Thursday, April 4, 2002
Justices Grapple With Attorney Malpractice Indemnity
By a MetNews Staff Writer
State Supreme Court justices appeared skeptical yesterday of requests to find that one lawyer can owe a duty to another when both represent the same client.
Grappling with apparently inconsistent 2001 rulings from the First District Court of Appeal, several of the justices directed their most pointed questions to lawyers for a Bay Area attorney whom Div. Two allowed to sue her co-counsel for indemnity, and another attorney whose similar lawsuit was rejected by Div. Three.
By the time Oakland attorney John M. Drath got up to argue that the Div. Three ruling should be upheld, he was greeted with Justice Joyce Kennard’s presumption that he believed that recognizing a duty from one lawyer to another would be “fraught with problems.”
Drath, clearly pleased with the question, responded:
“I didn’t even get to ‘May it please the court.’”
Before the justices are a June 26, 2001 opinion for Div. Three by Alameda Superior Court Judge Jeffrey Horner and a July 7, 2001 opinion by Div. Two Presiding Justice J. Anthony Kline.
In Horner’s case, American Equity Insurance Company v. Beck, attorney Daniel 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 Ronald Wecht, as local counsel.
During the trial, General Motors offered the plaintiffs a $6 million settlement and the clients met with Wecht and McBee and told them to accept it. But McBee 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 for breach of fiduciary duty 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.
Horner rejected Beck’s argument that there could be a fiduciary duty owed him by Wecht. “To avoid any detriment to the jointly represented client, it is imperative that no collateral duties arise to interfere with the duty of ‘undivided loyalty and total devotion’ owed to the client,” Horner said.
In Musser v. Provencher, family law attorney Sandra Musser was representing a woman in divorce proceedings when the client’s estranged husband filed for bankruptcy. Musser sought bankruptcy expertise from specialist Douglas Provencher and asked him to help her obtain relief from the automatic stay.
Provencher told Musser that she could proceed with the support hearing without violating the stay. He was wrong, and when Musser continued with the hearing, the grant of spousal and child support were voided since the support hearing violated the automatic stay.
The client settled with her former husband for less than the support order, then sued Musser for malpractice.
Provencher refused Musser’s request to contribute to a settlement offer, and Musser sued Provencher for indemnity. The Marin Superior Court granted Provencher’s motion for nonsuit.
Kline said there could be no bight-line rule on whether one lawyer owes a duty to another when both represent the same client in the same matter.
“As tempting as it may be to avoid a case-by-case analysis of the potential conflicts which were raised in a particular concurrent representation in favor of a general rule, we believe that the concurrent representation situation presents a much less certain potential for conflict of interest than where predecessor counsel seeks indemnity from successor counsel,” Kline said.
Kline also said, in a footnote, that there remains a “legitimate question” about whether earlier rulings barring the assignment of malpractice claims are “still sustainable,” given the “evolved attorney client relationship of today.”
Arguing yesterday for Provencher, Santa Rosa attorney Noreen Evans said courts should not countenance any division of loyalty by an attorney. If an expert who is hired onto a case knows that he or she can obtain indemnity, she said, “That would certainly tend to make the attorney who is able to seek indemnity somewhat less careful.”
When one lawyer hires another, Evans told the justices, “I believe that the duty there runs to the clients, not the first attorney.”
San Francisco lawyer James Murphy, arguing for Musser, said anything less than a case-by-case determination of when a duty is owed between lawyers “would be unfair, unjust and unwise.”
Justice Janice Rogers Brown asked whether the question should be resolved using comparative negligence principles instead of indemnity.
Murphy responded that the situation should be like that of a surgeon who in turn is like the captain of the ship.
“He is responsible for everyone down the line,” he said, and can then sue his crew for indemnification.
“That should apply to lawyers as well,” he said.
Copyright 2002, Metropolitan News Company