Roberts v. Chimileski
Annotate this Case
Roberts v. Chimileski (2001-158); 175 Vt. 480; 820 A.2d 995
2003 VT 10
[Filed 07-Feb-2003]
ENTRY ORDER
2003 VT 10
SUPREME COURT DOCKET NO. 2001-158
JUNE TERM, 2002
Marcel Roberts, David Currier and } APPEALED FROM:
Roberts Real Estate }
}
v. } Orleans Superior Court
}
Robert Chimileski, William Davies, }
Robert Davis, Gregory Howe, } DOCKET NO. 167-9-93 Oscv
Michael Loignon, John Monette and }
Andrew Pepin }
Trial Judge: Matthew I. Katz
In the above-entitled cause, the Clerk will enter:
¶ 1. This appeal involves legal malpractice claims arising out of
the formulation of a development scheme that sought to circumvent Act 250
permit requirements. Plaintiffs Marcel Roberts and David Currier appeal a
superior court decision upholding the findings of a Special Master denying
recovery for legal malpractice against defendants Robert Chimileski,
William Davies, Robert Davis, Gregory Howe, Michael Loignon, John Monette,
and Andrew Pepin. Plaintiffs contend that (1) the Special Master should
not have heard expert testimony to establish the standard of care of a
Vermont attorney with regard to the practice of reviewing Environmental
Board decisions; and (2) the failure to disclose the inherent risk of a
development plan in questionable conformity with an unsettled area of the
law constituted legal malpractice as a matter of law. We affirm.
¶ 2. As found by the Special Master and adopted by the trial
court, the facts are as follows. In July 1984, Roberts, a real estate
developer, consulted attorney Monette about Act 250 permit requirements
concerning the subdivision of land into ten or more lots. At that time,
Act 250 had just been amended to define a "lot" as any undivided interest
in land and not just parcels under ten acres. See 10 V.S.A. § 6001(11).
Additionally, the 1984 version of 10 V.S.A. § 6001(19) defined
"subdivision" as
a tract or tracts of land, owned or controlled by a person, which
have been partitioned or divided for the purpose of resale into
ten or more lots within a radius of five miles of any point on any
lot, and within any continuous period of 10 years after the
effective date of this chapter. In determining the number of
lots, a lot shall be counted if any portion is within five miles.
10 V.S.A. § 6001(19) (1984) (amended 1987) (emphasis added). Thus, after
the 1984 amendment of subsection 11, developers subdividing land into lots
of any size needed to acquire an Act 250 permit if they "owned or
controlled" the land being subdivided. See 10 V.S.A. § 6081(a) (no person
may sell any interest in a subdivision without a permit).
¶ 3. In response to his inquiry, Monette advised Roberts that
subsequent land sales could still occur legally without a permit if the
original owner prepared the subdivision first and then conveyed the lots to
Roberts so that Roberts would not "control" the lots during subdivision.
Under this arrangement, Roberts would cover the costs and handle the
preparation of the subdivision plan. Monette and Howe concede, however,
that the definition of "control" was legally ambiguous at the time. There
is no evidence that any of the defendants warned Roberts and his associates
of the potential illegality of this modus operandi ("m.o."), apparently
believing that they had no duty to advise plaintiffs of the m.o.'s risk
because it was too remote and tenuous.
¶ 4. Roberts and his associates, including plaintiff Currier,
subsequently completed over 100 real estate transactions employing the m.o.
between 1984 and 1990. Roberts and his associates were represented mostly
by Howe and Monette and occasionally by the other defendants in both the
purchase and sale of these properties.
¶ 5. In 1987, the Vermont Environmental Board issued declaratory
rulings in In re Eastland, Decl. Ruling #177 (Vt. Envtl. Bd. June 29,
1987), and In re Vitale, Decl. Ruling #183 (Vt. Envtl. Bd. July 9, 1987),
holding that a permit was required under circumstances very similar to the
m.o. because a buyer who manipulated the property before a sale fell within
Act 250's definition of "control." The Board's decisions were not widely
circulated although a brief description of the pending appeal to this Court
in Eastland appeared in a 1988 issue of the Vermont Bar Journal. In 1989,
this Court affirmed the Environmental Board's Eastland decision, In re
Eastland, Inc., 151 Vt. 497, 562 A.2d 1043 (1989), and the opinion was
circulated to attorneys who received this Court's decisions through
subscription.
¶ 6. Upon learning of the Supreme Court's Eastland decision,
Monette and Howe advised Roberts and Currier that the decision raised
serious doubts about the legality of the m.o. Roberts and Currier
proceeded to make one more m.o. transaction after receiving this
information. The State subsequently prosecuted Roberts and Currier for
making illegal subdivisions between 1986 and 1990.
