Mutuelles Unies v. Kroll & Linstrom

Decision Date25 February 1992
Docket NumberNos. 90-55009,90-55022,s. 90-55009
Citation957 F.2d 707
Parties, 34 Fed. R. Evid. Serv. 1185 MUTUELLES UNIES, a French corporation, Plaintiff-Appellee-Cross Appellant, v. KROLL & LINSTROM, a California Law Partnership, Defendant, and Sol Kroll, et al., Defendants-Appellants-Cross Appellees.
CourtU.S. Court of Appeals — Ninth Circuit

Manuel R. Ramos, Lewis, D'Amato, Brisbois & Bisgaard, San Diego, Cal., for defendants-appellants-cross appellees Sol Kroll, et al.

Hillel Chodos, Gina M. Putkoski-Chodos, Los Angeles, Cal., for plaintiff-appellee-cross appellant, Mutuelles Unies.

Appeal from the United States District Court for the Central District of California.

Before FARRIS, NOONAN and TROTT, Circuit Judges.

FARRIS, Circuit Judge:

In a legal malpractice action, Sol Kroll, individually, and his law firm, Kroll, Pomerantz & Cameron appeal a jury verdict awarding damages to Mutuelles Unies. The appeal questions: 1) the grant of diversity jurisdiction; 2) several jury instructions; 3) the application of California law to the settlement recommendation; 4) the application of Federal Rule of Civil Procedure 17(a); 5) the admission of plaintiff's expert declaration; and 6) the award of pre-judgment interest. Mutuelles cross appeals the denial of its request for additional compensation because of detrimental currency fluctuations. We affirm.

Mutuelles is a French insurance corporation, which provided liability insurance for Club Med. It was obligated to defend Club Med and pay the costs of any lawsuit. Sol Kroll is a founder of the New York law firm Kroll, Pomerantz & Cameron. Mutuelles had a long-term relationship with the law firm, which specializes in representing the interests of foreign insurers in American civil litigation. Kroll served Mutuelles as supervising counsel for all of Mutuelles' American claims litigation. It would personally handle any cases filed in New York. For cases filed elsewhere, it would select local trial counsel and act as supervising counsel.

Kroll: 1) supervised and closely monitored all aspects of any case tried by local counsel; 2) sent a personal representative to monitor the progress of all trials conducted by local counsel; 3) analyzed and periodically updated the potential exposure of Mutuelles for litigation and judgment costs; 4) received any settlement proposals from local counsel; 5) advised Mutuelles of its recommendations for settlement in each case; 6) received and approved all legal expenses of local counsel; and 7) paid local counsel after Mutuelles approved the expenses.

On August 8, 1979, Dr. Morrill, a physician, was seriously injured in a scuba diving accident while vacationing with his wife at a Club Med Resort in Tahiti. The Morrills brought a claim against Club Med for negligent supervision.

The lawsuit was brought in a state court in Los Angeles. Kroll selected local counsel to handle the litigation. Roy Pomerantz was supervising attorney for Kroll. 1 Pomerantz selected Gerald Kroll, the son of Sol Kroll, to act as local counsel. Gerald Kroll enlisted the aid of another attorney, Hugh Linstrom, and the two of them handled the Morrills' lawsuit.

The Morrills demanded damages in the amount of $1.5 million dollars. Kroll offered two to three thousand dollars to settle the case. The Morrills increased their demand to $2,187,000. Kroll and local counsel recommended a settlement offer of $500,000. Mutuelles accepted the recommendation. The Morrills rejected the offer.

In April 1985, two months before trial, Linstrom recommended that Mutuelles offer one million dollars to the Morrills. At a settlement conference immediately prior to trial, Pomerantz recommended a $740,000 settlement offer. Linstrom continued to recommend one million dollars.

The trial began on June 27, 1985. On July 3rd, the Morrills indicated a willingness to accept one million dollars. The trial judge recommended $1,017,000 for settlement. Mutuelles, on the recommendation of Pomerantz, agreed to offer $740,000, which the Morrills rejected.

On July 22nd, Pomerantz sent a telex to Mutuelles recommending an offer of $900,000. He reported that the case had gone to the jury and that a verdict was expected within two days. Mutuelles failed to respond before July 24th, the date on which the jury returned a verdict of $3,071,000 for Dr. Morrill and $980,000 for Mrs. Morrill.

Mutuelles telexed an offer of $900,000 after the jury had returned a verdict. Mutuelles eventually paid a final settlement of $3,115,381, some of which was paid by two other insurance companies, Suisse Re and Lloyd's of London. Mutuelles was lead insurer and made all decisions concerning the handling and settlement of the case.

