Rowlett v. Fagan

Lawyers cannot be held to have breached a duty of care in a malpractice action by failing to raise claims that are colorable, but not viable, because in order to prove malpractice a client must show he had, “a valid cause of action or defense, which, had it not been for the attorney’s alleged negligence, would have brought about a judgment favorable to the client in the original action.”

Plaintiffs filed an action for malpractice against their lawyers and the lawyers’ law firm (Defendants), claiming negligence, negligent misrepresentation, breach of fiduciary duty, and claims relating to attorney fees. The underlying case involved Defendants’ representation of Plaintiffs in an action against Plaintiffs’ business partners. Plaintiffs ultimately settled the matter, and soon after initiated this malpractice action, alleging Defendants’ negligence caused Plaintiffs to settle for far less than what they would have but for Defendants’ negligence. A jury found Defendants negligent in their representation but also found they were not the cause of Plaintiffs’ damage. Plaintiffs appealed, assigning error to the trial court’s (1) dismissal of two allegations in the complaint relating to Defendants’ failure to timely assert an oppression claim and (2) grant of Defendants’ motion to include on the verdict form the date of settlement as an alternative date for valuing Plaintiffs’ interest. The Court of Appeals agreed with Plaintiffs’ arguments and reversed the rulings; Defendants then appealed that Court of Appeals decision. On this appeal, Defendants argued that Plaintiffs never had a viable oppression claim because Oregon law does not allow an oppression claim against an LLC or its other members (as was the case in the original litigation); therefore, it could not have been malpractice when Defendants failed to make the claim earlier in the litigation. The Court of Appeals found Defendants should have raised the colorable, though not viable, claim of oppression because it could have altered the outcome of Plaintiffs’ negotiations by giving them more leverage to secure a more favorable settlement. The Supreme Court found that the pleadings showed Plaintiffs had no claim for oppression because no such claim for relief exists in Oregon under the circumstances of the case. Furthermore, lawyers cannot be held to have breached a duty of care in a malpractice action by failing to raise claims that are colorable, but not viable, because in order to prove malpractice a client must show he had, “a valid cause of action or defense, which, had it not been for the attorney’s alleged negligence, would have brought about a judgment favorable to the client in the original action.” Harding v. Bell, 265 Or 202, 205 (1973). The Court held that even if the trial court erred in dismissing Plaintiffs’ claims for oppression, the error was harmless and did not affect the outcome of the malpractice case because other claims remained that allowed Plaintiffs to make essentially the same argument; therefore, the Court of Appeals erred when it reversed the trial court’s order striking the oppression allegations. The Court also held that, when the jury instructions and verdict form were viewed as a whole, even if the trial court did err by including the settlement date among other dates on the verdict form there was not a significant likelihood the error affected the result. Court of Appeals decision reversed in part and affirmed in part; remanded to the Court of Appeals to address Plaintiffs’ remaining assignments of error.