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Banker v. Nighswander, Martin & Mitchell

United States Court of Appeals for the Second Circuit · 1994 · Evidence
37 F.3d 866 (2d Cir. 1994)
Updated
EvidenceLegal malpracticeDamagesMitigation of damagesAttorney's feesSettlement evidenceproximate causemitigation

Facts

Banker retained the New Hampshire firm Nighswander, Martin & Mitchell to collect on a promissory note after the debtors defaulted. Acting on the firm's advice, Banker repossessed stock that secured the note and later took control of the debtor corporations. In the underlying collection action, the New Hampshire federal court held that this conduct amounted to an involuntary strict foreclosure that barred further recourse against the individual debtors. Banker then sued the firm for malpractice, alleging that it failed to research and warn him about the risks of repossessing the stock and taking control of the corporations.

Issue

Whether the district court correctly found legal malpractice, whether Banker failed to mitigate his damages by not appealing the underlying collection judgment, whether the $50,000 damages award could stand, and whether Banker was entitled to attorney's fees in the malpractice action.

Rule

Under New Hampshire law, a legal malpractice plaintiff must prove duty, breach, and proximate causation of harm. A damages award must rest on findings that provide a reasonable basis for calculating damages with reasonable certainty, and a plaintiff's duty to mitigate extends only to reasonable efforts that do not involve undue risk, expense, or humiliation. A settlement offer may not be used under Federal Rule of Evidence 408 to prove the amount of liability.

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Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.
In a malpractice bench trial in federal court in Vermont, Maya Ortega claims that her former lawyer's bad advice caused her to lose a $180,000 contract claim. To prove damages, the defendant lawyer offers evidence that, before trial in the underlying contract suit, Maya had offered to settle that suit for $40,000.

For what purpose, if any, may the court rely on Maya's prior settlement offer under the governing rule from the majority opinion?

Explanation. The majority held that Federal Rule of Evidence 408 bars use of a settlement offer to prove the amount of liability. That principle applied even though the settlement discussions occurred in the underlying dispute and even though the later case was a bench trial. Unless the settlement created a new contract, the offer itself cannot be used as proof fixing damages.