Sherman v. Ellis, Esquire

IN THE SUPERIOR COURT OF THE STATE OF DELAWARE
DEAN SHERMAN, :
:
:
Plaintiff, :
: C.A. No. K18C-06-009 JJC
: In and for Kent County
v. :
:
STEPHEN P. ELLIS, ESQUIRE, :
:
:
Defendant. :
OPINION
Submitted: November 22, 2019
Decided: January 2, 2020
Patrick K. Gibson, Esquire, Ippoliti Law Group, Wilmington, Delaware, Attorney
for Plaintiff.
Colleen D. Shields, Esquire, Gary W. Lipkin, Esquire, & Alexandra D. Rogin,
Esquire, Eckert Seamans Cherin & Mellott, LLC, Wilmington, Delaware, Attorneys
for Defendant.
Clark, J.
Plaintiff Dean Sherman sues his former attorney, Stephen Ellis, Esquire, for
legal malpractice. Prior to Mr. Sherman’s 1997 marriage, Mr. Ellis drafted a
premarital agreement (the “Agreement”) designed to protect Mr. Sherman’s assets.
Mr. Sherman then presented the Agreement to his fiancé. 1 The Agreement waived
her right, upon divorce, to receive alimony or to share in wealth accumulated over
the course of their marriage. Her attorney advised her not to sign it but she
nevertheless did.
During their divorce proceedings in 2015, Mr. Sherman’s wife challenged the
Agreement’s enforceability in Family Court. The Family Court found it to be
unconscionable and thus unenforceable. The Delaware Supreme Court, however,
reversed the Family Court’s decision. In the end, the Agreement successfully barred
her challenges.
Notwithstanding Mr. Sherman’s success after appeal, he now sues Mr. Ellis
because he did not include a waiver of disclosure clause in the draft agreement.
According to Mr. Sherman’s expert, it would have been a “silver bullet” removing
the incentive for his ex-wife to engage in protracted litigation. Mr. Sherman claims
that this expanded litigation in turn expanded his costs and fees. He now seeks to
recover those attorney and expert fees from Mr. Ellis.
Presently, Mr. Ellis seeks summary judgment in a motion that raises two
principal issues. First, the motion requires the Court to evaluate the legal foundation
for Mr. Sherman’s expert’s standard of care opinion. Second, with regard to
proximate cause, the motion addresses a plaintiff’s ability to recover for legal
malpractice in drafting a premarital agreement that, in the end, successfully
1
Mr. Sherman’s former spouse is not a party. The Court will refer to her as Mr. Sherman’s fiancé,
wife, or ex-wife as did the Delaware Supreme Court when it assigned her a pseudonym in the
underlying action. See Silverman v. Silverman, 206 A.3d 825 (Del. 2019) (assigning pseudonyms
and general titles to the parties).
2
protected the plaintiff’s assets. To evaluate the second issue, the Court must address
whether the standard for proximate cause in transactional legal malpractice claims
differs from the standard applied in litigation legal malpractice claims.
For the reasons that follow, genuine issues of material fact remain regarding
the applicable standard of care and whether Mr. Ellis breached that standard.
However, in this case, there is insufficient evidence of record to support an inference
that Mr. Sherman’s ex-wife would have agreed to include this “silver bullet” term in
the Agreement. In addressing an issue of first impression, the same “but for”
proximate cause limitation that applies in litigation malpractice actions must apply
in transactional legal malpractice actions. When applying that standard, because
record evidence does not support an inference that Mr. Sherman’s ex-wife would
have likely accepted the term, the trier of fact would be forced to speculate regarding
whether Mr. Ellis’s alleged negligence proximately caused Mr. Sherman harm. For
that reason, Mr. Ellis’s motion for summary judgment must be GRANTED.
FACTS AND PROCEDURAL BACKGROUND
The recited facts are those of record when viewed in the light most favorable
to Mr. Sherman, the non-movant. In 1997, Mr. Sherman retained Mr. Ellis to
negotiate and draft the Agreement prior to his marriage. The draft included
provisions designed to protect Mr. Sherman’s assets in the event of a divorce. It also
included a mutual waiver of alimony. Finally, it included a clause recognizing that
both parties had fully disclosed their premarital assets.2 The proposed agreement,
2
Pl. Response, Ex. A., Ex. 1, “Ante-Nuptial Agreement” at 3 (providing “[t]he parties hereby
acknowledge that each of them has made a full disclosure to the other of all property owned or
otherwise held by each respective party on Exhibits ‘A’ and ‘B’ attached hereto”).
3
however, did not contain a waiver of the parties’ obligations to disclose assets and
obligations “beyond the disclosure provided.”3
Before his fiancé signed the Agreement, she consulted with an attorney. Her
attorney first asked Mr. Sherman to revise the proposed agreement to secure her
future financial security. Mr. Sherman rejected those requests with the exception of
one minor issue. His fiancé then met with her attorney to review the Agreement.
He told her that it was one-sided and that she should not sign it. Notwithstanding
this advice, she executed it. When doing so, she acknowledged in writing that her
attorney had advised her not to. The two then married.
In 2015, Mr. Sherman’s wife filed for divorce and moved to set aside the
Agreement. At that point, Mr. Sherman’s assets exceeded twelve million dollars and
his annual income exceeded one million dollars. In contrast, she had no independent
income or separate assets. In her motion to set aside the Agreement, she argued that
it was unenforceable because she did not execute it voluntarily. 4 She also argued
that the Agreement was unconscionable because (1) she was not provided a fair and
reasonable disclosure of Mr. Sherman’s property, and (2) because she “did not
voluntarily and expressly waive in writing any right to that disclosure.” 5
Prior to the parties’ execution of the Agreement in 1997, Mr. Sherman had
disclosed in writing his then four million dollars in assets.6 The disclosure, however,
contained errors. Namely, it omitted that he owned a Ford Explorer (though his
fiancé had nearly exclusive use of it prior to the disclosure) as well as a three
thousand dollar life insurance policy. It also inaccurately described his one hundred
3
See 13 Del. C. § 326(a)(2)b (permitting a waiver of disclosures beyond those provided).
4
See id. at § 326(a)(1) (providing a premarital agreement is unenforceable if not executed
voluntarily).
5
Pl. Response, Ex. A, Ex. 3, “Motion to Set Aside Ante-Nuptial Agreement,” at ¶ 5.
