Monday, December 19, 2016
Court of Appeal Rules:
Failure to Sue Ex-Clients Fatal to Lien Suit
By KENNETH OFGANG, Staff Writer
A discharged law firm was required to sue its ex-clients to perfect its attorney fee lien before suing the successor attorneys to collect, the Fourth District Court of Appeal has ruled.
Div. One ruled last Tuesday that David T. Pursiano and Laurel Barry were properly awarded summary judgment in the action brought against them by Duke Gerstel Shearer LLP, a firm they previously worked for. The unpublished opinion was posted Friday on the state courts website.
The lawyers’ dispute grows out of a suit by Phoenix-area homeowners regarding defects in a housing development known as Canyon Ridge. The homeowners retained Eric Sachrison, then managing attorney of the Duke firm’s Phoenix office, to bring a class action and signed a contingency fee agreement.
Sachrison died suddenly in May 2003. A month later, Pursiano and Barry, who were working in the firm’s Las Vegas office, quit the firm, which accused the pair, as well as Sachrison’s widow—a lawyer—and Arizona lawyer Michael Poli of conspiring to convince the clients to take their business elsewhere.
In July 2003, the clients fired the Duke firm and retained Poli’s firm. That firm then retained several co-counsel, including Pursiano, Barry, and Trinette Sachrison, who continued to represent the clients until the case settled in 2008.
The trial judge awarded the plaintiffs’ lawyers 38 percent of the class recovery, plus costs. Two years later, the Duke firm sued Pursiano and Barry in San Diego Superior Court for interference with contract and with prospective economic advantage, breach of fiduciary duty, misappropriation of trade secrets, conversion, and unjust enrichment.
Pursiano and Barry demurred, arguing the claims were barred by statutes of limitation, and that they could not be liable for unjust enrichment because they were not the clients. The trial judge agreed and dismissed the case.
The judgment was partially reversed on the law firm’s first appeal, the panel ruling in 2012 that the plaintiff could amend the complaint to allege timely claims for conversion and money had and received, pursuant to an attorney lien giving it a right to a share of the fees.
Duke alleged in its amended complaint on remand that it was entitled to $1.1 million of the $1.2 million in attorney fees that Pursiano and Barry received. The pair subsequently moved for summary judgment, which Superior Court Judge Judith Hayes granted, ruling that the firm lacked an enforceable lien.
Justice Richard Huffman, writing for the Court of Appeal, agreed with Hayes.
The justice explained that under the original contingency agreements relied on by the Duke firm, the clients were required to pay the firm either 31 percent or 38 percent of their recovery, depending on whether or not the case was resolved at least 30 days before its first scheduled trial date.
Because the firm was fired years before the case was resolved, however, it could only recover the reasonable value of its services, Huffman said, and that only if it proved the existence of a valid lien.
He cited Mojtahedi v. Vargas (2014) 228 Cal.App.4th 974, which held that a discharged attorney could not enforce his lien against successor counsel in a personal injury case because he never established the validity, amount, and enforceability of the lien in a separate action against the clients.
The Duke firm argued that the cases were distinguishable because unlike the trial court in Mojtahedi, the Arizona court that tried the Canyon Ridge case had jurisdiction to award fees to class counsel. But Huffman said he was “not persuaded” that the Arizona court, by awarding fees from a common fund, “somehow established the validity of” the Duke firm’s lien.
He noted that the Duke firm did not request a fee award in the class action, nor did it invoke a provision in the retainer agreements authorizing binding arbitration to determine the value of the firm’s services in the event its representation was terminated before the case was resolved.
“Thus, even though these retainer agreements were executed some 13 to 14 years before the opinion in Mojtahedi was issued, Duke clearly contracted for a similar procedure to establish the amount of its lien that the court found was required in Mojtahedi…,” the justice wrote.
The case is Duke Gerstel Shearer LLP v. Pursiano, D068633.
Copyright 2016, Metropolitan News Company