(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
NATHAN CONKLIN, ET AL. V. HANNOCH WEISMAN, ET AL. (A-92-95)
Argued February 14, 1996 -- Decided July 18, 1996
O'HERN, J., writing for a unanimous Court.
The primary issue in this legal malpractice action is whether plaintiffs are entitled to a new trial
against their lawyer and his law firm based on the trial court's charge to the jury regarding proximate cause.
In the Fall of 1984, the Conklins listed for sale "100+ prime acres" of their farm. The Conklins
retained the law firm of Hannoch Weisman, P.C., to represent them in that sale. The law firm assigned
then-associate, Carlton R. Kemph, to handle the matter.
In April 1985, Longview Estates (Longview) agreed to purchase the Conklin farm for $12 million.
The contract required that the purchaser pay $3 million cash at or before closing. The remaining $9 million
was financed through a purchase-money note and mortgage to be paid within five years after closing. The
Longview partners guaranteed the partnership's note. The contract of sale described the purchase-money
mortgage obligation as "subordinate" to one or more institutional construction mortgages. The contract was
amended to subordinate the Conklin's purchase-money mortgage to a mortgage securing a loan that
Longview was to obtain to raise any balance of cash due at closing.
By 1990 Longview had defaulted on its purchase-money mortgage and its construction mortgage and,
along with its individual partners, had filed for bankruptcy protection. A mortgage lender that had priority
over the Conklins by virtue of the subordination agreement foreclosed on the property. As a result, the
Conklins lost the $9 million owed to them under the contract of sale and their land.
The Conklins, believing that their attorneys had failed to protect them in this transaction, sued
Hannoch Weisman and Carlton Kemph (collectively, Hannoch) for legal malpractice. The Conklins claimed,
among other things, that Hannoch had been negligent in preparing the contract documents and had failed
adequately and accurately to explain to the Conklins the meaning and risks of subordination. The parties
presented conflicting positions in respect of the communications between them on the subject of
subordination. The Conklins claimed that Hannoch failed to provide any explanation of the meaning of
subordination or the ramifications of subordination in the event of default by the buyers on any of the loans,
including any attendant foreclosure. Hannoch, on the other hand, asserted that on numerous occasions they
had provided the Conklins with detailed explanations concerning the meaning and risks of subordination,
including the effects of foreclosure and default.
At the conclusion of a lengthy trial, the jury determined that Hannoch was negligent in explaining subordination and the risks associated with subordination, but found that Hannoch's negligence was not a proximate cause of the damage suffered by the Conklins. The jury found that Hannoch was not negligent in drafting the contract documents insofar as they concerned subordination. The Conklins moved for a judgment notwithstanding the verdict or, alternatively, for a new trial on the subordination issue. The trial court concluded that a paragraph in its charge may have misled the jury to believe that Hannoch's malpractice could not be considered a proximate cause of the Conklins' losses if those losses were also caused by the bankruptcy of Longview and its partners. The court further concluded that a second paragraph in the charge, which it added just before the jury began its deliberations, failed to overcome the misleading effect of the original charge. Determining that its misleading jury charge resulted in a verdict that
clearly constituted a miscarriage of justice under the law, the court granted the motion for a new trial on the
negligent advice/subordination issue.
Concerning the nature and scope of the retrial, the court determined that, based on the diametrically
opposed evidence offered at trial, it could fairly be inferred that the jury had accepted the Conklins' version
of the facts concerning subordination and had rejected Hannoch's version. Accordingly, the court preserved
the verdict establishing Hannoch's negligence and ordered the jury on retrial to determine proximate cause,
comparative negligence and damages based on the Conklins' version of the facts, that is, that Hannoch had
not advised them of the risks of subordination.
On appeal, the Appellate Division agreed that the jury charge was defective and that the trial court's
insertion of the separate paragraph on the issue of intervening causation did not overcome that defect. The
Appellate Division disagreed, however, with the trial court's disposition concerning the nature and the scope
of the retrial. The Appellate Division first instructed the court on retrial to exclude proximate cause from its
charge to the jury and instead employ an objective cause-in-fact analysis similar to that used in medical
malpractice "informed consent" cases. Under that analysis, when an attorney provides inadequate advice, the
jury should be asked whether a prudent client would have declined to enter into the transaction if adequately
informed of its risks. The Appellate Division also held that this case required the application of a limited
"subjective" standard. Under that standard of causation, a jury should be asked to determine not whether a
prudent plaintiff would have entered the disputed transaction, but whether the plaintiff in this case would
have entered the transaction if adequately informed of the risks. Accordingly, in addition to making an
objective analysis of what a prudent seller would have done, the jury should be instructed to answer whether
the Conklins would have declined to sell rather than undertake the risks of subordination, regardless of
whether a prudent seller would have done so. On the scope of the retrial, the Appellate Division affirmed
the trial court's ruling that preserved the jury's finding of Hannoch's negligence but removed the issue of the
Conklins' comparative negligence from the retrial.
The Supreme Court granted Hannoch's motion for leave to appeal.
HELD: This matter requires a new trial because the jury charge on proximate cause could have confused the
jury and led to an unjust result. The retrial must include the issue of defendants' negligence but not
the Conklins' comparative negligence. For legal malpractice cases in which inadequate or inaccurate
advice is alleged as a concurrent cause of harm, usual principles of negligence apply, including
foreseeability. Because the traditional jury charge on proximate cause as a continuous sequence is
unsuitable for legal malpractice cases in which there are concurrent, independent causes of harm,
the jury must be instructed to determine whether the negligence was a substantial factor in bringing
about the ultimate harm.
1. The trial court could reasonably conclude that the paragraph at issue effectively directed a verdict in favor
of defendants on the issue of proximate cause and was, thus, clearly capable of producing an unjust result.
