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Biomet Inc. v. Finnegan Henderson LLP

March 19, 2009

BIOMET INC., APPELLANT,
v.
FINNEGAN HENDERSON LLP, APPELLEE.



Appeal from the Superior Court of the District of Columbia (05-CA-2462) (Hon. Maurice A. Ross, Trial Judge).

The opinion of the court was delivered by: Washington, Chief Judge

Argued December 10, 2008

Before WASHINGTON, Chief Judge, BLACKBURNE-RIGSBY, Associate Judge, and SCHWELB, Senior Judge.

Biomet Inc. ("Biomet") appeals from the grant of summary judgment in favor of Finnegan Henderson LLP ("Finnegan") by the trial court. Below, the trial court found that, as a matter of law, Finnegan could not be held liable for legal malpractice in this case and granted summary judgment. The trial court set forth two basic grounds for its grant of summary judgment: (1) that the constitutional issue that the Federal Circuit deemed waived was not preserved in the post-trial motions, and Finnegan was not responsible for the post-trial motions, and (2) that Finnegan could not be held liable for malpractice based on its reasonable, tactical litigation decision involving an unsettled point of law. Because we agree with the trial court's conclusion that Finnegan made a reasonable, tactical litigation decision involving an unsettled point of law, we affirm.

I.

This case involves a legal malpractice claim brought by Biomet, a manufacturer of orthopedic devices, against Finnegan, a law firm, alleging that Finnegan failed to preserve a constitutional challenge to excessive punitive damages resulting in waiver of the issue. Briefly, the relevant facts include the following. In 1991, Dr. Raymond Tronzo brought a suit against Biomet in the United States District Court for the Southern District of Florida alleging that Biomet infringed and misused his patent and other confidential information. In 1996, following a jury verdict, the district court awarded $7,134,000 in compensatory damages and $20 million in punitive damages against Biomet for patent infringement, fraud, and violation of a confidential relationship. The district court also enjoined Biomet from manufacturing the device that used the infringed patent. Finnegan was hired by Biomet to assist with the post-trial motions in the district court and to handle Biomet's appeal to the Federal Circuit, if necessary.

After the district court rejected Biomet's post-trial motions for relief, Finnegan handled Biomet's appeal to the Federal Circuit challenging the district court's ruling that the plaintiff had presented sufficient evidence to support a jury verdict of patent infringement. Finnegan did not appeal the punitive damage award as unconstitutional at that time because the ratio of punitive to compensatory damages after the initial trial was only 3:1, and the jury had found Biomet's conduct to be particularly reprehensible making such an argument extremely difficult. On appeal, Finnegan successfully obtained reversal of the patent infringement finding and the injunction. See Tronzo v. Biomet, Inc., 156 F.3d 1154 (Fed. Cir. 1998). The Federal Circuit then remanded the case for recalculation of damages in light of its ruling.

On remand from the Federal Circuit, the district court determined that Biomet was liable for only $520 in compensatory damages. Following the significant reduction in the compensatory damages, Finnegan moved for a reduction of the $20 million punitive damage award in light of the Supreme Court's ruling in BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), which held that excessive punitive damages can violate constitutional due process. The district court agreed that the new 38,000:1 ratio of punitive to compensatory damages was unconstitutionally excessive and reduced the punitive damages to $52,000. On appeal from the district court's judgment reducing both the compensatory and punitive damage awards, the Federal Circuit held that punitive damage relief was precluded by its mandate. Specifically, the Federal Circuit held that because punitive damages were not challenged in the initial appeal, Biomet had waived its right to seek relief from the punitive damage award while the case was on remand. See Tronzo v. Biomet, Inc. (Tronzo II), 236 F.3d 1342 (Fed. Cir. 2001). Therefore, the Federal Circuit reinstated the $20 million punitive damage award.

II.

Under District of Columbia law, to prevail on a claim of legal malpractice, a plaintiff must establish the applicable standard of care, a breach of that standard, and a causal relationship between the violation and the harm complained of. See O'Neil v. Bergan, 452 A.2d 337, 341 (D.C. 1982). Here, there is no dispute, that, with regard to the initial appeal to the Federal Circuit, Finnegan was the attorney of record, Finnegan and Biomet had an attorney-client relationship, and Finnegan owed a duty to Biomet based on that relationship. Specifically, Finnegan owed Biomet a duty to work in Biomet's interests using a reasonable degree of knowledge, care, and skill. See Morrison v. MacNamara, 407 A.2d 555, 561 (D.C. 1979) ("[A] lawyer must exercise that degree of reasonable care and skill expected of lawyers acting under similar circumstances."); see also D.C. R. PROF. COND. R. 1.1. The issue before us is whether Finnegan could be found to have breached its duty of care to Biomet by failing to include a constitutional challenge to punitive damages in its initial appeal to the Federal Circuit.

