Marshall v. Gibson, Dunn & Crutcher

• Citation: 37 Cal.App.4th 1397,44 Cal.Rptr.2d 339
• Decision Date: 24 August 1995
• Docket Number: No. B086555,B086555
• Court: California Court of Appeals
• Parties: , 95 Cal. Daily Op. Serv. 6755, 95 Daily Journal D.A.R. 11,529 George T. MARSHALL, Plaintiff and Appellant, v. GIBSON, DUNN & CRUTCHER, et al., Defendants and Respondents.

Page 339

44 Cal.Rptr.2d 339

37 Cal.App.4th 1397, 95 Cal. Daily Op. Serv. 6755,

95 Daily Journal D.A.R. 11,529

George T. MARSHALL, Plaintiff and Appellant, v. GIBSON, DUNN & CRUTCHER, et al., Defendants and Respondents.

No. B086555.

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

Aug. 24, 1995.

Rehearing Denied Sept. 14, 1995.

Review Denied Dec. 14, 1995.

Love & Bosserman, Beth A. Shenfeld and Anne McWilliams, Los Angeles, for plaintiff and appellant.

McDermott, Will & Emery, Stephen A. Kroft, Lee L. Blackman and Steven L. Sevrin, Los Angeles, for defendants and respondents.

LILLIE, Presiding Justice.

In this action for legal malpractice, plaintiff Marshall appeals from judgment of dismissal entered after the court sustained without leave to amend the demurrer to complaint of defendants Gibson, Dunn & Crutcher, Ronald E. Gother, Anne K. Hilker, and David H. Kennedy on the ground that the action was barred by the statute of limitations.

ALLEGATIONS OF THE COMPLAINT ¹ AND PROCEDURAL BACKGROUND

On December 3, 1993, plaintiff filed complaint for damages for legal malpractice and breach of fiduciary duty arising out of defendants' provision of legal services to plaintiff in connection with negotiations and drafting of a written agreement memorializing the terms of plaintiff's Incentive and Compensation Plan offered to him by a publishing company, Marshall and Swift, a limited partnership.

The publishing company had been established by plaintiff's grandfather in 1932; in 1972, the general partners were plaintiff's father, J.W. Marshall, and F.C. Swift; in 1975 plaintiff began employment at Marshall and Swift and learned all aspects of the In 1983, plaintiff retained defendants to "represent plaintiff in the negotiations and drafting of a written agreement memorializing the terms of the Incentive and Compensation Plan offered by J.W. Marshall and F.C. Swift to plaintiff," and defendants agreed to perform legal services and protect "plaintiff's entitlement to the full benefits of the Incentive and Compensation Plan." For close to 30 years, defendants had a "close, professional, relationship with Marshall and Swift and its majority partner," and at all times relevant herein, "defendants concurrently provided legal services to plaintiff, as an individual, J.W. Marshall, as an individual, and Marshall and Swift, a limited partnership," and did not obtain "the written consent or written waiver of the conflict of interest of plaintiff, J.W. Marshall, and F.C. Swift."

business in order to take over its operations; plaintiff was subsequently promoted to manager of the marketing, sales and education department. In 1981, plaintiff's grandfather passed away, and plaintiff became the chief executive officer of Marshall and Swift, also acquiring a 4.5 percent equity ownership of the partnership. In 1981, the senior general partners of Marshall and Swift represented to plaintiff that he would participate in the future growth and profits of Marshall and Swift generated by his efforts by future increases in his ownership interest in the partnership. Plaintiff, J.W. Marshall, and F.C. Swift engaged in discussions concerning the "passing of the partnership mantle to plaintiff through an Incentive and Compensation Plan," designed to transfer equity and control of the partnership from J.W. Marshall and F.C. Swift to plaintiff.

Plaintiff continued to work full time as Chief Executive Officer of Marshall and Swift; by the end of 1983, plaintiff's ownership interest in the partnership increased to 10 percent. In June 1986, defendants, plaintiff, J.W. Marshall, and F.C. Swift negotiated and agreed upon a definitive plan to implement plaintiff's Incentive and Compensation Plan; the Agreement was executed in August 1986, and "confirmed J.W. Marshall's and F.C. Swift's consent to and promise to implement the incentive plan 'within a reasonable period of time.' " Defendants also prepared "a document memorializing the terms of plaintiff's Incentive and Compensation Plan in a document entitled 'Outline of New Marshall and Swift Compensation Plan,' which was attached as an exhibit and incorporated into the Agreement."