6
Pl. Response, Ex. A, Ex. 1 at 7.
4
percent interest in a two hundred acre property as a fifty percent interest.7 In the
Family Court property division litigation, after discovery, briefing, and oral
argument, that court held the Agreement to be unconscionable. Because of the
disclosure errors, it also held that Mr. Sherman’s disclosure of assets and liabilities
was not fair and reasonable.8
Mr. Sherman then filed an interlocutory appeal to the Delaware Supreme
Court. With that appeal pending, Mr. Sherman filed the current legal malpractice
suit against Mr. Ellis. The then legal backdrop to the malpractice case included only
the adverse Family Court finding, which at that point was on appeal.
After Mr. Sherman filed suit, the Delaware Supreme Court reversed the
Family Court’s decision. 9 When doing so, it confirmed that Mr. Sherman’s ex-wife
had voluntarily executed the Agreement10 and that Mr. Sherman’s disclosure of his
property and financial obligations was fair and reasonable. 11 As a result, the
Supreme Court held it to be immaterial whether or not the Agreement was
unconscionable.12 It held the Agreement to be enforceable.13
Nevertheless, Mr. Sherman continues to prosecute his legal malpractice claim
against Mr. Ellis. In doing so, he seeks to recover significant attorneys’ fees that he
alleges he incurred while litigating the unconscionability of the Agreement in Family
Court and on appeal. His claim centers on Mr. Ellis’s allegedly negligent failure to
7
Id. See also Silverman v. Silverman, 206 A.3d 825, 833 (Del. 2019) (summarizing the errors in
the disclosures).
8
Sherman v. Sherman, No. CS15-01396, 2018 (Del. Fam. Apr. 4, 2018).
9
Silverman, 206 A.3d at 834.
10
Id. at 829 (explaining that “[t]he parties have accepted the Family Court's ruling that Wife
voluntarily entered into the premarital agreement. Thus, voluntariness is no longer at issue.”).
11
Id. at 833–34.
12
Id. at 834.
13
Id.
5
include a single clause or sentence in the Agreement—a waiver of disclosures term
authorized by Delaware’s Premarital Agreement Act (the “Act”).14
The Act recognizes that a clause in a premarital agreement that waives further
disclosure of assets or financial obligations has a direct bearing on the enforceability
of a premarital agreement. 15 While the parties dispute the effect of this portion of
the Act, there is no dispute that the Agreement contained no waiver of disclosure
provision.
In the present suit, Mr. Sherman identified Judy Jones, Esquire, as his expert
witness. In her report and deposition testimony, Ms. Jones opines that including the
waiver provision would by itself have precluded any claim that the Agreement was
unconscionable. As a result, she further opines that the standard of care for a
domestic attorney as of 1997 required an attorney to include this waiver provision
in the Agreement. Mr. Ellis’s expert counters that the standard of care did not require
Mr. Ellis to include such a provision.
Apart from the standard of care issue, evidence of record relevant to proximate
cause of harm is limited to three sources. First, Mr. Sherman’s litigation attorney,
David Gagne, Esquire, testified in his deposition that Mr. Sherman incurred
additional fees and costs because Mr. Ellis did not include the provision in the
Agreement. Specifically, Mr. Gagne testified as a fact witness that because Mr. Ellis
did not include this language, Mr. Sherman had to hire two experts to address
property values that would have otherwise been unnecessary. 16 Those expert fees
were approximately $38,000. Mr. Gagne also estimated that $285,000 of a total of
$310,000 in attorneys’ fees that he charged were necessary only because Mr. Ellis
14
See 13 Del. C. §§ 321–28.
15
See 13 Del. C. § 326.
16
Mr. Ellis also filed a motion in limine to exclude Mr. Gagne’s testimony to the extent that it
includes expert opinions. The Court need not decide that motion for purposes of this decision.
6
did not include the disputed provision in the Agreement. Second, Ms. Jones offers
her expert opinion that Mr. Ellis’s failure to include this term proximately caused
the increased costs and fees identified by Mr. Gagne. Third, Mr. Sherman argues
that his ex-wife’s agreement to what were otherwise draconian terms in a one-sided
Agreement circumstantially supports a reasonable inference that she would have
agreed to anything he asked, including the waiver of disclosure provision.
Notwithstanding that his ex-wife agreed to other one-sided terms, there is no
evidence of record addressing her impressions regarding a waiver of disclosure
provision or her willingness to agree to one. Namely, there is no direct evidence
from her or the then-attorney that bears upon what other terms she may have agreed
to. While she agreed to the vast majority, but not all of the terms proposed in the
draft agreement, Mr. Sherman did not depose her or her then-attorney regarding how
she would have reacted to the provision at issue. Likewise, there is no
correspondence, documentary evidence, or circumstantial evidence demonstrating
her propensity to agree to that specific provision.
Mr. Ellis now moves for summary judgment. He has also filed a motion in
limine to exclude Ms. Jones’s expert opinions regarding standard of care and
proximate cause of damages. Because Ms. Jones offers opinions regarding each
element of Mr. Sherman’s malpractice claim, the foundation for her opinions must
be addressed when deciding Mr. Ellis’s motion for summary judgment.
ARGUMENTS OF THE PARTIES
Mr. Ellis raises three arguments in support of his motion. First, he argues that
there is no genuine issue of material fact regarding the standard of care. In support
of this argument, he relies upon his expert’s opinion that the standard of care did not
require the waiver language to be included in the Agreement. Furthermore, he asks
the Court to disregard Ms. Jones’s expert opinion because she allegedly
7
misinterprets a provision in the Act that anchors her standard of care opinion.
Because she misinterprets the statute, he argues that her opinion has no foundation
and should be rejected for purposes of summary judgment.
Second, he argues that because the Agreement survived a legal challenge and
protected Mr. Sherman’s assets, Mr. Sherman’s claim fails as a matter of law. He
concedes the absence of mandatory authority or in-State persuasive authority
regarding transactional malpractice claims. Rather, Mr. Ellis cites other states’
authority holding that a legal malpractice plaintiff must demonstrate that, but for the
defendant’s conduct, he or she would have obtained a more favorable result than the
one obtained. According to Mr. Ellis, applying the same “case within a case”
approach used by many courts in litigation malpractice actions, mandates summary
judgment in this case.
