Facts

Plaintiff Brian Goldberg was a defendant in a prior lawsuit, in which defendant Roe Attorney, and his firm, represented plaintiff.

The previous matter involved the purchase of a vacation rental business in Big Bear, owned by plaintiff's father. The purchaser, SAC Enterprises LLC, pursued claims for fraud against plaintiff and his father, asserting that both plaintiff and his father intentionally misrepresented material financial information regarding the business to SAC's principals on which they relied in purchasing the business, among other claims.

On July 7, 2009, the court in the SAC lawsuit awarded a judgment against plaintiff and his father, and in favor of SAC, for fraud, including punitive damages, in the amount of $576,872. Plaintiff then sued defendants for legal negligence and breach of fiduciary duties.

PLAINTIFF'S CONTENTIONS:
Plaintiff contended that he had no ownership interest in the business sold to SAC, and was not a member of the board of directors for the business. Plaintiff asserted that he assisted his father, who was ill with cancer, with the sale by helping SAC's principals to physically obtain the financial documents they requested, in regards to the business. Plaintiff also attended a meeting with his father and SAC's principals, and a subsequent meeting at the business's office with a principal of SAC. Plaintiff contended that he testified in deposition for the SAC lawsuit, that he was not involved in the day-to-day financial operations of the business and that he was not involved in obtaining, developing, or reviewing any of the financial data for the business. Plaintiff testified that he merely passed on to SAC's principals the information he found in the files of the business that were maintained by his father.

Plaintiff claimed defendants were aware of plaintiff's involvement and his deposition testimony during the course of the suit when defendants substituted into the suit as counsel for both plaintiff and his father. Plaintiff claimed that defendants were also aware that plaintiff's father lost his composure at his prior deposition and yelled at those in attendance. Plaintiff claimed defendants considered, but discounted, the viability of a separate defense for plaintiff, and that defendants' believed that presenting a united defense on behalf of plaintiff and his father in the suit was in the best interests of their clients. In trial, plaintiff's father testified that plaintiff handled the books and records of the business when he was sick, and no testimony was elicited from plaintiff regarding how limited his role in the business was. Nor was any testimony or argument advanced by defendants, on behalf of plaintiff, that could refute testimony by his father regarding the nature or extent of plaintiff's activities in the business or his knowledge of the finances of the business. Plaintiff's father, while both sitting in the courtroom and when testifying, exhibited such angry and emotional outbursts that defendants instructed him to not be in attendance during much of the trial.

Plaintiff claimed that he suffered damages as a result of defendants' legal negligence and breach of fiduciary duty by jointly representing plaintiff and others, including his father, in the lawsuit. Plaintiff claimed that defendants committed malpractice by failing to inform him of potential and/or actual conflicts of interest existing between his father and him in the suit and failing to obtain plaintiff's informed written consent to the joint representation. Plaintiff contended that by presenting a unified defense of plaintiff and his co-defendants, defendants breached their duty of representing him with undivided loyalty and deprived plaintiff of the ability to advocate exonerating defenses that would be in conflict with his co-defendant, his father. Plaintiff alleged that suffering a joint and several judgment against him and his father for fraud damaged him.

DEFENDANTS' CONTENTIONS:
Defendants denied the existence of a potential or actual conflict of interest in the representation of plaintiff in the SAC lawsuit since plaintiff and his father each actively participated in the negotiation of the sale of the business. Defendants denied that they breached any duty of loyalty to plaintiff, and denied that they failed to adequately advocate exonerating defenses available to plaintiff in the SAC lawsuit.

Result

The arbitrator found in favor of plaintiff, finding that notwithstanding defendants' good faith and honesty, there existed an actual conflict of interest between plaintiff and his father. The arbitrator concluded that defendants violated Rule 3-310(C)(1) and (2) of the California Rules of Professional Conduct, and breached their duty to plaintiff of undivided loyalty by failing to advance available defenses. The arbitrator further concluded that, had a reasonable finder of fact heard the testimony concerning plaintiff's knowledge and participation in the business, a reasonable jury would not have found plaintiff liable for fraud or suffered the judgment rendered against him. Plaintiff was awarded $822,166, representing the amount of the judgment against plaintiff in the SAC lawsuit, plus interest at the rate of 10 percent from the date of the judgment through the arbitration. Plaintiff was also awarded $14,068, representing the attorney fees paid by plaintiff to defendants. Plaintiff also received interest on the amounts awarded, at the rate of 10 percent per annum, from the date of the arbitration.

Other Information

Plaintiff's motion for costs was granted in the amount of $29,132. Defendants' filed a motion to correct the arbitration award identifying arbitration testimony where plaintiff and his expert testified there were no witnesses or testimony that defendants omitted in the underlying trial. Defendants also identified trial testimony introduced at arbitration that demonstrated the defenses available to plaintiff were presented to the jury. Defendants' motion was denied. Plaintiff's motion to Superior Court to confirm the arbitration award was granted. Judgment was entered on Feb. 4 and has been paid. FILING DATE: Oct. 20, 2011.