Opinion of the Court by Chief Justice MINTON.
Brenda Osborne sued her attorney, Steven H. Keeney, claiming he breached his professional duty to her by failing to file suit against Clifford Quesenberry before the statute of limitations expired. Because of Keeney's breach, Osborne alleged she lost the ability to recover from Quesenberry for losses she suffered as a result of Quesenberry's crashing his airplane into her home. A circuit court jury decided this legal malpractice case in Osborne's favor, resulting in a judgment against Keeney in excess of $5 million. The Court of Appeals affirmed the judgment, in part, but vacated a large portion of the damage award.
We granted Osborne's and Keeney's separate petitions for discretionary review to consider three important issues presented in this case: first, whether the suit-within-a-suit procedure as approved by Kentucky precedent remains the proper method for litigating legal malpractice under the circumstances presented in this case; second, whether the physical impact rule — a rule, firmly embedded in Kentucky tort law — remains the proper threshold standard for claims involving emotional distress; and third, whether lost punitive damages should be recoverable in legal malpractice actions, an issue of first impression in Kentucky.
As to the first issue, we reaffirm our precedent holding the proper method for trying legal malpractice claims is the suit-within-a-suit, which requires the trial court to instruct the jury as if it were trying the underlying tort case before instructing the same jury on the legal malpractice claim. The trial court in the case at hand properly tried the case using the suit-within-a-suit method but erred when it failed to instruct the jury on Quesenberry's negligence. Lacking a jury determination on this issue, Osborne failed to establish that Keeney's malpractice proximately caused her loss. And the Court of Appeals erred by upholding the trial court's instruction on this issue. So we reverse the decision of the Court of Appeals and remand the case to the trial court for further proceedings consistent with this opinion.
Because the second issue is likely to recur in the event of a retrial on remand, we take this opportunity to address the physical impact rule and hold that it is no
Because the third issue is also likely to recur in the event of a retrial on remand, we hold that lost punitive damages are not recoverable against an attorney in a legal malpractice case. The purpose for punitive damages is clear in this jurisdiction, and transposing them into a form of compensatory damages to allow a legal malpractice plaintiff to recover thwarts, that purpose. By disallowing recovery for lost punitive damages, we align the jurisprudence in this jurisdiction with a growing number of states.
In October of 2002, while Osborne was sitting alone at home watching TV, an airplane crashed through her roof, resulting in significant damage to the home and its contents. The plane had just departed from a nearby airport. The pilot, Quesenberry, experienced mechanical difficulties with the plane before takeoff. By his estimation, the engine drive-pump had lost its prime. An airport mechanic offered to help, but Quesenberry declined and said he had encountered the problem a few times before. Attempting a quick fix to return home, Quesenberry squirted fuel into the air-intake of the left engine. The engine backfired, catching fire. Quesenberry extinguished the flames and again squirted fuel into the engine in order to get it to start. Finally, the engine started and Quesenberry took off.
Shortly after leaving the runway, at an altitude of approximately fifty feet, Quesenberry lost power to the left engine and began a rapid descent. He was able to steer the plane to avoid potentially greater damage on the ground below, but he did not avoid hitting Osborne's home. The plane sliced through her chimney, inflicted significant damage to the second story, and set the house afire before coming to rest in the adjacent street. Osborne said she heard a "sonic boom" and ran outside to discover her home on fire. No debris from the airplane or the house struck Osborne in any manner, and she suffered no physical injury as a result of the crash.
Shortly after the crash, Osborne was transported to a local hospital where Dr. Rhonda Sively, an internist, treated her. Osborne had suffered for years from anxiety, depression, hypertension, insomnia, and diabetes. Dr. Sively testified that Osborne was in obvious shock, and her preexisting ailments were exacerbated. According to the doctor, Osborne was emotionally unstable as a result of the destruction of her home and her personal belongings. For an extended period of time after the crash, Osborne received treatment.
Osborne retained Keeney approximately six months after the crash. Shortly after being hired, Keeney arranged a meeting
In August of 2004 — nearly two years after the crash — Keeney attempted to dissuade Osborne from proceeding with litigation against Quesenberry. By this time, the applicable one-year statute of limitations had expired. But Osborne insisted on going forward with litigation in hopes of receiving a substantial damages award. So Keeney filed a lawsuit against Quesenberry in state court in October 2004.
Quesenberry removed the case to federal court and claimed the action was barred by the applicable statute of limitations. Osborne claimed that she was unaware that the statute of limitations had expired.