Third, Mr. Ellis argues that Mr. Sherman’s claim is “fatally speculative.”17
He lists six assumptions that a jury would need to speculate about before it could
find proximate cause of harm. Namely, he argues that Mr. Sherman’s claim requires
speculation regarding the following: (1) Mr. Sherman’s former wife would have
accepted the waiver of disclosure language if Mr. Ellis had proposed it; (2) Mr. Ellis
never, in fact, proposed the language; (3) if he included the language in the
Agreement, she would not have challenged the Agreement anyway; (4) the litigation
expenses would have been less had he included the waiver of disclosure language;
(5) the Family Court would have ruled differently if the waiver language was
included; and (6) Mr. Sherman’s ex-wife, as opposed to Mr. Sherman, would not
have appealed if she had lost in Family Court.18 On balance, he argues that because
there is no evidence regarding Mr. Sherman’s ex-wife’s willingness to have agreed
17
Def. Ellis Opening Br. at 10.
18
Id. at 5.
8
to this pivotal term or her resolve to continue litigating under various scenarios,
proximate cause of harm to Mr. Sherman is speculative.
In response, Mr. Sherman argues that the evidence of record creates issues of
material fact precluding summary judgment. Namely, he argues that the conflicting
deposition testimonies of his and Mr. Ellis’s expert witnesses create a jury question
as to the appropriate standard of care. Mr. Sherman also argues that Ms. Jones’s
interpretation of the Act is correct as a matter of law. Finally, Mr. Sherman urges
the Court to apply a relaxed approach when evaluating proximate cause of damages.
He argues that the relationship of damages to the negligence alleged is not
speculative when applying this relaxed standard.
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate only if there is no genuine issue of material
fact and the movant is entitled to judgment as a matter of law. 19 The Court must
view the evidence in the light most favorable to the non-moving party. 20 The burden
of proof is initially on the moving party. 21 However, if the movant meets his or her
initial burden, then the burden shifts to the non-moving party to demonstrate the
existence of material issues of fact. 22 The non-movant's evidence of material facts
in dispute must be sufficient to withstand a motion for judgment as a matter of law
and sufficient to support the verdict of a reasonable jury. 23
19
Super. Ct. Civ. R. 56(c); Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979).
20
Brozaka v. Olson, 668 A.2d 1355, 1364 (Del. 1995).
21
Super. Ct. Civ. R. 56(e); Moore, 405 A.2d at 680 (Del. 1979).
22
Moore, 405 A.2d at 681 (citing Hurtt v. Goleburn, 330 A.2d 134 (Del. 1974)).
23
Lum v. Anderson, 2004 WL 772074, at *2 (Del. Super. Mar. 10, 2004).
9
ANALYSIS
The Court must first determine whether there is a genuine issue of material
fact regarding the standard of care applicable to Mr. Ellis. Because (1) expert
testimony regarding this issue is necessary, and (2) Mr. Sherman’s expert relies upon
her interpretation of the Act to support her opinion, the Court must determine if the
Act supports her position. Next, the Court must address whether Mr. Sherman states
a claim when the Agreement ultimately protected his assets. In other words, is there
any legally recognizable harm when the Agreement fulfilled its primary purpose,
although through a more circuitous route? Finally, the Court must address whether
the evidence of record, when examined in the light most favorable to Mr. Sherman,
demonstrates a genuine issue of material fact regarding proximate cause.
The record demonstrates a genuine issue of material fact regarding the
applicable standard of care and whether Mr. Ellis breached it.
Central to the Court’s decision regarding the standard of care is Mr. Ellis’s
motion in limine to exclude Ms. Jones’s opinion regarding the applicable standard
of care.24 Expert testimony is required for a plaintiff to establish the standard of care
in a legal malpractice case. As to the standard of care, the parties offer competing
expert opinions. Ms. Jones’s relevant opinion includes that Mr. Ellis “acted
negligently and breached the applicable standard of care for a Delaware lawyer when
24
Neither Mr. Ellis nor Mr. Sherman couched their submissions in terms of a Daubert challenge.
Foundational requirements are an aspect of a Daubert review. See Perry v. Berkley, 996 A.2d
1262, 1267 (Del. 2010) (explaining the Delaware Supreme Court “has adopted the United States
Supreme Court holding in Daubert [v. Merrell Dow Pharm., Inc., 509 U.S. 579, 593–95 (1993)],
which requires that an expert's opinion be based upon a proper factual foundation and sound
methodology to be admissible, as the correct interpretation of D.R.E. 702”). Because the parties
proceeded immediately to their contrary arguments regarding the proper interpretation of the Act
and whether Ms. Jones’s interpretation provides an adequate foundation for her opinion, the Court
will focus only on that aspect of the Daubert requirements.
10
he failed to include in the [Agreement] a written waiver of further disclosure of
property or financial obligations as permitted by 13 Del. C. § 326(a)(2)[b].”25
Mr. Ellis argues that because Ms. Jones incorrectly interprets the cited statute,
her opinion deserves no weight and need not be accepted for summary judgment
purposes. Mr. Sherman counters that had Mr. Ellis included one sentence in the
Agreement, it would have significantly minimized Mr. Sherman’s attorney fees and
expert costs.
The parties agree that the standard of care issue centers on their contrary
interpretations of a provision in Delaware’s version26 of the Uniform Premarital
Agreement Act (the “UPAA”). The provision of the Act relevant to this dispute is
Section 326. In relevant part, it provides:
(a) A premarital agreement is not enforceable if the party against whom
enforcement is sought proves that:
(1) Such party did not execute the agreement voluntarily; or
(2) The agreement was unconscionable when it was executed
and, before execution of the agreement, that party;
a. Was not provided a fair and reasonable disclosure of the
property or financial obligations of the other party;
b. Did not voluntarily and expressly waive, in writing,
any right to disclosure of the property or financial
obligations of the other party beyond the disclosure
provided; and
c. Did not have, or reasonably could not have had, an
adequate knowledge of the property or financial
obligations of the other party. 27
In paragraphs (1) and (2) of Subsection 326(a) of the Act, the General
Assembly provided two independent bases to challenge the enforceability of a
25
Pl. Response, Ex. C, at 7.
26
See 13 Del. C. §§ 321–28 (where the General Assembly enacted Delaware’s version of the
UPAA).