Therefore, a new trial is appropriate. (pp. 12-15)
2. Although the jury's finding of negligence may not have been affected by error, there is no way of knowing
precisely what conduct the jury based that finding on. Thus, the jury's finding of negligence was not entirely
distinct and separable from the issue of proximate cause. The retrial must embrace questions of fault on the
part of the attorneys relating to the adequacy of their advice to the Conklins concerning subordination and
the risks associated with subordination. On retrial, the jury should not be permitted to consider the
Conklins' conduct as contributory negligence. (pp. 15-20)
3. The objective theory of informed consent, under which the jury would be asked to consider whether a reasonably prudent client would have entered into a business transaction if adequately informed of its attendant risks, fails to reflect the many highly subjective, personal, financial and strategic concerns that
underlay most legal decisions but are not present in the majority of medical decisions. In addition, there is
no persuasive need to introduce into attorney malpractice the subjective standard of informed consent.
Rather, usual principles of negligence should apply to legal malpractice cases. (pp. 20-27)
4. The standard proximate cause charge for concurrent causes is ill-suited for legal malpractice cases where
there are concurrent causes of harm. Rather, the substantial factor test is suited for legal malpractice cases
in which inadequate or inaccurate legal advice is alleged to be a concurrent cause of harm. The substantial
factor test accounts for the fact that there can be any number of intervening causes between the initial
wrongful act and the final injurious consequences and does not require an unsevered connecting link between
the negligent conduct and the ultimate harm. As such, the jury must be instructed to determine whether the
lack of adequate advice was a substantial factor in causing the Conklins' exposure to an unwanted risk of
harm. (pp. 27-32)
As MODIFIED, the judgment of the Appellate Division is AFFIRMED.
JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and COLEMAN join in JUSTICE
O'HERN's opinion. CHIEF JUSTICE WILENTZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
92 September Term 1995
NATHAN CONKLIN; RICHARD CONKLIN;
FRANK CONKLIN, III; AUDREY CONKLIN,
Individually and as Executrix of
the Estate of FRANKLIN CONKLIN,
Deceased,
Plaintiffs-Respondents,
v.
HANNOCH WEISMAN, a Professional
Corporation and CARLETON R. KEMPH,
ESQ.,
Defendants-Appellants,
and
PAULA HERTZBERG; ELLIOT LEIBOWITZ
and JOEL LEIBOWITZ, Individually
and d/b/a LONGVIEW ESTATES, a New
Jersey General Partnership;
THEODORE D. CASSERA, P.E.; CANGER,
SCHOOR and CASSERA INC., a New
Jersey Corporation,
Defendants.
Argued February 14, 1996 -- Decided July 18, 1996
On appeal from the Superior Court, Appellate
Division, whose opinion is reported at
281 N.J. Super. 448 (1995).
Laurence B. Orloff argued the cause for
appellants (Orloff, Lowenbach, Stifelman &
Siegel, attorneys; Mr. Orloff, Linda S. Moore
and Adam K. Derman, on the brief).
John B. Collins argued the cause for
respondents (Bongiovanni, Collins & Warden,
attorneys).
Felice T. Londa submitted a brief on behalf
of amicus curiae New Jersey State Bar
Association (George W. Canellis, Chairman,
New Jersey State Bar Association; Amicus
Committee, attorney).
The opinion of the Court was delivered by
O'HERN, J.
The primary issue in this legal malpractice action is
whether plaintiffs are entitled to a new trial against their
lawyer and his law firm based on the trial court's charge to the
jury regarding proximate cause. In its original form, that
charge would, in essence, have required defendants' negligence to
have been the sole cause of the harm to the client for the
attorneys to be held liable. The trial of the matter had
resulted in a jury verdict of no cause for action against the
defendants on the plaintiffs' major claim. Although differing as
to the nature and scope of the retrial, both lower courts agreed
that the charge on proximate cause contained language clearly
capable of producing an unjust result and that plaintiffs were
entitled to a new trial on liability. Each court, however,
preserved some of the first jury's findings. We agree that
plaintiffs are entitled to a new trial based on the defective
jury charge below, but differ from both lower courts concerning
the nature and scope of the retrial.
The Conklin plaintiffs are members of a farm family that settled in Montville in the 1800's. Over the years, the family
diversified its activities and was, at the time of the events
that led to this lawsuit, conducting, in partnership form, farm
and sand and gravel operations, and had business counselors with
whom it had explored the possibility of sale of the property. In
the Fall of 1984, the Conklins listed for sale "100+ prime acres"
of their farm. On the advice of their real estate broker, the
Conklins retained the law firm of Hannoch Weisman, P.C., to
represent them in the sale. The law firm assigned a then-associate, Carleton R. Kemph, to handle the matter.
In April 1985, a buyer, Longview Estates, agreed to purchase
the Conklin Farm for $12 million. The contract required the
purchasers to pay $3 million in cash at or before closing. A
purchase-money note and mortgage to be paid within five years
after closing and bearing interest at 9 per cent represented the
remaining $9 million. The Longview partners guaranteed the
partnership's note.
The contract of sale, executed by the parties on May 2,
1985, described the purchase-money mortgage obligation as
"subordinate" to one or more institutional construction
mortgages.See footnote 1 The parties later amended the contract to
subordinate the Conklin's purchase-money mortgage to a mortgage
securing a loan that Longview was to obtain to raise any balance
of cash due at closing.
The sale took place on December 22, 1986. By 1990, however,
Longview had defaulted on its purchase-money mortgage and its
construction mortgage. A mortgage lender that had priority over
the Conklins by virtue of the subordination agreement contained
in the contract of sale foreclosed on the property. In order to
recover the land or hold onto their second mortgage, the Conklins
would have had to have bid between $10 million and $12 million at
the foreclosure sale to satisfy the balances due on the
outstanding construction mortgage. The Conklins did not have the
funds for such a buyout, not to mention that it would have made
little sense to spend $12 million to recover the $9 million due
to them, unless the property (with any improvements) had
substantially appreciated in value. Meanwhile, Longview and its
individual partners filed for bankruptcy protection. As a result
of those events, the Conklins lost the $9 million owed to them
under the contract of sale as well as their land.
The Conklins, believing that their attorneys had failed to
protect them in this transaction, sued Hannoch Weisman and
Carlton Kemph for malpractice. Plaintiffs' major claims at trial
were that defendants had been negligent in preparing the contract
documents and had failed adequately and accurately to explain to
the Conklins the meaning and risks of subordination.
