CA Court of Appeal Clarifies Termination of Tolling Period for Legal Malpractice Statute of Limitations Under Code of Civil Procedure § 340.6 (a)(2)
By: Carl I. S. Mueller of The Maloney Firm, APC
On October 12, 2016, the California Court of Appeal filed its opinion in the matter styled as Gotek Energy, Inc. v. Socal IP Law Group, LLP. The central issue of law on appeal in this legal malpractice action was whether the trial court below correctly entered summary judgment in favor of the defendants, Socal IP Law Group, LLP (“firm one”), based on a statute of limitations defense. At a basic level, the appellate court reaffirmed the rule that the one year statute of limitations for legal malpractice actions is not tolled pursuant to Cal. Code of Civil Procedure § 340.6 (a)(2) once legal representation has terminated. However, the facts of the case make clear that the language of the communications is of the utmost importance in determining when the legal representation ends. Thus, the summary judgment ruling was affirmed and the legal representation found to have ended on the date that firm one sent a letter to its client stating that the attorney-client relationship “is terminated forthwith.”
To sum up the facts of the case, firm one represented Gotek Energy, Inc. (“client”) in relation to specific patent filings. Firm one admittedly failed to timely file for patent rights in Japan and Brazil, and informed client in August 2012 that it had been negligent. On September 26, 2012, client retained Parker Mills (“firm two”) to investigate firm one’s negligence. On November 5, 2012, firm one sent a fax to firm two stating that client was making a malpractice claim on firm one, and asking firm one to tender the claim to its insurance carrier. On November 7, 2012, firm one sent an email to client stating that it “must withdraw” and including the following language:
Consequently, the firm’s attorney-client relationship with [client] is terminated forthwith, and we no longer represent [it] with regard to any matters.[…] Please tell us immediately where we should send [client’s] files[…]. You should retain patent counsel to handle your patent matters.
Client requested that firm one release client’s files to a third law firm on November 8, 2012, requesting the transfer be complete by November 23, 2012. On November 15, 2012, firm one sent client a letter to “confirm” that the attorney-client relationship had been “terminated” and that the client’s files would be released pursuant to the request.
Firm two filed client’s complaint for legal malpractice against firm one on November 14, 2013. There is no dispute that the injury occurred at least by September 26, 2012, and likely before. However, client argued that the statute of limitations should be tolled until November 15, 2012, when firm one released client’s file.
The Appellate Court disagreed, stating that firm one’s representation of client ended by November 8, 2012:
[F]irm one’s representation of client ended on November 8, 2012, when client wrote a letter to firm one requesting that it “immediately make all necessary preparations and take all necessary action to deliver all [of client’s] filed to” Armstrong Teasdale, LLP. [Omitted]. By requesting that its files by immediately delivered to replacement counsel, client consented to firm one’s express withdrawal of the previous day.
The court further ruled that based on firm one’s letter to client on November 7, 2012 stating that it was terminating the attorney-client relationship, client had no reasonable expectation of firm one’s continuing representation after that date under the rule set out in Gonzalez v. Kalu (2006) 140 Cal.App.4th 21. As such, the statute of limitations stopped tolling on November 7, 2012:
Pursuant to this rule, firm one’s representation ended on November 7, 2012. On that date, firm one emailed client that it “must withdraw” as client’s attorney, that is “attorney-client relationship with [client] is terminated forthwith,” and that it “no longer represent[s] [client] with regard to any matters.” After receiving the email, client could not reasonably have expected that firm one would provide further legal service.
As such, it appears that the Appellate Court has used this opportunity to establish a bright line rule to end the ongoing representation tolling rule of a legal malpractice statute of limitations under Code of Civil Procedure § 340.6 (a)(2): when a client has already engaged replacement counsel, the ongoing representation ends upon a communication with the client that states the attorney-client relationship is ending. As stated by the court, any delay in releasing the client’s files does not continue the representation, as “the transfer of files was a clerical, ministerial activity,” and not legal representation.
Congratulations to Patrick M. Maloney for becoming a newly appointed member of the California State Bar’s Committee on Mandatory Fee Arbitration. Mr. Maloney’s three-year term begins today. The committee’s primary function is to oversee the mandatory attorney-client fee arbitration program established by Business & Professions Code Sections 6200-6206.
