A claim of legal malpractice by client against a former attorney does not, at the same time, give rise to a breach of fiduciary claim under Virginia law, according to Judge Henry Hudson of the Eastern District of Virginia (Richmond Division). Judge Hudson’s ruling is a development in the law of fiduciary duty, and it goes into territory that has not yet been covered by the Virginia Supreme Court.
In Kylin Network (Beijing) Movie & Culture Media Co. Ltd v. Fidlow, 3:16-cv-999-HEH, 2017 WL 889620 (E.D. Va. Mar. 6, 2017), the case began with a Chinese company that wanted to make a movie about the life of martial arts legend Bruce Lee. The company hired the defendants (a Virginia attorney and his former law firm) to negotiate and obtain the movie rights with the supposed copyright owner. According to the Complaint, after some negotiation, the attorney recommended that the plaintiff pay $1 million to the supposed seller of the rights. After the payment was made, the plaintiff allegedly discovered the seller did not have good title to the movie rights. The unhappy client then filed a three-count complaint in federal court against its former attorney for legal malpractice, breach of fiduciary duty, and fraud.
The defendants sought to dismiss all counts of the Complaint under Fed. R. Civ. P. 12(b)(6). The defendants first argued that the legal malpractice claim failed due to the plaintiff’s contributory negligence. While Judge Hudson recognized that contributory negligence could be a complete defense to legal malpractice, he ruled that the defense had to be resolved at trial by the fact-finder when “reasonable minds could disagree” on the disputed facts. Thus, the judge denied the 12(b)(6) motion on this count.
The defendants, however, had better luck on the remaining two counts. The plaintiffs’ breach of fiduciary duty claim, according to Judge Hudson, was based upon duties arising from the attorney-client relationship. In turn, this relationship was based in contract, specifically the written engagement agreement between the law firm and the clients that gave rise to the legal malpractice claim. Judge Hudson noted that the Virginia Supreme Court has not ruled on the issue, but based upon prior precedent, he held that the breach of fiduciary duty had to arise from a duty independent of the attorney-client contract. According to Judge Hudson, “[i]n Virginia, because legal malpractice is a contract claim, an additional claim for breach of fiduciary duty must be based on something other than a violation of a duty arising under the attorney-client relationship.”
Judge Hudson then made short work of the remaining fraud count, dismissing it on similar grounds and holding that such a claim must arise from a source other than the contractual relationship between the parties.
The plaintiffs’ legal malpractice claim survived the 12(b)(6) stage, which appears to be the true core of the plaintiffs’ case. But Judge Hudson’s opinion is notable as a development in the law of fiduciary duty in Virginia, a claim that seems to appear more frequently in business litigation in the Eastern District.