We will deal here with choice of law issues in malpractice actions and not with choice of law issues in disciplinary matters. This latter is governed by Model Rule 8.5 (and its state equivalent), which provides that in case of litigation matters, the ethics rules of the jurisdiction in which the tribunal sits control (Rule 8.5(b)(1)), while in non litigation matters, the rules of “the jurisdiction in which the lawyer’s conduct occurred” controls, unless “the predominant effect of the conduct is in a different jurisdiction” in which case the rules of that jurisdiction apply (Rule 8.5(b)(2)). These rules could be relevant to identify the law applicable in malpractice actions if you do a governmental analysis (see, e.g., Parker v. Asbestos Processing, LLC, 2015 U.S. Dist. LEXIS 1765 (D.S.C. Jan. 8, 2015), rejecting the application of Mississippi law based on a Rule 8.5(b)(1) situs of litigation reasoning).
The truth is that relevant differences exist among the jurisdictions in conflict of law rules. Some jurisdictions apply the lex loci delicti, while others engage in a governmental interest analysis, sometimes attaching paramount importance to the licensure of the lawyer.
A recent South Carolina case illustrates application of lex loci delicti. In Rogers v. Lee, 777 S.E.2d 402 (S.C. Ct. App. 2015), the court of appeals dealt with the law applicable to a legal malpractice action. In Rogers, the client, Malloy, hired attorney Lee to represent him in a workers compensation claim in North Carolina resulting from a fall from a ladder in North Carolina. Malloy was a resident of South Carolina and Lee was licensed in both North and South Carolina. The case was settled in North Carolina by agreement with the employer and the carrier. Later Malloy, through his guardian ad litem, Rogers, brought a legal malpractice case against Lee. The court of appeals held that in a tort action, South Carolina follows the choice of law principle of lex loci delicti. Under this principle the law of the place where the injury occurs controls. In this case the injury occurred in North Carolina where the lawyer’s allegedly negligent advice led to the client’s acceptance of a settlement before the Industrial Commission in North Carolina. The client lost the right to pursue his worker’s compensation claim or settle for a greater amount.
In applying the principle of lex loci delicti the court distinguished between the place of the injury and the place where the results of the injury manifest themselves. The results manifested themselves financially in South Carolina where Malloy resided, but the injury took place in North Carolina. The court specifically rejected the residence of the client as the basis of choice of law.
In addition, the contract of representation provided that North Carolina law governed the representation. The court held that the choice of law clause in the contract of representation was enforceable. North Carolina had a four-year statute of repose. Applying that statute the court of appeals affirmed the circuit court’s decision granting summary judgment for the defendant lawyer. The court also found that application of the North Carolina statute did not violate a fundamental public policy of South Carolina.
Chief Justice Few, concurring, agreed that North Carolina law governed the claim of malpractice arising from handling of the workers’ compensation claim, but other aspects of the relationship might be governed by the substantive law of South Carolina, for example claims against the ladder manufacturer, the floor installer, or medical providers, some of which were located in South Carolina.
Does the licensure of the lawyer count at all? In New York, it does. New York employs an interest choice of law analysis, which gives controlling effect to the law of the jurisdiction which, because of its relation or contact with the occurrence or the parties, has the greatest concern with the specific issue raised in the litigation. When conducting an interest analysis for any tort claim, the most significant contacts are, almost exclusively, the parties’ domiciles and the locus of the alleged tort. With respect to the specific tort of legal malpractice, a state has a strong interest in regulating the conduct of a law firm or lawyer licensed to practice within its borders, and a law firm or lawyer consents to be so regulated when it locates its offices in a particular state. Cobalt Multifamily Investors I, LLC v. Shapiro, 857 F. Supp. 2d 419 (S.D.N.Y. 2012).
In accord, The Diversified Grp. v. Daugerdas, 139 F. Supp. 2d 445, 453 (S.D.N.Y. 2001), holding that a “a state has a paramount interest in regulating the conduct of attorneys licensed to practice within its borders.”
A great example of the application of the place of licensure in the governmental analysis is LNC Invs., Inc. v. First Fid. Bank, N.A., 935 F. Supp. 1333, 1996 U.S. Dist. LEXIS 10948, Fed. Sec. L. Rep. (CCH) P99, 319 (S.D.N.Y. 1996). In this case, investors in an indenture trust lost their investment and sued the trustee. The indenture trust was secured by airplanes that were leased to an airline; the airline went bankrupt and the trustees delayed filing a motion to lift the bankruptcy stay. The value of collateral plummeted, and the investors – which became undersecured – filed a suit against the trustees and their attorneys.
The collateral trustee, First Fidelity, sought to implead a successor trustee and its attorneys for contribution.
First Fidelity alleged that “Gibson, Dunn is liable to it for contribution on the theory that Gibson, Dunn is liable to plaintiffs and to First Fidelity for attorney malpractice.”
In the case, the choice of the applicable law was determinative, with Gibson, Dunn contending that New York law applies and First Fidelity pressing for the application of New Jersey law.
New York law permitted claims in malpractice when the relationship between the parties is one of “actual privity, or one that is so close as to approach that of privity. The exception to the requirement of actual privity has been interpreted narrowly by the New York courts.” (internal quotation mark omitted). Instead New Jersey recognized that “attorneys may owe a duty of care to non-clients when the attorneys know, or should know, that non-clients will rely on the attorneys” representations and the non-clients are not too remote from the attorneys to be entitled to protection.”
The court found that under “interest analysis”, “controlling effect [is given] to the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issues raised in the litigation. In a tort case, the most important contacts are the parties’ domiciles and the site of the alleged tort [but] [a] …state has a strong interest in regulating the conduct of a law firm licensed to practice within its borders, and a law firm consents to be so regulated when it locates its offices in a particular state.”
The court held that licensure was paramount here:
That principle exerts extra force here because New York, by adopting an attorney-protective strict privity rule, has articulated a strong interest in protecting its resident attorneys from suits by non-clients. Likewise, New York attorneys are entitled to rely on that protection when they practice law in New York. New Jersey has some interest in regulating out-of-state attorneys who enter that state, and in protecting its domiciliaries who participate in out-of-state transactions. But those interests do not outweigh New York’s interests here.
These two are only examples of possible variations of choice-of-law in malpractice action.
For more information, Nathan M. Crystal and Francesca Giannoni-Crystal.