Friday, February 6, 2015
C.A. Revives Legal Malpractice Action Based on Equitable Estoppel
By a MetNews Staff Writer
The Court of Appeal for this district yesterday reinstated an action against an attorney for legal malpractice based on his alleged failure to alert his clients to malpractice by their former attorney.
Gerald Malanga of the mid-Wilshire law firm of Lattie Malanga Libertino, LLP, is the defendant in the action. The plaintiffs are Dr. Jeffrey Gunter and his wife, Johanna Gunter, who hired Malanga in connection with litigation with their former contractor.
Binding arbitration resulted in an award to the contractor of $560,115.
The Gunters’ subsequent action against Malanga was based on his alleged failure to tip them off that their previous lawyer, construction attorney Robert Mann, had fired the contractor on their behalf without observing the 15-day warning period in their contract with him, operating to their prejudice. The plaintiffs also alleged that Malanga failed to advise them of the applicable statute of limitation, causing their cause of action to perish.
The record shows that Marina del Rey attorney/arbitrator George Calkins concluded that the failure to give 15 days’ notice evidenced that the termination was for convenience, rather than cause.
Statute of Limitations
Also reflected by the record is that the Gunthers, represented by Santa Monica attorney Timothy D. McGonigle, sought to avoid the one-year bar time on legal malpractice actions by setting forth in their first amended complaint:
“In or about January 2010, the parties began pursuing binding arbitration of Plaintiffs’ claims against Malanga. On or about February 8, 2010, Malanga, through his counsel, provided a written tolling agreement to Plaintiffs, in which he agreed to toll the one-year statute of limitations, without limitation.…In light of this tolling agreement, Malanga contractually agreed to, and is equitably and contractually estopped from, asserting the one-year statute of limitations in defense of Plaintiffs’ claims as he agreed to toll the one-year statute of limitations.”
The plaintiffs sought binding arbitration based on a provision for it in the attorney-client retainer agreement.
Included in an exhibit to the complaint is the text of e-mails exchanged on Feb. 8, 2010, between Malanga’s attorney, Jon Cole of the Sherman Oaks firm of Nemeck & Cole in, and the Gunthers’ lawyer, David Parker of the Bunker Hill firm of Parker Mills LLP.
Cole wrote (in part):
“Please confirm today that your client acknowledges that the dispute is subject to binding arbitration per the retainer agreement he himself prepared, and that my demand constituted commencement of the action for purposes of the statute of limitations.”
“Dave—I will agree that your demand constituted commencement of the action for S/Ls [statute of limitation] purposes which is all I think you need at this point….”
“Does that mean you are not now acknowledging that your own client’s retainer agreement requires binding arbitration?”
Cole assured him:
“I am not going to tell what I am thinking at the moment. I am researching certain issues which could potentially affect your right to compel binding arbitration. That is all. I should have an answer shortly. You have your agreement that the S/Ls is now deemed tolled so you are not prejudiced.”
The parties negotiated as to the mode of arbitrating the dispute and appeared to have agreed on a three-person panel.
Then, on Oct., 2012, there came an e-mail from Malanga’s counsel announcing:
“After discussing the matter with our clients and in light of the fact that there is no signed agreement to arbitrate, our clients have decided to reject your proposal for arbitration.”
An action was filed on Feb. 20, 2013, and Malanga demurred on the ground that it was time-barred. Los Angeles Superior Court Judge Holly E. Kendig sustained a demurrer, without leave to amend, and a judgment of dismissal followed.
Writing for Div. Eight, Justice Madeleine Flier said the Gunthers are entitled to a reversal, but not because the statute of limitation was, in fact, tolled.
“Although filing a civil action tolls a statute of limitation in an arbitration agreement…, the Gunters cite no authority that sending a demand for arbitration tolls a statute of limitations for a later filed civil action,” she explained.
Apparently unaware that the first amended complaint did asserted equitable estoppel, Flier said:
“Here the allegations in the operative pleading and other evidence in the record provided by Malanga suggests the Gunters may be able to amend their complaint to assert a claim for equitable estoppel. The Gunters may be able to allege that the delay in filing the action was caused by Malanga.”
In addition to the language quoted above, the pleading also said:
“Plaintiffs relied upon Malanga’s conduct to their injury, and delayed filing a legal malpractice action against Malanga within the one-year statute of limitations period. Thus, Malanga is estopped from asserting any statute of limitations defense to Plaintiffs’ claims.”
“Malanga’s argument that the Gunters’ three-year delay in filing the lawsuit forecloses equity is disingenuous. The record indicates that Malanga’s counsel agreed the Gunters timely demanded arbitration. Once they learned that Malanga refused to arbitrate the Gunters filed the lawsuit four months later—not three years later….At a minimum, an argument could be made that the delay in filing the lawsuit was due to Malanga, not the Gunters, and the Gunters should have the opportunity to allege relevant facts.”
The case is Gunter v. Malanga, B253621.
McGonigle represented the Gunthers on appeal. Cole, joined by Mark Schaeffer and David B. Owen, acted for Malanga.
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