Monday, April 30, 2018
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Ninth Circuit:
Fraud Action Against Attorney Girardi, Others, Is Time-Barred
Opinion Says Former Client, Who Alleges Personal Use of Funds in Trust Account, Was On Notice of Facts in 2001 When Final Check From Lockheed Settlement Was Received
By a MetNews Staff Writer
The Ninth U.S. Court of Appeals on Friday affirmed the dismissal with prejudice of a man’s action against personal injury attorney Thomas V. Girardi and others for fraud, civil racketeering and breach of duty because he waited too long to sue.
A three-judge panel said in a memorandum opinion that plaintiff Paul Kranich—one of 248 current and former employees of Lockheed who sued the aerospace company in 1991 for maladies they contracted based on exposure to toxic chemicals—was on notice as of 2001, the date he received his last settlement check in the case, that he might have been shortchanged.
He asserts that defendants Girardi, the law firm of Girardi & Keese, and attorney Robert W. Finnerty of that firm, converted some of the settlement proceeds to their personal use.
Judge Snyder’s Decision
Kranich brought his action on Feb. 22, 2016. On June 16 of that year, District Judge Christina A. Snyder of the Central District of California dismissed the action, but granted leave to amend.
With respect to his contention that the statute did not begin to run until 2015, she said:
“Here, plaintiff alleges that he did not discover defendants’ wrongful conduct until March of 2015 when his current attorney, Peter R. Dion-Kindem, advised him of defendants’ wrongful conduct….However, plaintiff pleads only a single fact to explain why he could not have discovered his causes of action prior to March of 2015. Specifically, plaintiff alleges that ‘[t]he bank records and other records reflecting Girardi’s improper use of the settlement proceeds were in Girardi’s possession, and Plaintiff did not have access to such records.’…In short, plaintiff appears to allege that defendants’ bank records revealed that they had used the Lockheed settlement proceeds for improper purposes and that, without access to these bank records, even if plaintiff had conducted a reasonable investigation he would not have discovered defendants allegedly wrongful conduct. Yet plaintiff fails to explain why access to defendants’ bank records was the only way to determine how the Lockheed settlement proceeds had been allocated.”
Duty to Infirm
Snyder also rejected the argument that the defendants had a duty to advise him of a 2001 action in the Los Angeles Superior Court case of Anzures v. Girardi & Keese alleging skimming of the settlement fund. The judge said:
“[T]he Anzures action was a matter of public record. Assuming that defendants did not inform plaintiff of the Anzures action, plaintiff still fails to explain why he could not have independently discovered the existence of this ligation.”
She added that tolling of the statute of limitations based on fraudulent concealment requires a showing that the defendants had actively misled the plaintiff which, she observed, Kranich had not pled.
Oral Argument
Argument in the case was held Feb. 9. While Snyder pointed to various statutes of limitations, the longest being four years, Dion-Kindem pointed to Probate Code §16460 which provides that when a beneficiary of a trust “does not receive any written account or report,” from the trustee, “the claim is barred as to that beneficiary unless a proceeding to assert the claim is commenced within three years after the beneficiary discovered, or reasonably should have discovered, the subject of the claim.”
Girardi did not provide an accounting when the final settlement check was sent in 2001, or since.
“Mr. Girardi was a trustee,” Dion-Kindem told the judges. “The money went into his account.”
An accounting was demanded in 2016.
Visiting Judge’s Question
District Judge Joseph F. Bataillon of the District of Nebraska, who was sitting by designation, questioned whether there was no time limit on seeking an accounting.
The lawyer gave the example of a beneficiary who was tipped off by a secretary that her boss had wrongfully pocketed funds belonging to the beneficiary 20 years earlier. He said of the hypothetical malefactor and his dereliction:
“Does he get a free pass because he’s been able to hide it for 20 years? Does that make sense?”
Argument for Defendants
San Diego appellate attorney Martin Buchanan argued for the defendants. He declared that the mere fact that Girardi did not provide an accounting in 2001 put Kranich on notice of a possible claim.
Buchanan declared:
“Mr. Kranich was only too happy to accept these checks back in 1992 through 2001 knowing, in fact, he did not have the information that he now claims he didn’t have. He had a right to demand an accounting back in 2001 when the last settlement check was issued.
“In fact, the duty of an attorney to provide an accounting is not even dependent on a demand.”
The statute of limitations under §16460 began to run in 2001 when the duty to provide an accounting arose, he argued.
Buchanan also asserted that it was “reasonable” to give no effect to a demand for an accounting “long after the duty to retain records ceased.”
In Friday’s memorandum opinion, the judges said:
“The district court did not err when it determined that Kranich was on notice of his claim no later than 2001 when he received his final settlement check. Sufficient notice existed to put Kranich on notice of the fraud, and thus he had a duty to further investigate.”
It went on to say:
“The district court did not err in finding that Kranich’s claims were barred by the statute of limitations, no matter which limitations period applied. California Probate Code §16460 contains a three-year statute of limitations and an action for accounting is tied to the nature of the case….Also, an action for an accounting to a client is required by Rule 4-100 of the California Rules of Professional Conduct. There is a four year statute of limitations or a one year limitation after discovery which applies to state law claims against attorneys….Further, there is a five-year limitation period on the retention of records after the ‘final appropriate distribution of client fluids.’…The district court correctly determined that under any of these limitation periods. Kranich, who waited 14 years to make a claim, was without recourse.”
The case is Kranich v. Girardi, No. 16-56164.
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