Heller v. Pillsbury Madison & Sutro

• Decision Date: 19 November 1996
• Docket Number: No. B096769,B096769
• Citation: 50 Cal.App.4th 1367,58 Cal.Rptr.2d 336
• Court: California Court of Appeals Court of Appeals
• Parties: , 96 Cal. Daily Op. Serv. 8400, 96 Daily Journal D.A.R. 13,868 Philip HELLER, Plaintiff and Appellant, v. PILLSBURY MADISON & SUTRO, et al., Defendants and Respondents.

Page 336

58 Cal.Rptr.2d 336

50 Cal.App.4th 1367, 96 Cal. Daily Op. Serv. 8400,

96 Daily Journal D.A.R. 13,868

Philip HELLER, Plaintiff and Appellant, v. PILLSBURY MADISON & SUTRO, et al., Defendants and Respondents.

No. B096769.

Court of Appeal, Second District, Division 7, California.

Nov. 19, 1996.

Rehearing Denied Dec. 11, 1996.

Review Withdrawn March 12, 1997.

[50 Cal.App.4th 1373] Jerold Fagelbaum, Los Angeles, for Plaintiff and Appellant.

Latham & Watkins, Robert A. Long and Deborah A. Bigbee, Los Angeles, for Defendants and Respondents.

FRED WOODS, Associate Justice.

Plaintiff Philip Heller appeals from the post-judgment order awarding costs, and the judgment entered for defendant law firm Pillsbury Madison & Sutro and individual defendants, Pillsbury partners T. Neal McNamara, Charles Patterson, Walter Stafford and Rodney Peck. Heller had filed the instant action as a result of his expulsion from the Pillsbury firm. Heller contests the preliminary court hearing where the court found the law firm's 1992 partnership agreement, providing for expulsion of partners, fully integrated and binding on Heller. He also challenges the trial court's nonsuit on four of his causes of action and the judgment under Code of Civil Procedure section 630, subdivision (f) following a mistrial resulting from a deadlocked jury on the remaining cause of action before the jury. Heller additionally contests the trial court's dismissal of his accounting cause of action.

FACTUAL BACKGROUND

In January 1990, Heller joined the Pillsbury, Madison & Sutro law firm as a lateral partner in the firm's Los Angeles office. This San Francisco firm had some 225 partners. Soon thereafter, Heller signed the firm's 1990 partnership agreement.

Either immediately or soon after Heller became a Pillsbury partner, he brought in CB Commercial and the musical group New Kids on the Block as new clients. Defendant Stafford, the managing partner of Pillsbury's Los Angeles office in 1990, received billing credit for Pillsbury's legal work for CB Commercial.

A year later, in January 1991, Pillsbury merged with the Lillick & McHose law firm. This merger agreement was incorporated into the 1991 partnership agreement which Heller signed.

The next month, in February of 1991, Heller appeared in the Los Angeles magazine in an article entitled "Why L.A. Men Won't Commit." The article described Heller as an attorney at Pillsbury, included a photograph of Heller leaning against the Porsche car he owned at the time, and quoted Heller as stating that he dates " 'an embarrassing number of women.' "

That same month, on February 14, Heller met Edward Stead, Vice President and General Counsel of Apple Computer, Inc. At the time, Heller knew that Pillsbury partner Barbara Creed was doing some work for Apple. Heller later learned that Creed was the billing attorney for the work she did for Apple.

As of February or March 1991, Heller periodically sent Stead letters which he copied to Creed. Later in the year, in a letter dated December 9, Heller sent Stead an outline of a proposal for the Pillsbury firm to handle Apple's employment law cases. Heller did not send Creed a copy of his proposal. A few days later, in a letter dated December 16, Creed sent Denise Rocha, Chief Counsel of Human Resources at Apple, a different proposal for Pillsbury to represent Apple in employment matters.

Upon receiving a copy of the proposal prepared by Creed, Heller told Stead to discard Heller's letter dated December 9.

Apple decided not to have Pillsbury do its legal work, because of what looked like a lack of coordination at Pillsbury and because the Pillsbury partners appeared to be disorganized.

Meanwhile, in 1991, Heller met with Jack Douglas, the general counsel of the Reebok company known for making athletic shoes. Douglas offered Pillsbury through Heller legal work, and informed Heller there was a prior case involving an opposing party represented by the Lillick firm now merged with Pillsbury. After Heller met with Douglas, he spoke with attorney Amy Hogue, who had handled the prior case. Hogue initially told Heller that the prior case was over and that there would be no problem doing work for Reebok. Later, however, Hogue said there was a conflict of interest in that Hogue did some work for Reebok's insurer Seaboard Surety.