27
13 Del C. § 326.
11
premarital agreement: involuntariness in execution or unconscionability. In the
underlying litigation, Mr. Sherman’s ex-wife challenged the Agreement based upon
both.
With regard to unconscionability, Ms. Jones opines that had Mr. Ellis included
a provision mirroring the language in subparagraph (a)(2)b, it would have acted as a
“silver bullet” to any challenge to the Agreement based upon unconscionability. Mr.
Sherman provided a written disclosure of his property and obligations as required
by subparagraph (a)(2)a, and the Supreme Court held it to be fair and reasonable.
However, the Agreement included no waiver as contemplated in subparagraph
(a)(2)b. That, according to Mr. Sherman’s theory of the case, would have limited
the arguments in Family Court, and later in the Delaware Supreme Court, to whether
his former wife executed the Agreement voluntarily. That limited scope, in turn,
Mr. Sherman argues, would have prevented the need to litigate the highly factual
issue of the fairness and reasonableness of the disclosure as referenced in
subparagraph (a)(2)a.
Mr. Ellis counters that there is no meaningful way to interpret subparagraphs
(a)(2)a and (a)(2)b to provide any guidance of value to an agreement drafter. He
further argues that regardless of whether he included (a)(2)b’s waiver of disclosure
language in the Agreement, the parties would have still needed to litigate the issue
presented under (a)(2)a — that is, whether the initial disclosure was fair and
reasonable.
Mr. Ellis reasonably argues that the interrelationship of these two provisions
is unclear. They seem to contradict each other to a certain extent. Namely, the
statute requires that there be a “fair and reasonable disclosure” on one hand, while
also permitting a written waiver of disclosure on the other hand. The only qualifying
language in the Act regarding the nature of the waiver is that it is effective “beyond
the disclosure provided.” The Act does not define that phrase. It is unclear whether
12
a correction to the first disclosure would qualify as one being “beyond the disclosure
provided.” It is also unclear regarding whether a “disclosure beyond the disclosure
provided” could obviate the need for a party to provide a fair and equitable disclosure
in the first instance. At oral argument, neither party provided the Court with
authority addressing the interrelationship of the two provisions.
In written supplements, both parties provided contrary persuasive authority
supporting contrary readings of the UPAA.28 The Court’s overriding goal in
statutory construction must be to implement the General Assembly’s intent.29 When
doing so, it must first look to the plain language of the statute. 30 Here, in the
underlying litigation, the Delaware Supreme Court addressed the statute’s structure
as follows:
to render the premarital agreement unenforceable under the statute
[based upon unconscionability], the spouse contesting enforcement
must prove that the agreement is unconscionable and prove three other
grounds – lack of fair and reasonable disclosure of the other spouse’s
property or financial obligations, non-waiver, and lack of adequate
knowledge of [the other spouse’s] property and financial obligations.31
In this matter’s underlying litigation, the Supreme Court did not expressly
address the effect of failing to include a waiver of disclosure provision. Nor was it
necessary for the Court to define “non-waiver” in the passage quoted above.
28
Mr. Ellis offers a Kansas Supreme Court decision interpreting the provision in the UPAA to
refer to “a waiver of any future disclosures, and not to a waiver of any and all disclosures made in
the past.” Davis v. Miller, 7 P.3d 1223, 1229–30 (Kan. 2000) (emphasis added). Mr. Ellis also
cites a Georgia appeals court decision holding that the UPAA does not provide that the waiver of
disclosure provisions is a “silver bullet.” Kwon v. Kwon, 775 S.E.2d 611, 615–16 (Ga. App. Ct.
2015). In response, Mr. Sherman cites an Illinois appellate court decision, In re Marriage of
Solano, 124 N.E.3d 1097 (Ill. App. Ct. 2019). In that decision, the Illinois court held that the
waiver of disclosure provision in the UPAA is effective as to all disclosures, past and present. Id.
at 1111.
29
Zambrana v. State, 118 A.3d 773, 775–76 (Del. 2015).
30
Friends of H. Fletcher Brown Mansion v. City of Wilmington, 34 A.3d 1055, 1059 (Del. 2011)
(quoting Caminetti v. United States, 242 U.S. 470, 485, (1917)).
31
Silverman 206 A.2d at 832–33 (emphasis added).
13
Nevertheless, its statutory interpretation of Subsection 326(a) controls. When
applying this interpretation, it follows that whatever further disclosures “beyond the
disclosure provided” are, if the premarital agreement includes language waiving
such a disclosure, then it is impossible for the challenging party to invalidate a
premarital agreement based upon unconscionability.
Mr. Ellis relies upon the rule of statutory construction that statutes should not
be read to render their provisions meaningless.32 In this regard, he argues that the
two subparagraphs when read in pari materia, cannot be reconciled. Regardless of
the difficulty in interpreting and applying the two provisions, the Act’s plain
language must control. Here, the policy and rationale behind including such a “silver
bullet” is for the General Assembly to decide, not the Court. By including
subparagraph (a)(2)b in the Act, the General Assembly has permitted any party who
includes a waiver of disclosure provision in a premarital agreement to in all cases
defeat a challenge to the Agreement based upon alleged unconscionability. As the
Delaware Supreme Court recognized in the underlying case, “[i]t may be time to
take another look at Delaware’s premarital agreement law . . .”33 When observing
this, the Supreme Court based this recommendation, in part, upon the circumstances
of this case (in the underlying litigation) and, in part, upon other states’ decisions to
adjust the UPAA based upon their experiences.34
On balance, given the Delaware Supreme Court’s guidance in Silverman, the
plain language of the statute, and persuasive authority interpreting the UPAA
consistently with Ms. Jones’s interpretation, there is an adequate foundation for Ms.
Jones’s interpretation. As a result, in total, the record includes competing opinions
32
See 1A Sutherland Statutory Construction § 21:1 (7th ed.) (explaining that [c]ourts should
construe a statute, if possible, so no term is rendered superfluous or meaningless”).
33
Silverman, 206 A.3d at 834, n. 46.
34
Id.
14
regarding the necessary standard of care that applied in 1997 to an attorney drafting
a premarital agreement designed to protect a client’s assets.35 The opposing experts
evaluated Mr. Ellis’s performance in light of the applicable standards of care that
they described. 36 These competing opinions create issues of fact regarding the
applicable standard and whether Mr. Ellis breached it.37 As a result, summary
judgment is inappropriate on those bases.
