Sherman v. Ellis

• Decision Date: 02 January 2020
• Docket Number: C.A. No. K18C-06-009 JJC
• Parties: DEAN SHERMAN, Plaintiff, v. STEPHEN P. ELLIS, ESQUIRE, Defendant.
• Court: Delaware Superior Court

DEAN SHERMAN, Plaintiff, v. STEPHEN P. ELLIS, ESQUIRE, Defendant.

C.A. No. K18C-06-009 JJC

SUPERIOR COURT OF THE STATE OF DELAWARE In and for Kent County

Submitted: November 22, 2019

January 2, 2020

OPINION

Patrick K. Gibson, Esquire, Ippoliti Law Group, Wilmington, Delaware, Attorney for Plaintiff.

Colleen D. Shields, Esquire, Gary W. Lipkin, Esquire, & Alexandra D. Rogin, Esquire, Eckert Seamans Cherin & Mellott, LLC, Wilmington, Delaware, Attorneys for Defendant.

Clark, J. Plaintiff Dean Sherman sues his former attorney, Stephen Ellis, Esquire, for legal malpractice. Prior to Mr. Sherman's 1997 marriage, Mr. Ellis drafted a premarital agreement (the "Agreement") designed to protect Mr. Sherman's assets. Mr. Sherman then presented the Agreement to his fiancé.¹ The Agreement waived her right, upon divorce, to receive alimony or to share in wealth accumulated over the course of their marriage. Her attorney advised her not to sign it but she nevertheless did.

During their divorce proceedings in 2015, Mr. Sherman's wife challenged the Agreement's enforceability in Family Court. The Family Court found it to be unconscionable and thus unenforceable. The Delaware Supreme Court, however, reversed the Family Court's decision. In the end, the Agreement successfully barred her challenges.

Notwithstanding Mr. Sherman's success after appeal, he now sues Mr. Ellis because he did not include a waiver of disclosure clause in the draft agreement. According to Mr. Sherman's expert, it would have been a "silver bullet" removing the incentive for his ex-wife to engage in protracted litigation. Mr. Sherman claims that this expanded litigation in turn expanded his costs and fees. He now seeks to recover those attorney and expert fees from Mr. Ellis.

Presently, Mr. Ellis seeks summary judgment in a motion that raises two principal issues. First, the motion requires the Court to evaluate the legal foundation for Mr. Sherman's expert's standard of care opinion. Second, with regard to proximate cause, the motion addresses a plaintiff's ability to recover for legal malpractice in drafting a premarital agreement that, in the end, successfullyprotected the plaintiff's assets. To evaluate the second issue, the Court must address whether the standard for proximate cause in transactional legal malpractice claims differs from the standard applied in litigation legal malpractice claims.

For the reasons that follow, genuine issues of material fact remain regarding the applicable standard of care and whether Mr. Ellis breached that standard. However, in this case, there is insufficient evidence of record to support an inference that Mr. Sherman's ex-wife would have agreed to include this "silver bullet" term in the Agreement. In addressing an issue of first impression, the same "but for" proximate cause limitation that applies in litigation malpractice actions must apply in transactional legal malpractice actions. When applying that standard, because record evidence does not support an inference that Mr. Sherman's ex-wife would have likely accepted the term, the trier of fact would be forced to speculate regarding whether Mr. Ellis's alleged negligence proximately caused Mr. Sherman harm. For that reason, Mr. Ellis's motion for summary judgment must be GRANTED.

FACTS AND PROCEDURAL BACKGROUND

The recited facts are those of record when viewed in the light most favorable to Mr. Sherman, the non-movant. In 1997, Mr. Sherman retained Mr. Ellis to negotiate and draft the Agreement prior to his marriage. The draft included provisions designed to protect Mr. Sherman's assets in the event of a divorce. It also included a mutual waiver of alimony. Finally, it included a clause recognizing that both parties had fully disclosed their premarital assets.² The proposed agreement,however, did not contain a waiver of the parties' obligations to disclose assets and obligations "beyond the disclosure provided."³

Before his fiancé signed the Agreement, she consulted with an attorney. Her attorney first asked Mr. Sherman to revise the proposed agreement to secure her future financial security. Mr. Sherman rejected those requests with the exception of one minor issue. His fiancé then met with her attorney to review the Agreement. He told her that it was one-sided and that she should not sign it. Notwithstanding this advice, she executed it. When doing so, she acknowledged in writing that her attorney had advised her not to. The two then married.

