Mahoney v. Shaheen, Cappiello, Stein & Gordon, P.A.

• Decision Date: 16 April 1999
• Docket Number: No. 96–640.,96–640.
• Citation: 727 A.2d 996,143 N.H. 491
• Parties: Dennis MAHONEY v. SHAHEEN, CAPPIELLO, STEIN & GORDON, P.A. and another.
• Court: New Hampshire Supreme Court

143 N.H. 491

727 A.2d 996

Dennis MAHONEY

v.SHAHEEN, CAPPIELLO, STEIN & GORDON, P.A. and another.

No. 96–640.

Supreme Court of New Hampshire.

April 16, 1999.

Decato Law Offices, of West Lebanon (Karen Creighton Borgstrom and R. Peter Decato, on the brief, and Ms. Borgstrom orally), for the plaintiff.

Roussos & Hage, of Manchester (Sara B. Shirley, on the brief), and Orr and Reno P.A., of Concord (Bradford W. Kuster orally), for the defendants.

BRODERICK, J.

The plaintiff, Dennis Mahoney, appeals an order by the Superior Court (Morrill , J.) dismissing his claim of malpractice against the defendants, Shaheen, Cappiello, Stein & Gordon, P.A., and Barbara Keshen, an attorney formerly with the firm. We affirm.

This case is a legal malpractice action brought by a convicted felon against the attorneys who represented him in grand jury proceedings prior to his indictment. In January 1994, Mahoney pled guilty to twelve felony indictments for theft by deception, falsification of evidence, and Medicaid fraud. The charges arose out of his theft of Medicaid and private insurance funds totaling over $373,000 while employed as a pharmacist by Health Center Pharmacy, Inc. (HCP), a corporation in which he held a majority interest. He was sentenced to serve seven to fourteen years at the State Prison and was required to pay restitution. He also was required to pay contempt fines totaling $60,000 that the Trial Court (Manias , J.) imposed on him and HCP prior to his indictment. After being sentenced, Mahoney obtained permission from the court to retain one-half of any recovery he secured in the legal malpractice action he intended to file against the defendants.

Before detailing the underlying facts of this case, we note its procedural posture. The defendants filed a motion to dismiss, or, alternatively, for summary judgment with accompanying affidavits, testimonial excerpts, and other supporting documents. The trial court apparently dismissed Mahoney's writ as a matter of law. On appeal, Mahoney faults the trial court for failing to recognize numerous factual disputes, which he argues should have been resolved by a jury. Even if we assume factual disputes exist, Mahoney cannot maintain a malpractice claim in this case as a matter of law.

I

Viewed in the light most favorable to Mahoney, the record reflects that in 1991, the Office of the Attorney General (the State) began investigating Mahoney and HCP for Medicaid fraud. In July 1991, the grand jury served a subpoena duces tecum on Mahoney as custodian of HCP's records, seeking prescription records regarding Medicaid patients and certain other business records of HCP. After receiving the subpoena, Mahoney destroyed certain prescription documents and other HCP records and purged prescription information from HCP's computer, all of which were requested by the subpoena and potentially incriminating.

In early August 1991, Mahoney agreed to produce some records and to allow access to others, but refused to produce everything requested. The State moved to compel production of the withheld documents, and HCP attempted to quash the subpoena on claims of physician-patient and Fifth Amendment privileges. On August 22, 1991, the Trial Court (Manias , J.) denied HCP's motion to quash based, in part, on the legal inability of a corporation, including a corporate officer on the corporation's behalf, to claim a Fifth Amendment privilege, and ordered it to produce the subpoenaed documents.

In September 1991, the grand jury served another subpoena duces tecum on Mahoney in his custodial capacity seeking additional HCP records, including prescription information for non-Medicaid patients not covered by the first subpoena. That same day, the State filed a petition for civil contempt relating to the court's August 1991 order due to Mahoney's noncompliance.

In early September, Mahoney hired the defendants to represent HCP and him, individually, in the grand jury investigation. He alleges that he informed the defendants that he destroyed much of the requested information, although they deny it. The defendants proceeded to execute a strategy to forestall the State from obtaining most of the subpoenaed documents. As part of this strategy, they sought to enjoin the grand jury from issuing a subpoena for non-Medicaid patients, to enjoin proceedings, and to pursue an interlocutory appeal. Counsels' arguments focused on the voluminous nature of the requested records and concerns that compliance would be unreasonably time-consuming, burdensome, and expensive.

