O'Neil v. Cunningham

• Decision Date: 29 April 1981
• Citation: 118 Cal.App.3d 466,173 Cal.Rptr. 422
• Court: California Court of Appeals Court of Appeals
• Parties: Albert A. O'NEIL, Plaintiff and Appellant, v. E. Robert CUNNINGHAM and Pacific Indemnity Company, Defendants and Respondents. Civ. 45633.

Page 422

173 Cal.Rptr. 422

118 Cal.App.3d 466

Albert A. O'NEIL, Plaintiff and Appellant, v. E. Robert CUNNINGHAM and Pacific Indemnity Company, Defendants and Respondents.

Civ. 45633.

Court of Appeal, First District, Division 3, California.

April 29, 1981.

Ricardo J. Hecht, San Francisco, for plaintiff and appellant.

Robert C. Gebhardt, Deborah A. David, Bronson, Bronson & McKinnon, San Francisco, for defendants and respondents.

FEINBERG, Associate Justice.

On January 30, 1976, appellant Albert A. O'Neil filed a complaint for damages against the County of Alameda, Peter Carbone, Nadine Foreman, E. Robert Cunningham and Pacific Indemnity Company (Pacific). Approximately one year later, appellant filed a request for a dismissal without prejudice as to all defendants except Cunningham and Pacific, who are the respondents to this appeal. Respondents specially and generally demurred to the complaint pursuant to Code of Civil Procedure section 430.10, subdivisions (e) and (f). ¹ The demurrer was sustained with 30 days' leave to amend on the ground that the complaint failed to state a cause of action.

Appellant filed an amended complaint in one count, the material allegations of which are summarized below:

Appellant is an anesthesiologist, licensed to practice medicine in this state.

Defendant Alameda County operates Highland General Hospital.

Defendant Carbone is and has been employed by the county as Chief of Anesthesiology at Highland Hospital.

Defendant Foreman is and has been employed by the county as Director of Clinical and Medical Education.

Respondent Pacific was at all relevant times the malpractice insurance carrier for the county, and appellant believed that a contract between those parties required that Pacific provide malpractice insurance to physicians with whom the county had contracted to render services at Highland Hospital.

Respondent Cunningham is an attorney, licensed to practice in this state. Appellant believed that Cunningham had been retained by Pacific to perform legal services, as an independent contractor, for Pacific, the county and for the aforementioned physicians at Highland Hospital.

Pursuant to several contracts with the county, appellant served as a staff anesthesiologist at Highland Hospital from April 15, 1969 to mid-February 1975. During 1974, appellant was paid approximately $43,000.

Carbone and Foreman were in a position of authority over appellant. They had the power to assign duties to appellant and to cause the county to terminate appellant's employment contract. Appellant believed that respondents were aware of these facts.

For many years, appellant has had blind spots on the macula of both eyes, but this defect does not, and has not, impaired appellant's ability to perform the visual functions related to and required in the proper performance of his professional duties.

Since August 1969, the Director of the County's Health Care Agency, Carbone and Foreman were aware of this defect.

Carbone and Foreman agreed to terminate appellant's contract with the county, and they acquired the means to act upon this agreement after a particular malpractice action was filed.

On August 29, 1972, a thyroidectomy was performed on Mrs. Bobby J. Gandy at Highland Hospital. Appellant supervised the administration of the anesthetic by an intern. The intern performed this task competently, requiring assistance only in the actual intubation, which was successfully performed by appellant. The administration of the anesthesia was uneventful, and the surgery was performed.

The next day, Mrs. Gandy encountered respiratory distress and brain damage which, it was claimed, rendered her totally, permanently physically incapacitated.

Mrs. Gandy, acting through her guardian, sued the county and all persons who rendered medical services in connection with her thyroidectomy and post-operative care, including appellant.

Respondent Pacific undertook control of the defense of Mrs. Gandy's suit, and, in so doing, assumed the obligation to deal fairly and in good faith with defendants while discharging its responsibilities.

