Elyousef v. O’Reilly & Ferrario, LLC, Supreme Court of Nevada, November 18, 2010
Facts: Homayouni entered into a transaction with his law firm’s client, Elyousef, to acquire interest in Nevada Oil and Land Development ("NOLD"). Perceiving this as a conflict of interest, Homayouni’s firm opposed the transaction. Homayouni left the firm to complete the transaction.
When the business relationship soured, however, Homayouni sued Elyousef. Elyousef counterclaimed and was awarded upwards of $375,000. Eventually, however, he settled for $50,000, plus the return of his interest in NOLD. After settling with Homayouni, Elyousef brought a number of claims against Homayouni’s former firm, including legal malpractice and breach of fiduciary duty. The trial court held that Elyousef’s claims were barred by the doctrine of double recovery and issue preclusion.
Issue: Was Elyousef barred from pursuing claims against the law firm after entering into a settlement with Homayouni?
The Court first noted that "under the double recovery doctrine, "there can be only one recovery of damages for one wrong or injury…Thus, [a] plaintiff may not recover damages twice for the same injury simply because he or she has two legal theories."
Valuing Elyousef’s interest in NOLD at $2 million, the Court held that Elyousef had fully satisfied his judgment against Homayouni and could not now proceed for a double recovery against the O’Reilly firm. The Court noted that "settlement prevents further recovery from another party for the same injury when the total amount of damages is established before settlement and the settlement fully satisfies those damages." The Court did not address application of the doctrine where a party chooses to, voluntarily and knowingly, enter into a settlement for less than the value of his judgment.
The Court further ruled that Elyousef was barred from re-litigating his damages as a result of Homayouni’s conduct in a new suit against the O’Reilly firm, since the issue had been fully litigated and decided on the merits in the first litigation.
Lesson: The double recovery doctrine will be applied where a party seeks recovery under a legal malpractice theory after entering into a settlement that fully satisfies damages awarded in a separate litigation for the same injury.