Monday, May 24, 2010
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C.A. Tosses Malpractice Action Against Quinn Emanuel
By SHERRI M. OKAMOTO, Staff Writer
This district’s Court of Appeal has upheld the dismissal of a malpractice action against Quinn Emanuel Urquhart Oliver & Hedges and attorney Richard Schirtzer.
In an April 23 decision ordered published Thursday, Div. Four concluded that David Lockton’s action was time-barred based on facts alleged in previous verified versions of the complaint and that the defendants were entitled to recover their attorney fees.
Lockton, a lawyer and entrepreneur, founded Interactive Network in 1987 to exploit his patent for a new technology that allowed television viewers to compete with one another while simultaneously interacting with the television programming where the event was taking place.
After the company’s largest shareholder attempted a takeover in 1994, Lockton and Interactive’s board of directors retained Morrison & Foerster, including partners Marshall Small and Adam Lewis, to represent Interactive’s interests in remaining independent. That case settled in 1998.
About a year later, Lockton retained Illinois attorney Michael O’Rourke of O’Rourke, McClosky & Moody, and Schirtzer of Quinn Emanuel to pursue a case based on the alleged wrongdoing of the shareholder who had attempted the takeover, Interactive’s board of directors, and the Morrison & Foerster attorneys.
Although he allegedly informed his new counsel that he “saw the Morrison defendants as the prime defendants in the proposed lawsuit,” Lockton acknowledged that O’Rourke and Schirtzer were reluctant to formally name the Morrison & Foerster parties as defendants to a lawsuit and advised him against doing so.
In August 1999, Quinn Emanuel filed an action against various members of the Interactive board including Lockton. This action originally was filed in the Los Angeles Superior Court, and was subsequently removed to the U.S. District Court for the Northern District of California and settled in 2003.
While the federal action was proceeding, Lockton retained San Francisco attorney Guy Kornblum of Kornblum & Associates to sue the Morrison & Foerster parties in Santa Clara Superior Court, allegedly on the advice of O’Rourke to retain separate counsel and proceed in state court on his causes of action for libel per se, libel per quod, slander and violations of the California Labor Code.
The lawsuit was ultimately dismissed after the Sixth District Court of Appeal held that the Morrison & Foerster defendants’ special motion to strike should have been granted as to all causes of action because Lockton could not demonstrate a probability of success on the merits since his claims were barred by the statute of limitations.
Lockton then sued Schirtzer, O’Rourke and their firms in the San Francisco Superior Court for malpractice based on their failure to preserve his claims against the Morrison & Foerster parties. The case was later transferred to the Los Angeles Superior Court and Judge Mary Thornton House sustained the defendants’ demurrers to Lockton’s fifth amended complaint, finding that Lockton’s claims were time-barred.
Writing for the appellate court, Presiding Justice Norman L. Epstein agreed with House’s decision, explaining that she had properly taken into account the versions of the conversation between Lockton, O’Rourke and Schirtzer set forth in Lockton’s earlier verified complaints.
In the earlier complaints, Lockton claimed that O’Rourke had advised him regarding the statute of limitations for his claims against the Morrison & Foerster parties, but in his last filed complaint, which was unverified, he claimed that O’Rourke had not addressed the subject. Epstein emphasized that Lockton could not avoid the earlier versions of the conversation by changing the account in his later amended complaint.
Epstein further noted that the statute of limitations was not tolled while O’Rourke, Schirtzer and their firms represented Lockton in the federal action. Once the attorneys told Lockton they would not name the Morrison & Foerster parties as defendants in the suit Lockton had hired them to bring and advised him to retain new counsel to pursue a state court action, Epstein reasoned, Lockton could not expect further legal services from O’Rourke and Schirtzer in regards to his claims against the Morrison & Foerster parties.
The fact that O’Rourke and Schirtzer continued to represent Lockton in the federal action, which “was replete with allegations against the Morrison defendants,” was not enough to establish continuing conduct after Lockton chose to pursue those claims through another attorney, Epstein added.
Since Lockton learned of the basis for his malpractice action over a year before the state court action was filed against the Morrison & Foerster parties, Epstein concluded, the trial court had not erred in finding that complaint untimely filed.
Turning to Quinn Emanuel and Schirtzer’s claims for attorney fees, Epstein noted that both were represented by other attorneys of the firm in this action. Because Schirtzer was not an attorney of record and did not proceed in propria persona, the justice posited that Civil Code Sec. 1717 did not bar him from recovery.
As for the firm, Epstein said, an award of attorney fees was permitted based on the fee clause in its retainer agreement, in which Lockton agreed to pay Quinn Emanuel for the value of the time spent by attorneys in that firm to prosecute or defend an action based on the attorney-client relationship created by that retainer agreement.
Justices Thomas L. Willhite Jr. and Nora A. Manella joined Epstein in his decision.
Lockton was represented by Stephen W. Steelman. Quinn Emanuel and Schirtzer were represented by the firm’s own Eric J. Emanuel and Roxanna A. Manuel, as well as Robin Meadow and Kent J. Bullard of Greines, Martin, Stein & Richland. Daniel Sanchez-Behar and John W. Sheller of Hinshaw & Culbertson represented O’Rourke and his firm.
The case is Lockton v. O’Rourke, 10 S.O.S. 2674.
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