Conklin v. Weisman
1996 N.J. LEXIS 954, 145 N.J. 395, 678 A.2d 1060 (1996)
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Rule of Law:
In a legal malpractice action where an attorney's negligent advice is a concurrent cause of harm with a third party's actions, the proper test for proximate cause is whether the attorney's negligence was a substantial factor in bringing about the client's ultimate harm.
Facts:
- In 1984, the Conklin family retained the law firm Hannoch Weisman and attorney Carleton Kemph to represent them in the sale of their 100+ acre farm.
- In April 1985, the Conklins entered into a contract to sell the farm to Longview Estates for $12 million, consisting of $3 million in cash and a $9 million purchase-money mortgage held by the Conklins.
- The contract of sale stipulated that the Conklins' $9 million mortgage would be 'subordinate' to any institutional construction mortgages the buyer, Longview, would later obtain.
- The sale closed on December 22, 1986.
- By 1990, Longview Estates had defaulted on its senior construction mortgage and its subordinated purchase-money mortgage to the Conklins.
- Longview and its partners filed for bankruptcy protection.
- The senior mortgage lender foreclosed on the property, extinguishing the Conklins' subordinated mortgage interest.
- As a result of the foreclosure and subordination, the Conklins lost both their land and the $9 million owed to them on the mortgage.
Procedural Posture:
- The Conklins (plaintiffs) sued Hannoch Weisman and Carleton Kemph (defendants) for legal malpractice in a New Jersey trial court.
- After an eleven-week trial, a jury returned a special verdict finding defendants were negligent in explaining subordination but that this negligence was not a proximate cause of the plaintiffs' damages.
- Plaintiffs moved for a new trial, arguing the jury charge on proximate cause was erroneous and misleading.
- The trial court granted plaintiffs' motion for a new trial on the issues of proximate cause, comparative negligence, and damages, while preserving the jury's finding of defendants' negligence.
- Defendants appealed to the Appellate Division (an intermediate appellate court).
- The Appellate Division affirmed the grant of a new trial but modified its scope, holding that an 'informed consent' standard should apply to causation and that the issue of plaintiffs' comparative negligence should be removed from the retrial.
- The Supreme Court of New Jersey granted the defendants' motion for leave to appeal.
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Issue:
In a legal malpractice action based on an attorney's failure to advise a client of transactional risks, is the 'substantial factor' test the appropriate standard for determining proximate cause when the client's loss is also caused by a third party's subsequent, foreseeable actions?
Opinions:
Majority - O'Hern, J.
Yes. In a legal malpractice case where an attorney's negligent advice and a third party's foreseeable act are concurrent causes of a client's loss, the 'substantial factor' test is the proper standard for proximate cause. The traditional 'natural and continuous sequence' jury instruction for proximate cause is ill-suited for such cases because the attorney's negligence (failure to advise) does not 'set in motion' the third party's independent act (bankruptcy). The 'substantial factor' test correctly focuses the jury on whether the attorney's failure to protect the client from foreseeable risks was a significant contributor to the resulting harm. The court also rejected importing the 'informed consent' doctrine from medical malpractice, finding it inappropriate for the highly subjective and varied nature of commercial transactions. Finally, a client's failure to understand the risks an attorney was hired to explain is not contributory negligence but rather an issue of causation.
Analysis:
This decision clarifies the causation standard for transactional legal malpractice, moving away from a rigid, linear causation analysis toward the more flexible 'substantial factor' test. It establishes that an attorney's failure to advise on foreseeable risks can be a legal cause of a client's loss, even if that loss is directly triggered by an independent third-party event like a bankruptcy. The ruling also firmly distinguishes legal malpractice from medical malpractice by rejecting the 'informed consent' framework, thereby preventing the application of a 'prudent client' standard in complex business contexts. Finally, it reinforces that an attorney's duty includes protecting clients from their own lack of sophistication, making it difficult for attorneys to use a client's ignorance as a defense of contributory negligence.
