Declarations and Exclusions

On Second Thought, You’re Excused: 9th Circuit En Banc Panel Finds “Excusable Neglect” in Delegation of Calendaring to Paralegal

Last December Decs & Excs reported on the case of Pincay v. Andrews, in which the 9th Circuit U.S. Court of Appeals held that an attorney who missed a critical filing deadline after relying on a paralegal to schedule the filing date would not be relieved from the dire consequences of that error.  Here is a repeat of the earlier summary of the facts:   

Laffit Pincay Jr. and Chris McCarron -- two well-known and successful jockeys -- were engaged in litigation with Vincent Andrews Management Co. and its principals for some 13 years, finally obtaining a judgment against the Andrews parties in 2002. When the judgment arrived, a non-attorney calendaring clerk in the unnamed ‘large law firm’^[1] representing Andrews notified the handling attorney. An e-mail exchange followed, in which the attorney relied on the calendar clerk to determine and make note of the deadline to appeal. The clerk's calculations were inaccurate, and the appeal date came and went without action being taken. On discovering the error, the attorney quickly sought an order from the trial court to extend the appeal date. The attorney argued that his reliance on the calendar clerk was reasonable and that the error was the result of ‘excusable neglect.’ The trial court agreed and granted the extension; Pincay and McCarron appealed that order -- that is, they appealed from the extension of their opponent’s time to appeal -- and the 9th Circuit has now ordered the extension reversed, cutting off Andrews' appeal.

The majority on the original 3-judge panel found that counsel’s error was neglect, but not “excusable” neglect.  As noted by a commenter to my original post, the 9th Circuit granted rehearing of the matter en banc in May of this year.  Now, the Court has overturned the decision of the earlier 3-judge panel, and has concluded that the trial court’s decision to grant relief from the calendar error can only be overturned in the event of a patent abuse of that court’s discretion and that the law as articulated by the U.S. Supreme Court does not permit a rigid per se rule against delegating calendar responsibilities to non-lawyer staff.  Finding no obvious error, the en banc panel has sustained the order granting relief, and directed that the appeal from the judgment should proceed forward to a hearing on its merits. Relying principally on  the 1993 Supreme Court decision in Pioneer Investment Services Co. v. Brunswick Associated Ltd. Partnership, 507 U.S. 380, the 9th Circuit emphasizes that each case must be dealt with on its own particular facts, applying a four-part analysis considering “(1) the danger of prejudice to the non-moving party, (2) the length of delay and its potential impact on judicial proceedings, (3) the reason for the delay, including whether it was within the reasonable control of the movant, and (4) whether the moving party’s conduct was in good faith.”  The trial court found that factors 1, 2 and 4 all supported relief, and that while the “reason for delay” was plain error in reading the controlling rule, that error should be excused.

In the modern world of legal practice, the delegation of repetitive legal tasks to paralegals has become a necessary fixture. Such delegation has become an integral part of the struggle to keep down the costs of legal representation. Moreover, the delegation of such tasks to specialized, well educated non-lawyers may well ensure greater accuracy in meeting deadlines than a practice of having each lawyer in a large firm calculate each filing deadline anew. The task of keeping track of necessary deadlines will involve some delegation. The responsibility for the error falls on the attorney regardless of whether the error was made by an attorney or a paralegal. [Citation.]  We hold that delegation of the task of ascertaining the deadline was not per se inexcusable neglect.

Although in this case “the misreading of the Rule was egregious, and the lawyer undoubtedly should have checked the Rule itself before relying on the paralegal’s reading”, the 9th Circuit nonetheless finds that the trial court was permitted to grant relief.

We are persuaded that, under Pioneer, the correct approach is to avoid any per se rule. Pioneer cautioned against ‘erecting a rigid barrier against late filings attributable in any degree to the movant’s negligence.’ 507 U.S. at 395 n.14. There should similarly be no rigid legal rule against late filings attributable to any particular type of negligence. Instead, we leave the weighing of Pioneer’s equitable factors to the discretion of the district court in every case.

The decision of the en banc panel in Pincay v. Andrews (Nov. 15, 2004), Case No.  02-56577, including a stern dissent by Judge Alex Kosinski,² can be found at this link in PDF format.

