“Suit Within a Suit” Requirement

Normally in a legal malpractice suits, a client not only has to prove malpractice, but also must establish that a money loss resulted from the attorney’s negligence. To establish this requires proving something about the underlying matter.

The level of what must be proved regarding the underlying litigation (or underlying business or personal transaction) differs from state to state. There are three general categories of the requirements. I’ll generalize, using litigation as the underlying matter. Some states allow or require.

  • Category #1. Must show that underlying litigation would have been won but for the negligence.
  • Category #2. Must only show that underlying litigation could have been won but for the negligence, and most probably would have been won.
  • Category #1. Must show that underlying litigation would have had a better settlement value but for the negligence.

Even within these categories, there is variation. For example in category #1 above, some states want the reference to be to what a “reasonable trier of fact, or a reasonable judge, as the case may be, would have done. Other states want the reference to be to what the specific jury or judge would have done.

In most states the rule is that if the attorney’s error occurred in litigation, the doctrine requires the aggrieved party to show: (1) that the initial litigation, if handled properly, would have resulted in a judgment in that party’s favor (the so-called suit within a suit rule); and (2) that the resulting judgment was collectable. E.g., see Jackson v. Urban, Coolidge, Pennington & Scott, 516 S.W.2d 948 (Tex. Civ. App. Houston [1st Dist.] 1974, writ ref’d n.r.e.).

However, this requirement of proving the result of the litigation may be overcome in some jurisdictions. It seems unfair to require a person claiming that a former lawyer bungled earlier litigation to show that the earlier suit, if properly handled, absolutely would have resulted in a judgment in that person’s favor, when in all likelihood that case would have been settled rather than tried. Statistically, most cases are settled, not tried. Less than 5% of cases get past pre-trial and legal motions and settlements to a courtroom trial door.

Some jurisdictions permit a party in that position to show that the underlying suit had settlement value and to use that value as a measure of damages. Lieberman v. Employer’s Ins. of Wausau, 419 A.2d 417 (New Jersey 1980); Merzlah v. Purcell, 830 P.2d 1278 (Mont. 1992). Cf. Alva v. Hurley, Fox, Selig, Caprari & Kelleher, 593 N.Y.S.d 728 (Sup. Ct. N.Y. 1993) (providing that New York law requires only proof of actual damages).

In Texas the case of Heath v. Herron, 732 S.W.2d 748 (Tex. App. Houston [14th Dist.] 1987, no writ) affirmed a judgment against an attorney for malpractice based on expert settlement value testimony admitted without objection, about an underlying case which had been settled. This is not the same level of case law as a case in which objection had been made at the trial level either to the testimony or the instructions on damages. Likewise in 864 S.W.2d 662 Haynes & Boone v. Bowser Bouldin, Ltd., (Tex.App.-San Antonio 1993) the case involved a defendant in the underlying case who had settled after the malpractice of its attorney. It was said: “The proper measure of damages is the difference between the value of the settlement handled properly and improperly. Heath v. Herron, 732 S.W.2d 748, 753 (Tex.App.–Houston [14th Dist.] 1987, writ denied).”

Another way to say the above is to list in a checklist style, as follows.

  • First the Plaintiff must show that there was attorney malpractice (professional negligence)
  • Second, if the attorney’s error occurred in litigation, Plaintiff must prove what would have happened in the litigation if his/her attorney had not been careless. Usually, to do so a Plaintiff must prove “a case within a case” — that the he/she would have won if the attorney had not committed malpractice.
  • In some states and cases, it may be possible to claim the attorney’s error caused the settlement value of the case to decrease, without showing that the case could have been won. This is most likely to be allowed in a situation where the underlying case had been settled.
  • Third, in litigation cases, the Plaintiff is some states must show that the jury award or a reasonable settlement amount could have been collected from the defendant in the underlying case.

The following items likewise can be listed in a checklist style.

  • Economic damages may be recovered in all forms of malpractice cases. In litigation cases, economic damages may include any elements of damages that the client could have recovered in the underlying litigation, including out of pocket losses, mental anguish damages recoverable in the underlying litigation, lost pre-judgment and post-judgment interest, and lost court costs, et cetera.
  • Mental anguish damages are ordinarily not recoverable in malpractice claims based on negligence, but may sometimes be recovered because of special statute in the state.
  • Exemplary damages may be recoverable if an attorney acted with malice or committed fraud. These awards are capped by statute, but there are numerous complicated exceptions.
  • If a legal malpractice Plaintiff wins on a breach of fiduciary duty claim or negligence, the attorney may be required to give the client any fees he collected on the case.
  • A Plaintiff may not recover the amount of fees he had to pay to bring a claim against his first attorney except in some states the amount necessary to prove the underlying case in the legal malpractice action.