¶ 7. Roberts and Currier commenced this malpractice action in 1993
against Howe, Monette, and several other attorneys who had represented
Roberts and Currier in m.o.-type transactions. Roberts and Currier argued
that defendants had breached the standard of care of a Vermont attorney by
failing to research and advise them of the ambiguous meaning of "control"
with regard to Act 250 jurisdiction from 1985 to this Court's 1989 Eastland
decision. With the exception of Monette and Howe, all of the defendants
filed motions to sever that were deferred to the conclusion of the trial.
Monette and Howe then filed a motion for summary judgment, arguing that the
standard of care did not require them to review Environmental Board
annotations and that their conclusions were made on a then-unsettled area
of the law without the benefit of hindsight. The trial court denied the
motion for summary judgment and then granted the parties' request for a
trial by a Special Master. Both parties presented expert testimony
regarding the standard of care for a Vermont attorney during the ten-day
trial before the Special Master.
¶ 8. In his final report, the Special Master made the following
findings and conclusions of law: (1) An attorney in Vermont does not breach
the standard of care if the attorney conducts reasonable research into an
unsettled area of the law and informs the client of the risks involved in
proceeding under an unsettled interpretation; (2) Monette and Howe had not
conducted reasonable research because they had failed to review the
Environmental Board declaratory rulings, annotated in the Board's rules;
(3) the failure to review the Board's annotations was not the proximate
cause of plaintiff's injury because such research would not necessarily
have revealed the Eastland decision or any other ruling that would have
changed the assessment of the m.o.; (4) Monette had breached the standard
of care through his representation in the one m.o. transaction that
occurred after our Eastland decision, in which he failed to advise Roberts
of the risk; and (5) Monette had no liability for the post-Eastland
transaction because Roberts had already been informed of the Eastland
decision and the potential risk of the m.o. and had "knowingly and
voluntarily assumed the risk."
¶ 9. The trial court upheld the Master's findings, added its own
conclusions, and dismissed with prejudice all claims against Howe, Monette,
and the other defendants. The court concluded that defendants could not be
held negligent for their participation in the m.o. because the definition
of "control" was a professional opinion regarding the interpretation of an
unsettled area of the law, and they were thus shielded by the "judgmental
immunity" doctrine, which protects attorneys from liability when their
opinions are based on speculation into an unsettled area of the law. In
terms of whether defendants could be held negligent for their alleged
failure to perform adequate research, the court agreed with the Special
Master's findings that a reasonable, careful, and prudent Vermont attorney
would have reviewed Environmental Board case annotations - something
defendants failed to do - but that such a review would not have disclosed
any reason to question the assessment of the m.o. The court further found
that plaintiffs had failed to prove that there was a prevailing practice to
go behind the published annotations and study the full Board decisions.
Thus, plaintiffs had failed to prove a standard of care that defendants
breached and which breach was the proximate cause of harm to plaintiffs.
The trial court did not address whether defendants could be found negligent
for failure to inform plaintiffs of the risks associated with their advice
that the m.o. was lawful. Plaintiffs subsequently brought this appeal.
¶ 10. Plaintiffs first challenge the trial court's finding that
they failed to demonstrate that the existing standard of care for a Vermont
attorney required an investigation beyond the annotations to review the
Environmental Board's decisions. Plaintiffs argue that under Estate of
Fleming v. Nicholson, 168 Vt. 495, 724 A.2d 1026 (1998), the court should
have looked to common knowledge instead of expert testimony to determine
whether Monette and Howe had breached the standard of care. We disagree.
¶ 11. We held in Nicholson that expert testimony is not necessary
to determine the elements of negligence "[w]here a professional's lack of
care is so apparent that only common knowledge and experience are needed to
comprehend it . . . ." Nicholson, 168 Vt. at 497-98, 724 A.2d at 1028. In
doing so, we distinguished Nicholson from Tetreault v. Greenwood, 165 Vt.
577, 578, 682 A.2d 949, 950 (1996) (mem.), where we found that expert
testimony was required to demonstrate that a Vermont attorney had breached
the standard of care by failing to discover subdivision permit violations
during a title search. Our holding in Nicholson concerned the
nondisclosure of title information, not the methods employed to conduct a
title search unique to the legal profession in Vermont at issue in
Tetreault. Nicholson, 168 Vt. at 498, 724 A.2d at 1028-29.
