Tuesday, October 22, 2002
Two Law Firms Lose Bid for Arbitration in City of Hope Lawsuit
By ROBERT GREENE, Staff Writer
Two law firms that were sued by the City of Hope over their role in a long and bitter legal struggle between the cancer treatment center and two of its executives lost their bid yesterday to have the matter referred to arbitration.
This district’s Court of Appeal rejected assertions by Bryan Cave and by Weil, Gotshal & Manges that they, while serving as counsel for City of Hope, also had become agents for the ex-officials, entitled to the benefits of a settlement agreement
Los Angeles Superior Court Judge Aurelio Munoz, writing on assignment for Div. Seven, dismissed the two firms’ attempt to “finesse” their way into the arbitration agreement without a showing that they were third-party beneficiaries.
Munoz said the firms opted against formally petitioning for arbitration because doing so would have required a court hearing which in turn would have created “substantial risk to their position.” So they instead cited language in amended complaints, filed by the City of Hope years after the litigation started, that each defendant acted as the agent of the other.
Since the settlement agreement between City of Hope and its former executives—Chief Administrative Officer Sanford Shapero and Chief Operating Officer Andrew Leeka—released all parties and their agents from liability for their acts, the firms argued, and since they included an arbitration clause, they were entitled to arbitrate.
“In a classic case of ‘chutzpah and ‘Gotcha!’ gamesmanship, Bryan Cave even demurred to the amended complaint claiming that because the settlement agreements waived any misconduct of the Former Officers or their agents prior to 1996, the complaint should be dismissed against Bryan Cave even though Bryan Cave claims to have been representing City of Hope during this period of time,” Munoz said.
The ruling upholds an order by Superior Court Judge Madeline I. Flier, who also rejected the request to refer the matter to arbitration.
It is the latest decision to come out of the continuing fallout over City of Hope’s management troubles that many observers say began with allegations of sexual harassment in the mid-1990s.
Several female City of Hope management employees left, and Shapero fired the chief operating officer, following lawsuits and confidential settlements with the Duarte-based cancer research and treatment center.
Many of the pleadings and documents from that time remain under seal, as do documents in current court files that refer to those settlements. Even the name of the former chief operating officer is protected and is referred to in Munoz’s opinion as “Doe 3.”
In a footnote, Munoz complained that that the “quest for secrecy and anonymity has reached almost paranoic levels.”
Shapero elevated Leeka to be his chief operating officer, but he and Leeka eventually had a falling out with the City of Hope Board of Directors.
The board hired a consulting firm to look into allegations of sexual misconduct against Shapero and Leeka and claimed it hired Weil, Gotshal in a related matter. But City of Hope claimed that the law firm at the time was giving legal advice to the ex-officers and did not disclose its conflicts of interest.
City of Hope made similar allegations against Bryan Cave, which had been on retainer to provide legal services. Lynn Thompson, a Bryan Cave attorney, allegedly advised Shapero and Leeka, and assisted Leeka in obtaining a secret golden parachute contract clause, while officially representing City of Hope.
Shapero ultimately left and Leeka followed, exercising the golden parachute.
City of Hope sued the two law firms on several causes of action including malpractice.
Munoz said the court did not have to reach the question of the firms’ agency allegations, because they failed to show they were beneficiaries to the arbitration agreement.
“WGM and Bryan Cave tried to finesse their way into arbitration even though they had not shown they were third party beneficiaries under the contracts,” Munoz said. “Given the circumstances and atmosphere under which the settlement agreements were negotiated, this was probably an almost insurmountable task….Since WGM and Bryan Cave did not prove they were intended beneficiaries under the settlement agreements, there was no error in denying their petitions for arbitration.”
The case is City of Hope v. Bryan Cave, B15541.
Copyright 2002, Metropolitan News Company