Undisputed factual showing of harm does not establish 'actual injury' as matter of law.
Cite as
1997 DJDAR 8206Published
Jun. 29, 1997Filing Date
Jun. 24, 1997
ORDER
Review Granted
PATRICK BARKHORDARIAN et al., Appellants v. COOLEY, GODWARD, CASTRO, HUDDLESTON & TATUM et al., Respondents C.A. 1st, No. A073726 S061544 California Supreme Court Filed June 25, 1997 Petition for review GRANTED.
Further action in this matter is deferred pending consideration and disposition of a related issue in Jordache v. Brobeck, Phleger & Harrison, S056954 (see Cal. Rules of Court, rule 29.2(c)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 29.3, is deferred pending further order of the court.
[Editor's Note - For your convenience we reprint below the Daily Journal's Ruling Column Brief which summarized the earlier decision of the lower court.]
ATTORNEYS
Undisputed Factual Showing of Harm Does Not Establish `Actual Injury` As Matter of Law.
The C.A. 1st has held, in the published portion of the opinion, that summary judgment on grounds that the plaintiffs action was time barred was inappropriate because the trial court's determination of when the plaintiff's cause of action accrued was erroneous.
In January 1989, the law firm of Cooley, Godward, Castro, Huddleston & Tatum (Cooley) was retained by Renaissance Software Inc. Renaissance Chief Executive Officer Alex Vieux recruited Patrick Barkhordarian, Keesup Choe, Bruce Felt, and Kannan Ayyar to start-up the business. Financing was obtained by Compagnie Financiere du Scribe (CFS), a French capital firm. Renaissance and CFS signed a memorandum of understanding (MOU) which provided, among other things, that Alan Mendelson, an attorney at Cooley, would be "the lawyer of the deal." Mendelson drafted various corporate documents including a shareholders agreement and bylaws, ostensibly based on the MOU. At the annual shareholders meeting on July 10, 1992, Andre Harari was elected director of the company. Barkhordarian and the others objected that the provision that allowed Harari's election violated the spirit and intent of the MOU. On July 30, 1993, Barkhordarian and the others filed an action against Cooley, alleging attorney malpractice and breach of fiduciary duty. Barkhordarian contended that Mendelson prepared corporate documents in such a way as to allow CFS to wrest control of the Board of Directors through the election of Harari, which resulted in Barkhordarian and the others losing their jobs. The trial court granted summary judgment for Cooley solely on grounds that the claim was barred by the statute of limitations.
The C.A. 1st reversed. Under Code of Civil Procedure Section 340.6 a malpractice action must be filed within one year of when the facts constituting malpractice were discovered, or should have been discovered. Section 340.6 provides that a malpractice action accrues once the malpractice is discovered, and is tolled until the client suffers "actual injury" from the malpractice. Barkhordarian's Corporations Code Section 709 action to determine the validity of the July 10, 1992, election of Harari resulted in an adverse ruling by the referees on July 27. However, that ruling was only a preliminary statement of decision, the final decision was not issued until July 30. Therefore, actual injury was not suffered until at least the date of the final decision of the reference panel in this "underlying action." "In accordance with the analysis of ITT [Small Business Finance Corp. v. Niles] the fact of 'harm' - whether it is in the form of expenditure of attorney fees or in the form of being voted off the Board July 29 - is not alone determinative." The undisputed factual showing of harm to Barkhordarian on July 29 did not establish "actual injury" as a matter of law within the meaning of Section 340.6. Barkhordarian's cause of action did not accrue until July 30, 1992. Accordingly, summary judgment was inappropriate.
Barkhordarian v. Cooley, Godward, Castro, Huddleston & Tatum, C.A. 1st, No. A073726, filed April 10, 1997, by Jones, J.
The full text of this case appears in 97 Daily Journal DAR on page 4719, April 14, 1997.
