Kiribati Seafood Co. v. Dechert LLP.
| Decision Date | 11 October 2017 |
| Docket Number | SJC–12287 |
| Citation | 83 N.E.3d 798,478 Mass. 111 |
| Parties | KIRIBATI SEAFOOD COMPANY, LLC, & another v. DECHERT LLP. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Megan C. Deluhery, Boston, (John R. Neeleman, of Washington, also present) for Kiribati Seafood Company, LLC.
Denis M. King (Richard M. Zielinski also present), Boston, for the defendant.
Present: Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, & Cypher, JJ.2
The issue on appeal is whether, in a legal malpractice action, a court's error of law constitutes a superseding cause that bars recovery to the plaintiff client even where the defendant attorney was negligent for failing to prevent or mitigate the legal error. The plaintiff, Kiribati Seafood Company, LLC (Kiribati), brought a legal malpractice claim against its former law firm, Dechert LLP (Dechert). Kiribati alleged that Dechert negligently failed to provide a French appellate court with the evidence the court deemed necessary for Kiribati to prevail on a claim, which resulted in the court's denial of the claim. A judge of the Superior Court granted summary judgment to Dechert and denied partial summary judgment to Kiribati. The judge determined that the French appellate court committed an error of law in requiring this evidence and that, even if Dechert were negligent in failing to provide the evidence to the court, Kiribati could not recover damages for Dechert's negligence because the court's legal error was a superseding cause of the adverse decision. We conclude that an error of law under these circumstances is a concurrent, not a superseding, proximate cause and that the judge therefore erred in granting summary judgment to Dechert and denying partial summary judgment to Kiribati.
Background. Because this is an appeal from an allowance of summary judgment, we set forth the undisputed material facts. Kiribati purchased a fishing vessel known as the Madee (ship), and chartered it to Olympic Packer, LLC, and Dojin Co., Ltd., for the purpose of fishing for tuna in the Pacific Ocean.3 After sustaining damage to its rudder, the ship was placed in a dry dock in the Autonomous Port of Papeete (port) in Tahiti to undergo repairs. When the dry dock collapsed, the ship sustained damages so severe that it was deemed a "constructive total loss" by Kiribati's "port risk" insurer, Certain Underwriters of Lloyd's of London (Lloyd's). Kiribati retained two attorneys in the Paris office of the law firm Coudert Brothers LLP (Coudert) to file a lawsuit for damages against the port in the Commercial Court of Papeete (commercial court). When these two attorneys left Coudert to join Dechert, Kiribati continued to retain them and transferred the representation to Dechert.
Lloyd's paid Kiribati $1,763,803.71 on its insurance claim regarding the loss of the ship, which compensated Kiribati for some, but not all, of its losses. As a result of its payment, Lloyd's had a right of subrogation to recover that amount from the port. In April, 2004, Lloyd's and Kiribati entered into a written agreement jointly to prosecute Kiribati's litigation in the commercial court, where Kiribati sought to recover its losses that were not compensated by Lloyd's, and where Lloyd's sought to recover through subrogation the amount it paid to Kiribati. As part of the agreement, Lloyd's agreed to pay half of the attorney's fees and costs associated with this litigation.
The agreement between Kiribati and Lloyd's jointly to prosecute the suit against the port did not end Kiribati's financial disputes with Lloyd's. Kiribati contended that it was paying substantially more than its fifty per cent share of the legal fees in the litigation and that Lloyd's was failing to pay its equal share. Kiribati also claimed that Lloyd's had failed to pay it in full for the "sue and labor" and mitigation expenses it was entitled to under its policy. To settle these and other disputes, in December, 2004, Kiribati and Lloyd's entered into a new agreement in which Kiribati released Lloyd's from all outstanding claims, including its claims for unpaid attorney's fees and "sue and labor" and mitigation expenses. In return, Lloyd's assigned its subrogation claim to Kiribati.
In January, 2008, the commercial court issued a judgment in favor of Kiribati and against the port. As part of the judgment, the court found that the assignment of the subrogation claim was "signed abroad" by "two foreign registered entities" without any specific agreement that French law would apply, so the validity of the assignment could not be determined under French law. The court concluded that it was "valid" under "foreign law," and therefore awarded Kiribati the full amount of the subrogation claim assigned to it by Lloyd's—approximately $1.76 million. The port appealed from the decision to the Court of Appeals of Papeete (court of appeals).
