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Legal Malpractice Damages

One of our clients’ primary questions is always: “what damages can I recover in my legal malpractice claim?”

The first point to remember is that if an attorney commits malpractice, that attorney is responsible for the monies that could have been recovered in the underlying matter. As the Arizona Court of Appeals has said: “the measure of damages is the value of the lost claims, i.e., the amount that would have been recovered by the client except for the attorney’s negligence.” Elliot v. Videan, 164 Ariz. 113, 116, 791 P.2d 639 (App. 1989).

These damages include damages or fees awarded against the client, that would not have been awarded, but for the attorney’s errors. In Hyatt Regency v. Winston & Strawn, 907 P.2d 506, 184 Ariz. 120 (App. 1995), the attorney’s misconduct led to a verdict of over $3,000,000, reduced to over $1,000,000 by the arbitrator and settled for $812,000. The $812,000 was found to be fully recoverable by the Court.

Recoverable damages can also include financial losses of the client, but there has to be a clear showing that the losses would not have occurred, but for the legal malpractice. In Asphalt Eng’rs., Inc. v. Galusha, 160 Ariz. 134, 770 P.2d 1180 (App.1989), the clients lost over $19,000 because the attorney negligently failed to file construction liens. This same sum was awarded to the clients as damages in a legal malpractice suit against the attorney.

The Galusha case also indicated that money paid to the malpracticing attorney as legal fees was recoverable as damages. The Court held that the $1400 the clients had paid to Galusha was recoverable as damages in their malpractice suit. Another court has agreed with this holding. However, this area of the law is not well developed and there will probably be future litigation clarifying this.

Likewise, there is some authority that fees paid to another attorney to fix the malpracticing attorney’s mess is recoverable against the malpracticing attorney. In Myers v. Wood, 850 P.2d 672, 174 Ariz. 434, 435 (App. 1993), the Court commented in passing that the money paid to a second attorney to fix the first attorney’s mess would be recoverable as damages against the first attorney. Once again, this area of the law is not clear and will also probably require future litigation.

Emotional distress damages are almost never recoverable, although there may be very narrow exceptions. The exception would be limited to situations where, for example, a couple lost custody of an adopted child who has been in their care for a few years, because of an error by the attorney. Emotional distress arising from the financial losses caused by malpractice is never recoverable as damages. Reed v. Mitchell & Timbanard P.C., 183 Ariz. 313, 318-19, 903 P.2d 621 (App. 1995).

The fees paid to the legal malpractice attorney are also not recoverable against the malpracticing attorney. This rule is subject to one very narrow exception – when the malpracticing attorney is found to have also breached a contract. This exception is so unusual, it does not bear going into.

Prejudgment interest is also clearly recoverable, as set forth in Hyatt Regency v. Winston & Strawn, 907 P.2d 506, 184 Ariz. 120 (App. 1995). Post judgment interest is subject to the usual rule: it may be recoverable if the loss can be calculated with certainty and without the use of discretion.

Punitive damages are recoverable against the malpracticing attorney if it can be shown that the attorney had an evil hand, guided by an evil mind – this generally requires a showing of intentional deception or a conflict of interest in which the attorney intentionally tried to damage the client’s interests. Id. For instance, in Elliot v. Videan, 164 Ariz. 113, 116, 791 P.2d 639 (App. 1989), the attorney went into business with a client. He later promised the client that if the client agreed to grant a majority interest to wealthy investors, the client would remain in an executive position and be well compensated. The attorney was in league with the investors and after the investment, they fired the client with the attorneys knowledge and approval and on the attorney’s advice, paid the client nothing. This was found to be a proper basis for punitive damages.

As a final matter, there is a fairly strong consensus that a client does not have to initiate an appeal in order to recover damages and that the defense cannot argue “failure to appeal” if the appeal would have had little chance of success. Hayenga v. Gilbert, 1 CA-CV 13-0489 (App. 2015).