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Sherman v. Ellis

Superior Court of Delaware, Kent

January 2, 2020

.DEAN SHERMAN, Plaintiff,

          Submitted: November 22, 2019

          Patrick K. Gibson, Esquire, Ippoliti Law Group, Wilmington, Delaware, Attorney for Plaintiff.

          Colleen D. Shields, Esquire, Gary W. Lipkin, Esquire, & Alexandra D. Rogin, Esquire, Eckert Seamans Cherin & Mellott, LLC, Wilmington, Delaware, Attorneys for Defendant.


          Clark, J.

         Plaintiff Dean Sherman sues his former attorney, Stephen Ellis, Esquire, for legal malpractice. Prior to Mr. Sherman's 1997 marriage, Mr. Ellis drafted a premarital agreement (the "Agreement") designed to protect Mr. Sherman's assets. Mr. Sherman then presented the Agreement to his fiancé.[1] The Agreement waived her right, upon divorce, to receive alimony or to share in wealth accumulated over the course of their marriage. Her attorney advised her not to sign it but she nevertheless did.

         During their divorce proceedings in 2015, Mr. Sherman's wife challenged the Agreement's enforceability in Family Court. The Family Court found it to be unconscionable and thus unenforceable. The Delaware Supreme Court, however, reversed the Family Court's decision. In the end, the Agreement successfully barred her challenges.

         Notwithstanding Mr. Sherman's success after appeal, he now sues Mr. Ellis because he did not include a waiver of disclosure clause in the draft agreement. According to Mr. Sherman's expert, it would have been a "silver bullet" removing the incentive for his ex-wife to engage in protracted litigation. Mr. Sherman claims that this expanded litigation in turn expanded his costs and fees. He now seeks to recover those attorney and expert fees from Mr. Ellis.

         Presently, Mr. Ellis seeks summary judgment in a motion that raises two principal issues. First, the motion requires the Court to evaluate the legal foundation for Mr. Sherman's expert's standard of care opinion. Second, with regard to proximate cause, the motion addresses a plaintiff's ability to recover for legal malpractice in drafting a premarital agreement that, in the end, successfully protected the plaintiff's assets. To evaluate the second issue, the Court must address whether the standard for proximate cause in transactional legal malpractice claims differs from the standard applied in litigation legal malpractice claims.

         For the reasons that follow, genuine issues of material fact remain regarding the applicable standard of care and whether Mr. Ellis breached that standard. However, in this case, there is insufficient evidence of record to support an inference that Mr. Sherman's ex-wife would have agreed to include this "silver bullet" term in the Agreement. In addressing an issue of first impression, the same "but for" proximate cause limitation that applies in litigation malpractice actions must apply in transactional legal malpractice actions. When applying that standard, because record evidence does not support an inference that Mr. Sherman's ex-wife would have likely accepted the term, the trier of fact would be forced to speculate regarding whether Mr. Ellis's alleged negligence proximately caused Mr. Sherman harm. For that reason, Mr. Ellis's motion for summary judgment must be GRANTED.


         The recited facts are those of record when viewed in the light most favorable to Mr. Sherman, the non-movant. In 1997, Mr. Sherman retained Mr. Ellis to negotiate and draft the Agreement prior to his marriage. The draft included provisions designed to protect Mr. Sherman's assets in the event of a divorce. It also included a mutual waiver of alimony. Finally, it included a clause recognizing that both parties had fully disclosed their premarital assets.[2] The proposed agreement, however, did not contain a waiver of the parties' obligations to disclose assets and obligations "beyond the disclosure provided."[3]

         Before his fiancé signed the Agreement, she consulted with an attorney. Her attorney first asked Mr. Sherman to revise the proposed agreement to secure her future financial security. Mr. Sherman rejected those requests with the exception of one minor issue. His fiancé then met with her attorney to review the Agreement. He told her that it was one-sided and that she should not sign it. Notwithstanding this advice, she executed it. When doing so, she acknowledged in writing that her attorney had advised her not to. The two then married.

