Professional Liability Alert: Court Confirms Absence of Causation in “Settle and Sue” Malpractice Claim Arising From Marital Dissolution Action

In Namikas v. Miller (No. B244685 – 4/14/2014, certified for publication 5/7/2014), the Second District Court of Appeal affirmed summary judgment for the defendant attorneys in connection with their former client’s malpractice claim, which alleged the settlement of his marital dissolution action was excessive because the attorneys used an incorrect methodology to calculate the permanent spousal support obligation to the client’s ex-wife for purposes of the Marital Settlement Agreement (“MSA”). The trial court’s order was based upon the absence of triable issues of fact as to whether, in the absence of the alleged negligence, the plaintiff would have obtained a more favorable settlement or judgment.

In the underlying dissolution proceeding, the husband’s spousal support obligation had been calculated utilizing DissoMaster software widely used by the courts to calculate and to set such obligations; a copy of the DissoMaster calculation had been attached to the parties’ June 2004 MSA. The attorney did not advise his client that because the “marital standard of living” is a factor considered by courts in awarding spousal support, he might consider obtaining a forensic analysis. The husband “grudgingly” accepted a settlement requiring $7,000 per month in permanent spousal support because it also imputed $4,000 per month in income to the ex-wife, and the deal resulted in net after-tax support payments of $3,885. Over the next few years, the husband sought to modify the support required, but the defendant attorneys had advised it was too soon to do so. The husband then retained new counsel, who engaged a forensic specialist to analyze the ex-wife’s monthly needs based on the “marital standard of living.” Based on that analysis, the husband concluded his ex-wife needed only $738 in monthly support on top of her other net income and moved to modify the 2004 support order. In June 2012, the court concluded the ex-wife needed support of only $2,750 per month for two years and ordered that support be discontinued at the end of that period.

The husband then sued his former attorneys for legal malpractice, alleging that their negligence caused him to pay excessive spousal support for eight years because no “marital standard of living” analysis had been obtained when the MSA was entered into in 2004. The attorneys moved for summary judgment on the grounds that the husband could not prove that his ex-wife would have settled for less than $7,000 per month, or that he would have obtained a better outcome at trial. A declaration from the ex-wife’s attorney supported that argument, confirming that even if he had received the recently prepared “marital standard of living” calculations, he would not have agreed to settle the spousal support issue for less than $7,000 per month.

Citing a series of California precedents, including Viner v. Sweet (2003) 30 Cal.4th 1232, which require malpractice plaintiffs to prove that, but for the attorney’s negligence, the plaintiff would have obtained a more favorable judgment or settlement, thus establishing damages to a “legal certainty,” the appellate court concluded that the husband failed to meet this burden. First, it determined that the husband failed to present evidence suggesting that his ex-wife would have accepted less than $7,000 per month. The court concluded that the allegation that the husband would have obtained a better settlement was based on “speculation, imagination, guesswork, or mere possibilities” (citing Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1058). Next, the court held that the husband failed to meet the burden of establishing what a better outcome at trial would have been. It explained that ultimately, the “martial standard of living” is only one of many factors for determining need and support. The court reasoned that the husband’s income of $30,000 per month and his ex-wife’s unemployed status and struggles with substance abuse trumped all other factors as to whether the husband could have obtained a better result at trial.

Clients suing their former attorneys for malpractice in the “settle and sue” situation confront a high burden of proof on the element of causation, and attorney defendants enjoy the possible option of summary judgment as a result unless the plaintiff can establish a clear factual basis for the conclusion that a better outcome would have occurred. In the family law context, even assuming that the defendant attorney erred, the plaintiff must still establish that the ex-spouse would have accepted a lower settlement amount or, alternatively, that he or she would have fared better at trial than the amount of the questioned settlement. This decision clearly illustrates the difficulties for plaintiffs in fulfilling such requirements.

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May 9, 2014