Consumer Complaints, Gripe for the Picking

"One of these days, I want to burn down an insurance company -- just so they'll have to make a claim!"
-- Comedian Alonzo Bodden, on NBC's Last Comic Standing

The spirit of entrepreneurship is alive and well and coming to an insurance regulator near you. Insurance Journal reports today on the launch of an online service offering consumers a pathway for the presentation of complaints to state insurance regulators:

A new Web site, with the provocative name of 'InsuranceGripe.com,' has been launched to help consumers complain to their respective insurance departments about an insurance related problem.

'The site was created specifically to walk consumers through the process of collecting the proper information, preparing a letter and sending the letter to the appropriate address,' said the bulletin. The service is provided free of charge.

"Free" is always a good selling point, and there is no reason to object to rendering consumers assistance when they believe they have a grievance with their insurer, agent or broker, but is that service really the point at Insurancegripe? No, not really.

Insurance Journal seems to have taken a press release at face value. In an article dated August 2, The Business Review of Albany, New York, inquired further:

Insurancegripe.com was created by Rich Pagano, an Albany-based Web-site designer, and Rick Weidman, an insurance industry veteran from Bethlehem, Pa. The site simplifies the process of complaining to a state insurance department and then gives the customers the option of switching carriers or agents. Pagano and Weidman will then sell the leads to agents.

After a few years, they hope to have enough data on customer service to sell to insurance carriers.

'I've been in insurance business for 24 years and one of the things I've noticed is that there is not a lot of customer market research,' Weidman said. 'There are a handful of consultants, but they charge a lot of money.'

(Underscoring added.)

While posturing itself as a consumer assistance service -- the service provided being little more than the preparation of a letter that the consumer can then submit to his or her state insurance department -- Insurancegripe is reasonably open about its real motivations. The site's FAQ page includes this disclosure, clothed in the rhetoric of "we're just here to help":

So, if you don't charge me anything, how do you make money?

When you provide information via the complaint, this information remains confidential unless you specifically request us to do something with it.... such as refer you to an insurance agent. We then take the complaint information that you have provided and aggregate it with all of the other complaints and use it to improve the services of the companies that you have complained about. We do sell the anonymously pooled information to the companies you have complained about. However, we will never release your personal information, unless you have requested us to do so.

In some cases, consumers may be unhappy with their insurance company or insurance agency, and they would like to switch their insurance to someone else. At your request, we can attempt to refer you to a different insurance agency to replace your insurance company. But, only at your request.

(Underscoring added.) A link in the main page sidebar also leads to Insurancegripe's New Insurance Coverage page, explaining the availability of a referral service:

In some cases, consumers are not satisfied with the quality of service they receive from their existing insurance company or agency, and they are interested in speaking to someone else about purchasing their insurance from a different insurance company or agency. If you have indicated YES to this question when completing your fact sheet, someone from a respected insurance agency will contact you directly within the next five business days.

We have negotiated with several National Wholesale Insurance Agencies to respond to your needs quickly, and we will continue to monitor the quality of service you receive from them to insure your satisfaction.

Generally, we are unable to provide individuals with alternatives to their WORKERS COMPENSATION or HEALTH CARE benefits issues because they are generally coverage’s, [sic] which are provided through their employer.

(Emphasis in original.) That grammatically peculiar final paragraph that doesn't exactly build confidence, but informed consumers will surely draw their own conclusions.

One Too Many Games of "Yacht-zee!"

The conviction of former attorney Rex DeGeorge (not currently licensed to practice, for reasons which will be obvious) for insurance fraud, perjury and related crimes has been upheld by the 9th Circuit Court of Appeals. Mr. DeGeorge's case provides an object lesson in the perils of overreaching:

DeGeorge was convicted in March 2002 in Los Angeles for attempting to sink the 76-foot custom-built Principe di Pictor.

He previously had received insurance payments after claiming two other boats sank and one was stolen.

According to court testimony, the lawyer and two other men left Viareggio, Italy, on the Principe without a captain on Nov. 6, 1992, and cut holes in the bottom of the boat in an unsuccessful attempt to sink the yacht.

When the men were rescued by Italian authorities hours later, they reported that their hired captain had tried to sink the boat before fleeing in a speedboat.

