8th Circuit: Malpractice Action May Proceed Before Underlying Lawsuit is Resolved

Legal malpractice claims usually aren’t filed until after somebody loses a lawsuit. But what happens when the underlying dispute hasn’t been resolved, but a litigant has to hire new counsel to clean up mistakes that were made during discovery?

A panel of the 8th Circuit Court of Appeals ruled Friday that under Arkansas law, Gerber Products Co. may pursue a malpractice suit to recover what it paid for “corrective attorney fees.” One justice said damages in the case may exceed $500,000.

The panel, in a 2-1 decision, reversed a decision by the US District Court to grant summary judgment in favor of the Mitchell Williams Selig Gates & Woodyard law firm in Little Rock.

The majority said most of the Arkansas court decisions it reviewed involved disputes that emerged after a lawsuit was resolved, creating a case within the malpractice case. But that doesn’t mean a party can never file a malpractice suit until the first lawsuit is resolved.

“It makes sense that proving a case-within-a-case is not a hard-and-fast requirement because an attorney’s negligence can result in injuries other than a loss in court,” the opinion says.

Gerber hired the Mitchell Williams firm in 2012 after it was sued by a contractor that had participated in a construction project at its plant in Fort Smith, Arkansas. During discovery, the plaintiff requested copies of emails related to the project and other documents, including the personnel files of two employees. Gerber produced 2,700 pages of documents on diskettes and did not object to releasing records that were protected by attorney-client privilege.

Not long after, Mitchell Williams received notice from the plaintiff’s counsel that documents subject to attorney-client privilege had been included in the batch of documents. The law firm was able to get those documents back and promised to create a privilege log, which is a list containing short descriptions of documents that are not being released and the reason they were withheld.

The mistakes compounded from there. The plaintiff filed more motions to compel and Gerber released 96,000 pages of records, but no privilege log. The plaintiff persisted and Gerber produced thousands of pages more, but this time with a privilege log.

Gerber hired new counsel, who filed a lawsuit seeking to recover privileged documents that had been inadvertently released. The Sebastian County Circuit Court Court ruled against that request, finding that Gerber had waived attorney-client privilege by releasing the documents. The Arkansas Court of Appeals affirmed the decision in 2017.

Gerber filed a malpractice suit in federal court against Mitchell Williams and attorney Byron Freeland, of counsel for the firm.

The US District Court for Eastern Arkansas ruled that Gerber could not proceed with a malpractice claim because the state court case had not yet gone to trial.

The Circuit Court majority found that the decision to dismiss the suit was an error. In order to win the malpractice suit, Gerber must show that the law firm’s actions were the proximate cause of its loss. The majority opinion says Gerber can prove proximate cause by showing that it would not have incurred the legal fees in the absence of Mitchell Williams’ negligence. The underlying case does not have to be decided.

“If the injury has nothing to do with an underlying judgment, in other words, the plaintiff can establish proximate cause “without proving the results of a trial,” the majority opinion says.

Justice Ericksen dissented, in part, to the ruling. He said in a separate opinion that federal courts can only predict how the Arkansas Supreme Court would ultimately rule on the question if the lawsuit were in state court.

“Before I would expose a law firm to this previously uncharted type of malpractice claim with potential damages exceeding $500,000, I would take the rare step of certifying the question to the Arkansas Supreme Court, even though neither party made such a request,” Ericksen said.

Mitchell Williams’ general counsel, Megan D. Hargraves, declined to comment on the case.