By Carl Mueller and Sam Fogas, The Maloney Firm, APC
It might seem obvious, but it bears repeating: diligence cannot be assumed or overlooked when it comes to a client’s case. Law firms should have checks in place to ensure they are preparing and prosecuting their client’s case diligently and not cutting corners. In a pair of recent California Court of Appeal decisions, the Court illustrated the consequences of counsel failing to diligently prepare and prosecute their clients’ cases.
Deposition Testimony: Get It Right the First Time
In Berroteran v. Superior Court (2019) 41 Cal.App.5th 518, the Court of Appeal reversed the trial court’s ruling to deny use of nine depositions of Ford’s current and former employees from prior state and federal cases under California Rule of Evidence § 1291. Despite all nine depositions being taken under oath, all nine declarants being unavailable, and all of the claims from the prior cases being identical to the present case, the trial court determined that Ford did not have a similar opportunity and interest to cross-examine the declarants at deposition in the prior litigation as they did in the current litigation.
However, the Court of Appeal disagreed,
Each deponent was represented by Ford’s counsel, and Ford had the same interest to disprove the allegations related to the [prior cases]. . . . Although each case involved a different plaintiff or additional plaintiffs, the gravamen of each lawsuit was the same or similar. The undisputable fact that every owner will have a different purchase and repair history does not negate Ford’s similar motive in questioning its witnesses on the substantial overlapping allegations . . . .
In its decision the Court of Appeal demonstrates that the circumstances under which a witness’s prior testimony can be admitted are very broad. As such, attorneys must diligently prepare their witnesses to give complete answers, avoiding partial answers that are not beneficial or that can be taken out of context. In other words, prepare your witness to respond for this case and the next.
Prosecuting the Case: Don’t Let Details Fall Through the Cracks
In MGA Entertainment, Inc. v. Mattel, Inc. (2019) 41 Cal.App.5th 554, MGA Entertainment (“MGA”) lost all of its claims because it failed to diligently investigate and pursue claims against Mattel within the statute of limitations. During a lengthy court battle over the ownership of the Bratz line of dolls, MGA became aware of potential trade secret misappropriation by Mattel. MGA, however, missed the statute of limitations deadline to file its claim for misappropriation of trade secrets by three days.
Mattel claimed that the statute of limitations had begun to run because, in a related action, MGA was aware of enough facts that it had served discovery to investigate whether Mattel had misappropriated its trade secrets. MGA hoped and argued that the statute of limitations should have been tolled until they discovered the actual facts underlying each separate act of trade secret misappropriation.
The Court of Appeal was not persuaded by MGA’s argument.
The standard of accrual of the statute of limitations under the discovery rule is not the receipt of documentary evidence of misappropriations. The question is when MGA was “ ‘on notice of a potential claim.’ ” . . . [T]he question is not when MGA actually discovered all 114 misappropriations; it is when MGA by the exercise of reasonable diligence should have discovered Mattel engaged in misappropriation.
Instead, the Court of Appeal held that the statute of limitations began to run as soon as MGA became aware of facts that led them to suspect that Mattel may have engaged in trade secret misappropriation. And, that as a result, MGA could not argue for a date for accrual of the statute of limitations later than the date it served discovery as to trade secrets misappropriations by Mattel.
The exact procedural history and specific aspects of the ruling are not as important as the practical implications: courts will not give clients or their attorneys a second chance to diligently investigate and pursue their claims, regardless of how meritorious those claims may be.
Be Diligent About Diligence
As the two recent decisions from the Court of Appeal reflect, the consequences of failing to diligently prepare and prosecute a client’s case are dire. While not all failures of diligence will result in harmful evidence being introduced or loss of claims, attorneys must be careful to ensure that they are not cutting corners and nothing is falling through the cracks.
About the Authors: Carl Mueller and Sam Fogas
Mr. Mueller represents attorneys and clients in disputes over legal fees and legal malpractice and Mr. Fogas is a civil litigation attorney at The Maloney Firm, APC. If you have questions regarding this article contact Carl Mueller at email@example.com and firstname.lastname@example.org.