Whiteheart v. Waller, 681 S.E.2d 419 (2009)

Brief Summary
The North Carolina Court of Appeals affirmed the dismissal of a legal malpractice claim based on the doctrine of in pari delicto. Dismissal under the doctrine was appropriate, despite the lawyers’ misconduct, because the plaintiff was collaterally estopped from denying that he had committed intentional misconduct.

Complete Summary
Plaintiff William Whiteheart sued his former law firm, Waller & Stewart, for malpractice. Whiteheart’s claim was based on multiple instances in which Waller & Stewart facilitated Whiteheart’s wrongdoing. For example, Waller & Stewart reviewed a per se defamatory letter that Whiteheart wrote about one of his business competitors. Waller & Stewart did not warn Whiteheart of potential liability for the letter, and he later distributed the letter. In a related matter, Waller & Stewart helped Whiteheart maintain a billboard well past the term of the billboard’s lease, even though the landlord rightfully sought removal of the billboard. Waller & Stewart even went so far as to obtain a temporary restraining order to prevent removal of the billboard, despite no apparent legal basis for maintaining the billboard on the property.

The landlord and the defamed business competitor successfully sued Whiteheart, obtaining a verdict of more than $700,000. Whiteheart then sued Waller & Stewart seeking damages that would cover this judgment. The trial court dismissed Whiteheart’s claim for failure to state a claim upon which relief could be granted. Whiteheart appealed.

The court of appeals affirmed based on the doctrine of in pari delicto. The doctrine prevents courts from redistributing losses among wrongdoers. The court held that this doctrine bars recovery in legal malpractice unless the client acts pursuant to legal advice so complex that assessing the illegality of the advice would not be possible. Whiteheart was barred from arguing that he was ignorant of any wrongdoing, the court held, because in the prior proceeding the court had found Whiteheart’s misconduct intentional.

Whiteheart, therefore, was collaterally estopped from arguing against the court’s application of in pari delicto. Because no North Carolina court had applied in pari delicto to a legal malpractice case, the court of appeals looked to other jurisdictions for guidance. The court noted that allowing malpractice recovery in such cases could encourage clients to commit illegal acts upon the advice of their lawyers, and that malpractice liability is not needed to deter such faulty legal advice because the threat of attorney discipline serves as an adequate deterrent.

Significance of Opinion
This case marks an area in which professional liability and civil liability do not overlap. Although an unethical lawyer will always be subject to discipline, the lawyer may be shielded from liability to unethical clients.

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.

Register Today for the 8th Annual Law Firm General Counsel Forum: Risk Management in Troubled Times

Presented by Hinshaw & Culbertson LLP, The Hildebrandt Institute and WestLegalEdCenter

Date: December 2-3, 2009

Location

Thomson Reuters
Thomson Hall, 4th Floor
195 Broadway
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Who Should Attend?

• Law Firm General Counsel
• Chief Human Resources Directors
• Chief Compliance Officers
• Human Resources Professionals
• Risk Management Partners

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Space is limited so register early by contacting WestLegalEdCenter at 1-800-241-0214 or by clicking on the link below. Provide offer code 000000.
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Topics Include

• Managing opportunities and risks in the current economy
• The evolving role of the general counsel
• Risks of disagreeing litigation services
• Implications of abandoning the hourly fee
• Legal issues surrounding laterals

Fee and Discounts

$1,495 for Law Firm Registration

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Receive a 10% discount off the registration fee for all participants if you send three or more people from the same organization to the Forum.

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States have widely varying regulations regarding MCLE credit. Please note that some jurisdictions do not accredit Law Practice Management programs. WestLegalEdCenter is an approved provider in AK, CA, GA, IL, ME, MO, ND, NV, NY, OK, SC, VT and WV. Credit may be applied for in additional jurisdictions upon request and in accordance with state MCLE rules.

REGISTER NOW for the Ninth Annual Legal Malpractice & Risk Management Conference and receive a 10% Early Bird Discount before December 1, 2009

Attend the industry's premier annual event focused on current and important developments in the law and litigation of malpractice claims, legal malpractice insurance and risk management strategies. Each conference panel examines recent case law and significant developments throughout the last year. One and one-half days will be devoted to legal malpractice (March 3-4), and one and one-half days will be devoted to risk management (March 4-5). The conference will be held in Chicago at The Westin Chicago River North Hotel.

Earn up to 15 hours of CLE credit, including up to 6.50 ethics credit!

Conference Topics

Legal Malpractice Sessions (March 3-4)

• Standing to Sue, Privity and Duty of Disclosure
• Litigation/Litigation Attorney
• What's Your Little Secret? They Want to Know
• Judgmental Immunity — A Modern Look at the Legal Profession's Oldest Defense 
• Insurance Coverage Update: The Year in Review – Prior Knowledge Redux and the Definition of Professional Services
• 2009 LMRM Case Updates and Statutory Causes of Action
• Stump the Panel

Legal Malpractice/Risk Management Cross-Over Sessions (March 4)

• The Insurance Marketplace and Considerations
• Who is the Client and Standing to Sue – Successor Entities, Affiliates and Subsidiaries
• Advance Conflict Waivers, Screening and How to Do It

Risk Management Sessions (March 4-5)

• The General Counsel Forum
• Suits for Fees/Mandatory Fee Arbitration
• Risk Management Considerations in Restructuring and Winding-Up Law Firms
• Managing Client and Law Firm Data, and What Gives When Client and Firm Policies Conflict?
• On the Horizon – The Slow Motion Revolution

Registration Fees

$1,300 for the Entire Conference - March 3-5
$925 for the Legal Malpractice Sessions Only - March 3-4
$925 for the Risk Management Sessions Only - March 4-5

Discounts (maximum 15% discount per registration)

Returning registrants receive 5% off the conference price
Multiple registrants receive 15% off when two or more colleagues from the same company register for the conference
Early birds receive 10% until December 1, 2009

For more information, please visit www.LMRM.com or click here to Register Now!

To speak with the Conference Planner, Katherine McCormack, please call 312-704-3329.