Smith v. McLaughlin

Decision Date26 February 2015
Docket NumberNo. 140500.,140500.
Citation289 Va. 241,769 S.E.2d 7
PartiesShevlin SMITH v. Bruce W. McLAUGHLIN.
CourtVirginia Supreme Court

Frank K. Friedman (Erin B. Ashwell ; David D. Hudgins ; Reese A. Pearson ; Woods Rogers, Roanoke; Hudgins Law Firm, on briefs), for appellant.

Thomas K. Plofchan, Jr. (Lavanya K. Carrithers; Westlake Legal Group, on brief), for appellee.

Present: LEMONS, C.J, GOODWYN, MILLETTE, McCLANAHAN, and POWELL, JJ., and RUSSELL and LACY, S.JJ.

Opinion

Opinion by Justice LEROY F. MILLETTE, JR.

In this appeal we consider, among other issues, (1) whether an attorney breaches the duty to a client by failing to correctly anticipate a judicial ruling on an unsettled legal issue, (2) whether collectibility is relevant to a legal malpractice claim when the alleged injury is the loss of an otherwise viable claim, and (3) whether non-pecuniary damages are recoverable in a legal malpractice claim.

I. Facts And Proceedings

This appeal arises from a legal malpractice claim. Typically, a legal malpractice claim involves a case within the case, because the legal malpractice plaintiff must establish how the attorney's negligence in the underlying litigation proximately caused the legal malpractice plaintiff's damages. This appeal presents an additional level to this typical format, as the underlying litigation in which the alleged malpractice occurred was itself a legal malpractice claim. This legal malpractice claim therefore implicates a case (the initial criminal matter) within a case (the criminal malpractice matter) within the case (the legal malpractice matter that is now before us).

A. The Criminal Matter

In 1998, Bruce McLaughlin was charged on multiple counts of felony sexual abuse. McLaughlin hired William J. Schewe of the firm Graham & Schewe, and Harvey J. Volzer of the firm Shaughnessy, Volzer & Gagner, P.C. to represent him in this criminal matter. At the conclusion of trial, the jury found McLaughlin guilty and convicted him of nine counts of sexual abuse of three of his children, and McLaughlin was sentenced to serve 13 years in prison.

McLaughlin's direct appeal was denied. A few hours after learning of this denial, McLaughlin was brought to the Loudoun County General District Court on an unrelated matter. At that time McLaughlin attempted to escape from custody by running from the courthouse, but was quickly apprehended. McLaughlin pled guilty to the class six felony of simple escape and was sentenced to five years in prison with two and one half years suspended.

Pursuant to habeas proceedings, McLaughlin's convictions for the felony sexual abuse charges were vacated and he was granted a new trial. A second trial on the felony sexual abuse charges was held in 2002, and at the conclusion of trial the jury found McLaughlin not guilty on all charges. McLaughlin had been incarcerated for over four years, from September 1998 until his release in December 2002.

B. The Criminal Malpractice Matter

McLaughlin sought to bring a legal malpractice claim against his criminal defense attorneys Schewe, Volzer, and their respective law firms (the “criminal malpractice claim”). McLaughlin hired the firm Shevlin Smith to pursue that criminal malpractice claim, with Brian Shevlin as lead counsel. The criminal malpractice claim alleged that McLaughlin's criminal defense attorneys negligently failed to obtain the taped interviews of the alleged victims and compare those tapes with the inaccurate written transcripts used during McLaughlin's first criminal trial.

Volzer and the firm Shaughnessy, Volzer & Gagner, P.C. had $2,000,000 in insurance coverage for any liability arising from the criminal malpractice claim. The malpractice insurer for Schewe and the firm Graham & Schewe had obtained a judicial ruling that it was not required to provide coverage for the criminal malpractice claim. Nevertheless, the insurer provided $50,000 to Schewe and the firm Graham & Schewe to handle the criminal malpractice matter or settle the case.

As McLaughlin needed money and wanted to accept the settlement offer, Shevlin Smith negotiated a settlement and release with Schewe and the firm Graham & Schewe in order to settle McLaughlin's criminal malpractice claim against them (the “Release Agreement”). This Release Agreement was executed in 2005, and specifically settled McLaughlin's criminal malpractice claim against Schewe, John T. Graham, and the firm Graham & Schewe for $50,000. The Release Agreement expressly did not discharge McLaughlin's criminal malpractice claim against Volzer and the firm Shaughnessy, Volzer & Gagner, P.C., and was entered into pursuant to Code § 8.01–35.1.

Approximately four months after Shevlin Smith executed the Release Agreement, this Court issued its opinion in Cox v. Geary, 271 Va. 141, 624 S.E.2d 16 (2006). Based on one of the holdings in that case, Volzer and the firm Shaughnessy, Volzer & Gagner, P.C. filed a plea in bar to McLaughlin's criminal malpractice claim. Volzer and the firm argued that McLaughlin's criminal malpractice claim against them must be dismissed because, under the rationale of Cox, the settlement and release of some co-defendants to the legal malpractice claim by way of the Release Agreement was a release of all codefendants. The trial court agreed, sustained Volzer's and the firm's plea in bar, and dismissed McLaughlin's complaint against those parties. This Court, by unpublished order, affirmed the circuit court's judgment.