Plaintiff "relied upon and performed under the executed Agreement for nearly three years," and reinvested additional profits into the partnership. In March 1988, J.W. Marshall advised defendants that he wanted to rescind the Agreement and replace it with some type of restructuring of the partnership. Defendants advised J.W. Marshall regarding the enforceability of the Agreement. In March 1988, defendants first advised plaintiff that defendants' joint representation of plaintiff, the partnership, and J.W. Marshall, presented a potential conflict of interest "prohibited by Rule 5.102 of the Rules of Professional Conduct applicable to California lawyers, and requested a written waiver from the general partners of the actual or potential conflicts of interest." Thereafter, J.W. Marshall and F.C. Swift refused to continue performing under the Agreement drafted by defendants, taking the position that the Agreement was not legally enforceable against them.

On February 6, 1989, J.W. Marshall and F.C. Swift terminated plaintiff from his management position at Marshall and Swift and "wrongfully reduced his ownership interest in the partnership and substantially reduced his partnership draws." In January 1990, plaintiff filed a lawsuit against J.W. Marshall and Frank C. Swift seeking to enforce the terms of the Agreement drafted by defendants. According to the allegations of the complaint, plaintiff's rights in the underlying action were contingent upon the enforceability of the Agreement defendants drafted when they represented conflicting interests. Inasmuch as the Agreement required that the issues in dispute be adjudicated by a panel of arbitrators, the matter was arbitrated. On April 19, 1993, the arbitrators issued a decision and award. According to the allegations of the complaint, the decision was "adverse to plaintiff's claims therein, determining that plaintiff was not entitled to the additional 45 percent equity interest in the On September 14, 1993, the trial court confirmed an arbitration award and ordered that it be entered as a judgment. Plaintiff alleges that it was not until confirmation of the award that he sustained "an actual economic injury attributable to defendants' conduct." According to the allegations of the complaint, defendants breached their duties to plaintiff by representing conflicting interests without written consent of all parties, failing to make a full disclosure of all facts and circumstances affecting plaintiff's rights and interests in the Incentive and Compensation Plan, and failing to advise plaintiff that the Agreement did not adequately protect his entitlement to the Incentive and Compensation Plan and of the courses of action needed to protect and implement the full benefits under the terms of the Incentive and Compensation Plan. Plaintiff alleges that as a result of the negligence of defendants, plaintiff was required to protect his interests by bringing the underlying breach of contract action and he has lost wages, earnings, and increased equity interest in Marshall and Swift. The complaint sought general damages and special damages, including past and present loss of income, past and present value of the loss of increased equity interest in Marshall and Swift, and "compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures incurred in bringing the underlying action to enforce the terms of the Incentive and Compensation Plan."

partnership under the terms of the Agreement and Outline drafted by defendants, but also confirmed plaintiff's 15 percent interest in the partnership from January 1988 to the date of the award." ²

Defendants demurred to the complaint on the ground that it was barred by the statute of limitations (Code Civ.Proc., § 340.6), alleging that plaintiff suffered actual injury at the time he discovered defendants' alleged breaches of duty in 1988, and when the partners "refused to continue performing under the Agreement" and took the position that the Agreement was not legally enforceable against them. In opposition to the demurrer, plaintiff contended that his damage did not accrue until the arbitrators rendered their decision because it "was not until then that his claims regarding the enforceability of the Agreement were lost and the impact of the wrongful acts ... caused plaintiff damage."

After hearing on April 14, 1994, the court sustained the demurrer without leave to amend. ³ The minute order for April 14, 1994, states in pertinent part: "The court finds that plaintiff's malpractice action is time-barred since it was filed on December 3, 1993, long after the limitations period expired." Judgment of Dismissal was filed. Plaintiff filed timely notice of appeal from the Judgment of Dismissal.

I STANDARD OF REVIEW

On appeal from a judgment of dismissal following the sustaining of a demurrer without leave to amend, the reviewing court must accept as true not only those facts alleged in the complaint but also facts that may be implied or inferred from those expressly alleged. (Rose v. Royal Ins. Co. (1991) 2 Cal.App.4th 709, 716, 3 Cal.Rptr.2d 483.) A demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. (Moseley v. Abrams (1985) 170 Cal.App.3d 355, 359-360, 216 Cal.Rptr. 40.) In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred. (Mangini v. Aerojet-General Corp. (1991) 230 Cal.App.3d 1125, 1155, 281 Cal.Rptr. 827.)

"[Code of Civil Procedure section 340.6] provides in pertinent part that 'An action against an attorney for a wrongful act or omission, other than for actual...