Thursday, June 12, 2003
S.C. Grants Review of Award to Pasadena Lawyer Over Firm’s Breakup
By a MetNews Staff Writer
The California Supreme Court agreed yesterday to hear a dispute between former law partners, in which the defendants were held liable for, among other things, interfering with business relations by convincing the old firm’s employees to join their new venture.
This district’s Court of Appeal upheld an award of $150,000 to Pasadena immigration lawyer Robert L. Reeves against Daniel P. Hanlon and Colin T. Greene. An arbitrator agreed the defendants were liable for having taken Reeves & Hanlon’s client lists, case files, secretaries, paralegals and even a car when they abruptly left to form Hanlon & Greene, also of Pasadena, four years ago.
Of the 155 clients that left Reeves for Hanlon & Greene in 1999 and the subsequent two years, Justice Daniel Curry noted in the partially published opinion, 147 failed to pay their outstanding bills to Reeves, and 144 had Hanlon as their lawyer before he split with his former partner.
“In our view, sufficient evidence supports the determination that Hanlon and Greene intended to lure away clients of the Reeves firm, and they acted in a manner reasonably certain to cause the 144 clients to breach their contracts,” Curry said. “To begin, there is direct evidence that their departure was calculated to cripple the Reeves firm’s ability to provide legal services: they left abruptly, damaged computer files, removed firm property, and failed to provide adequate guidance concerning their open cases.”
There also was evidence that Hanlon and Greene telephoned many of the clients and “exploited” their lack of knowledge of English and ignored their rights concerning the selection of counsel, Curry said.
The split came a little more than a year after Reeves agreed to give Hanlon a 15 percent interest in what had been Robert L. Reeves & Associates and to rename it Reeves & Hanlon. The two lawyers entered into their contract in May 1998.
By the following February, according to Curry’s opinion, Hanlon had grown dissatisfied. Evidence showed he was unhappy with a $5,000 year-end bonus he believed should have been up to 10 times larger and was upset that Reeves reported there were no profits to share at a time when—Greene testified—Reeves bought a yacht and remodeled his home.
Hanlon also was said to believe Reeves would renege on his agreement to give him an equity interest. Evidence also showed Hanlon did not like the manner in which cases were assigned, was unhappy about the firm’s purchase of a conference table, and was upset about an end to the firm’s policy of paying for cell phone use.
Hanlon and Greene, an associate at the Reeves firm, agreed to form their own firm but did not tell Reeves about it. They printed out a list of the Reeves firm’s 2,100 clients, leased office space in Pasadena and set up an Internet site.
They resigned on the morning of June 30, 1999, and immediately started their own practice. Evidence showed Hanlon kept some of the Reeves firm’s library books and retained a car that was leased by the firm.
Hanlon did not leave Reeves with a list of the 1,500 cases he had been handling, and neither Hanlon nor Greene left memos describing action that needed to be taken on their cases. They instead contacted each of the Reeves firm’s clients to let them know they had opened their own practice.
Six paralegals and support staff followed the two lawyers to their new firm, and five more left Reeves to join Hanlon & Greene within the next two years.
Reeves and his bookkeeper testified that the clients who went with Hanlon & Greene left an outstanding balance of $121,000, and that based on past practice they expected to have gotten another $100,000 from those clients in future business. They also testified as to costs for recruiting replacement employees and printing up revised stationery and brochures.
After Reeves sued, Hanlon and Greene filed cross-complaints, later resolved by arbitration, alleging that Reeves improperly withheld client files and that Reeves converted the car that he alleged Hanlon had improperly kept.
Los Angeles Superior Court Judge Jan Pluim ruled that Hanlon, Greene and their firm had engaged in interference with contracts and prospective business opportunity and misappropriation of trade secrets. Damages of more than $180,000 were lowered to $150,000 pursuant to a stipulation limiting any award to that amount.
The Court of Appeal ruled, in the published portion of the opinion, that tortious interference with the relationship between an employer and an at-will employee is actionable when the defendant does not show that its conduct in hiring away the employees was justifiable or legitimate.
In doing so, it expressly rejected a 2000 opinion from the Fourth District’s Div. Three holding that there cannot be tortious interference with the relationship between employer and at-will employee as a matter of law.
The case is Reeves v. Hanlon, 106 Cal.App.4th 433.
In other actions at yesterday’s conference, the court:
•Agreed to hear a pair of cases involving sex offender registration requirements.
In People v. Barker, 107 Cal.App.4th 147, a divided panel of the First District’s Div. Four held, among other things, that forgetting to update one’s registration within five days of one’s birthday, by itself, is not a defense to a charge of willful failure to register.
In People v. Britt, 107 Cal.App.4th 8, a divided Third District panel held that a registered sex offender who fails to notify law enforcement agencies of the person’s change of address when he or she moves from one county to another can be prosecuted for separate offenses in both counties.
•Declined to hear a bid by a number of San Diego County police unions for access to a Public Defender’s Office database containing, among other things, information on police misconduct allegations. The contents of the database, including information compiled from individual client files and public records, are not public records and would be exempt from disclosure if they were, the Fourth District’s Div. One ruled in Coronado Police Officers Association v. Carroll, 106 Cal.App.4th 1001.
Copyright 2003, Metropolitan News Company