Proximate cause in a transactional legal malpractice claim must be
evaluated under the same traditional principals of tort law that apply to
litigation malpractice claims.
In Delaware, the elements of a legal malpractice claim include “(1) the
employment of the attorney; (2) the attorney’s neglect of a reasonable duty; and (3)
the fact that such negligence resulted in and was the proximate cause of loss to the
35
Delaware adopted the Act the year prior, in 1996. 70 Del. Laws ch. 462, § 2 (1996).
Compare also Pl. Response, Ex. D “Deposition of Judy M. Jones,” at 47 providing:
Q: Any time an attorney, in your opinion represents a spouse seeking to protect his
or her assets in drafting a prenuptial agreement, is it your belief that any time
that they did not suggest including that waiver language, they are committing
malpractice to their client?
A: Probably yes.
with Pl. Response, Ex. E “Deposition of Kathryn Laffey,” at 55 providing:
Q: So you don’t believe the standard of care of the Delaware family lawyer
preparing a prenuptial agreement requires this inclusion of this disclosure
waiver language?
A: Certainly not in 1997.
36
Compare Pl. Response, Ex. D “Deposition of Judy M. Jones,” at 102.
Q: And again, is it your opinion within a reasonable degree of professional certainty
based on your professional experience, that Mr. Ellis’ failure to include the
waiver language . . . was a deviation from the applicable standard of care
expected of a Delaware family lawyer?
A: Yes, it was. It was a deviation.
with Pl. Response, Ex. E “Deposition of Kathryn Laffey,” at 50.
Q: Do you believe that Stephen Ellis deviated from the applicable standard of care
in the drafting of this document?
A: No.
37
See Streevy v. Roberts, 2007 Del. Super. LEXIS 2634 (Del. Super. Mar. 21, 2007) (explaining
that “competing expert testimony is a classic issue of fact for the jury”).
15
client.”38 Often, legal malpractice claims arise out of an attorney’s conduct during
the course of litigation. In those circumstances, the plaintiff must “demonstrate that
the underlying action would have been successful but for the attorney’s
negligence.”39
In the litigation context, the general rule requires analyzing a “case within a
case.” Namely, a legal malpractice plaintiff cannot succeed in a claim unless he or
she can demonstrate that but for the defendant’s negligence in a litigated case, the
plaintiff would have won.40 While Delaware case law has not used the specific “case
within a case” nomenclature, Delaware law aligns directly with that general
approach in litigation malpractice cases. Namely, in Flowers v. Ramunno,41 the
Delaware Supreme Court articulated the causation standard for such a claim. In that
decision, the Court required the plaintiff to “demonstrate that the underlying action
would have been successful but for the attorney’s negligence.”42
Other legal malpractice actions, however, stem from attorney representations
in transactions. Legal malpractice actions in the transactional context often do not
look back on the success or failure of litigation, but involve evaluating an attorney’s
actions that, at the time, looked forward toward a future deal, settlement, or the
prevention of litigation.
Distilling a general rule for transactional malpractice cases has caused more
uncertainty than in the binary, win versus lose, litigation setting. Transactional legal
malpractice cases may arise from an attorney’s drafting of a release, or as in this
case, a premarital agreement. In such transactional representation claims, some of
those cases follow a loss to the client in litigation. Such cases fit more easily within
38
Weaver v. Lukoff, 511 A.2d 1044, 1986 WL 17121, at *1 (Del. July 1, 1986) (TABLE).
39
Flowers v. Ramunno, 27 A.3d 551, 2011 WL 3592966 at *2 (Del. Aug. 16, 2011) (TABLE).
40
Id.
41
Id.
42
Id. (emphasis added).
16
the general rule for causation used in litigation malpractice. At some point, there
was often a poor result in an underlying suit.
Other transactional malpractice cases, however, stem from lost profits, a
disappointing settlement or sale price, or a lost benefit of the bargain. For instance,
they may include claims that an attorney’s malpractice caused lost profits in a deal
that the parties did not consummate, or did so under less favorable terms than were
possible. These claims may also, inter alia, involve lost net profit because an
attorney either negligently prepared documents or negligently represented a party in
negotiations. In those transactional malpractice cases, the success of an “underlying
action” cannot be gauged in binary terms such as winning or losing.
To date, the Delaware Supreme Court has not addressed the standard for
proximate cause in transactional malpractice claims.43 A number of other
jurisdictions have examined the issue and align in two camps.44 Some jurisdictions
continue to use a “case within a case” framework while modifying its application by
applying a “but for” causation requirement in the transactional context. On the other
hand, some courts provide for a more relaxed causation approach in transactional
legal malpractice cases due to the number of variables involved in a successful
transaction. Mr. Sherman advocates this relaxed approach and equates it to a loss of
43
But see Dickerson v. Murray, 2016 WL 1613286 at *4 (Del. Super. Mar. 24, 2016) (relying upon
a decision of the Court of Appeals of Ohio to explain application of the “walk away” scenario in
legal malpractice claims in a manner that seems to relax the standard for proximate cause without
articulating the standard).
44
See George S. Mahaffey Jr., CAUSE-IN-FACT AND THE PLAINTIFF'S BURDEN OF PROOF
WITH REGARD TO CAUSATION AND DAMAGES IN TRANSACTIONAL LEGAL
MALPRACTICE MATTERS: THE NECESSITY OF DEMONSTRATING THE BETTER DEAL, 37
Suffolk U. L. Rev. 393 (2004) [hereinafter Cause-in-Fact] (generally discussing legal malpractice
and specifically addressing the dispute regarding the causation in transactional malpractice claims,
including the “Case-within-a-Case” approach). See also John M. Palmeri & Franz Hardy,
TRANSACTIONAL LEGAL MALPRACTICE CLAIMS: Application of the “Case within a Case”
Standard, 50 No. 3 DRI For Def. 48 (2008) (noting that, in the author’s opinion, the majority of
courts that have addressed causation in a transactional malpractice claim have adopted the case
within a case standard).
17
chance type action. He argues that there is a cognizable malpractice claim if an
attorney’s actions merely resulted in a loss of chance to avoid excess litigation.
