O'Connor Agency, Inc. v. Brodkin

• Decision Date: 31 May 2002
• Docket Number: No. G026504.,G026504.
• Citation: 120 Cal.Rptr.2d 336,99 Cal.App.4th 488
• Parties: O'CONNOR AGENCY, INC., Plaintiff and Appellant, v. Alan L. BRODKIN et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

120 Cal.Rptr.2d 336

99 Cal.App.4th 488

O'CONNOR AGENCY, INC., Plaintiff and Appellant, v. Alan L. BRODKIN et al., Defendants and Respondents.

No. G026504.

Court of Appeal, Fourth District, Division 3.

May 31, 2002.

Review Granted August 14, 2002.

Esner & Chang and Stuart B. Esner, Los Angeles, for Plaintiff and Appellant.

Sims & Sprowl, Wayne R. Sims, Costa Mesa, and Selim Mounedji for Defendants and Respondents.

OPINION

MOORE, J.

O'Connor Agency, Inc. (O'Connor) sued attorney Alan Brodkin for negligently failing to recover punitive damages in a lawsuit he brought on O'Connor's behalf. The trial court found O'Connor's action was time barred and granted summary judgment in Brodkin's favor. We conclude the statute of limitations issue was wrongly decided and that recovery of lost punitive damages is available in a legal malpractice action, and therefore reverse.

I FACTS

O'Connor is an advertising agency specializing in ads for the national yellow pages. In 1989, it hired Brodkin to pursue an action against some of its former employees for misappropriation of clients and unfair competition. Following a court trial in 1993, the judge awarded O'Connor $160,467 in compensatory damages and $500,000 in punitive damages.

Defendants appealed, arguing several grounds for reversing the award of compensatory damages, including the sufficiency of the evidence and several of the trial court's evidentiary rulings. They also argued the award of punitive damages was improper because O'Connor failed to present evidence of defendants' financial worth. We agreed and reversed the portion of the judgment awarding punitive damages. We also reduced the amount of the compensatory award. (O'Connor Agency, Inc. v. Anchor Publications, Inc. (July 23, 1997, G015472) [nonpub. opn.] pp. 14-18.)

On July 17, 1998, O'Connor sued Brodkin for negligently failing to prove its claim for punitive damages. Brodkin moved for summary judgment on the basis O'Connor's suit was filed beyond the statute of limitations applicable to legal malpractice actions. (See Code Civ. Proc, § 340.6.) In opposing the motion, O'Connor argued the statute of limitations was tolled throughout the appeal because: (1) it did not sustain actual injury until the appeal was decided; and (2) Brodkin continued to act as its attorney during this time. (Ibid.) The court rejected O'Connor's arguments and granted summary judgment against it. The court also denied O'Connor's motion for reconsideration, and this appeal followed.

While this appeal was pending, Division One of this court decided Piscitelli v. Friedenberg (2001) 87 Cal.App.4th 953, 105 Cal.Rptr.2d 88 (hereafter Piscitelli). Piscitelli held that in a legal malpractice action based on negligence, the plaintiff could not recover lost punitive damages. The parties submitted supplemental briefs addressing Piscitelli.

II DISCUSSION

Standard of Review

This court reviews de novo the trial court's decision to grant summary judgment. (Hersant v. Department of Social Services (1997) 57 Cal.App.4th 997, 1001, 67 Cal.Rptr.2d 483.) We accept as true the facts alleged in the evidence of the party opposing summary judgment and the reasonable inferences that can be drawn from them. (Ibid.) All doubts as to whether any material issues of fact exist are resolved in favor of the party opposing summary judgment. (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 642, 58 Cal.Rptr.2d 89.)

Statute of Limitations

Code of Civil Procedure section 340.6, subdivision (a), states in part: "An action against an attorney for a wrongful act or omission ... arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission ...." The one-year statute of limitations is tolled, however, if "the plaintiff has not sustained actual injury" and while "[t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred...." (Code Civ. Proc, § 340.6, subd. (a)(1), (2).)

When does a client who won its case at the trial court but lost on appeal suffer "actual injury" for purposes of the statute of limitations? The trial court ruled that O'Connor suffered actual injury when "it retained separate counsel and became obligated ... to defend itself in the appeal." O'Connor argues it did not suffer actual injury until this court reversed the judgment in the underlying action.