In October 1991, the court ordered both HCP and Mahoney to comply with the subpoenas. In January 1992, the State petitioned a second time for civil contempt, and the defendants unsuccessfully filed suit in federal court challenging the propriety of the grand jury subpoenas, an issue previously decided in State court. On March 2, 1992, the Trial Court (Manias , J.) found both Mahoney and HCP in civil contempt, ordered them "to produce the documents [sought by both subpoenas], or proof of their nonexistence, at the next meeting of the grand jury," and warned that failure to comply would result in civil fines of $1,000 for each day of noncompliance. The defendants filed neither a motion to reconsider nor an appeal.

On the defendants' advice, Mahoney appeared in his custodial capacity at the March 25, 1992, meeting of the grand jury and invoked his Fifth Amendment privilege in response to questions regarding HCP's records. In May 1992, the defendants moved to stay the fines, and in July 1992, unsuccessfully moved to reconsider the original contempt order. In January 1993, the court held a hearing to calculate fines. The defendants objected to the fines based, in part, on grounds that the court ruled untimely. The Trial Court (Manias , J.) imposed identical $30,000 contempt fines against Mahoney and HCP. Mahoney contends that because HCP had been sold on the defendants' advice and all of its assets depleted, he was liable to discharge HCP's contempt fines as well as his own. Subsequently, the defendants appealed the fines on Mahoney's behalf without his knowledge, consent, or involvement. We declined the appeal, and Mahoney ultimately pled guilty to multiple felony charges of Medicaid fraud, theft by deception, and falsifying physical evidence.

In May 1995, Mahoney sued the defendants for malpractice associated with their advice and activities regarding the Medicaid fraud investigation. Specifically, he sought damages for the civil contempt fines and attorney's fees paid to the defendants that he claimed were incurred as a result of the defendants' flawed legal representation, including their (1) decision and method of resisting the subpoenas, (2) representation of parties with adverse interests, i.e. , HCP and Mahoney, (3) failure to negotiate immunity for Mahoney's testimony before the grand jury, and (4) failure to properly seek post-decision relief from the trial court's contempt findings. Mahoney did not allege that the defendants advised him to destroy the HCP records or that he was innocent of Medicaid fraud, theft by deception, or falsifying physical evidence. The defendants moved to dismiss, or in the alternative, for summary judgment, alleging that Mahoney's illegal conduct was the cause of his damages. The Trial Court (Morrill , J.) dismissed the complaint, reasoning that a malpractice claim in this context required Mahoney to establish his actual innocence of the underlying crime. The court concluded that because Mahoney admitted he destroyed the HCP records and thus could not establish his innocence, his claim failed as a matter of law. Mahoney appealed.

II

Mahoney argues that the trial court erred in dismissing his malpractice claim because it improperly subjected his writ to a criminal , rather than a civil , malpractice standard. Alternatively, he claims that even if his writ asserted criminal malpractice, the court erred in dismissing it because he could not establish his actual innocence. The issues raised by Mahoney are matters of first impression.

Mahoney characterizes his malpractice claim as civil, arguing that pre-indictment investigation by a grand jury is a civil process because it (1) is not controlled by the legislature or any other "branch of institutional government," and (2) "may result in an indictment, or it may not ." We disagree. The purpose of a grand jury investigation is to identify criminal wrongdoing, see Powell v. Pappagianis , 108 N.H. 523, 524–25, 238 A.2d 733, 734 (1968) ; 1 R. McNamara, New Hampshire Practice, Criminal Practice and Procedure § 511, at 486, § 512, at 487–88 (1997), not civil or tortious acts. The inability of a particular branch of government to control the grand jury or the grand jury's declination to indict after its investigation does not change the criminal nature of the grand jury's investigatory function. Cf . Powell , 108 N.H. at 524, 238 A.2d at 734; 1 R. McNamara, supra § 513, at 489 (1997). Accordingly, the defendants' alleged malpractice in their representation of Mahoney and HCP during the grand jury investigation is criminal and not civil in nature. Having concluded that Mahoney's claim is for criminal malpractice, we next examine the elements of proof required to establish it.

III

In this State, a civil malpractice action requires proof of (1) an attorney-client relationship, which triggers a duty on the attorney to exercise reasonable professional care, skill, and knowledge in providing legal services to that client, (2) a breach of that duty, and (3) resultant harm legally caused by the breach. Witte v. Desmarais , 136 N.H. 178, 182, 614 A.2d 116, 117 (1992) ; see McLaughlin v. Sullivan , 123 N.H. 335, 340, 461 A.2d 123, 126 (1983). Public policy, however, dictates an augmented standard in criminal malpractice actions. While such an action requires all the proof essential to a civil malpractice claim, a criminal malpractice action will fail if the claimant does not allege and prove, by a...