Thursday, August 1, 2002
Clients’ Failure to Appeal Did Not Excuse Lawyer’s Malpractice—C.A.
By KENNETH OFGANG, Staff Writer/Appellate Courts
The failure of his clients to pursue what would have been a successful appeal did not excuse an attorney’s malpractice, this district’s Court of Appeal has ruled.
A divided panel in Div. Seven Tuesday upheld a Los Angeles Superior Court jury’s award of $146,000 in damages to Judy and Susan Rosen, Sol Munn and Carol Solomon against Sherman Oaks practitioner Joel Drum and the firm of Davis & Drum.
An award of $80,000 in punitive damages was overturned, however, as the court found that the malpractice did not amount to fraud, malice, or oppression. The opinion, by Justice Dennis Perluss, was unpublished.
The plaintiffs, owners of a piece of commercial property, sued Drum and his firm after they lost a suit resulting from damage caused by their tenant. Among other things, Drum argued in his defense that the landlords would not have suffered damages had they joined what turned out to be a successful appeal by their co-plaintiff.
The underlying suit was on a guarantee by the tenant’s parents, which the landlords pursued after the tenant declared bankruptcy. The landlords claimed that the tenant demolished a garage on the property without their consent.
Release of Claims
The landlords had a policy with Northbrook Property & Casualty Company, which paid about $21,000 for the loss and sued the tenant and guarantors on the basis of subrogation. The landlords, however, claimed that the payment was inadequate to cover the costs of repair, and the tenant agreed to pay part of the additional costs in exchange for a release of claims.
The landlords, according to testimony in the malpractice action, asked Northbrook if they could settle with the tenant without forfeiting the $21,000. They were referred to Northbrook’s attorney, Drum, who told them they could not, they said.
Drum, they said, advised them to join the subrogation action, and offered to represent them on a contingency basis. He also advised them to bring a separate suit for breach of the lease, which they did, with him as their attorney.
The suit against the guarantors resulted in a nonsuit after the judge excluded the guarantee on the ground that it was not on the exhibit list. The guarantors moved for attorney fees, arguing that they stood in the shoes of the tenant and were entitled to rely on the attorney fee clause of the lease, and were awarded $116,000.
The landlords, who discharged Drum after the nonsuit, were represented on the attorney fee motion by a new lawyer, David Pettit.
Northbrook appealed—Drum filed the appeal but was later replaced by an appellate specialist—and won a reversal on the ground that the judge committed an abuse of discretion by excluding critical evidence of which the opposing parties were obviously aware even if it was not on the exhibit list.
The landlords, on Pettit’s advice, did not join the appeal.
While the appeal was pending, the landlords sued Drum. They said he should have told them his dual representation of their interests and Northbrook’s was an actual or potential conflict, should have included the guarantee on the exhibit list, and should have laid a foundation for the introduction of the guarantee into evidence.
At trial, the defense called appellate specialist Robert Gerstein as an expert witness. He testified that while a full-blown appeal would have cost about $30,000, the landlords could have joined Northbrook’s appeal for about $200, that there was no “downside” to doing so, since a loss would have left them no worse off than not appealing at all, and that at a minimum, Pettit should have preserved their right of appeal until Northbrook’s opening brief could be completed and reviewed.
Pettit testified that he advised against the appeal because of the cost, the likelihood of defeat, the cost of trying the case on remand if they won, and the clients’ lack of faith in Drum. He did not tell the clients that another lawyer might handle the appeal, or that they could join the insurer’s appeal for a small sum of money.
Perluss, writing for the Court of Appeal, said the landlords’ decision not to appeal the underlying judgment did not preclude their malpractice claim as a matter of state law.
“The rationale for the California rule is plain,” he said. “Although reversal of an unfavorable trial court judgment will likely reduce the client’s damages, if the adverse judgment would not have occurred without attorney negligence (such as the failure to list a critical document on the trial exhibit list), the lawyer is properly held responsible for any remaining damages caused by that error.”
Perluss also rejected the argument that Pettit’s advice was so unreasonable as to constitute a superseding cause of the clients’ damages. The jury found that Drum was 100 percent responsible, the justice noted.
There was substantial evidence that Pettit’s advice not to appeal was reasonable given the circumstances, Perluss said.
Presiding Justice Mildred Lillie concurred in the opinion.
Justice Earl Johnson Jr. dissented.
The cause of the clients’ damages, he argued, was “judicial error,” not legal malpractice. As a matter of public policy, he said, a client should not be permitted to recover for attorney malpractice if the attorney establishes, as an affirmative defense, that the claimed malpractice would have been cured by a correct judicial ruling.
“Unless clients face some risk from failing to appeal adverse rulings arguably attributable to a lawyer’s mistake, they have every incentive to file malpractice actions against their lawyers rather than trying to cure the problem in the underlying case,” Johnson argued. “Better and often easier to go after the lawyers and their malpractice insurers than seek to convince an appellate court the trial court committed judicial error.”
The case is Rosen v. Davis & Drum, B147804.
Copyright 2002, Metropolitan News Company