Below, the trial court found that Finnegan's decision not to challenge the punitive damage award as constitutionally excessive in the initial appeal was a protected exercise of legal judgment and not a basis for legal malpractice. On appeal, Biomet argues that the reasonableness of Finnegan's litigation strategy is a question of fact for the jury. While the reasonableness of an attorney's litigation strategy may not always be susceptible to resolution on summary judgment, we believe in this case the trial court's ruling was proper.

It has long been recognized that an attorney is not liable for mistakes made in the honest exercise of professional judgment. See National Sav. Bank v. Ward, 100 U.S. 195, 198 (1880) ("[I]t must not be understood that an attorney is liable for every mistake that may occur in practice, or that he may be held responsible to his client for every error of judgment in the conduct of his client's cause."). In Ward, the Supreme Court recognized that, where an attorney makes an error in judgment, "the rule is that if he acts with a proper degree of skill, and with reasonable care and to the best of his knowledge, he will not be held responsible." Id. Today, that same basic proposition is often recognized as professional judgment immunity or judgmental immunity. See e.g., Woodruff v. Tomlin, 616 F.2d 924, 930 (6th Cir. 1984) (applying Tennessee law); see also Dixon Ticonderoga Co. v. Estate of O'Connor, 248 F.3d 151, 173 (3d Cir. 2001) (applying New Jersey law); Paul v. Smith, 599 S.E.2d 206, 209 (Ga. Ct. App. 2004); McIntire v. Lee, 816 A.2d 993, 1000 (N.H. 2003); Sun Valley Potatoes, Inc. v. Rosholt, Robertson & Tucker, 981 P.2d 236, 239-40 (Ida. 1999); Crosby v. Jones, 705 So. 2d 1356, 1358 (Fla. 1998); Simko v. Blake, 532 N.W.2d 842, 847 (Mich. 1995); Gelsomino v. Gorov, 149 N.E.2d 809, 813-14 (Ill. App. Ct. 1986); Halvorsen v. Ferguson, 735 P.2d 675, 681-82 (Wash. Ct. App. 1986); Martinson Mfg. Co. v. Seery, 351 N.W.2d 772, 775 (Iowa 1984); Kirsch v. Duryea, 578 P.2d 935 (Cal. 1978); Martin v. Burns, 429 P.2d 660, 662 (Ariz. 1967); Hodges v. Carter, 80 S.E.2d 144, 146 (N.C. 1954).

In Woodruff, supra, a seminal case on attorney judgmental immunity, the Sixth Circuit examined the doctrine and its underpinnings and held that "there can be no liability for acts and omissions by an attorney in the conduct of litigation which are based on an honest exercise of professional judgment." 616 F.2d at 930 (affirming the dismissal of a malpractice claim where "the concessions in the appellate brief resulted from a tactical decision reached in the exercise of professional judgment and d[id] not furnish a basis for a malpractice action"). Recognizing the widespread acceptance of the judgmental immunity principle, the Sixth Circuit specifically noted that "neither counsel nor we have found an American decision holding an attorney liable for the choice of trial tactics or the good faith exercise of professional judgment." Id. at 930 n.1. Although we have not formally recognized judgmental immunity as a doctrine in the District of Columbia, we have concluded that the doctrine is a valid defense in negligence cases and have applied the principle in the legal malpractice context. See Mills v. Cooter, 647 A.2d 1118, 1122 (D.C. 1994) ("An informed judgment, even if subsequently proven to be erroneous, is not negligence."); see also Flax v. Schertler, 935 A.2d 1091 (D.C. 2007).

Essentially, the judgmental immunity doctrine provides that an informed professional judgment made with reasonable care and skill cannot be the basis of a legal malpractice claim. Central to the doctrine is the understanding that an attorney's judgmental immunity and an attorney's obligation to exercise reasonable care coexist such that an attorney's non-liability for strategic decisions "is conditioned upon the attorney acting in good faith and upon an informed judgment after undertaking reasonable research of the relevant legal principals and facts of the given case." Sun Valley, supra, 981 P.2d at 240; Gelsomino, supra, 149 N.E.2d at 267 ("[M]erely characterizing an act or omission as a matter of judgment does not end the inquiry."). "To hold that an attorney may not be held liable for the choice of trial tactics and the conduct of a case based on professional judgment is not to say, that an attorney may not be held liable for any of his actions in relation to a trial. He is still bound to exercise a reasonable degree of skill and care in all of his professional undertakings." Woodruff, supra, 616 F.2d at 930. As a result, the judgmental immunity doctrine has been described "as nothing more than a recognition that if an attorney's actions could under no circumstances be held to be negligent, then a court may rule as a matter of law that there is no liability." Sun Valley, supra, 981 P.2d at 240. Having now been presented squarely with the issue, we are satisfied that ...


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