Keeney did not respond to Quesenberry's motion for summary judgment. And Keeney did not inform Osborne that a motion for summary judgment had been filed. Furthermore, Keeney did not answer interrogatories or participate in discovery leading up to the dismissal. The federal court went so far as to observe in a written order that Keeney had acted with "willfulness, bad faith[,] or fault"; was warned several times regarding his conduct; and that his conduct alone was sufficient to warrant a dismissal of Osborne's claim.
It was January of 2006 before Osborne became aware that her federal lawsuit against Quesenberry was dismissed. Dr. Sively, not Keeney, told Osborne. Dr. Sively had become aware of the dismissal through a conversation with Quesenberry's counsel. Without Osborne's knowledge, the federal court entered judgment against her for the cost of the dismissed action.
Osborne later filed this action against Keeney asserting breach of contract, legal malpractice, and fraud and deceit. The jury returned a verdict in Osborne's favor on all claims. The jury awarded Osborne the following damages: (1) $54,924.04 for loss of her personal property; (2) $500,000 for pain and suffering from the airplane crash; (3) $750,000 as punitive damages against Quesenberry; (4) $53,025.39 for legal fees paid to Keeney; (5) $250,000 for
The Court of Appeals affirmed the judgment, in part, but reversed several aspects of the jury's verdict. The damages Osborne received for pain and suffering, both regarding the pilot's conduct and Keeney's representation, were vacated because there was no physical impact. Further, following a discussion of whether lost punitive damages
Taken together, Osborne and Keeney challenge several aspects of not only the decision of the Court of Appeals, but the trial court's rulings as well. Foremost, Keeney argues that the trial court erroneously denied his motion for directed verdict. By allowing Osborne's malpractice claim to go to the jury with arguably little evidence, Keeney claims the importance of proving the suit-within-a-suit is disregarded completely. Additionally, Keeney disagrees with the trial court's refusal to instruct the jury on the underlying negligence claim against Quesenberry and the unwillingness of the Court of Appeals to address the issue. And Osborne petitions this Court either to find an impact for her emotional distress claim, or if we do not find a sufficient impact, abandon our prior jurisprudence and entertain crafting a new standard for claims involving emotional distress. Finally, Osborne claims that she should be entitled to recover from Keeney punitive damages she would have recovered from Quesenberry but lost as a result of Keeney's malpractice.
Before delving into the record and the evidence presented at trial, it is appropriate to look first at the standard of review to be used by this Court when reviewing similar matters. The role of an appellate court, when reviewing evidence supporting a judgment entered upon a jury verdict, is limited. The Court must only determine whether the trial court erred in failing to grant the motion for directed verdict. In doing so, "[a]ll evidence which favors the prevailing party must be taken as true[;] and the reviewing court is not at liberty to determine credibility or the weight which should be given to the evidence."
The fact that Osborne, as Keeney repeatedly argues, did not call a witness with personal knowledge of the crash is not sufficient to warrant a directed verdict to be returned for Keeney. The plaintiff, as master of her claim, is entitled to present the evidence she deems sufficient, credible, and persuasive. The jury is fully capable of weighing the value of the evidence presented and determining whether or not no witness with "personal knowledge" is damning to the plaintiff's case.
In the instant case, the trial judge correctly refused to direct a verdict for Keeney.
It cannot be said that there was a complete absence of proof on a material issue or that no disputed issue of fact existed. The case was properly given to the jury, and a directed verdict should have been denied. As such, the jury verdict, supported by reason instead of passion or prejudice, will not be overturned on these grounds.
Under Kentucky law, a plaintiff in a legal malpractice action has the burden of proving: "[(]1) that there was an employment relationship with the defendant/attorney; [(]2) that the attorney neglected his duty to exercise the ordinary care of a reasonably competent attorney acting in the same or similar circumstances; and (3) that the attorney's negligence was the proximate cause of damage
The manner in which the plaintiff can establish what should have happened in the underlying action, but for the attorney's conduct, will depend on the nature of the attorney's error.
When trying a suit-within-asuit, especially when the reason for the lost claim is the expiration of the relevant statute of limitations,
In fact, this is the approach that Kentucky law has adopted. Daugherty v. Runner has become a keystone in the practice of legal malpractice actions in the Commonwealth. Palmore and Cetrulo cite Daugherty as the source for the recommended legal malpractice jury instruction.
"The Court instructs the Jury:
So, in Daugherty, it is plain to see that the jury was instructed on the underlying action and then asked to find whether the attorney was negligent or not. We hold that this is the required way of determining causation in a legal malpractice claim involving a suit-within-a-suit.
