Monday, June 18, 2012
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Court of Appeal Applies Offset Rule to Legal Malpractice Verdict
Judgment Against Firm Reduced to Zero Based on Plaintiff’s Settlement With Clients
By KENNETH OFGANG, Staff Writer
California’s rule that allows a defendant who suffers judgment at trial to claim the value of the plaintiff’s good-faith settlement with a fellow tortfeasor as an offset against the judgment applies to a legal malpractice verdict, the Fourth District Court of Appeal ruled Friday.
Div. Three affirmed a judgment reducing to zero a jury verdict that a widow obtained against her late husband’s attorneys. The panel upheld the trial court’s ruling that the plaintiff’s previous settlement with the firm’s clients—the plaintiff’s stepsons—completely offset the $200,000 jury verdict against the law firm.
The plaintiff, Elaine Oliveira, was married to Richard Oliveira for 18 years before he died. At the time of his death, the couple owned their primary residence in Cypress, along with a second home and three undeveloped lots in Cambria.
Change of Plan
Less than two months before his 2008 death, Richard Oliveira changed his estate plan. He recorded three deeds severing the joint tenancies in the properties and transferred his undivided 50 percent interest in each to a trust.
His son Richard Oliveira II, known as Rick, was given a 70 percent interest in the property. The other son, Patrick Neil Denmark, received the remaining 30 percent.
Elaine Oliveira contended that she and her husband were advised, while he was in failing health, to execute separate trusts. That advice, she alleged, came from a paralegal, Dael Kiesler, employed by Irvine attorney Daniel Clark Hales of Citadel Law Corporation.
Elaine Oliveira’s complaint named her stepson, the attorney, the paralegal, and the law firm as defendants.
Kiesler, according to the complaint, did not disclose that she was working at the instigation of Rick Oliveira or that the interests of the plaintiff and her husband were conflicting. The complaint sought invalidation of the trust; cancellation of the deeds based on undue influence, mistake, and/or fraudulent concealment; and damages for negligence and legal malpractice.
Settlement Reached
The plaintiff settled with her stepsons, who agreed to quitclaim their interests in the Cypress home, with Rick Oliveira retaining a right of first refusal in the event she put the house up for sale, and an option to purchase it from her estate if she held it until death.
The parties agreed to put the Cambria home up for sale and divide the proceeds, that Rick Oliveira would become sole owner of the vacant lots and assume the mortgages on them, and to divide various items of personal property.
Orange Superior Court Judge Kirk Nakamura determined that the settlement was made in good faith under Code of Civil Procedure Sec. 877. Under that statute, if multiple tortfeasors are “claimed to be liable for the same tort” or are claimed to be liable for contribution, a good faith settlement with the plaintiff “shall reduce the claims against the others in the amount stipulated by the release...or in the amount of the consideration paid for it, whichever is the greater.”
The release also discharges the settling party from liability for contribution, the statute says.
The claims against the law firm defendants went to trial before a jury, which returned a $200,000 verdict. The defendants then moved for a Sec. 877 offset, which the plaintiff opposed.
In support of that motion, they argued that the property the plaintiff received in the settlement was worth far more than $200,000, and that because the loss of that property was the same damage she allegedly suffered as a result of the law firm’s conduct, the offset rule applied.
Rule Held Applicable
The plaintiff argued that the interests of attorney and client are separate, so that they were not “claimed to be liable for the same tort,” for purposes of Sec. 877. The judge, however, concluded that the offset rule did apply, and that it was unnecessary to determine the exact value of the settlement because it was “clear that its value exceeds the $200,000 judgment.”
Justice Eileen Moore, writing Friday for the panel, agreed with Nakamura.
“[T]here was,” she said, “one injury— the loss of anticipated survivorship interests in certain properties due to the creation and implementation of an estate plan that terminated the joint tenancies.” The torts that were committed, she said, were part of a single plan by which Rick Oliveira hired the law firm to instigate a change in his father’s estate plan, and the firm did what he hired it to do.
She distinguished Munoz v. Davis (1983) 141 Cal.App.3d 420, which held that an attorney sued for malpractice, after the time in which to file a motor vehicle injury suit expired, could not claim indemnity from the allegedly negligent driver.
That case is not controlling, Moore said, because the accident and the failure to file a lawsuit were separate and independent events, the alleged joint tortfeasor had neither selected the attorney nor controlled his actions, and the policy considerations on which the decision was based “are simply absent here.”
There is, she added, precedent for finding an attorney and client to be joint tortfeasors under Sec. 877.6, a related section that immunizes a joint tortfeasor who settles in good faith from claims for equitable contribution or indemnity based on comparative fault.
She cited Gackstetter v. Frawley (2006) 135 Cal.App.4th 1257, which barred a trustee—accused of diverting funds and failing to properly account—from obtaining contribution from his lawyer after the lawyer settled a claim that he committed malpractice in his representation of the trustee, to the detriment of the beneficiaries.
The case is Oliveira v. Kiesler, 12 S.O.S. 2895.
Copyright 2012, Metropolitan News Company