According to a D.C. Court of Appeals opinion handed down yesterday, even lawyers make tactical mistakes, but they shouldn’t be held liable for them if they acted in good faith.
For the first time, the court has adopted a “judgmental immunity doctrine” for lawyers that protects them from malpractice suits if they can show they acted with "reasonable care" in making a tactical decision for a client.
Yesterday's opinion in Biomet Inc. v. Finnegan Henderson (.pdf) stems from a suit the orthopedic device manufacturer filed against Finnegan, Henderson, Farabow, Garrett & Dunner that alleged the firm failed to preserve a constitutional challenge to excessive punitive damages resulting in a waiver of the issue. In 1991, Biomet was sued for violating a patent owned by Dr. Raymond Tronzo. In 1996, a jury ordered Biomet to pay $7.1 million in compensatory damages and $20 million in punitive damages for patent infringement, fraud, and violation of a confidential relationship. Biomet then hired Finnegan to handle the company’s appeal to the U.S. Court of Appeals for the Federal Circuit.
The issue at hand arose when Finnegan opted not to appeal the the $20 million punitive award because at the time of the initial appeal, the ratio of punitive to compensatory damages was only 3:1, well within the constitutional ratio. Finnegan’s success on appeal came back to bite them after they won a reversal of the patent infringement finding.
On remand, the district court ruled that Biomet was only liable for $520 in compensatory damages, changing the ratio of punitive to compensatory damages to 38,000:1. When the appeal of the punitive damages went back in front of the Federal Circuit, the panel determined that because Finnegan did not challenge them on the initial appeal, Biomet had waived its right to seek relief from them. In short, Biomet was on the hook for $20 million.
However, yesterday’s ruling, written by Chief Judge Eric Washington and joined by Judge Anna Blackburne-Rigsby and Senior Judge Frank Schwelb, found that because Finnegan had acted reasonably in light of the original damages ratio, there was no negligence involved. As a result, the appeals court affirmed the lower court's grant of summary judgment to the firm.
The opinion goes on to define the judgmental immunity standard. The standard requires a lawyer to show that the alleged error is one of professional judgment and that the lawyer exercised “reasonable care in making his or her judgment.”
“Because there was no clear precedent one way or the other prior to the Federal Circuit’s opinion in the underlying case, and thus, reasonable attorneys could disagree, we are satisfied that, as a matter of law, there was no legal malpractice in this case,” Washington writes.
John Villa, a Williams & Connolly partner who argued the case on behalf of Finnegan, said in an e-mailed statement that he was gratified by the court’s opinion.
“The decision endorses the vitality of the attorney judgment rule which protects informed exercise of an attorney’s judgment even if the court or jury subsequently disagrees,” Villa says. “In nearly every case, one side wins and the other loses. Without this protection, litigators and trial lawyers could be subject to unfair second-guessing. This decision is correct and very good news for the legal profession.”
UPDATE (1:45 p.m.): Biomet’s attorney John Karr, a name partner at Karr & Allison, says yesterday's decision is one of the "most curious" ones he has seen come out of the court.
“It’s very curious reasoning that a lawyer can be immunized against lawsuits for virtually anything after the harm has been done if they can show they made a reasonable judgment,” Karr says. He adds, "That judgment [made by Finnegan] is in direct violation of a court rule that says if you have something you want to appeal, you can't do it in pieces."