preparing or Conducting Litigation — Twentieth Century Cases, 90 A.L.R.4th 1033, § 14 (1991). Historically, a negligent attorney was entitled to deduct from a subsequent malpractice award the amount he would have been entitled to as a contingent fee in the underlying action. See, e.g., Childs v. Comstock, 69 A.D. 160, 74 N.Y.S. 643, 649 (1902), disagreed with by Andrews v. Cain, 62 A.D.2d 612, 406 N.Y.S.2d 168 (1978); Moores v. Greenberg, 834 F.2d 1105 (1st Cir.1987); Sitton v. Clements, 385 F.2d 869 (6th Cir. 1967) (affirming malpractice award reflecting a deduction for the attorney's contingent fee although the appropriateness of the deduction was not specifically discussed); McGlone v. Lacey, 288 F.Supp. 662 (D.S.D.1968) (recognizing deduction rule but deciding case on the basis that the attorney owed no duty to the plaintiff because no attorney/client relationship existed between the parties). The cases held the deduction was warranted so the judgment would accurately reflect the amount the client would have recovered if the attorney had not committed malpractice and the client's action had been successful. See Childs, 74 N.Y.S. at 649. See also, Cohen, supra, at 753-56.

[¶ 8] In the latter part of the twentieth century, some courts began to rule a negligent attorney is not entitled to such a deduction. See, Cohen, supra, at 756-759. According to Cohen, supra, at 756, Benard v. Walkup, 272 Cal.App.2d 595, 77 Cal.Rptr. 544 (1969), was the first reported decision to deny the deduction. Responding to the specific facts presented in that case, the court noted the amount of fee owed to the attorney was uncertain because the retainer agreement included a sliding scale contingent fee, with the fee increasing as the litigation progressed. Id. at 551. Because of the flexibility in the fee, the court stated: "Clearly there is . . . no way in which we can ascertain what amount of damages would have been produced by full performance of the contract on both sides." Id. See also, Andrews, 406 N.Y.S.2d at 169. Moreover, the attorney's negligence in that case resulted from his failure to file an action before the statute of limitation expired and the court remarked that there was no evidence that the attorney had performed any part of his agreement. Benard, 77 Cal.Rptr. at 546, 551. On those facts, the Benard court refused to deduct the negligent attorney's contingent fee in the underlying case from the client's malpractice award. Id. at 551.

[¶ 9] Other courts have answered the contingent fee issue by simply stating that a negligent attorney should not benefit from shoddy or negligent work. See, e.g., Campagnola v. Mulholland, Minion & Roe, 76 N.Y.2d 38, 556 N.Y.S.2d 239, 555 N.E.2d 611, 614-15 (1990); McCafferty v. Musat, 817 P.2d 1039, 1045 (Colo.Ct.App.1990), as modified on denial of rehearing (1991); Strauss v. Fost, 213 N.J.Super. 239, 517 A.2d 143, 145 (Ct.App.1986) (stating it rested its "decision upon the proposition that a negligent attorney in the appropriate case is not entitled to recover his legal fees."). Other decisions focus on the "case within a case" nature of a malpractice action. See, e.g., Andrews, 62 A.D.2d at 613, 406 N.Y.S.2d 168; Carbone v. Tierney, 151 N.H. 521, 864 A.2d 308, 319-20 (2004). In order to prevail in the malpractice case, the client must employ another attorney to prove the underlying action would have been successful and also prove the first attorney's negligence. Thus, some courts hold that deduction of the first attorney's contingent fee from the malpractice award is not appropriate because the client incurred a second attorney's fee in prosecuting the malpractice case. See Andrews, 62 A.D.2d at 613, 406 N.Y.S.2d 168; Carbone, 864 A.2d at 319-20. These decisions state that the benefit the client gets from not having the negligent attorney's contingent fee deducted from his malpractice award is "canceled out" by the fee the client incurred in prosecuting the malpractice action. See, e.g., McCafferty, 817 P.2d at 1045; Winter v. Brown, 365 A.2d 381, 386 (D.C.Ct.App.1976); Togstad v. Vesely, Otto, Miller & Keefe, 291 N.W.2d 686, 695-96 (Minn.1980), citing with approval dicta in Christy v. Saliterman, 288 Minn. 144, 179 N.W.2d 288, 306-07 (1970). Employing a related, though somewhat different, rationale, some courts have held that the client may recover his attorney's fee in the legal malpractice action as a consequential or incidental damage resulting from his attorney's negligence.¹ Foster v....