There is a type of attorney malpractice lawsuit known as a "settle and sue" case, which involves a former client suing after litigation has been settled. Depending on whether the disgruntled client was the plaintiff or the defendant in the antecedent lawsuit, the basis of the claim is that the settlement was less than it should have been, or more than it had to be, by reason of the negligence of the party's attorney. Obviously, the manner in which the underlying lawsuit was concluded will often make it problematic whether causation and damages can be established.
Here, the trial court awarded the former clients more than half a million dollars for the malpractice committed by their former attorney while representing them in an eminent domain proceeding. The court concluded that even though the attorney's negligence occurred prior to the eventual settlement — a settlement they agreed to while represented by a successor attorney — various actions by the attorney were below the standard of professional care and caused the clients to settle for $574,000 less than they would otherwise have received. The court further concluded that, notwithstanding his malpractice, the former attorney was entitled to recover approximately $242,000 for the quantum meruit value of his services.
Both sides have appealed. On the attorney's appeal from the malpractice judgment, we reverse, concluding that as a matter of law there is no causal connection between the attorney's assertedly negligent acts and omissions and the amount the clients received when they settled. On the clients' appeal from the quantum meruit judgment, we affirm.
In 1978, James and Carolyn Filbin purchased a 13-acre parcel of unimproved real property adjacent to what is now the San Luis Obispo County
The Filbins' practice came to the unfavorable attention of county and state officials. The ensuing hostility fueled a lengthy chapter of administrative and legal proceedings, and even a misdemeanor criminal conviction with a probation violation. A dispute about the property's being rezoned soon after the Filbins' purchase aggravated matters. And in 2004 San Luis Obisbo County (the County) decided to acquire the property through eminent domain.
On June 6, 2006, the County commenced judicial proceedings to acquire the property. After obtaining an order for immediate possession of the property (see Code Civ. Proc., § 1255.410),
The following month the Filbins retained Herman H. Fitzgerald
In May 2007, as the case wended its way to trial, the court rejected a stipulation arranged between the parties that the stockpiled material would be included in fixing the value of the property. The court concluded that the Filbins' "wholesale disregard of local and state land use regulations" amounted to "a remarkable history of recalcitrance" and "a repetitive pattern of illegality" sufficiently egregious to warrant "an order prohibiting Filbin from presenting to the jury any evidence showing that the stockpiled material has a fair market value above zero." At the same time, "The County will be permitted to show the diminution in value, if any, due to negative abatement costs."
In July 2007, with trial less than a month away, the Filbins had to decide on the mandatory settlement offer required by section 1250.410
The Filbins refused to settle for less than the amount of the Gilman appraisal, and actually wanted to increase it to $9.1 million. They also wanted to get a new appraisal. Because this was contrary to Fitzgerald's advice, and because the Filbins refused to budge, Fitzgerald was discharged as their counsel. It was July 31, 2007, less than three weeks before trial.
The Filbins filed a declaration in which they advised the court that Fitzgerald had quit as their attorney. They also filed an application for a continuance. Fitzgerald responded with a letter advising the court: "In the later afternoon of July 31, 2007, defendant James P. Filbin discharged this office .... I will appear at the presently scheduled Trial Readiness Conference on Friday, August 3, 2007 ... in order to enter the discharge on the record pursuant to Code of Civil Procedure section 284."
On August 2, the County increased its offer to $1.8 million.
The Filbins engaged new counsel, William Brewer, the lawyer Mr. Filbin told Judge Crandall on August 3 was already "studying the matter." Mr. Brewer promptly commissioned two additional appraisals, another by Gilman and one by a new appraiser, Thomas Diamond. Gilman's second effort, made with an "extraordinary assumption" concerning rezoning of the property, specified the parcel's value at $6.8 million. Operating with the same assumption, Diamond's number was $7.1 million. The Filbins' final settlement demand was $5.8 million.
