2013 year in review: notable decisions affecting lawyers, Part 2

As we began to detail last week in this space, 2013 brought a steady stream of important appellate decisions with implications for lawyers confronted with a lawsuit, whether for malpractice, malicious prosecution, or a wide array of other associated claims. In Part 2 of this two-part series surveying the decisions issued this past year affecting lawyers, particularly those who have been sued (Part 1 was published Jan. 17), we look at cases examining the preclusion against assigning malpractice claims, the collectability element essential to certain malpractice claims, the implications of obtaining conflict waivers, and the limits of the pre-filing requirement for claims of conspiracy.

Legal Malpractice and Conflict Cases

In October, the Court of Appeal turned back to malpractice issues in Wise v. DLA Piper LLP (US), 220 Cal. App. 4th 1180 (2013), which emphasized the imperative that a malpractice plaintiff prove collectability as part of the malpractice case in chief, at least when the malpractice allegedly involved the prosecution of an underlying case. Wise involved an alleged failure by an attorney to advise that a judgment previously obtained on behalf of a client needed to be renewed every 10 years. The client was precluded from enforcing the judgment after its expiration on that basis, and therefore sued his attorneys, even though there was also evidence that the former debtor was insolvent anyway. The client put on expert testimony (largely consisting of speculation as to the likelihood that the debtor could have satisfied the judgment, had it been renewed), but the court was not persuaded. It underscored that it is the plaintiff's evidentiary burden in a malpractice case to establish (among other things) collectability ("[w]hen the plaintiff does not introduce evidence from which a trier of fact could conclude, to a reasonable degree of certainty, the judgment would have been collectable, a verdict in favor of the plaintiff must be reversed"), and ultimately reasoned that the client's reliance on speculative expert testimony was insufficient to meet its burden, warranting dismissal of the malpractice claim.

In November, the Court of Appeal in Yanez v. Plummer, 221 Cal. App. 4th 180 (2013), held that where an attorney represents clients with adverse interests, the failure to obtain a written conflict waiver can constitute a basis for malpractice and breach of fiduciary duty exposure. Yanez involved a claim by a former employee who was accused of making conflicting statements under oath while represented by corporate counsel. The employee was fired for dishonesty, and thereafter sued corporate counsel for contributing to the elicitation of the conflicting statements. The Yanez court held that a triable issue of fact existed as to whether the attorney's failure to obtain written consent to represent conflicting interests constituted malpractice and/or breach of fiduciary duty. The Yanez ruling left somewhat unclear the responsibilities of corporate counsel in instances in which he or she is preparing an employee for testimony, but strongly suggested that any possibility that an employee will offer incriminating testimony (at least in the eyes of the employer) would require informed consent before corporate counsel could proceed with the concurrent representation of an employee and employer.

Meanwhile, November also saw in White Mountains Reinsur. Co. of America v. Borton Petrini LLP, 221 Cal. App. 4th 890 (2013), the first exception to the preclusion against assignment of malpractice claims. After surveying well-settled case law creating the public policy preclusion against assignment, the court in White Mountains found its facts to be an exception to the rule in the narrow instance in which the so-called assignee was an insurance company which purchased the assets of the assignor, another insurance company. The court held in that specific factual scenario that the general rule did not apply because the public policy reasons supporting the prohibition on assignments of malpractice claims were not generally implicated when the transfer of the malpractice claim is merely incidental to a much larger commercial transaction. White Mountains is probably sui generis.

Other Suits Against Attorneys by Third Parties

Closing out the year, in December, the Court of Appeal issued its rulings in Stueve Bros. Farms LLC v. Berger Kahn, 2013 DJDAR 16343 (2013), and the companion case, Stueve v. Berger Kahn, 2013 DJDAR 16381 (2013), which, among other matters, observed that a predecessor firm could not impute to a former client a successor firm's supposed knowledge of a self-dealing attorney's conduct for purposes of the statute of limitations, and that the pre-filing requirements under Code of Civil Procedure Section 1714.10 in relation to conspiracy claims against an attorney were of limited application. Stueve Bros. and its companion case both arose out of allegations that self-dealing attorneys schemed and conspired to siphon off funds for their own benefit through complicated estate planning. The Stueve Bros. court noted that Section 1714.10 is restricted to conspiracy claims "against an attorney based on conduct arising from the representation of a client that is in connection with any attempt to contest or compromise a claim or dispute," and not a conspiracy claim related merely to "transactional activities" which did not involve an attempt to contest or compromise a claim. The Stueve Bros. court further rejected out of hand any attempt to impute knowledge of the misconduct to the clients just because the allegedly offending lawyers moved firms.

It was another fertile year when it comes to legal decisions involving attorneys. While most of the decisions constituted not more than a tweak of existing law, each offers not only insight into the risks that practicing lawyers encounter, but also useful guidance for lawyers facing a claim. Have a great 2014.