At least one secondary source has characterized the “case within a case”
approach as representing the general rule in the transactional context. 45 The most
cited case supporting this approach is the Supreme Court of California’s decision in
Viner v. Sweet.46 That court reasoned that:
[there is] nothing distinctive about transactional practice that would
justify a relaxation of, or departure from, the well-established
requirement in negligence cases that the plaintiff establish causation by
showing either (1) but for the negligence, the harm would not have
occurred, or (2) the negligence was a concurrent independent cause of
the harm.47
There, the court rejected an intermediate appellate court’s reasons for relaxing the
but for test for causation. The lower court relaxed the standard because of the large
number of variables necessary to evaluate transactional success when compared to
success in litigation. In rejecting a relaxed causation standard, the Supreme Court
of California observed that “[c]ourts are properly cautious about making attorneys
guarantors of their clients’ faulty business judgment.”48
Other high courts have likewise required a showing of “but for” causation.
For instance, the Supreme Court of Minnesota formally adopted this approach in the
transactional setting in Jerry’s Enterprises, Inc. v. Larkin et al.49 There, the court
held that in a transactional malpractice matter, “the [proximate cause of damages
element] of a cause of action is modified to show that, but for defendant’s conduct,
45
See Palmeri & Hardy, TRANSACTIONAL LEGAL MALPRACTICE CLAIMS: Application of the
“Case within a Case” Standard (describing the “case within a case” standard as the majority
approach).
46
70 P.3d 1046 (Cal. 2003).
47
Id. at 1051.
48
Id. at 1053 (citing Bauman, Damages for Legal Malpractice: An Appraisal of the Crumbling
Dike and Threatening Flood (1988) 61 TEMP. L. REV. 1127, 1154–55).
49
711 N.W.2d 811 (Minn. 2006).
18
the plaintiff would have obtained a more favorable result in the underlying
transaction than the result obtained.”50 When articulating this standard, the Supreme
Court of Minnesota held that without a demonstrated failure in the underlying
transaction, proximate cause cannot be established under this rule. 51 This approach
fits loosely within a “case within a case” analysis. In order to prove causation under
this standard, a plaintiff must demonstrate consequences that resulted from the
alleged negligence in contrast to what should have resulted from the transaction. 52
Courts applying this but for standard in transactional malpractice cases require
evidence of the potential missing links in the causal chain. Specifically, in claims
involving an alleged failure to “obtain or advise of a provision, concession or benefit,
the [plaintiff-]client must prove that the other party would have agreed.” 53 Evidence
that the other party “might have” agreed to the term is insufficient to meet this
showing.54 These courts reason that without such a showing, juries would have to
speculate regarding a myriad of possibilities that could have occurred following the
suggestion or failure to suggest an additional term to an agreement. The California
Supreme Court and the Supreme Court of Virginia have both required plaintiffs to
meet this burden.55 In doing so, they recognize that absent evidence that the other
50
Id at 819; See also Adams v. Manion, 2017 WL 2729603 at *2 (Minn. Ct. App. June 26, 2017)
(quoting Jerry’s Enterprises, Inc., 711 N.W.2d at 819); Viner, 70 P.3d at 1054 (finding that a
plaintiff must show “but for the alleged malpractice, it is more likely than not that the plaintiff
would have obtained a more favorable result”).
51
Id.
52
3 Ronald E. Mallen & Jeffrey M. Smith, Legal Malpractice § 24.5 (2019 ed.).
53
Id. (citing Hazel & Thomas, P.C. v. Yavari, 465 S.E.2d 812, 815 (Va. 1996)).
54
Id. (citing Hazel, 465 S.E.2d at 815 (finding the plaintiff did not show the other party would
have still agreed to the contract where the other party stated he did not know if he would have
granted a request for the added provision in the agreement at issue, but “certainly would have
found a way to make the deal happen”)).
55
Viner, 70 P.3d at 1053; Hazel, 465 S.E.2d at 815.
19
party would have likely agreed to the term, a plaintiff-client has not shown that the
negligence proximately caused a loss.56
The Court recognizes that apart from these jurisdictions, others relax the
nexus necessary to demonstrate proximate cause of harm. For instance, Mr.
Sherman relies upon the Wisconsin decision in Estate of Campbell v. Chaney.57 In
that decision, the Court of Appeals of Wisconsin examined a claim involving a
premarital agreement.58 The plaintiff alleged that because of how a drafting attorney
structured an agreement, the plaintiff had to engage in unnecessary litigation.59
Namely, in Chaney, the underlying case settled before a final decision, but after
some litigation. 60 In framing the standard regarding causation, the Wisconsin high
court required a showing “that the attorneys’ negligence caused weakness in the
prenuptial agreement and that the weakness caused litigation.” 61 The court reasoned
that it was “immaterial that the agreement might later be enforced after a finding that
the widow already knew the financial information . . .. [I]f [a failure] caused the
[plaintiff] to settle a claim that a proper agreement would have made meritless, then
the attorney may be held liable.”62
The defendant-attorney in Chaney argued a strict “case within a case”
approach to causation; namely, he argued that because the agreement was not
56
See Viner v. Sweet, 117 Cal. App. 4th 1218 (Cal. Ct. App. 2004) (finding on remand, while
recognizing that an “express concession” by the other party of what they would have agreed to is
not necessary and that circumstantial evidence can be used to establish causation, that the plaintiff
did not identify direct or circumstantial evidence of causation in support of the claim); see also
Hazel, 465 S.E.2d at 815 (finding the plaintiff failed to provide sufficient evidence of his attorneys’
negligence when he could not point to any evidence that the other party would have agreed to the
additional provisions).
57
485 N.W.2d 421 (Wis. Ct. App. 1992).
58
Id. at 423.
59
Id.
60
Id.
61
Id. at 425.
62
Id.
20
nullified by judicial decision because the parties had settled mid-litigation, there was
no cognizable malpractice claim.63 In rejecting that argument, the Wisconsin high
court adopted a relaxed standard for causation for transactional based claims. 64
When doing so, that court applied what seems to be an improper burden shift.65
Namely, it denied summary judgment because the defendant-attorney could not
show that the plaintiff settled despite a strong probability that the plaintiff would
have prevailed. 66 Such an approach does not comport with traditional tort concepts.
