Tuesday, September 2, 2003
C.A.: Attorney Liability for Mediating Dispute Not Barred
By a MetNews Staff Writer
An attorney can be liable to someone whose business dispute the lawyer agrees to mediate, despite the absence of an attorney-client relationship, if he conceals his partiality to an adverse party, the First District Court of Appeal ruled Friday.
Writing for Div. Three, Justice Stuart Pollak said David Furia might not have been “entirely accurate” in labeling his cause of action against attorney Hugh N. Helm III as legal malpractice. Helm agreed to mediate a dispute between Furia, a licensed general contractor, and Helm’s clients, for whom Furia had built a home.
Furia alleged Helm falsely represented he could be impartial, though in a letter to his clients the lawyer said he was “not going to be truly neutral during our efforts to negotiate an agreement” and made arrangements with them for communications relating to the mediation that would be concealed from Furia.
The letter was inadvertently produced during discovery, Pollak noted.
The justice said the appellate court was not ruling on whether it could ever be proper for a lawyer to undertake mediation between his own clients and an adverse party.
“Assuming that the attorney for one party to a dispute can ever properly agree to act as a mediator in attempting to resolve that dispute,” Pollak wrote, “certainly the full understanding of the responsibilities the attorney will perform should be set out unambiguously in a common writing to both parties, with no undisclosed side understandings with one of them.”
Pollak said Sonoma Superior Court Raymond Giordano erred in ruling that because no attorney-client relationship between Helm and Furia existed, the lawyer could not be liable for malpractice.
“[I]t is correct to conclude that an attorney-client relationship did not arise between Helm and Furia, so that Helm did not owe Furia the obligations of a fiduciary,” Pollak conceded. But he added:
“That is not to say...that as an attorney agreeing to act as a neutral mediator for the conflicting parties, Helm did not assume duties to both of them.”
Legal malpractice consists of the same basic elements as does any other negligence cause of action, the justice observed.
“We need not explore the full dimensions of that duty, but certainly the duty encompassed disclosing to Furia any facts that reasonably might cause Furia to believe that Helm would not or could not be impartial,” the justice wrote. “In agreeing to act as neutral mediator, Helm did not assume the duties of Furia’s attorney, but he did assume the duty of performing as a mediator with the skill and prudence ordinarily to be expected of one performing that role.”
Though provisions of the Rules of Professional Conduct dealing with conflicts of interest “may not be strictly applicable,” the justice declared, “we have no doubt that an attorney accepting the role of mediator has the same duty of full disclosure as an attorney accepting the representation of clients with actual or potentially conflicting interests.”
“The amended complaint sufficiently alleges that Helm did not fully and fairly disclose to Furia that he did not intend to be entirely impartial as a mediator, and in fact misrepresented his intentions, and in that respect breached the duty to exercise reasonable care that he assumed towards Furia.”
Furia’s suit, however, was still properly dismissed since he failed to allege any cognizable damages caused by Helm’s conduct, Pollak said.
“Although we have some misgivings about the manner in which Helm accepted dual responsibilities, we agree with the trial court that Furia has failed to allege facts entitling him to relief, and we therefore affirm,” the justice wrote.
Though Furia claimed he abandoned efforts to remodel the home based on Helm’s advice, he also asserted in a cross-claim and in disciplinary proceedings before the Contractors’ State License Board that he did not abandon the project, and he was estopped from taking a contrary positions in his effort to establish damages, Pollak said.
Because he was cleared of abandoning the project at the administrative hearing, his inability to adequately allege damages was fatal to his claim, the justice reasoned. As a result, it was unnecessary for the court to consider Helm’s argument—in which, the justice commented, there “may well be merit”—that because Furia knew Helm was the homeowners’ attorney, any reliance he placed on Helm’s recommendation was, as a matter of law, unjustifiable.
Justices Carol Corrigan and Joann C. Parrilli concurred. The case is Furia v. Helm, A100102.
Copyright 2003, Metropolitan News Company