Friday, July 7, 2006
Bad Legal Advice Held No Ground for Vacating Settlement
By a MetNews Staff Writer
A plaintiff who accepts an unfavorable offer of judgment because of poor legal advice generally cannot later have the judgment vacated, the Ninth U.S Circuit Court of Appeals held yesterday.
The panel affirmed an order by U.S. District Judge John F. Walter of the Central District of California, denying relief to Elizabeth Latshaw from a judgment entered pursuant to her acceptance of a settlement offer under Federal Rule of Civil Procedure 68.
Latshaw alleged that she had accepted the offer by Trainer Wortham & Company, Inc. on the basis of her attorney’s deception and erroneous legal advice.
Represented by Missouri-based attorney Dian Nygaard and Los Angeles attorney David Harrison, Latshaw had sued Trainer Wortham in Los Angeles Superior Court claiming the financial group mismanaged her investments.
Trainer Wortham removed the case to federal district court and then made a $15,000 “offer of judgment” to Latshaw per Rule 68, which permits accepted settlement offers to be entered as the final judgment in federal proceedings.
Latshaw said she and her attorneys initially considered the offer grossly insufficient, but she later felt she “had no choice” but to accept the offer after Nygaard said she and Harrison would be resigning from the case, and that Latshaw would be liable for Trainer’s attorney’s fees and costs if she rejected the offer and it exceeded the ultimate judgment.
After the court entered judgment in accordance with the offer, Latshaw claimed she been deceived by Nygaard because Harrison in fact had not intended to resign and because Latshaw would only have been liable for Trainer’s costs, not attorney fees, had she rejected the offer.
She filed a motion under Rule 60(b), citing subsections (1), (3), and (6), which permit the court to rescind and vacate a judgment on the basis of mistake, fraud, or for “any other reason.”
Walter rejected Latshaw’s arguments on all three grounds, and the appellate panel agreed, concluding that Walter did not abuse his discretion in denying the Rule 60(b) motion.
The judges decided on first impression that Rule 60(b)(1), which empowers courts to grant relief from final judgments on account of “mistake, inadvertence, surprise, or excusable neglect,” is not intended to remedy the effects of poor litigation decisions based on attorney error.
Judge Richard R. Clifton, writing for the panel, said:
“For purposes of subsection (b)(1), parties should be bound by and accountable for the deliberate actions of themselves and their chosen counsel. This includes not only an innocent, albeit careless or negligent attorney mistake, but also intentional attorney misconduct.”
Malpractice claims are the proper vehicle for addressing attorney misconduct, the judge added, emphasizing that a party would not be released from a poor litigation decision even when it resulted from inaccurate information his or her attorney provided.
The judges also rejected Latshaw’s subsection (b)(3) fraud claim because Nygaard, the alleged perpetrator of the fraud, was not an “adverse party” as required by the rule.
They also declined to offer Latshaw relief under subsection (b)(6)’s broad catchall provision, reasoning that Nygaard’s gross negligence was not “exceptional” enough to justify disturbing the final judgment.
“Latshaw knowingly and voluntarily signed the Rule 68 acceptance,” Clifton reiterated.
The case is Latshaw v. Trainer Wortham & Company, 03-57230.
Copyright 2006, Metropolitan News Company