Rather, it constitutes an improper burden shifting in a loss of chance setting. In fact,
it provides for what is nearly alternative liability. Delaware case law has never
accepted alternative liability as an exception to the requirement for traditional
proximate causation. 67
The Seventh Circuit Court of Appeals has also held that proving a case within
a case is unnecessary in transactional legal malpractice claims. 68 Namely, in Nicolet
Instrument Corp. v. Lindquist & Vennum, the Seventh Circuit examined a district
court’s granting of summary judgment. The district court granted summary
judgment because the Plaintiff could not prove that the other party would have
agreed to the term at issue. 69 The Seventh Circuit reversed, holding that “but for”
causation is not the appropriate benchmark in transactional legal malpractice
63
Id.
64
Id. (finding the question for summary judgment purposes was “whether the defendant's alleged
negligence forced the estate to engage in litigation it otherwise would not have had to engage in”).
65
Id. at 426.
66
Id.
67
State Farm Fire & Cas. Co. v. Middleby Corp., 2011 WL 683883, at *3 (Del. Super. Feb. 8,
2011) (explaining that “[i]n the nearly twenty-five years that have passed since Nutt [v. A.C. & S.
Co., Inc., 517 A.2d 690 (Del. Super. 1986)], the legislature has not authorized collective liability
under either the market-share or alternative liability theories, and the Court perceives no reasoned
basis for it to impose such a change now”).
68
Nicolet Instrument Corp. v. Lindquist & Vennum, 34 F.3d 453 (7th Cir. 1994)
69
Id. at 455–56.
21
actions. 70 To the contrary, it applied what it described as a “not very demanding
standard.”71 In doing so, it recognized the difficulty of proof of causation in legal
malpractice cases in even the litigation setting, and the significantly greater difficulty
involved in the transactional setting where there often is no “right outcome.” 72
Because of that difficulty, the Seventh Circuit relaxed the standard and did not
require the plaintiff to prove that the other party would have likely agreed to the
additional term.73
These cases and others like them differ from Delaware precedent that applies
traditional concepts of proximate cause consistently among tort claims. In legal
malpractice claims, the Delaware Supreme Court’s only decision addressing
causation, although in the litigation malpractice context, recognized that traditional
proximate cause, with a “but for” floor for liability, applied. 74 Alternative liability
has not been applied in Delaware in any setting.75 Moreover, there is no support in
Delaware law to relax the standard for only one sub-set (transactional legal
malpractice claims) of one type of claim (legal malpractice claims in general),
merely because the former, by nature of the challenged attorney action, has an
increased number of variables that make it more difficult to prove.
70
Id. at 455.
71
Id.
72
Id.
73
Id.
74
Flowers, 2011 WL 3592966 at *2.
75
Nutt v. A.C. & S. Co., Inc., 517 A.2d 690, 694 (Del. Super. 1986) (referencing In re Asbestos
Litig., 509 A.2d at 1118 when “declin[ing] to adopt the alternative liability theory in Delaware.
[The Court is] satisfied that such a change in traditional tort law should be left to the legislature”);
In re Asbestos Litig., 509 A.2d 1116, 1118 (Del. Super. 1986) (explaining that an assumption of
product identification would be “mere speculation and would be the establishment of something
akin to market-share liability . . . , a change in Delaware tort law which if desired this Court
believes is best left to the legislature”), aff'd sub nom. Nicolet, Inc. v. Nutt, 525 A.2d 146 (Del.
1987).
22
A recent Supreme Court of Mississippi decision that addressed a legal
malpractice claim in the transactional context is persuasive.76 In Gulfport OB-GYN,
P.A. v. Dukes, that court examined a claim involving an employment agreement’s
covenant not to compete.77 An employee left the plaintiff-client’s medical practice
to start her own practice and challenged its enforceability.78 After the departing
physician prevailed, the plaintiff-client filed a legal malpractice claim against the
law firm that drafted the employment agreement because of a missing provision.79
In affirming the lower court’s decision to grant summary judgment, the
Supreme Court of Mississippi described the required showing of proximate cause
where an underlying transaction is at issue.80 It explained that a legal malpractice
claim requires a plaintiff to establish proximate cause by the trial-within-a-trial test,
and that while transactional claims may not involve a “trial” or “case,” the “same
principles apply: causation ‘turns on whether the attorney’s conduct was the but-for
cause of the failure to obtain a more favorable result rather than success or failure in
litigation.’”81 Noting that a substantial majority of courts have followed this rule,82
the Mississippi court persuasively held that where the
complaint is that the attorney should have proposed different or
additional terms to a transaction, the malpractice plaintiff must show
76
Gulfport OB-GYN, P.A. v. Dukes, Dukes, Keating & Faneca, P.A., --- So.3d ----, 2019 WL
4071721 (Miss. Aug. 29, 2019).
77
Id. at *1.
78
Id.
79
Id.
80
Id. at *2–4.
81
Id. at *2 (quoting Frederick v. Wallerich, 907 N.W.2d 167, 173 (Minn. 2018)) (citing Mahaffey
Jr., Cause-in-Fact, at 436–37).
82
Id. (citing John M. Palmeri, Franz Hardy, Nicole Salamander Irby, Better Deal or No Deal:
Causation in Transactional Malpractice Cases, 42 COLO. LAW. 51, 51 (Dec. 2013), which in turn
cited Viner v. Sweet, 70 P.3d 1046 (2003); Serafin v. Seith, 672 N.E.2d 302 (1996); Blackhawk
Building Systems, Ltd. v. Aspelmeier, Fisch, Power, Warner and Engberg, 428 N.W.2d 288 (Iowa
1988); Jerry's Enters., Inc. v. Larkin, Hoffman, Daly & Lindgren, Ltd., 711 N.W.2d 811 (Minn.
2006); Froom v. Perel, 872 A.2d 1067 (N.J. App. Div. 2005); Hazel and Thomas, P.C. v. Yavari,
465 S.E.2d 812 (Va. 1996); Cannata v. Wiener, 789 A.2d 936 (Vt. 2001)).
23
that such terms would have been accepted by the other party or that the
client would not have entered into the deal and would have been better
off for doing so. Absent such proof there exists no genuine issue of
material fact as to causation of damages, and summary judgment is
appropriate.83
Proving causation in a transactional malpractice claim, as in a litigation
malpractice claim, requires proof that, but for the attorney’s negligence, the plaintiff
would have obtained a more favorable result. While ultimate success in litigation in
a case like Mr. Sherman’s does not per se bar a malpractice claim, when the claim
involves alleged negligence in not proposing or including an additional term in a
proposed agreement, the plaintiff-client must first show that the other party would
have agreed to the omitted term. Without evidence of record supporting a reasonable
inference that the opposing party would more likely than not have agreed to the term,
there is no genuine issue of material fact regarding proximate cause of damages.