For an attorney to be found liable for legal malpractice, it must be shown that the attorney violated the standard of care and that such violation was the proximate cause of injury to the client, i.e., the client would have been successful in the underlying claim but for the negligence of the attorney. The client cannot be found successful on the underlying claim if the jury is not fully instructed on the underlying claim. And it follows then that the attorney cannot be found liable without fully litigating the underlying claim and properly instructing the jury.
In the instant case, the trial court properly instructed the jury on the standard for legal malpractice to be applied to Keeney. But the trial court failed to instruct the jury at all on the underlying case.
As a result, the trial court's jury instructions in this case are erroneous. They failed to advise the jury adequately of what it had to believe from the evidence in order to return a verdict in favor of Osborne.
We prefer "bare bones" instructions to make the oft-confusing task of determining liability easier for the layperson to perform. But while simple instructions are preferred, correct and complete instructions are required.
Of course, "it is a rule of longstanding and frequent repetition that erroneous instructions to the jury are presumed to be prejudicial."
Our decision to reverse and remand renders the parties' remaining allegations of error moot. But we will address them because they are likely to recur if the case is retried.
This Court has long been wed to the principle that "an action will not lie for fright, shock[,] or mental anguish which is unaccompanied by physical contact or injury."
Unfortunately, the impact rule, while adopted with good intentions, has proven difficult in its application and has been repeatedly stretched and diluted. The supposed beauty of the impact rule is that it draws a bright line for determining when a plaintiff is entitled to recover for emotional injuries.
In Deutsch, this Court found that "the amount of physical contact or injury that must be shown is minimal."
X-rays are simply waves at a much higher frequency with much higher energy than light waves or sound waves, but waves nonetheless. If bombardment with x-rays is sufficient contact, would not bombardment with light waves while witnessing an event be sufficient contact? Would
In Wilhoite, like Deutsch, the facts were especially tragic. But, unlike in Deutsch, the plaintiff was denied the chance for a recovery because of a lack of physical impact. Wilhoite witnessed her infant daughter suffer severe injuries when the truck driven by the defendant left the road and struck her. The infant daughter eventually died as a result of her injuries. The trial court granted summary judgment to the defendant because Wilhoite suffered no physical impact, and the Court of Appeals affirmed. But the Court of Appeals did note that "[i]t might be questioned whether there is any logical difference between the [x]-rays which caused the mother distress in [Deutsch] and the light rays which caused the mother distress in this case."
In the case at hand, the trial court noted in overruling Keeney's motion for directed verdict on the emotional distress claim that if x-rays were enough, then certainly the reverberation of the house and sound waves emitted upon the plane's impact were sufficient to justify recovery. The trial court's observation is not without merit. Looking at Kentucky case law, a logical conclusion would be that sound waves or Shockwaves from an incident could be sufficient contact to allow recovery in claims involving emotional distress. The Court of Appeals disagreed with the trial court's reasoning and reversed Osborne's claim for emotional distress. In reality, the bright line of impact establishing liability is not so bright.
Additionally, while the rationale underlying the impact rule remains relevant, there are more effective methods of effectuating and protecting that rationale. We have remained steadfast in our commitment to requiring a physical contact because emotional distress "is possibly trivial and simply too speculative and difficult to measure unless [it is] directly linked to and caused by a physical harm."
We act today, as always, mindful of the value of precedent and the doctrine of stare decisis. The doctrine of stare decisis "is the means by which we ensure that the law will not merely change erratically, but will develop in a principled and intelligible fashion."
Today, believing the justification supporting the existence of the impact rule is no longer valid, we clarify our rule. Our research reveals that at least forty jurisdictions have either rejected the impact rule or abandoned it. An exhaustive review of the law surrounding this issue and the strengths and weaknesses of approaches used in other jurisdictions has persuaded us that these cases should be analyzed under general negligence principles. That is to say that the plaintiff must present evidence of the recognized elements of a common law negligence claim: (1) the defendant owed a duty of care to the plaintiff, (2) breach of that duty, (3) injury to the plaintiff, and (4) legal causation between the defendant's breach and the plaintiff's injury.
Criticism of this rule is to be expected. Most likely, there will be concern over a potential flood of litigation or much lamentation about the deletion of a supposed predictable demarcation of liability. We take this opportunity to dispel the initial volley of criticism by noting that there has been no noticeable flood of litigation in other jurisdictions that have adopted a similar rule.