A more expansive version of this salty yarn is included in the 9th Circuit's opinion:

The government presented evidence that DeGeorge, Ebeling, and a third associate, Gabriel Falco, set out from Viareggio, Italy, on November 4, 1992, for the maiden voyage of the Principe. For the first day of their journey, the yacht was captained by an Italian man named Ramono Romani, who was aided by an additional Italian crew member. When the group reached Naples, Italy, on November 5, DeGeorge dismissed Romani and the crew member.

According to testimony from Ebeling and Falco, the three men left Naples without a captain on the evening of November 6. They sailed for several hours, with DeGeorge and Falco alternating at the helm while Ebeling read and slept. Sometime in the middle of the night, DeGeorge instructed Falco to take the power tools they had purchased a few days earlier and begin cutting holes in the boat. For the next six or seven hours, DeGeorge, Falco, and Ebeling took turns cutting holes and trying to do anything else necessary to sink the Principe, including smashing equipment and opening vents in the engine room to make the boat take on more water. The scene became rather frantic, and at one point DeGeorge even began ramming a dinghy into the side of the yacht. Despite their efforts, and despite taking on a significant amount of water, the Principe refused to sink.

Sometime after daybreak, Italian authorities patrolling the coast spotted the yacht and began to approach. Noticing the Italian ship on the horizon, the three men disembarked the Principe and got into rescue dinghies to await the arrival of the Italians. Falco and Ebeling testified that while they waited DeGeorge devised a story for the three men to explain how they ended up off the coast of Italy with a scuttled yacht.

DeGeorge’s story went as follows: he, Ebeling, and Falco had been in Naples looking for a captain. A man named Captain Libovich, who resembled Robert Redford and claimed to be a former Russian submarine captain, heard of their search and offered his services, along with those of his two crewmen. The six men took the yacht out from Naples for what was ostensibly to be a test drive. The captain and his men each brought aboard two large black duffel bags.

After several hours at sea, the captain and his crewmen overpowered the others and forced them into the cabin of the yacht. The captain and crew then set about cutting holes in the yacht so that it would sink. Sometime near dawn, a black speed boat pulled up next to the yacht. Libovich and his men unloaded their six bags onto the boat, jumped aboard, and sped off.

The Italian authorities were suspicious and held the soggy Americans in custody for a time, but pressed no charges. On returning to the U.S., DeGeorge presented a claim to Cigna, the insurer of the yacht. Cigna investigated, ultimately saw through the charade and brought a successful civil suit to rescind its policy. The trial judge in that case referred the matter to the U.S. Attorney's office, the criminal prosecution ensued and now it's more than just Mr. DeGeorge's boat yacht that's sunk.

UPDATE 9/8/04: Ted Frank at Overlawyered points out the serious lessons to be learned from the long-running saga of Mr. DeGeorge.

FURTHER UPDATE 9/21/04: Martin Grace -- who posted about this case here -- and I received a stern e-mail message today contesting the accuracy of certain characterizations of Mr. DeGeorge and his history. All of the passages quoted in the e-mail, however, came from Ted Frank's write-up, here. Martin has posted the text of that e-mail here, and I've left a comment to that post, for the completists among you. Anchors a-weigh!

"D'oe!" -- Defendants' Active Participation in Case Precludes Claim of Untimeliness

We have reported previously on cases in which an appellate court refuses to relieve an attorney from the consequences of a procedural error. (Several examples are summarized here.) In contrast, the Court of Appeal for the Fourth District has stepped in at the last moment to salvage a claim that might very well have been deemed time-barred due to an omission of the plaintiff's attorney.

In brief, the original complaint filed in this case included several "Doe" defendants -- parties whose identities were not precisely known to plaintiff's counsel at the outset, and who were therefore sued initially under fictitious names. Counsel filed an amended complaint, leaving out any mention of the "Doe" defendants -- which under California law had the effect of dismissing them from the case. He then identified and served the "Doe" parties with the original (superceded) complaint.

Having no idea that the allegations against them had been dropped in the amended version, the "Doe" defendants appeared and actively litigated the case. Plaintiff's counsel then sought to file a second amended complaint, whereupon the former "Doe" parties learned of the existence of the previous Doe-dropping amendment. They persuaded the trial court to dismiss the case against them, because it technically did not exist at the time they had actually been served.

