Monday, April 26, 2004
After Remand From Supreme Court:
C.A. Rejects Bid to Reinstate Huge Legal Malpractice Judgment
By KENNETH OFGANG, Staff Writer/Appellate Courts
This district’s Court of Appeal Friday rejected a bid by the founders of Dove Audio, Inc. to reinstate their multimillion dollar judgment against the lawyer who drafted the agreement by which they sold their interest in the audio book publisher.
The suit by Michael Viner and his wife, actress/director/producer/writer Deborah Raffin Viner, had been sent back to Div. Seven by the California Supreme Court last June. The high court ruled unanimously that the plaintiffs were required to prove that the purchasers would have accepted the terms that their attorney negligently failed to include in the agreement.
The “case-within-a-case” approach to litigating attorney negligence claims applies whether the malpractice allegations involve transactional work or litigation, the high court said, contrary to the holding of the Court of Appeal.
The plaintiffs then asked the Court of Appeal to reinstate the judgment, arguing that there was sufficient proof in the record to satisfy the high court’s standard.
But a divided panel Friday said that the evidence supporting five of the Viners’ seven malpractice claims was inadequate under the high court’s standard. The justices reduced the judgment, which was originally for more than $13 million, to $515,000—less an offset for the defendants’ costs on appeal.
The opinion by Presiding Justice Dennis Perluss was joined by Justice Fred Woods, but drew a spirited dissent from Justice Earl Johnson Jr., author of the court’s original opinion, which was widely criticized by commercial lawyers, local bar associations, and malpractice insurers.
The controversial ruling arose after the Viners sued Charles A. Sweet—then a partner in the Washington, D.C. firm of Williams & Connolly, but now with Carlsmith Ball LLP in Honolulu—for negligence in handling their contract negotiations with Dove. The company became NewStar Media before selling its assets in bankruptcy three years ago.
Audio Book Pioneers
The Viners founded Dove in 1984. The company pioneered the idea of having audio books read by their authors or by celebrities and later published books as well.
Dove went public in 1994 and the Viners sold most of their stock in 1997. That sale was a product of disagreements between the founders and Media Equities International, which had purchased $4 million worth of Dove stock a few months earlier.
Viner and Raffin agreed to resign from Dove, with which they both held lucrative employment contracts, and transfer most of their stock in exchange for $1.5 million, payable over five years.
After arbitration concerning the terms of the agreement, the sued Sweet and his firm.
They claimed the attorneys were negligent in:
•Failing to secure the clients’ rights to solicit Dove authors for non-audio-book projects;
•Not objecting to an arguably invalid non-competition clause;
•Failing to include a provision requiring payment of attorney fees to the prevailing party in arbitration proceedings;
•Failing to secure “producer” credit for Raffin on audiobooks initiated during her employment;
•Allowing payment of stock dividends to fall within the terms of a general release;
•Failing to negotiate an indemnification for liabilities the couple might incur as a result of their former employment; and
•Advising them to accept a new class of stock as security for the monthly payments, when they would have been better off as unsecured creditors.
Jurors agreed as to all seven claims. The original award of $13.292 million in damages was cut by the Court of Appeal to $8.066 million after it concluded that a portion of the suit had not been proven by substantial evidence.
But Justice Joyce L. Kennard, writing for the state high court, said the “but for” test must be applied to transactional malpractice for the same reason it has been in effect “for more than 120 years...to safeguard against speculative and conjectural claims.”
The Viners’ attorney, Patricia Glaser of Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, called the high court decision “a victory for the bar associations and a defeat for the people,” but argued that her clients had presented sufficient evidence of “but for” causation to support the judgment.
Perluss, however, concluded Friday that the only claims as to which the plaintiffs presented substantial evidence of causation were those concerning producer credit and stock security. As to the other claims, Perluss cited the testimony of a principal in Media Equities and said the Viners had the opportunity, but failed, to prove that it was Sweet’s negligence rather than hard bargaining by Media Equities that resulted in the unfavorable terms.
Johnson agreed with the majority that the lack of a “but for” jury instruction was prejudicial to the defendants, but argued in dissent that it was unjust to deny the Viners the opportunity to prove their claims at a new trial in which jurors would be instructed under the Supreme Court’s standard.
A jury instructed under that standard might have returned a verdict for the Viners, Johnson argued.
“In assessing how a jury could have or might have decided a case had it received an instruction the trial court failed to deliver, an appellate court necessarily engages in a hypothetical inquiry,” Johnson wrote. “The inquiry becomes doubly hypothetical when the missing instruction itself would direct the jury to embark on a speculative journey into the mind of a key witness and what that witness would or would not have decided if the other side had insisted.”
The case is Viner v. Sweet, B138149.
Copyright 2004, Metropolitan News Company