Grassi v. Hyden, 2010 Ark. App. 203 (March 3, 2010).
Facts: Grassi retained Hyden with regard to the disposition of his majority interest in a lumber company. Ultimately, upon Hyden’s advice, Grassi proceeded with an Employee Stock Retirement Plan ("ESOP"). The lumber company, however, was unable to make payments to the ESOP after several years and, as a result, Grassi lost hundreds of thousands of dollars. He subsequently sued Hyden for legal malpractice.
At trial, Grassi presented the testimony of an attorney, Wyck Nisbet. Nisbet testified about the general process of creating an ESOP, and stated that a feasibility study is a critical part of deciding whether to form one. He did not, however, specifically say that Hyden’s representation fell below the standard of care, or that in this particular instance, the ESOP was not a reasonable recommendation in light of the lumber company’s profitability.
Hyden moved for summary judgment in the malpractice suit, alleging that Grassi’s did not present expert testimony as to the applicable standard of care, breach, and proximate cause.
Issue: What elements of the legal malpractice action must an "expert" witness address?
Ruling: Expert testimony must establish that the allegedly negligent attorney departed from the applicable standard of care, and that this caused the plaintiff to sustain the damages of which he complains.
Recognizing that feasibility of an ESOP is a complex subject that is not within the province of a jury, the Court first held that the issue presented by this case was not one of "common knowledge," and that an expert was certainly necessary.
Interestingly, the Court did not view Nisbet as Grassi’s expert. Instead, it ruled that Nisbet’s testimony demonstrated a need for an expert to opine on whether or not, based upon the then existing conditions, it was a reasonable for Hyden to advise Grassi to proceed with an ESOP. In other words, Nisbet’s general statements as to when and how an ESOP should be created were not enough – Grassi needed an expert to opine as to the specific standard of care applicable to Hyden and how he breached that standard.
Accordingly, the Court granted Hyden’s motion for summary judgment.
Lesson: In a legal malpractice case where the issues are not subject to the rare "common-knowledge exception," it is essential for plaintiff to present expert testimony on (1) the applicable standard of care; (2) the breach of that standard; and (3) how the breach proximately caused the plaintiff’s damages.