On appeal, the court concluded that the "Doe" defendants really weren't parties when they were served, but held that their own conduct in actively participating in the litigation bars them from now asserting they weren't brought in to the case in a timely manner. No doubt the plaintiff's attorney was relieved to read the second paragraph in this excerpt from the appellate court's opinion:

In essence, the trial court ruled that, even though the new defendants had participated in the action for over a year, filing not only answers but also cross-complaints and even a motion for summary judgment, they had never really been parties at all. Moreover, it was too late to make them parties. The plaintiff’s procedural gaffes precluded it from any recovery against them.

By and large, we agree with the trial court’s reasoning -- as far as it went. We will hold, however, that the new defendants waived any objection to their joinder by filing answers and thereby making a general appearance. Their waiver was effective even though they had no reason to suspect, at the time, that they had not been properly joined. Thus, the action was commenced against them, for purposes of the statute of limitations, not later than when they filed their answers. We cannot say, as a matter of law, that the applicable statutes of limitations had run by that date. Hence, we will reverse.

The decision in Fireman's Fund Ins. Co. v. Sparks Construction Co. (January 8, 2004), Case No. E033 453, can be found at these links in PDF and Word formats.

A Day Late and $3.00 Short -- Lack of Sufficient Filing Fee Bars Last Minute Medical Malpractice Claim

When little things go wrong, large and unpleasant consequences may follow. A cautionary tale:

An attorney in San Diego representing the potential plaintiff in a medical malpractice case to be venued in San Francisco submitted the complaint for filing two days before the statute of limitations was set to expire. Unfortunately, the filing fee check the attorney submitted with the complaint was in an amount $3.00 less than required by local court rules. The court clerk rejected the filing. Counsel did not learn of the rejection until after the statutory time to file had expired. The complaint was accepted with a new fee check, but the defendants were ultimately able to obtain a dismissal on the basis of the statute of limitations. Confronted with these facts, the Court of Appeal is sympathetic to the plaintiff's plight, but ultimately unable to come to her aid:

Benjamin Franklin described the snowballing consequences of inattention to a small detail—'For want of a nail, the shoe was lost; for want of a shoe the horse was lost; and for want of a horse the rider was lost.' (Oxford Dict. of Quotations (2d ed. 1955) p. 211.) In this case the missing nail is a check that was $3 short of the amount required to file a complaint for medical malpractice that allegedly caused the death of the plaintiffs’ infant child. The harsh but unavoidable result is that we affirm the trial court’s dismissal of the complaint because it was not filed before the statute of limitations ran.

Noting that "[a]n unbroken line of decisions by our Supreme Court holds that it is mandatory for court clerks to demand and receive the fee required by statute before documents or pleadings are filed", the court reluctantly rejected plaintiff's argument that the $3.00 shortfall was a trivial defect that should not preclude the complaint from being deemed to have been filed when it arrived in the courthouse.

Three practical safety tips for attorneys can be drawn here:

♣ Try to avoid filing complaints at the last moment before the expiration of a statute of limitations. [There is much less room for error when the time to correct a mistake or to respond to a surprise development is so short.]

♣ Be extra cautious when filing in a court at a distance from your own local practice. [Again, reaction times slow when the problem is developing hundreds of miles away. If the case were being filed in San Diego rather than San Francisco, the San Diego attorney would probably still have had time to submit the extra fee.]

♣ Always double-check the procedural details of the local rules of the court in which you are filing. [The precise reason the fee check came up short here is not stated, but one possible cause is an assumption that the fee in San Francisco was the same as in San Diego. As 'twas said of old: "When you assume, you make an ass of you and me." (Ass u me - get it?)]

The sad story can be read in the decision in Duran v. St. Luke's Hospital (December 16, 2003), Case No. A102182, at these links in PDF and Word formats.

Delegation is Not Representation: Attorney's Delegation of Responsibility to Non-Attorney is not "Excusable" Neglect

Every so often a busy attorney must rely on a non-attorney staff member to keep track of important deadlines, such as the last day on which to file an appeal. If the non-attorney misses the deadline, however, the U.S. Court of Appeals for the 9th Circuit will have no sympathy for the attorney and will not permit him or her to be relieved of the consequences of the omission.

