Goldfisher v. Superior Court

• Decision Date: 23 June 1982
• Citation: 133 Cal.App.3d 12,183 Cal.Rptr. 609
• Court: California Court of Appeals Court of Appeals
• Parties: Steven J. GOLDFISHER, Petitioner and Cross-Defendant, v. SUPERIOR COURT OF the State of California, For the COUNTY OF LOS ANGELES, Respondent, SHAPIRO, LAUFER, POSELL & CLOSE, a California Professional Corporation, Mitchell S. Shapiro, an individual, Richard E. Posell, an individual, Richard H. Close, an individual, Real Parties in Interest. Civ. 63871.

Page 609

183 Cal.Rptr. 609

133 Cal.App.3d 12

Steven J. GOLDFISHER, Petitioner and Cross-Defendant, v. SUPERIOR COURT OF the State of California, For the COUNTY OF LOS ANGELES, Respondent SHAPIRO, LAUFER, POSELL & CLOSE, a California Professional Corporation, Mitchell S. Shapiro, an individual, Richard E. Posell, an individual, Richard H. Close, an individual, Real Parties in Interest.

Civ. 63871.

Court of Appeal, Second District, Division 2, California.

June 23, 1982.

Hearing Denied Aug. 18, 1982.

Steven J. Goldfisher, Toluca Lake, for petitioner and cross-defendant in pro per.

No appearance for respondent court.

Shapiro, Laufer, Posell & Close, by Mitchell S. Shapiro, Beverly S. Tillett, Los Angeles, for real parties in interest.

ROTH, Presiding Justice.

Predicated upon the facts outlined below, petitioner (Lawyer II) asks this court to mandate respondent court to vacate its order overruling his general demurrer to the cross-complaint of Real Party in Interest Lawyer I filed against him and to enter an order sustaining the demurrer of Lawyer II without leave to amend and to enter a judgment against Lawyer I.

During a lawsuit herein referred to as the primary action wherein Lawyer I was among other things defending an O.S.C. seeking a preliminary injunction against the clients of Lawyer I, said clients believing Lawyer I had negligently created the situation which had engendered the lawsuit and that it was not being properly managed, substituted Lawyer II.

Within approximately a month thereafter Lawyer I, through an assignee, sued the clients for fees. Clients employed Lawyer II to represent them in the fee action. Lawyer II answered and filed a cross-complaint on their behalf against Lawyer I. Lawyer I then appeared in the fee action, answered and cross-complained against Lawyer II alleging Lawyer II could have successfully defended the request for a preliminary injunction in the primary action, had he been properly prepared. And, further alleging that by reason of lack of defense to the issuance of the preliminary injunction and in other respects as to the management of the primary action the damages which clients suffered which they claim were caused by Lawyer I were generated by the professional negligence of Lawyer II in his management of the primary action and in any event were exacerbated. Lawyer I seeks equitable indemnification from Lawyer II.

The initial case speaking directly on a factual situation such as at bench is Held v. Arant (1979) 67 Cal.App.3d 748, 134 Cal.Rptr. 422 (hg. den.). It was followed by:

Commercial Standard Title Co. v. Superior Court (1979) 92 Cal.App.3d 934, 155 Cal.Rptr. 393. (hg. den.);

Gibson, Dunn & Crutcher v. Superior Court (1979) 94 Cal.App.3d 347, 156 Cal.Rptr. 326. (hg. den.);

Rowell v. Transpacific Life Ins. Co. (1979) 94 Cal.App.3d 818, 156 Cal.Rptr. 679. (hg. den.);

Parker v. Morton (1981) 117 Cal.App.3d 751, 173 Cal.Rptr. 197;

Pollack v. Lytle (1981) 120 Cal.App.3d 931, 175 Cal.Rptr. 81. (hg. den.).

In Held, Arant, a patent attorney (Lawyer I) negotiated an agreement to settle a pending lawsuit for Held with Nova-Tech. Held was thereafter sued by Nova-Tech predicated on misrepresentations which induced the agreement. Held represented by successor counsel Lawyer II sued Lawyer I alleging professional negligence. Arant answered denying negligence and cross-complained against Lawyer II alleging Lawyer II had in the action brought by Nova-Tech against Held settled legally defensible claims " * * * in a manner that forseeably damaged Arant by exposing him to malpractice and injuring his professional reputation." The cross-complaint [sought] indemnity from [successor] if Arant [was] found liable to Held.

The Held court said:

"Because reasons of policy peculiar to the tripartite relationship of attorney-client-adversary override the principle of equitable indemnity enunciated in cases such as Herrero v. Atkinson (1964) 227 Cal.App.2d 69 [38 Cal.Rptr. 490, 8 A.L.R.3d 629] and Niles v. City of San Rafael (1974) 42 Cal.App.3d 230 , we conclude that the first lawyer has no right of indemnity from the second. Accordingly, we affirm a judgment dismissing an amended cross-complaint on general demurrer." (P. 750, 134 Cal.Rptr. 422.)