Subordination of a mortgage is an innocuous sounding
expression but in the field of commercial financing it has the
potential for disaster. To put the concept in simple terms, if
you are a lender, to subordinate a loan to that of another means
that someone else must be paid before you can collect anything
from the borrower. If the borrower owes a substantial sum of
money to that other party, you may not be paid at all. To
protect themselves, lenders often insist on collateral, an
interest in the property of the borrower that the lender can
acquire if the borrower does not pay. A mortgage on real estate
is perhaps the most familiar form of collateral. Again, if you
are a lender, to subordinate your mortgage to the mortgage of
another means that you cannot reach the collateral (the property)
until that other party (holding the mortgage with priority) has
been fully paid. In effect, you stand on line until all other
holders of mortgages with priority have been paid.
A mortgage is thus only as good as the collateral that it
secures. A $100,000.00 mortgage on a house worth $50,000.00 puts
the lender at risk for $50,000.00. A $100,000.00 mortgage on the
same property that is subordinated to another mortgage of
$50,000.00 is really worthless unless the borrowers have other
money or assets to pay the loan. As events turned out, the
partnership that bought the Conklin farm did not have other money
or assets sufficient to pay the loan. Assuming that the property
was worth what it sold for, the Conklin's $9 million mortgage was
at risk the minute that other lenders were to be paid out of the
property before the Conklins were. The more that was owed to
those other preferred lenders, the more the Conklins were put at
risk.See footnote 2
At trial, the parties presented diametrically opposed
positions concerning the communications between them on the
subject of subordination. Plaintiffs claimed that defendants
failed to provide any explanation of the meaning of subordination
or the ramifications of subordination in the event of default by
the buyers on any of the loans, including any attendant
foreclosure. Defendants, on the other hand, asserted that on
numerous occasions they provided plaintiffs with detailed
explanations concerning the meaning and risks of subordination,
including the effects of foreclosure and default.
Defendants emphasize that Frank Conklin, Jr., the since
deceased managing partner for the family, fully understood the
meaning and consequences of subordination. Defendants point out
that the Conklins' family lawyer had counseled against
subordination and that the Conklins' prior negotiations with
potential purchasers made the Conklins fully aware that they
could not sell the farm for $12 million without allowing
purchasers to obtain mortgage money to construct the housing that
gives the property its value. One family member acknowledged
that they had "agreed to compromise" to make the deal. Although
the evidence presented by both parties at trial was thus in
conflict, the jury determined by way of answers to special
interrogatories that defendants were negligent in explaining
subordination and the risks associated with subordination. The
jury answered "Yes" to the following special interrogatory:
Were Carleton R. Kemph and Hannoch Weisman
negligent in representing the Conklin Farm
partnership in connection with explaining
subordination and the risks associated with
subordination?
However, the jury answered "No" to the next interrogatory:
Was the negligence of Carleton R. Kemph and
Hannoch Weisman a proximate cause of damage
suffered by the Conklin Farm partnership?
In addition, the jury found that defendants were not negligent in
drafting the contract documents insofar as they concerned
subordination.See footnote 3
Plaintiffs moved for judgment notwithstanding the verdict or
for a new trial on the subordination issue. After reviewing the
filings and hearing oral argument, the trial court concluded that
a paragraph in its charge may have misled the jury. That
paragraph read as follows:
Thus, for example, if you as jurors find that
the proximate cause of plaintiffs' alleged
losses was the bankruptcy of Longview Estates
[and its principals], then you may not find
Kemph liable for malpractice because his acts
and omissions, even if you conclude they were
deviations from accepted standards of
practice, were not the proximate cause of the
plaintiffs' losses.
The court found that the paragraph could have misled the jury to
believe that defendants' malpractice could not be considered a
proximate cause of plaintiffs' losses if those losses were also
caused by the bankruptcy of Longview Estates and its partners.
The court further concluded that a second paragraph in the
charge, which the court added just before the jury began its
deliberations, failed to overcome the misleading effect of the
original charge. That paragraph read:
However, the defendant is not relieved from
liability for his negligence by the
intervention of acts of third persons if
those acts were reasonably foreseeable, such
as the occurrence of the default, foreclosure
and bankruptcy and the defendant failed to
advise about the possibility of same.
Neither is the defendant relieved from
liability by the intervening acts of third
persons where his own prior negligence was an
efficient cause of the damage.
Because the trial court determined that its misleading jury
charge "resulted in a verdict which clearly constituted a
miscarriage of justice under the law," the court granted
plaintiffs' motion for a new trial on the negligent
advice/subordination issue.
Concerning the nature and scope of the retrial, the court
determined that, based on the diametrically opposed evidence
offered at trial, the court could fairly infer that the jury had
accepted plaintiffs' version of the facts concerning
subordination and had rejected defendants' version. Accordingly,
the court preserved the verdict establishing defendants'
negligence and ordered the jury on retrial to determine proximate
cause, comparative negligence and damages based on plaintiffs'
version of the facts, that is, that defendants had not advised
them of the risks of subordination. (The jury had not reached
the related issues of comparative negligence and damages at the
first trial because it found no proximate cause between
defendants' negligence and plaintiffs' damages.)
The Appellate Division agreed with the trial court that the
jury charge was defective and that the trial court's insertion of
a separate paragraph on the issue of intervening causation did
not overcome the defect. The Appellate Division explained that
"[i]n the absence of an express statement to the jury that the
original charge was incorrect, the additional charge merely left
the jury with unresolved conflicting instructions of the law in
the critical portion of the charge that relates difficult
abstract concepts to the facts of the case."
281 N.J. Super. 448, 454 (1995).
Although the Appellate Division agreed with the trial
court's conclusion that the defective jury charge required a new
trial, the court disagreed with the trial court's disposition
concerning the nature and scope of the retrial. The Appellate
Division first instructed the court on retrial to exclude
proximate cause from its charge to the jury (except as a factor
in assessing damages if the jury found defendant to be liable)
and instead to employ an objective cause-in-fact analysis similar
to that used in medical malpractice "informed consent" cases, in
which a court asks the jury to decide whether a prudent patient
would have declined to undergo the medical treatment if
adequately informed of its risks. Under that rationale, when an
attorney provides inadequate or inaccurate advice, the jury
should be asked whether a prudent client would have declined to
enter into the transaction if adequately informed of its risks.