Notwithstanding his indicated disinclination, Judge Crandall did grant the Filbins a continuance, but with the strict proviso that the case would be "frozen," with no information or discovery generated subsequent to Fitzgerald's discharge allowed at the trial, now set for October, and the Filbins would be bound by Fitzgerald's stipulation that the property was not improperly rezoned.
In August 2008, the Filbins commenced this action in San Mateo Superior Court against Fitzgerald with a complaint for "attorney malpractice" and "breach of fiduciary duty." Fitzgerald responded with a cross-complaint to recover the quantum meruit value of the legal services he had provided to the Filbins.
A bench trial began on October 20, 2009, and ended six court days later on October 29. After all evidence had been presented, counsel for the Filbins summarized his argument why Fitzgerald was liable for $2,715,195.64:
However, counsel candidly, if obliquely, conceded that the issue of causation was murky: "Frankly, Mr. Filbin has taken the position throughout this case I screwed up and we can't sort it out. I'm not asking Mr. Fitzgerald to pay me the million and a half dollars of value that I lost. It may have been Judge Crandall's fault. It may have been Mr. Fitzgerald's fault. Or really, it might have been Mr. Filbin's fault."
On March 19, 2010, the court entered a "Statement of Decision and Order of Judgment on Complaint" concerning the Filbins' complaint, the pertinent portions of which (with minor nonsubstantive editorial alterations) provide as follows:
"Plaintiffs allege numerous actions by Defendant Fitzgerald which Plaintiffs contend were below the standard of care. The Court finds that Mr. Filbin
"It is undisputed, however, that Fitzgerald misrepresented the law in advising the Filbins that they were `required' to present a settlement demand lower than the appraisal of Plaintiffs' designated valuation expert, Les Gilman. By misstating the law to Mr. Filbin, on a point of major importance to Mr. Filbin, Fitzgerald's action was below the standard of care.
"Following Fitzgerald's misstatement of law, the Court finds that there was a breakdown in the attorney-client relationship which resulted in Fitzgerald appearing before Judge Crandall on his Motion to Withdraw. A hearing on the Motion to Withdraw could have been avoided by a written Substitution of Attorney form, which Fitzgerald did not realize could have been used. Mr. Fitzgerald was incorrect in that regard.
"Fitzgerald again misstated the law to Judge Crandall at the time of the Motion to Withdraw. Judge Crandall accepted that incorrect statement of law as fact, and addressed Mr. Filbin in a manner which made it apparent that Judge Crandall believed Mr. Filbin sought to deviate from the requirements of law. Fitzgerald's misstatement of law to Judge Crandall was also below the standard of care.
"Although Plaintiffs allege a breach of fiduciary duty by Fitzgerald resulting from negative comments about his client unnecessarily made to Judge Crandall, the Court believes that Judge Crandall would have wanted information to justify terminating the attorney-client relationship on the eve of trial. In addition, the Court finds that Plaintiffs' ethics expert, Carol Langford, Esq., was unpersuasive based upon limited qualifications. Then Court believes that a judge is, in addition, presumably able to accept negative information about a litigant without becoming biased. The Court, however, does not reach this issue factually, and did not formulate an opinion whether or not Judge Crandall became biased against the Filbins as a result of the disclosures made by Fitzgerald during the Motion to Withdraw. Plaintiffs' claim for breach of fiduciary duty is denied.
"Fitzgerald's breaches of the standard of care are a legal cause of damage under the significant burden of proof set forth in Marshak v. Ballesteros (1999) 72 Cal.App.4th 1514 [86 Cal.Rptr.2d 1], and Slovensky v. Friedman (2006)
"But for the breaches of the standard of care by Fitzgerald, Plaintiffs would have settled their case for the sum of $3,174,500. Reduced by the settlement amount of $2,600,000.00, the Court finds Plaintiffs are entitled to damages on their Complaint against Defendant, Fitzgerald, in the amount of $574,000.00."