On July 22, 1986, Mutuelles brought a diversity action in federal court against Kroll, Roy Pomerantz, Kroll & Linstrom, Gerald Kroll, and Hugh Linstrom. Mutuelles claimed that Roy Pomerantz and Kroll were negligent: 1) as supervising counsel and; 2) in their handling of the case. Kroll's answer admitted that each defendant was an American citizen. All parties agreed that California law would govern.

Before trial, the district court ruled that Suisse Re was a real party in interest, but that Lloyd's was not. On July 24, 1989, the district court set an August 25th deadline for Mutuelles to either join Suisse Re to the lawsuit, or file a ratification for Suisse Re pursuant to Fed.R.Civ.P. 17(a). Both Lloyd's and Suisse Re filed timely ratifications.

On September 18th, Mutuelles informed Kroll that John McKay, its only expert witness, would have surgery September 22nd and would be unavailable for one to two weeks. Mutuelles offered to videotape McKay's direct and cross-examination before his pending surgery. Kroll declined the offer.

The trial began on September 21, 1989. That morning, Mutuelles informed the district court that McKay was unavailable from September 22, but was available that afternoon. In September 1987, McKay had submitted a declaration in opposition to Kroll's motion for summary judgment. In 1988, Kroll took McKay's deposition. The district court allowed Mutuelles to read McKay's declaration into the record and permitted Kroll to use his deposition for cross-examination of the declaration.

The jury found that Kroll was negligent in its handling of the Morrill case and awarded Mutuelles damages for the difference The district court awarded pre-judgment interest in the amount of $611,370.34. Mutuelles petitioned for additional compensation to cover the decline in the value of the dollar compared to the French franc between the time Mutuelles paid the Morrills and the time Mutuelles could collect on the malpractice judgment. The district court refused to award additional compensation. Both parties appealed.

                between one million dollars and $3,115,381.   It also awarded approximately $68,000, to cover the litigation costs charged by Kroll
I. Federal Jurisdiction

Diversity jurisdiction exists between "citizens of a State and citizens or subjects of a foreign state" where the amount in controversy exceeds fifty thousand dollars. 28 U.S.C. § 1332(a)(2). Jurisdiction is determined at the time the lawsuit is filed. Faysound Ltd. v. United Coconut Chems., Inc., 878 F.2d 290, 296 (9th Cir.1989). The citizenship of each member of a partnership must be considered. Carden v. Arkoma Assoc., 494 U.S. 185, 195, 110 S.Ct. 1015, 108 L.Ed.2d 157 (1990). "Diversity jurisdiction does not encompass foreign plaintiffs suing foreign defendants." Cheng v. Boeing Co., 708 F.2d 1406, 1412 (9th Cir.), cert. denied, 464 U.S. 1017, 104 S.Ct. 549, 78 L.Ed.2d 723 (1983).

In its answer to Mutuelles' complaint, Kroll admitted that: "All of the members of Kroll, Pomerantz & Cameron are citizens of California, New York, or other States of the United States ..." If, as Kroll now contends, several partners were not "citizens of California, New York, or other States of the United States," it must establish evidence to substantiate its claim.

Kroll first raised the issue of jurisdiction almost four years after admitting the necessary jurisdictional facts. We recognize that a party may challenge the existence of jurisdiction at any time in the proceedings. Von Dunser v. Aronoff, 915 F.2d 1071, 1074 (6th Cir.1990). The problem is Kroll's failure to substantiate its claim. Kroll submitted an affidavit of one of its partners, Patrick Moynihan, who declared that he had dual Irish-American citizenship, and Kroll also requested judicial notice of its 1986 listing in Martindale-Hubbell, wherein Andre and Oliver Brane are listed as French partners of Kroll. Kroll argues that the dual citizenship of these partners defeats jurisdiction under § 1332(a)(2) in reliance upon Faysound, which denied § 1332(a)(2) jurisdiction because of an alien co-defendant corporation. Faysound, 878 F.2d at 295.

We reject the argument. Dual citizenship (even when established) does not defeat jurisdiction. See Sadat v. Mertes, 615 F.2d 1176, 1187 (7th Cir.1980) ("only the American nationality of the dual citizen should be recognized" under § 1332(a)(2)). See also Action S.A. v. Marc Rich & Co., 951 F.2d 504, 507 (2nd Cir.1991) (same). The district court had jurisdiction.

II. The Jury Instructions

Kroll assigns error to the giving of jury instructions 28, 29 and 42. Kroll complains that these jury instructions prejudiced its defense. Kroll's argument lacks merit.

Jury instruction 28 provided, in pertinent part, "when a lawyer or law firm retains a supervisory role in the handling of the case, he may be liable for failing to perform those supervisory duties in accordance with the standard of care common to supervising lawyers." Kroll acted as supervising attorney for Mutuelles in America. The instruction did not unfairly burden Kroll.

Jury instruction 29 provided: "The lawyer's duty to the client includes the obligation to attempt to effectuate reasonable settlement...

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