4-2 Estoppel

• Jurisdiction: United States

4-2 Estoppel

The affirmative defenses of collateral estoppel, estoppel based on taking a position inconsistent with the one taken in a prior suit involving the same party, estoppel in pais, and res judicata are all discussed in Keramati v. Schackow.⁴

The Keramatis' child suffered a profound loss of hearing due to the alleged medical malpractice of a doctor who failed to promptly diagnose streptococcus bacteria that caused spinal meningitis. The Roberts' child, born at approximately the same time, at the same hospital, and attended by the partner of the doctor of the Keramatis' child, was severely retarded due to the same alleged failure to diagnose. Both families retained the law firm of Schackow & McGalliard to prosecute medical malpractice actions. The firm filed separate civil suits, which were assigned to different judges. The judge overseeing the Roberts' case granted the defendants summary judgment on statute of limitations grounds, and the appellate court affirmed on appeal.⁵

Schackow & McGalliard then negotiated a $200,000 settlement for the Keramatis, even though it had initially told the Keramatis their case might be worth as much as $2 million. The Keramatis agreed to the settlement but subsequently filed a legal malpractice suit, claiming that they had had no choice but to accept the settlement because of the expired statute of limitations. Although the trial court entered summary judgment in favor of the law firm on various estoppel theories, its decision was reversed on appeal.⁶

The appellate court first held that neither res judicata nor collateral estoppel was a viable defense: "Both doctrines require the identity of the parties or their privies to be applicable."⁷ An additional reason cited for rejecting the collateral estoppel argument was that the actions and issues in the underlying case and the legal malpractice case were "clearly not the same"⁸ because "[i]n the medical malpractice case, the adequacy of the amount settled for was not litigated, nor was the adequacy of Schackow's and McGalliard's representation in recommending such a settlement."⁹

Also absent was an "equitable basis to apply those cases which hold a party estopped in subsequent litigation to take a position inconsistent with one taken in a prior suit involving the same party."¹⁰ The $200,000 settlement may have been the best obtainable because of the lawyers' negligence. Moreover, because the law firm would be entitled to a set-off for the malpractice settlement, such settlement "appears to benefit them more than to harm them."¹¹ Lastly, the court found that estoppel in pais was inapplicable because the Keramatis' acceptance of the settlement did not amount to a false representation.¹²

Bill Branch Chevrolet, Inc. v. Philip L. Burnett, P.A.¹³ involved an allegation that a client was forced to settle a claim for more than its value due to inadequate trial preparation. Citing Keramati, the appellate court reversed the trial court's decision that a legal malpractice case cannot survive a settlement of the underlying case.¹⁴

Miller v. Finizio & Finizio, P.A.¹⁵ arose from a divorce case in which the former client claimed that the law firm had failed to obtain a required financial disclosure and had promised that financial disclosures and equitable distribution would be pursued after the marital settlement agreement was signed. An appeal followed a judgment on the pleadings in favor of the law firm. The ruling in favor of the law firm was based on the arguments that the plaintiff knowingly and voluntarily entered into the marital settlement agreement and that redressable harm could not be established because a marital settlement agreement always is subject to modification based on changed circumstances.

The first argument was rejected because

[u]nder Florida law, a client's mere acceptance of a settlement in a prior case does not automatically foreclose the client from bringing a malpractice suit against the attorney who handled the case. Keramati v. Schackow, 553 So.2d 741, 745-46 (Fla. 5th DCA 1989). A client's agreement to settle a case does not, as a matter of law, negate "any alleged legal malpractice as a proximate cause of loss." Bill Branch Chevrolet, Inc. v. Philip L. Burnett, P.A., 555 So.2d 455, 456 (Fla. 2d DCA 1990). Instead, "[t]his is a matter of proof for trial." Id.¹⁶

