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Law firm can countersue ex-client for abuse of process

Massachusetts Lawyers Weekly By Bernkopf Goodman on 11.09.2017
Posted In: In The News

Malpractice claim alleged to be ‘ploy’ to avoid fees

rsb3A Boston law firm could pursue an abuse-of-process counterclaim against an ex-client who allegedly brought a legal malpractice claim as a “ploy” to avoid paying attorneys’ fees owed for the firm’s representation in an insurance dispute, a judge in the Business Litigation Session has decided.

Plaintiff Daniel McLaughlin argued that the counterclaim for abuse of process asserted by the defendant law firm, Rackemann, Sawyer & Brewster, should be dismissed pursuant to the anti-SLAPP statute.

But Judge Edward P. Leibensperger disagreed.

“Assuming for now that Rackemann can prove McLaughlin’s ulterior motive for commencing the legal malpractice claim, Rackemann’s right to petition for damages as a result of abuse of process is a legitimate claim that should be allowed to proceed,” Leibensperger wrote in denying the plaintiff’s motion to dismiss.

The nine-page decision is McLaughlin, et al. v. Rubenstein, et al., Lawyers Weekly No. 09-023-17. The full text of the ruling can be found here.

‘Blanchard’ applied

The plaintiff was represented by Kevin T. Peters. The Boston attorney rejected any notion that his client was trying to reap a “windfall.” According to Peters, after 10 years of litigation in an insurance case he supposedly “won,” his client was actually “in the hole” for $90,000.

“I can’t reconcile the court’s conclusion that the McLaughlins have a viable malpractice claim case against Rackemann with the conclusion that the McLaughlins also might have abused process by bringing it,” Peters added.

He said the decision raises the “specter” of abuse-of-process counterclaims anytime a law firm commits malpractice and is owed money at the same time, a result contrary to the purpose of the anti-SLAPP statute.

“All a law firm has to say is you’re just trying to chisel us down on fees,” said Peters.

The defendant was represented by Boston attorney David A. Grossbaum, who did not respond to a request for comment prior to deadline.

Boston litigator Robert W. Stetson said McLaughlin was significant because the court was guided by the most recent Supreme Judicial Court jurisprudence on anti-SLAPP motions, in particular decisions earlier this year in Blanchard v. Steward Carney Hospital, Inc. and 477 Harrison Avenue, LLC v. Jace Boston LLC.

“The augmented standard [under Blanchard and 477 Harrison Avenue] gives judges a tremendous amount of freedom and discretion to really look holistically [at a case] and figure out if this abuse-of-process claim not only has merit, but whether or not the primary purpose was to vindicate your rights or quell some sort of petitioning activity,” said Stetson.

But because the facts of the case were so unique, Stetson disagreed with the notion that McLaughlin will “open the door” to abuse-of-process claims being used as a means to defeat legal malpractice claims.

“What you had here was a course of conduct that supported a plan to avoid these legal fees,” he said. “That’s where you get a misuse of the process.”

Richard M. Haley, of Woburn, is a professional liability attorney who also represents lawyers before the Board of Bar Overseers. Haley found it significant that the plaintiff in McLaughlin attested to the reasonableness of Rackemann’s legal fees in the course of the underlying insurance case, undercutting any contrary claim in his malpractice suit against the firm.

“Rackemann Sawyer seems to be the reasonable party in this,” said Haley. “They even negotiated to cut their fees. The judge got it right.”

“A fact finder could conclude that the malpractice claim was commenced with an ulterior motive to keep the fees awarded and not to pay any amounts to Rackemann.”

— Judge Edward P. Leibensperger

Legal malpractice suit

Rackemann represented the plaintiff in an unfair claim settlement practices action brought against an insurer. After a bench trial in 2014, the insurance company was found to have violated both G.L.c. 176D and G.L. c. 93A. The plaintiff was awarded nearly $775,000 for attorneys’ fees charged by Rackemann. The fee award was a substantial part of the plaintiff’s recovery in the insurance case.

According to Rackemann, the plaintiff stopped paying his legal bills in 2013 while the firm continued its representation through the 2014 trial and a subsequent appeal. The latter concluded in August 2016, with the Appeals Court affirming most of the trial court’s judgment, including the award of attorneys’ fees.

The law firm alleged that, even though the insurer paid the plaintiff the entire fee award, the plaintiff paid Rackemann only $400,000 of the fees due. Instead, in a February 2016 letter to Rackemann, the plaintiff indicated he was investigating a claim of malpractice and requested that the firm enter into an agreement tolling the statute of limitations.