98 Daily Appellate Report
Review Granted
PATRICK BARKHORDARIAN et al., Appellants v. COOLEY, GODWARD, CASTRO, HUDDLESTON & TATUM et al., Respondents C.A. 1st, No. A073726 S061544 California Supreme Court Filed June 25, 1997 Petition for review GRANTED.
Further action in this matter is deferred pending consideration and disposition of a related issue in Jordache v. Brobeck, Phleger & Harrison, S056954 (see Cal. Rules of Court, rule 29.2(c)), or pending further order of the court. Submission of additional briefing, pursuant to California Rules of Court, rule 29.3, is deferred pending further order of the court.
George, Chief Justice
Mosk, Associate Justice
Kennard, Associate Justice
Baxter, Associate Justice
Chin, Associate Justice
[Editor's Note - For your convenience we reprint below the Daily Journal's Ruling Column Brief which summarized the earlier decision of the lower court.]
ATTORNEYS
Undisputed Factual Showing of Harm Does Not Establish `Actual Injury` As Matter of Law.
The C.A. 1st has held, in the published portion of the opinion, that summary judgment on grounds that the plaintiffs action was time barred was inappropriate because the trial court's determination of when the plaintiff's cause of action accrued was erroneous.
In January 1989, the law firm of Cooley, Godward, Castro, Huddleston & Tatum (Cooley) was retained by Renaissance Software Inc. Renaissance Chief Executive Officer Alex Vieux recruited Patrick Barkhordarian, Keesup Choe, Bruce Felt, and Kannan Ayyar to start-up the business. Financing was obtained by Compagnie Financiere du Scribe (CFS), a French capital firm. Renaissance and CFS signed a memorandum of understanding (MOU) which provided, among other things, that Alan Mendelson, an attorney at Cooley, would be "the lawyer of the deal." Mendelson drafted various corporate documents including a shareholders agreement and bylaws, ostensibly based on the MOU. At the annual shareholders meeting on July 10, 1992, Andre Harari was elected director of the company. Barkhordarian and the others objected that the provision that allowed Harari's election violated the spirit and intent of the MOU. On July 30, 1993, Barkhordarian and the others filed an action against Cooley, alleging attorney malpractice and breach of fiduciary duty. Barkhordarian contended that Mendelson prepared corporate documents in such a way as to allow CFS to wrest control of the Board of Directors through the election of Harari, which resulted in Barkhordarian and the others losing their jobs. The trial court granted summary judgment for Cooley solely on grounds that the claim was barred by the statute of limitations.
The C.A. 1st reversed. Under Code of Civil Procedure Section 340.6 a malpractice action must be filed within one year of when the facts constituting malpractice were discovered, or should have been discovered. Section 340.6 provides that a malpractice action accrues once the malpractice is discovered, and is tolled until the client suffers "actual injury" from the malpractice. Barkhordarian's Corporations Code Section 709 action to determine the validity of the July 10, 1992, election of Harari resulted in an adverse ruling by the referees on July 27. However, that ruling was only a preliminary statement of decision, the final decision was not issued until July 30. Therefore, actual injury was not suffered until at least the date of the final decision of the reference panel in this "underlying action." "In accordance with the analysis of ITT [Small Business Finance Corp. v. Niles] the fact of 'harm' - whether it is in the form of expenditure of attorney fees or in the form of being voted off the Board July 29 - is not alone determinative." The undisputed factual showing of harm to Barkhordarian on July 29 did not establish "actual injury" as a matter of law within the meaning of Section 340.6. Barkhordarian's cause of action did not accrue until July 30, 1992. Accordingly, summary judgment was inappropriate.
Barkhordarian v. Cooley, Godward, Castro, Huddleston & Tatum, C.A. 1st, No. A073726, filed April 10, 1997, by Jones, J.
The full text of this case appears in 97 Daily Journal DAR on page 4719, April 14, 1997.
98 Daily Appellate Report
#244478
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