MISSOURI COURT OF APPEALS NORTHERN DISTRICT. David Moore, for Appellant, and Stone C. Defense for Respondent.

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1 MISSOURI COURT OF APPEALS NORTHERN DISTRICT JOHN JONES Defendant-Appellant vs. No. ND JANE SMITH Plaintiff-Respondent. David Moore, for Appellant, and Stone C. Defense for Respondent. Before O BRIEN, SHAFFER AND SWAN, JJ. O BRIEN, Chief Judge. In this attorney malpractice case, John Jones, Appellant - attorney (hereinafter Attorney, appeals from the judgment entered after a jury returned a verdict for Jane Smith, Respondent-Client (hereinafter Client, on her claim for legal malpractice. Attorney makes two claims of error on this appeal: (1 the trial court erred in permitting the jury to award Client lost punitive damages (those she would have been awarded in the underlying suit; and (2 the trial court erred when it refused to reduce any compensatory damages awarded to Client by the amount of the fee she would have owed to Attorney had the underlying case been successful. The judgment of the trial court is reversed. FACTS We need not go into great detail regarding the underlying facts. Suffice it to say that, taking the facts in the light most favorable to the verdict, Client Jane Smith was severely injured by a product manufactured by Zinger Corporation. She purchased the product based on representations made by Zinger in its advertising that the product was safe for its intended use. After she was injured, Client retained the services of Attorney John Jones, who was licensed to practice in Missouri. Client and Attorney entered into a written retainer agreement wherein Attorney agreed to represent Client in her personal injury action against Zinger. She agreed to a contingent fee of 40%. Attorney initiated investigation of Client s case, in the course of which he discovered evidence that Zinger had knowledge that the representations it made about the safety of its products were false. He advised Client that, in light of this information, it was likely that she would recover not only fairly substantial compensatory damages to compensate for her serious injuries but significant punitive damages as well. Attorney initiated suit by filing a petition on March 27, Zinger moved to dismiss, alleging that the suit was not timely filed since the statute of limitations expired on March 25, Apparently, Attorney made an error in calculating the filing deadline and filed the case two days beyond the limitation period. As a result, the suit was dismissed with prejudice. CURRENT CASE 1

2 After her case against Zinger was dismissed, Client commenced this action against Attorney for legal malpractice, seeking the value of her lost claim. She sought to recover as compensatory damages in this malpractice action both the compensatory and punitive damages that she would have recovered in the underlying case had attorney not been negligent. There was no allegation that Attorney s conduct was other than negligent. Prior to trial, Attorney sought unsuccessfully to limit the scope of damages in this case to compensatory damages in the underlying case. The case proceeded with a trial in a trial, in which the jury heard evidence to support the underlying case against Zinger as well as evidence of Attorney s negligence. Attorney sought to exclude any evidence relevant only to the issue of punitive damages in the underlying case, but that effort was unavailing. At the conclusion of all evidence, and over Attorney s objections, Judge Cindy J. Cruise instructed the jury that, if it found Attorney was negligent and that, but for that negligence, Client would have prevailed in the underlying lawsuit, it could award all the damages it found appropriate, including both compensatory and punitive damages from the underlying case. In addition, Attorney requested an instruction that the jury should reduce any damage award by 40%, the amount of the attorney s fee Attorney would have received had the original case been successful. Judge Cruise refused to give that instruction and told the jury that, if it reached the issue of damages, it should ignore any issue of attorneys fees. The jury returned a verdict in favor of Client in the amount of $2,040,000, which included $240,000 in compensatory damages and $1.8 million in punitive damages that it believed Client should have been awarded in the underlying case. Attorney s motions to strike the portion of the award that reflected lost puntives and to reduce the award by 40% were both denied. Judge Cruise did reduce the award by $900,000 based on RSMo (3 and entered judgment in favor of Client for $1.14 million. LOST PUNITIVE DAMAGES On appeal, Attorney claims that the trial court erred in allowing the jury to award Client punitive damages from the underlying suit. We agree. This issue is a matter of first impression in Missouri. Manoo Mofidi, May Punitive Damages Obtained in the Underlying Action (But Subsequently Lost on Appeal Be Recovered as Compensatory Damages in a Legal Malpractice Case Predicated on Negligence?, 59 J. Mo. Bar. 166 (2003. As a guide to determining how the court should rule on this issue, legal malpractice law and punitive damage awards in Missouri were reviewed. Id. In an action for legal malpractice based on negligence, the plaintiff must prove: (1 that an attorney-client relationship existed; (2 that the attorney was negligent; (3 the attorney s negligence was the proximate cause of the client s damages; and (4 but for the attorney s actions, the client would have been successful in the underlying action. Donahue v. Shughart, Thomson & Kilroy, P.C., 900 S.W.2d 624, 626 (Mo. banc Further, the amount of damages the plaintiff should receive is the amount she would have received but for the attorney s negligence. Steward v. Goetz, 945 S.W.2d 520, 532 (Mo. App. E.D As justification that punitive damages should not be included in the calculation of the amount of damages that the plaintiff would have received had the attorney not been 2