The court also entered a separate judgment on Fitzgerald's cross-complaint in which the court incorporated a prior order adjudicating Fitzgerald's claim for attorney fees and costs, as follows: "Fitzgerald's cross-complaint for attorney's fees and costs is not barred by his withdrawal but needs to be considered in light of the ruling above [(a reference to the judgment for the Filbins)]. Further, the evidence as to attorney's fees is based on a reconstruction of attorney time estimated by Fitzgerald years after many of the events. On the other hand, it is clear that Fitzgerald spent considerable time and money during his representation of the Filbins. The Court finds that Fitzgerald, in Exhibit CC-1, has proven with sufficient specificity the expenditure of $42,542.69 and awards him reimbursement of those costs. As to a claim for attorney's fees based on a reasonable value of services, some exercise of discretion is necessary. The Filbins challenged Fitzgerald's time calculations based on a lack of actual records and an after-the-fact recreation of time sheets; further, those services were devalued to some extent by Fitzgerald's mistakes, which caused the case to be settled below value as described above. Fitzgerald has estimated, in Exhibit CC-1, the expenditure of 1088 hours of attorney time prior to withdrawal. Considering his services, but also considering the lack of records and the effect of his mistaken advice, the Court considers payment to Fitzgerald of 500 hours, or approximately one-half, at $400/hour as an appropriate fee of $200,000."
Concerning the third and fourth of these elements, our Supreme Court cautioned: "If the allegedly negligent conduct does not cause damage, it generates no cause of action in tort. [Citation.] The mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm — not yet realized — does not suffice to create a cause of action for negligence." (Budd v. Nixen (1971) 6 Cal.3d 195, 200 [98 Cal.Rptr. 849, 491 P.2d 433]; cf. Hecht, Solberg, Robinson, Goldberg & Bagley LLP v. Superior Court (2006) 137 Cal.App.4th 579, 591 [40 Cal.Rptr.3d 446] ["In the legal malpractice context, the elements of causation and damage are particularly closely linked."]; 4 Mallen & Smith, Legal Malpractice (2012 ed.) § 37:15, p. 1509 ["Causation connects the element of fault to the fact of injury.... [T]he question may be whether the claimed damage was caused by the alleged wrongful conduct. The opposite perspective is whether the alleged misconduct... caused legally cognizable damage."].)
The requirement that a plaintiff need prove damages to "a legal certainty" is difficult to meet in any case. It is particularly so in "settle and sue" cases, as the discussion in Barnard v. Langer, supra, 109 Cal.App.4th 1453 illustrates. There, affirming a nonsuit (and awarding defendants sanctions for a frivolous appeal), the court observed as follows: "The hindsight vulnerability of lawyers is particularly acute when the challenge is to the attorney's competence in settling the underlying case. As a leading legal malpractice text observes, the amount of a compromise is often `an educated guess of the amount that can be recovered at trial and what the opponent was willing to pay or accept. Even skillful and experienced negotiators do not know whether they received the maximum settlement or paid out the minimum acceptable.
Marshak v. Ballesteros, supra, 72 Cal.App.4th 1514, one of the cases cited in Barnard, was an action brought against the attorney who had represented the plaintiff when a marital dissolution action was settled. Affirming summary judgment for the attorney, the Court of Appeal stated: "In order to prevail in his legal malpractice action, plaintiff must prove that the dissolution action would have resulted in a better outcome had defendant recommended that he reject the settlement offer. Plaintiff must prove what that better outcome would have been." (Marshak v. Ballesteros, supra, 72 Cal.App.4th 1514, 1518, italics added; accord, Orrick Herrington & Sutcliffe v. Superior Court, supra, 107 Cal.App.4th 1052, 1057.)
