Tuesday, June 10, 2003
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California Supreme Court Rules:
Lost Punitive Damages Not Recoverable in Malpractice Action
By KENNETH OFGANG, Staff Writer/Appellate Courts
Punitive damages allegedly lost through attorney negligence are not recoverable in a malpractice suit, as a matter of public policy, the California Supreme Court ruled yesterday.
“Making a negligent attorney liable for lost punitive damages would not serve a societal interest, because the attorney did not commit and had no control over the intentional misconduct justifying the punitive damages award,” Justice Janice Rogers Brown wrote for the court. “Imposing liability for lost punitive damages on negligent attorneys would therefore neither punish the culpable tortfeasor...nor deter that tortfeasor and others from committing similar wrongful acts in the future.”
The decision upheld lower court rulings in favor of the San Francisco firm of Lieff, Cabraser, Heimann & Bernstein, LLP. The suit arose out of the firm’s representation of the plaintiff class in an action against Union Oil Company of California, better known as Unocal.
Rodeo Refinery
The suit was brought on behalf of thousands of neighbors of the Rodeo refinery in Contra Costa County, where a processing tower released toxic chemicals into the air in a 1994 incident.
Lieff Cabraser’s suit was consolidated with others arising from the incident, and a judge designated Lieff Cabraser as co-lead class counsel and Casper, Meadows & Schwartz as co-lead direct action counsel, among other assignments.
Lieff Cabraser eventually reached an agreement whereby the class action plaintiffs would withdraw their class allegations of personal injury and property damages, a class consisting of all possible claimants—with no opportunity to opt out—would be certified with regard to punitive damages, and individuals with claims for personal injury and property damages were given time to file claims.
Following discovery, settlement negotiations were held under the supervision of retired San Francisco Superior Court Judge Daniel H. Weinstein, resulting in an agreement to an $80 million global settlement of the consolidated actions. All class claims for punitive damages were required to be dismissed.
The parties also stipulated that Weinstein be appointed a private judge for the purpose of deciding whether to approve the settlement and allocating the proceeds.
Eight members of the punitive damages class objected, saying the settlement was inadequate and the dismissal of the punitive damage claims unfair.
Objections Voiced
Two class members who had been represented by Casper Meadows, Brent Ferguson and Florencia Prieto, appeared on their own behalf. They said Casper Meadows would not represent them in opposition to the settlement, and they were unable to secure other counsel.
Weinstein found that the deterrent and punitive purposes behind exemplary damages would be served by the settlement. Ferguson and Prieto, represented by Casper Meadows, then participated in the allocation process and received a total of $225,000 from the settlement fund.
Ferguson and Prieto, however, later sued Lieff Cabraser and three of its individual attorneys for malpractice. They claimed that the lawyers owed them fiduciary and other duties that were breached as a result of various aspects of the settlement, including the dismissal of punitive damage claims without the chance to opt out.
As damages, they sought the punitive damages, and greater compensatory damages, that they allegedly would have received if not for the firm’s malpractice.
Lower Court Rulings
A San Francisco Superior Court judge granted the firm’s motion for summary judgment. The First District Court of Appeal affirmed, saying that the claim for lost additional compensatory damages was waived by the plaintiffs’ participation in the claims process and that lost punitive damages were not recoverable as a matter of law.
The state Supreme Court granted review solely as to the issue of lost punitive damages, and upheld the decision of the lower courts.
Brown wrote for a four-justice majority, including Chief Justice Ronald M. George, Justice Marvin Baxter, and Justice Ming Chin.
“Because an award of lost punitive damages bears no relation to the gravity of the attorney’s misconduct or his or her wealth, it cannot further the deterrent purpose behind such damages,” Brown wrote.
Justice Joyce L. Kennard, joined by Justices Kathryn M. Werdegar and Carlos Moreno, concurred in the result, but said the court should have limited its decision to the class-action context and left its decision on the broader issue “for another day...when considerations different from those involved here may lead to a different conclusion.”
The case is Ferguson v. Lieff, Cabraser, Heimann & Bernstein, LLP, 03 S.O.S. 2888.
Copyright 2003, Metropolitan News Company