Wednesday, February 29, 2012

Ambiguous Agreement Leads to Finding of Legal Malpractice

In Pennsylvania, legal malpractice can arise in the area of family law when the intentions of the parties are not accurately addressed by an attorney.  In September of this past year, the legal malpractice lawsuit of Lewis v. Pietragallo Bosick & Gordon LLP went to trial in Allegheny County.  As you will see, Maurice A. Nernberg, Esq., did a wonderful job representing the plaintiff.  The case concerned the drafting of a cohabitation agreement.  Because the cohabitation agreement drafted by an attorney was unclear a jury found that legal malpractice had occurred.

A cohabitation agreement is a legal agreement reached between a couple who have chosen to live together. In some ways, such a couple may be treated like a married couple, such as when applying for a mortgage or working out child support. However, in some other areas, such as property rights, pensions and inheritance, they are treated differently.  A cohabitation agreement contains documentation for a couple who want to live together in order to protect themselves from unnecessary cost and litigation should their cohabitation break down. Cohabitation agreements are a lot like prenuptial agreements.  They allow the individuals to determine in advance who will keep which assets and what will happen to assets that have been purchased jointly if they separate. These agreements typically bind both parties.

In 1995, plaintiff Robert J. Lewis employed the law firm of Pietragallo Bosick & Gordon LLP, to represent him for purposes of drafting a cohabitation agreement with Jill Neely, the mother of his child. Lewis wanted Neely to move in with him in Pittsburgh in order to help raise their son.

Lewis and Neely agreed that Lewis would pay Neely $10,000 annually for each year of the couple's cohabitation. Lewis said he wanted to pay it as a lump sum at the end of cohabitation. Lewis and Neely signed the agreement, which was drafted by an attorney, with the alternate language that read: "I have attached to the front Alternate Language for Paragraph 24(b), which would require you to give Jill $10,000 at the end of each twelve months rather than at the end of cohabitation as a lump sum. She told me this change was fine with you, but I've included both versions, so you can choose." Lewis alleged that he and Neely believed that the lump sum payment was provided for in the agreement, as signed, because no payments were made during cohabitation.

In 2006, following termination of the cohabitation agreement, Neely contended that instead of providing for payment of $10,000 annually during cohabitation or as a lump sum at the end of cohabitation, that the agreement required an annual payment equal to $10,000 times the number of years of cohabitation for her lifetime. Subsequently, a board of arbitrators held that the agreement should be interpreted against Lewis, because his attorney wrote it, and ordered Lewis to pay Neely the sum of $30,000 annually until the first to die. The arbitrators accepted Neely's interpretation of the cohabitation agreement and found that the couple cohabitated for a period of three years.

Lewis sued Pietragallo Bosick & Gordon LLP for breach of contract.

Plaintiff's counsel Nernberg argued that the cohabitation agreement, as drafted by a member of the defendant's firm, was patently ambiguous. Counsel said the defendant failed to draft an agreement that was clear on its face and reflected the wishes of Lewis, its client. Moreover, the agreement failed to include standard clause language that would have prevented the agreement from being interpreted against Lewis. The plaintiffs' legal experts testified that the defendant breached the standard of care by failing to draft an agreement which conveyed the plaintiff's intent.

The defense asserted that Lewis in fact was aware that Neely had wanted a provision that would pay her money after the relationship ended (similar to alimony). Also, Lewis had previously rejected, via a letter written  on Sept. 21, 1995, Neely's proposal of a $10,000 payment to be made annually during cohabitation. Instead, Lewis accepted Neely's Oct. 13 proposal of a $10,000 payment per year after cohabitation ended. The defense said Lewis agreed to the change Neely wanted because the agreement, and the companion custody agreement, provided him substantial other benefits, limiting his liability for child support and thwarted possible claims of "common law marriage" (which was then applicable under state law), which would have been very expensive for Lewis, given his substantial wealth and income.

The defense also argued that Lewis was careless or in breach of his obligations under the relationship with the lawyers by failing to read the letters and agreements the lawyers sent him. The defense claimed that Lewis admitted that he never read any of the various letters sent to him by the lawyers and did not read any of the drafts of agreement, and that was the last the lawyer heard of efforts to reach a cohabitation agreement. Without contacting the lawyer or advising the lawyer, the parties substituted the "alternate" provision requested by Neely, and that Neely executed the document on Oct. 17 and returned it to Lewis. The defense maintained that Lewis admitted that he never read any of the following: the handwritten note explaining the change requested by Neely; the agreement either before or after Neely signed it; the alternate provision drafted at the request of Neely; and Lewis admitted that he never read the agreement before he signed it. Moreover, Lewis held the agreement signed by Neely for 60 days, without reading it and without contacting the lawyers for any advice; he then signed the draft document on Dec. 12. Lewis later told the lawyer that he "didn't know where Jill Neely was" and the lawyer naturally concluded that efforts to reach an agreement to cohabitate had failed. The lawyer did not learn for eight years that the parties had signed the draft agreement without her knowledge. Unbeknownst to the lawyer, the parties had not begun cohabitating in 1995, but did begin cohabitating in 1999 or 2000, according to Lewis. Lewis never contacted the lawyers when he began cohabitating and never reviewed the agreement at that time, said the defense.

Finally, defense counsel asserted that Lewis breached his obligations by failing to keep the defendant lawyers in the loop with regard to the signing of the agreement, and that the defendant lawyers performed exactly as requested and expected until Lewis took them out of the process by not advising them of his actions concerning the agreement. Furthermore, the agreement that was provided to Lewis on Oct. 13, 1995, was only a draft and was not expected to be signed by anyone, as it was incomplete and not "execution ready." The parties had not agreed upon a date on which cohabitation would begin, and the agreement provided that Neely would obtain an attorney and would be represented in the agreement process. (These theories were supported by the defense legal experts.)

Jurors found that defendant breached its contract with the plaintiff, that the defendant's breach was material, and that the plaintiff did not breach the contract with the defendant. The plaintiff was awarded $525,000.

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