Schmidt v. Coogan

181 Wash.2d 661

335 P.3d 424

Teresa SCHMIDT, Petitioner

v.Timothy P. COOGAN and Deborah Coogan, and the marital community comprised thereof; and The Law Offices of Timothy Patrick Coogan and all partners thereof, Respondents.

No. 88460–9.

Supreme Court of Washington, En Banc.

Oct. 9, 2014.

Dan'L Wayne Bridges, McGaughey Bridges Dunlap PLLC, Seattle, WA, for Petitioner.

Paul Alexander Lindenmuth, Benjamin Franklin Barcus, Ben F. Barcus & Associates PLLC, Tacoma, WA, for Respondent.

Opinion

WIGGINS, J.

¶ 1 This legal malpractice case presents two questions that we have never before addressed. The first is whether the elements of legal malpractice include the collectibility of an underlying judgment. Jurisdictions are split. We adopt the growing trend to make the uncollectibility of an underlying judgment an affirmative defense that negligent attorneys must plead and prove. The second is whether emotional distress damages are available in legal malpractice cases. We hold that the facts of this case do not support an award of emotional distress damages.

FACTS AND PROCEDURE

¶ 2 In December 1995, Teresa Schmidt slipped and fell while visiting a Tacoma Grocery Outlet. She retained Timothy Coogan to represent her in a claim against the store. On December 21, 1998, just days before the statute of limitations ran, Coogan filed a complaint naming the wrong defendant. He subsequently filed two amended complaints, but the trial court dismissed the case as barred by the statute of limitations.

¶ 3 Schmidt then filed a complaint against Coogan, asserting claims for negligence and breach of contract. The case went to trial in November 2003, and the jury returned a verdict in favor of Schmidt in the amount of $32,000 for past economic damage and $180,000 for noneconomic damages. The trial court granted a new trial on the issue of damages only, finding that Coogan was denied a fair trial. Schmidt's counsel gave an improper closing argument, and the damages were so excessive as to unmistakably indicate that the verdict was the result of passion and prejudice. The Court of Appeals affirmed the trial court's order granting a new trial on damages.¹

¶ 4 In March 2010, Schmidt moved for leave to amend the complaint to add a claim for outrage/reckless infliction of emotional distress. She alleged that Coogan harassed, intimidated, and belittled her when she raised the problem of the statute of limitations before it expired.² During the 2003 trial, the jury was instructed to determine general damages arising out of Coogan's conduct and malpractice. In the second trial, however, Coogan challenged the availability of general damages in legal malpractice cases. Because her counsel could not find settled authority either affirming or denying the availability of emotional distress damages in Washington, Schmidt sought to add a claim that encompassed the damages. The trial court denied Schmidt's motion to amend. Schmidt also filed a motion for summary judgment on the availability of general damages and a motion in limine. The court denied both motions.

¶ 5 After Schmidt rested her case in the damages-only trial, Coogan moved for judgment as a matter of law. He argued that collectibility was an essential element of legal malpractice and that Schmidt presented no evidence that a judgment against Grocery Outlet would have been collectible. The court denied the motion, and the jury returned a verdict in favor of Schmidt for $83,733.16 plus interest.

¶ 6 Coogan appealed the jury verdict, arguing that the trial court should have granted his motion for judgment as a matter of law. Schmidt cross appealed on the ground that general damages are available in attorney malpractice claims and that the trial court erred in denying her motion to amend the complaint. The Court of Appeals concluded that collectibility was an essential component of damages that Schmidt failed to prove, and it reversed the trial court's denial of Coogan's motion for judgment as a matter of law. Schmidt v. Coogan, 171 Wash.App. 602, 604, 287 P.3d 681 (2012), review granted, 177 Wash.2d 1019, 304 P.3d 115 (2013).

ANALYSIS

¶ 7 The primary questions before us are (1) whether collectibility is an element of malpractice and (2) whether a plaintiff may recover emotional distress damages for legal malpractice. These are questions of law, which we review de novo. Cost Mgmt. Servs., Inc. v. City of Lakewood, 178 Wash.2d 635, 641, 310 P.3d 804 (2013).

I. Collectibility

¶ 8 Our court has never addressed how the collectibility of an underlying judgment intersects with the elements of legal malpractice. We hold that the burden of establishing collectibility is not on the plaintiff-client. Rather, uncollectibility is an affirmative defense that a defendant-attorney must plead and prove.

¶ 9 Uncollectibility may be a relevant inquiry because it relates to proximate cause and damages elements of legal malpractice. The essential elements are:

“(1) The existence of an attorney-client relationship which gives rise to a duty of care on the part of the attorney to the client; (2) an act or omission by the attorney in breach of the duty of care; (3) damage to the client; and (4) proximate causation between the attorney's breach of the duty and the damage incurred.”

