Jackson v. Roe

• Decision Date: 11 December 2001
• Docket Number: No. 00-15614,PLAINTIFFS-APPELLANTS,DEFENDANTS-APPELLEES,00-15614
• Citation: 273 F.3d 1192
• Parties: (9th Cir. 2001) GLENN K. JACKSON INC., DBA JACKSON & DONAHUE; GLENN K. JACKSON,, v. RICHARD ROE; STUART, MAUE, MITCHELL & JAMES,
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1192

273 F.3d 1192 (9th Cir. 2001)

GLENN K. JACKSON INC., DBA JACKSON & DONAHUE; GLENN K. JACKSON, PLAINTIFFS-APPELLANTS, v. RICHARD ROE; STUART, MAUE, MITCHELL & JAMES, DEFENDANTS-APPELLEES.

No. 00-15614

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted October 10, 2001

Filed December 11, 2001

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] John D. O'Connor, Laura E. Malkofsky, Robert A. Roth, Tarkington, O'connor & O'neill, San Francisco, California, for appellants Glenn K. Jackson, Inc., dba Jackson & Donahue a corporation, and Glenn K. Jackson an individual.

James M. Wagstaffe, Pamela Urueta, Timothy J. Fox, Kerr & Wagstaffe Llp, San Francisco, California, and Steven H. Leyton, Stone, Leyton & Gershman, St. Louis, Missouri, for appellee Stuart, Maue, Mitchell & James, Ltd.

Appeal from the United States District Court for the Northern District of California Marilyn H. Patel, District Judge, Presiding D.C. No. CV-97-04216-MHP

Before: Pregerson, Rawlinson, Circuit Judges, and Weiner, District Judge.¹

Weiner, Senior District Judge.

I.

Glenn K. Jackson, Inc., d.b.a. Jackson & Donahue, and Glenn K. Jackson individually (collectively "J&D") appeal the district court's granting of summary judgment in favor of Stuart, Maue, Mitchell & James ("Stuart Maue") in J&D's diversity action seeking relief under California law. The action arises out of an audit conducted by Stuart Maue of J&D's billing statements sent to Golden Eagle Insurance Company. J&D billed Golden Eagle for attorneys' fees incurred while representing Golden Eagle and its insureds in worker's compensation cases, as one of Golden Eagle's panel counsel. The district court had jurisdiction pursuant to 28 U.S.C. §§§§ 1332, 1441; this court has jurisdiction pursuant to 28 U.S.C. §§ 1291. We affirm in part and reverse in part.

II.

Jackson & Donahue is a law corporation owned by Glenn K. Jackson. J&D is primarily involved in the defense of insureds in workers' compensation litigation. In early 1995, Golden Eagle hired J&D to represent it and its insureds in workers' compensation cases as one of its panel counsel. Before beginning work for Golden Eagle, Jackson, on behalf of his firm, acknowledged and agreed to Golden Eagle's Litigation Handling Procedures for Panel Counsel (the"Guidelines") by returning a signed copy of the Guidelines to Golden Eagle. One purpose of the Guidelines was to provide billing instructions for the firm. The Guidelines authorized Golden Eagle to conduct on-site audits of J&D, utilizing both independent legal bill auditing firms and internal teams of auditors, claims personnel and/or lawyers.

In his declaration in opposition to the motion for summary judgment, Jackson stated he "felt" that he had the right to object to the auditors selected, and withhold his approval and cooperation, if the auditors assigned to perform the audit were incompetent or biased or, for whatever reason, including lack of sufficient pay, did not intend to spend the time necessary to adequately analyze the billing records. In addition, Jackson felt he had the right to discuss with Golden Eagle any objections he had to either the auditor or the procedures employed. The Guidelines, however, state only that the audit"would be based upon solely the work quality, reporting and time and costs disbursements."

During the period of February 24, 1995 to June 6, 1996, J&D submitted bills to Golden Eagle for legal fees in the amount of $793,957.25 and expenses in the amount of $57,472.55. J&D utilized a "fee schedule" for certain tasks, i.e., set monetary charges for specific tasks, rather than using time-based billing, on invoices to Golden Eagle. Although Jackson disputed that the Guidelines prohibited the submission of legal bills with "blocked-billed" entries, he conceded that the Guidelines provided that "block billing is unacceptable and will not be paid."

In January 1996, Golden Eagle informed J&D that it would be audited and hired Stuart Maue to do the work. Stuart Maue is engaged in the business of legal auditing. From July 8 through July 11, 1996, John Decker of Stuart Maue conducted an audit at Jackson's office. According to Jackson, Decker spent a total of about fifteen hours on-site reviewing one hundred twenty three requested files. In August 1996, Stuart Maue submitted its audit report to Golden Eagle. Decker's analysis of J&D's billing statements resulted in the classification of $266,626.75 as unverified fees and $1,425.49 as unverified expenses. Thereafter, J&D and Golden Eagle entered into a settlement on the fee dispute. Golden Eagle stopped referring cases to J&D after Stuart Maue issued the audit report.

