Issue preclusion does not bar attorney’s claims for attorney’s fees against former client

By Joe Forward, Legal Writer, State Bar of Wisconsin

June 21, 2011 – A corporate client sued its attorney for professional negligence after the court dismissed the client’s construction defect lawsuit. Recently, the District II Wisconsin Court of Appeals ruled that issue preclusion did not apply to bar the attorney’s cross-claim for attorney’s fees.

Construction of Harborview Office Center LLC (Harborview) was completed in 1997. Efforts to remedy a water infiltration problem prompted Harborview to file suit against construction entities.

But the circuit court dismissed the case after finding that Harborview authorized remediation work during litigation without notifying the construction defendants and thus acted egregiously in the spoliation of evidence. An appeals court affirmed.

Harborview then brought professional negligence claims against the remediation engineer/architect and its attorney, Randall Nash, arguing that it depended on them to “further [its] lawsuit and preserve [evidence] in accordance with the rules of engineering and law” during the course of the case.

Nash counter-claimed for attorney’s fees. The circuit court dismissed Harborview’s professional negligence claims based on the doctrine of in pari delicto.

That is, the court concluded Harborview could not recover damages, even assuming Nash and Fischer were negligent, because it was an “active participant” in the destruction of evidence. The court did not determine whether Nash was negligent, but assumed that he was for purposes of summary judgment.

Harborview then moved for summary judgment on Nash’s cross-claim for attorney’s fees, asserting that “issue preclusion barred Nash from arguing that he was not in pari delicto with Harborview.” The circuit court agreed and dismissed Nash’s counterclaim.

But in Harborview Office Center LLC v. Nash, 2010AP1802 (June 15, 2011), the appeals court reversed the circuit court’s summary judgment, concluding that Nash’s alleged negligence was never actually litigated, not determined in a prior proceeding, and not essential to the prior judgment.

“Nash’s motion for summary judgment against Harborview [in the professional negligence action] did not concede negligence, nor did this court make any factual or legal determination as to Nash’s negligence in the underlying litigation,” Judge Lisa Neubauer wrote in the opinion.

The appeals court reversed the circuit court and remanded the case to determine “whether Nash’s conduct in the underlying litigation and spoliation precludes him from now recovering attorney fees.”