Patrick Maloney was quoted in a recent Law 360 article detailing the latest round of a dispute between rival developers and the applicability of California’s Environmental Quality Act (CEQA) to a high stakes RICO claim. The matter before the 9th Circuit Court of appeals concerns Los Angeles hotel developer Relevant Group LLC’s appeal of a lower court’s decision that a rival developer was shielded from racketeering claims by CEQA’s Noerr-Pennington doctrine.

Relevant Group’s appeal drew a response from a coalition of environmental interest groups. The groups argue the California Legislature has sought to balance CEQA to allow for public participation in the environmental review process. Overturning the lower court’s ruling and allowing for an exception to the Noerr-Pennington doctrine might have a chilling effect on individuals thinking about filing future CEQA complaints.

Patrick Maloney praised the environmental interest group’s brief in comments to Law360 Thursday, underscoring that Relevant should bring its concerns about the CEQA process to the California Legislature instead of the courts. Read the full article on Law 360 here.

An opinion recently published by California’s Second Appellate District, Engel v. Pech, 95 Cal.App.5th 1227 (2023), reinforces that when counsel for a corporate entity commits malpractice, it is the entity itself – not the owners – that must bring the malpractice claim.

The Facts: An Individual Sues in Place of an LLP

A partnership, Engel & Engel LLP (LLP), hired an attorney (Pech) to represent it in litigation. The retainer agreement between Pech and the partnership was signed by both the LLP and one of its partners (Engel), in his individual capacity. The agreement specified the scope of the attorney’s work was limited to the representation of the LLP itself in litigation. 

When the LLP lost the case, Engel personally, not the LLP, timely sued Pech for malpractice. The LLP was not a party to the lawsuit Engel filed. Later, after the LLP’s statute of limitations on malpractice claims had lapsed, Engel attempted to amend his complaint and add the LLP as a second plaintiff.

Pech filed a demurrer challenging the amended complaint, stating that Engel had no basis for filing for malpractice because the LLP was Pech’s sole client in the litigation and thus only the LLP itself had standing to sue for malpractice.  Further, although the LLP was later added as a plaintiff, its statute of limitations had expired. 

The trial court agreed with both points and dismissed the case.

Court of Appeal: LLP’s Claim Time-Barred and Distinct from Individual Claim

Though Engel appealed, the California Court of Appeal affirmed the lower court’s decision. After confirming the statute of limitations for the LLP’s malpractice claim had run, the court ruled Engel’s attempt to amend the complaint and add the LLP as a plaintiff was invalid because it did not meet the requirements for relating back to the filing date of the original complaint. Though amended complaints may in some instances relate back to the date of filing of the original complaint, they must rest on the same general set of facts and the same injury. Amendments involving a new plaintiff (the LLP) do not automatically relate back because in many instances they do not seek vindication of the same rights asserted by the original plaintiff.

Affirming the trial court’s ruling, the Court of Appeal held Pech’s legal liability or obligation to the LLP was distinct from his legal liability to Engel. Specifically, the retainer agreement stated Pech represented only the LLP in the underlying litigation. Therefore, only the LLP could have suffered damages attributable to Pech’s malpractice, stating” only the partnership has potentially viable claims for malpractice” (2) and “because the LLP’s potentially viable claims for malpractice are a property acquired by the partnership and not of the partners individually . . . the LLP’s malpractice claims belong solely to the LLP and not to Engel.” Id. at 1241.

Key Takeaways

Engel v. Pech reinforces the important concept of the legal distinction between a business entity and its owners. This is of particular importance pursuing claims against attorneys for malpractice when there are both legal entities and individuals involved. Any claims arising from a lawyer’s errors may belong to the entity alone, the individuals alone, or some combination of the two, depending upon the structure of the retainer agreement and how the case was originally filed. Due to the waiver of the attorney client privilege that comes with the filing of any malpractice lawsuit, other cases hold that the right to bring a malpractice claim cannot be assigned or transferred. Coupled with the short statute of limitations for legal malpractice claims, it is critically important to take care to ensure the right party is designated as the plaintiff.

If contemplating a legal malpractice action, it is crucial to review the retainer agreement between all parties, as well as the complaint in the underlying case. to determine how to properly file a claim within the allowed timeframe. For questions regarding any potential legal malpractice issue, contact the attorneys at the Maloney Firm.

On January 18, 2024, The Maloney Firm’s attorneys Carl Mueller and Gary Varnavides achieved a resounding victory for their client before the California Court of Appeal, resolving a multi-year litigation entirely in their client’s favor.

