In a case of first impression for Boston legal malpractice lawyers, the Superior Court entered summary judgment in favor of estate planning attorneys. Sherman et. al. v. Shub et al., dated June 15, 2011 and written by Peter M. Lauriat, Justice of the Superior Court, is a Massachusetts legal malpractice case regarding damages.
Apparently the irrevocable trusts they set up and funded in 1992 were discovered in 2004 to not be tax efficient. Fortunately, there were no damages; or were there?
The plaintiffs, two affluent cardiologists in their 60s, discovered that their trusts could result in a higher estate tax because a negligently worded portion of the trusts. For some reason, they waited until after the statute of limitations on legal malpractice, three years, but within the three year statute of limitations for the Consumer Protection Statute, legal malpractice Chapter 93A,to file suit against their former attorneys.
The Court found the plaintiff’s expert witness calculation of potential future damages too speculative: negligence damages are instituted to award “actual losses” and not damages that are “remote, speculative, hypothetical, and not within the realm of reasonable certainty.”
While a plaintiff need not calculate damages to a “mathematical certainty,” the plaintiffs here fell “well short” of proving any damages at all. As the defendants’ experts opined, there are too many current variables to reasonably ascertain damages. When will the plaintiffs die? What will their marital status be at that time? What state will they live in? What will the federal estate tax law be? What will their state’s tax law look like? Without knowing the answers, damages, if any, are conjectural and therefore too elusive.
The Court’s well reasoned decision is peppered with a philosophical quote from John Lennon and cites a law review article with a title take off from Shakespeare called, “First Let’s Sue All the Lawyers.” The decision sounds in a too speculative damages case, but can be seen as a causation case as well. According to the Court, proving future damages is too speculative when tax laws are ever changing, additional estate planning can be undertaken, future state residence is unclear and the value of the estate is ever in flux. Any one of these factors could be addressed to reduce the future tax burden, especially since the plaintiffs had over three years from when they discovered the negligence until they filed suit, and now have had 7 years. Given that time and a host of variables, it is hard to prove causation: the plaintiffs need to prove a causal connection between the negligence of the estate planning attorney and actual future damages. How can a negligently set up trust cause damage when years have gone by in which to rectify the negligence?
Who had the last clear chance to avoid the estate taxes?
On the other hand, do we have enough information to examine the Court’s decision? There is no information in the decision as to what percentage of the plaintiffs’ $6 million estates went into the trusts. It would be helpful to cross examine the defense expert for opinions on how to set up the trust. While the Court mentions that the plaintiffs’ estates fail to provide for charitable gifts parenthetically, in a footnote, what bearing does this have or should this have on the Court’s reasoning?
The law on speculative damages is not crystal clear in Massachusetts, so this is a case of first impression. The Court reviews a Kansas case where no liability was found because damages were not calculable — they are a function of the decedent’s tax status, assets, and the law at the time of death; a federal case in the 11th Circuit which stated that damages that are derived from “whatever tax laws may be in effect” at death are too speculative to assess now; and, a New York appellate case where the Court found damages “dependent on future changeable events, and, thus, inherently speculative. Such a loss is not compensable.”
It is unfortunate that the estate tax laws have become a political football. This creates uncertainty among the affluent. Nevertheless, estate planning attorneys need to redouble their efforts to review their trusts, and to update clients, including past clients, on the law. That they can become less accountable in tort as a result of the inability to speculate is a consequence of this area of law. The only things that are certain are death and taxes, unless you are a negligent estate planning lawyer where the only things that are too speculative are taxes and death.