Day on Torts
Where a plaintiff could not show that she justifiably relied on alleged negligent misrepresentations from a financial advisor, the trial court’s award of damages to the plaintiff was reversed.
In Bartholomew v. Southard, No. W2024-01494-COA-R3-CV (Tenn. Ct. App. May 29, 2026) (memorandum opinion), the plaintiff represented a client in a wrongful death action, helping to obtain a large settlement for the client with a present value of $2,250,000. The plaintiff’s attorney’s fees totaled $750,000, but rather than paying the full fee immediately, the client asked to pay the fee over time as the settlement was paid. The plaintiff attorney and the client entered into an assignment agreement, whereby the plaintiff was to receive over $2.1 million over a 30-year period. The plaintiff asked the defendant, a financial advisor, to calculate the annual amounts to be paid by the client, and the plaintiff paid the defendant $250 for this work.
In 2011, the client stopped making annual payments under the assignment agreement. By this time, the client had paid $600,752.72 to the plaintiff attorney. The plaintiff attorney filed a complaint against the client, and shortly thereafter the client filed an ethics complaint against the attorney. The client alleged that the plaintiff did not counsel him to seek independent legal advice before agreeing to the assignment agreement, and that the assignment agreement was not in his best interest. Before the plaintiff and client mediated their fee dispute, the plaintiff’s counsel realized that some of the calculations suggested by the defendant had not been reduced to their present value, which would have resulted in an overpayment to the plaintiff. The plaintiff ultimately settled with the former client for an additional payment of $100,000.
After this settlement, the plaintiff filed this case for negligent misrepresentation and breach of contract against the defendant. The trial court ruled in favor of the plaintiff, awarding over $1.2 million in damages, but the Court of Appeals reversed.
The Court of Appeals explained that under either a negligent misrepresentation or professional negligence theory, the plaintiff had to demonstrate that her damages were proximately caused by the defendant’s alleged negligence. Considering this determinative issue, the Court noted that it was “undisputed that [the defendant’s] calculation errors pertaining to payments in 2015 and 2020 did not cause [the client] to breach the Assignment Agreement.” In fact, the client stopped making payments before the calculation errors were discovered.
The plaintiff asserted that the calculation errors “caused her not to pursue her action” against the client, as she thought the assignment was not valid anymore due to the errors and was informed likewise by her attorney. Essentially, the plaintiff “believed the calculation errors would render the Assignment Agreement unenforceable, and accordingly settled for less than she otherwise might have in mediation with [the client].” But, as the Court noted, the plaintiff did not show that the assignment agreement could not be corrected or reformed, and she made no showing that she made any attempt to reform the agreement.
After questioning whether the assignment agreement would have been enforceable in Tennessee, the Court explained:
Upon review of the record, however, we agree with [the defendant] that [the plaintiff] has not carried her burden to demonstrate proximate cause as to the damages she asserts. Although she may have felt that her “goose was cooked” when the calculation errors in future payments were discovered, [the plaintiff] leap-frogged over her burden to demonstrate that, as a matter of law, 1) the agreement was rendered unenforceable in toto as a result of the two calculation errors in future payments, or 2) reformation of the agreement was not possible. Though testimony was presented as to her belief, the advice given by her own attorney, and expert testimony as to the ethics of the accelerated agreement, the record before us contains no finding by a court or testimony that the mistake rendered the agreement incapable of reformation. Cases involving professional negligence are often seen as “cases within cases.” The second case within a case requires the plaintiff to prove that had the defendant not been negligent, the plaintiff “more likely than not” would have prevailed in the underlying action.
Here, there is no proof or finding as to the “inside” case— there is only Ms. Bartholomew’s belief. Ms. Bartholomew essentially argues that causation is satisfied because her belief is “a cause.” We disagree that her “belief” satisfies her burden on the element of causation. Further, although we do not hold that a structured agreement for the payment of legal fees is never permissible, Ms. Bartholomew has not demonstrated that the Assignment Agreement in this case was an otherwise enforceable fee agreement under Wright or that she would have successfully recovered more than $1,000,000 in additional legal fees from Mr. Sprinkle.
(internal citations omitted).
The Court wrote that the plaintiff’s belief was not enough to prove causation, and the plaintiff had failed to show that absent the defendant’s negligence, the assignment agreement was otherwise enforceable or that she would have successfully recovered over $1 million in additional legal fees in the underlying matter. Finding that the plaintiff had not met her burden on the element of causation, the trial court’s judgment for the plaintiff was reversed.
This case was released eight months before oral arguments.