Building upon this logic, Fitzgerald goes right to the verge of soliciting a decision flatly prohibiting liability against former counsel for settlements. He presents a strong argument that the uncertainties and imponderables of settlement preclude a disgruntled former client from establishing causation and damages to "a legal certainty." As he puts it: "post hoc evaluations of what the outcome in an underlying case could have been had it not been settled are inherently speculative." And, he reasons, "Allowing a litigant to settle an underling case and then seek the difference between the settlement
There is no occasion for us to examine a flat prohibition because our Supreme Court appears to have accepted the existence of settlement liability. (See Viner v. Sweet, supra, 30 Cal.4th 1232, 1242, citing Marshak v. Ballesteros, supra, 72 Cal.App.4th 1514, 1518-1519 and Thompson v. Halvonik, supra, 36 Cal.App.4th 657, 661-663.)
We nevertheless rule for Fitzgerald, concluding that the judgment against him cannot satisfy the necessary requirements because there is no substantial evidence of causation or damages.
We begin our analysis by recalling the instances in which the trial court analyzed Fitzgerald's performance to determine whether they fell below the standard of care:
Next, there is the matter of the means of Fitzgerald's departure from the case. The trial court appears to have believed that a "written Substitution of Attorney form" under section 284 would have obviated the need of "Fitzgerald appearing before Judge Crandall on his Motion to Withdraw." The trial court's finding that "Mr. Fitzgerald was incorrect in that regard" we take to be a finding that Fitzgerald erroneously concluded that a formal motion seeking Judge Crandall's leave to withdraw was necessary. Assuming that both the Filbins and Fitzgerald were agreeable to Fitzgerald's departure, judicial approval was not necessary. (Hock v. Superior Court (1990) 221 Cal.App.3d 670, 673-674 [270 Cal.Rptr. 579].) However, the trial court did not conclude that Fitzgerald's failure to use this unilateral procedure fell below the standard of care.
Finally, there is the trial court's conclusion that "Judge Crandall accepted that incorrect statement of law as fact, and addressed Mr. Filbin in a manner which made it apparent that Judge Crandall believed Mr. Filbin sought to deviate from the requirements of law," and this "was also below the standard of care." These determinations must obviously be based on the court's reading of the in camera hearing Judge Crandall conducted on Fitzgerald's discharge. We have read the transcript of that hearing (see fn. 6, ante), and it does not support the trial court's conclusion. Nothing in it suggests, much less establishes, that Judge Crandall "accepted" Fitzgerald's "incorrect statement of law as fact, and addressed Mr. Filbin in a manner which made it apparent that Judge Crandall believed Mr. Filbin sought to deviate from the requirements of law." The sole points of Judge Crandall's comments at the hearing were to ascertain whether the attorney-client relationship had irretrievably ruptured, and to impress upon Mr. Filbin that if Fitzgerald were discharged there would be no continuance. At no point during the hearing did Judge Crandall indicate that he "accepted" Fitzgerald's interpretation of section 1250.410. On the contrary, Judge Crandall expressly told Mr. Filbin: "I have no idea whether the demand or the final offer that's been made is even in accordance with law, and I don't know what's going to happen to that."
These acts or omissions, whether individually or collectively, do not establish actionable malpractice that caused the Filbins actual damage — let alone to "a legal certainty." At best, they constitute what Cardozo famously characterized as " `negligence in the air' " (Palsgraf v. Long Island Railroad Co. (1928) 248 N.Y. 339, 341 [162 N.E. 99]), making the same point as California courts when noting that attorney breaches of the standard of care
The ostensibly adverse findings of the trial court are neutralized by its discussion of why the Filbins failed to establish that Fitzgerald breached his fiduciary duty. Concerning Fitzgerald's termination, it must be remembered that the in camera hearing before Judge Crandall occurred only 17 days before the scheduled trial date. Even a consensual substitution that would not have required Judge Crandall's approval would almost certainly have required some explanation, particularly in light of the impending trial date. (See generally Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter Group 2012) ¶ 9:385.2, p. 9(I)-150 (rev. # 1, 2010).) Thus, given the timing, the trial court sensibly reasoned that "Judge Crandall would have wanted information to justify terminating the attorney-client relationship on the eve of trial." As to what Fitzgerald may have told Judge Crandall at that hearing, the court below stated its belief that "a judge is ... presumably able to accept negative information about a litigant without becoming biased."
