CT: Underlying contract restructuring
Facts: Former attorney represented a company in a contract restructuring matter. The company was a corporation that produced steam energy, and its existing buyer wanted out of the agreement. Under this negotiation, the older buyer paid a sum (in the millions to the energy corp) to be relieved of the long term contract, and was replaced by Enron Power as the new buyer. Enron Power then went into bankruptcy, owing the energy corp around $200 million. The Town of West Hartford (not the energy company) then sued the attorney for negligent representation in the contract restructuring; namely arguing that the Town now had to pay “increased waste disposal fees to make up for [the energy corp’s] loss of revenue occasioned by Enron’s failure to pay.” The attorney moved to dismiss, arguing that the Town lacked standing to bring a malpractice claim since the Town’s damages were too remote to be attributable to the attorney’s representation, and that the energy company was a more appropriate party to bring a malpractice claim. The trial court granted this motion, and the Town lost. The Town now appeals.
Issue: 1) Does a party lack standing if its injuries are too remote from the actions of the attorney?
2) Does a party lack standing if there is a different party that suffered a more direct injury from the attorney action and has already brought the same claims against that attorney?
Ruling: 1) Yes. Here, the Town was not a party in the underlying contract litigation. Since it is remote, it is exceedingly difficult whether to attribute its losses to the attorney’s actions, or to other independent factors. It can not be determined that the attorney’s actions were the cause of the Town’s alleged injuries. Therefore, the Town lacks standing to being a malpractice claim.
2) Yes. Here, the energy corp is a more appropriate plaintiff to assert legal malpractice because it was the client of the attorney in the underlying litigation. The energy corp’s injuries are more direct than those of the Town, and the energy corp has brought the same malpractice claims against its former attorney in a separate lawsuit. Because of this, the Town should be denied standing to bring a legal malpractice claim.
Lesson: 1) A plaintiff must be a proper party to bring a malpractice claim. To be proper, the plaintiff’s injuries must be a direct result of the conduct of the attorney. If the injury suffered by the plaintiff is too remote from the attorney’s actions (eg: the plaintiff was not involved in the underlying action) then the plaintiff lacks “standing,” and is therefore, barred from bringing a legal malpractice action.
2) It is proper to deny standing to a party when a different “party with a more direct interest has asserted the same claim against the defendants in a different action.”
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