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4th Circuit Re-Affirms that Contributory Negligence is Issue for Jury, Not Judge

May 29, 2019 By Adam D. Perrelli

On an appeal from the United States District Court for the District of Maryland, the 4th Circuit Court of Appeals unanimously held that where there is “room for difference of opinion” as to whether or not Plaintiffs are contributorily negligent, summary judgment is improper and contributory negligence is a question for the jury.       
In Berkenfeld, et al. v. Lenet, et al., 2019 U.S. App. LEXIS 10238, the 4th Circuit reversed and remanded a decision by the U.S. District Court granting summary judgment on behalf of the Defendants on the issue of contributory negligence.  The Plaintiffs/Appellants, Berkenfeld, Diamond and Holland-Eytan, were beneficiaries of the estate of Claire Blumberg, from which each Plaintiff inherited two annuities as equal beneficiaries.   Defendant Lenet was a financial advisor and Senior Vice President at Morgan Stanley who specialized in “estate and trust planning” and who had a professional and personal relationship with each Plaintiff, providing each with investment advice at the same time that he was advising Blumberg.  It was alleged that, after Blumberg passed away, Lenet met with the Plaintiffs and advised them that the only way for them to receive their shares was by a single lump-sum payment.   The Plaintiffs all elected to receive lump-sum distributions of the annuities, and received a “Tax Withholding Section” of the election form, which read: “You may wish to discuss your withholding election with a qualified tax advisor.”  Additionally Lenet stated that he expressly instructed all Plaintiffs to consult with their tax advisors before selecting a distribution option.  The Plaintiffs denied that this advice ever occurred.

Plaintiffs were heavily taxed for choosing the lump-sum payment, and when Plaintiffs discovered that those taxes could have been significantly reduced if they had elected to receive the annuities over time, they sued Lenet and Morgan Stanley for negligence, breach of fiduciary duty, and professional negligence.  Following discovery, Defendants moved for summary judgment, which was granted with the following findings:  The District Court concluded that (a) the facts of the case supported a prima facie case of negligence; (b) that the Defendants owed Plaintiffs an ordinary duty of care; (c) that the evidence created a triable issue of fact as to whether Defendants had breached that duty of care; and (d) that Plaintiffs were contributorily negligent as a matter of law, which under Maryland law is a total bar to any recovery.

Plaintiffs contended that the District Court erred in granting summary judgment and the 4th Circuit agreed, citing a long-standing rule about taking cases from the jury in negligence actions.  Thus, “the issue of contributory negligence is a question for the jury where there is a conflict of evidence as to material facts relied on to establish contributory negligence, or more than one inference may be reasonably drawn therefrom.”  Baltimore Gas & Elec. Co. v. Flippo, 348 Md. 680, 705 (1998).  The 4th Circuit held that there could be “room for difference of opinion” as to whether a reasonably prudent person would rely on Lenet’s alleged advice, given Lenet’s experience, position and relationship with Plaintiffs.  The 4th Circuit also held that there could be “room for difference of opinion” as to whether a reasonable person in Plaintiffs’ position would rely on Lenet’s advice as to the distribution options, without reviewing language in the election form or consulting with another financial advisor.

Judge James Wynn, writing for the 4th Circuit stated:

 Put simply, just as a reasonable fact finder could find that a client who has been advised by a lawyer as to a particular legal issue is not contributorily negligent by failing to seek the advice of a second lawyer or by failing to read case law himself, so too a reasonable factfinder could find that Plaintiffs acted reasonably in failing to seek a second opinion and in failing to conduct independent research as to their distribution options   
The 4th Circuit did not decide the issue of negligence itself, but concluded that Maryland’s high bar for taking the question of contributory negligence away from the fact finder was not met in this case.  The District Court held that Plaintiffs had “years of prior experience with annuities,” yet there was no evidence that any of the Plaintiffs had experience with making an annuity election regarding the distribution of proceeds and the tax consequences that might follow.

Maryland law stands with the national minority when it comes to contributory negligence, joining only North Carolina, Virginia, Alabama and the District of Columbia in barring a plaintiff from recovery if the plaintiff’s negligence contributed at all to their injury.  This decision re-affirms that standing.