Judge: Malcolm Mackey, Case: 21STCV13121, Date: 2023-01-31 Tentative Ruling

Case Number: 21STCV13121    Hearing Date: January 31, 2023    Dept: 55

J-M MANUFACTURING COMPANY, INC. v. WFBM, LLP               21STCV13121

Hearing Date:  1/31/23,  Dept. 55

#7:   DEMURRER TO FIRST AMENDED CROSS-COMPLAINT.

Notice:  Okay

Oppositions

MP:     Cross-Defendant KEAN MILLER LLP.

RP:      Cross-Complaint of WFBM, LLP.

Summary

On 4/6/21, Plaintiff J-M MANUFACTURING COMPANY, INC. filed a Complaint.

On 8/25/21, Plaintiff filed a First Amended Complaint, alleging:  Defendant WFBM, LLP provided legal representation as to a defensible asbestos case-- Norris Morgan v. J-M Manufacturing Company, Inc., LASC Case No. BC695605, in which the underlying case plaintiffs were represented by Simmons Hanly Conroy, LLC (SHC), with lead trial associate Scott Peebles.  But Defendant grossly poorly represented Plaintiff, in the action to recover damages allegedly resulting from Plaintiff’s asbestos exposure, including Defendant’s appalling lack of pre-trial preparation, leading to a large Judgment against Plaintiff, in the sums of $7,213,704.39 in compensatory damages, and $15 million punitive damages.   In a prior wrongful termination case by attorney Peebles, represented by Dolan Law Firm, PC, it was alleged that he was fired by Simmons Hanly Conroy, for being a whistleblower about the law firm’s ongoing ethics violations, and that case settled with a protective order and confidentiality agreement.

The causes of action of the First Amended Complaint herein are:

(1) LEGAL MALPRACTICE;

(2) BREACH OF FIDUCIARY DUTY;

(3) BREACH OF CONTRACT/ BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING;

(4) NEGLIGENT MISREPRESENTATION;

(5) FRAUDULENT CONCEALMENT.

On 9/15/22, Defendant WFBM, LLP filed a First Amended Cross-Complaint against Plaintiff;    OUTSIDE GC, LLC;  FRANK FLETCHER;  and KEAN MILLER LLP, alleging that any determined damages in the main action were caused by Cross-Defendants that jointly represented J-M MANUFACTURING COMPANY, INC, providing legal services in Morgan et al. v. J-MM Manufacturing Company, Inc., et al., Los Angeles Superior Court Case Number BC695605.

The claims of that cross-complaint are:

(1) EQUITABLE INDEMNITY;

(2) PARTIAL EQUITABLE INDEMNITY;

(3) CONTRIBUTION;

(4) DECLARATORY RELIEF;

(5) QUANTUM MERUIT;

(6) COMMON COUNT-SERVICES RENDERED; AND

(7) COMMON COUNT-ACCOUNT STATED.

MP Positions

Moving party requests an order sustaining the demurrer to the First Amended Cross-Complaint, on grounds including the following:

·         The indemnity claims of the First Amended Cross-Complaint (FAXC) are barred as a matter of law by public policy, as recognized in Kroll & Tract v. Paris & Paris (1999) 72 Cal.App.4th 1537 and Shaffery v. Wilson, Elser, Moskowitz, Edelman & Dicker (2000) 82 Cal.App.4th 768, amongst many other cases.

·         Walsworth’s FAXC seeks indemnity from Kean Miller LLP  for a legal malpractice claim brought against Walsworth by their mutual client, J-M Manufacturing, Inc.  The FAXC falls squarely within the foregoing public policy exception and implicates grave public policy concerns.

·         Walsworth’s indemnity claims should be barred because they inevitably create a conflict of interest between Kean Miller and its current client, JMM.

·         The underlying joint representation of the client in Musser had ended for both attorneys when the cross-complaint was filed. (Musser, 28 Cal.4th at 277.) The Court therefore deemed there was no concern about a conflict of interest. (Id. at 284.) In this case, Kean Miller’s ongoing representation of JMM places the public policy concern over a conflict of interest squarely in the crosshairs.

·         Walsworth’s claims against Kean Miller cannot proceed because JMM has not waived the attorney-client privilege with respect to Kean Miller.