         In 2015, Mr. Sherman's wife filed for divorce and moved to set aside the Agreement. At that point, Mr. Sherman's assets exceeded twelve million dollars and his annual income exceeded one million dollars. In contrast, she had no independent income or separate assets. In her motion to set aside the Agreement, she argued that it was unenforceable because she did not execute it voluntarily.[4] She also argued that the Agreement was unconscionable because (1) she was not provided a fair and reasonable disclosure of Mr. Sherman's property, and (2) because she "did not voluntarily and expressly waive in writing any right to that disclosure."[5]

         Prior to the parties' execution of the Agreement in 1997, Mr. Sherman had disclosed in writing his then four million dollars in assets.[6] The disclosure, however, contained errors. Namely, it omitted that he owned a Ford Explorer (though his fiancé had nearly exclusive use of it prior to the disclosure) as well as a three thousand dollar life insurance policy. It also inaccurately described his one hundred percent interest in a two hundred acre property as a fifty percent interest.[7] In the Family Court property division litigation, after discovery, briefing, and oral argument, that court held the Agreement to be unconscionable. Because of the disclosure errors, it also held that Mr. Sherman's disclosure of assets and liabilities was not fair and reasonable.[8]

         Mr. Sherman then filed an interlocutory appeal to the Delaware Supreme Court. With that appeal pending, Mr. Sherman filed the current legal malpractice suit against Mr. Ellis. The then legal backdrop to the malpractice case included only the adverse Family Court finding, which at that point was on appeal.

         After Mr. Sherman filed suit, the Delaware Supreme Court reversed the Family Court's decision.[9] When doing so, it confirmed that Mr. Sherman's ex-wife had voluntarily executed the Agreement[10] and that Mr. Sherman's disclosure of his property and financial obligations was fair and reasonable.[11] As a result, the Supreme Court held it to be immaterial whether or not the Agreement was unconscionable.[12] It held the Agreement to be enforceable.[13]

         Nevertheless, Mr. Sherman continues to prosecute his legal malpractice claim against Mr. Ellis. In doing so, he seeks to recover significant attorneys' fees that he alleges he incurred while litigating the unconscionability of the Agreement in Family Court and on appeal. His claim centers on Mr. Ellis's allegedly negligent failure to include a single clause or sentence in the Agreement-a waiver of disclosures term authorized by Delaware's Premarital Agreement Act (the "Act").[14]

         The Act recognizes that a clause in a premarital agreement that waives further disclosure of assets or financial obligations has a direct bearing on the enforceability of a premarital agreement.[15] While the parties dispute the effect of this portion of the Act, there is no dispute that the Agreement contained no waiver of disclosure provision.

         In the present suit, Mr. Sherman identified Judy Jones, Esquire, as his expert witness. In her report and deposition testimony, Ms. Jones opines that including the waiver provision would by itself have precluded any claim that the Agreement was unconscionable. As a result, she further opines that the standard of care for a domestic attorney as of 1997 required an attorney to include this waiver provision in the Agreement. Mr. Ellis's expert counters that the standard of care did not require Mr. Ellis to include such a provision.

         Apart from the standard of care issue, evidence of record relevant to proximate cause of harm is limited to three sources. First, Mr. Sherman's litigation attorney, David Gagne, Esquire, testified in his deposition that Mr. Sherman incurred additional fees and costs because Mr. Ellis did not include the provision in the Agreement. Specifically, Mr. Gagne testified as a fact witness that because Mr. Ellis did not include this language, Mr. Sherman had to hire two experts to address property values that would have otherwise been unnecessary.[16] Those expert fees were approximately $38, 000. Mr. Gagne also estimated that $285, 000 of a total of $310, 000 in attorneys' fees that he charged were necessary only because Mr. Ellis did not include the disputed provision in the Agreement. Second, Ms. Jones offers her expert opinion that Mr. Ellis's failure to include this term proximately caused the increased costs and fees identified by Mr. Gagne. Third, Mr. Sherman argues that his ex-wife's agreement to what were otherwise draconian terms in a one-sided Agreement circumstantially supports a reasonable inference that she would have agreed to anything he asked, including the waiver of disclosure provision.

         Notwithstanding that his ex-wife agreed to other one-sided terms, there is no evidence of record addressing her impressions regarding a waiver of disclosure provision or her willingness to agree to one. Namely, there is no direct evidence from her or the then-attorney that bears upon what other terms she may have agreed to. While she agreed to the vast majority, but not all of the terms proposed in the draft agreement, Mr. Sherman did not depose her or her then-attorney regarding how she would have reacted to the provision at issue. Likewise, there is no correspondence, documentary evidence, or circumstantial evidence demonstrating her propensity to agree to that specific provision.