The key California Supreme Court cases addressing this issue arose in quite different factual settings. In Laird v. Blacker (1992) 2 Cal.4th 606, 7 Cal.Rptr.2d 550, 828 P.2d 691 (hereafter Laird), a client who lost below argued she had not suffered actual injury until her appeal was rejected, and the court disagreed. It held the statute began to run when the case was dismissed in the lower court and judgment was entered against her.

In Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 76 Cal.Rptr.2d 749, 958 P.2d 1062 (hereafter Jordache), the client sued its attorney for failing to timely tender defense to its malpractice carrier. The client argued it did not suffer actual injury until it settled subsequent bad faith litigation against the carrier, and the court rejected this argument. The court held the statute began to run after it learned of its counsel's neglect and hired new attorneys to prosecute actions against its insurance carriers. (Id. at p. 752, 76 Cal.Rptr.2d 749, 958 P.2d 1062.)

The court also noted: "(1) determining actual injury is predominantly a factual inquiry; (2) actual injury may occur without any prior adjudication, judgment, or settlement; (3) nominal damages, speculative harm, and the mere threat of future harm are not actual injury; and (4) the relevant consideration is the fact of damage, not the amount." (Jordache, supra, 18 Cal.4th at p. 743, 76 Cal.Rptr.2d 749, 958 P.2d 1062.)

The crux of Brodkin's argument is that O'Connor sustained injury when it was forced to spend money to defend itself in the appeal of the underlying case. Yet incurring attorney fees on appeal is not the kind of "injury" contemplated by Code of Civil Procedure section 340.6, subdivision (a)(1). Defending a victory is a common occurrence in litigation, experienced by many litigants prevailing at the trial court. The fact that an appeal is filed in and of itself implies nothing about its merits, nor the trial attorney's performance. Even if Brodkin had presented evidence regarding the underlying defendants' financial worth, there is no reason to believe the appeal would not have proceeded on the other issues defendants raised. "Actual injury occurs when the client suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions." (Jordache, supra, 18 Cal.4th at p. 743, 76 Cal. Rptr.2d 749, 958 P.2d 1062.) The fact that an appeal was filed, but not ruled upon, does not constitute "injury legally cognizable as damages." Until this court ruled in the underlying defendant's favor, O'Connor was not injured, but victorious.

Brodkin asks us to adopt a rule that would require a successful litigant in the trial court to file a malpractice action against its attorney if the opposing party appeals, citing any reason that might implicate attorney malpractice, before the appeal is decided. Such a rule would defy common sense and result in the filing of myriad malpractice cases. Any "winning" plaintiff served with a notice of appeal that might possibly implicate attorney malpractice would be required to retain malpractice counsel and file a new lawsuit based solely on the defendant's contentions on appeal. This is plainly absurd. Why wait for the appeal? Instead, the plaintiff could simply enclose a complaint for malpractice along with the thank-you flowers being sent to his or her "victorious" attorney.

We do not, however, adopt a bright-line rule stating that actual injury never occurs to a prevailing plaintiff until an appellate court reverses the judgment. As the court noted in Jordache, when actual injury occurs is a question of fact that will depend on the specifics of each case. (Jordache, supra, 18 Cal.4th at p. 743, 76 Cal.Rptr.2d 749, 958 P.2d 1062.) In this case, because defending the appeal would have been required even absent the alleged malpractice, no actual injury was suffered until this court reversed the lower court's judgment in O'Connor's favor.

The case was filed within one year of that date and was therefore not barred by the statute of limitations, and summary judgment was improper on this ground. Because of this conclusion, we need not analyze O'Connor's argument regarding continuing representation.

Recovery of Lost Punitive Damages

Although a recent decision from this district has reached the contrary conclusion, we hold with longstanding legal authority that lost punitive damages can be recovered by a plaintiff in a legal malpractice action. This decision is consistent with the relevant statutes regarding the measure of damages due an injured plaintiff, and we believe that any exception to these statutes should be established by the legislature, not the courts.

The first published decision in California to consider whether lost punitive damages are recoverable in a legal malpractice action was Merenda v. Superior Court (1992) 3 Cal.App.4th 1, 4 Cal.Rptr.2d 87 (hereafter Merenda). In that case, the Third Appellate District relied on the general rule that a plaintiff is entitled to be "made whole" when his attorney's negligence causes a loss. The court therefore decided the plaintiffs recovery may include any punitive damages he would have obtained in the underlying action. (Id. at p. 12, 4 Cal.Rptr.2d 87.) Although the court recognized that several cases had prohibited an award of punitive damages against...