Thursday, December 20, 2001
State Supreme Court Agrees to Review Controversial Ruling on Transactional Lawyers’ Malpractice
By a MetNews Staff Writer
The state Supreme Court decided yesterday to review a controversial Sept. 28 Court of Appeal decision that critics say could send legal liability insurance premiums soaring.
All of the high court’s justices except Carlos Moreno voted to review the decision of this district’s Div. Seven in Viner v. Sweet, 92 Cal.App.4th 730, a court official said. The State Bar and the Los Angeles County Bar Association were among those urging review.
The lower panel held that the traditional “case-within-a-case” approach to establishing causation in legal malpractice claims does not apply when the alleged malpractice came in a transactional matter instead of litigation.
“Case-within-a-case” refers to the court’s duty to try both the issue of the lawyer’s alleged negligence that the plaintiff claims resulted in an unfavorable judgment or forced an unfavorable settlement, and the merits of the underlying claim, to show that the plaintiff would have obtained a better result at trial if not for the malpractice.
Justice Earl Johnson Jr. wrote that such an approach makes no sense for alleged malpractice in transactional settings, since proving what would have happened if the lawyer had insisted on putting in or leaving out a contract term is a “highly speculative venture.”
Instead, causation is established by expert testimony or other evidence, the justice said.
The ruling has caused “universally deep distress” in the legal community, Eric Webber of Irell & Manella told the LACBA trustees in urging their support for review. Webber chairs LACBA’s Commercial Law and Bankruptcy Section.
The plaintiffs in the case were Michael Viner and his wife, actress Deborah Raffin. They sued Washington, D.C. attorney Charles A. Sweet and his firm, Williams & Connolly, for negligence in handling their contract negotiations with Dove Audio, Inc., a firm that they founded in 1984 and that has since been renamed NewStar Media.
The transaction at issue involved the plaintiffs’ 1997 stock sale and their resignation from the company. They said their lawyers were negligent in failing to secure their rights to solicit Dove authors for non-audio-book projects, for not objecting to a non-competition clause, for not insisting that they be given production credit for work begun during their regime, and a host of other alleged lapses.
A Los Angeles Superior Court jury awarded them more than $13 million in damages against their former lawyers. Judge David Workman denied the defendants’ motions for a new trial and judgment notwithstanding the verdict, rejecting the argument that he should have instructed the jury on “but for” causation.
In other action yesterday, the justices:
•Amended their recently adopted policy on service of process on death row inmates by their lawyers.
The policy originally required that copies of most court documents filed by defense counsel be served on the client by mail around the time of filing. The amended policy, adopted at the urging of the California Appellate Project, gives an attorney the alternative of personally serving the filing on the client within 30 days, filing a declaration stating that the substance of the filing has been explained to the client, or obtaining a waiver of service from the client.
The policy, which originally applied only to appointed counsel, was also expanded to include retained counsel.
•Denied a stay of a recent ruling of the Fourth District Court of Appeal, thus clearing the way for a March 5 vote on an Orange County initiative that would rezone the site of the El Toro Marine Base as open space.
The Fourth District’s Div. One ruled on Nov. 21 that opponents of the initiative, who sought the stay, lacked standing to challenge the summary that appeared on the petitions—prepared by County Counsel Laurence M. Watson—as biased or misleading. Unlike the summary that will be prepared for the ballot, which may be challenged by backers of either side, the summary prepared for printing on the petitions can only be challenged by a proponent, the appellate panel ruled.
None of the justices voted to stay the ruling in Songstad v. Superior Court, Nestande RPI, 01 S.O.S. 5635.
•Denied review of a ruling by Div. Five of this district’s Court of Appeal that nutritional supplements that raise, but do not contain, testosterone do not have to carry Proposition 65 warnings. The panel affirmed a ruling by Los Angeles Superior Court Judge Marilyn L. Hoffman that products produced by Weider Nutrition Group and related companies do not directly “expose” users to chemicals that cause cancer.
Consumer Cause, Inc., which has filed numerous citizens’ actions under the 1986 toxics disclosure initiative, claimed that the presence of such substances as DHEA and Andro—which when ingested cause a chemical reaction that raises testosterone levels in the body—subjects various Weider products to Proposition 65.
Weider and its amicus, Attorney General Bill Lockyer, argued otherwise. Only Justices Joyce L. Kennard and Carlos Moreno voted to grant review in the case, Consumer Cause, Inc. v. Weider Nutrition International, Inc., 92 Cal.App.4th 1346A.
•Unanimously denied review of an unpublished Oct. 4 Court of Appeal decision that denied a Philadelphia law firm its claimed share of the fees earned by Milberg, Weiss, Bershad Hynes & Lerach in a derivative suit by shareholders of FarWest Financial Corporation against Michael Milken and Drexel Burnham Lambert, Inc. to recover alleged losses from illegal junk bond investments.
The Fourth District’s Div. One held that since the firm had been retained as co-counsel by another Philadelphia firm that was working with Milberg Weiss, it had no fiduciary relationship with Milberg Weiss. The case is Fred Lowenschuss & Associates v. Lerach, D036837.
Copyright 2001, Metropolitan News Company