         Mr. Ellis now moves for summary judgment. He has also filed a motion in limine to exclude Ms. Jones's expert opinions regarding standard of care and proximate cause of damages. Because Ms. Jones offers opinions regarding each element of Mr. Sherman's malpractice claim, the foundation for her opinions must be addressed when deciding Mr. Ellis's motion for summary judgment.


         Mr. Ellis raises three arguments in support of his motion. First, he argues that there is no genuine issue of material fact regarding the standard of care. In support of this argument, he relies upon his expert's opinion that the standard of care did not require the waiver language to be included in the Agreement. Furthermore, he asks the Court to disregard Ms. Jones's expert opinion because she allegedly misinterprets a provision in the Act that anchors her standard of care opinion. Because she misinterprets the statute, he argues that her opinion has no foundation and should be rejected for purposes of summary judgment.

         Second, he argues that because the Agreement survived a legal challenge and protected Mr. Sherman's assets, Mr. Sherman's claim fails as a matter of law. He concedes the absence of mandatory authority or in-State persuasive authority regarding transactional malpractice claims. Rather, Mr. Ellis cites other states' authority holding that a legal malpractice plaintiff must demonstrate that, but for the defendant's conduct, he or she would have obtained a more favorable result than the one obtained. According to Mr. Ellis, applying the same "case within a case" approach used by many courts in litigation malpractice actions, mandates summary judgment in this case.

         Third, Mr. Ellis argues that Mr. Sherman's claim is "fatally speculative."[17]He lists six assumptions that a jury would need to speculate about before it could find proximate cause of harm. Namely, he argues that Mr. Sherman's claim requires speculation regarding the following: (1) Mr. Sherman's former wife would have accepted the waiver of disclosure language if Mr. Ellis had proposed it; (2) Mr. Ellis never, in fact, proposed the language; (3) if he included the language in the Agreement, she would not have challenged the Agreement anyway; (4) the litigation expenses would have been less had he included the waiver of disclosure language; (5) the Family Court would have ruled differently if the waiver language was included; and (6) Mr. Sherman's ex-wife, as opposed to Mr. Sherman, would not have appealed if she had lost in Family Court.[18] On balance, he argues that because there is no evidence regarding Mr. Sherman's ex-wife's willingness to have agreed to this pivotal term or her resolve to continue litigating under various scenarios, proximate cause of harm to Mr. Sherman is speculative.

         In response, Mr. Sherman argues that the evidence of record creates issues of material fact precluding summary judgment. Namely, he argues that the conflicting deposition testimonies of his and Mr. Ellis's expert witnesses create a jury question as to the appropriate standard of care. Mr. Sherman also argues that Ms. Jones's interpretation of the Act is correct as a matter of law. Finally, Mr. Sherman urges the Court to apply a relaxed approach when evaluating proximate cause of damages. He argues that the relationship of damages to the negligence alleged is not speculative when applying this relaxed standard.


         Summary judgment is appropriate only if there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law.[19] The Court must view the evidence in the light most favorable to the non-moving party.[20] The burden of proof is initially on the moving party.[21] However, if the movant meets his or her initial burden, then the burden shifts to the non-moving party to demonstrate the existence of material issues of fact.[22] The non-movant's evidence of material facts in dispute must be sufficient to withstand a motion for judgment as a matter of law and sufficient to support the verdict of a reasonable jury.[23]


         The Court must first determine whether there is a genuine issue of material fact regarding the standard of care applicable to Mr. Ellis. Because (1) expert testimony regarding this issue is necessary, and (2) Mr. Sherman's expert relies upon her interpretation of the Act to support her opinion, the Court must determine if the Act supports her position. Next, the Court must address whether Mr. Sherman states a claim when the Agreement ultimately protected his assets. In other words, is there any legally recognizable harm when the Agreement fulfilled its primary purpose, although through a more circuitous route? Finally, the Court must address whether the evidence of record, when examined in the light most favorable to Mr. Sherman, demonstrates a genuine issue of material fact regarding proximate cause.

         The record demonstrates a genuine issue of material fact regarding the applicable standard of care and whether Mr. Ellis breached it.

