Friday, June 28, 2002
Lawyer Sued for Malpractice May in Some Cases Sue Co-Counsel for Indemnity, State High Court Rules
By KENNETH OFGANG, Staff Writer/Appellate Courts
A lawyer sued for malpractice may, at least in some cases, bring a cross-complaint for indemnity against co-counsel who allegedly bears responsibility for the negligence, the state Supreme Court ruled yesterday.
“We conclude public policy does not require the adoption of…a blanket rule” barring co-counsel from suing each other for indemnification of legal malpractice damages, Justice Janice Rogers Brown wrote for the court.
Suits by concurrent or co-counsel, the justice explained, are different from those in which a predecessor attorney seeks indemnification from a successor attorney. Several Court of Appeal decisions say the latter type of suit is barred.
Those cases, Brown explained, have identified two public policy considerations—avoiding creation of a conflict of interest between client and new attorney, and protecting the confidentiality of attorney-client communications.
Since the first concern won’t arise in the context of a suit between co-counsel, and the second may or may not arise under the facts of a particular case, there is no reason to impose an absolute bar on such suits.
The high court’s decision upheld a ruling by Div. Two of the First District Court of Appeal, reinstating Sandra G. Musser’s cross-complaint against Douglas Provencher. Musser, a San Francisco family law attorney who has taken inactive status, claims that bad advice by Provencher—who practices bankruptcy law in Santa Rosa—caused her former client’s alleged losses.
The malpractice suit grew out of Musser’s representation of Pam Scott in divorce proceedings in 1992. Scott’s husband filed for bankruptcy prior to a scheduled hearing on spousal and child support and Musser retained Provencher for assistance with regard to the bankruptcy.
According to her cross-complaint, Musser proceeded with the support hearing solely on Provencher’s advice that doing so would not violate the automatic stay as long as the stay was lifted before a support order was entered. The advice was wrong, Musser contends, and resulted in the support award being overturned on appeal.
In addition, Musser pled, her client was forced to settle for reduced support rather than face possible sanctions for violation of the automatic stay.
Musser settled with Scott, and also settled a claim by her husband that Musser was liable for breach of the automatic stay. The settlements were for a total of $85,000—of which $10,000 was paid by Musser as a deductible and the rest by her carrier—plus a write-off of $20,000 in costs and attorney fees.
Musser, through counsel assigned by her malpractice carrier, cross-complained for those amounts plus $62,000 in defense costs. But San Francisco Superior Court Judge Vernon Smith ruled prior to trial that Musser could only sue for the $10,000 she paid personally, holding that a malpractice claim cannot be assigned to an insurer and that her settlement with Scott barred her from suing Provencher for the waived fees and costs.
Smith later granted a nonsuit on Musser’s claim for the $10,000, resulting in a defense judgment, which the appellate panel overturned.
Brown, writing for the high court, said there was no worry that Musser’s cross-complaint would force a breach of confidentiality, since Scott waived attorney-client privilege as part of her settlement with Musser for the specific purpose of enabling Musser to sue Provencher .
The justice also concluded that the trial judge erred in applying the rule against assignment or subrogation of legal malpractice claims to the co-counsel context.
She agreed with Div. Two Presiding Justice J. Anthony Kline that the rule “should be contained by the context in which the rule arose—that of a third party (including the client’s insurer) attempting to succeed to the client’s legal malpractice action against the client’s attorney.”
The court’s decision was unanimous, but Justice Joyce L. Kennard wrote separately to express her concern about “difficult questions” not present in the case, including the scope of indemnity between predecessor and successor counsel and the extent of a waiver of attorney-client privilege when the client sues one of her attorneys but not the other.
But while allowing lawyers for a mutual client to sue each other for indemnification, the court ruled unanimously in a companion case that an attorney cannot sue co-counsel for breach of fiduciary duty on the theory that the defendant’s malpractice cost the plaintiff a fee.
Court of Appeal panels were previously split on the issue, Brown noted in siding with the First District’s Div. Three and rejecting Daniel Beck’s suit against Ronald Wecht.
Beck was hired to represent two people in their injury lawsuit against General Motors. Beck associated in Texas lawyer L.L. McBee—because of his expertise in prosecuting “side-saddle” gas tank cases against GM—and California lawyer Wecht, as local counsel.
During the trial, General Motors allegedly offered the plaintiffs a $6 million settlement and the clients met with Wecht and McBee and told them to accept it. But McBee allegedly never contacted General Motors, and the jury returned a defense verdict.
The clients then sued McBee and Wecht for failing to carry out their settlement instructions. McBee settled, and Beck was paid $224,000 for releasing his claim against McBee. Wecht’s malpractice carrier, American Equity, paid $1.4 million to settle the clients’ claims against Wecht.
Beck then sued Wecht to recover the fee he would have received had McBee and Wecht followed the clients’ instructions and settled the case. American Equity intervened and sued Beck in subrogation. Each party was granted summary judgment against the other’s claims.
Finding a fiduciary duty among co-counsel to protect each other’s fees, Brown wrote, would jeopardize the attorney-client privilege.
Unlike the issue in Musser’s case, the justice said, the issue of fiduciary duty need not be resolved on a case-by-case basis. “The better approach, we conclude, is a bright line rule refusing to recognize such a fiduciary duty,” she wrote.
The cases are Musser v. Provencher, 02 S.O.S. 3229, and Beck v. Wecht, 02 S.O.S. 3235.
Copyright 2002, Metropolitan News Company