·         Walsworth instead may raise the affirmative defense of Kean Miller’s alleged comparative negligence to reduce its liability. This is the approach courts have adopted rather than force Kean Miller to disclose privileged communications and defend a cross-complaint in its own self-interests creating an adversarial relationship with its current client JMM.

RP Positions

Opposing party advocates overruling, for reasons including the following:

·         In Musser v. Provencher (2002) 28 Cal.4th 274, the California Supreme Court was clear that, "public policy [does] not require the adoption of […] a blanket rule" "barring concurrent counsel or cocounsel from suing one another for indemnification for legal malpractice damages". (Musser, 28 Cal.4th at 276.)

·         In Forensis Group, Inc. v. Fantz, Townsend & Foldenauer (2005) 130 Cal.App.4th 14, 18,48,  the Court of Appeal allowed an equitable contribution claim by experts against the law firm that hired them, including because, to defend against the equitable indemnity claim, the attorneys primarily provide information about strategy and judgment, which has very little to do with client communications or client protection.

·         Cross-Complainant and Cross-Defendant were doing concurrent representation of the same client, as to which the policy against attorneys suing each other is inapposite.

·         From September 2018 onward Cross-Defendant Kean Miller was involved in trial strategy, witness preparation, and witness selection for trial. (FAXC ¶ 26.) Client J-MM required that general counsel NCC and local counsel, like Cross-Complainant (Walsworth), follow communication guidelines. The communication guidelines required Walsworth to jointly share information with NCC, J-MM's general counsel, and J-MM’s cost sharing partner. (FAXC ¶ 28.)  J-MM now faults Walsworth for alleged errors in the in the underlying case.

·         The fact that Kean Miller continues to represent J-MM in other unrelated matters creates no conflict based on the allegations in the cross-complaint. The underlying Morgan matter has long since ended and Kean Miller may still honor its duty of loyalty to the client and provide the same counsel to its client on ongoing matters.

·         Kean Miller already revealed communications, either by copying Walsworth on them, or revealing via a timeline after the end of the litigation. (FAXC ¶¶ 28-42; 46-47.) To the extent that Kean Miller needs to reveal J-MM's playbook to defend itself, J-MM has already put that plainly in issue in this matter. (FAC ¶¶ 28-29, 49(f).) As in Crouse, such disclosures have nothing to do with ongoing matters. (See Crouse, 130 Cal.App.4th at 39.) Kean Miller does not articulate what possibly privileged information would be disclosed.

·         The privilege is waived when the client or the other attorney discloses the communication or subject matter of the communications. (Kerner v. Superior Court (2012) 206 Cal.App.4th 84, 112.) That is what occurred here and, as a result, there are no privilege concerns implicated here.

·         The mere possibility of a conflict is not enough to dismiss Walsworth's meritorious claim at the pleading stage. (See Moore v. Conliffe (1994) 7 Cal. 4th 634, 638; Parkowners Ass'n v. City of Monclair (1999) 76 Cal.App.4th 784, 790.) 

·         Dismissal of claims based on the attorney-client privilege is improper at the pleading phase. "Rather, in the usual case, whether the privilege serves as a bar to the […] recovery will be litigated and  determined in the context of motions for protective orders or to compel further discovery responses, as well as at the time of a motion for summary judgment (General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1190.)

·         There would be prejudice to Cross-Complainant.  A comparative negligence defense is just not a substitute for a cross-complaint and will not "suffice" to prevent harm. (See Forensis, 130 Cal.App.4th at 36 FN 6.).

Tentative Ruling

The demurrer is overruled.

Twenty days to answer.

The defenses of public policies going against some attorneys suing each other for malpractice, and privileges of any specified communications, are not revealed by the pleading alleging concurrent representation in the underlying case, and complainants have no obligation to address defense issues unless already revealed.

Complainants are not required to address and anticipate affirmative defenses in their pleadings, unless already revealed.  E.g., Gentry v. eBay, Inc. (2002) 99 Cal.App.4th 816, 825.   “‘[A] demurrer based on an affirmative defense will be sustained only where the face of the complaint discloses that the action is necessarily barred by the defense.’”  McKenney v. Purepac Pharmaceutical Co.  (2008) 167 Cal.App.4th 72, 78-79.  A demurrer does not lie, based upon privilege, unless the defense was already revealed on the face of the pleading, and complainants have no obligation to anticipate and negate such defenses.  Fuhrman v. Cal. Satellite Systems  (1986) 179 Cal.App.3d 408, 422, overruled on other grounds by  Silberg v. Anderson (1990) 50 Cal.3d 205, 219.