J&D's First Amended Complaint alleges claims of breach of contract, negligence, breach of fiduciary duty, fraud and deceit, defamation, intentional interference with contract and prospective business advantage, and unfair competition and false advertising. The district court granted summary judgment in favor of the defendant on all claims. J&D appeals the grant of summary judgment on the causes of action for negligence, fraud, defamation, and unfair competition. In addition, Jackson appeals the district court's ruling that he lacked standing on the defamation claim.

III.

A grant of summary judgment is reviewed de novo. Weiner v. San Diego County, 210 F.3d 1025, 1028 (9th Cir. 2000); Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc). The appellate court's review is governed by the same standard used by the trial court under Federal Rule of Civil Procedure 56(c). Adcock v. Chrysler Corp., 166 F.3d 1290, 1292 (9th Cir. 1999); Meade v. Cedarapids, Inc. , 164 F.3d 1218, 1221 (9th Cir. 1999). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. See, Lopez, 203 F.3d at 1131; Balint v. Carson City, 180 F.3d 1047, 1050 (9th Cir. 1999) (en banc). Our place is not to weigh the evidence or determine the truth of the matter, but only determine whether there is a genuine issue for trial. Id. at 1054.

IV.

To whom did Stuart Maue's duty of care run?

[1] Under California law, "[t]he threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another that enjoys legal protection against unintentional invasion . . . . Whether this essential prerequisite to a negligence cause of action has been satisfied in a particular case is a question of law." Adelman v. Associated International Insurance Co., 90 Cal.App.4th 352, 360, 108 Cal.Rptr.2d 788, 793 (2001). In Biakanja v. Irving, 49 Cal.2d 647, 320 P.2d 16 (1958), the California Supreme Court undertook to create a checklist of factors to consider in assessing the existence of a legal duty of one party to another in the absence of privity of contract between them. In Biakanja, the defendant notary public had prepared the will of plaintiff's brother which left the entire estate to the plaintiff. Due to defendant's negligence, the will was improperly attested and could not be admitted to probate. As a result, plaintiff received only her intestate share of the estate. The court concluded that defendant owed a duty of reasonable care to plaintiff which he had clearly breached. In reaching this conclusion, the Court was careful not to declare an unlimited scope of liability in favor of any person who might have received a benefit under a contract but for its negligent performance. The Court emphasized that the "end and aim " of the transaction was to benefit the plaintiff Biakanja and the injury to her from Irving's negligence was clearly foreseeable. Id. at 650, 320 P.2d 16.

The determination whether in a specific case the defendant will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are [1] the extent to which the transaction was intended to affect the plaintiff, [2] the foreseeability of harm to him, [3] the degree of certainty that the plaintiff suffered injury, [4] the closeness of the connection between the defendant's conduct and the injury suffered,[5] the moral blame attached to the defendant's conduct, and [6] the policy of preventing future harm.

Id. This test has been used in cases applying Biakanja to impose a duty of care and liability in negligence for its breach, in a variety of contexts. See, e.g., Lucas v. Hamm, 56 Cal.2d 583, 15 Cal.Rptr. 821 (1961) (attorney who undertakes to draft or prepare a will owes a duty not only to the testator but also to the testator's intended beneficiary to complete the task in a manner which will achieve the testator's purpose); Connor v. Great Western Savings & Loan Assn., 69 Cal.2d 850, 73 Cal.Rptr. 369 (1968) (applying the Biakanja factors to find that a construction lender owed a duty to third party home buyers to discover and prevent major defects in homes the construction of which it financed because, by virtue of its position, it exercised control over the quality of the construction); Roberts v. Ball, Hunt, Hart, Brown & Baerwitz, 57 Cal.App.3d 104, 128 Cal.Rptr. 901 (1976) (attorney, in giving a written opinion to a client, which the attorney knew would be transmitted to and relied upon by a third party in dealing with the client, owed a duty of care to such third party in providing advice to the client because the third party's anticipated reliance was the end and aim of the transaction); J'Aire Corp. v. Gregory, 24 Cal.3d 799, 157 Cal.Rptr. 407 (1979) (contractor liable to lessee of premises for negligent delay in construction because injury from delay was foreseeable and circumstances established a special relationship between contractor and lessee even though they were not in privity of contract). As a group, these cases establish the principle that "where the `end and aim' of...