The Appellate Division further held that, although that
objective standard would suffice in most legal malpractice cases,
this case also required the application of a limited "subjective"
standard. Under the subjective standard of causation, a jury is
asked to determine not whether a prudent plaintiff would have
entered the disputed transaction, but rather whether the
plaintiff in the case would have entered the transaction if
adequately informed of its risks. The court determined that a
subjective analysis was appropriate in this case because, based
on uncontested evidence of statements of certain plaintiffs to
defendants prior to the sale of the Conklins' land, a jury could
determine without relying solely on uncorroborated hindsight that
plaintiffs would not have sold their property if advised of the
risks of subordination.
In earlier negotiations with another purchaser concerning a
joint venture, defendants acknowledged that their clients did not
want to entertain any "risk quotient." Accordingly, the
Appellate Division held that at the retrial, in addition to
making an objective analysis of what a prudent seller would have
done, the jury should be instructed to answer the following
question: "[R]egardless of what a prudent seller would have done,
would these plaintiffs have declined to sell rather than
undertake the risks of subordination." Id. at 455.
On the scope of the retrial, the Appellate Division affirmed
the trial court's ruling that preserved the jury's finding of
defendants' negligence. The Appellate Division agreed with the
trial court that the jury's finding of negligence at trial turned
on whether the jury accepted plaintiffs' or defendants' version
of the facts concerning subordination and that those facts were
separable from the issue of causation. "The jury's rejection of
defendant[s'] evidence [was] entirely distinct and separable from
the issue of causation, particularly in light of our reduction of
that issue to causation in fact rather than proximate cause."
Id. at 457.
In addition, the Appellate Division removed the issue of
plaintiffs' comparative negligence from the retrial. The court
believed that the jury's factual finding that defendants were
negligent subsumed the issue of plaintiffs' comparative
negligence. It declared: "Plaintiffs cannot be found negligent
for failing to understand [or inquire about] the meaning and
risks of subordination where the jury has found that defendant
negligently failed to provide an explanation that would have
given them that understanding." Id. at 458. Rather than to
allow another trial with those issues in dispute, we granted
defendants' motion for leave to appeal.
142 N.J. 510 (1995).
It is indeed unfortunate that an eleven week jury trial has been substantially set aside because of a single paragraph contained in a sixty-seven page jury charge. However, "An appellate court should give considerable deference to a trial court's decision to order a new trial, as the trial court has gained a `feel of the case' through the long days of the trial." Lanzet v. Greenberg, 126 N.J. 168, 175 (1991). The standard for ordering a retrial of issues of fact is "vastly different" from the standard for resolving issues of fact. Ibid. The trial court could reasonably conclude that the paragraph at issue effectively directed a verdict in favor of defendants on the issue of proximate cause and was thus "clearly capable of producing an unjust result . . . ." Gaido v. Weiser, 227 N.J. Super. 175, 198 (App. Div. 1988), aff'd, 115 N.J. 310 (1989).See footnote 4
The disputed paragraph had the potential in the trial court's view to prohibit the jury from finding that defendants' negligence was a proximate cause of plaintiffs' alleged losses
if the jury concluded that the intervening bankruptcy of Longview
Estates and its partners was also a proximate cause of those
losses. "The charge permitted, if not compelled, a finding that
the [bankruptcy of Longview] constituted an independent
intervening cause which absolved defendants, even if negligent,
from responsibility for the effects of the [bankruptcy]." Ellis
v. Caprice,
96 N.J. Super. 539, 547-48 (App. Div.), certif.
denied,
50 N.J. 409 (1967) (reversing jury verdict in favor of
defendant on issue of proximate cause when trial court commented
that doctrine of intervening cause was not applicable to case
"because no one could reasonably foresee [a third party's
negligence]"). The trial court could reasonably conclude that
the jury below had no choice, had it followed the charge as
originally written, but to find in favor of defendants on the
issue of proximate cause.
The defective portion of the charge also incorrectly stated
that plaintiffs were required to establish that defendants'
negligence was the proximate cause of plaintiffs' losses when in
fact and law there may be any number of proximate causes of a
given result. The trial court in Ellis, supra, similarly charged
the jury that the plaintiffs were required to establish that the
defendants' negligence was the proximate cause of the plaintiffs'
injuries. Rejecting the defendants' contention that any error
inherent in that portion of the charge was rendered harmless by
the numerous other sections of the charge that instructed the
jury that the defendants' negligence need not be the sole cause
of the injuries if it concurred with other efficient causes to
bring them about, the Ellis court wrote:
The challenged instruction bore upon a
sensitive and decisive issue in the case.
Regardless of how well intentioned the jury
may have been, it had no way of knowing which
of the two versions represented the correct
rule.
In charging the correct rule the trial
judge neither withdrew those portions of the
charge which required plaintiffs to establish
that defendants' negligence was the proximate
cause of their injuries nor stated the
correct rule with such completeness as to
counteract the erroneous one.
We are satisfied that the challenged
instruction, considered in connection with
the other parts of the charge to which
reference has been made above, requires
reversal of the judgment.
[Id. at 549-50 (citations and
quotation omitted).]
Defendants remind this Court that we are obligated, as is any reviewing court, to evaluate the charge in its entirety and that, if the charge as a whole adequately presents the law and would not tend to confuse or mislead the jury, the fact that a particular expression, standing alone, may be said to be erroneous does not afford grounds for reversal. Stackenwalt v. Washburn, 42 N.J. 15, 26-27 (1964). We agree with the Appellate Division that an express statement by the trial court that its original charge was incorrect may have salvaged this charge but that absent such an express statement, the trial court's decision to grant a new trial should stand. In a departure from custom,
the jury took the written charge into the jury room during its
deliberations. Conscientious jurors may have fastened their
attention on the uncorrected portion of the charge and believed
themselves bound by its literal terms that forbade a verdict for
plaintiffs if the intervening default and bankruptcy of Longview
were deemed a proximate cause of plaintiffs' losses. Having
determined that a new trial is required, we now turn our
attention to the nature and scope of the retrial.
