The South Dakota Supreme Court heard argument yesterday in a legal malpractice action involving questions of conflict of interest. The underlying issue was an agreement between an underlying plaintiff beekeeper and three sets of defendant beekeepers regarding placement of hives on the property of others. The defendant beekeepers (Roger Hamilton, Mike Block, and Monte Amman) were all represented by Richard A. Sommers of Bantz, Gosch & Cremer, Prof. L.L.C. in the settlement of the underlying action.
The present legal malpractice action is brought by one of the defendant beekeepers (Hamilton) against the attorneys representing him in the settlement. The beekeeper argued the attorneys did not adequately explain the severity of the conflict between the three defendant beekeepers or suggest he should consult independent counsel. The beekeeper presented two expert witnesses, including Minnesota Supreme Court Justice David Lillehaug. Summary judgment was granted in favor of the attorneys. The circuit court found (1) collateral estoppel bared re-litigation on the issue of conflicted representation, (2) Hamilton failed to prove he would have been successful in the underlying lawsuit or that the settlement was unreasonable, (3) the “locality rule” in South Dakota has been expanded to that of a state-wide jurisdiction, (4) Justice Lillehaug failed to identify the appropriate standard of care for conflicted representation in South Dakota, (5) Justice Lillehaug failed to identify the appropriate standard of care for investigating possible insurance coverage in South Dakota, and (6) Justice Lillehaug’s opinion lacked proper foundation. The beekeeper appealed the grant of summary judgment. The appellant argued the trial court improperly barred his expert testimony, that collateral estoppel did not apply, and that he would have been successful in the underlying action.
This case presents a number of interesting issues, but perhaps most importantly emphasizes the risks attorneys face when representing multiple potentially adverse clients in a settlement. While the attorneys allegedly sent out conflict waivers, Hamilton alleged he did not sign his (the trial court made a determination Hamilton did sign a conflict waiver). As we have stated before, conflicts of interest are one of the more common reasons for legal malpractice actions, and while conflict waiver letters are important, even the best letter may not be sufficient to prevent a subsequent professional liability claim.