Edward Roberts, LLC v Shipman & Goodwin LLP
Attorneys and Parties
Brief Summary
A legal malpractice dispute arising from advice given during the COVID-19 pandemic about selling disinfectant wipes in compliance with the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) [federal law regulating pesticides, including registration and labeling requirements] and Environmental Protection Agency rules.
The trial court granted defendant law firm's summary judgment motion in part by limiting plaintiff's damages to out-of-pocket losses tied to products covered by the embargo and possible resale profits from customers other than Walmart or customers who canceled orders, while otherwise denying the motion.
The Appellate Division modified the order to deny the defendant's summary judgment motion in its entirety, eliminating the damages limitation imposed by the lower court.
Although defendant showed that plaintiff made false statements to Walmart about the wipes' regulatory status, plaintiff raised factual issues as to whether those statements were based on defendant's allegedly negligent advice, preventing a finding as a matter of law that plaintiff's conduct was a superseding cause. The court also held that damages tied to the Environmental Protection Agency embargo and lost future profits were not too speculative to dismiss on summary judgment.
Background
In September 2020, plaintiff retained defendant law firm to advise on compliance for the sale of disinfectant wipes under the brand name DisinfeX. Defendant advised that, before the wipes obtained an Environmental Protection Agency registration number, they could not be marketed with 'kill language' such as claims that they killed 99.9% of germs. Plaintiff pursued a dual-track strategy: selling the product immediately as multipurpose wipes without kill claims while awaiting registration, and then later selling them as disinfecting wipes after approval. Walmart later canceled orders and returned product. The Environmental Protection Agency then embargoed all wipes plaintiff had sold and required them to be recovered and sequestered until export or destruction. By the time registration was obtained in June 2021, the inventory had expired or was no longer saleable. Plaintiff sued for legal malpractice, alleging negligent compliance advice caused its losses.
Lower Court Decision
Supreme Court, New York County, held that plaintiff could not pursue the full scope of claimed damages. It limited damages to out-of-pocket losses associated with embargoed goods and profits that might have been earned by reselling those goods to customers other than Walmart or customers who canceled purchase orders, while allowing the malpractice action otherwise to proceed.
Appellate Division Reversal
The Appellate Division held that the damages limitation was improper. Defendant established prima facie that plaintiff misrepresented to Walmart that the wipes were Environmental Protection Agency-listed or registered disinfectant wipes and that Walmart returned the goods because of that misrepresentation. But plaintiff submitted evidence raising a factual dispute as to whether its statements to Walmart were based on defendant's legal advice, meaning a jury must decide whether plaintiff's conduct was an intervening, superseding cause breaking causation. The court also ruled that losses stemming from plaintiff's inability to resell about $40 million in returned inventory were tied to the Environmental Protection Agency embargo itself, and because defendant conceded for summary judgment purposes that its advice was negligent and caused the embargo, causation for those losses also remained for trial. Finally, the court held that plaintiff's lost future profits claim based on two months of Walmart sales was not too speculative as a matter of law.
Legal Significance
The decision underscores that in legal malpractice cases, proximate cause and damages often cannot be resolved on summary judgment where there is evidence that the client's allegedly wrongful conduct may itself have been influenced by the attorney's negligent advice. It also confirms that lost profits may survive summary judgment if grounded in an existing sales history and that challenges to expert proof may be deferred to later evidentiary motions rather than used to dispose of the claim at this stage.
A law firm accused of giving faulty regulatory advice could not narrow the client's malpractice damages on summary judgment where factual disputes remained over whether the client's misstatements to a retailer were caused by that advice and whether the Environmental Protection Agency embargo, rather than the retailer deception alone, caused the bulk of the losses.