Mattco Forge, Inc. v. Arthur Young & Co.
| Decision Date | 09 April 1992 |
| Court | California Court of Appeals Court of Appeals |
| Parties | MATTCO FORGE, INC., et al., Plaintiffs and Appellants, v. ARTHUR YOUNG & CO., et al., Defendants and Respondents. B058047. |
Eugene R. Erbstoesser, Cameron D. Coy, Kathryn A. Oberly, Melanie T. Morris and Ernst & Young, New York City, for defendants and respondents.
INTRODUCTION
The litigation privilege in Civil Code section 47, subdivision (b), 1 has at times seemed to protect virtually anyone participating The case at bench arose out of litigation in federal district court between Mattco Forge, Inc. ("Mattco") and General Electric. In that suit Mattco engaged Arthur Young & Co. ("Arthur Young") to perform litigation support accounting work. After the dismissal of that underlying suit against General Electric, the second amended complaint filed in the Los Angeles Superior Court by plaintiffs Mattco and Mateo Minguez named as defendants Arthur Young & Co., Richard E. Lamping, Thomas W. Blumer, and Ernst & Young. Against one or more of each of these defendants, the second amended complaint alleged causes of action for professional malpractice, fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract, tortious breach of the implied covenant of good faith and fair dealing, constructive trust, and fraudulent concealment.
in litigation from subsequent suit. Nevertheless California precedent does not authorize, and the policies underlying the privilege do not support, its use to protect a negligent expert witness from liability to the party who hired that witness. We therefore conclude that the trial court erroneously relied upon the privilege in granting summary judgment in favor of the expert witness.
Defendants moved for summary judgment on February 14, 1991. On March 28, 1991, the trial court filed a judgment dismissing the second amended complaint and entering judgment in favor of the defendants. Notice of entry of judgment was filed April 1, 1991. Plaintiffs filed a timely notice of appeal on April 23, 1991.
As Code of Civil Procedure section 437c states, summary judgment shall be granted only if the papers submitted show no triable issue as to any material fact and entitle the moving party to a judgment as a matter of law. On appeal, this court limits its review to facts in documents presented to the trial court, and independently determines their effect as a matter of law. (McDaniel v. Sunset Manor Co. (1990) 220 Cal.App.3d 1, 5, 269 Cal.Rptr. 196.)
A drastic procedure, summary judgment denies the adverse party's right to a trial and should be used with caution. The moving party bears the burden of furnishing supporting documents showing the adverse party's claims lack merit on any legal theory. This court strictly construes evidence submitted by the moving party, and liberally construes the opposing party's evidence. Summary judgment law turns on issue finding rather than on issue determination. (Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35-36, 210 Cal.Rptr. 762, 694 P.2d 1134.)
Defendants' motion argued that Mattco's unclean hands and the litigation privilege in section 47, subdivision (b) barred the complaint as a matter of law and entitled the defendants to summary judgment. As presented to the trial court in their motion, separate statement of material facts, and supporting papers, defendants alleged the following facts.
Mattco hired the defendants as damage consultant and expert witness on damages in Mattco's action against General Electric in federal district court. To calculate Mattco's estimated lost profits, defendants needed complete information about Mattco's prior contracts with General Electric, but neither Mattco nor defendant Blumer could locate all the original General Electric job cost estimating sheets. Blumer asked Mattco for figures from the missing General Electric estimate sheets. Mattco recreated estimate sheets and gave them to Blumer and the defendants. Mattco informed Blumer the documents were recreated job cost estimate sheets for General Electric contracts that contained true recreated cost information.
The federal district court held that Mattco and Minguez created and produced fraudulent documents to General Electric, with an intent to deceive General Electric and the court and artificially to inflate Mattco's claimed damages. The federal The federal district court ordered Mattco to pay General Electric $1.4 million in sanctions or have its case dismissed. Mattco did not appeal the federal court's ruling that Mattco had engaged in fraudulent conduct. The motion included the federal district court's orders for sanctions, containing factual findings.
court cited evidence indicating that Mattco had deliberately destroyed evidence to weaken General Electric's counterclaim for procurement fraud, and cited evidence indicating that Mattco lied to the court by submitting testimony that Mattco routinely discarded such evidence.