Specifically, the First Amended Cross-Complaint does not admit involving only successor lawyers’ failing to extricate from situations created by predecessor attorneys, insurance-arranged attorneys sued for monitoring, or an ongoing viable attorney-client privilege without any exceptions such as revelation or client settlement and waiver of the privilege.

An opinion describes the policies as follows:

Again, one of the two policy considerations that led courts to prohibit indemnification claims brought by a predecessor attorney against a successor attorney was that such a claim could create a conflict of interest for the client's new attorney. The conflict of interest we are concerned about is not a conflict between an attorney's duty to the client and the attorney's purported duty to concurrent counsel or cocounsel, as we make clear in the companion case, Beck v. Wecht, supra, 28 Cal. 4th 289. Rather, the conflict of concern is a conflict between an attorney's duty to the client and the attorney's self-interest. Provencher gives us no reason, and we have not discovered any reason ourselves, to believe that an attorney's self-interest will interfere with loyalty to the client just because the attorney, as a joint tortfeasor, may face an indemnification claim if the client sues the attorney's concurrent counsel or cocounsel for malpractice.

The other relevant policy is protecting the confidentiality of attorney-client communications. The concern is that the law firm from which indemnification is sought may be unable to defend itself without revealing privileged client communications. (Kroll & Tract, supra, 72 Cal. App. 4th at p. 1544.) In Kroll & Tract, the Court of Appeal held that by choosing not to sue the law firm that was the subject of the indemnification claim, the client "expressly preserved the privilege" as to that firm. (Ibid.) That is not true in this case. As the Court of Appeal observed, Pam Scott, in her settlement with Musser, expressly waived her attorney-client privilege with respect to Provencher's representation of her in the bankruptcy portion of the dissolution action.

In conclusion, because the policy considerations that underlie the rule barring indemnification claims in predecessor/successor cases do not obtain in this concurrent counsel case, it would be unjust to deny Musser an opportunity to seek indemnity or contribution from Provencher when Musser has been sued by Pam Scott for damages allegedly attributable to Provencher's tortious conduct.

Musser v. Provencher (2002) 28 Cal.4th 274, 284-85.

Opinions emphasized in the demurrer, are distinguishable, basically in not squarely addressing allegedly concurrent legal representation in an underlying case followed by successor representation in another related case. 

One opinion mentioned law against attorneys suing successor attorneys and had a holding dealing with insurer-arranged attorneys to monitor a case.  See  Shaffery v. Wilson, Elser, Moskowitz, Edelman & Dicker (2000) 82 Cal.App.4th 768, 769  (“To the chorus of cases decreeing that a lawyer sued by a former client for professional negligence cannot seek indemnity from the lawyer subsequently retained by the client on the same matter, we add…: When a lawyer whose fees were paid by his client's insurer is sued by the insurer for malpractice, the lawyer may not seek indemnity from the lawyers retained by the insurer to "monitor" the same case.”)

Another cited case similarly involved a particular insurance situation:  “Even though Kroll & Tract and Paris & Paris shared the common goal of defending San Jose Crane in the underlying lawsuit, they filled separate roles. Kroll & Tract was hired by San Jose Crane's insurer, who provided it with a defense under a reservation of rights. Paris & Paris, who began the defense as San Jose Crane's personal counsel, remained in the case as Cumis counsel.”  Kroll & Tract v. Paris & Paris (1999) 72 Cal.App.4th 1537, 1542.

“Language used in any opinion is of course to be understood in the light of the facts and the issue then before the court, and an opinion is not authority for a proposition not therein considered.”  Ginns v. Savage (1964) 61 Cal.2d 520, 524, n.2.  “‘A decision, of course, does not stand for a proposition not considered by the court.’"  Flatley v. Mauro (2006) 39 Cal. 4th 299, 320 (quoting Nolan v. City of Anaheim (2004) 33 Cal.4th 335, 343).   See also  Bosworth v. Whitmore  (2006) 135 Cal.App.4th 536, 550 (“appellate opinions are not authority for unconsidered propositions….”).  "A legal proposition asserted without apposite authority necessarily fails."  People v. Taylor (2004) 119 Cal.App.4th 628, 643.