Ang v. Martin, 28389-1-II.

• Decision Date: 23 September 2003
• Docket Number: No. 28389-1-II.,28389-1-II.
• Citation: 118 Wn. App. 553,76 P.3d 787,118 Wash. App. 553
• Parties: Jessy A. ANG, M.D., and Editha A. Ang, husband and wife; and Evergreen Medical Panel, Inc., a Washington Corporation, Appellants, v. Michael G. MARTIN and Jane Doe Martin, his wife, and the marital community comprised thereof; and Richard Hansen and Jane Doe Hansen, his wife, and the marital community comprised thereof, Respondents.
• Court: Washington Court of Appeals

76 P.3d 787

118 Wn. App. 553

118 Wash. App. 553

Jessy A. ANG, M.D., and Editha A. Ang, husband and wife; and Evergreen Medical Panel, Inc., a Washington Corporation, Appellants, v. Michael G. MARTIN and Jane Doe Martin, his wife, and the marital community comprised thereof; and Richard Hansen and Jane Doe Hansen, his wife, and the marital community comprised thereof, Respondents.

No. 28389-1-II.

Court of Appeals of Washington, Division 2.

September 23, 2003.

Christopher Holm Howard, Holland Knight LLP, Sam Breazeale Franklin, Lee Smart Cook Martin & Patterson, Seattle, WA, for Respondents.

Robert B. Gould, Attorney at Law, Seattle, WA, for Appellants.

SEINFELD, J.

Jessy and Editha Ang sued their former attorneys, Michael G. Martin and Richard Hansen, for legal malpractice and violations of the Consumer Protection Act (CPA). The allegations arose out of Martin and Hansen's representation of the Angs on federal charges that had resulted in an acquittal. In this case, the trial court dismissed the legal malpractice action after the Angs failed to prove that they were innocent of the charged federal crime. Holding that proof of actual innocence is an essential element of legal malpractice for deficient conduct in a criminal trial, and finding no reversible error, we affirm.

FACTS

Dr. Jessy Ang, a psychiatrist, and his wife Editha own Evergreen Medical Panel, which evaluates injured workers for the Washington State Department of Labor and Industries (L & I). A federal investigation of financial wrongdoing led to the execution of a search warrant for Jessy Ang's office.

During the search, an Internal Revenue Service (IRS) agent discovered copies of the Angs' tax returns and income statements for the mid 1980s to the early 1990s. There were two copies for each year, one was a set filed with the IRS and the other was a set that had been furnished to banks for loan applications. The IRS copies reported significantly lower adjusted gross income figures than those listed on the bank copies.

Faced with possible federal prosecution, Jessy Ang hired Richard Hansen to represent him for a flat fee of $225,000. And Editha Ang hired Michael Martin for a flat fee of $100,000.

A grand jury indicted the Angs on 18 counts, including conspiracy, bank fraud, false statements, and tax fraud. Martin and Hansen arranged a plea agreement with the federal prosecutor, Assistant U.S. Attorney Steve Schroeder. But the Angs rejected Martin and Hansen's proposed plea agreement and instead they proceeded to trial.

After the United States presented its case, Schroeder offered the Angs another plea agreement, which they reluctantly accepted. As a result of the plea, at least in part, L & I revoked Evergreen Medical Panel's qualified provider status.

The Angs contacted attorney Monte Hester for a second opinion as to whether they should have pleaded guilty. Hester reviewed the trial transcript and concluded that the plea offered them no material benefit over going to trial.

The Angs terminated Martin and Hansen, hired Hester and Keith McFie to represent them, and withdrew their guilty plea. They waived their right to a jury trial, proceeded before the federal trial court, and were acquitted.

The Angs sued Martin and Hansen for legal malpractice and violations of the Consumer Protection Act (CPA). They also argued, apparently under their CPA claim, that the terms of Martin's fee agreement with Editha were unsettled. In addition to other damages, the Angs sought disgorgement of the fees that they had paid to Martin and Hansen. The trial court dismissed the CPA claim and denied the request for disgorgement without sending those questions to the jury. It allowed the legal malpractice claim to proceed.

At trial, Editha Ang's brother Benjamin Almeda testified about a conversation he had with Hansen in the courthouse parking lot after the Angs pleaded guilty. Almeda testified that he told Hansen that he overheard the federal trial jury say they would not have found Jessy Ang guilty.

Later, Schroeder testified that several jurors told him they believed the Angs were guilty. Over the Angs' hearsay objection, the trial court admitted Schroeder's testimony but gave the jury a limiting instruction.

The trial court ruled that the Angs needed to prove to the jury by a preponderance of the evidence that they were not guilty of the federal crimes charged in order to prevail on their legal malpractice claim. But after Martin and Hansen presented evidence of their guilt, including the seized tax returns and income statements, the jury found that the Angs had failed to prove their innocence, and the trial court subsequently dismissed their legal malpractice claim.

