Behr v. Imhoff, 2009 WL 6962145, July 8, 2009 (Pa. Com. Pl. 2009) is aPennsylvania case which examines some of the most important requirements for initiating a legal malpractice action. Most importantly, this case qualifies when damages exist and when ...
Behr v. Imhoff, 2009 WL 6962145, July 8, 2009 (Pa. Com. Pl. 2009) is aPennsylvania case which examines some of the most important requirements for initiating a legal malpractice action. Most importantly, this case qualifies when damages exist and when there is a duty originating from an attorney-client relationship. Both of these are necessary before a legal malpractice case can advance to the case-within-a case stage.
Behr and Imhoff were two of the three managers of a large investment fund. The managers formed the fund as a group of limited partners. At an annual investors' meeting in late 2002, Behr announced that the fund had received almost 300 potential investment opportunities between January and August of 2002. Following the meeting, Behr believed Imhoff and the third partner had misled the limited partners, and believed that the limited partners needed to be apprised of the situation. Behr sought the advice of an attorney who was employed as counselor to the Fund; she advised him that it would be against the Fund's interest to raise the issue with the partners because it was a minor issue and would be counter-productive.
Behr acted against this advice, issuing a clarifying statement concerning the number of reported investment opportunities. After releasing the statement in March 2003, Behr raised the issue publicly, accusing Imhoff, the attorney, and the third partner of various complaints. As a result of these accusations, the limited partners voted to remove Behr from his position as a Fund manager, and continued with Imhoff and the third partner.
Once removed from Fund management, Behr brought legal malpractice claims against the attorney, as well as claims against his former partners. Behr based the legal malpractice action on the counselor's representing the interests of the Fund over his individual interests. Behr also believed the poor legal advice provided by counsel prevented him from properly addressing the problems with the Fund, and increased the risk of harm to him personally. The court initially believed the case had no merits, and granted summary judgment; however, Behr appealed this order.
One of the hurdles to clear in a legal malpractice action is establishment of an attorney-client relationship which forms a duty; the failure of the attorney to exercise ordinary care; and that failure proximately caused damages. An essential element is proof of actual loss rather than breach of duty causing nominal, speculative, or threat of future loss. When referring to speculative damages, the standard is whether there is uncertainty concerning the identification of the existence of damages rather than the ability to precisely calculate the amount or value of damages.
Pennsylvaniais a bit different than other states in proving the employment context, because a fee-service contract is not required. An express contract is certainly helpful, but if not available the relationship can be implied in a number of ways; the purported client sought advice from the attorney, the advice sought was within the attorney's professional competence, the attorney expressly or impliedly agreed to render such assistance, and it is reasonable for the putative client to believe such attorney was representing him.
Behr's claim in this case was mainly it was not clear if the attorney was acting for him or for the Fund, or for both. He insisted that the attorney had a duty to advise Behr of any conflict of interest arising from the representation. By failing to advise Behr of any conflicts, Behr asserted that he was terminated by the Fund. His theory of liability was negligent performance of undertaking to render services.
The tort liability of negligent undertaking subjects a person to liability when they undertake to render services to another which he should recognize as necessary for the other's protection if the failure to exercise care increases that person's risk of harm, or harm is suffered because of reliance on the undertaking. InPennsylvania, increased risk of harm is not applicable to legal malpractice actions, thus Behr had to show actual damages. Because he could not show actual damages, this tort was dismissed.
The legal malpractice action initiated by Behr was also amenable to dismissal. There were two reasons cited by the Court; Behr failed to show the existence of actual damages and it was not reasonable for Behr to believe that the attorney was representing both his and the Fund's interests at the same time.
Behr could not prove actual damages because he acted against the advice of the attorney. When he initiated the case, Behr only submitted speculative numbers for damages. Additionally, he made claims which were based on an alternative course of action. However, the Court noted that had Behr listened to the advice of counsel, he likely would not have been terminated. Despite moving on, the advice from the attorney helped effectively resolve the issue regarding deception, and the termination was a result of Behr's poor decisions.
The second reason given by the court was based on a more objective test. Behr was an experienced businessman, and thus should have known that it was unreasonable for him to believe the attorney was acting for him if he suspected a conflict existed. This was considered in tandem with evidence that Behr had been responsible for hiring several outside attorneys to represent the Fund. This suggested that he was aware of the attorney's role as fund advisor. This negated a key element of the implied attorney-client relationship.
When analyzing this case, it is important to note the objective and subjective reasoning courts use. In defining "reasonable", courts will impute knowledge which they believe someone should have. This means a given person may or may not actually have that knowledge. Of course, this case describes someone who has experience hiring attorneys and should be familiar with the process. It would be equally viable that a first time client would reasonably not know of conflicts. This informs decisions an attorney should make in speaking with clients. Secondly, the subjective analysis of the alternative paths; courts are often asked to look at what would have happened had a person not done something. As with any other speculation, this sort of analysis can certainly provide grounds for disagreement. Most importantly, is the fact that the implied relationship is much harder to prove because of the various elements. Thus, when a client is unsure of representation, a fee-service contract which explicitly outlines the relationship should always be used.