EMOTIONAL DISTRESS DAMAGES AGAINST LAWYERS IS A REAL THREAT

It has been five years since the Knutson v. Foster (2018) 25 Cal. App. 5th 1075 decision landed, and it is clear that it has dramatically changed the landscape of professional liability claims. In Knutson, the court made two critical rulings: (1) a client's claim against his or her attorney for intentional breach of fiduciary duty is subject to the substantial factor causation standard, not the "but for" or "trial within a trial" causation standard applied in legal malpractice claims for negligence, and (2) the client's testimony alone is sufficient to support emotional distress damages on such a claim where the emotional distress consisted of "anxiety, shame, a sense of betrayal, and a continuing impact on personal relationships."

In Knutson, Plaintiff Dagny Knutson had given up a five-year scholarship package to swim in college when she was enticed by USA Swimming's head coach to swim professionally instead. The coach made various oral promises regarding financial support USA Swimming would provide without any performance markers. After the head coach was fired, USA Swimming refused to honor the oral agreement and Knutson retained an attorney, Foster, to enforce the agreement. Foster did not disclose his close ties to USA Swimming or his previous representation of the head coach who had made the oral agreement. Foster then negotiated a settlement on Knutson's behalf. In doing so, he convinced Knutson to agree to a nearly impossible performance marker of top 25 in the world or top three in the U.S. for three years, and to release all claims against the coach. Knutson did not reach the performance markers, and the pressure and stress of the deal led Knutson to reactivating a prior eating disorder. Knutson eventually burned out and retired from the sport.

Knutson sued Foster, alleging fraudulent concealment and breach of fiduciary duty. Following a jury trial, Knutson prevailed on both causes of action.

Foster moved for a new trial, arguing that Knutson failed to prove causation. The trial court agreed, ruling that "substantial factor causation [was] still an element of proof," so Knutson had to prove that but for her attorney's conduct, she would have obtained a better result. (Knutson, supra, p. 7896.) Knutson appealed and the Fourth District Court of Appeal reversed, holding that the trial court erroneously "applied the legal malpractice standard of causation to Knutson's intentional breach of fiduciary duty cause of action." (Knutson, supra, p.7898.) The court ruled that "Knutson's claim for breach of fiduciary duty is based on intentional conduct and, thus, is subject to the substantial factor standard of causation." The court found that "[t]he evidence established Foster breached his duty of loyalty by, among other things, failing to provide written disclosures of his relationships with USA Swimming."

Since 2018, Knutson has gained momentum. A plaintiff who alleges a claim for intentional breach of fiduciary duty is allowed a much easier path to victory and may also recover damages that are not permitted in a traditional legal malpractice action. Indeed, CACI 4106, the jury instruction for intentional breach of fiduciary duty, omits a critical word - "intentional.". This begs the question: What is the difference between intentional conduct and negligent conduct in the context of deciding whether CACI 4106 applies? For example, an attorney's failure to obtain a conflict waiver or disclose a conflict of interest is more likely to be seen as an intentional act vs. a negligent act based upon the existing duties imposed on lawyers to obtain adequate waivers. In addition, unlike fraud, there is no requirement that the attorney intended to cause the client harm. A plaintiff is only required to prove:

1. That [name of defendant] breached the duty of an attorney [describe duty];

2. That [name of plaintiff] was harmed; and

3. That [name of defendant]'s conduct was a substantial factor in causing [name of plaintiff]'s harm. (CACI 4106)

Lawyers practicing in California need to be aware that engaging in the type of conduct as described in the Knutson case may lead to significant exposure. In most cases, clients seek lawyers' help in a time of great distress; many have never retained an attorney before and want advice in making critical decisions, whether the retention involves an injury, divorce, or real estate transaction. If conflicts exist and are not disclosed, or money goes missing (just to name a few), the client and future plaintiff will be able to testify about how much distress the lawyer's conduct caused without having to call an expert. Let's face it, there is usually little sympathy for attorneys in front of a jury and defending against a claim for emotional distress that the attorney caused the client to suffer is not easy.

Marshall R. Cole is a partner and Certified specialist,and Daniel Reback is an partner at Nemecek & Cole.