Malpractice claim can proceed after large judgment is tossed

The Missouri Court of Appeals Eastern District says a legal malpractice claim can proceed against two St. Louis lawyers who won an $11 million judgment on behalf of a client but were unable to collect it.

The lawsuit against attorneys Matthew O’Grady and James O’Leary has its roots in a 2006 motorcycle mishap that cost plaintiff Daniel McCullen his leg. He sued several parties, including Shernaman Enterprises, which sold the Honda motorcycle to McCullen prior to his accident.

Shernaman Enterprises’ owners failed to respond to the suit, but their insurer, Federated Mutual Insurance Co., discovered it during unrelated litigation more than two years after the suit’s filing. The insurer agreed to defend Shernaman under a reservation of rights, which would have allowed it to deny payment of any judgment.

Instead, the defendant entered into an agreement with McCullen under Missouri statute 537.065, which permits the defendant to drop its defense but limit payment of the judgment to the proceeds of its insurance, if any. In 2014, a St. Louis County circuit judge issued a judgment for $11,031,096 — the 8th largest plaintiffs’ win of that year, as tracked by Missouri Lawyers Media.

Litigation to collect the judgment commenced, but on Jan. 20, 2016, another judge found that Federated wasn’t liable for the judgment because it hadn’t been provided timely notice of the underlying suit. Five years to the day later, McCullen filed a malpractice action against O’Grady and O’Leary, alleging that he’d never recovered any part of the $11 million judgment and suffered other financial hardships due to their negligence.

The St. Louis County Circuit Court dismissed the suit after finding that the five-year statute of limitations for malpractice claims had expired. The defendant attorneys argued that their former client had been put on notice of the potential problems with the case as early as 2014 when the insurer issued its reservation of rights letter, as well as during the subsequent unsuccessful settlement negotiations.

But Judge Robert M. Clayton III, writing for the appeals court, said none of those earlier events would give a reasonable layperson reason to be concerned with his legal representation. The earliest date that McCullen’s claim could have accrued, he added, was the date of the summary judgment order.

“When this ruling was entered, and despite Defendants’ assertions to the contrary, all potential avenues of recovery of the approximate $11 million judgment had effectively closed in that Plaintiff could not recover from Federated because of the grant of summary judgment in its favor, Plaintiff could not recover from the Shernaman defendants personally pursuant to the terms of the 2014 settlement agreement, and Plaintiff could not recover from Honda because it was dismissed as a party in 2011,” Clayton wrote. Judges Angela T. Quigless and Sherri B. Sullivan concurred.

Andrew B. Protzman of the Protzman Law Firm in Leawood, Kansas, an attorney for McCullen, said he was pleased that the case could now proceed to discovery.

“Danny McCullen’s claims are going to get to go forward, and hopefully he’ll get some justice after a long, sordid ordeal for him,” he said.

O’Grady is with OnderLaw in St. Louis and also has practiced under his own firm name, O’Grady Law. O’Leary, formerly of OnderLaw, is now with O’Leary, Shelton, Corrigan, Peterson, Dalton & Quillian in St. Louis. Tim Sansone of Sandberg Phoenix & Von Gontard, an attorney for the defendants, referred a request for comment to Gerard Carmody of Carmody MacDonald, who could not be reached.

The case is McCullen v. O’Grady et al., ED110811.