According to the firm, the plaintiff steadfastly refused to pay his legal bills. To the contrary, the plaintiff allegedly demanded the firm pay him an amount well in excess of the legal fees it was due.

Rackemann attempted to negotiate a settlement under which the firm would agree to reduce the amount of unpaid legal fees it was seeking. Those negotiations were unsuccessful, and in 2016 the plaintiff sued Rackemann for legal malpractice.

The plaintiff alleged that the firm was negligent in failing to relay a settlement offer from the defendant in the insurance case and for pursuing legal strategies that ran up his legal bills. In asserting excessive billing, the plaintiff pointed to a holding by the trial judge in the insurance case that $200,000 of Rackemann’s billings were not recoverable from the insurer as reasonable attorneys’ fees.

Rackemann responded by filing a multi-count counterclaim which included a claim for abuse of process. The abuse of process counterclaim alleged that the plaintiff planned to collect an award of legal fees based on Rackemann’s work in the insurance case without intending to pay the firm for that work. According to Rackemann, the plaintiff filed the legal malpractice as part of a scheme to avoid paying his legal fees.

The plaintiff countered by arguing that Rackemann’s abuse-of-process claim was a tactic to chill his right to pursue damages for legal malpractice. According to the plaintiff, allowing such a claim would encourage defendants to allege abuse of process in every malpractice case involving unpaid legal bills.

The plaintiff filed a special motion to dismiss the abuse-of-process claim pursuant to the anti-SLAPP statute.

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“What you had here was a course of conduct that supported a plan to avoid these legal fees. That’s where you get a misuse of the process.”

— Robert W. Stetson, Boston

Legitimate claim

The judge addressed the plaintiff’s anti-SLAPP motion under the three-part framework established by the SJC in Blanchard.

Under Blanchard, the moving party first must make a showing that the claims against it are “based on” petitioning activities alone. Once such a showing is made, the burden shifts to the non-moving party to show both that the moving party’s exercise of its right to petition was devoid of any reasonable factual support or any arguable basis in law, and that the moving party’s acts caused actual injury.

Finally, the non-moving party may defeat an anti-SLAPP motion by establishing that its suit was not “brought primarily to chill” the movant’s legitimate exercise of its right to petition.

Leibensperger concluded the plaintiff could not satisfy the first prong of the Blanchardtest because he was unable to show that the law firm’s counterclaim for abuse of process was based on the filing of the plaintiff’s malpractice suit lawsuit alone and had no substantial basis other than or in addition to that petitioning activity.

On this point, the judge was guided by 477 Harrison Avenue, noting that in that case the SJC recognized that a party’s attempt to use an invocation of legal process to “extort” an opposing party constitutes a substantial, non-petitioning basis for an abuse-of-process claim.

Leibensperger further noted that Rackemann alleged that the plaintiff, prior to suing for malpractice, accepted the firm’s legal services without paying for those services, collected the award of attorneys’ fees from the defendant in the insurance case and, finally, refused to pay the awarded fees to Rackemann.

Further, while raising the threat of a malpractice suit, the plaintiff allegedly refused to negotiate a reduction of fees with Rackemann and instead demanded payment of a sum well in excess of the fees owed to the firm, all the while refusing to offer to pay any of what was owed the firm.

“I find that the entire course of conduct, starting with the non-payment of legal bills in 2013, and continuing with the further engagement of Rackemann as counsel, was to create unfair leverage in favor of McLaughlin,” Leibensperger wrote. “The conduct was a larger scheme than merely the last step — filing this lawsuit. The scheme was ‘separate and independent from the petitioning activity.’”

 

McLaughlin, et al. v. Rubenstein, et al.

THE ISSUE: Does the state’s anti-SLAPP statute bar an abuse-of-process counterclaim brought by a law firm against an ex-client who allegedly sued for legal malpractice as a “ploy” to avoid paying attorneys’ fees he owed for the firm’s representation in an insurance dispute?

DECISION: No (Suffolk Superior Court, Business Litigation Session)

LAWYERS: Kevin T. Peters of Gesmer Updegrove, Boston (plaintiff)

David A. Grossbaum and Jamie L. Kessler, of Hinshaw & Culbertson, Boston (defense)

Originally published in Massachusetts Lawyers Weekly, November 9, 2017