In 1989, the Los Angeles Superior Court sustained demurrers to Mattco's original and first amended complaints due to Mattco's unclean hands in the underlying federal district court action. In 1990, the Los Angeles Superior Court denied defendants' demurrer to Mattco's second amended complaint because it felt constrained to the bounds of the pleadings. The court suggested that after conducting discovery, defendants should bring a motion going beyond the bounds of the pleadings. Plaintiffs and defendants conducted discovery, including depositions, inspection demands, interrogatories, and requests for admissions.
Plaintiffs responded to defendants' motion and separate statement, and filed a statement of additional undisputed facts and supporting evidence bearing upon the motion. Plaintiffs disputed defendants' statement that to calculate Mattco's estimated lost profits, defendants needed complete information regarding Mattco's prior contracts with General Electric. Plaintiffs responded that Arthur Young's promotional literature advertised itself as an organization that could assist attorneys and clients having a "real or apparent lack of data." Lamping described Mattco's record-keeping as good compared to other small businesses. Mattco contended it was not necessary for Arthur Young to have each original estimate sheet for each General Electric job, insofar as actual costs were available and could have been used in calculating lost profits.
Plaintiffs disputed defendants' statement that Blumer asked Mattco to give him the figures from the missing General Electric estimate sheets. Plaintiffs responded that Blumer asked Minguez to give him a "rough idea" or "best recollection" of how the job would have been estimated and to prepare non-contemporaneous estimating information. Blumer did not expect that he would receive exact replications of the missing estimate sheets.
Plaintiffs disputed defendants' statement that Mattco recreated estimate sheets and gave them to Blumer and Arthur Young, and that Mattco told Blumer the documents were recreated job cost estimate sheets for General Electric contracts that contained true recreated cost information. Plaintiffs responded that although Minguez prepared non-contemporaneous estimating information at Blumer's request, he did not intend to prepare it for use as evidence in the litigation against General Electric. Minguez did not know or have reason to know that such documents would be produced to General Electric. Minguez never told Blumer that documents containing non-contemporaneous estimating information contained "true" or accurate data. Blumer did not expect the information would be an exact replica of the missing estimate sheets.
Plaintiffs disputed defendants' statement that the federal district court held that plaintiffs created and produced fraudulent documents with an intent to deceive General Electric and the court and to inflate Mattco's claimed damages. Plaintiffs responded that this statement was irrelevant to any collateral estoppel argument. The federal district court instead held that Mattco was responsible for the conduct of its accountants and banished Arthur Young from further involvement in the case. Arthur Young never participated in the federal district court proceedings.
Plaintiffs disputed defendants' statement that Mattco had engaged in fraudulent conduct. Plaintiffs responded that this statement mischaracterized the ruling, but admitted they did not appeal the federal district court's order.
Plaintiffs' "Additional Statement of Undisputed Facts and Supporting Evidence" alleged the following facts. Arthur Young's petition for writ of mandate seeking to overturn the denial of demurrers to the second amended complaint was denied. Defendants' summary judgment motion does not controvert allegations in the second amended complaint, paragraphs 29 and 61, and testimony by Arthur Young employees substantiates those allegations.
[5 Cal.App.4th 399] Paragraph 29 alleged that when he prepared non-contemporaneous estimating information for Blumer, Minguez was trying to help Blumer determine costs. Minguez did not intend to prepare documents for production as evidence in the litigation against General Electric. Minguez did not know or have reason to know that the non-contemporaneous estimating information would be produced to General Electric as estimate sheets.
Paragraph 61 alleged that Arthur Young cannot rely on estoppel by judicial admissions to preclude plaintiffs from obtaining relief. Plaintiffs' attorneys represented to the federal district court that Arthur Young had not attempted to fabricate documents and did not rely on the non-contemporaneous estimating information in performing its analysis. Plaintiffs' attorneys relied on Arthur...
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