April 3rd. The Kansas Supreme Court has issued its decision in Tilzer v. Davis, Bethune and Jones (No. 99,678), a legal malpractice suit. In a unanimous opinion, written by Justice Johnson, the Court reversed a summary judgment issued by the Johnson County District Court to dismiss an action brought by the Tilzer family against their former attorneys over a class action lawsuit in Missouri. Note: This case was argued in the January sitting of the Court, after former Chief Justice Kay McFarland’s retirement. District Judge David King served as the seventh member of the court hearing the case.
The exact details of the case are unclear, due to the the records being under seal. The background is that the Tilzer family were among a group of people who sued Eli Lilly and Bristol-Myers Squibb for negligently allowing a pharmacist to dilute cancer drugs. They hired the Davis, Bethune and Jones law firm to act as their attorneys. This action was brought in Missouri. The pharmaceutical companies settled and the Missouri court established a process using two special masters to assess each claim and allocate money out of a capped settlement pot. The facts of the case, and documents obtained during the case were sealed as part of the settlement. The Tilzer’s objected to the terms of the settlement, but were compelled by a court order of the Missouri court to go along with it. Their attorneys filed an attorney’s lien to get their payment for services rendered from the Tilzers.
The Tilzers attempted to resist this, arguing that the terms of the settlement constituted an aggregate settlement, which would have required their attorneys to disclose certain information which they had not done. The Missouri court rejected this argument, but stated that its ruling did not foreclose any legal malpractice action they might want to bring. The Tilzers did not appeal the ruling in Missouri, but instead brought a fresh action alleging legal malpractice in Kansas.
Missouri has a rule which states that if one of two parties in a lawsuit might bring their counterargument as a separate claim, they cannot do so but must rather bring the matter up in the instant case (couterparty claim rule). Davis, Bethune and Jones successfully argued in the Kansas District Court that the legal malpractice claim should have been brought under this rule in the attorney’s lien hearing (the trial judge’s comments notwithstanding). In addition, the District Court also ruled that the Tilzer’s claim was blocked under collateral estoppel since it was already litigated in the Missouri actions. During the Kansas case the pharmaceutical companies intervened in the case to ensure the continued sealing of the documents. The other matter decided in the District Court was that that Court ruled that the settlement of the Missouri action was not an aggregate settlement.
In its decision the Kansas Supreme Court reverses the District Court on all but the sealing of the documents. On that point it held that the public policy interests of out of court settlement of class action lawsuits were served by the documents remaining under seal, while the Tilzers suffered no ill effects from the sealing. The Court noted that the proper venue for having challenged the sealing of the documents would have been an appeal in Missouri of the original settlement.
On the remaining points the Court ruled for the Tilzers:
Counterparty claim rule – the District Court had expanded the Missouri counterparty claim rule beyond its normal parameters influenced greatly by a decision in New Mexico regarding a similar rule. During the time the case has been on appeal the New Mexico Supreme Court overturned that decision, rather undercutting the logic behind the District Court’s decision. Therefore the Court determined that “Missouri’s compulsory counterclaim rule does not require a client to litigate a claim for legal malpractice in response to an attorney’s motion to enforce an attorney’s fee lien in the underlying action that gave rise to both the malpractice claim and the attorney’s fee lien”.
Collateral Estoppel - the Kansas Supreme Court ruled that the case was not collaterally estopped. It bases its decision on some disagreements with the Missouri Court’s process for arriving at a ruling which foreclosed certain avenues to the Tilzers to make their case which are open in the fresh case. Based on Missouri’s more lenient rules around collateral estoppel the Court held that there were sufficient parts of the Tilzer’s case which had not been adjudicated completely or properly to prevent them litigating them in the legal malpractice case.
Aggregate Settlement - in perhaps the most significant aspect of the decision, the Court held that the settlement in the Missouri case was an aggregate settlement, despite the ruling of the Missouri Court saying otherwise. The Court based this decision on a report compiled by the American Law Institute to define what exactly an aggregate settlement is. In this case the fact that the damages awarded to each participant in the lawsuit was not purely based on the facts of the case but influenced by the fact that the settlement pot was capped. This created an interdependency between the various claimants (since they shared in the award), which the Court held was the abiding mark of an aggregate settlement.
The case was therefore remanded to District Court for further proceedings on the merits of the Tilzer’s case.