The second argument was rejected because

[it] is inconsistent with Florida's bright-line rule on accrual of legal malpractice claims.
Redressable harm for legal malpractice arising out of litigation occurs when "the litigation is concluded by final judgment" and "the final judgment becomes final." Silvestrone v. Edell, 721 So.2d 1173, 1175 (Fla. 1998). "[A] judgment becomes final either upon the expiration of the time for filing an appeal or post[-] judgment motions, or, if an appeal is taken, upon the appeal being affirmed and either the expiration of the time for filing motions for rehearing or a denial of the motions for rehearing." Id. at 1175 n.2.
The rule of Silvestrone, however, "merely establishes a bright line for establishing when the client has suffered some loss as a consequence of the attorney's negligence." Larson & Larson, P.A. v. TSE Indus., Inc., 22 So.3d 36, 42 (Fla. 2009) (plurality opinion). This bright-line rule "does not require that there be a determination of the full extent of all losses suffered by the client due to the lawyer's negligence." Id.
Here, under the bright-line rule of Silverstrone, the plaintiff's legal malpractice claim has accrued because the underlying dissolution litigation has been concluded by final judgment. The dissolution judgment is final within the meaning of Silverstrone because the time for filing an appeal or post[-]judgment motions has expired. The defendants' argument to the contrary is unworkable in practice and would create uncertainty as to when legal malpractice claims accrue in the family law context.¹⁷

In Winston v. Brogan,¹⁸ Bruce Winston discovered after his mother died that certain documents he had signed as part of her estate plan would result in his receiving her assets over the course of 25 years instead of upon her death. When he sued his mother's lawyers for malpractice, they moved for summary judgment and claimed Winston was estopped from suing because he had read and signed the documents. In rejecting this argument, the court wrote:

A client who, after receiving advice of counsel, signs a document acknowledging that he has read and understands it, should not necessarily be estopped from asserting that the advice he received from counsel was misleading. In this case, there remain questions of fact regarding the plaintiff's understanding of the transactions and the information he received from counsel.¹⁹

Collateral estoppel did not bar a claim for legal malpractice in Smith v. Perry,²⁰ which involved a former wife's claim against an attorney who allegedly failed to properly present her loss of consortium claim in a personal injury lawsuit brought by her former husband. The lawyer claimed that the malpractice issues were previously litigated in the divorce action. The court stated that collateral estoppel is applicable

where a subsequent cause of action between the same parties is upon a different claim or demand from the first cause of action. In such a case, the judgment of the prior action estops the parties from litigating in the second suit issues or questions common to both causes of action which were actually adjudicated in the prior litigation.²¹

The court determined that the issues presented in the dissolution action did not overlap the issues in the malpractice proceeding and overturned a contrary trial court summary judgment.²²

In Zeidwig v. Ward,²³ the Florida Supreme Court answered the following rephrased certified question in the negative: "[W]hether identity or mutuality of the parties or their privies is a prerequisite in Florida to the defensive application of the doctrine of collateral estoppel in the criminal-to-civil context."²⁴

The client had unsuccessfully asserted an "ineffective assistance of counsel" argument in the underlying criminal proceeding with regard to certain recorded conversations that he alleged would have exonerated him. The malpractice case was based on the use of the same tapes. The attorney's argument—that the client was collaterally estopped from proceeding on the same theory that he lost on in the criminal proceeding—trumped the client's argument that the identity of the parties in the two proceedings were not the same, rendering the doctrine inapplicable.²⁵ It should be noted that it is rare for a court to permit the use of collateral estoppel without requiring mutuality of the parties.²⁶

In USA Interactive v. Dow Lohnes & Albertson, P.L.L.C.²⁷ the court found that

collateral estoppel applies if: (a) an identical issue is being litigated by the parties in the subsequent litigation; (b) the issue was previously fully litigated; (c) the issue was litigated by the same parties or their privies; and (d) a final decision was reached by a court of competent jurisdiction.²⁸

Based on a review of the facts, the court determined that the third element was not satisfied because the attorneys were not parties to the state court litigation nor were they "virtually represented."²⁹

In Natural Answers, Inc. v. Carlton Fields, P.A.,³⁰ the court...