         Central to the Court's decision regarding the standard of care is Mr. Ellis's motion in limine to exclude Ms. Jones's opinion regarding the applicable standard of care.[24] Expert testimony is required for a plaintiff to establish the standard of care in a legal malpractice case. As to the standard of care, the parties offer competing expert opinions. Ms. Jones's relevant opinion includes that Mr. Ellis "acted negligently and breached the applicable standard of care for a Delaware lawyer when he failed to include in the [Agreement] a written waiver of further disclosure of property or financial obligations as permitted by 13 Del. C. § 326(a)(2)[b]."[25]

         Mr. Ellis argues that because Ms. Jones incorrectly interprets the cited statute, her opinion deserves no weight and need not be accepted for summary judgment purposes. Mr. Sherman counters that had Mr. Ellis included one sentence in the Agreement, it would have significantly minimized Mr. Sherman's attorney fees and expert costs.

         The parties agree that the standard of care issue centers on their contrary interpretations of a provision in Delaware's version[26] of the Uniform Premarital Agreement Act (the "UPAA"). The provision of the Act relevant to this dispute is Section 326. In relevant part, it provides:

(a) A premarital agreement is not enforceable if the party against whom enforcement is sought proves that:
(1) Such party did not execute the agreement voluntarily; or
(2) The agreement was unconscionable when it was executed and, before execution of the agreement, that party;
a. Was not provided a fair and reasonable disclosure of the property or financial obligations of the other party;
b. Did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
c. Did not have, or reasonably could not have had, an adequate knowledge of the property or financial obligations of the other party.[27]

         In paragraphs (1) and (2) of Subsection 326(a) of the Act, the General Assembly provided two independent bases to challenge the enforceability of a premarital agreement: involuntariness in execution or unconscionability. In the underlying litigation, Mr. Sherman's ex-wife challenged the Agreement based upon both.

         With regard to unconscionability, Ms. Jones opines that had Mr. Ellis included a provision mirroring the language in subparagraph (a)(2)b, it would have acted as a "silver bullet" to any challenge to the Agreement based upon unconscionability. Mr. Sherman provided a written disclosure of his property and obligations as required by subparagraph (a)(2)a, and the Supreme Court held it to be fair and reasonable. However, the Agreement included no waiver as contemplated in subparagraph (a)(2)b. That, according to Mr. Sherman's theory of the case, would have limited the arguments in Family Court, and later in the Delaware Supreme Court, to whether his former wife executed the Agreement voluntarily. That limited scope, in turn, Mr. Sherman argues, would have prevented the need to litigate the highly factual issue of the fairness and reasonableness of the disclosure as referenced in subparagraph (a)(2)a.

         Mr. Ellis counters that there is no meaningful way to interpret subparagraphs (a)(2)a and (a)(2)b to provide any guidance of value to an agreement drafter. He further argues that regardless of whether he included (a)(2)b's waiver of disclosure language in the Agreement, the parties would have still needed to litigate the issue presented under (a)(2)a - that is, whether the initial disclosure was fair and reasonable.

         Mr. Ellis reasonably argues that the interrelationship of these two provisions is unclear. They seem to contradict each other to a certain extent. Namely, the statute requires that there be a "fair and reasonable disclosure" on one hand, while also permitting a written waiver of disclosure on the other hand. The only qualifying language in the Act regarding the nature of the waiver is that it is effective "beyond the disclosure provided." The Act does not define that phrase. It is unclear whether a correction to the first disclosure would qualify as one being "beyond the disclosure provided." It is also unclear regarding whether a "disclosure beyond the disclosure provided" could obviate the need for a party to provide a fair and equitable disclosure in the first instance. At oral argument, neither party provided the Court with authority addressing the interrelationship of the two provisions.

         In written supplements, both parties provided contrary persuasive authority supporting contrary readings of the UPAA.[28] The Court's overriding goal in statutory construction must be to implement the General Assembly's intent.[29] When doing so, it must first look to the plain language of the statute.[30] Here, in the underlying litigation, the Delaware Supreme Court addressed the statute's structure as follows:

to render the premarital agreement unenforceable under the statute [based upon unconscionability], the spouse contesting enforcement must prove that the agreement is unconscionable and prove three other grounds - lack of fair and reasonable disclosure of the other spouse's property or financial obligations, non-waiver, and lack of adequate knowledge of [the other spouse's] property and financial obligations.[31]

         In this matter's underlying litigation, the Supreme Court did not expressly address the effect of failing to include a waiver of disclosure provision. Nor was it necessary for the Court to define "non-waiver" in the passage quoted above. Nevertheless, its statutory interpretation of Subsection 326(a) controls. When applying this interpretation, it follows that whatever further disclosures "beyond the disclosure provided" are, if the premarital agreement includes language waiving such a disclosure, then it is impossible for the challenging party to invalidate a premarital agreement based upon unconscionability.