The court then stated: "Despite the lack of a requirement of privity, an attorney's liability for negligence, * * * is limited by the concept of duty * * * Here the cross-complaint shows on its face that [Lawyer I] was not an intended beneficiary of his former client's representation by [Lawyer II]." (Id., at p. 751, 134 Cal.Rptr. 422.)

The Held court continued:

"In the context of the case at bench, MM&H [Lawyer II] owed an undivided loyalty to Held to use its best judgment to extricate him from the situation created by Arant's [Lawyer I] advice. Extrication involved consideration both of resistance of the claim of Nova-Tech and of the assertion of an affirmative claim against Arant. [Lawyer II's] ability to choose between courses of conduct best designed to protect the interests of its client cannot be 'inhibited by the proposition that if it chooses the course of resistance of the claim it will be immune from liability to the one adversary absent malicious prosecution (Daly v. Smith (1963) 220 Cal.App.2d 592, 604, 33 Cal.Rptr. 920 * * *), while if it chooses the course of prosecuting the client's claim for malpractice against a prior attorney it may be subject to a claim to indemnify that attorney'.

"We thus conclude that the nature of the relationship of attorney and client requires that the attorney retained to represent the client in a cause in which actual or potential adversaries include both a private person and a prior attorney not be subjected to the potentiality of being required to indemnify the prior lawyer in the event that the subsequent counsel advises settlement with the private party and the prosecution of a malpractice action against the first lawyer." (Pp. 752-753, 134 Cal.Rptr. 422.)

In Commercial Standard (Cologne, J., dissenting) the majority discussing and refuting any legal effect of the application of American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 146 Cal.Rptr. 182, 578 P.2d 899 (AMA), (not raised or treated in Held ) would have on the tripartite relationship defined in Held said at pages 944-945, 155 Cal.Rptr. 393: "But to return to solid legal firmament, reasons of public policy peculiar to the [tripartite situation] make the application of equitable principles enunciated in American Motorcycle untenable. The Lawyer has the duty of undivided loyalty.... He should not be forced to choose between conflicting interests.... There is inherent in the proposed extension of the A.M.A. rule, the seeds of irresponsible cross-lawsuits...."

In Gibson, Lawyer I had originally advised his client with respect to a transaction which required client to guarantee a note payable to a bank collateralized with certain security interests of the client's wholly owned subsidiary. The subsidiary defaulted. A Chapter XI proceeding followed. The client on demand of bank paid the note. The bank concurrently assigned the security interests it had received as collateral to client who then retained Lawyer II, to extricate it from the loss suffered. Gibson among other things, filed an action on behalf of client against bank and Lawyer I alleging " * * * Bank and [Lawyer I] acting on behalf of [client] * * * were negligent * * * failing to advise [client] of the risk that the security interests would not be enforceable."

Bank and Lawyer I severally filed cross-complaints alleging that Lawyer II was negligent in their representation in the Chapter XI proceedings and that such negligence contributed to the loss client seeks to recover from them.

Gibson, adopts and fortifies the Held announcement of public policy. It treats and discusses the effects of AMA and faces it squarely. After pointing out two distinctions (a) AMA deals with a single indivisible injury whereas the facts at bench involve two successive acts and (b) deprivation of a party of a lawyer of his choice who is also the lawyer most familiar with the background of his case and its critical relationship with Lawyer II with respect to the resolution of the situation of Lawyer I, the Gibson court said:

"The most conspicuous consequence of a cross-complaint against the plaintiff's lawyer is to preclude that lawyer from trying the case on behalf of the plaintiff. Depriving a party of the lawyer of his choice, who is also the lawyer most familiar with the background of the case, is a serious matter, but we do not view it as controlling here. In Comden v. Superior Court (1978) 20 Cal.3d 906, 145 Cal.Rptr. 9, 576 P.2d 971 * * *, the Supreme Court imposed a standard which severely impairs the availability of attorneys to litigate cases arising out of business matters in which they or their firms participated. The impact of Comden is to give secondary importance to the need of a party to be represented by the law firm he deems best qualified for that task.

"The critical element is the effect upon the relationship between the injured party and lawyer II while they are trying to resolve the situation created by lawyer I." (P. 352, 156 Cal.Rptr. 326.)

" * * *

"A client seeking to extricate himself from a situation caused by the negligence of lawyer I may find his options limited both by legal constraints and practical considerations. The client's perception of his own best interests, after obtaining sound legal advice, may dictate a course which lawyer I may fairly characterize as 'unreasonable and disproportionate to the risk involved.' What effect a settlement so motivated would have on the client's claim against lawyer I is not before us. What is pertinent here is the effect upon the relationship between lawyer II and the client when the client's alternatives are under consideration. "Lawyer II should not be required to face a potential...