Wednesday, June 23, 2004
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C.A. Revives Suit Against Firm Accused of Botching Class Action
By KENNETH OFGANG, Staff Writer/Appellate Courts
A malpractice suit claiming that a San Francisco law firm that recovered $90 million in a labor class action was negligent in failing to pursue theories that would have resulted in an even greater award was revived yesterday by the First District Court of Appeal.
“While we may share the attorneys’ dismay that their efforts have been rewarded with this lawsuit rather than with the kudos they no doubt expected, and perhaps deserve, we are nonetheless constrained to hold that plaintiff’s claim cannot be rejected out of hand,” Justice Stuart Pollak wrote for Div. Three.
Steven Zieff and the firm of Rudy, Exelrod & Zieff represented a class of some 2,400 claims representatives who sued Farmers Insurance Company for unpaid overtime. Farmers claimed that the representatives were exempt from the Labor Code overtime provisions, but the trial judge ruled otherwise and the case went to trial solely on the issue of damages.
The judgment was largely upheld on appeal earlier this year.
In the malpractice case, however, the plaintiff—who was not a named plaintiff in the underlying action but purported to sue on behalf of the class—claimed that the lawyers were negligent in failing to assert an unfair competition claim. Had they done so, the plaintiff alleged, the award would have been higher because such claims are subject to a four-year statute of limitations, rather than the three-year statute governing Labor Code claims.
A Court of Appeal decision handed down while the suit was pending held that Labor Code claims may be brought under the unfair competition law.
Alameda Superior Court Judge James Richman dismissed the action, holding that the attorneys owed no duty to class members who were not named plaintiffs to assert any cause of action not covered by the class certification order.
But Pollak, writing for the Court of Appeal, said the duty of class counsel was broader.
“Defendants cite no case, and we have found none, that stands for the proposition that class counsel have no duty to class members extending beyond the prosecution of class members’ claims as they are literally described in the class certification order,” the justice wrote.
Cases holding that there is no attorney-client relationship between the plaintiffs’ lawyers and class members who have not retained them until the class is certified do not address the issue of whether a fiduciary relationship exists between counsel and class members, the justice wrote. Pollak cited several cases from California and elsewhere for the proposition that it does.
Pollak also analogized to the duty of an attorney “to at least consider and advise the client” with respect to related matters not specifically covered by the retainer agreement. He cited Nichols v. Keller (1993) 15 Cal.App.4th 1672, holding that a workers’ compensation attorney, while having no duty to represent the client with respect to third-party tort claims, could be held liable for failing to advise that such claims were possible and that other counsel might need to be consulted.
“In the context of a class action, both the representative plaintiffs and the absent class members similarly are entitled to assume that their attorneys will consider and bring to the attention of at least the class representatives additional or greater claims that may exist arising out of the circumstances underlying the certified claims that class members will be unable to raise if not asserted in the pending action,” the jurist explained. “The class members are entitled to assume that their attorneys are attempting to maximize their recovery for the conduct they are challenging and that they are not, without good reason, failing to assert those claims that will do so.”
Pollak acknowledged that the attorneys may have acted reasonably in not bringing unfair competition claims prior to the Court of Appeal ruling, and that a motion to amend the complaint prior to trial might not have been in the best interests of class members. But those are issues of fact that cannot be resolved on demurrer, he said.
The case is Jank v. Rudy, Exelrod & Zieff, A102513.
Copyright 2004, Metropolitan News Company