         Mr. Ellis relies upon the rule of statutory construction that statutes should not be read to render their provisions meaningless.[32] In this regard, he argues that the two subparagraphs when read in pari materia, cannot be reconciled. Regardless of the difficulty in interpreting and applying the two provisions, the Act's plain language must control. Here, the policy and rationale behind including such a "silver bullet" is for the General Assembly to decide, not the Court. By including subparagraph (a)(2)b in the Act, the General Assembly has permitted any party who includes a waiver of disclosure provision in a premarital agreement to in all cases defeat a challenge to the Agreement based upon alleged unconscionability. As the Delaware Supreme Court recognized in the underlying case, "[i]t may be time to take another look at Delaware's premarital agreement law . . ."[33] When observing this, the Supreme Court based this recommendation, in part, upon the circumstances of this case (in the underlying litigation) and, in part, upon other states' decisions to adjust the UPAA based upon their experiences.[34]

         On balance, given the Delaware Supreme Court's guidance in Silverman, the plain language of the statute, and persuasive authority interpreting the UPAA consistently with Ms. Jones's interpretation, there is an adequate foundation for Ms. Jones's interpretation. As a result, in total, the record includes competing opinions regarding the necessary standard of care that applied in 1997 to an attorney drafting a premarital agreement designed to protect a client's assets.[35] The opposing experts evaluated Mr. Ellis's performance in light of the applicable standards of care that they described.[36] These competing opinions create issues of fact regarding the applicable standard and whether Mr. Ellis breached it.[37] As a result, summary judgment is inappropriate on those bases.

         Proximate cause in a transactional legal malpractice claim must be evaluated under the same traditional principals of tort law that apply to litigation malpractice claims.

         In Delaware, the elements of a legal malpractice claim include "(1) the employment of the attorney; (2) the attorney's neglect of a reasonable duty; and (3) the fact that such negligence resulted in and was the proximate cause of loss to the client."[38] Often, legal malpractice claims arise out of an attorney's conduct during the course of litigation. In those circumstances, the plaintiff must "demonstrate that the underlying action would have been successful but for the attorney's negligence."[39]

         In the litigation context, the general rule requires analyzing a "case within a case." Namely, a legal malpractice plaintiff cannot succeed in a claim unless he or she can demonstrate that but for the defendant's negligence in a litigated case, the plaintiff would have won.[40] While Delaware case law has not used the specific "case within a case" nomenclature, Delaware law aligns directly with that general approach in litigation malpractice cases. Namely, in Flowers v. Ramunno, [41] the Delaware Supreme Court articulated the causation standard for such a claim. In that decision, the Court required the plaintiff to "demonstrate that the underlying action would have been successful but for the attorney's negligence."[42]

         Other legal malpractice actions, however, stem from attorney representations in transactions. Legal malpractice actions in the transactional context often do not look back on the success or failure of litigation, but involve evaluating an attorney's actions that, at the time, looked forward toward a future deal, settlement, or the prevention of litigation.

         Distilling a general rule for transactional malpractice cases has caused more uncertainty than in the binary, win versus lose, litigation setting. Transactional legal malpractice cases may arise from an attorney's drafting of a release, or as in this case, a premarital agreement. In such transactional representation claims, some of those cases follow a loss to the client in litigation. Such cases fit more easily within the general rule for causation used in litigation malpractice. At some point, there was often a poor result in an underlying suit.

         Other transactional malpractice cases, however, stem from lost profits, a disappointing settlement or sale price, or a lost benefit of the bargain. For instance, they may include claims that an attorney's malpractice caused lost profits in a deal that the parties did not consummate, or did so under less favorable terms than were possible. These claims may also, inter alia, involve lost net profit because an attorney either negligently prepared documents or negligently represented a party in negotiations. In those transactional malpractice cases, the success of an "underlying action" cannot be gauged in binary terms such as winning or losing.

         To date, the Delaware Supreme Court has not addressed the standard for proximate cause in transactional malpractice claims.[43] A number of other jurisdictions have examined the issue and align in two camps.[44] Some jurisdictions continue to use a "case within a case" framework while modifying its application by applying a "but for" causation requirement in the transactional context. On the other hand, some courts provide for a more relaxed causation approach in transactional legal malpractice cases due to the number of variables involved in a successful transaction. Mr. Sherman advocates this relaxed approach and equates it to a loss of chance type ...

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