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CO: Issue Preclusion in Legal Malpractice

Stanton v. Schultz, 222 P.3d 303 (CO Jan. 11, 2010). 

Facts:  Schultz brought a post-conviction motion for a new trial based on newly discovered evidence in a federal criminal prosecution.  In that motion, he argued that his attorneys failed to call an essential witness, Pedro Castillo, whose testimony would have led to Schultz’s acquittal.  

The district court denied Schultz’s motion and held:  (1) Schultz failed to show that this newly discovered evidence could not have been discovered through the exercise of due diligence; (2) even if Castillo had testified, Schultz likely would have been convicted.  The Tenth Circuit upheld the district court’s ruling only on ground one and expressly refused to consider whether or not Castillo’s testimony would have had any impact on Schultz’s conviction. 

Schultz then filed a legal malpractice action against his former attorneys.  The trial court granted the attorneys’ motion to dismiss on the basis that the malpractice action was precluded by the court’s holdings in Schultz’s post-conviction motion.  The appellate court reversed and the attorneys appealed.

Issue:  Can a claim for legal malpractice be precluded by factual determinations in the underlying action? 

Ruling:  Perhaps.

In making its determination, the Court first set forth each of the requirements that must be satisfied to bar re-litigation under issue preclusion, or collateral estoppel: 

(1) the issue is identical to an issue actually litigated and necessarily adjudicated in the prior proceeding; (2) the party against whom estoppel was sought was a party to or was in privity with a party to the prior proceeding; (3) there was a final judgment on the merits in the prior proceeding; and (4) the party against whom the doctrine is asserted had a full and fair opportunity to litigate the issues in the prior proceeding.

The first requirement was satisfied in that Schultz had to demonstrate, in both proceedings, that he would not have been convicted had his former attorneys presented Castillo’s testimony.  This issue, however, was not "necessarily adjudicated" in the previous proceeding, since the Tenth Circuit denied Schultz’s motion only on due diligence grounds, and expressly declined to consider whether Castillo’s testimony  would have led to an acquittal.  The Court relied on Comment o to The Restatement (Second) of Judgments, Section 27: 

Effect of an appeal. If the judgment of the court of first instance was based on a determination of two issues, either of which standing independently would be sufficient to support the result, and . . . the appellate court upholds one of these determinations as sufficient and refuses to consider whether or not the other is sufficient and accordingly affirms the judgment, the judgment is conclusive as to the first determination.

Since the only ground actually considered and upheld by the appellate court may be given preclusive effect, the issue of whether or not Castillo’s testimony would have impacted Schultz’s conviction was open to litigation in the malpractice proceeding.  The Court further noted that comment o was supported by sound reasoning:

when the Tenth Circuit declined to review the causation issue, it effectively denied Schultz his right to appeal that issue. Preclusive effect should not be given to such a determination because our precedent requires an opportunity for review before a judgment can be considered final for purposes of issue preclusion.

Lesson: An issue presented in a legal malpractice action will be subject to preclusion only where it has previously been considered and upheld by the appellate court in the underlying action.  If the appellate court declines to consider certain grounds, those grounds are subject to re-litigation in a future proceeding.  

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Posted in: Colorado