Laffit Pincay Jr. and Chris McCarron -- two well-known and successful jockeys -- were engaged in litigation with Vincent Andrews Management Co. and its principals for some 13 years, finally obtaining a judgment against the Andrews parties in 2002. When the judgment arrived, a non-attorney calendaring clerk in the unnamed "large law firm" representing Andrews notified the handling attorney. An e-mail exchange followed, in which the attorney relied on the calendar clerk to determine and make note of the deadline to appeal. The clerk's calculations were inaccurate, and the appeal date came and went without action being taken. On discovering the error, the attorney quickly sought an order from the trial court to extend the appeal date. The attorney argued that his reliance on the calendar clerk was reasonable and that the error was the result of "excusable neglect." The trial court agreed and granted the extension; Pincay and McCarron appealed that order -- that is, they appealed from the extension of their opponent's time to appeal -- and the 9th Circuit has now ordered the extension reversed, cutting off Andrews' appeal. The judges in the majority were unequivocal in their disapproval of the attorney's excuse:

Andrews’ counsel did not show good cause for his failure to file on time, nor can his action be classified as excusable neglect. What counsel did was to delegate a professional task to a nonprofessional to perform. Knowledge of the law is a lawyer’s stock in trade. Bureaucratization of the law such that the lawyers can turn over to nonlawyers the lawyer’s knowledge of the law is not acceptable for our profession.

(Emphasis added.) In dissent, Circuit Judge Andrew T. Kleinfeld did not endorse the attorneys' erroneous practice, but urged that the lower court was within the bounds of its considerable discretion in excusing it:

My dissent is directed to the proposition that compels the majority’s conclusion: 'Not knowing the law governing one’s practice is different from mere neglect, and it cannot be classed as excusable neglect,' especially when compounded by delegation of that knowledge to a non-lawyer. This holding is erroneous. Ignorance of the law and negligent delegation can indeed be classed as excusable neglect. And ignorance of the law plus negligent delegation—not knowing that the deadline for filing a notice of appeal in a civil case where the government is not a party is 30 days, not 60, and relying on a calendar clerk’s reading of Federal Rule of Appellate Procedure 4—is the precise error that the Andrews’ lawyer made.

The majority fleshes out this concept of ignorance of the law, qualifying it with its concern that the lawyer delegated professional tasks to a non-lawyer to perform. Delegation may be negligent, but negligence, under Pioneer, can be “excusable neglect.” There is no difference in principle between negligent mistake of law and negligent supervision. All professionals delegate. Medical doctors delegate many traditional duties to physician’s assistants and nurses. Lawyers and judges delegate to associates, law clerks, interns, paralegals, calendar clerks, and secretaries. Lay calendar clerks commonly set trial dates for district judges, who delegate to them to avoid Speedy Trial Act errors. Of course delegation can be excessive, but what matters is the degree of supervision.

He adds an expression of concern for the perhaps unintended consequences of the majority's strict interpretation, with a nod to the likely consequences of the ruling for the attorney involved:

Good lawyers commonly give their adversaries stipulations relieving them of inadvertent errors not going to the merits. The rigid per se rule the majority creates today will make it difficult for them to do so. Our court thereby damages the mutual civility and accommodation that characterizes the practice of law at its best. This unnecessary rule will be career-destroying for decent lawyers who make inadvertent errors.

The 9th Circuit's decision in Pincay v. Andrews (Dec. 10, 2003), Case No. 02-56577, can be found at the following link in PDF format.

Attorneys Behaving Badly [A Continuing Series]: No Recovery of Fees For Law Firm Disqualified for Actual Conflict of Interest

What Is Wrong With This Picture?  A law firm already engaged in a dispute over fees with a former client takes on the representation of a third party in an action against the same former client.  The former client moves, successfully, to disqualify the law firm from representing the third party on the ground that the law firm possesses confidential information acquired in the prior attorney-client relationship, and therefore has an actual conflict of interest.  Later, the third party settles with the law firm’s former client, and the law firm seeks to recover a percentage of that settlement as fees for pursuit of the claim from which it was disqualified.  Do the attorneys get paid?  They do not, in the opinion of California’s First District Court of Appeal.

