A legal malpractice case that ended with a $350,000 settlement hatched just before closing arguments offers some key lessons for the bar, said the lawyer for the defendant.
“First, if you get a call from a disgruntled client or his spouse, you should expect that you’re probably being taped,” said T. Bart Gary of Freeman Mathis & Gary. “Second, don’t let paralegals or other employees discuss your cases with clients. Leave that to the lawyers, and do it in person.”
Gary represented bankruptcy practitioner and veteran trustee Ira D. Gingold, who, according to the suit, told a client facing bankruptcy to stop payment on two checks sent to creditors and instead bring the money to him.
Gingold’s client was Timothy L. Allen, who in January 2001 was the proprietor of a foundering feed and seed business, Allen’s Country Cottage.
Allen approached Gingold for advice in filing for Chapter 7 bankruptcy protection, and the lawyer asked whether Allen had any outstanding checks, according to the plaintiffs’ documents filed in the case.
“Told that two checks, totaling $2,462 had been written to vendors for merchandise provided to the business, Gingold instructed Allen to stop payment on the checks” and “to bring Mr. Gingold $2,500.00 cash for his fee, plus $200 for the bankruptcy filing,” according to the plaintiffs’ documents.
Allen, said the complaint, did as he was instructed, and his bankruptcy was discharged that August.
But two months later, Allen—who had since taken a job at Marietta Toyota as a ser-vice representative —was arrested at work by Paulding County deputies and charged with two counts of felony theft by deception, stemming from the stop-payment orders he had issued on the vendors’ checks.
Allen spent “about 11 hours” at the jail before his wife, Tracy, was able to post a bond for him, putting up a house she owned as security, according to court filings.
The charges were later dropped when Allen paid the creditors; he never served any more time in jail, and he kept his job at the dealership.
But in May 2003, Allen and his court-appointed bankruptcy trustee sued Gingold in DeKalb County State Court, claiming legal malpractice and breach of fiduciary duty. Allen sought damages for a return of the fees he paid Gingold, attorneys’ fees for his representation in the criminal matter, general damages for pain and suffering and punitive damages, according to the defense summary contained in the pretrial order.
Linley Jones, a sole practitioner who represented Allen and Paul H. Anderson Jr., the bankruptcy trustee, said Gingold insisted that he had not told his former client to stop payment on the checks.
But she said Allen’s wife, Tracy, had taped conversations with Gingold and an employee that seemed to rebut his account.
Plus, Jones added, Gingold “admitted on the stand that, if he had told [Allen] to stop payment, that would have been a violation of the standard of care.”
Jones said Anderson was in an uncomfortable spot because he and Gingold have both served as appointed trustees for years Gingold has some 38 years as a bankruptcy attorney—and that she had difficulty finding a local lawyer willing to supply the necessary affidavit supporting the malpractice complaint, as required by Georgia law.
She ultimately called upon Allen P. Turnage, a bankruptcy attorney licensed to practice in Georgia but whose office is in Tallahassee, Fla. Turnage wrote that Gingold, if his actions were accurately reflected in the complaint, failed Allen by not advising him of the potential for criminal liability in stopping payment on the checks and by not advising his client that a Chapter 13 bankruptcy filing may have saved his business.
Jones said her clients offered to settle prior to trial for $275,000, but the offer was turned down.
The parties had wrapped up a four-day trial before DeKalb County State Court Judge Edward A. Carriere Jr. and had come in for closing arguments Feb. 20, when the defense offered to settle for $350,000, said Jones.
Gingold continues to deny the accusation and admits no liability, said Gary. The agreement must still be approved by the bankruptcy court, he added.
Both lawyers agreed that a key settlement factor was Carriere’s denial of defense motions for a directed verdict and a limit on punitive damages and attorneys’ fees.
“They had asked for a directed judgment, and the judge turned it down,” said Jones. “I think that made all the difference.”
“The defense did a great job,” she observed. “They just didn’t have very much to work with.”
” Gary said, “When the trial judge denied our motion on punitives, it made it difficult for us to take a chance on the jury.” The defense lawyer also said the tapes, including some in which Gingold’s paralegal made some potentially damaging comments, provided a steep burden to overcome.
Gary said he wasn’t certain how the jury, if it ruled against the defense, would have decided to compensate Allen.
“How do you put a value on a half-day in jail?” he asked. “He wasn’t beaten or anything. Yes, he was embarrassed, but there was no disqualifying action. The charges were dropped.”
Gary said Gingold’s malpractice insurance covered the settlement, adding that the case illustrates the care every attorney should take in communicating with clients and with allocating legal duties to underlings.
“This is one of those ‘there, but for the grace of God, go I,’ cases,” said Gary. “Other lawyers should look at this case as a lesson.”
The case is Anderson v. Gingold, No. 03-A-06842-6 (DeKalb St. Ct.)