Gursey, Schneider & Co. v. Wasser

• Decision Date: 25 July 2001
• Docket Number: No. B142728.,B142728.
• Citation: 90 Cal.App.4th 1367,109 Cal.Rptr.2d 678
• Court: California Court of Appeals Court of Appeals
• Parties: GURSEY, SCHNEIDER & CO. et al., Plaintiffs and Appellants, v. WASSER, ROSENSON & CARTER et al., Defendants and Respondents.

109 Cal.Rptr.2d 678

90 Cal.App.4th 1367

GURSEY, SCHNEIDER & CO. et al., Plaintiffs and Appellants, v. WASSER, ROSENSON & CARTER et al., Defendants and Respondents.

No. B142728.

Court of Appeal, Second District, Division 7.

July 25, 2001.

As Modified on Denial of Rehearing August 23, 2001.

Review Granted November 14, 2001.

Chapman, Glucksman & Dean, Randall J. Dean, Los Angeles, and Allen A. Mescobi for Plaintiffs and Appellants.

Musick, Peeler & Garrett, Costa Mesa, Cheryl A. Orr, Los Angeles, and Brett D. Watson, Searcy, Ark., for Defendants and Respondents.

JOHNSON, Acting P.J.

In this case we hold public policy considerations do not bar a suit for indemnity by an accountant against a lawyer who represented the same client at the same time, where the client originally sued both lawyer and accountant for malpractice but the client's malpractice suit against the lawyer was barred by the statute of limitations. Therefore we reverse the trial court's order sustaining respondents' demurrer without leave to amend.

FACTS AND PROCEEDINGS BELOW

This case arises out of divorce litigation between Deborah Pratt and Don Bellisario, who were married in June 1984. Bellisario is a successful writer, creator, producer and director of many television shows including Magnum PI, Airwolf, and Quantum Leap. Pratt filed for dissolution of marriage on September 10, 1991, and retained respondent Wasser, Rosenson & Carter as her counsel in 1992. The Wasser firm negotiated a marital settlement agreement on Pratt's behalf, which was signed on October 7, 1994. A judgment of dissolution of marriage (status only) was entered on October 30, 1992, and a further judgment of dissolution of marriage on reserved issues was entered on October 7, 1994. The Wasser firm withdrew as counsel for Pratt in December 1994.

After the Wasser firm withdrew as her counsel, Pratt discovered Bellisario had failed to disclose significant community property assets including certificates of deposit, individual retirement accounts, pension plans, and fees relating to the Quantum Leap television program. She filed a motion to set aside the judgment of dissolution on reserved issues, contending she signed the marital settlement agreement because of Bellisario's fraud. The motion was supported by a declaration from Pratt's business manager regarding the undisclosed assets. The family court denied the motion, observing Pratt's remedy was a malpractice action against her former counsel and accountants.

Pratt filed a malpractice action against the Wasser firm and three of its members on April 22, 1997. Wasser successfully moved to compel arbitration, and on July 15, 1998, the arbitrator (Jerry K. Fields, Judge of the Superior Court, Retired) ruled in favor of Wasser based on the statute of limitations.

Pratt also sued Gursey, Schneider & Co. and two of its employees, Michael Miskei and David Cantor, who had been employed as forensic accountants in connection with her dissolution action. Miskei represented Pratt at a meeting of Pratt's and Bellisario's accountants, during which they reached agreement on the primary financial issues in the dissolution case. After Pratt's malpractice action was ordered to arbitration, the arbitrator found the Gursey defendants failed to adequately review Bellisario's financial records, and "although they did not review the records ... and had failed to inform [Pratt] of said fact, they not only allowed [Pratt] to settle her dissolution action with Don Bellisario, but encouraged her to do so indicating that it was the best she could do even in a trial." The arbitrator awarded Pratt "the sum of $2,472,752 against Defendants Gursey, Schneider & Co., LLP, Michael Miskei, and David Cantor jointly and severally."

On December 8, 1999, Gursey, Miskei and Cantor filed suit against the Wasser firm and the individual respondents,¹ seeking equitable indemnity, declaratory relief, and apportionment in connection with the arbitration award against Gursey and in favor of Pratt.

Wasser demurred to the complaint, arguing public policy bars equitable indemnity claims against attorneys by non-clients. Gursey opposed the demurrer on the ground it was an intended beneficiary of the attorneys' legal services. The trial court sustained the demurrer without leave to amend. In so doing, it relied on Major Clients Agency v. Diemer,² in which the Court of Appeal discussed public policy considerations surrounding the attorney-client relationship, and held an entertainment agent could not maintain a suit against the client's attorneys.³ Gursey timely appealed from the resulting judgment, and we now reverse the trial court's ruling sustaining the demurrer.