The firm of Aguilar & Sebastinelli represented Richard Peterson in connection with a number of matters involving his business and professional interests through the early 1990s.  (The appellate court makes oblique references to several insurance-related enterprises and a condominium in the Cayman Islands, but is otherwise discrete.)  The Aguilar firm collected over $1.5 Million in fees for its services, but the relationship ultimately broke down, with the Aguilar firm suing for Peterson for additional fees.  Meanwhile, A.I. Credit Corp., Inc. (AICCI), represented by another firm, had obtained a judgment against Peterson for some $675,000.

An attorney at the Aguilar firm knew an attorney representing AICCI, and through that connection the Aguilar firm was ultimately retained by AICCI, on a contingent fee basis, to pursue enforcement of AICCI’s judgment against the Aguilar firm’s former client, Peterson.  Peterson, through new counsel, moved successfully to have the Aguilar firm disqualified from representing AICCI against him, on the relatively obvious ground that the Aguilar firm had acquired confidential information, and thus had a conflict of interest, arising from its former representation of Peterson.  AICCI returned to its original attorneys and was able to reach a settlement under which Peterson would pay the $675,000 judgment against him.  The Aguilar firm then filed a claim for 30+% of the settlement, on the ground that it was entitled to recover under its contingent fee agreement with AICCI.  The trial court and the Court of Appeal disagreed, and spurned the Aguilar firm’s attempt to obtain a benefit from a representation in which it possessed a clear, adjudicated conflict of interest.

The Court of Appeal in its opinion evinces no patience at all with the Aguilar firm’s arguments, which it characterizes as “riddled with errors.”  It notes that the firm did not appeal -- and hence cannot now contest -- the original disqualification order, so it is conclusively deemed to have had an actual conflict of interest in taking on AICCI’s representation against Peterson.  The rule is clear that a law firm in that position has no entitlement to fees following its breach of its professional obligations.  (Any other rule would result in their being no consequence at all for a patent dereliction of ethical duty.)

The Aguilar firm also argued, in effect, that AICCI should not be relieved of any obligation pay fees to the firm because AICCI was itself seeking to take advantage of the firm’s access to private information about Peterson.  Be that as it may, the Court of Appeal concludes, the firm must still bear the loss for its own straying from the straight and narrow path of professional responsibility.  To the extent the contract with AICCI specifically contemplated taking advantage of the firm’s conflict of interest, it was an illegal contract, and ““the law is not to be subsidized to overthrow itself. . . .’”

None of the participants emerges from the Court’s opinion smelling like an ethical rose, but the Court reserves its particular scorn for the attorneys involved, who are by their calling presumed to know better.  Once again, what we might call the “Nixon rule” -- that a professional should listen closely to that little voice that says “We could do it, but it would be wrong” -- plays out for all to see.

The decision in A.I. Credit Corp., Inc. v. Aguilar & Sebastinelli (Dec. 1, 2003), Case No. A101841, is available at these links in PDF
and Word formats.

The Esquire Strikes Back: ethicalEsq Site Rises Again

Apparently, rumors of the demise of David Giacalone's ethicalEsq are proving to be a bit premature. David has let it be known that his site is about to be revived, with a slightly revised agenda but still focused on attorney ethics and client-centric reform issues, under the new moniker of giacalone's Bar & Grill. It is a true pleasure to re-welcome David's particular voice and perspective to the legal weblogosphere.

(Meanwhile, as the Bar & Grill is tuning up, readers may wish to look into the Gacalone-inspired discussions at Sherry Fowler's Stay of Execution on the web journal-ists' constant conundrum: how many are actually reading what gets posted on sites like these?)

Attorneys Behaving Badly: No Recovery for Services Rendered When Attorneys Withdrew Unilaterally After Client Raised Legitimate Questions

There is a special store of scorn and derision on which appellate judges can draw when they conclude that attorneys have behaved in a manner exactly reflecting credit on their profession. Most often, the judges’ low opinion of counsel’s performance will be displayed to a limited audience when the appeal comes on for oral argument. When, however, the court concludes that attorneys should be made an example of, the court’s expressions of disapproval will be incorporated in the court’s opinion, and the opinion will be certified for publication.