Court Grants Law Firms Wide Berth In Celebratory Press Releases
By: Carl I. S. Mueller of The Maloney Firm, APC
In J-M Manufacturing Company, Inc. v. Phillips & Cohen LLP, the California Appellate Court considered whether a defamation and trade libel claim based on a law firm’s celebratory press release fell within Code of Civil Procedure § 425.16. In its decision filed on May 2, 2016, the Court of Appeal reversed the trial court’s decision that “it was a question of fact for the jury whether the press release was privileged as a fair and true report of judicial proceedings” within Civil Code § 47, and granted the law firm’s Anti-SLAPP motion striking the defamation and trade libel allegations.
The press release at issue arose from a jury decision as to liability in a bifurcated trial finding against J-M Manufacturing Company, Inc. (“J-M”), as follows:
On November 14, 2013 the jury returned a special verdict in favor of each of the five representative plaintiffs, finding that J-M did “present or caused to be presented to a [government] officer or employee a claim for payment or approval that was false or fraudulent,” that the claim was materially false and that J-M presented the false claim with the requisite intent.
However, no decision was made as to damages. Like many law firms, the law firm trying the case against J-M, Phillips & Cohen LLP (“Phillips & Cohen”), issued a press release announcing the winning verdict on the liability stage, with the following headline:
JM Eagle faces billions in damages after jury finds JM liable for making and selling faulty water pipes.
Phillips & Cohen also included within its press release that the jury found that J-M “knowingly manufactured and sold to government entities substandard plastic pipe,” despite the jury making no express findings as to these allegations.
In response to the press release, J-M filed a lawsuit against Phillips & Cohen that alleged defamation and trade libel:
[S]tatements in Phillip & Cohen’s press release that “a federal jury unanimously found that J-M manufactured and sold pipe that is ‘faulty,’ ‘substandard,’ ‘weak,’ and ‘shoddy’” were “neither a fair nor an accurate report of the proceedings” and grossly misrepresented the jury’s findings.
Applying Civil Code § 47, the Court of Appeal was tasked to determine whether a privilege existed for Phillip & Cohen’s statements as a “fair and true” report of official proceedings. Although the trial court had found that adequate evidence had been presented in opposition to Phillip & Cohen’s Anti-SLAPP motion to allow this issue to be decided by a jury, the Court of Appeal found:
[I]n measuring “a ‘fair and true report’” the defendant is “permit[ted] a certain degree of flexibility/literary license,” [Citing Reader’s Digest Assn. v. Superior Court (1984) 37 Cal.3d 244, 262, footnote 13.]
Further the Appellate Court ruled that any challenged statements must be read in light of the entirety of the allegedly defamatory publication:
[T]he challenged language must be viewed in context to determine whether, applying a “totality of the circumstances” test, it is reasonably susceptible to the defamatory meaning alleged by the plaintiff.
In its opposition to the Anti-SLAPP motion, J-M conceded its allegation arose out of protected activity, but still contested, and the trial court agreed, that there was enough evidence to show a likelihood of prevailing on its claim. But the Appellate Court held in its decision to reverse:
To describe the noncompliant and misrepresented pipe sold by J-M as “faulty” or “substandard” falls well within the acceptable margin of flexibility/literary license.
Further, as to the misleading headline, the Appellate Court determined that any misunderstanding would be cured after “the headline is read and considered with the press release as a whole.”
As such, the Appellate Court has apparently opened the door for law firms to issue flashy press releases – even if it rises to “self promotion or puffery” – provided that the bravado of those headlines are properly explained within the body of the press release.
In a published decision, the California Court of Appeal recently ordered a major law firm to return $1.3 million in previously paid fees due to a deficient conflict waiver. In this presentation, Patrick Maloney will address the requirements of preparing bullet proof conflict waivers, which are necessary to avoid allegations of malpractice, breach of fiduciary duty, or disgorgement of fees.
Space is limited. Please RSVP by calling 310.540.1505 or emailing firstname.lastname@example.org.
Patrick Maloney will be on the panel for tonight’s CEO Roundtable of business leaders providing insight and guidance to local high school students participating in the Young Entrepreneurs Academy. To learn more about YEA, Click Here.
Congratulations to Patrick M. Maloney for being named to the 2016 Southern California Super Lawyers list, an honor bestowed upon only 5% of attorneys. Super Lawyers 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 selection process includes independent research, peer nominations and peer evaluations.
Shocking Behavior Sets New Standard for Terminating Sanctions
By Carl Mueller, The Maloney Firm, APC
In a recent decision, Crawford v. JPMorgan Chase Bank, N.A., the California Appellate Court definitively set the upward limit on abusive behavior during a deposition:
If ever a case required terminating sanctions, this is it. Crawford threatened to use pepper spray and a taser on opposing counsel and was openly contemptuous of the trial court. He made it impossible to continue with the litigation. Far from the trial court abusing its discretion, it would have been an abuse of discretion not to impose a terminating sanction.
