Facts

JP Hyan was a highly compensated executive at Lowe Enterprises Inc. in 1993-1997. Hyan had brought to Lowe the Los Angeles County Employees Retirement Account ("LACERA") business. Lowe was an investment manager on certain Lowe real estate investments. Part of Hyan's agreed to compensation from Lowe was 10 percent of the gross revenues Lowe received from the LACERA housing account.

In 1997, Hyan changed his status at Lowe from employee to consultant. He hired Frank Hobbs, Geoffrey Gold and Rutter Hobbs and Davidoff to negotiate the contracts memorializing his change in status and including protection for his ongoing 10 percent of the fees in the event Lowe should transfer or sell the housing program account. For 10 years, Hyan received his 10 percent, amounting to more than $11 million.

In 2006, Lowe sold the housing account and the new owner, Tri Pacific cut off Hyan's fees. Hyan returned to defendants for legal advice when his payments were cut off. Defendants took the position that the 1997 contract they drafted required Lowe or TriPacific to continue paying the 10 percent because they had inserted a standard "successors and assigns" clause into the agreement. Lowe and TriPacific argued that the 1997 contract did not require continuation of Hyan's fees if there was a sale of the program, and that successors and assigns language does not require a third party purchaser to assume obligations under a contract it did not sign.

Defendants sued TriPacific. The matter went to binding arbitration and Hyan lost. A judgment of over $500,000 was entered in favor of TriPacific, because Rutter Hobbs had inserted an attorneys fees provision in the 1997 contract.

Rutter Hobbs sued Hyan for over $700,000 in fees for their handling of the arbitration. Hyan's 10 percent of the revenues from the LACERA housing program up to the date of trial were over $3 million and future damages from the lost revenues for five years were over $5 million present value.

PLAINTIFF'S CONTENTIONS:
Hyan contended that defendants were negligent in handling the 1997 separation agreements because they did not understand and failed to research the meaning of "successors and assigns." Defendants told him that such language covers all transfers of the account, when it is basic contract law that it does not. The failure to recognize the limitations of successors and assigns language in the event of a future sale or transfer and to include language covering such an event was malpractice and cause Hyan to lose the stream of revenue and to suffer the adverse judgment and to incur unnecessary legal fees from Rutter Hobbs.

DEFENDANTS' CONTENTIONS:
Defendants contended that they were not negligent; that they gave Hyan excellent legal representation and they did not cause any harm to Hyan. Defendants also asked for an allocation of fault between Hobbs and Gold and argued that Gold only spent 42 minutes reviewing the contracts and therefore was not a substantial factor.

Settlement Discussions

At settlement conference with Hon. Robert Altman at ADR, plaintiff made a CCP 998 demand of $9,505,000, while defendants made no offer.

Result

Plaintiff's verdict for $10,155,559 on negligence claim.

Other Information

Individual defendant Frank Hobbs found 99 percent responsible for the malpractice and individual defendant Geoffrey Gold 1 percent negligent. Rutter Hobbs is responsible as a matter of law for the acts of its partners. All defendants are jointly liable for full damages. FILING DATE: Jan. 19, 2010.