Viking Corp. v. Van Dyke Gardner (Mich. Ap. Ct. 2011) (VikingMalpracticeOpinion.pdf)
First Lawsuit & Settlement: In 2003, Viking and several other fire sprinkler manufacturers were sued for infringing Central Sprinkler's patent rights. In 2005, the parties settled the case with a non-exclusive license agreement that included the payment of ongoing royalties and $1,000,000 for past damages. Although Central Sprinkler was (and still is) a subsidiary of Tyco International, the agreement did not expressly bind Tyco or its other divisions.
Second Lawsuit & Settlement: In 2007, Tyco sued Viking for infringement of two additional patents and Viking again settled the case by paying additional royalties and damages. One of the patents had already issued by time of the 2005 agreement. The other did not issue until 2007.
Malpractice Allegations: Viking then sued its original litigation counsel for malpractice. Viking's position was that it had understood the 2005 agreement to bind the entire family of Tyco companies and that Viking would have no further liability to Tyco with respect to its large “K factor sprinklers.” The particular alleged acts of malpractice were (1) advising Viking to enter into the 2005 agreement, (2) failing to include the new Tyco patents in the 2005 agreement or to at least advise Viking that they were excluded, and 3) failing to bind Tyco in the 2005 agreement or to at least advise Viking that Tyco was not bound.
On summary judgment, the trial court dismissed the case — holding that Viking was estopped from claiming that it did not understand the 2005 settlement agreement. Critical to this holding were the conclusions that the law firm made no affirmative misrepresentations regarding the agreement and, as a signatory to the agreement, Viking was presumed to have read and understood the terms of the agreement.
On appeal, the Michigan appellate court affirmed — holding that absent fraud, coercion, or mistake, the law generally presumes that a signatory to an agreement knows the nature of the agreement.
Defendants claim, and we agree, that because plaintiff signed the 2005 agreement, it should be presumed to know and understand the nature of the document—especially the fact that Tyco was not a party to the agreement and Tyco would not be bound by it. In addition, plaintiff offers no evidence that defendants advised it otherwise. Plaintiff's executives claim that a release from Tyco was one of the goals of the 2005 settlement negotiations and that they believed Tyco and Central were the same entity. However, Van Dyke testified, and [Viking's Vice President] confirmed, that Van Dyke never told plaintiff that Tyco would be bound by the 2005 agreement. On the contrary, Van Dyke explained that Central flatly rejected a draft including Central and its parents, but plaintiff's executives thereafter continued reviewing and negotiating drafts that excluded Central's parents.
Here, the court went on to hold that there was no malpractice liability even if the firm's actions rose to the level of negligence because the alleged negligence was not the proximate cause of harm.