Professional Liability - Winter 2004/2005

Contents

• Ninth Circuit En Banc Panel Rejects Finding of "Per Se" Inexcusable Neglect for Reliance on Paralegal - By Lori Blitstien

• Expert Testimony Required to Explain Impact of Alleged Malpractice to Jury - By Mike Pipkin

• Trio of Cases Address Attorney Duty to Third Parties in Estate-Planning Context - By Lori Blitstien

• Lawsuit Against Attorney for Breach of Duty of Loyalty Not a SLAPP - By Lori Blitstien

• Successor Fiduciary Has Standing to Bring Malpractice Claim Against Attorney Hired by Predecessor - By Lori Blitstien

• Duty of Class Counsel to Class Members Extends Beyond Certified Claims - By Lori Blitstien

Ninth Circuit En Banc Panel Rejects Finding of "Per Se" Inexcusable Neglect for Reliance on Paralegal

Pincay v. Andrews, 2004 U.S. App. LEXIS 23822 (9th Cir., Nov. 15, 2004)

After missing the 30-day deadline for filing a notice of appeal for his client, counsel sought an extension of time to file the notice by claiming excusable neglect. The attorney explained that he relied on his paralegal to calendar deadlines, and on this occasion his paralegal erroneously calendared the notice under a 60-day deadline. The district court judge found excusable neglect, and granted the extension, but a three-judge panel of the Ninth Circuit Court of Appeal reversed and dismissed the appeal, holding the attorney’s reliance on a paralegal was inexcusable per se. The Ninth Circuit then voted to rehear the case en banc to consider whether the creation of a per se rule is consistent with the four-part balancing test set forth by the U.S. Supreme Court in Pioneer Investment Services Co. v. Brunswick Associated Ltd. Partnership, 507 U.S. 380 (1993) (balancing prejudice, length of delay, reason for delay, and good faith).

A majority of the en banc panel affirmed the district court’s finding of excusable neglect. Reflecting on the "modern world of legal practice," the majority opinion acknowledged than the delegation of repetitive legal tasks to paralegals has become a necessary fixture in the struggle to control legal costs. Even though the court recognized that the filing deadline was unambiguous, and that the matter was within the control of the attorney, the court concluded that an attorney’s carelessness may be excusable when considered within the context of the particular case.

In this case, the district court’s findings reflected an application of the Pioneer test. After noting that the district court’s ruling was being reviewed for abuse of discretion, and further noting that the district court was in a better position that the Ninth Circuit panel to evaluate contextual factors such as the attorney’s quality of representation during the life of the case and the propensity of the opposing party to capitalize on petty mistakes, the majority concluded that district court did not abuse its discretion.

Judge Kozinski, joined by Judges Rymer and McKeown, dissented. Kozinski opined that, even under Pioneer, the standard is not mere neglect – it is "excusable neglect" – and thus the neglectful party must present a sufficient excuse. In Kozinski’s view, the only explanation provided for the neglect here was that "the lawyer didn’t bother to read the rule; instead, he relied on what a calendaring clerk told him." Kozinski concluded that "While delegation may be a necessity in modern practice, it can’t be a lever for ratcheting down the standard for professional competence."

Judge Berzon separately concurred, joining the majority opinion in full and disagreeing with the dissent on two points: First, that the dissent relied too heavily on the third Pioneer factor, the reason for delay, instead of viewing it as only one of four factors weighed. Second, that the "something" to make the neglect excusable was the complete misfiring of a well conceived calendaring system and an effort to ascertain the deadline rather than ignoring the issue entirely.
Lori Blitstien

Alexander v. Turtur & Associates, Inc., 146 S.W.3d 113 (Aug. 27, 2004)

In Alexander v. Turtur & Associates, Inc., 146 S.W.3d 113 (Aug. 27, 2004), a case of first impression, the Texas Supreme Court issued a take-nothing judgment against plaintiffs in a legal malpractice case. The court held that, in cases involving trial malpractice in which causation was not "obvious," expert testimony was required to assist the jury in determining whether a "client would have prevailed in an underlying trial, but for its attorneys alleged negligence in preparing and trying the case." Without expert testimony, the court stated, the jury did not have the benefit of direct evidence explaining the legal significance of omitted evidence and its impact on how the finder of fact, be it judge or jury, in the underlying case might have reached a more favorable result for the client.

According to the facts recited in the opinion, the defendant-attorneys (Alexander & McEvily) were hired to represent the plaintiff-client (Turtur & Associates, Inc.) in a bankruptcy adversary proceeding, about two months before trial, with the understanding that Alexander would actually try the case. However, two days before the adversary proceeding was set to commence, Alexander announced ready for trial in another court. The bankruptcy judge, having already granted one continuance, refused to grant another, and limited trial testimony to two days. Alexander's new associate, Judy Mingledorff, a former district attorney with no civil trial experience, was thrust into the first chair and tried the case.

The outcome of the trial did not become known until two years later, when the bankruptcy judge awarded the defendants a judgment on their counterclaim, offset by limited damages sought by the plaintiff-client. Ultimately, the parties settled, followed by the plaintiff-client’s suit against the defendantattorneys for malpractice, with a later amendment to include a Texas Deceptive Trade Practices Act allegation.