The case involved their client’s receipt of approximately $1.2 million in cash and securities held in Wells Fargo brokerage accounts from the client’s lifelong friend after the friend died in 2018. In 2020, the plaintiff, the friend’s grandson, filed suit against The Maloney Firm’s client, Wells Fargo, and others asserting claims for breach of fiduciary duty and breach of constructive trust in a bid to obtain a share of the brokerage accounts. In the suit, the plaintiff claimed that he was entitled to the assets in the brokerage accounts because they were held in trust for him and other unspecified beneficiaries.

At the trial court level, The Maloney Firm successfully obtained a dismissal of the plaintiff’s claims, following multiple demurrers. Plaintiff appealed. The complex appeal touched on issues involving California’s probate and banking laws and fiduciary duties.

The Court of Appeal denied plaintiff’s appeal in its entirety and affirmed the trial court’s dismissal, with prejudice. In its Opinion, the Court of Appeal found that plaintiff’s claims wholly failed to properly allege the nature and existence of specified trust beneficiaries and, therefore, plaintiff’s claims failed in their entirety.

The Maloney Firm is pleased to achieve such a complete victory for their client so he can finally put years of litigation behind him.

The case is Stordahl vs. Johnson, Wells Fargo Clearing Services, LLC, et al., Appeal No. B324765, B326356 (CA Ct. of Appeal, Second Appellate District, Division Four).

The Maloney Firm is pleased to announce that two of our attorneys have been recognized as Super Lawyers in Southern California for 2024. The list includes outstanding lawyers with a excellent peer recognition and achievement in their practice areas. Maloney Firm attorneys Patrick Maloney and Gregory Smith have been recognized this year by Super Lawyers as among the top rated Business Litigation attorneys in Southern California.

About Super Lawyers

Super Lawyers, part of Thomson Reuters, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area. The result is a comprehensive and diverse listing of exceptional attorneys.

About the Maloney Firm

The Maloney Firm represents clients in trials, arbitrations, and appeals in state and federal courts, and also regularly counsels clients on a wide range of business matters delivering cost-effective solutions for their legal needs.

Clients of The Maloney Firm receive expertise in and outside of court, even when up against larger, national firms. Always looking out for its clients’ best interests, The Maloney Firm provides significant expertise without significant cost.

For cases filed after January 1, 2024, CCP §2016.090 now includes new rules for initial disclosures of information in discovery.

Timing and Trigger of Initial Disclosures

Any party that has appeared in the litigation may demand that all parties make disclosures 60 days thereafter.  This shortened timeline is intended to encourage early information sharing and foster a more collaborative approach to discovery.  However, disclosures are not required if no demand is made, so parties might be encouraged to reach alternative agreements instead of making such a demand and putting all parties “on the clock.”

Content and Terms of Initial Disclosures

The prior version of CCP §2016.090, authorized the Court to order parties to provide initial disclosures within 45 days of a demand. The amendment to the Discovery Act now removes the need for the court’s intervention and specifies content that must be included in initial disclosures. Parties must disclose:

1. Names and contact information of individuals likely to have relevant, discoverable information regarding disputed claims or defenses (not including expert witnesses, consultants, or information that is to be used solely for impeachment);
2. A brief description of the nature and substance of each party’s claims and defenses; and
3. Copies or descriptions of documents, electronic data, or other tangible items that support each party’s claims or defenses.

The amendment explicitly states that a party cannot avoid the obligation to provide initial disclosures based on reasons such as incomplete case investigation. It also prohibits disputing the adequacy of another party’s disclosures or the non-compliance of another party in making their disclosures.

Exceptions and Limitations to Initial Disclosures

There are some exceptions and limitations to the new initial disclosure rules. For example, the procedure for initial disclosures does not apply to parties who are not represented by counsel, nor does it apply to unlawful detainer actions, small claims actions, or actions brought under the Family or Probate Codes. Additionally, the court may grant an extension of time to provide initial disclosures for good cause shown.

The Courts will also likely have to answer some questions left open by revised statute. For example, are there obligations of a late-added party to make disclosures without an additional demand from the prior parties?

Key Takeaways

The objective of the newly enacted initial disclosure provisions is ostensibly to reduce litigation expenses and, possibly, encourage quicker resolutions to litigation. When parties are required to disclose the factual bases for their allegations at the start of the litigation process, unsupported claims may be identified more quickly. Parties may then be able to cut short the protracted timelines of traditional discovery and shorten the overall length of litigation (and size of attorney’s fees).

The objective of the newly enacted initial disclosure provisions is ostensibly to reduce litigation expenses and, possibly, encourage quicker resolutions to litigation. When parties are required to disclose the factual bases for their allegations at the start of the litigation process, unsupported claims may be identified more quickly. Parties may then be able to cut short the protracted timelines of traditional discovery and shorten the overall length of litigation (and size of attorney’s fees).