There are three issues concerning the nature and scope of the retrial: (1) whether the first jury's finding that defendants had failed properly to inform plaintiffs of the risks of subordination should be binding on a jury at retrial; (2) whether the jury should consider plaintiffs' conduct as contributory negligence that might limit or bar their recovery; and (3) whether the standard for assessing professional malpractice in the context of advice concerning commercial or financial risks undertaken by a client should include the doctrine of informed consent derived from medical malpractice.
There are two aspects of the problem concerning the binding effect of the first jury's finding on the attorneys' malpractice, one is abstract, the other concrete. The abstract question is whether the erroneous jury instruction on proximate cause undermines confidence in the remainder of the verdict. In DeRobertis v. Randazzo, 94 N.J. 144, 160 (1983), this Court held
that a jury's finding of monetary damages would have to be retried because there was an erroneous jury instruction on liability. Should a jury's finding of fact on an aspect of negligence be treated otherwise? A jury verdict in a civil tort claim ordinarily consists of two components, a finding of negligent conduct and a finding of damages proximately caused by that conduct. Negligence, then, is usually inextricably intertwined with the concept of proximate cause. Thus, in Tobia v. Cooper Hospital University Medical Center, 136 N.J. 335 (1994), we found that an incorrect jury charge on contributory negligence tainted a jury verdict of no negligence on the part of the professional defendants. We said: "[T]he erroneous charge may have affected those verdicts [with respect to defendants] by improperly focusing the jury's attention on plaintiff's conduct, thus distracting the jury from the key question of whether defendants had been negligent." 136 N.J. at 343. So too here, the jury's finding of fault on the part of professional defendants may have been tempered by its understanding that the finding would not result in the imposition of any damages. In Ahn v. Kim, ___ N.J. ___ (decided July 18, 1996), (slip op. at 14), also decided today, we note "the general rule that issues in negligence cases are to be retried together unless it clearly and convincingly appears that the issue unaffected by error is `entirely distinct and separable' from the other issues." Although the jury's finding of negligence in the within case very well may have been unaffected by error, we have no way
of knowing precisely what conduct the jury based that finding on.
Thus we cannot say that the jury's finding of negligence was
entirely distinct and separable from the issue of proximate
cause. In Williams v. James,
113 N.J. 619 (1989), we explained
the difference between the concepts of a special verdict and a
general verdict, the former being "`a device for returning the
facts only--leaving the legal consequences to the judge.'" Id.
at 631 (quoting Schabe v. Hampton Bays Union Free School Dist.,
480 N.Y.S.2d 328, 334 (App. Div. 2d Dept. 1984)). "[T]he focus
of a special verdict is the `resolution of specific factual
questions,' whereas the focus of a general verdict is to
determine the outcome of the case." Ibid. (quoting Schabe,
supra, 480 N.Y.S.
2d at 334).
The concrete question is what precisely were the jury's
factual findings and how would those findings relate to the
issues of causation. For example, the attorneys' negligence may
have consisted in giving no explanation of subordination at all
(plaintiffs' basic theory), an incomplete explanation (one
witness said that Kemph told one of the plaintiffs that
subordination means that the bank gets paid first), or an
unartful explanation couched in legal jargon rather than in the
plain language necessary to impart its meaning to lay clients (a
theory of one of the experts). How then might the court at
retrial pose the issue to the jury? We foresee too many problems
of repeat error if the terse language of the jury findings is
translated into background circumstances that may or may not have
been what the first jury intended to convey.
Because the jury's factual findings concerning the fault of
the attorneys did not determine the outcome of the case and
because those findings were imprecise, we direct that the retrial
embrace those questions of fault on the part of the attorneys
relating to the adequacy of their advice to plaintiffs concerning
subordination and the risks associated with subordination. We
leave undisturbed the determination of the lower courts that
there need not be a retrial of the defendants' duty to consult
directly with certain individual partners.
We agree with the Appellate Division that the jury should
not be permitted to consider plaintiffs' conduct as contributory
negligence. In a long series of cases, we have explained that
when the duty of the professional encompasses the protection of
the client or patient from self-inflicted harm, the infliction of
that harm is not to be regarded as contributory negligence on the
part of the client. See Cowan v. Doering,
111 N.J. 451, 468
(1988) ("Because [defendants'] duty of care included the
prevention of the kind of self-damaging acts that caused
plaintiff's injuries, the plaintiff's actions and capacity were
subsumed within the defendants' scope of duty. Thus, . . . the
defense of contributory negligence was not available."). The
reason is that the patient's conduct relates to causation rather
than duty.
In Theobald v. Byers,
13 Cal. Rptr. 864 (Dist. Ct. App.
1961), the attorneys did not inform the clients that they had to
perfect by filing a mortgage that the attorneys had prepared for
a loan that the clients were making to a third-party debtor. The
clients sued for malpractice when the mortgage later failed as a
secured claim in the debtor's bankruptcy proceeding. The
attorneys argued that the clients' failure to inquire whether
they needed to record the mortgage constituted contributory
negligence, barring plaintiffs' claim. The Theobald court
reversed the trial court's judgment in favor of the attorneys,
finding that although the doctrine of contributory negligence
could be applied to bar recovery in some cases (as when a client
disregards the advice of an attorney), it was inapplicable to the
facts presented in that case. Id. at 867. It reasoned that it
would not be fair to hold the clients contributorily negligent
solely because of their failure to themselves
perform the very acts for which they employed
[the attorneys]. Such a result cannot be
upheld. Clearly the value of an attorney's
services in connection with a transaction of
this nature consists largely of [the
attorney's] superior knowledge of the
necessary legal formalities which must be
fulfilled in order for a document to be valid
in the eyes of the law.