At the jury trial of the legal malpractice claim, the plaintiff-client’s counsel called a former general counsel for the State Bar of Texas, who testified that in his expert opinion, Alexander was negligent for failing to try the case and for failing to advise his client of the conflict in his trial schedule. He also testified that the associate Mingledorff failed to properly prepare for and try the case. He did not testify, however, that but for the alleged malpractice, a different, more favorable result would have been obtained. The jury believed that there was sufficient of causation and awarded the plaintiff-client actual damages of $3 million. The trial judge granted a motion for judgment notwithstanding the verdict, finding that expert testimony was needed on causation.

The First Court of Appeals disagreed, finding no need for an expert because the connection between the attorney’s malpractice and the harm caused was "obvious," even to a jury of laypersons. The Texas Supreme Court then reversed this holding.

Outgoing Chief Justice Phillips authored the opinion. In a concurrence, Justice Nathan Hecht wondered aloud about whether the question of causation in trial malpractice cases might be better viewed as a question of law rather than fact, and what type of expert might be necessary to provide the required testimony.

The court’s opinion appears to be in harmony with medical malpractice cases, where the issue is whether the doctor caused harm. With respect to this particular case, the defendant-attorneys argued that since the case was tried to the bench during the adversary proceeding, there was no way for a jury to determine whether the judge wouldhave decided the case differently without independent evidence of causation from an expert. On the other hand, the opinion can be read to have carved out an exception for lawyers, making it more difficult for plaintiffsclients to sustain their legal malpractice cases, with the issue of causation a legal, rather than a fact, issue.
Mike Pipkin

On the heels of two companion opinions from California’s Second Appellate District that limit the scope of an attorney’s duty of care to claimed beneficiaries of testamentary legal services, the state’s Sixth Appellate District handed down a case in which it extended an attorney’s duty to an intended beneficiary. The trio of cases illustrate the importance of clear evidence of testator intent in third-party malpractice matters.

In the first of the two Second District opinions, Featherson v. Farwell, the court explained that even though an attorney retained to provide estate planning services may, in certain circumstances, owe a duty of care to an intended third party beneficiary, the duty will not be extended to a third party when it compromises the attorney’s primary duty of undivided loyalty to the client – especially where the testator’s intent or capacity are questioned. In that case, Marie Featherson retained attorney Farwell to prepare a grant deed that transferred her home to her daughter Mary Jean. Although the deed was prepared and signed by Featherson, the deed was not recorded until two months after Featherson’s death. After conflicting testimony about Featherson’s intentions, the probate court returned the home to the estate. Mary Jean sued Farwell for negligence, claiming that he failed to timely record the grant deed. The trial court concluded that Farwell represented Featherson, not Mary Jean, and therefore did not owe a duty to Mary Jean. The appellate court affirmed, holding that Farwell’s primary duty of undivided loyalty was to Featherson.

In the companion case, Boranian v. Clark, the Second District reversed a judgment entered against estate planning attorney Clark on the grounds that he did not owe a duty of care to the daughter of Clark’s client, Marlene Farris. Clark prepared a will for Farris, in which she gifted a business to her male companion and a home to her daughter. The daughter contested the gift to the male companion and then sued Clark for negligence and breach of fiduciary duty, claiming that Farris lacked testamentary capacity and alleging that Clark failed to ascertain Farris’ true intent. The trial court found in favor of the daughter, but the appellate court reversed. The court stressed that where, as in this case, there is a substantial question as to whether the third party was in fact the testator’s intended beneficiary, the duty cannot be extended to the beneficiary. The imposition of a such a duty, according to the Boranian court, "might interfere with the attorney’s ethical duties to his client or impose an undue burden on the profession."

California’s Sixth Appellate District took up the third party issue shortly thereafter, in Osornio v. Weingarten, 2004 Cal. App. LEXIS 1961 (Nov. 22, 2004). Unlike the Second District cases, the court determined that a third-party beneficiary could state a claim for malpractice.

Plaintiff Orsonio was a caretaker for Dora Ellis, who eight months prior to Ellis’ death, asked her attorney to prepare a new will naming Orsonio as her executor and sole beneficiary.

After Ellis’ death, the beneficiary to Ellis’ prior will contested the new will on the grounds that it was barred by a provision of the Probate Code that bars a "care custodian" of a dependent adult from receiving a transfer except as provided by statute, for example, where the beneficiary can prove by clear and convincing evidence that the bequest was not procured by fraud, duress, undue influence, or menace, or where an unless certified by an independent attorney that he or she reviewed the transfer and it was not procured under circumstances of fraud, duress, undue influence or menace. Osornio sued the attorney who prepared the new will for legal malpractice, alleging that the attorney was negligent in not obtaining the independent review.