3 negligent, Missouri case law suggests that punitive damages are justified only when there is some element of wantonness or bad motive. Vermillion v. Pioneer Gun Club, 918 S.W.2d 827, 833 (Mo. App. W.D In this case, Attorney lacks the requisite wantonness or bad motive. Further, the purpose of awarding punitive damages is to punish and deter wrongful actors. Rodriguez v. Suzuki Motor Corp., 936 S.W.2d 104, 110 (Mo. banc This court is not persuaded by Client s argument that Attorney s negligent act is the proximate cause of her damages and therefore the damages she should receive should include the amount of any punitive damages assessed against her. Hunt v. Dresie, 740 P.2d 1046, 1057 (Kan As a matter of public policy, punitive damages are not compensation but are specific to a certain reprehensible act. Piscitelli v. Friedenberg, 87 Cal. App. 4 th 953, 981 (Cal. Ct. App It is inconsistent with the goal of punishment and deterrence to pass on the punishment to an innocent actor. Id. at 982. For these reasons, we find that the trial court erred in awarding Client damages that included the punitive damage amount. CONTINGENT FEE The second issue before this court is whether the trial court erred in including the attorney s contingent fee as part of Client s damages. We believe that her damages should be reduced by the amount of the contingent fee she would have paid Attorney had he been successful in the underlying case. Client relies on Distefano v. Greenstone, 815 A.2d 496 (N.J. Super. App. Div. 2003, to support her position that the contingent fee should not be deducted from her damage award. But we find that case unpersuasive. We agree instead with the analysis in Moores v. Greenberg, 834 F.2d 1105, 1110 (1 st Cir. 1987, where the court could find no cognizable basis for allowing the client to receive from the lawyer more than he would have netted from the tortfeasors. Further, Client argues that she should be compensated for the expense of having to bring this legal malpractice action, which would not have been brought if the attorney had not been negligent. Campagnola v. Mulholland, Minion & Roe, 555 N.E.2d 611 (N.Y But, under our American system of litigation, allowing Client to recover the contingent fee leads to overcompensation. Pursuant to the contingent fee agreement in the underlying case, Client would not have received the full damage award. Attorney would have received 40% of that award. For these reasons, we find that the trial court erred in not reducing Client s damage award by the amount of the contingent fee. Accordingly, the judgment is reversed. SHAFFER, J. joins this opinion. 3

4 SWAN, J. DISSENTING I cannot join the court in its decision today, as I believe it misstates the law of this state. Even though the issue of lost punitive damages is a case of first impression in Missouri, I believe that Missouri would and should follow the majority view of cases on this issue. I find the argument that lost punitive damages should be included as a component of the Appellant s compensatory damages to be persuasive. Scognamillo v. Olsen, 795 P.2d 1357 (Colo Ct. App When an attorney commits malpractice, the victim should be made whole. Jacobsen v. Oliver, 201 F. Supp. 2d 93, (D.D.C Allowing the victim to receive punitive damages in the legal malpractice action makes the victim whole and punishes the attorney for being careless. Id. The court also erred today in reducing the Respondent s damage award by the contingent fee amount. Because Client will have to share the damages she received with her current attorney, if her award is reduced by the contingent fee amount, she will in effect be paying twice and will not be made whole. McCafferty v. Musat, 817 P.2d 1039, 1045 (Colo. App As a policy matter, if the damage award is reduced by the contingent fee amount, the negligent attorney is, in essence, being rewarded for his negligent acts. By not allowing the reduction, attorneys are encouraged to be more careful in their practice of law. I agree with the court in Distefano v. Greenstone, 815 A.2d 496 (N.J. Super. App. Div. 2003, that duplicate recovery, even though a windfall to the plaintiff, is considered the lesser evil to crediting the attorney with an undeserved fee where he has botched the job. Id. at 499. I would affirm the trial court s rulings on these issues. 4

5 IN THE SUPREME COURT OF MISSOURI JOHN JONES Defendant/Appellant vs. No JANE SMITH Plaintiff/Respondent. ORDER GRANTING TRANSFER The motion of Respondent is hereby granted; the decision of the Missouri Court of Appeals, Northern District is vacated; and the case is hereby transferred to this Court. The parties are invited to appear at a special session of this court in October 2003 to argue the following issues: 1. Whether, in a legal malpractice action, a plaintiff may recover as part of her damages punitive damages that would have been awarded in the underlying case? 2. Whether, in a legal malpractice action, recovery should be reduced by the amount of attorney s fees the client would have paid had the underlying case been successful? J. Orr, Chief Justice 5

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