On the other hand, if a client or patient deliberately violates the professional's instructions with respect to self-care or heedlessly enters a transaction regardless of any instructions on the part of the professional, the trier of fact may find that there is no causal connection between the fault and the harm, Lamb v. Barbour, 188 N.J. Super. 6, 12-13 (App. Div. 1982) ("[N]owhere in the findings or the evidence . . . is there anything to warrant a finding of proximate cause. Most
conspicuous is the absence of testimony by either of the
plaintiffs as to any circumstances reasonably to be hypothesized
under which they could have been dissuaded from completing the
transaction."), cert. denied,
93 N.J. 297 (1983), or that the
plaintiff failed to mitigate her damages as she should have,
e.g., Ostrowski v. Azzara,
111 N.J. 429, 445 (1988). Plaintiffs'
expert agreed that an attorney has no obligation "to lie down in
front of a speeding train" to prevent a bad deal. In any event,
the analysis is that of causation, not contributory negligence.
Malpractice in furnishing legal advice is a function of the
specific situation and the known predilections of the client.
An attorney in a counselling situation must advise a client of
the risks of the transaction in terms sufficiently clear to
enable the client to assess the client's risks. The care must be
commensurate with the risks of the undertaking and tailored to
the needs and sophistication of the client.
Defendants complain that this ruling encourages a client to
act as a "potted plant" throughout the counseling, not asking
questions about any matters that the client may not understand.
Experience tells us, however, that most clients will not hesitate
to ask questions when they have sufficient understanding to know
that there is something about which they should be concerned.
The final issue is the standard for negligence in legal
malpractice cases in which inadequate or inaccurate counselling
is alleged as a concurrent cause of harm. As noted, the
Appellate Division opinion would incorporate into legal
malpractice the objective and subjective standards of informed
consent that have developed in the field of medical malpractice.
See generally Perna v. Pirozzi,
92 N.J. 446 (1983) (discussing
doctrine of informed consent in medical malpractice context).
Those concepts of consent, drawn from the autonomy over one's
body, seem strained in the context of commercial business
transactions. Recall that the consent involved in medical
malpractice usually relates to the invasion of a patient's body.
It is a battery if a physician operates without the patient's
consent; it is negligence if the physician operates without the
patient's informed consent. The difference that we see is that
in many instances the business client, unlike the medical
patient, is not sick when the client consults an attorney. The
business client is often motivated to enter into a legal
transaction for many more reasons than a medical patient and may
be at no risk at all at the inception of the transaction.
Moreover, while most patients will not appreciate the risks of
medical treatments absent an explanation by a doctor, many
clients may understand as well as their attorney, if not better,
the risks of a commercial business transaction.
The objective theory of informed consent, under which the
jury would be asked to consider whether a reasonably prudent
client would have entered into a business transaction if
adequately informed of its attendant risks, fails to reflect the
many highly subjective, personal, financial and strategic
concerns that underlay most legal decisions and that are not
present in the majority of medical decisions. A majority of
medical patients are sick and consult a doctor for a single
purpose -- to get well. The patients usually bring little or no
personal knowledge to the evaluation of the risks associated with
their recovery.
Without any insight into the make-up and needs of the legal
malpractice plaintiff, expert testimony regarding what a
reasonably prudent client would have done under similar
circumstances in weighing the risks and complications of complex
commercial business transactions appears of dubious value to the
trier of fact. (Would a client wish not to be presented as a
prudent person?) Clients such as Donald Trump or Harry Helmsley
might view such matters differently than family farmers or
business people or real estate developers. Defendants' expert
acknowledged that the measure of the attorney's advice "depends
on the expertise of the individual [client] involved."
In short, some clients may sufficiently understand aspects
of a financial transaction, such as the priority of mortgages, so
as not to impose a duty on their lawyer to explain the
transaction in detail. For them, what a prudent client might do
is largely irrelevant. On the other hand, each would probably
approach by-pass surgery with a single similar purpose -- to get
well.
Because of its own concerns for the reliability of the
concept of objective informed consent as the measure of causation
in attorney malpractice cases, the Appellate Division would allow
a subjective factor to be added to the analysis of informed
consent when prior consistent statements corroborate a
plaintiff's trial testimony. That analysis asks the jury not
only whether a reasonable client in plaintiff's shoes would have
entered into the transaction if adequately informed of its risks,
but also whether the client in the case would have entered into
the transaction if adequately informed of its risks. In Largey
v. Rothman,
110 N.J. 204 (1988), we set forth our reasons for
rejecting the subjective standard of informed consent in the
medical malpractice context. We stated:
[The subjective standard] places the
physician in jeopardy of the patient's
hindsight and bitterness. It places the
factfinder in the position of deciding
whether a speculative answer to a
hypothetical question is to be credited. It
calls for a subjective determination solely
on testimony of a patient witness shadowed by
the occurrence of the undisclosed risk.
[Id. at 216 (citing Canterbury v. Spence,
464 F.2d 772, 790-91 (D.C. Cir.), cert. denied,
409 U.S. 1064,
93 S. Ct. 560,
34 L. Ed.2d 518 (1972)).]
Although the Appellate Division's requirement of corroboration reduces the potential for evaluations of attorney malpractice based on hindsight, we find no persuasive need to introduce into attorney malpractice the subjective standard of informed consent that we rejected in Largey. That is not to say that a legal malpractice claimant's testimony concerning whether he or she would have entered into a transaction, if adequately informed of its risks, is irrelevant. A client's attitude about risk is a part of that client and is a component of proximate cause.
Compare Profit Sharing Trust v. Lampf,
267 N.J. Super. 174, 193
(Law Div. 1993) (holding that assumed legal malpractice was
proximate cause of damages when plaintiffs specifically testified
that had they been adequately or accurately informed of risks of
commercial business transaction they would not have entered into
transaction) with Lamb v. Barbour, supra, 188 N.J. Super. at 12-13 (holding that assumed legal malpractice was not proximately
connected to claim of damages when plaintiff offered no testimony
"as to any circumstances reasonably to be hypothesized under
which [plaintiff] could have been dissuaded from completing the
transaction.").