More comprehensive responses to initial disclosures can encourage parties to better assess the strengths and weaknesses of their cases at the outset, and experienced practitioners indeed may use these additional tools to efficiently streamline their cases. However, these disclosure requirements may end up introducing more inefficiencies into the discovery process. Since parties may still demand up to four supplemental disclosures, along with the initial disclosures, it is possible the initial disclosures will only add to the tasks required in the discovery process. There is nothing to prevent parties from demanding these new initial disclosures, up to four supplemental disclosures, and also issue regular discovery requests.

By Carl I.S. Mueller, Esq. and Gary A. Varnavides, Esq.

Download a PDF version of this article here

One of the many benefits or drawbacks of arbitration awards is that they are “nearly immune” from challenge on appeal; but, the Court of Appeal recently determined that arbitrator bias due to a non-native English speaker party’s use of a translator provides a basis to overturn an award. On October 17, 2023, the California Court of Appeal published its decision in FCM Investments, LLC v. Grove Pham, LLC, which featured a rare reversal of an arbitration award for $10 million following the failed sale of a nursing home business. The Court of Appeal ruled that the arbitrator demonstrated impermissible bias towards a respondent, an immigrant, by making adverse credibility determinations solely because the respondent testified through an interpreter.

In the underlying claim, plaintiff FCM alleged that defendant Grove breached certain contractual obligations and terminated the deal to sell a nursing home before escrow closed. FCM filed suit and the parties participated in a two-day arbitration in June 2021.

The arbitrator ruled in FCM’s favor, awarding approximately $10 million in damages. The arbitrator found that although the transaction was “rather complicated,” her decision was “made easier” because she believed Grove’s owners suffered “rampant and obvious” credibility issues. With respect to Phuong Pham, the arbitrator wrote:

“Mrs. Pham’s use of an interpreter appeared to the Arbitrator to be a ploy to appear less sophisticated than she really is.”

As expected, the trial court entered judgment on the arbitration award. But the Court of Appeal reversed, vacating the award. Though “arbitration awards are ‘nearly immune’ from attack,” the Court of Appeal found the arbitrator’s adverse credibility determinations were the product of racial bias and rose to the level of “misconduct.”

The FCM Investments, LLC, decision discusses a range of legal issues pertaining to arbitration, bias, and appellate procedure, making the decision a must read for lawyers practicing in these areas. But the heart of the case is the Court of Appeal’s focus on racial bias. Rule 8.4.1 of the California Rules of Professional Conduct prohibits discrimination in the legal profession. Lawyers must familiarize themselves with this rule, and the potential for bar discipline for violating it. Attorneys should also appreciate that if they make impermissible arguments based on a party’s or witness’ membership in a protected category, their clients may pay a heavy price, including an appellate reversal of a favorable award and the burden of starting over at square one.

About the Authors:

 

Carl I.S. Mueller is a business litigation attorney that represents clients in all phases of civil litigation in California and Oregon. Mr. Mueller’s practice has a focus on attorney-client disputes of all kinds. If you have questions regarding this article contact Carl Mueller at cmueller@maloneyfirm.com.

 

Gary A. Varnavides has extensive experience representing and advising a diverse array of clients in a wide range of commercial litigation matters and governmental and regulatory investigations. He is licensed in New York and California and can be reached at gvarnavides@maloneyfirm.com.

.

On October 10, 2023, a Los Angeles Superior Court jury returned a verdict in favor of a law firm represented by Carl Mueller. Mr. Mueller singlehandedly took on a defense team of three experienced attorneys from a prominent firm, funded by a billionaire client. Though outnumbered, Mr. Mueller was not overmatched. Mr. Mueller persuaded the jury to award his client every penny of the unpaid legal fees and costs, as well as an award of interest.

Patrick Maloney and Elizabeth Schaus of the Maloney Firm, APC, Obtain Ruling from California Appellate Court Upholding Dismissal of Legal Fee Dispute.

On Wednesday, September 20, 2023, Patrick Maloney argued to the California 2nd District Court of Appeal that it should uphold a trial court order dismissing a lawyer’s claim for fees from a former client because the suit was filed too late. A day later on Thursday, September 21, 2023, the Court of Appeal issued its opinion, finding that the lawyer had waited too long to file suit and the statute of limitations barred his claims.

The attorney, Robert Kent, had claimed to represent Richard Kay on a contingent fee arrangement. But Kent had not, as required by California Business & Professions Code § 6147, obtained a written fee agreement signed by Kay. Because Kent had not complied with the statute, he was only entitled to receive a reasonable fee for his services, rather than the fee he claimed Kay had agreed to pay. Moreover, because Kent had not obtained a signed fee agreement, he had to file his claim within two years, rather than the four-year period applicable to written fee agreements. Both the trial court and the California Court of Appeal saw through Kent’s excuses, finding that Kent had filed the lawsuit too late because he did so more than two years after last rendering services for Kay.