The trial court sustained a demurrer without leave to amend, but the Court of Appeal reversed, agreeing that Osornio failed to state a cause of action because the independent review is not a document included in a will, but rather, separate and apart from it, but finding nevertheless, that the complaint could be amended to state a claim alleging the negligent failure to refer Ellis to an independent attorney or advise her that the will could be presumptively disqualified. In so holding, the court reasoned that attorneys owe a duty to an intended beneficiary because otherwise no one would be left to enforce the testator’s right to be effectively represented, that is, no one would be left to ensure that the testator’s intent was effectuated as the testator had intended.
Lori Blitstien

Benasra v. Mitchell, Silberberg & Knupp LLP, 123 Cal. App. 4th 1179 (Nov. 4, 2004)

After an arbitration panel denied a motion to disqualify the law firm of Mitchell, Silberberg & Knupp from representing clothing company Guess Inc. in the arbitration, the moving party (and former Mitchell Silberberg client) PourLe Bebe Inc. (PLB), a manufacturer of children’s clothing, sued Mitchell Silberberg for conflict of interest.

PLB alleged that Mitchell Silberberg breached its duty of loyalty to PLB by representing a party with adverse interests, Guess Inc., in the arbitration. The trial court deemed the prior ruling of the arbitration panel to be res judicata and impliedly ruling that no breach of the duty of loyalty occurred. The California Court of Appeal reversed, and after remand PLB amended its complaint to add as defendants two former Mitchell Silberberg partners who had left the firm while the appeal was pending.

The two former partners brought a special motion to strike under California’s anti-SLAPP statute (Cal. Code Civ. Proc. §425.16), arguing that their representation of the manufacturer’s rival was an act in furtherance of the right to petition or free speech, and that the lawsuit therefore constituted a strategic lawsuit against public participation, or "SLAPP." In opposition, one of the manufacturer’s principals filed a declaration stating the Mitchell Silberberg represented Guess Inc. while it was still doing work for PLB, and that the former partner "relentlessly crossexamined" him about housekeepers, drivers and girlfriends, and personal matters that Mitchell Silberberg learned in the course of the representation. The trial court granted the motion to strike, concluding that the anti-SLAPP statute was applicable because the matter encompassed a cause of action arising from a statement or writing made in connection with an official proceeding — that is, the Guess Inc. arbitration.

The California Court of Appeal reversed, finding that the malpractice action was not based on the filing of declarations, motions or appearance made on Guess Inc.’s behalf, but rather on an alleged violation of Rule 3-310(c) of the Rules of Professional Conduct, concerning client conflicts and the assumption of representation adverse to a client or former client..
Lori Blitstien

Borissoff v. Taylor & Faust, 33 Cal. 4th 523 (July 15, 2004)

Plaintiff Borissof was named as executor in a will that was contested in probate court. Pending resolution of the contest, the probate court appointed a former probate commissioner to act as special administrator for the estate. The special administrator retained a law firm to provide counsel on tax issues for the estate. Some time later, after the special administrator confessed to having borrowed money from the estate for personal reasons, the law firm withdrew its representation of the special administrator. The special administrator died shortly thereafter, and the law firm turned over the estate’s file to another attorney.

Meanwhile, the will contest was resolved, and plaintiff Borissof reinstated as executor of the estate. Borissof discovered that an annual IRS filing had been missed, and filed suit for malpractice against the former law firm. The law firm asserted, as an affirmative defense, that it owned no duty to plaintiff Borissof because there was no privity of contract. The trial and appellate courts agreed, finding that plaintiff lacked standing to sue defendants.

The California Supreme Court reversed, ruling that a successor fiduciary of an estate in probate may assert a professional negligence claims against tax counsel whom a predecessor fiduciary engaged to perform tax work for the estate. In so holding, the court relied exclusively on the Probate Code (§§10801(b), 820(a), and 8524(c)), and concluded that the absence of privity, viewed as an impediment to standing, is a gap filled by the Legislature with respect to the specific relationship of estate fiduciaries who retain counsel to provide tax advice for the estate..
Lori Blitstien

Janik v. Rudy, Exelrod & Zieff, 119 Cal. App. 4th 930 (June 22, 2004)

The law firm of Rudy, Exelrod & Zieff won $90 million for a class of insurance adjusters who claimed their employer had violated overtime rights laid out in California’s Labor Code. Despite that win, plaintiff Stanley Janik filed a malpractice claim against the law firm, saying that a larger recovery would have been possible if the law firm had looked to California’s Business and Professions Code §17200, which would have permitted a recovery of wages for a four-year period, while the Labor Code claim was limited to three years. The trial court threw out the malpractice lawsuit, sustaining defendants’ demurrer without leave to amend on the ground that the attorneys had no duty to class members with respect to claims that were not specified in the class certification order.

California’s First Appellate District reinstated the suit, concluding that, while "the scope of the duty of class counsel must be determined with reference to the certification order . . . the attorneys’ obligations may extend beyond the claims as certified to related claims arising out of the same facts that class members reasonably would expect to be asserted in conjunction with the certified claims." The court reversed the trial court judgment and remanded to require the attorneys to establish that they did not breach the applicable standard of care..
Lori Blitstien

© 2004 Sedgwick, Detert, Moran & Arnold LLP

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