More crucially, nothing Fitzgerald did, or failed to do, up to the time he departed as the Filbins' counsel caused the Filbins to do anything to their detriment. Fitzgerald's misstating the import of section 1250.410 did not persuade the Filbins to follow his advice about the amount of their demand to the County. Indeed, their refusal to follow Fitzgerald's advice was the basis on which the attorney-client relationship foundered. The Filbins stuck to their guns and refused to lower their demand below the amount of Gilman's appraisal — to the point that they raised their demand. Thereafter, they secured new counsel and a continuance of the trial date. And, it must be kept in mind, the court found that "Fitzgerald's conduct prior to his discussion with the Filbins regarding the pretrial demands and offers addressed by CCP
Therefore, when replacement counsel took over the case on August 3, it was with no lingering impairment at Fitzgerald's hands. When it came time for the Filbins to consider whether to settle the case some two and a half months later, in mid-October, they were free agents. No past decision by Fitzgerald hobbled them. Nothing prevented their new counsel from giving them impartial advice. No one would stop them from going to trial. Their decision to settle was theirs and theirs alone, made with the assistance of new counsel, with no input from Fitzgerald. The consequences of that decision are likewise theirs alone.
It is supremely ironic that, having fired Fitzgerald, the Filbins attempt to use his history of success in condemnation cases against him by positing that history as establishing not only the likelihood of a higher settlement but also the amount, this based on the appraisal made by the appraiser that Fitzgerald had selected. Plainly, for the Filbins, the best weapon against Fitzgerald is Fitzgerald himself.
As previously mentioned, the Filbins appealed from the judgment on Fitzgerald's cross-complaint; they did not appeal from the separate judgment on their complaint. In their opening brief, they do not challenge the judgment on the cross-complaint as either an abuse of the trial court's broad discretion (see Leaf v. City of San Mateo (1984) 150 Cal.App.3d 1184, 1189-1190, fn. 6
Section 906 will not assist the Filbins. That statute provides in pertinent part: "The respondent, or party in whose favor the judgment was given, may, without appealing from such judgment, request the reviewing court to and it may review any of the foregoing matters [(i.e., the verdict or decision and any intermediate ruling, proceeding, order or decision)] for the purpose of determining whether or not the appellant was prejudiced by the error or errors upon which he [(the appellant)] relies for reversal or modification of the judgment from which the appeal is taken. The provisions of this section do not authorize the reviewing court to review any decision or order from which an appeal might have been taken." (Italics added.)
The Filbins are not raising the fiduciary duty issue in the defensive manner allowed by the statute; that is, they are not arguing that any error in the fiduciary duty finding may be used to neutralize other error pointed out by Fitzgerald. No, they are quite open in seeking the overturn of the separate judgment on Fitzgerald's cross-complaint, their opening brief requesting "this Court to reverse the lower court's Judgment in favor of Cross-Complainant Fitzgerald and to direct the entry of a new Judgment in favor of the Filbins which properly denies Fitzgerald any award of attorneys' fees and costs." That relief is foreclosed to them by the italicized portion of the statute quoted above.
