McDevitt v. Guenther, 522 F.Supp.2d 1272 (D.Haw. 2007)

Brief Summary
Evidence of the divorce settlement was inadmissible to prove damages in a legal malpractice case brought by husband against the attorney who drafted the couple’s prenuptial agreement.

Complete Summary
Following his divorce from Yoakam, plaintiff McDevitt sued Yoakam’s good friend, Guenther, an attorney who had helped the couple with prenuptial issues. McDevitt alleged, inter alia, legal malpractice and negligence based on Guenther’s preparation of the Guenther-Yoakam prenuptial agreement. On cross motions for summary judgment, the court assessed: (1) whether McDevitt had formed an attorney-client relationship with Guenther; (2) whether McDevitt could introduce evidence of the divorce settlement amount as the basis for his damages; and (3) whether, without using evidence of the divorce settlement, McDevitt’s damages claim was too speculative.

The court held that there were genuine issues of material fact as to whether Guenther was McDevitt’s attorney. The facts weighing in favor of finding an attorney-client relationship were: McDevitt sent a fax to Guenther asking her to review and customize a template agreement and to bill him for her work; Guenther did create a rough draft agreement based on the template and conversations with the couple; and McDevitt sent Guenther $500 for her work. The facts weighing against finding an attorney client relationship were: the parties never executed a formal engagement agreement; McDevitt never expressly asked Guenther to represent him; McDevitt’s fax contained language suggesting he was hiring Guenther for Yoakam’s benefit (a logical inference given that Guenther and Yoakam were good friends); Guenther’s template was indeed favorable to Yoakam; and Guenther never billed McDevitt. The court held that the factfinder could conclude that McDevitt’s subjective belief that Guenther was his attorney was either reasonable or unreasonable.

The court held that McDevitt could not introduce the divorce settlement into evidence. Federal Rule of Evidence 408 generally bars admission of a settlement agreement when offered to prove damages. Circuits are split on whether this rule applies when the defendant was not a party to the suit in which the settlement occurred. The Ninth Circuit has held that such evidence may not be admitted when the party not involved in the settlement seeks admission. The Ninth Circuit has reasoned that parties may be discouraged from settling if they know evidence of the settlement may be used against them in future litigation.

In the present case, however, the district court was faced with a situation in which McDevitt, one of the parties to the settlement, sought admission of the evidence against a third party. The court extended the reach of Rule 408 to these facts based in part on a note from the Advisory Committee to the 2006 amendment to Rule 408. The Committee stated that “the protections of Rule 408 cannot be waived unilaterally,” and the rule “protects both parties . . . .” Id. at 1285. Further, the court noted that considerations of whether a settlement will help or harm parties in future litigation should not enter the settlement negotiation process, and, at least in the divorce attorney context, “it is generally undesirable to invite situations where attorneys will be called as witnesses in actions involving their clients.” Id. at 1286.

The court held that without this evidence, McDevitt’s damages claim was too speculative. Even if McDevitt based his damages on the prenuptial agreement, however, his claim was still too speculative because Yoakam never signed the agreement and because it was “impossible to know what the outcome of a negotiated prenuptial agreement would have been if both sides had their own counsel.” Id. at 1288.

Significance of Opinion
This holding may at times force parties in divorce or other proceedings to decide between settling with an opponent and pursuing a malpractice claim against their lawyer.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

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