Rather than importing the doctrine of informed consent into
attorney malpractice, we hold, as do most jurisdictions, that the
usual principles of negligence apply to legal malpractice. "The
requisite elements of a cause of action for legal malpractice
are: (1) the existence of an attorney-client relationship
creating a duty of care upon the attorney; (2) the breach of that
duty; and (3) proximate causation." Lovett v. Estate of Lovett,
250 N.J. Super. 79, 87 (Ch. Div. 1991).
Although it sounds simple, "`causation' is an inscrutably
vague notion, susceptible to endless philosophical argument, as
well as practical manipulation." Glen O. Robinson, Multiple
Causation in Tort Law: Reflections on the DES Cases,
68 Va. L.
Rev. 713, 713 (1982). Dean Prosser observed almost fifty years
ago that "`Proximate cause remains a tangle and a jungle, a
palace of mirrors and a maze . . . [it] covers a multitude of
sins . . . [and] is a complex term of highly uncertain meaning
under which other rules, doctrines and reasons lie buried."See footnote 5
Mitchell v. Gonzales,
819 P.2d 872, 876 (Cal. 1991) (quoting
William L. Prosser, Proximate Cause in California,
38 Cal. L.
Rev. 369, 375 (1950)).
The first and most basic concept "buried" within proximate
cause is that of causation in fact. Cause in fact is sometimes
referred to as "but for" causation. In the routine tort case,
"the law requires proof that the result complained of probably
would not have occurred `but for' the negligent conduct of the
defendant." Vuocolo v. Diamond Shamrock Chemicals Co.,
240 N.J.
Super. 289, 295 (App. Div.) (quoting Evers v. Dollinger,
95 N.J. 399, 415 (1984)), certif. denied,
122 N.J. 333 (1990). The
simplest understanding of cause in fact in attorney malpractice
cases arises from the case-within-a-case concept. For example,
if a lawyer misses a statute of limitations and a complaint is
dismissed for that reason, a plaintiff must still establish that
had the action been timely filed it would have resulted in a
favorable recovery. Laura Callaway Hart et al., From Offense To
Defense: Defending Legal Malpractice Claims,
45 S.C. L. Rev. 771,
775 (1994).
Those cases present the easier aspects of causation. More
complex are cases in which the attorney's negligent conduct
combines with other causes that lead to the client's injury. In
Kelly v. Gwinnell,
96 N.J. 538, 543 (1984), we spoke of
negligence that "creates" a risk of intervening harm. The host
who serves alcohol to a visibly intoxicated guest creates the
risk of harm ultimately caused by the drunken driver-guest. Id.
at 543, 548. The negligent attorney, however, often does not
"create" the risk of intervening harm (the attorney does not make
the borrower more likely to become insolvent), but rather fails
to take the steps that competent counsel should take to protect a
client from the risks that ultimately produce the injury. See,
e.g., Picco v. Fords Diner, Inc.,
113 N.J. Super. 465, 467 (App.
Div. 1971) (holding that jury question existed concerning whether
diner operator's failure to provide lighting for parking area
behind diner might be considered negligence that proximately
caused criminal assault against infant patron of diner in parking
lot at night).
The Conklins' theory is not that defendants directly caused
or produced the insolvency of Longview, or even increased its
risk, but rather that defendants failed to provide the Conklins
with a sufficient understanding of subordination to enable them
to protect themselves from the risks associated with
subordination.
This lack of a causal relationship between defendants'
failure to inform plaintiffs about the risks of subordination and
the borrower's insolvency that caused plaintiffs' subsequent
losses prompted the Appellate Division to find that the standard
jury charge on proximate cause, even apart from the defective
portions discussed above, was ill-suited for the situation.
Traditionally, proximate cause has been defined "as being any
cause which in the natural and continuous sequence, unbroken by
an efficient intervening cause, produces the result complained of
and without which the result would not have occurred." Fernandez
v. Baruch,
96 N.J. Super. 125, 140 (App. Div. 1967), rev'd on
other grounds,
52 N.J. 127 (1968). Similarly, the jury charge
below stated that, to be a proximate cause of plaintiffs' losses,
defendants' negligence had to be "an efficient cause of the
plaintiffs' losses, a cause which necessarily set the other
causes in motion and was a substantial factor in bringing about
the plaintiffs' losses." (Emphasis added). The problem with
this language is that defendants' failure to inform plaintiffs
about the risks of subordination did not in any sense "set in
motion" the chain of events that led to the bankruptcy of
Longview Estates, the other primary cause of plaintiffs' losses.
Language concerning the "cause that sets the other causes
in motion" relates to the concept of cause in fact, not to the
value driven aspects of proximate cause. Such language does not
aid the trier of fact when there are concurrent causes of harm
that are neither set in motion nor increased by the other. The
Supreme Court of California has disapproved, in cases involving
"independent causes," the standard proximate cause definition in
favor of the "sufficiently intelligible" substantial factor test.
Mitchell v. Gonzales,
819 P.2d 872, 878 (Cal. 1991). It reasoned
that "[the standard jury charge on proximate cause as a
continuous sequence is] conceptually and grammatically deficient.
The deficiencies may mislead jurors, causing them . . . to focus
improperly on the cause that is spatially or temporally closest
to the harm."See footnote 6 Ibid.
Generally, our concepts of causation for failure to act are
expressed in terms of whether the negligent conduct may be
considered a substantial factor contributing to the loss. See
Brown v. United States Stove Co.,
98 N.J. 155, 171 (1984) ("With
respect to concurrent proximate causation, a tortfeasor will be
held answerable if its `negligent conduct was a substantial
factor in bringing about the injuries,' even where there are
`other intervening causes which were foreseeable or were normal
incidents of the risk created.'") (quoting Rappaport v. Nichols,
31 N.J. 188, 202 (1959)). Although the law of negligence
recognizes that there may be any number of concurrent causes of
an injury, "[n]evertheless, these acts need not, of themselves,
be capable of producing the injury; it is enough if they are a
`substantial factor' in bringing it about." Scott v. Salem
County Memorial Hosp.,
116 N.J. Super. 29, 33-34 (App. Div.
1971).See footnote 7
The substantial factor test accounts for the fact that there
can be any number of intervening causes between the initial
wrongful act and the final injurious consequence and does not
require an unsevered connecting link between the negligent
conduct and the ultimate harm. The test is thus suited for legal
malpractice cases in which inadequate or inaccurate legal advice
is alleged to be a concurrent cause of harm. To relate the
concepts to the facts, a court might instruct the jury to
consider whether a reasonably competent transactional lawyer
would have advised the clients of the economic risks that they
took and whether the lack of the benefit of that advice was a
substantial factor in causing them harm. Application of the test
will guard against the concerns expressed by the Appellate
Division concerning the jury charge in this case.
