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Brunacini v. Kavanagh12/16/1993
DONNELLY, Judge.
This interlocutory appeal raises the issue of whether the trial court erred in denying Defendants' (the Law Firm) motion to dismiss the legal malpractice action brought by Mayme Brunacini and Brunacini Appliance Company (Plaintiffs). The sole question presented on appeal is whether Plaintiffs' claim of legal malpractice was a compulsory counterclaim that was required to be raised in the Law Firm's prior action against Plaintiffs to recover legal fees. We reverse the trial court's order denying the motion to dismiss and hold that Plaintiffs' malpractice claim was a compulsory counterclaim within the contemplation of SCRA 1986, 1-013(A) (Repl. 1992), and that the malpractice claim is barred in the present action under the doctrine of res judicata.
FACTS
Plaintiffs employed the Law Firm to review a contract of employment with a third party to determine its enforceability. Robert Kavanagh, a member of the Law Firm, reviewed the employment contract and, on November 13, 1989, prepared an opinion letter that stated, in part: "It is my legal opinion that [the written agreement] has no effect to bind the corporation [Brunacini Appliance Company).
Based on the opinion letter and the advice given by Kavanagh, Plaintiffs terminated the employment of the third party. Thereafter, the third party filed a lawsuit against Plaintiffs for breach of the employment contract, and the Law Firm was retained to defend Plaintiffs in the action. Following a jury trial, the jury returned a verdict finding that Mayme Brunacini was not liable individually for any damages resulting to the third party, but that Brunacini Appliance Company breached the employment contract. The jury awarded damages in favor of the third party and against Brunacini Appliance Company in the amount of $120,067. Judgment was entered against the corporation on May 21, 1991.
Thereafter, Plaintiffs filed an appeal from the judgment. On October 25, 1991, while the appeal was still pending, the Law Firm filed a lawsuit against Plaintiffs to collect its legal fees for its services in representing Plaintiffs in the breach of contract action.
After the Law Firm filed its suit to collect legal fees, Plaintiffs employed a new attorney to defend against such claim and also to represent them in their pending appeal. On May 16, 1992, Plaintiffs, with the advice of their new attorney, entered into a stipulated judgment settling the Law Firm's suit for legal fees. On June 19, 1992, our Supreme Court, in an unpublished decision, denied Plaintiffs' appeal and affirmed the jury verdict in the breach of employment contract case.
Approximately four and one-half months later, on November 5, 1992, Plaintiffs brought a legal malpractice action against the Law Firm and Kavanagh, alleging that Defendants were negligent in the issuance of the Law Firm's opinion letter and that they negligently failed to warn and advise Plaintiffs of the foreseeable risk and financial exposure that could arise from the Law Firm's interpretation and construction of the disputed contract.
The Law Firm filed a motion to dismiss the malpractice action, arguing that the malpractice claim was a compulsory
counterclaim to the action for legal fees and that the judgment entered in the legal fees case was res judicata, thus barring any subsequent attempt to litigate the malpractice claim. Following a hearing on February 23, 1993, the trial court denied the motion to dismiss.
RES JUDICATA
The Law Firm argues that the trial court erred in fail
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