The Angs appeal, arguing that (1) the trial court erred by submitting the question of their innocence to the jury because the acquittal conclusively established innocence; (2) Schroeder's testimony was inadmissible hearsay and prejudicial to their case; (3) the trial court improperly advised the jury to disregard the instructions on the verdict form; and (4) the trial court erred by declining to have the jury determine the terms of Martin's fee agreement and the disgorgement issue.

DISCUSSION

I. Proof of Innocence

The Angs claim that the trial court erred by submitting the question of their innocence to the jury. They argue that proof they had been acquitted at their criminal trial proved, as a matter of law, their innocence in the malpractice action.

To succeed on a claim of legal malpractice allegedly occurring in a criminal trial, a plaintiff must prove "at a civil trial that he or she is innocent of the charged crime" and must do so by a preponderance of the evidence. Falkner v. Foshaug, 108 Wash. App. 113, 119, 29 P.3d 771 (2001) (emphasis added). We hold that this requires the plaintiff to prove innocence in fact and not merely to present evidence of the government's inability to prove guilt.

There are sound policy reasons for the proof of innocence requirement, namely

prohibit[ing] criminals from benefiting from their own bad acts, maintain[ing] respect for our criminal justice system's procedural protections, remov[ing] the "harmful chilling effect" on the defense bar, prevent[ing] suits from criminals who "may be guilty, [but] ... could have gotten a better deal," and prevent[ing] a flood of nuisance litigation.

Falkner, 108 Wash.App. at 123-24, 29 P.3d 771 (citation omitted). Proof of innocence in fact more appropriately furthers these policies. And the Angs' acquittal on the criminal charges did not prove their innocence in fact, "it merely prove[d] the existence of a reasonable doubt as to [their] guilt." United States v. One Assortment of 89 Firearms, 465 U.S. 354, 361, 104 S.Ct. 1099, 79 L.Ed.2d 361 (1984).

In 89 Firearms, a jury apparently accepted the defendant's entrapment defense and acquitted the defendant of charges that he knowingly dealt in firearms without a license. 465 U.S. at 355-56, 104 S.Ct. 1099. In the government's subsequent civil action for forfeiture of the seized firearms, the defendant asserted the defenses of collateral estoppel and res judicata. 89 Firearms, 465 U.S. at 356, 104 S.Ct. 1099. The District Court rejected the defenses and ordered forfeiture. The U.S. Supreme Court agreed, reasoning that

the jury verdict in the criminal action did not negate the possibility that a preponderance of the evidence could show that Mulcahey was engaged in an unlicensed firearms business. Mulcahey's acquittal on charges brought under § 922(a)(1) therefore does not estop the Government from proving in a civil proceeding that the firearms should be forfeited pursuant to § 924(d). It is clear that the difference in the relative burdens of proof in the criminal and civil actions precludes the application of the doctrine of collateral estoppel.

89 Firearms, 465 U.S. at 362, 104 S.Ct. 1099 (emphasis added).

Similarly, the court in United States v. Watts noted that "`[a]n acquittal is not a finding of any fact. An acquittal can only be an acknowledgment that the government failed to prove an essential element of the offense beyond a reasonable doubt.'" 519 U.S. 148, 155, 117 S.Ct. 633, 136 L.Ed.2d 554 (1997) (quoting United States v. Putra, 78 F.3d 1386, 1394 (9th Cir.1996)).

The Angs also complain that the jury did not have "adequate instructions for the jury to measure, by way of Federal criminal law, [the Angs'] guilt or innocence." Reply Br. of Appellant at 9. But Martin and Hansen introduced as exhibits the proposed jury instructions from the Angs' federal criminal trial, which described the elements of the charged crimes. Further, the Angs did not assign error to the trial court's instructions to the jury or describe such an argument as an issue pertaining to their assignments of error as required under RAP 10.3(a)(3) and (5).¹ The Angs argue that a requirement that they relitigate their innocence violates the doctrine of judicial estoppel as enunciated by Falkner. Falkner described the doctrine as "[p]reventing `perversion of the judicial process' by not allowing parties to `gain an advantage by litigation on one theory, and then seek[ing] an inconsistent advantage by pursuing an incompatible theory.'" Falkner, 108 Wash.App. at 124,29 P.3d 771 (citations omitted).

Robert Falkner pleaded guilty, using an Alford² plea and maintaining his innocence; he then brought a legal malpractice action in which he sought to relitigate his innocence. Falkner, 108 Wash.App. at 116, 29 P.3d 771. The Falkner Court held that judicial estoppel did not prevent Falkner from relitigating his innocence even though he had pleaded guilty. 108 Wash.App. at 125, 29 P.3d 771.

In contrast to Falkner, here the Angs seek to employ judicial estoppel to limit the defense. Further, the facts and legal issues here are substantially different from those in Falkner. Most significantly, this case does not involve a defendant's effort to deny the plaintiff in a civil case the...