Legal malpractice; Attorney lien; Res judicata; Garrett v Washington; Collateral estoppel; Monat v State Farm Ins Co; Mutuality of estoppel

The court held that the trial court erred by granting summary disposition for defendant-law firm in this matter involving legal malpractice and an attorney lien. Plaintiffs were involved in civil and criminal federal court proceedings related to their healthcare businesses. They subsequently retained defendant to assist them with an in rem proceeding seeking money and accounts seized by the federal government. Plaintiffs alleged the firm failed to file a claim of interest on two accounts, which were administratively forfeited. The federal district court eventually granted defendant’s motion to withdraw and entered an order requiring plaintiffs to satisfy defendant’s attorney lien before it could receive any remaining funds from a proposed settlement in their underlying case. The 6th Circuit remanded, and on remand the federal district court entered an order declining to exercise supplemental jurisdiction over the malpractice issue and closed the case. Plaintiffs then filed this suit in state court. On appeal, the court agreed with plaintiffs that (1) the trial court erred when it granted defendant’s motion for summary disposition because the federal district court’s order was not itself a release that could be enforced, and (2) because their malpractice claims were never litigated on the merits and there was no final judgment, they were not precluded from bringing their claims in state court. At every stage of the proceedings they “have objected to the idea of executing a release of liability. Moreover, there is no contractual language for this Court to interpret to determine the intent of the parties. The order itself required plaintiffs to execute a ‘full and complete’ release, but the order is not the release itself.” And because “there was no ‘release’ in the first place, it would have been error for the [trial] court to rely on the ‘release’ when granting summary disposition.” In addition, neither “res judicata nor collateral estoppel apply to the facts of this case for the same reason: there was no final decision on the merits.” Had defendant “immediately tried to enforce the order, it would not have been successful because the record was undeveloped. Thus, there was neither a ‘decision on the merits,’ nor a ‘valid and final judgment’ for the” trial court to enforce. “And once the federal district court declined to exercise supplemental jurisdiction, neither collateral estoppel nor res judicata prevented plaintiffs from asserting their malpractice claims in state court.” Reversed and remanded.