Thursday, February 18, 2016

Rosemann v. Sigillito

Opinion filed May 4, 2015
        In 2012, Phil Rosemann filed a complaint in the U.S. District Court for the Eastern District of Missouri against Martin Sigillito alleging legal malpractice.[1]  Rosemann had hired Sigillito to counsel him in foreign investments.[2]  One of the investments failed and Rosemann brought suit, alleging Sigillito had failed to exercise “the reasonable degree of knowledge and skill that is ordinarily possessed and exercised by attorneys in the preparation of a Promissory Note.”[3]  The district court granted summary judgment for Sigillito because Rosemann “failed to name an expert [in discovery] who would testify about the appropriate standard of care.”[4] 

        On appeal, the Eighth Circuit affirmed the district court’s holding.[5]  The court held that because the basis for Rosemann’s claim was that Sigillito negligently handled Rosemann’s investments, Rosemann was required, per Missouri law, to name an expert who would testify regarding the proper standard of care, and Rosemann failed to do so.[6]

I.  Facts and Holding

        In 2002, Phil Rosemann hired Martin Sigillito, an attorney, to counsel his investment of several millions of dollars in foreign investments.[7]  Martin Sigillito held himself out as being an expert in international investments and assured Rosemann that there would be no risk in investing the money in a foreign company.[8]
        In 2007, Rosemann received $15.6 million from the sale of shares of his family’s business.[9]  Sigillito suggested that Rosemann loan $5 million to METAG Insaat Ticaret A.S., a Turkish contractor (“Metis”).[10]  Rosemann resisted the loan at first; however, Sigillito assured Rosemann that the loan was guaranteed by North Atlantic Treaty Organization (“NATO”) contracts and the deal would be structured to protect Rosemann.[11]  Rosemann eventually consented.[12]  All $15.6 million was transferred to Sigillito, who then loaned $5 million to Metis.[13] 
        In 2009, two years after Rosemann loaned the money to Metis, Metis defaulted.[14]  Later the same year, Metis filed for bankruptcy protection in Turkey.[15]  Sigillito filed suit against Metis but the suit was dismissed.[16] 
        In 2012, Sigillito was convicted and sentenced to 480 months imprisonment in a separate case.[17]  After Sigillito’s conviction, Rosemann filed suit against Sigillito for legal malpractice in regard to the handling of Rosemann’s loan to Metis.[18]  Rosemann alleged that Sigillito negligently advised him that the loan was a safe investment because there were assets – NATO contracts – that could be seized in case of a default, but there were no assets.[19]   
        The district court concluded that Rosemann’s complaint framed the claim as “one of legal malpractice based on negligence.”[20]  The court stated the case was not submissible to a jury because, generally under Missouri law, a claimant alleging professional negligence must name an expert during discovery that would testify about the appropriate standard of care.[21]  As a result, the court granted summary judgment for Sigillito before the case ever went to trial.[22] 
        On appeal, the Eighth Circuit affirmed the district court’s holding.[23]

II.  Legal Background

        “Under Missouri law, when liability depends on the attorney’s negligent performance of professional services to a client, the claim must be treated as one for attorney malpractice (i.e. professional negligence).”[24]  When the case involves the negligence of a professional,
“[T]he specific duty is defined by the profession . . .”; thus, an expert witness is generally necessary to tell the jury what the defendant should or should not have done under the particular circumstances of the case and whether the doing of that act or the failure to do that act violated the standards of care of that profession.[25] 
There are exceptions to the rule that expert testimony is required to establish the standard of care.  For example, if the negligence in question is “clear and palpable to a jury of laymen” then expert testimony is not needed.[26] 

III.  Instant Decision

        On appeal, Rosemann argued that his complaint focused on Sigillito’s false representation that the loan was guaranteed by NATO contracts; thus, Rosemann had not been required to provide the name of an expert to testify about the appropriate standard of care.[27]  The Eighth Circuit rejected Rosemann’s argument that his complaint focused on Sigillito’s false representations and affirmed the district court’s grant of summary judgment.[28] 
        The court noted that Rosemann did not discuss false representation in the complaint.[29]  Instead, the court stated that the basis of Rosemann’s complaint was that “Sigillito mishandled the Promissory Note, failed to protect Rosemann from risk, and otherwise committed legal malpractice.”[30]  The court explained that the knowledge required to prudently prepare the promissory note and protect Rosemann’s interest was not common knowledge; therefore, to determine whether Sigillito negligently handled the loan, a jury would have needed to know what an attorney, “under the same or similar circumstances” would have done and why Sigillito’s actions were unacceptable.[31]  Rosemann failed to provide the name of an attorney capable of doing so.

IV.  Comment

         Rule 1.3 of the Model Rules of Professional Conduct (“MRPC”) states that “[a] lawyer shall act with reasonable diligence and promptness in representing a client.”[32]  In Rosemann v. Sigillito, the facts suggest that Phil Rosemann’s lawyer failed to act according to MRPC 1.3 – twice.  Unfortunately, Rosemann lost a great deal of money.
        However, in Rosemann, the Eighth Circuit’s affirmance of the district court’s decision established a bright line rule that when a petitioner might have a claim for professional negligence, the petitioner must name an expert who would later testify as to the appropriate standard of care for the particular situation.  First, the bright line rule will help lawyers diligently perform their jobs.  More importantly, the rule should help plaintiffs, like Phil Rosemann, who have been or will be wronged by the failure of their lawyer to act diligently.
         -        Brian Scott

[1] Rosemann v. Sigillito, 785 F.3d 1175, 1178 (8th Cir. 2015).
[2] Id. at 1177.
[3] Id. at 1181.
[4] Id. at 1179.
[5] Id. at 1181.
[6] Id.
[7] Id. at 1177.
[8] Id.
[9] Id.
[10] Id. 
[11] Id. 
[12] Id.
[13] Id.  In addition to the loan to Metis, Sigillito also took portions of the money for himself and loaned $10.8 million to a party in England who failed to pay much of the loan back.  Id.
[14] Id.
[15] Id.
[16] Id.  At the time this opinion was written, Rosemann contended the total owed in principal and interest was $7,464,041.  Id.
[17] Id.
[18] Id.
[19] Id. at 1179.
[20] Id.
[21] Id.
[22] Id.
[23] Id. at 1181.
[24] Id.  See also Beare v. Yarbrough, 941 S.W. 2d 552, 557 (Mo. Ct. App. 1997).
[25] Rosemann, 785 F.3d at 1179-80.
[26] Id. at 1180.  See Zweifel v. Zenge, 778 S.W.2d 372, 374 (Mo. Ct. App. 1989).
[27] Id. at 1180.
[28] Id. at 1181.
[29] Id. at 1182.
[30] Id. at 1181.
[31] Id. at 1180.
[32] Model Rules of Prof’l Conduct 1.3 (2013).