¶ 12. The question of whether Monette and Howe should have reviewed
Environmental Board decisions is more analogous to the central
determination in Tetreault, because it involves the methods involved in
researching the legality of a subdivision, an undertaking unique to the
legal profession. Such a determination requires the guidance of expert
opinion. Therefore, we uphold the trial court's determination that the
expert testimony presented by plaintiff failed to demonstrate that the
review of Environmental Board decisions was, under the circumstances,
required of a reasonably competent Vermont attorney.
¶ 13. Plaintiffs also argue that the trial court erred in granting
judgmental immunity for Monette's and Howe's failure to disclose the
potential risk of the m.o. transaction, asserting that judgmental immunity
does not apply to nondisclosure of the risk involved. Plaintiffs point out
that the unsettled definition of "control" should have obliged Monette and
Howe to advise their clients about the risky nature of the m.o. Plaintiffs
argue that defendants are liable under this informed consent as a matter of
law despite the expert testimony that defendants were not negligent.
¶ 14. The record reflects that plaintiffs' counsel slowly came to
the recognition that the theory on which they pled the case - that
defendants were negligent in advising that the m.o. complied with Act 250 -
was not as good as the theory that they argue here - that defendants were
negligent in failing to advise plaintiffs of the legal risks of the m.o.
They particularly came to this recognition when their primary theory ran up
against the judgmental immunity defense, applicable because the law was
unsettled. The problem is that they started presenting this alternative
theory to the trial court - and then only obliquely - after the evidence
was closed. While the arguments of plaintiffs' counsel began to reflect
the new theory, plaintiffs' evidence never did. Indeed, neither the
Special Master nor the superior court perceived that plaintiffs were making
this argument, and neither addressed it. As is so often the case,
plaintiffs fully stated their new theory for the first time only in this
Court, after their initial theory failed in the trial court. Therefore, we
find that plaintiffs failed to raise below and offer sufficient proof for
their informed consent theory, and we will not address this issue here.
State v. Bressette, 130 Vt. 321, 322, 292 A.2d 817, 818 (1972) (this Court
will not review questions on appeal unless "the trial court had a fair
opportunity to consider, evaluate and rule upon such question[s]").
¶ 15. In fact, this case demonstrates why it is critical that we
consider an issue on appeal only if it is fully presented to the trial
court. A legal malpractice action is at base a negligence action:
plaintiff must prove that the attorney was in fact negligent and that this
negligence was the proximate cause of plaintiff's injury. Nicholson, 168
Vt. at 497, 724 A.2d at 1028. We have emphasized that an element of
proximate cause in lawyer malpractice actions is "cause-in-fact." Knott v.
Pratt, 158 Vt. 334, 336, 609 A.2d 232, 233 (1992); Brown v. Kelly, 140 Vt.
336, 338, 437 A.2d 1103, 1104 (1981). Plaintiffs had a simple theory of
cause-in-fact for their original negligence theory - defendants' negligence
in advising plaintiffs that the m.o. was lawful caused plaintiffs to incur
penalties and other damages when it turned out that the development without
an Act 250 permit was unlawful. The informed consent theory, however,
requires a different showing of cause-in-fact - that plaintiffs never would
have entered into the unlawful development scheme if they were aware of the
legal risks in using the m.o. Plaintiffs never made that showing. Indeed,
their testimony indicates that they would have gone forward with the
unlawful development scheme even in the face of a risk disclosure, as
Roberts did even after he was aware of the Eastland decision. Putting
aside that plaintiffs never sought a finding that the lack of a risk
disclosure was a proximate cause of their damages, neither the Special
Master nor the superior court could have made such a finding on the
evidence presented. See Brown, 140 Vt. at 338-39, 437 A.2d at 1104-05
(lawyer not liable for damages in malpractice action for negligent failure
to search for attachable assets of judgment debtor on behalf of plaintiff
because evidence showed that no such assets existed and, therefore,
proximate cause was absent as a matter of law).
¶ 16. Even if there was evidence that plaintiffs' actions would
have been influenced by a risk disclosure, that evidence must be based in
turn on some showing of what kind of risk disclosure was required.
Undoubtedly, plaintiffs' conduct may have been influenced by the nature of
the disclosure defendants should have made. Plaintiffs try to skate over
this proof element with the simple response that defendants made no risk
disclosure and, therefore, there is no need to get into what disclosure
should have been made. Since we are not prepared to eliminate the
causation requirement from the tort, we cannot accept this as an adequate
answer.
¶ 17. Further, our holding that expert testimony is required for
plaintiffs' primary theory applies equally here to the alternative theory.
