3:7 Unsettled Law Doctrine

• Jurisdiction: Arizona

§ 3:7 Unsettled Law Doctrine

In Martin v. Burns,^[94] an attorney had obtained a default judgment on a client’s behalf. The party against whom the default was entered appealed and the default judgment was set aside. The clients later sued their attorney, on the theory that the attorney should have argued that the default judgment was nonappealable.^[95]

The Arizona Supreme Court held that the attorney would not be liable while acting in good faith “for a mistake in a point of law that has not been settled by the highest court of the jurisdiction and upon which reasonable lawyers may differ.” (Cite omitted.)^[96]

The court then stated:

There were no cases prior to the consideration of the Overson matter in which this question was presented. See Overson v. Martin, 90 Ariz. 9, 363 P.2d 604 (1961). It is clear that a lawyer cannot predict accurately what courts may in the future decide on a point of law . . . . Although the appellees may have been incorrect in believing the order to be appealable, we cannot say that they were guilty of malpractice for this error. The law was not well settled at the time of the appeal that the order there involved was not appealable.^[97]

Similarly, in Molever v. Roush,^[98] the client alleged that the attorney was negligent for failing to object at trial to jury instructions regarding defamation. The Arizona Court of Appeals held:

Moreover, to the extent that Peagler could conceivably be read to suggest that a conditional privilege could be overcome by a mere showing of negligence, Roush, in the face of Arizona authority to the contrary, would not be negligent for failing to object on Peagler grounds. An attorney is not liable for negligence regarding unsettled issues of law on which reasonable attorneys may differ. (Cites omitted.)^[99]

Given that the law is unsettled on many points, these cases and a couple of similar cases opened the floodgates and Arizona attorneys being sued for malpractice began arguing in every case that they were not liable under the unsettled law doctrine.

In Baird v. Pace,^[100] the Arizona Court of Appeals narrowed the unsettled law doctrine significantly. Baird sued attorney Pace for failing to properly file a security interest. Pace argued that under the unsettled law doctrine, it was not completely clear where the interest should have been filed and that this was a complete defense to negligence.

Baird argued that Pace should have simply filed the security interest in all possible...