Tahitian courts are part of the French legal system. A judgment by the commercial court may be appealed from as of right to the court of appeals, which will review the decision de novo and consider new evidence offered by the parties to supplement the record. A decision by the court of appeals is appealable from as of right to the Cour de cassation in Paris, which is the French Supreme Court, but that court will review decisions only for errors of law.
In its first appellate decision, issued in April, 2010, the court of appeals affirmed much of the judgment of the commercial court, but it deferred decision regarding its enforcement of the assignment of the subrogation claim. It did not challenge the validity of the assignment under foreign law but noted that the "enforceability" of the assignment in a French court of law against a French defendant must be determined according to French law, which forbids "double compensation of the same damages." Where the port claimed that Kiribati was seeking "a double compensation for the damages and accordingly an unjust enrichment," the court of appeals decided to defer any decision regarding this claim for compensation to allow Kiribati to prove the amount paid in consideration for the assignment by showing the "actual price of the transfer."
After the first appellate decision, a Dechert attorney, Xavier Nyssen, advised Dennis Moran, an attorney in another law firm who was acting essentially as Kiribati's general counsel, that he needed evidence of the consideration paid by Kiribati for the assignment to address the court of appeals's concern about double compensation. Moran on two separate occasions provided various documents to Dechert, including (1) a 2004 letter from Moran to Lloyd's counsel demanding payment of Lloyd's equal share of Coudert's legal fees, with attached payment records that demonstrated that Kiribati had paid far more of the attorney's fees than did Lloyd's despite the provision in the settlement agreement that payment of the fees be shared equally; (2) the December, 2004, agreement between Kiribati and Lloyd's that included a release by Kiribati of all further claims on its Lloyd's policy; (3) correspondence identifying the various claims against Lloyd's that Kiribati had released; and (4) an unsworn written statement by a Lloyd's representative that declared that "[t]he subrogation rights were assigned for valuable consideration, the amount of which is privileged."
In support of its brief, Dechert submitted to the court of appeals as evidence only the 2004 letter from Moran, without any of the supporting documentation regarding legal fees, and the unsworn written statement by the Lloyd's representative, without the policyholder's release or the correspondence identifying the released claims. After the port in its response noted that Kiribati had provided no proof of having paid attorney's fees that Lloyd's was obligated to pay, another Kiribati attorney (who was not associated with Dechert) caused Nyssen again to be sent the documents that Moran had earlier provided and informed Nyssen that he needed to submit the attorney's fee payment records and the policyholder release in order to demonstrate the payment of consideration for the assignment. Dechert did not further supplement the record by providing these documents to the court of appeals.
In May, 2011, the court of appeals in its final decision reduced the amount of Kiribati's award by the amount of the assigned subrogated claim because Kiribati had failed to meet its burden to provide evidence of the "financial compensation" it paid for the assignment, explaining that "double recovery for the same damage must be avoided." The court specifically noted that Kiribati had failed to provide any evidence that it had paid attorney's fees that Lloyd's was obligated to pay, or that it had released Lloyd's from legal claims that Kiribati otherwise could have brought in a court of law.
In June, 2011, Kiribati was in receivership, so Nyssen sent an electronic mail message to its receiver informing him that the court of appeals decision could be challenged before the Cour de cassation, but only as to errors of law. Nyssen wrote, "As for Kiribati's subrogation interest acquired from ... Lloyd's, there may be grounds to call into question its decision, although we would need the opinion of a lawyer registered with the Cour de cassation to take [a] position." Nyssen wrote that he "would not recommend challenging the decision" because of the cost and duration of the appeal, which he estimated at one to two years, and because an appeal by Kiribati may cause the defendants to challenge the entirety of the court of appeals ruling, which might result in a suspension of its enforcement. The receiver later filed in the receivership action a motion for authorization to waive an appeal in the Tahiti litigation, attaching to his declaration a letter from an attorney for Kiribati stating that "Kiribati's shareholders will follow Dechert's advice and not appeal the Tahiti litigation outcome." The court approved the receiver's ...
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