Indeed, the case was tried as a battle of the expert witnesses. Yet, no
expert witness testified that defendants were negligent in failing to make
a risk disclosure, and none described what disclosure, if any, should have
been made. Without such testimony, it is impossible for the Special Master
and the trial court, as well as for this Court, to determine the boundaries
of permissible attorney conduct with the care and narrowness that the
subject matter requires.
¶ 18. Plaintiffs would have us announce a broad new doctrine of
lawyer malpractice liability based on a record that is wholly inadequate to
make this decision. It may be that this Court should recognize malpractice
liability based on the failure of the lawyer to obtain the informed consent
of the client for the lawyer's proposed course of action, but it should not
adopt that doctrine on this record. (FN1)
¶ 19. We therefore uphold the ruling of the trial court, based on
the trial court's reasoning. First, we agree that since the legality of
the m.o. was unsettled at the time, see Eastland, 151 Vt. at 499, 562 A.2d
at 1044 ("the meaning of 'controlled' in § 6001(19) is not entirely
plain"), defendants are shielded from liability for their participation in
the m.o. by the judgmental immunity doctrine. See 3 R. Mallen & J. Smith,
Legal Malpractice § 18.1, at 2 (5th ed. 2000) ("the rule that an attorney
is not liable for an error of judgment on an unsettled proposition of law
is universally recognized"). Second, we agree that defendants cannot be
held negligent for performing allegedly inadequate legal research since, as
both the Special Master and the trial court found, plaintiffs failed to
establish that defendants' breach of the standard of care pertaining to
legal research - which was determined by the expert witnesses and which did
not include going behind published annotations and studying the full Board
decisions - proximately caused harm to plaintiffs. See Nicholson, 168 Vt.
at 497, 724 A.2d at 1028 (plaintiff alleging negligence has burden of
proving standard of care, breach of that standard, and harm proximately
caused by breach); LaFaso v. LaFaso, 126 Vt. 90, 96, 223 A.2d 814, 819
(1966) (existence of negligence ordinarily question for finder of fact).
Affirmed.
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Dissenting
¶ 20. MORSE, J., dissenting. That defendants ignored the patent
ambiguity and legal uncertainty inherent in the term "controlled" in 10
V.S.A. § 6001(19) hardly requires an expert opinion to establish.
Defendants' negligent failure to communicate that uncertainty, and the
associated risks, was alleged below as surely as plaintiffs' other, more
obscure claims of negligent research. Plaintiffs should not be penalized
merely because the trial court failed to address the obvious. Indeed, it
was the place to start the analysis and, given the obvious incompatibility
of defendants' modus operandi ("m.o.") with the statute, the place to end
the analysis.
¶ 21. It requires no extensive discussion to establish that the
unsettled scope of the term "controlled" in § 6001(19) obligated defendants
to advise their clients about the risky nature of their scheme, or m.o., to
circumvent Act 250 requirements. Judgmental immunity shields attorneys
only from liability arising out of advice based on reasonable research into
an unsettled area of the law. 3 R. Mallen & J. Smith, Legal Malpractice §
18.1, at 2-5 (5th ed. 2000). While the meaning of "controlled" under the
statute may have been unsettled at the time of defendants' scheme, the
risk that it might include buyers who manipulate a property before a sale
was sure to be deduced by any minimally competent lawyer. No research, and
certainly no definitive administrative or judicial interpretation, was
required to reach this conclusion.
¶ 22. Furthermore, judgmental immunity does not extend to a
failure to advise a client of the risks associated with an action of
questionable legality. "The attorney's responsibilities to the client may
not be satisfied concerning a material issue simply by determining that a
proposition is doubtful or by unilaterally deciding the issue. When there
are reasonable alternatives, the attorney should inform the client that the
issue is uncertain, unsettled or debatable and allow the client to make the
decision." Wood v. McGrath, 589 N.W.2d 103, 106 (Neb. 1999) (citing 2 R.
Mallen & J. Smith, Legal Malpractice § 17.15, at 531-32 (4th ed. 1996)
(emphasis added); see also Williams v. Ely, 668 N.E.2d 799, 806 (Mass.
1996) ("The problem is not that [defendant] gave reasonable advice that in
time proved to be wrong. The problem is that the apparent certainty of the
opinion, at a time when the issue was not conclusively resolved, denied the
plaintiffs the opportunity to assess the risk and to elect to follow
[another course]."). "Thus, an allegation that an attorney did not
properly inform a client of relevant unsettled legal issues does not
provide the same need for immunity from suit as does an attorney's judgment
or recommendation in an area of unsettled law." Wood, 589 N.W.2d at 115.