In adopting a new rule for claims involving emotional distress, we note that generally, there is no good reason for not applying a new rule of tort law retroactively.
We now turn to the issue of whether a legal malpractice plaintiff may recover punitive damages he would have recovered in the underlying action but for the attorney's professional negligence. This is apparently an issue of first impression in Kentucky
Jurisdictions that have allowed recovery have done so on the basis of compensatory damages because they were lost as a result of the attorney's negligence.
Kentucky has a history of awarding punitive damages to penalize egregious
Allowing Osborne to recover lost punitive damages would not advance the policy underlying punitive damages in any way. In fact, allowing recovery would be antithetical to what punitive damages stand for, untying "the concept of punitive damages from its doctrinal moorings."
Aside from the failure to conform to the purpose of punitive damages, the plain language of KRS 411.184 prohibits the recovery of lost punitive damages by a legal-malpractice plaintiff. KRS 411.184(2) allows: "[a] plaintiff [to] recover punitive damages only upon proving[]... that the defendant from whom such damages are sought acted toward the plaintiff with oppression, fraud[,] or malice."
While the issue of lost punitive damages is novel in the legal malpractice setting, we have dealt with an analogous issue in cases involving deceased tortfeasors. In Stewart v. Estate of Cooper,
Osborne also argues that KRS 411.165, the statute controlling liability of an attorney for professional negligence, allows recovery of lost punitive damages because it says that an attorney found guilty of malpractice "shall be liable to the client for all damages and costs sustained by reason thereof." In crafting her argument, Osborne seizes on the "all damages" language used in the statute to contend that "lost" punitive damages are obviously included and, thus, recoverable. Although we recognize the logic of Osborne's argument, we disagree.
In Shawnee Telecom Resources, Inc. v. Broivn, we stated the general method in which this Court interprets statutes:
On their face, KRS 411.184 and 411.165 do not appear to be ambiguous. But in giving the words in the statutes "their commonly understood meaning,"
Moreover, when interpreting statutes, we do not read them in a vacuum. The "all damages" language used in KRS 411.165 must be read in conjunction with other statutes of similar import and relevance.
Finally, it is a well-known canon of statutory interpretation that the later controls the former when two statutes appear to be in conflict.
Not permitting plaintiffs to recover lost punitive damages means that they may not recover as much as they might have in the underlying action. While this may seem harsh, we recognize that this rule is ameliorated by the fact that a plaintiff may seek punitive damages from the attorney for the attorney's own conduct. The Court of Appeals cited Hendry v. Pelland, a D.C. Circuit case, for the proposition that it must be shown the attorney acted with "fraud, ill will, recklessness, wantonness, oppressiveness, (or) willful disregard of the (client's) rights."
In legal malpractice actions requiring a suit-within-a-suit, the trial court must instruct the jury on the law of the underlying action in addition to the law involved in the malpractice action. The jury should be instructed as if it were the jury in the underlying case, and success on the underlying claim instruction is necessary to a legal malpractice recovery.
Additionally, because it is likely to occur upon the remand of this case, we hold that the impact rule is no longer the rule of law in Kentucky. A plaintiff claiming emotional distress must satisfy the elements of a general negligence claim, as well as show a severe or serious emotional injury, supported by expert evidence. And a plaintiff in a legal malpractice claim may not recover lost punitive damages. This Court refuses to convert lost punitive damages to compensatory damages for legal malpractice actions. In doing this, we reaffirm the
We conclude that the new rules espoused today governing claims involving emotional distress and lost punitive damages in legal malpractice actions shall apply to: (1) the present case; (2) all cases tried or retried after the date of filing of this opinion; and (3) all cases pending, including appeals, in which the issue has been preserved.
Reversal is necessary in this case because the trial court erred by failing to instruct the jury on the law of the underlying case involving the negligence of the pilot, Quesenberry. Accordingly, we reverse the decision of the Court of Appeals and remand this case to the trial court for further proceedings consistent with this opinion.
MINTON, C.J.; ABRAMSON, CUNNINGHAM, NOBLE, SCOTT, and VENTERS, JJ., sitting. ABRAMSON, CUNNINGHAM, and NOBLE, JJ., concur. VENTERS, J., concurs, in part, and dissents, in part, by separate opinion in which SCOTT, J., joins. SCHRODER, J., not sitting.
VENTERS, J., Concurring, in part, and Dissenting, in part.