Mr. Sherman does not demonstrate a genuine issue of material fact regarding
proximate cause of damages.
At the outset, Mr. Ellis meets his initial burden on summary judgment as to
proximate cause. He emphasizes that the Supreme Court held the Agreement to be
enforceable. As a result, Mr. Sherman prevailed in the underlying litigation.
Accordingly, the burden shifts to Mr. Sherman to demonstrate an issue of fact
regarding proximate cause of harm.
In response to Mr. Ellis’s motion, Mr. Sherman emphasizes the conflicting
deposition testimony of the expert witnesses.84 He also claims the amount of
damages he suffered are not speculative because his litigation attorney, Mr. Gagne,
quantified the alleged harm as extra fees and costs incurred during the Family Court
83
Id. at *4.
84
Pl. Response, at 3–8.
24
litigation and Supreme Court appeal.85 In his testimony, Mr. Gagne provides an
estimate of the attorneys’ fees that Mr. Sherman would have incurred had the waiver
of disclosure language been included in the Agreement.86 Specifically, Mr. Gagne
believed there would have been no need to hire experts for the Family Court
litigation,87 and that the trial in Family Court would have taken approximately one-
half a day. 88 He conceded, however, that he would have still taken some depositions
and would have had to litigate the matter in Family Court.89 Based on this reasoning,
Mr. Gagne estimated that the litigation would have cost Mr. Sherman approximately
$35,000 to $50,000 in comparison to the $310,000 he charged him.90
Mr. Gagne’s estimation of the difference in costs—or in other words, an
identification of the amount of damages Mr. Sherman incurred—provides sufficient
evidence for a reasonable jury to fix an amount of damages. That, however, is not
all that is required. There must be sufficient evidence for it to reasonably infer that
the alleged negligence proximately caused the harm.
The evidence of record when considered in the light most favorable to Mr.
Sherman does not permit that bridge. Namely, Mr. Sherman does not meet his
burden by demonstrating that there is a genuine issue of fact regarding whether the
costs and fees would not have been incurred but for Mr. Ellis’s alleged negligence. 91
85
Id. at 9–10.
86
Pl. Response, Ex. F, at 42–43.
87
Id. at 42:7–42:13 (stating “[s]o with the waiver language in, I would not have retained the experts
for the valuations . . . I believe the expert costs and fees associated with depos, and that was to
38,000.00”).
88
Id. at 42:18–42:19 (stating “[i]t would have been probably a half day trial”).
89
Id. at 42:13–43:4 (stating “I would have had to go to a trial in Family Court, nonetheless, I would
have had the waiver – I still would have taken Tom Gay’s deposition, which I did. I still would
have done that even under the err [sic] set of circumstances . . . I still would have taken Ms.
Sherman’s deposition . . . [Mr. Sherman] would have been . . . And I assume Ms. Dougherty would
have taken Mr. Ellis’s deposition even had the waiver language be [sic] in there”).
90
Id. at 43:4–43:18 (stating “[a]n estimate, probably 35 to 50 [thousand dollars]”).
91
Flowers, 2011 WL 3592966 at *2.
25
Because the underlying action is a transaction and involves the claim that Mr. Ellis
failed to include a particular provision in the Agreement, Mr. Sherman would have
to demonstrate evidence justifying a jury’s inference, that more likely than not, his
ex-wife would have accepted the Agreement with the additional provision.
In this regard, the Court recognizes that the evidence permits a clear inference
that she might have.92 This “might have” evidence includes the ex-wife’s agreement
to other unfavorable terms, and Ms. Jones’s expert opinion. 93 Alone, the former
does not constitute a circumstance supporting an inference of a probability that Mr.
Sherman’s ex-wife would have agreed to a wholly separate term. In addition, Ms.
Jones conceded the same in her deposition testimony where she admitted that
speculation would be necessary to make that assumption. 94 In support of Ms. Jones’s
opinion regarding proximate cause of harm, she cited the fact that Mr. Sherman’s
ex-wife signed the Agreement against her attorney’s advice. Nevertheless, Ms.
Jones testified that she does not “think there is any way of knowing where [sic]
whether she would have refused signing the prenup if that statement had been in
there or not.”95 In fact, she confirmed the degree of speculation regarding the ex-
wife’s agreement to such a term to be “pure speculation.” 96
Here, the record contains no testimony from Mr. Sherman’s ex-wife, one of
the two parties to the Agreement, bearing on this material issue. Nor does it contain
testimony from the attorney who advised her. As recognized in the Viner decision,
while an express concession of acceptance is not necessary to prove proximate cause
92
See Mallen & Smith, Legal Malpractice (citing Hazel, 465 S.E.2d at 815 when explaining that
it is “not sufficient to show that the other party ‘might have’ agreed” to prove proximate cause of
harm in a transactional malpractice claim).
93
Pl. Response, Ex. D “Deposition of Judy M. Jones,” at 39:15–46:5.
94
Id. at 40:1–40:4.
95
Id. at 41:12–41:15.
96
Id. at 41:15.
26
of harm, there must at a minimum be circumstantial evidence of a probability of
acceptance of the term.97
The Court recognizes that proving proximate cause of harm will often be
challenging in circumstances, such as the one at hand, where the decision maker was
and remains an adverse party to the malpractice-plaintiff. As the California Supreme
Court correctly recognized in Viner, however, “difficulties of proof cannot justify
imposing liability for injuries that the attorney could not have prevented by
performing according to the required standard of care.”98 On balance, the record
contains no evidence—direct or circumstantial—that permits a reasonable inference
that Mr. Sherman’s ex-wife would have more likely than not agreed to this critical
term. Because (1) the but for standard for proximate cause represents the evidentiary
floor for establishing proximate cause, and (2) a critical link in the causal chain is
missing in this record, summary judgment must be granted in favor of Mr. Ellis.
Conclusion
When considering the facts of record in the light most favorable to Mr.
Sherman, there is no genuine issue of material fact regarding whether Mr. Ellis
proximately caused Mr. Sherman’s alleged damages. As a result, Mr. Ellis’s Motion
for Summary Judgment must be GRANTED.
97
Viner, 70 P.3d at 1053.
98
Id.
27