Respondent Cunningham represented defendants in the Gandy suit. In so doing, Cunningham assumed a duty of undivided loyalty to the interests of defendants. When Cunningham agreed to represent those defendants, he also agreed to, and did, represent respondent Pacific, knowing that he would be representing clients with different and probably conflicting interests. However, Cunningham did not explain to any of the Gandy defendants, including appellant, the implications of this multiple representation and, therefore, none of the defendants were given the opportunity to evaluate their need for separate representation. Furthermore, Cunningham never told the Gandy defendants that he and Pacific took the position that anything done by them in connection with the Gandy case was absolutely privileged pursuant to Civil Code section 47. As a result of his failure to explain and to disclose, Cunningham was able to become, nominally, appellant's attorney while he was solely Pacific's lawyer and, with Pacific, gained an advantage over appellant in violation of the obligations imposed by Civil Code section 2228.

After becoming appellant's attorney, Cunningham learned from appellant about his visual defect. Later, Cunningham deliberately distorted the facts about the defect to appellant's detriment in order to benefit his client, Pacific.

On May 24, 1974, Cunningham wrote a letter to Pacific in order to persuade Pacific and the county to settle the Gandy suit within certain limits, thereby minimizing the financial loss which might otherwise be incurred by Pacific. The letter made the following reference to appellant's participation in the surgery: "... Surgery was performed by Dr. Fox, a Fourth Year Surgery Resident. The surgery was uneventful, except the anesthesiologist, who has a severe sight problem, had difficulty in intubating the plaintiff and required several attempts to do so. He also was not able to pass the esophageal stethoscope and therefore used a chest stethoscope...."

The statement gives the false impression that the difficulty in intubating Mrs. Gandy and the failure to pass the esophageal stethoscope resulted from appellant's sight problem, and that appellant experienced "untoward difficulty" in intubating Mrs. Gandy.

On June 20, 1974, Pacific wrote a letter to the Director of the County's Health Care Agency and enclosed a copy of Cunningham's letter. The object of the letter to the director was to persuade the county to authorize settlement of Mrs. Gandy's claim, thereby minimizing Pacific's financial loss.

Appellant was not told about these letters. Therefore, he was deprived of the opportunity to correct the "false impression" conveyed in Cunningham's letter and of the opportunity to indicate that the letter could damage appellant's contractual relationship with the county and his professional standing.

When the letters were sent, respondents knew that there was a likelihood that the contents could be used by persons ill disposed toward appellant in order to inflict emotional distress upon him and to damage his professional standing and contractual relationship with the county. The letters were transmitted in order to save Pacific money without concern for appellant's rights.

Carbone and Foreman became aware of the contents of Cunningham's letter and, on the basis of that letter:

Falsely accused appellant of having a visual handicap which interfered with his ability to perform in accordance with his contract, and

Threatened appellant with the loss of his license unless he terminated his contract and left the state.

During this time, Carbone and Foreman were aware that appellant was susceptible to emotional distress.

Despite the fact that the conduct described above caused appellant "intense emotional distress," appellant neither terminated his contract nor left the state. Consequently, Carbone and Foreman employed the statements in the Cunningham letter to cause the county's Health Services Director to recommend that the county's Board of Supervisors cancel appellant's contract.

After learning that appellant had requested a full hearing by the Board before any action was taken, Carbone and Foreman stopped assigning professional duties to appellant which "effectively destroyed ... (appellant's) usefulness as a Staff Anesthesiologist, and thereby subjected ... (appellant) to derision, humiliation and ostracism." As a direct and proximate result of this conduct, appellant abandoned his request for a hearing and gave the county written notice terminating his contract.

Appellant has been unable to obtain comparable work.

The amended complaint contained certain allegations regarding exemplary damages and concluded with a prayer for special, general and exemplary damages.

Though the amended complaint is captioned as a complaint for damages for "Outrageous Conduct; Negligence," it is obvious that the complaint sounds in defamation for the basis of the action is the alleged defamatory statement in respondent Cunningham's letter. ² Appellant concedes as much.

Respondents also demurred to the amended complaint pursuant to Code of Civil Procedure sections 430.10, subdivisions (e) and (f). The second demurrer was sustained without leave to amend because appellant had failed to allege facts sufficient to state a cause of action, and the action was dismissed.

This appeal followed.

The Issue

Can the privilege of Civil Code section 47, subdivision 2 ³ apply where anattorney allegedly defames his client during the course of a judicialproceeding?

Discussion

Appellant agrees that the issue is the effect of section 47, subdivision 2. As he puts it, the issue is whether "An insurer and its lawyer are 'privileged' under section 47.2 to defame and injure an insured whom they have undertaken to defend." He does not distinguish between the "insurer and its lawyer"...