Crawford v. JPMorgan Chase Bank, N.A. (2015) Appellate Case No. B257412 (emphasis added).
To be sure, the behavior of the attorney in question, the named appellant, Mr. Crawford, was particularly egregious. At his deposition, Mr. Crawford produced a can of pepper spray during initial admonitions said:
Mr. Traver, if things get out of hand, I brought a what is legally pepper spray, and I will pepper spray you if you get out of hand.
Which Mr. Crawford followed by producing a stun gun and saying:
If that doesn’t quell you, this is a flashlight that turns into a stun gun.
Mr. Crawford then demonstratively discharged the stun gun twice.
Defeating Class Certification – When a Win Really Isn’t a Win
By Gene Williams, The Maloney Firm, APC
Attorneys who defend against class action lawsuits know that the most effective and decisive way to beat such a lawsuit is to defeat class certification. A denial of class certification reduces an otherwise large case with significant exposure for the defendant to a single plaintiff (or a small number of plaintiffs), and can then be resolved either with a motion for summary judgment or a modest settlement. However, not all denials of class certification are treated equally, as the defendant in Tellez v. Rich Voss Trucking, Inc., Santa Clara County Sup. Ct. No. 1-12-CV-227103 recently learned.
In Tellez, plaintiff filed a putative class action against Rich Voss Trucking alleging wage and hour violations. After substantial delay by the plaintiff, including one granted extension of time to file a motion for class certification and after another request for extension was denied, Plaintiff filed his motion for class certification. The court set the motion for hearing and issued a tentative denying the motion for class certification, but provided no basis for that denial. The tentative simply stated that the motion was denied.
In connection with the hearing on the motion, the plaintiff failed to comply with Santa Clara County local rules regarding contesting a tentative, which required the plaintiff to call the court and opposing counsel the day before the hearing to inform them of the party’s intent to contest the tentative. As a result, the defendant’s counsel did not appear at the hearing, and the court expressed its frustration with Plaintiff’s counsel that it could not substantively discuss the motion because defendant’s counsel was not present. The court simply indicated that the tentative would become final. When plaintiff’s counsel asked if the Court would provide a more detailed explanation of the basis for its denial of class certification, the Court stated that “I don’t intend to.”
Terms like “Chapter 11,” “automatic stay,” “core proceedings,” “exclusivity period,” and “nondischargeability” often sound like a foreign language to those who do not regularly practice in the bankruptcy courts. This presentation will help to demystify this lingo and provide attorneys with the an overview of the bankruptcy process so they can provide appropriate advice to their clients. Space is limited. Please RSVP by calling 310.540.1505 or emailing email@example.com.
This presentation has been approved by the State Bar of California for 1.0 hour of MCLE credit.
Does the Chipotle GMO Lawsuit Go Too Far?
By Gene Williams, The Maloney Firm, APC
In recent years, the American public has become markedly more health-conscious with respect to the ingredients contained in the food it consumes, and has demanded increased transparency from the companies who manufacture, prepare and sell food. The companies have acted predictably, looking to capitalize on the public’s desire for information by disclosing more and more information regarding what is or isn’t in the food they sell. The government has done its part by implementing heightened standards for food labeling. And consumer protection attorneys have played their role of watchdog, making sure that the companies who are profiting from this new heightened consumer focus on the ingredients in their food are honest with respect to the representations they make. The system has worked, for the most part, by providing the public with additional information regarding the contents of the food they consume, while allowing companies to profit by charging more for foods that contain premium ingredients, or that remove ingredients perceived as unhealthy or potentially dangerous.
One such example has been products containing genetically modified organisms (“GMOs.”) A large segment of the public has come to feel that GMOs are unhealthy or unsafe, and are willing to pay a premium for products that do not contain GMOs. Companies have obliged by offering and promoting “non-GMO” products, usually at a premium, and consumer protection attorneys have filed lawsuits against companies who falsely claim to be offering “non-GMO” products. Setting aside for a moment the question of whether GMOs are actually unhealthy or unsafe (many of us living in California have benefitted greatly from the drought-resistant and pesticide-resistant grains and fruits that are “genetically modified”), the checks and balances of the system have worked – consumers are given the information necessary to decide whether or not they want to pay more for GMO-free foods, while the companies profit from selling those foods at a higher rate.