While I concur with the Majority in the elimination of the physical impact rule and in requiring the use of the suit-within-a-suit method for trying legal malpractice claims, I disagree with its decision to the extent that it insulates lawyers from liability for the negligent destruction of a client's claim for punitive damages. The Majority sees conflict between KRS 411.184 and KRS 411.165 where, in this case, none exists. As explained below, KRS 411.184 is plainly not implicated in the issue of whether Osborne may assert a claim for lost punitive damages. And more specifically, KRS 411.165 states a clear legislative policy that negligent lawyers must be held responsible for all of the damages sustained by the client. The Majority opinion defeats that policy with the mistaken notion that Osborne seeks to hold Keeney vicariously liable for Quesenberry's gross negligence. Therefore, I respectfully dissent.
The Majority incorrectly holds that, because KRS 411.184(2) prohibits recovery of punitive damages from anyone but "the defendant from whom such damages are sought," Osborne's claim against Keeney for "lost punitive damages" is barred. The Majority errs because Osborne does not seek to impose punitive damages upon Keeney for Quesenberry's conduct. That aspect of her complaint is not a claim for punitive damages; it is a claim for compensatory damages. There is a tremendous conceptual difference between the claim Osborne had for "punitive damages" against Quesenberry and her claim against Keeney for "lost punitive damages." The former was truly a claim for punitive damages; the latter is clearly a claim for compensatory damages.
Osborne's claim for punitive damages against Quesenberry was a vested property right that she owned and it had economic value, just as her house had value. Because of Keeney's professional negligence, the value of that claim, like her claim for the damage to her house, was lost; the value of the punitive damage claim was reduced to $0.00. Plainly, under KRS 411.184, Osborne would have no right to recover from anyone for Quesenberry's alleged gross negligence or recklessness. But she does not seek recovery for Quesenberry's conduct — she's already lost that opportunity because of Osborne's negligence. Her present claim is to be compensated for the destruction of her right to assert a punitive damage claim. That is purely a claim for compensatory damages
Perhaps the issue gets confused because of the way we ascertain the extent of her economic loss. The value of the lost claim can be determined a number of ways, and I agree with the Majority that the fairest way is the trial-within-a-trial approach. But in using that approach, we must not lose sight of what is truly on trial. If her suit was successful, Keeney would not be adjudged to be responsible for the negligent destruction of Osborne's house or for the medical expenses, and mental anguish she suffered because of that ordeal. Keeney would be liable for the damages that naturally flowed from his own acts or omissions. Obviously, those damages include the value of her lost claims for the damage to her house and her belongings, her medical expenses, and the value of her lost claim for mental anguish and distress. But they also include the economic loss caused by the destruction of her punitive damage claim, which was separately destroyed by Keeney's negligence just as surely as her house was by Quesenberry's negligence. The trial-with-in-the-trial does not substitute Keeney as the party-defendant in the place of Quesenberry. It is simply the method that we have chosen to determine the value of those losses sustained by Osborne because of Keeney's negligence.
The Majority gives significant weight to the historical underpinnings of punitive damages, that is, to deter and punish the wrongdoer. While that observation, concerning the historical roots of punitive damages, is unassailable, it is not relevant to the issue under review. The issue we consider is not punitive damages per se; rather the issue we review is lost punitive damages caused by professional negligence.
In summary, KRS 411.184 does not apply because Osborne's claim does not seek to punish Keeney for what Quesenberry did. Her claim is to be compensated for the financial loss she sustained because of Keeney's inaction. KRS 411.165 requires us to hold the lawyer responsible to the client for all of the damages the client sustained by reason of his negligence. It makes no exception for damages caused when a lawyer destroys the client's claim for punitive damages. It follows that when an opportunity to recover punitive damages is lost because of professional negligence, the damage cannot properly be categorized as "punitive damages"; rather, the lost damages are transformed into, and correctly categorized as, compensatory damages. Therefore, KRS 411.184(2) is irrelevant to our review of this issue, and accordingly, I dissent.
SCOTT, J., joins.
Four states and the District of Columbia have allowed recovery, with the District of Columbia in Jacobsen v. Oliver, 201 F.Supp.2d 93 (D.C. Cir.2002) (interpreting District of Columbia law), being the most recent. The other jurisdictions following this line of reasoning are Arizona (Elliott v. Videan, 164 Ariz. 113, 791 P.2d 639 (1989)); Colorado (Scognamillo v. Olsen, 795 P.2d 1357 (Colo.Cl.App.1990)); Kansas (Hunt v. Dresie, 241 Kan. 647, 740 P.2d 1046 (1987)); and South Dakota (Haberer v. Rice, 511 N.W.2d 279 (S.D.1994)).