¶ 23. At the time defendant Monette suggested the m.o. to
plaintiffs, the full extent of the meaning of "controlled" was at best
doubtful, but the potential risks of the m.o. were obvious, if "controlled"
meant anything. Indeed, defendants Monette and Howe conceded that the
definition of "control" was legally ambiguous at the time. Yet despite
this doubt, no warning was given to plaintiffs. Although the Special
Master's findings do not contain a specific account of Monette's advice
regarding the risks associated with the m.o., both defendants and the trial
court accept plaintiffs' assertion that Monette failed to advise plaintiffs
of any potential risk.
¶ 24. The trial court avoided a finding of negligence based, in
part, on its observation that developers seeking legal advice about
avoiding a statutory permit requirement assume an "inherent" risk. In so
noting, the court mischaracterized the m.o. as one of plaintiffs'
invention, when in fact the Special Master found that defendant Monette had
developed the m.o. and presented it to plaintiffs. Furthermore, the risks
associated with such a patently questionable scheme are not "inherent," but
rather form the core of information that must be communicated to a client
by a lawyer to ensure an informed decision. See Smith v. St. Paul Fire &
Marine Ins. Co., 366 F. Supp. 1283, 1290 (M.D. La. 1973) ("[I]f the
attorney has reason to believe, or should have reason to believe that there
could be some adverse consequences from taking the course advised, he is
obligated to so advise his client."); First Nat'l Bank of Clovis v. Diane,
Inc., 698 P.2d 5, 10 (N.M. 1985) ("It is not the fact that defendant
incorrectly interpreted the statutes renders him liable; it is the failure
to warn of potential liability to the client of adverse consequences which
could result.").
¶ 25. Nor can liability be avoided on the questionable ground that
plaintiffs engaged in one additional transaction after defendants belatedly
informed them of the risks. Plaintiffs had already completed more than 100
such transactions, and can readily be excused for exhibiting a certain
reluctance - at that point - to believe that everything they had previously
accomplished on their lawyers' advice was illegal. Such evidence is hardly
sufficient to disprove that - given a timely and accurate assessment of the
risks - plaintiffs would not have engaged in such a scheme in the first
place.
¶ 26. I would therefore reverse the judgment in favor of
defendants, and remand for a determination of damages.
BY THE COURT:
Dissenting: _______________________________________
John A. Dooley, Associate Justice
_________________________________ _______________________________________
James L. Morse, Associate Justice Denise R. Johnson, Associate Justice
_______________________________________
Alan W. Cheever, Superior Judge
Specially Assigned
_______________________________________
Ernest W. Gibson III,
Associate Justice (Ret.)
Specially Assigned
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Footnotes
FN1. Our refusal to decide this significant issue on such an insufficient
record is further supported by the lack of clear consensus among the mere
handful of decisions around the country on malpractice liability based on
lack of informed consent. Compare Williams v. Ely, 668 N.E.2d 799, 806
(Mass. 1996) ("The problem is not that [defendant] gave reasonable advice
that in time proved to be wrong. The problem is that the apparent
certainty of the opinion given, at a time when the issue was not
conclusively resolved, denied the plaintiffs the opportunity to assess the
risk and to elect to follow [another course]."); Wood v. McGrath, 589 N.W.2d 103, 106 (Neb. 1999) ("[A]n allegation that an attorney did not
properly inform a client of relevant unsettled legal issues does not
provide the same need for immunity from suit as does an attorney's judgment
or recommendation in an area of unsettled law."); First Nat'l Bank of
Clovis v. Diane, Inc., 698 P.2d 5, 10 (N.M. 1985) ("It is not the fact that
defendant incorrectly interpreted the statutes that renders him liable; it
is the failure to warn of potential liability to the client of adverse
consequences which could result.") with Smith v. St. Paul Fire & Marine
Ins. Co., 366 F. Supp. 1283, 1290 (M.D. La. 1973) ("[I]f the attorney has
reason to believe, or should have reason to believe that there could be
some adverse consequences from taking the course advised, he is obligated
to so advise his client. But if there is no reasonable ground for him to
believe that his advice is questionable, he certainly has no obligation to
advise clients of every remote possibility that might exist."); Conklin v.
Hannoch Weisman, 678 A.2d 1060, 1070 (N.J. 1996) ("[W]e find no persuasive
need to introduce into attorney malpractice the subjective standard of
informed consent . . . ."); 4 R. Mallen & J. Smith, Legal Malpractice §
30.41, at 575-76 (5th ed. 2000) (noting that Wood, which involved the
settlement of a divorce action, raises "the risk that settlement
recommendations will be challenged by hindsight revelations of
alternatives").
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