In Ex parte: Gregory v. Malloy, the Supreme Court dealt with an attorney's duty to investigate a claim before filing suit and the propriety of sanctions under the Frivolous Civil Proceedings Sanctions Act. The case essentially concerned a dispute over settlement proceeds. George W. Gregory was hired by Annie Melton to try to recover settlement proceeds that Melton believed were being wrongly held by her former attorney Gerald Malloy, who had represented Melton in a wreck case. Gregory eventually filed suit against Malloy alleging conversion and other causes of action. Allegations were made that the settlement proceeds had been improperly removed from a trust account. The trial court hearing the matter found that the funds remained in the trust account at all times and tha the action for conversion was frivolous. Apparently, the funds had not been disbursed because of an ongoing negotiation with Medicaid over a lien. The trial court found the cause of action for conversion was frivolous and awarded $27,364.31 in sanctions.
The Supreme Court affirmed. The court found that had the legal malpractice plaintiff’s attorney conducted a reasonable investigation, he would have known that there was no basis for the conversion action. The court chastised the attorney for relying on Melton's statements about the status of the money and for making inflammatory statements to a newspaper accusing Attorney Malloy of pocketing the settlement money. The court further noted that the legal malpractice plaintiff attorney had time before filing suit to contact Medicaid and/or could have contacted Attorney Malloy to learn of the status of the settlement proceeds. Neither action was taken.
The Supreme Court held that "we find that while an attorney or pro se litigant does not have a duty to consult with a potential defendant prior to filing suit, before alleging conversion against an attorney for misappropriation of client funds or legal malpractice, a reasonable investigation is necessary."
The Supreme Court also affirmed the sanctions imposed.
This is an important legal malpractice decision in South Carolina. Plaintiffs' attorneys contemplating a legal malpractice case are bound to undertake a reasonable investigation before filing a complaint. The attorney cannot simply rely on allegations or statements by the client. This duty, coupled with the Frivolous Proceedings Act, will perhaps lessen the number of frivolous malpractice suits filed in this state.