Ang v. Martin, 154 Wash.2d 477, 482, 114 P.3d 637 (2005) (quoting Hizey v. Carpenter, 119 Wash.2d 251, 260–61, 830 P.2d 646 (1992) ). The measure of damages is the “amount of loss actually sustained as a proximate result of the attorney's conduct.” Matson v. Weidenkopf, 101 Wash.App. 472, 484, 3 P.3d 805 (2000). If the underlying judgment was uncollectible, for example, due to insufficient assets or bankruptcy, the lost value of the judgment is not the proximate result of an attorney's negligence. The client could not have collected the judgment even if the attorney used reasonable care.

¶ 10 While the collectibility of an underlying judgment may be relevant, the great weight of public policy considerations support our holding that uncollectibility is an affirmative defense. Traditionally, a majority of jurisdictions placed the burden of proving collectibility on the plaintiff. See McDow v. Dixon, 138 Ga.App. 338, 339, 226 S.E.2d 145 (1976) ; Whiteaker v. State, 382 N.W.2d 112, 114–15 (Iowa 1986) ; Jernigan v. Giard, 398 Mass. 721, 723, 500 N.E.2d 806 (1986) ; Eno v. Watkins, 229 Neb. 855, 857, 429 N.W.2d 371 (1988). However, in more recent years, states have begun departing from this rule and have placed the burden on the defendant-attorney. See Power Constructors, Inc. v. Taylor & Hintze, 960 P.2d 20, 31 (Alaska 1998) ; Clary v. Lite Machines Corp., 850 N.E.2d 423, 440 (Ind.Ct.App.2006) ; Jourdain v. Dineen, 527 A.2d 1304, 1306 (Me.1987) ; Teodorescu v. Bushnell, Gage, Reizen & Byington, 201 Mich.App. 260, 268, 506 N.W.2d 275 (1993) ; Hoppe v. Ranzini, 158 N.J.Super. 158, 171, 385 A.2d 913 (1978) ; Carbone v. Tierney, 151 N.H. 521, 533, 864 A.2d 308 (2004) ; Kituskie v. Corbman, 552 Pa. 275, 285, 714 A.2d 1027 (1998).

¶ 11 The traditional approach rests primarily on the theory that it is consistent with tort law: plaintiffs may recover only the amount that will make them whole (and not a windfall), and the plaintiff must prove both proximate cause and injury. See Klump v. Duffus, 71 F.3d 1368, 1374 (7th Cir.1995) ; McKenna v. Forsyth & Forsyth, 280 A.D.2d 79, 84, 720 N.Y.S.2d 654 (2001). This approach overlooks major policy concerns.

¶ 12 First, the traditional approach unfairly presumes that an underlying judgment is uncollectible when the record is silent. See Power Constructors, Inc., 960 P.2d at 31–32. The presumption is unnecessary and requires a client to always prove the opposite, even when there is no real question regarding solvency. Generally, collectibility is an issue only after the client has established the existence of a fiduciary relationship, the failure of the attorney to exercise due care, the attorney's negligence resulted in losing a valid claim (i.e., proving the “case within a case”), and the amount of the lost judgment. The need to establish collectibility is the result of an attorney's established malpractice at this point in the trial. It is a burden created by the negligent attorney. The presumption that a judgment would have been uncollectible places an unfair burden on the wronged client.

¶ 13 Second, the negligent attorney is in as good a position, if not better, than the client to discover and prove uncollectibility. If the underlying judgment would have been uncollectible, the original attorney should have advised his client of this fact. Failing to do so is negligent and, potentially, a breach of the attorney-client fiduciary relationship. Here, Coogan undertook an investigation of whether the slip-and-fall case was a good faith lawsuit when he represented Schmidt. Coogan testified by deposition (in a statement not placed into evidence before the jury) that an insurance company representative for Tacoma Grocery Outlet confirmed insurance coverage on more than one occasion. This suggests that the attorney is in a better position than the client to establish uncollectibility because the attorney has investigated the underlying claim closer to the time of the accident.

¶ 14 Third, the traditional approach has the unfortunate effect of introducing evidence of liability insurance into every legal malpractice case. The rules of evidence and the case law generally prohibit introducing evidence of liability insurance in negligence cases. See ER 411 ; Todd v. Harr, Inc., 69 Wash.2d 166, 168, 417 P.2d 945 (1966) (“[T]he fact that a personal injury defendant carries liability insurance is entirely immaterial, and the deliberate or wanton injection of this matter into the case by plaintiff is ground for reversal.”); Kappelman v. Lutz, 141 Wash.App. 580, 590, 170 P.3d 1189 (2007) (“[T]he fact that a defendant in a personal injury case carries liability insurance is not material to the questions of negligence and damages.”). Our...