DISCUSSION

I. PUBLIC POLICY CONSIDERATIONS DO NOT BAR GURSEY'S INDEMNITY ACTION AGAINST WASSER.

We review de novo the trial court's order sustaining the demurrer. "An appeal from a judgment entered after the sustaining of a demurrer without leave to amend presents anew the question whether `it appears that the plaintiff is entitled to any relief at the hands of the court against the defendants,' which is `a pure question of law' [Citations.] We construe the allegations of the complaint liberally `with a view to substantial justice between the parties.' [Citations.]"⁴ In other words, "the complaint is reviewed de novo to determine whether it contains sufficient facts to state a cause of action. [Citation.] In doing so, we accept as true the properly pleaded material factual allegations of the complaint, together with facts that may be properly judicially noticed."⁵ For purposes of the demurrer at issue here, Gursey has adequately alleged Wasser's partial responsibility for the harm suffered by Pratt. However respondents argue, and the trial court agreed, public policy considerations nevertheless bar Gursey's claim for indemnity.

Ordinarily, the equitable indemnity rule established in American Motorcycle Assn. v. Superior Court⁶ would permit a concurrent tortfeasor (Gursey) to obtain partial indemnity from another concurrent tortfeasor (Wasser) on a comparative fault basis. However, many California courts have held suits for partial equitable indemnity against lawyers are a different matter, based on public policy considerations which bar such lawsuits in certain circumstances.⁷ The question in this case is whether these same public policy considerations, or some form of them, likewise apply to prevent Gursey's suit. We hold they do not.

A. The "Majority Rule" Among California Courts of Appeal Precludes an Indemnity Suit By a Lawyer Against Another Lawyer, Where Such a Suit Would Create a Conflict of Interest or Interfere With an Existing Attorney-Client Relationship.

In its tentative ruling, which it ultimately adopted as its final ruling on Wasser's demurrer, the trial court stated "Third parties may generally not pursue equitable indemnity and negligence claims against attorneys as a matter of law and public policy. [Citation.] The policy for such preclusion under the law is that such third party actions arising out of an attorney's malpractice may threaten the attorney's undivided loyalty to the client. [Citation.] While the general rule and most cases concern attorney indemnity and negligence claims against predecessor attorneys who represented the same client, the rule has been extended to non-attorneys. [Citation.]" As will be explained below, the rule is not as broad as the trial court suggested in this statement. Nor does the rule or its underlying policies apply to the allegations in appellant's complaint.

Although the California Supreme Court has not spoken on the issue, according to the majority of Court of Appeal decisions in California, a lawyer sued by a former client for professional negligence cannot seek indemnity from a successor lawyer, subsequently retained by the client.⁸ Most of the California cases announcing the rule involve facts where the public policy is strongest against allowing indemnity actions.⁹ For example, in Goldfisher v. Superior Court,¹⁰ the two law firms provided serial representation to the same client in the same matter. Law Firm I mishandled the case, and the client replaced it with Law Firm II. The client directed Law Firm II to sue Law Firm I for malpractice, and Law Firm I filed a cross-action for indemnity against Law Firm II.¹¹ The court, following a line of similar cases,¹² held "To encourage claims of indemnification where two lawyers successively represented the same client is not for the benefit of the client. Differences between lawyer and client respecting malpractice should be limited to themselves. The facts which generally germinate the relief sought at bench are pregnant with the seed of exacerbated conflict. The inevitable consequence is a corrosion of the sacred attributes of complete confidentiality and undivided loyalty which are the heart of the relationship between lawyer and client. It is our considered judgment the potential damage involved is grave and inevitable. On balance any loss of an asserted right is of small consequence when measured against the public interest." ¹³

Certainly in cases like Goldfisher, there is a real conflict on the part of Law Firm II. In filing suit—and litigating and potentially settling the legal malpractice case— against Law Firm I, Law Firm II must be mindful it may be compelled to contribute some of its own money to the verdict or settlement being sought on behalf of an existing client. In such a case, there indisputably is an actual and existing conflict because the more Law Firm II wins for the client, the greater the firm's own potential exposure in the indemnity action. Moreover, in many cases Law Firm I may be using the indemnity suit as a tactic to disqualify Law Firm II from prosecuting the malpractice case against Law Firm I, thereby denying the client his or her counsel of choice in the malpractice action. Finally, the confidentiality of the client's communications with Law Firm II,...