Finally, the defendant and the amicus curiae, New Jersey
State Bar Association, contend that the Appellate Division has
imposed on attorneys a duty to warn of unforeseeable risks. In
its opinion, the Appellate Division stated: "As an attorney,
defendant had a legal duty to explain to plaintiffs the meaning
of a subordination agreement and to alert them of its risks,
reasonably foreseeable or not." 281 N.J. Super. at 454-55
(emphasis added). What the Appellate Division was really saying
is that foreseeability is a red herring in a case like this. The
risk was as plain as any can be -- if the buyers defaulted or
became insolvent, the Conklins' subordinated mortgage would
become worthless. Defendants' expert agreed that, although an
attorney need not "spell out for the client" all the possible
"scenarios" of loss, the attorney's "statement [to the client]
should be [that] if [the purchaser] does not pay for whatever
reason, whatever the cause, you are at risk."
The Appellate Division was thus concerned that it would be
unfair to require the Conklins to prove that the specific events
leading to their losses (the bankruptcy of and default by
Longview Estates) were foreseeable at the time of sale. See id.
at 454. The court remarked that "[t]here is a distinction
between whether defendant's conduct caused the foreclosure and
bankruptcies, and whether it caused plaintiffs' losses resulting
from those events." Ibid. However, "[i]f conduct creates an
unreasonable risk of foreseeable harm, it matters not that the
precise injury which occurred was not foreseen. If it is within
the realm of foreseeability that some harm might result,
negligence may be found." Koenig v. General Foods Corp.,
168 N.J. Super. 368, 373 (App. Div. 1979); Chomatopoulos v. Roma
DeNotte Social Club,
212 N.J. Super. 447, 453 (Law Div. 1985).
Thus, although it may not have been foreseeable that the Longview
parties would become insolvent, the consequences of insolvency
were always plainly foreseeable.
A client who engages an attorney to structure a deal without
a "risk quotient" is entitled to services commensurate with that
understanding or at least to be informed of the risks involved.
Obviously no attorney is a guarantor of the future and would not
be expected, for example, to advise a client that the United
States government might default on its bonds if that were the
form of collateral given to the client.
In reality, there is usually no such thing as a risk-free
deal. The best that a lawyer can do is to control the risks to
help the clients to achieve their financial objectives. The sale
of a house has risks--that the buyer will die (normally one the
seller doesn't worry about), that the buyers will not sell their
home (one that the sellers usually refuse to accept and the buyer
usually bears), that the buyers may not obtain a mortgage (one
the parties control through the terms of the commitment clause).
Through advice and negotiating the terms of the contract, the
parties and their lawyers control the risks of the deal. The
Conklins wanted a specific price--twelve million dollars. They
made a poor deal and sustained a grave loss. The question is
whether the lack of adequate advice was a substantial factor in
causing the Conklins' exposure to an unwanted risk of harm.
To summarize, we agree with the courts below that the jury charge on proximate cause could have confused the jury and led to an unjust result and that plaintiffs are entitled, under Rule 4:49, to a new trial. The retrial will be much less complex than the first trial, which involved many more issues and theories of negligence and even more parties. We hold that the retrial must include the issue of defendants' negligence but not plaintiffs' comparative negligence. Further, we find that the objective and subjective tests for informed consent, borrowed from the medical malpractice context, are unsuited for legal malpractice cases in which inadequate or inaccurate advice is alleged as a concurrent cause of harm. Rather, we hold that usual principles of negligence apply, including an analysis of foreseeability. We hold, however, that the traditional jury charge on proximate cause as a continuous sequence is inapt for legal malpractice cases in which there are concurrent independent causes of harm and that a jury in such cases must be instructed to determine whether the negligence was a substantial factor in bringing about the ultimate harm.
As modified, the judgment of the Appellate Division is affirmed.
JUSTICES HANDLER, POLLOCK, GARIBALDI, STEIN and COLEMAN join in JUSTICE O'HERN's opinion. CHIEF JUSTICE WILENTZ did not participate.
NO. A-92-95 SEPTEMBER TERM 1995
ON APPEAL FROM Appellate Division, Superior Court
ON CERTIFICATION TO
NATHAN CONKLIN; et al.,
Plaintiffs-Respondents,
v.
HANNOCH WEISMAN, etc., et al.,
Defendants-Appellants,
and
PAULA HERTZBERG, et al.,
Defendants.
DECIDED July 18, 1996
Justice Handler PRESIDING
OPINION BY Justice O'Hern
CONCURRING OPINION BY
DISSENTING OPINION BY
Footnote: 1The paragraph in the contract of sale concerning the
mortgage subordination obligation provided:
The Purchase Money Mortgage will be subordinate to one or more mortgages held by an institutional lender securing a loan for all construction and development expenditures; it will also (if required by law) be subordinate to any condominium documents and reciprocal easement documents
recorded in connection with the development of a condominium or townhouse project to be developed on the Premises. Footnote: 2In a sense the Conklins even loaned the down payment to themselves or worked for it. The contract of sale gave the purchasers a credit against the purchase price for the proceeds of the mining operations conducted on the property during the life of the contract. That came to roughly $1.5 million. The purchasers were authorized to mortgage the farm to raise the balance of the cash due at closing. The brokers received a $1.2 million commission and the Conklins, according to their brief, received roughly $50,000.00 at the closing. Footnote: 3The jury did find that the defendants were negligent concerning the handling of a disputed triangular piece of property and a road-widening issue and awarded damages for that negligence. Those iss