In 2015, Mr. Sherman's wife filed for divorce and moved to set aside the Agreement. At that point, Mr. Sherman's assets exceeded twelve million dollars and his annual income exceeded one million dollars. In contrast, she had no independent income or separate assets. In her motion to set aside the Agreement, she argued that it was unenforceable because she did not execute it voluntarily.⁴ She also argued that the Agreement was unconscionable because (1) she was not provided a fair and reasonable disclosure of Mr. Sherman's property, and (2) because she "did not voluntarily and expressly waive in writing any right to that disclosure."⁵

Prior to the parties' execution of the Agreement in 1997, Mr. Sherman had disclosed in writing his then four million dollars in assets.⁶ The disclosure, however, contained errors. Namely, it omitted that he owned a Ford Explorer (though his fiancé had nearly exclusive use of it prior to the disclosure) as well as a three thousand dollar life insurance policy. It also inaccurately described his one hundredpercent interest in a two hundred acre property as a fifty percent interest.⁷ In the Family Court property division litigation, after discovery, briefing, and oral argument, that court held the Agreement to be unconscionable. Because of the disclosure errors, it also held that Mr. Sherman's disclosure of assets and liabilities was not fair and reasonable.⁸

Mr. Sherman then filed an interlocutory appeal to the Delaware Supreme Court. With that appeal pending, Mr. Sherman filed the current legal malpractice suit against Mr. Ellis. The then legal backdrop to the malpractice case included only the adverse Family Court finding, which at that point was on appeal.

After Mr. Sherman filed suit, the Delaware Supreme Court reversed the Family Court's decision.⁹ When doing so, it confirmed that Mr. Sherman's ex-wife had voluntarily executed the Agreement¹⁰ and that Mr. Sherman's disclosure of his property and financial obligations was fair and reasonable.¹¹ As a result, the Supreme Court held it to be immaterial whether or not the Agreement was unconscionable.¹² It held the Agreement to be enforceable.¹³

Nevertheless, Mr. Sherman continues to prosecute his legal malpractice claim against Mr. Ellis. In doing so, he seeks to recover significant attorneys' fees that he alleges he incurred while litigating the unconscionability of the Agreement in Family Court and on appeal. His claim centers on Mr. Ellis's allegedly negligent failure toinclude a single clause or sentence in the Agreement—a waiver of disclosures term authorized by Delaware's Premarital Agreement Act (the "Act").¹⁴

The Act recognizes that a clause in a premarital agreement that waives further disclosure of assets or financial obligations has a direct bearing on the enforceability of a premarital agreement.¹⁵ While the parties dispute the effect of this portion of the Act, there is no dispute that the Agreement contained no waiver of disclosure provision.

In the present suit, Mr. Sherman identified Judy Jones, Esquire, as his expert witness. In her report and deposition testimony, Ms. Jones opines that including the waiver provision would by itself have precluded any claim that the Agreement was unconscionable. As a result, she further opines that the standard of care for a domestic attorney as of 1997 required an attorney to include this waiver provision in the Agreement. Mr. Ellis's expert counters that the standard of care did not require Mr. Ellis to include such a provision.

Apart from the standard of care issue, evidence of record relevant to proximate cause of harm is limited to three sources. First, Mr. Sherman's litigation attorney, David Gagne, Esquire, testified in his deposition that Mr. Sherman incurred additional fees and costs because Mr. Ellis did not include the provision in the Agreement. Specifically, Mr. Gagne testified as a fact witness that because Mr. Ellis did not include this language, Mr. Sherman had to hire two experts to address property values that would have otherwise been unnecessary.¹⁶ Those expert fees were approximately $38,000. Mr. Gagne also estimated that $285,000 of a total of $310,000 in attorneys' fees that he charged were necessary only because Mr. Ellisdid not include the disputed provision in the Agreement. Second, Ms. Jones offers her expert opinion that Mr. Ellis's failure to include this term proximately caused the increased costs and fees identified by Mr. Gagne. Third, Mr. Sherman argues that his ex-wife's agreement to what were otherwise draconian terms in a one-sided Agreement circumstantially supports a reasonable inference that she would have agreed to anything he asked, including the waiver of disclosure provision.

Notwithstanding that his ex-wife agreed to other one-sided terms, there is no evidence of record addressing her impressions regarding a waiver of disclosure provision or her willingness to agree to one. Namely, there is no direct evidence from her or the then-attorney that bears upon what other terms she may have agreed to. While she agreed to the vast majority, but not all of the terms proposed in the draft agreement, Mr. Sherman did not depose her or her then-attorney regarding how she would have reacted to the provision at issue. Likewise, there is no correspondence, documentary evidence, or circumstantial evidence demonstrating her propensity to agree to that specific provision.

Mr. Ellis now moves for summary judgment. He has also filed a motion in limine to exclude Ms....