Monday, June 18, 2007
Decision Limiting Recovery for Legal Malpractice Held Retroactive
By TINA BAY, Staff Writer
A legal malpractice plaintiff could not avoid the retroactive application of caselaw limiting its recovery simply because its former counsel had failed to inform it about the ruling, the Fourth District Court of Appeal ruled Friday.
Div. One affirmed San Diego Superior Court Judge Jeffrey B. Barton’s grant of summary judgment against the ex-client of San Diego-based firm Procopio, Cory, Hargreaves & Savitch. In its legal malpractice suit, the former client, Expansion Pointe Properties Limited Partnership, alleged that Procopio’s negligent representation of it in a 1998 breach of contract action had resulted in the dismissal of its punitive damages claim.
Barton properly ruled that under the 2003 California Supreme Court decision of Ferguson v. Lieff, Cabraser, Heimann & Bernstein, 30 Cal.4th 1037, Pointe was barred from recovering lost punitive damages as compensatory damages in its malpractice action against the firm, Div. One said.
Supreme Court Ruling
The Ferguson court agreed with the Fourth District’s conclusion in Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953 that permitting a jury in a malpractice case to impose punitive damages on a negligent defendant, by restyling them as compensatory “lost punitive damages,” was unjust and contrary to public policy.
The panel said that although Pointe and Procopio had entered into their retainer agreement before Ferguson was decided, Barton correctly applied the ruling retrospectively in accordance with the general rule that judicial decisions are given retroactive effect.
The panel rejected Pointe’s contention on appeal that retroactive application of the Ferguson ruling was unfair because Pointe had reasonably relied on pre-Ferguson law and was not informed by Procopio of the Piscitelli ruling in 2001.
At the time Piscitelli was decided, Procopio was still representing Pointe in the underlying breach of contract action, and the two were embroiled in disagreements over the firm’s refusal to introduce evidence related to Pointe’s punitive damages claim.
Had Procopio advised it about Piscitelli, and had it known that it could recover against the firm for a lost punitive damages claim, Pointe asserted, it without question would have fired Procopio.
No Reporting Duty
Writing for Div. One, Presiding Justice Judith McConnell said Pointe’s reliance argument failed because Procopio had no duty to report malpractice caselaw to its then-client.
“Pointe cites no authority suggesting an attorney has a duty to discuss—either at the inception of the attorney-client relationship or later in the representation—the various types of recovery a client may obtain in a potential malpractice action against him or her,” she wrote.
Justices Patricia D. Benke and James A. McIntyre concurred in the opinion.
In the underlying 1998 action, Pointe, a real estate development company, sued Mutual Life Insurance Company of New York over its alleged breach of several joint venture agreements.
The agreements, executed in 1986, pertained to upscale resorts that were part of three master-planned communities that Pointe developed in the Phoenix, Ariz. area during the 1970s and 1980s. The Pointe at Tapatio Cliffs and The Pointe at Squaw Peak were among the resorts.
Litigation between the parties started with Mutual’s declaratory relief action against Pointe, filed in U.S. District Court in Arizona. The parties disputed the amount of proceeds to which Mutual was entitled when Pointe exercised its right to purchase its interest in Tapatio Cliffs, and also when Squaw Peak was sold to the Hilton Hotel Corporation.
In response to Mutual, Pointe filed a declaratory relief action concerning Tapatio Cliffs, which was consolidated with Mutual’s action. It also filed a counterclaim against Mutual that included breach of contract allegations and sought punitive damages related to the sale of Squaw Peak.
With regard to Squaw Peak, Pointe asserted Mutual was liable for punitive damages because, among other things, it manipulated the closing documents four times on the day of closing escrow, and falsely claimed the joint venture agreement limited Pointe’s share of the proceeds to $300,000.
Mutual successfully moved for summary judgment on the punitive damages claim.
In dismissing the claim, the district judge said the evidence did not clearly and convincingly establish Mutual’s “evil mind,” as required by Arizona law to justify submitting the punitive damages claim to a trier of fact.
Ultimately, a jury awarded Pointe $16.7 million in compensatory damages related to the Squaw Peak sale.
In its subsequent malpractice suit against Procopio, Pointe argued that its former counsel had refused to submit two memoranda written by a Pointe employee that evidenced Mutual’s bad faith regarding the Squaw Peak transaction.
Written by Bob Brooks, managing director of Pointe’s resorts at the relevant time, the documents memorialized Brooks’ alleged conversations with several Mutual representatives. In one of the memoranda, a representative was reported as allegedly saying Mutual intended on buying the best legal representation to fight off Pointe’s legal challenges to Mutual’s claims plans to take over Squaw Peak.
“We are going to pick up the phone and call ABA [American Bar Association] and say, who are the biggest asshole litigators you have, and send the bill to this address,” the document stated.
Pointe claimed that although it pled with Procopio to submit the memoranda in support of its summary judgment opposition, the firm had declined on the ground that they were hearsay.
Barton found that Pointe raised a triable issue of fact that its counsel might have offered more evidence in the summary judgment opposition, such that the punitive damages issue could have gone to the jury, but that lost punitive damages were not recoverable in a legal malpractice action.
The case is Expansion Pointe Properties Limited Partnership v. Procopio, Cory, Hargreaves & Savitch, LLP, 07 S.O.S. 3213.
Copyright 2007, Metropolitan News Company