Lawyers as litigants in 2014, Part 2

This is the second of a two-part series surveying notable appellate cases from 2014 affecting lawyers. In the first part published Thursday, we discussed recent appellate decisions interpreting the causation element of legal malpractice claims, while in this second part, we examine appellate opinions addressing the scope of the statute of limitations, the anti-SLAPP statute, and the attorney-client privilege.

April brought the decision in Roger Cleveland Golf Company Inc. v. Krane & Smith APC et al., 225 Cal. App. 4th 660, a case which arose in the context of a successful anti-SLAPP motion brought in response to a malicious prosecution action, and "address[ed] the applicable statute of limitations when an attorney is sued for malicious prosecution." The attorney-defendants contended the appellants could not establish a probability of prevailing because the statute of limitations barred the claim. The trial court agreed in granting the anti-SLAPP motion, relying on the seemingly settled rule that the limitations period for claims for malicious prosecution against attorneys was governed by Code of Civil Procedure Section 340.6, which generally applies to "[a]n action against an attorney for wrongful act or omission, other than for actual fraud, arising in the performance of professional services." See Vafi v. McCloskey, 193 Cal. App. 4th 874 (2011), and Yee v. Cheung, 220 Cal. App. 4th 184 (2013).

The appellate court in Roger Cleveland, however, was not convinced. Guided by a discomfort with applying distinct statute of limitation rules to attorneys on the one hand and their clients on the other, when both are jointly sued for malicious prosecution, the Roger Cleveland court held that malicious prosecution actions were an exception to Section 340.6, and therefore the limitations period was two years (not one), and further, the discrete and narrow tolling bases that apply to actions arising under Section 340.6 were inapplicable and not limiting.

Relevant to the latter holding, the Roger Cleveland court further applied the rule in malicious prosecution actions which allows tolling during the time an underlying judgment is on appeal (not allowed for claims arising under Section 340.6), "because the plaintiff cannot truthfully plead favorable termination of the prior action, which is an element of the malicious prosecution cause of action" until the conclusion of the appeal, at which time, "the statute of limitations recommences to run." The limitations period therefore did not bar the malicious prosecution claim against the attorneys. (The expansiveness of Section 340.6 was further questioned by the appellate court in Lee v. Hanley, 227 Cal. App. 4th 1295 (2014), a case pending review by the Supreme Court, and which is expected to answer whether Section 340.6 applies "to a former client's claim against an attorney for reimbursement of unearned attorney fees advanced in connection with a lawsuit.")

The favorable reasoning in Roger Cleveland was ultimately a Pyrrhic victory for the appellants, since the court still upheld the anti-SLAPP order on the basis that the appellant had failed to establish a probability of prevailing on the malice element, notwithstanding that the malicious prosecution action was not time barred.

The attorney-defendants did not fare as well in Old Republic Construction Program Group v. The Boccardo Law Firm Inc., 230 Cal. App. 4th 859, an October decision also arising out of a granted anti-SLAPP motion. Unlike Roger Cleveland, involving a malicious prosecution cause of action (where it has been settled for over a decade that the anti-SLAPP statute applies to applies to such actions), Old Republic was a "Prong 1" case. Old Republic sought to clarify "two principles that have perhaps not been as clearly articulated in the case law as they should be," the first being that "in determining whether a cause of action arises from conduct protected by the anti-SLAPP law, the focus is on the wrongful, injurious acts or omissions identified in the complaint, and whether those acts or omissions come within the statute's description of protected conduct," and the second, "unless the wrongful conduct is communicative in character, it is protected by the statute only if it was undertaken in connection with an issue of public importance."

Old Republic arose out of claims that attorney-defendants "wrongfully withdrew settlement funds derived from a now-defunct lawsuit, which they had deposited in their trust account pursuant to a stipulation requiring [plaintiff's] consent to any withdrawal." The attorney-defendants responded with a successful anti-SLAPP motion, but the Old Republic court held that the anti-SLAPP statute did not apply "[b]ecause the withdrawal of funds underlying the causes of action at issue was neither communicative nor related to an issue of public interest."

Even though the written stipulation which was the subject of the action "involved statement[s] or writing[s] made in connection with an issue under consideration or review by a ... judicial body as protected under [the anti-SLAPP statute], the Old Republic court explained that the alleged wrongful conduct was divorced from that "statement[s] or writing[s]." The claims against the attorney-defendants did not assert there was anything wrongful about the attorney-defendants' having entered into the stipulation, but rather the allegedly unauthorized withdrawal of funds, an act merely incidental to the stipulation (i.e., the involved statement[s] or writing[s].) The Old Republic court similarly rejected the claim that the withdrawal of funds was communicative conduct (despite that withdrawing funds inherently "involves some communication between the account holder and the bank"), also determining any communication to be incidental. Finally, Old Republic also underscored that while the anti-SLAPP statute "protects noncommunicative conduct," it only does so when "the conduct is undertaken in connection with a public issue."

The anti-SLAPP statute remains a potent tool for attorneys faced with lawsuits arising out of litigation activities, but Old Republic put the brakes on any perception that all litigation-related activities would be protected. The opinion clarifies that it is the allegedly injurious conduct which must be analyzed in determining whether it is sufficiently communicative to be protected under the anti-SLAPP statute and, if not, it had better be in relation to a public issue. In the event neither apply, the anti-SLAPP statute will not necessarily serve as the means for a quick resolution.

Unlike in Old Republic, attorney communications were at the heart of a case decided in November - Edwards Wildman Palmer LLP v. Superior Court, 231 Cal. App. 4th 1214, which confronted the question of "whether the attorney-client privilege applies to intra-firm communications between attorneys concerning disputes with a current client, when that client later sues the firm for malpractice." In Edwards, the attorney-defendant had consulted with other attorneys in his firm about complaints made by a former client during the time that the firm still represented the former client. In the subsequent malpractice action arising out of those complaints, the former client sought the content of those consultations, arguing chiefly that to elicit advice from other attorneys within the same firm that represents the client creates an inherent conflict of interest, which justifies an exception to the attorney-client privilege.

The Edwards court was not persuaded. Mainly characterizing its holding as an exercise in judicial restraint, the Edwards court refused to carve out the exceptions to the attorney-client privilege statutes urged by the former client, and correspondingly concluded that "when an attorney representing a current client seeks legal advice from an in-house attorney concerning a dispute with the client, the attorney-client privilege may apply to their confidential communications."

The "may" qualifier was dependent on four prerequisites identified by the Edwards court. Confidential communications between law firm attorneys and the firm's in-house counsel concerning a malpractice claim would be protected by the privilege only if the (1) law firm had designated, either formally or informally, internal in-house or ethics counsel, (2) who has not performed any work on the particular client matter or a substantially related matter, (3) the time spent on the communications must not have been billed to the client, and (4) "the communications must have been made in confidence and kept confidential." In those circumstances, the Edwards court held that, absent future legislative action, an attorneys consultation with other firm attorneys is protected by the attorney-client privilege.

As detailed in the first part of this two-part series, legal malpractice defendants will be happy with recent case law focusing on the causation element, requiring litigants to substantiate each element of a malpractice claim with actual evidence. On the other hand, lawyers sued for malicious prosecution or for certain non-communicative conduct, may be at least a bit disappointed with a seeming diminishment of the tools available to respond to those type of claims in light of Roger Cleveland and Old Republic. For those lawyers who do not fall into either category, perhaps the intra-firm attorney-client protections offered by Edwards will help avoid those claims in 2015, and into the future.