The Court of Appeal for the Fourth District has just published such a decision. The issue before the court is whether the attorneys, who had withdrawn from representing the plaintiffs in an insurance “bad faith” case based on the attorneys’ seemingly unilateral determination that there had been a “breakdown” in the attorney-client relationship, evidenced by a single letter from the client asking questions about the content of a pleading, could claim nearly half of a later settlement as the value of the services they had rendered before withdrawal. Finding the withdrawal to have been purely for the attorneys’ own convenience and not compelled by any ethical obligation, the court concludes that the attorneys are entitled to nothing in the way of compensation.

The flavor of the opinion is captured in the introductory summary, which merits quotation at length:

A real estate empire collapses. The estate’s bankruptcy trustee, through its attorney of record, sues the empire’s accountants for their role in the collapse. The parties settle. As part of the settlement, the trustee’s attorneys now represent the accountants in a suit against their malpractice insurer on a contingency fee basis (while still representing the trustee in enforcing the settlement). The accountants waive the obvious conflict.

The accountants then write a letter asking some questions as to the basis for the suit against their malpractice insurer, which they have every right to do. After all, it is just as likely that they will be sued for malicious prosecution as the attorneys if the lawsuit is unsuccessful. The attorneys, however, are offended. Perhaps they sense they are being set up to take the fall if the litigation fails and they and their clients find themselves sued for malicious prosecution. But they never say that. In their motion to withdraw as counsel, the merely cite, without elaboration, a ‘break down in communications.’

The accountants, however, don’t think the differences are irreconcilable and oppose the withdrawal. Now chastened and humbled for being so uppity as to question their lawyers, they practically beg the attorneys to return.

The accountants lose the withdrawal motion. The trial court will not force unwilling lawyers to work for willing clients. So the accountants thrash around for a new law firm, and eventually find one, but not one willing to take the case on contingency.

Then comes the surprise. With their new attorneys, the accountants settle with the malpractice insurer on favorable terms, obtaining a large sum of money. The original attorneys return to assert a quantum meruit claim on the settlement. Can they?

Of course not. Taking umbrage at being asked facially legitimate questions by one’s client about the basis for a lawsuit is not justifiable cause warranting recovery in quantum merit. [Citation omitted.] Clients have every right to ask questions of their lawyers as to the basis of a lawsuit, and the asking of such questions is not a reasonable basis to claim a ‘break down in communications.’ If there was any ‘break down,’ it was the lawyers who did not want to answer legitimate questions posed by their clients as to the validity of their clients’ claims against their malpractice carrier.

In the remainder of the opinion, the court provides a blow-by-blow account of the prior litigation, the correspondence that precipitated the claimed "breakdown," and the circumstances under which the original attorneys sought to be paid. The court emphasizes the rule that an attorney who withdraws from a contingent fee case because he must -- because ethical rules require the withdrawal under the circumstances -- or an attorney who has been "fired" by the client unilaterally, may recover the reasonable value of the services rendered prior to the termination of the relationship, in order to avoid giving the client a "free ride" on the attorney's efforts. However, attorneys who withdraw for reasons of their own, thereby relieving themselves of the risks and costs that they had previously agreed to bear in the litigation, cannot not thereafter claim any benefit when the case is successfully completed by others.

The decision in Rus, Miliband & Smith v. Conkle & Olesten (Nov. 21, 2003), Case No. G030325, is available at these links in PDF and Word formats.

Should Clients Bear the Risk When Attorneys Risk Going Bare?

"Going bare" is the term commonly used when an attorney or other professional elects not to carry insurance against his or her liability for professional negligence or malpractice. The usual reasons for choosing to go without malpractice insurance are economic: the attorney estimates that the likely cost of responding personally to any liability will be less than the often high cost of paying the insurance premiums. The attorney's economic self-interest in this calculation is clear, but what of the attorney's obligations to clients who have retained his or her services in the expectation that there will be insurance available to respond should the attorney, heaven forfend, provide those services in a negligent fashion?

Recovering web journal-ist David Giacalone has passed along this exchange from the American Bar Association's Dialogue magazine between the manager of a Lawyer Referral and Information Service (LRIS) -- a service devoted to providing members of the public access to attorneys who may be able to meet their needs in a particular field or locale -- and Richard Zitrin, director of the Center for Applied Legal Ethics at the University of San Francisco, writing as Dr. Ethics:

[10/31/03: This post has been updated in its continuation.]