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Legal Malpractice and Proving Damages Under Chapters 93A and 176D

Is proving legal malpractice sufficient to win multiple damages and attorney fees?  No.  Not according to a case handed down by the United States District Court.  What this case shows is important for our legal malpractice clients.

Here is what happened.  Lynne Ingalls retained counsel for a Chapter 7 personal bankruptcy.  She had $36,463 in unsecured debt.  That was most likely credit card dept.  As a bankruptcy attorney, we can understand what likely happened next:  the attorney asked Ms. Ingalls a series of questions about her assets, her liabilities, her income, and her expenses.  The attorney, a Mr. Goldstein, likely secured the following documents, copies of Ms. Ingalls drivers license, her social security card, a year of all bank statements, copies of her bills, her credit report , two years of tax returns and any documents relating to her secured assets, such as a car loan and mortgage.  

Property Documents in a Chapter 7 Bankruptcy

Unfortunately, when the attorney asked Ms. Ingalls about her home, he did not secure all of the critical documents.  First, there is the deed.  The attorney would need to determine whose name the property is in to determine how to answer the Bankruptcy Petition co-debtor’s questions.  Next is the mortgage.  Who is the mortgagor?  Whose name is on the mortgage as being responsible for payment?

Finally, and most significantly in this case, there is the Homestead.   The Homestead is the document that you file with the appropriate Registry of Deeds.  It gives you $500,000 of “homestead” protection in the equity of you home.  Is works against unsecured creditors.  It works when you file a bankruptcy.  The document is easy to prepare, easy to file, and easy to look up at the Registry of Deeds.

The Legal Malpractice

In this case, Ms. Ingalls likely informed her attorney that she filed the Homestead.  Attorney Goldstein asserted this on Ms. Ingalls’ Chapter Petition and Schedules.  Ms. Ingalls testified, at the 341 Creditor’s Hearing that she had indeed filed a Homestead.

Unfortunately, the bankruptcy attorney neglected to ask his client for a copy of the filed homestead.  He neglected to look up, at the appropriate Registry of Deeds, whether Ms. Ingalls was correct.  He neglected to secure a copy of Ms. Ingalls alleged homestead.

And guess what?  Ms. Ingalls was mistaken.  She had never filed a Homestead.

Chapters 93A and 176D, the Demand Letter, and Proof

Ms. Ingalls retained a legal malpractice lawyer.  The new lawyer served the bankruptcy lawyer with a demand letter under Massachusetts General Laws (MGL) Chapter 93a and under Chapter 176D.  The demand was for $100,000.  The problem with the demand was that it did not specify damages.  The defendant attorney, in his response, offered $10,000.  A lawsuit was filed.  Ms. Ingalls won.  Following the judgment, Attorney Goldstein’s legal malpractice insurance company paid the judgment.

Next, Ms. Ingalls’ pursued multiple damages and attorney fees under Chapter 93A, saying that the insurance company was “unfair and deceptive” when it failed to offer more than the $10,000.  Unfortunately, neither party budged from their positions.

The Court held that damages were not “clear” and therefore, the insurance company had no obligation to pay the demanded $100,000, or to offer anything more than the $10,000, since damages were not clearly any specific amount above that.   Apparently, Ms. Ingalls’ evidence was that her damages were future damages, and the were unclear, and thus the court found that the insurance company determined that they “had something of a speculative or contingent quality.”

Finally, the Court pointed out that the damages could, and perhaps should, have been reduced because Ms. Ingalls was contributory negligent.  She contributed to the mistake by her attorney because she informed her attorney, and the Court, that she had a Homestead.