Wednesday, May 18, 2005
C.A. Allows Suit Against Foreign Firm for Unpaid Legal Fees
Lack of Jurisdiction Over Underlying Action No Bar to Lawyers’ Bid for Payment, Justices Hold
By KENNETH OFGANG, Staff Writer/Appellate Courts
A foreign corporation that retains California lawyers to represent it in California courts may be sued in this state even if the underlying action was dismissed for lack of personal jurisdiction, the Court of Appeal for this district ruled yesterday.
Div. Four overturned a ruling of Los Angeles Superior Court Judge Alan Buckner, since deceased, and reinstated a suit by the downtown Los Angeles law firm of Daar & Newman against VRL International, which operates the Breezes Hotel in Nassau, Bahamas.
While California courts lacked general jurisdiction over VRL, a foreign corporation lacking minimum contacts in the state, they had specific jurisdiction to hear Daar & Newman’s suit, Justice J. Gary Hastings explained for the Court of Appeal.
Jet Ski Accident
VRL retained the law firm after it was sued here by David Cuenllas, who suffered major injuries in a jet ski accident in the ocean off the Bahamas. Cuenllas alleged that he was a guest at the defendant’s hotel, and that he had been encouraged by the hotel to rent a jet ski from an operator adjacent to its property.
VRL, a Cayman Islands corporation, was served with the summons and complaint through its agent in the Bahamas. Following its retention, Daar & Newman undertook the corporation’s defense, including the filing of a motion to quash service for lack of personal jurisdiction.
In support of the motion, the firm presented evidence that VRL has no agent in California, employs no California workers, has no Californians among its officers and directors, pays no California taxes, owns no California property and solicits no business in this state.
The plaintiff responded by arguing that VRL should be subject to suit in California because its agent and co-defendant, International Lifestyles—a Florida corporation which was also represented by Daar & Newman but was not a party to the appeal decided yesterday—had solicited business in California and had sent brochures to the plaintiff before he departed on his trip to Nassau.
No Minimum Contacts
The motion to quash was granted on the ground that the purported advertising did not constitute minimum contacts and that the lack of a link between the advertising and the alleged injuries precluded a finding of specific jurisdiction. The Court of Appeal affirmed in an unpublished opinion.
Daar & Newman sued VRL and International Lifestyles for nearly $72,000 in unpaid fees. Buckner granted the defendants’ motion to quash “on the basis of the finding and holding of the Court of Appeal in the underlying...action, as well as the doctrine of judicial estoppel.”
The trial judge had it wrong, Hastings wrote for the Court of Appeal.
“At the outset, we conclude that the trial court was wrong in relying upon our prior opinion as a basis for granting the motion to quash in this case,” the justice explained. “Whether the court’s terse language was meant to refer to the doctrines of law of the case or res judicata, or each of them, neither apply here.”
While the judgment in the Cuenllas action might arguably preclude Daar & Newman from contending that California had general jurisdiction over VRL, Hastings explained, the firm made no such argument. The doctrine of judicial estoppel, which generally precludes a party which prevailed in an earlier proceeding from taking a “totally inconsistent” legal position in a later one, does not apply because Daar & Newman’s positions were not inconsistent, the justice said.
“Because appellant’s argument for specific jurisdiction is based on a different claim and different facts, it is not inconsistent with the argument it made on behalf of respondent in the Cuenllas action,” Hastings wrote.
Turning to the merits, Hastings said there was specific jurisdiction over the firm’s claim for fees.
VRL, the justice explained, chose to invoke the protection of the California courts, rather than risk allowing a default judgment to be taken and then defending against its enforcement on the ground that California lacked jurisdiction. Having done so, it subjected itself to the potential that its lawyers would sue for their fees, Hastings said.
David Daar represented his firm on appeal; Arlene N. Berger and Patrick M. Kelly of Wilson, Elser, Moskowitz, Edelman & Dicker represented VRL.
The case is Daar & Newman v. VRL International, 05 S.O.S. 2296
Copyright 2005, Metropolitan News Company