C. The Legal Malpractice Matter

Unable to pursue his criminal malpractice claim, McLaughlin filed a legal malpractice suit against Shevlin Smith. McLaughlin's complaint alleged 13 discrete failures of Shevlin Smith's legal representation in the criminal malpractice matter, each constituting a different theory of how Shevlin Smith breached its duty to McLaughlin. These theories can be grouped into two categories. First, that Shevlin Smith breached its duty to McLaughlin by failing to foresee how this Court's holding in Cox would impact the Release Agreement. Second, that Shevlin Smith breached its duty to McLaughlin by failing to take various actions with respect to Graham, Schewe, and the firm Graham & Schewe, and failing to fully advise McLaughlin about the alternative of refusing the settlement and continuing to proceed against Graham, Schewe, and the firm Graham & Schewe.

McLaughlin's case eventually went to trial. At trial, a legal malpractice plaintiff is required to prove how the defendant attorney committed malpractice in the underlying proceeding. Whitley v. Chamouris, 265 Va. 9, 11, 574 S.E.2d 251, 252–53 (2003). Additionally, if the alleged negligence occurred in a criminal proceeding, the legal malpractice plaintiff must prove post-conviction relief and innocence entitling him to release. Taylor v. Davis, 265 Va. 187, 191, 576 S.E.2d 445, 447 (2003) ; Adkins v. Dixon, 253 Va. 275, 281–82, 482 S.E.2d 797, 801–02 (1997). Pursuant to these principles, after hearing testimony and considering the evidence, the jury found Shevlin Smith liable to McLaughlin and awarded judgment in the amount of $5.75 million. Shevlin Smith timely filed a petition for appeal with this Court. We granted Shevlin Smith's eight assignments of error and McLaughlin's seven assignments of cross-error.

II. Discussion
A. Whether The Circuit Court Erred In Failing To Sustain Shevlin Smith's Second Plea In Bar

Assignment of error 8 reads:

The circuit court erred in [failing to sustain Shevlin Smith]'s second plea in bar, and by rejecting Shevlin Smith's position that an attorney does not commit malpractice, as a matter of law, by failing to anticipate a change or shift in the law or by exercising judgment on an unsettled point.
1. Standard Of Review

We apply a de novo standard of review when [t]here are no disputed facts relevant to the plea in bar and it presents a pure question of law.” David White Crane Serv. v. Howell, 282 Va. 323, 327, 714 S.E.2d 572, 575 (2011).

2. The Circuit Court's Refusal To Sustain The Plea In Bar Was In Error

Shevlin Smith's second plea in bar argued that McLaughlin was barred from recovering on his legal malpractice claim because, as a matter of law, Shevlin Smith “did not breach the prevailing standard of care and [its] actions are protected by the judgmental immunity doctrine.” McLaughlin countered that the issue of Shevlin Smith's alleged breach was not one of law, but one of fact, and therefore to be determined by a fact finder. The circuit court denied Shevlin Smith's plea in bar on two bases. Neither basis justified the court's action.

a. A Plea In Bar Can Be Sustained Even If It Only Presents A Partial Bar To The Plaintiff's Recovery

The circuit court first reasoned that it could not sustain the plea in bar because, even if Shevlin Smith was not negligent by failing to correctly anticipate a judicial ruling on an unsettled legal issue, such a conclusion would not resolve all issues in the case because McLaughlin had alleged additional theories of breach. This was error.

“A plea in bar asserts a single issue [of fact], which, if proved, creates a bar to a plaintiff's recovery.” Hawthorne v. VanMarter, 279 Va. 566, 577, 692 S.E.2d 226, 233 (2010). Usually, as a plea in bar “reduce[s] litigation to a distinct issue of fact,” the issue of fact asserted by the plea in bar is dispositive as to the entire suit. Schmidt v. Household Fin. Corp., II, 276 Va. 108, 116, 661 S.E.2d 834, 838 (2008) (internal quotation marks, alterations, and citation omitted); see also, e.g., Ferguson v. Stokes, 287 Va. 446, 450–52, 756 S.E.2d 455, 457–58 (2014) (statute of limitations); Weichert Co. of Virginia v. First Commercial Bank, 246 Va. 108, 109, 431 S.E.2d 308, 308 (1993) (standing).

Although pleas in bar typically present a complete bar to the plaintiff's recovery, we have recognized that a plea in bar “constitutes [either] a complete defense to the [complaint], or to that part of the [complaint] to which it is pleaded.” Campbell v. Johnson, 203 Va. 43, 47, 122 S.E.2d 907, 910 (1961) (emphasis added) (...

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