Is is Legal Malpractice or Breach of Fiduciary Duty?

Often times a lawyer’s misconduct can involve both negligence (i.e. legal malpractice) and breaches of fiduciary duty. How can you tell if your issues with your lawyer involves one, or the other, or both? The difference between legal malpractice and breach of fiduciary duty can oftentimes be important, since different statutes of limitations and different damages issues may come into play.

The statute of limitations in some jurisdictions for legal malpractice may be shorter than the limitations period for breaches of fiduciary duty, and damages like emotional distress damages or punitive damages may not be available for legal malpractice, but recoverable for some forms of breaches of fiduciary duty. It is, therefore, important to have the facts of each potential case evaluated by a certified expert in the field of legal malpractice.

One recent case illustrates some of these points. The case revolved around a practice of salesmen going door-to-door and selling home renovation. They promised a low cost loan, with a cash-out feature. Plaintiff thought that she was replacing her old mortgage with a lower interest mortgage, getting her bathroom renovated and getting $7,000 cash out. Sadly, it did not work out. When an attorney called her and suggested that he represent her at the closing, sadly it did not work out either.

To state a cause of action for a breach of fiduciary duty, a plaintiff must allege (1) the existence of a fiduciary duty relationship, (2) misconduct by the defendant, and (3) damages directly caused by the defendant’s misconduct. In this case, Amritt-Hall alleged that Horn was acting in his capacity as her attorney in the refinancing transaction, and that such fiduciary relationship continued beyond the subject closing due to his representations that he would obtain a traditional refinanced loan on her behalf at a more favorable rate and with a more favorable term. She further alleged that she was injured because Horn intentionally and willfully solicited her with false information, failed to represent her interests at closing, failed to ensure that she had the information necessary for making informed decisions, and misled her into believing that she would obtain a more favorable loan after closing. In moving to dismiss, Horn argued that Amritt-Hall had mislabeled what is essentially a legal malpractice claim instead as a breach of fiduciary duty claim involving fraud (with a longer six-year statute of limitations) in order to avoid the shorter statute of limitations for malpractice claims, which he claimed had expired. In determining whether the claim sounds in malpractice or arises from a fiduciary relationship, the court looked to the essence of the claim rather than the form in which it was pleaded. A fiduciary relationship is defined as one “founded upon trust or confidence reposed by one person in the integrity and fidelity or another”, the hallmark of which is an imbalance of power between the parties. Although the allegations in this case were similar, the court found the cause of action was sufficiently based on a violation of the trust Amritt-Hall placed in Horn to represent her in the loan transaction and secure refinancing thereafter, rather than some kind of lack of skill or negligence in performing his duties. The court also noted that the breach of fiduciary duty claim was not duplicative of the fraud claim asserted against him. Rather, the alleged fraud Horn perpetrated against his client was one way in which he violated the trust placed in him by virtue of the fiduciary nature of their relationship. Other courts have found that a separate claim for fraud does not exist when it is duplicative of a legal malpractice claim because it was based on concealment or intentional failure to disclose the attorney’s own lack of competence or legal expertise.

Lawyers have many fiduciary duties, including a duty of loyalty, a duty to zealously protect a client’s interests and the sacred duty of confidentiality. Many of these duties can continue to exist long after the termination of the attorney-client relationship, and many can form the basis of a cause of action against a former attorney which is different and distinct from a claim of negligence.

Many of the cases against lawyers we handle at Stanford, Ryan & Associates, APC involve claims and causes of action for both legal malpractice and breaches of fiduciary duties, and we aggressively prosecute both. We would be pleased to discuss the facts and circumstances of your particular case with you.