Faced with that, the Filbins argue that the record here demonstrates that Fitzgerald breached his duties as a matter of law. Their argument is as follows: "the facts as the trial court found them to be here clearly demonstrate that Fitzgerald's conduct not only fell below the applicable standard of care, but also constituted a fiduciary breach as a matter of law. First, as mentioned above, Fitzgerald alone created the phantom `conflict' with the Filbins by insisting they were compelled by law to make a settlement demand they were never required to make. (See 7 CT 1737 [(where the trial court finds that Fitzgerald's misstatement of the law `on a point of major importance' to the Filbins precipitated `a breakdown in the attorney-client relationship, eventually resulting in the hearing before Judge Crandall on Fitzgerald's Motion to Withdraw')].) Second, by then erroneously informing the underlying trial judge that the Filbins refused to follow the applicable law (that is, that they refused to make an offer of settlement they were not required to make) as a basis for Fitzgerald's withdrawal request, Fitzgerald unequivocally put his own interests before his clients' so he could justify abandoning them on the eve of trial. Not only were Fitzgerald's representations to the court false, they were also improper in that they had the very impact Fitzgerald intended: to influence the court to grant Fitzgerald's withdrawal motion by making the Filbins look so unreasonable and greedy in the court's perception that a withdrawal (even at that late stage of the litigation) would be justifiable. And that is precisely what happened. [Citation.] That this is
As we read the argument in the Filbins' brief, including that quoted above, its essence is that a violation of fiduciary duty appears as a matter of law because (1) Fitzgerald made some disclosure(s), supposedly of some client confidence(s), to Judge Crandall and (2) the disclosure(s) resulted in bias against the Filbins. We easily reject the argument, for several reasons.
First, the argument ignores that the trial court specifically found that it "did not formulate an opinion whether or not Judge Crandall became biased against the Filbins as a result of the disclosures made by Fitzgerald."
Second, the Filbins' argument is premised on a treatment of the record that is less than candid. The argument asserts what Fitzgerald did, so improperly they contend, was "as a basis for [his] withdrawal request [and] unequivocally put his own interest before his clients' so he could justify abandoning them on the eve of trial." To talk of "withdrawal" and "abandon[ment]" is to ignore any objective reading of the transcript of the in camera hearing, which hearing began as follows: "Judge Crandall: This is in the matter of the discharge of counsel that apparently occurred on July 31. So, Mr. Fitzgerald, can you give me some more information about it? What I'm trying to make sure of is that, that its, we, I want to make sure also Mr. Filbin knows what he is doing and that it is going to require him going forward on the 20th one way or the other. I guess that is my main thing. So let me ask Mr. Filbin. Mr. Filbin, you've terminated Mr. Fitzgerald and can you give me some idea as to why?" (Italics added.)
Third, review of the transcript shows nothing indicating that Fitzgerald revealed any confidences. And nothing indicating that Judge Crandall indicated any bias against the Filbins.
Fourth, the Filbins' "as a matter of law" argument is premised on inferences they contend must be drawn in their favor. The law, of course, is otherwise, that all inferences must be drawn in favor of the judgment. (Denham v. Superior Court (1970) 2 Cal.3d 557, 564 [86 Cal.Rptr. 65, 468 P.2d 193]; In re Marriage of Arceneaux (1990) 51 Cal.3d 1130, 1133 [275 Cal.Rptr. 797, 800 P.2d 1227].)
The judgment on the complaint is reversed, and the cause is remanded to the trial court to enter judgment in favor of Fitzgerald. The judgment on the cross-complaint is affirmed. Fitzgerald shall recover his costs on both appeals.
Kline, P. J., and Haerle, J., concurred.
"(a) At least 20 days prior to the date of the trial on issues relating to compensation, the plaintiff shall file with the court and serve on the defendant its final offer of compensation in the proceeding and the defendant shall file and serve on the plaintiff its final demand for compensation in the proceeding. The offer and the demand shall include all compensation required pursuant to this title, including compensation for loss of goodwill, if any, and shall state whether interest and costs are included. These offers and demands shall be the only offers and demands considered by the court in determining the entitlement, if any, to litigation expenses....
"(b) If the court, on motion of the defendant made within 30 days after entry of judgment, finds that the offer of the plaintiff was unreasonable and that the demand of the defendant was reasonable viewed in the light of the evidence admitted and the compensation awarded in the proceeding, the costs allowed pursuant to Section 1268.710 shall include the defendant's litigation expenses. [¶] ... [¶]
"(d) If timely made, the offers and demands as provided in subdivision (a) shall be considered by the court on the issue of determining an entitlement to litigation expenses.
"(e) As used in this section, `litigation expenses' means the party's reasonable attorney's fees and costs, including reasonable expert witness and appraiser fees." (§ 1250.410.)