These rulings reflect that courts will scrutinize a lawyer’s compliance with the rules and requirements governing fee arrangements with clients. Lawyers who fail to follow those rules will likely suffer the consequences, either in the form of a reduced fee or losing their right to payment.

The lawyers at the Maloney Firm represent both lawyers and their former clients in legal malpractice cases, disputes over fees, and claims of breach of fiduciary duty. The firm also provides advice and counsel to lawyers seeking to ensure they have complied with applicable rules and statutes. You may contact Patrick Maloney at pmaloney@maloneyfirm.com. Elizabeth Schaus may be reached at eschaus@maloneyfirm.com.

By Carl I.S. Mueller, Esq.

.

Download a PDF version of this article here

.

On June 22, 2023, the California Supreme Court approved one of two alternative versions of the proposed Rule of Professional Conduct 8.3, which has been derisively referred to as the “Snitch Rule.” In summary, the new Rule 8.3(a) requires a lawyer to report colleagues to the State Bar or other authorities in certain situations, as follows:  

A lawyer shall, without undue delay, inform the State Bar, or a tribunal* with jurisdiction to investigate or act upon such misconduct, when the lawyer knows* of credible evidence that another lawyer has committed a criminal act or has engaged in conduct involving dishonesty, fraud,* deceit, or reckless or intentional misrepresentation or misappropriation of funds or property that raises a substantial* question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer in other respects.

Many lawyers fear Rule 8.3 will result in a flood of complaints to the State Bar by lawyers seeking to punish their opposing counsel or gain an advantage in litigation. However, the majority of other jurisdictions in the United States maintain some version of the mandatory reporting requirements of Rule 8.3 and have not seen such a tidal wave. Rather, Rule 8.3 contains several qualifications that will likely the qualifications of Rule 8.3 are likely to limit the situations wherein reporting opposing counsel is appropriate.

First, Rule 8.3(a) limits the reporting requirement to instances wherein a lawyer “knows of credible evidence” of a crime or “conduct involving fraud, deceit, [etc.],” that “raises a substantial question as to that lawyer’s honesty, trustworthiness, or fitness as a lawyer.” As such, there is no reporting requirement where the reporting lawyer lacks evidence that can accompany the report. Additionally, the intent and “substantial question” requirements of Rule 8.3 raise the level of act that falls within the rule’s scope, such that the evidence must show that the offending lawyer’s subjective belief was that the actions were criminal, wrong, or dishonest, rather than falling within an acceptable interpretation of the applicable law or rules by the offending attorney.

Second, Rule 8.3(d) creates a broad exception, excluding from the reporting requirement “information gained by a lawyer while participating in a substance use or mental health program, or require disclosure of information protected by Business and Professions Code section 6068, subdivision (e) and rules 1.6 and 1.8.2; mediation confidentiality; the lawyer-client privilege; other applicable privileges; or by other rules or laws, including information that is confidential under Business and Professions Code section 6234.” In other words, there are many plausible and foreseeable scenarios where a lawyer will be aware of evidence that should be reported pursuant to Rule 8.3(a), but the lawyer will be precluded from reporting the same information due to the broad nature of the duty of confidentiality (or the other areas of exclusion referenced above). Indeed, California’s high standards on the duty of confidentiality will likely greatly limit the situations wherein reporting opposing counsel under Rule 8.3 is even allowed.

Third, nothing in Rule 8.3 abrogates Rule 3.10(a)’s bar of threats “to present criminal, administrative, or disciplinary charges to obtain an advantage in a civil dispute.” To wit, comment 8 to Rule 8.3 reminds lawyers of the same. As many lawyers know, the threat of action is often more effective than the action itself. A complaint to the State Bar can often have the unintended consequence of prolonging a dispute, because a lawyer defending against the complaint will be forced to prove the merits of his position rather than agreeing to a favorable settlement to avoid being proven wrong.

Rather than causing a deluge of snitching against opposing counsel, Rule 8.3 will hopefully prod otherwise reticent attorneys to report their colleagues if they engage in wrongdoing (e.g., reporting trust account theft). Whether or not Rule 8.3 achieves that goal remains to be seen. In the interim, lawyers should think carefully about the potential consequences before deciding to snitch on their opposing counsel.

Congratulations to The Maloney Firm, APC litigation team of Patrick M. Maloney, Carl I. S. Mueller, and Brittany B. Genthert who obtained a $1,141,963.50 decision on behalf of their client, Son of the South Owner, LLC in JAMS Arbitration. The arbitration centered around The Maloney Firm’s client being defrauded into entering a film promotion agreement, and being cheated out of hundreds of thousands of dollars. The arbitration award includes a finding of $750,000 of punitive damages.