In a letter dated October 25, 1991, Reebok's attorney John Mitchell stated that Douglas asked Mitchell to send Heller materials for a possible lawsuit against Reebok's insurers, including Seaboard Surety, to recover expenses related to a patent infringement action. Although the materials Mitchell sent Heller included Reebok's claim against Seaboard, Heller did not try to determine if Seaboard's name was run through Pillsbury's computer system to check for possible conflicts of interest. Heller only learned of the conflict when Hogue later called and told him that she did some work for Seaboard.

In April 1991, Heller met with Stafford regarding Heller's billable hours. At the time, Stafford was still managing partner of Pillsbury's Los Angeles office. After the meeting, Stafford sent Heller a copy of a memorandum dated April 16, 1991, which Stafford prepared for McNamara, chairman of the firm's Executive Committee. The memorandum stated that if Heller did not produce at least 1,800 billable hours by the end of the year, and if he did not generate new business, then the law firm would ask Heller "to leave or take a reduction in points."

According to the firm's time analysis report dated December 31, 1991, by early 1991, Heller was working at a pace that annualized to about 1,200 billable hours, which was about 1,000 hours less than Heller estimated he would produce. In addition, only $230,522 of his total $368,715 in billings for 1991 was actually collected. ¹

John Hansen, a Pillsbury partner and member of the firm's Compensation Committee, interviewed Heller in 1991. After the interview, Hansen told Heller on December 6, 1991, that Heller was being reduced in partner points for 1992. Hansen explained that Heller's performance, including low billable hours for 1991, declined. Hansen also told Heller that the Compensation Committee was concerned about the decrease in Heller's collections and the quality of his work.

On February 24, 1992, Heller signed the 1992 partnership agreement. He had the opportunity to review the agreement before he signed it.

The 1992 agreement provided that the law firm's "Executive Committee" "shall be the policy making and governing authority of the Firm." The agreement authorized the Executive Committee to expel partners.

In a letter dated May 21, 1992, and addressed to Michael Halloran, ² Executive Vice President and General Counsel of Bank of America, Heller wrote that Halloran's picture in the American Lawyer magazine "is almost a caricature of what Michael Lewis described in Liar's Poker [sic ] as 'One big swinging dick.' " A copy of this letter was sent to the bank's chief executive officer, Richard Rosenberg. At the time of the letter, Bank of America was one of Pillsbury's most important clients, generating between $6 million to $8 million in annual revenue.

On May 27, 1992, Heller sent Halloran a printed piece of material entitled "Why I Fired My Secretary." This material described a husband who agrees to go to his secretary's apartment and who disrobes, only to find his wife and children there.

According to David Grimes, Director of Administration of Bank of America's Legal Department, Grimes called Peck, a member of Pillsbury's Executive Committee, and asked that no more letters be sent to Rosenberg. Grimes made the call at Halloran's request. Grimes believed that if Heller's letters did not stop, Bank of America would no longer use Pillsbury's legal services.

Peck then on June 1 spoke with Heller. Peck asked Heller about any other correspondence sent to Bank of America, but Heller did not tell Peck about the May 27, 1992, mailing. Peck also instructed Heller not to communicate with Bank of America without coordinating with Peck first. Heller asked Peck whether Heller should apologize to Halloran or Rosenberg, and Peck replied in the negative. ³

Peck subsequently, on June 1 or 2, told McNamara that Heller sent the letter dated May 21, 1992. Peck said the letter upset Halloran and Rosenberg.

Contrary to Peck's instructions and without first informing Peck or sending him a copy, Heller sent Rosenberg an apology letter dated June 2, 1992.

At the Executive Committee's June 9, 1992, meeting, the committee approved termination of Heller as a partner of the firm. McNamara, Peck and other committee members, including defendant Patterson, attended the meeting. According to McNamara, the Executive Committee discussed Bank of America, Apple, Reebok, Heller's performance and the Los Angeles magazine article.

The next day, on June 10, Grimes telephoned Peck to inform him about the May 27 and June 2 mailings from Heller. Grimes warned that if Bank of America received one more letter, it would take Pillsbury off its approved list of outside counsel.

That same day, Peck left a message for McNamara about Grimes's call, stating that Bank of America was "in an uproar" over Heller's correspondence and that Halloran threatened to not give work to Pillsbury if the firm did not do something about its "loose cannon." Peck stated that he thought Heller needed to be removed promptly "to eliminate any prospect that in some apparently authorized way he can act on behalf of the firm. I think he needs to be told that we will sue his ass or do something bad to him if he tampers with our client relationships further in the manner in which he has done."

On June 11, 1992, McNamara telephoned Heller while he was returning to the office from a deposition. McNamara told Heller to come to an office conference room. McNamara and Patterson met privately with Heller. During the meeting, Peck was called, and he participated in the...