In Composition Roofers Local v. Bernard N. KATZ, Esq. and Meranze and Katz, the court held that an attorney who advised a Union it could lawfully pay the attorneys' fees to defend its officers charged with criminal activity was not negligent when it turned out his advise was erroneous. This was because there was no clear statement of the law on which the attorney could base his recommendation and such, his advice was not negligent, simply poor advice.
As the court put it, "an informed judgment on the part of counsel, even if subsequently proven erroneous, is not negligence."
The Union retained Bernard Katz, Esquire, to advise it on all legal matters. Thirteen of the Union's former members were indicted for its alleged criminal attempts to benefit the Union and its members. See United States v. Roofers Local 30, 686 F.Supp. 1139 (E.D.Pa. 1988), affirmed 871 F.2d 401 (3rd Cir. 1989), cert. denied, ___ U.S. ___, 110 S.Ct. 363, 107 L.Ed.2d 350 (1989).
Katz advised the Union that they could lawfully pay the legal expenses of the 13 members who were under indictment. The 13 members were later convicted of 152 criminal counts, including racketeering, RICO conspiracy, bribery of federal, state, and local officials, mail fraud, extortion, illegal kickbacks from providers to an employee benefit plan, embezzlement from the Union's legal services plan, and collecting debts for organized crime.
The attorney then advised the Union that it was lawful for it to pay for the appeals of the now convicted former members. The Union voted to authorize the payment of the attorneys' fees for the indicted Union officials and employees. The Union expended over one million dollars in attorneys' fees and related costs.
The court in United States v. Roofers Local 30, stated: "The use of union funds to pay for bail bonds, criminal defense and related costs incurred in criminal cases against Union officials is a breach of the Union officers' fiduciary responsibility... and constitutes illegaldisbursements."
The Union later sued the attorney for malpractice a breach of fiduciary duty claiming that the attorney was negligent in advising the Union that it could lawfully pay the attorneys' fees to defend its officers who were charged with criminal activity. The Union claims that Katz was negligent because he should have known that the payment of legal fees was in violation of the Labor Management Reporting and Disclosure Act.
However, after reviewing the cases, the court disagreed, saying the cases were not usually applied in that manner.In fact, the court specifically said "None of the cases we have reviewed, nor any of the cases cited by the Union are factually similar to the instant case." Further, the court went on to say that before United States v. Roofers Local 30, the previous court decisions would have led Katz to making the decision that he did and he would have had no indication that his advice would be erroneous.
Finally, the court says that in regards to the claim that Katz breached his fiduciary duty, "there is no indication that he acted in any manner other than with the utmost
good faith, integrity, fairness and undivided loyalty." As such, this claim was disregarded as well.
The take away point from this case was that while an attorney may be considered negligent if he fails to use ordinary skill, knowledge and care which would normally be possessed and exercised under the circumstances by members of the legal profession, simply being erroneous does not equate to malpractice.