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Archive for the ‘Professional Liability and MPL’ Category

Watch for the Sucker Punch… Joint and Several Liability for Professional Negligence?

Posted on: March 20th, 2019

By: Jon Tisdale

Litigants are forever looking for new ways to blame their lawyers when their mediocre case goes south. (As an aside, pay close attention to your intake protocol and “just say no” to those mediocre cases, because when they go bad, so will your relationship with your former client.) So, why is this a special problem for lawyers?

Like most states, California draws a bright line between economic and non-economic damages. In an effort to keep underinsured deadbeats from stiffing tort victims, California has enacted a statute with the stated economic impact being to hold “deep pocket” defendants (yes, the statute actually employs that disgraceful terminology) responsible jointly and severally for economic damages so as to not deprive an innocent victim of recovery of their medical bills, without regard to apportionment of fault. Non-economic damages (for “pain and suffering,” the so-called pot o’ gold at the end of the rainbow) remain collectible only to the extent of an actual apportionment of negligence by the trier of fact. This legislative enactment was, at least in California, aimed at the damages recoverable as a result of countless personal injury actions arising from car accidents. But wait… the statute applies to TORT actions… which means that it also applies, apparently unwittingly, to Professional Negligence actions.

California Jury Instructions (CACI) attempt to clearly define economic versus non-economic damages. Economic damages are verifiable, out-of-pocket monetary losses. Non-economic damages are the pie-in-the-sky general damages for physical pain, mental suffering and emotional distress that lead to the “Stella Award” type of verdicts. But that’s typically not the danger of professional negligence actions. CACI clearly instructs jurors that: “you will be asked on the Verdict Form to state the two categories of damages separately” (which is a legislative proclamation that if a trial judge permits a verdict form that does not require segregation of economic and non-economic damages, it will in fact be reversible error).

Why is this dangerous in professional negligence cases? Because, generally speaking, in cases involving the tort of professional negligence virtually all of the damages are economic! Professional negligence cases have a nominal “emotional distress” element to them, but the meat and potatoes of the tort is WHAT DID YOUR NEGLIGENCE COST ME OUT OF POCKET? It is not so much about how did it make the litigant feel, but how much did it cost them.

Increasingly we see cases in which litigants with less than clearly meritorious cases change lawyers mid-case, sometimes more than once. If it goes south, they are going to sue everyone. This is the danger that you need to be alerted to and cognizant of. You could be defending a lawyer who was just one of several lawyers in the chain of representation and who did seemingly nothing wrong.  But if the economic damages are millions of dollars and your client is found 1% at fault… he/she has joint and several liability for the full amount of the economic damages! More than a little scary…

If you have any questions or would like more information, please contact Jon Tisdale at [email protected].

Trends in Real Estate Claims

Posted on: March 5th, 2019

By: Peter Catalanotti

In representing real estate brokers through their Errors & Omissions insurance for over a decade, I often get asked what types of claims are trending. What follows is my experience regarding real estate broker claim trends.

Real estate broker claims tend to track the economy.

In increasing and level markets, the claims against real estate brokers often include equitable relief such as specific performance. Often times the plaintiff/buyer will be a plaintiff/attempted buyer. With increasing or level markets, sellers may receive multiple offers. The decision of which offer a seller should take is sometimes a close call. When something goes wrong during the transaction or delays the close of escrow, the seller often prefers to get out of the purchase contract and sell to a backup buyer. Sellers may think that the backup buyer will be less trouble. Occasionally, the seller will offer to repurchase the property.

In decreasing markets and recessions, we see more claims for misrepresentation, failure to disclose, and fraud cases. Sometimes, these cases often involve buyer’s remorse. Plaintiff/buyer then sues for damages. The property they purchased is worth less than they paid for it, so the buyer has an interest in recouping this loss. At least in California, there is almost always a defect in a transaction that an expert can exploit. A buyer who was marginally able to afford a property may be looking for a way out. Buyers behind on mortgage payments may sue the lender, mortgage broker, and real estate broker in an attempt to renegotiate the terms of their mortgage.

One of the reasons that real estate broker claims are hard to track is that the cases that make it to an appellate court or state supreme court were most likely filed years earlier. Therefore, when analyzing a real estate broker claim, it is important to take note of the economy at the time of purchase and the motivations of the plaintiff. Understanding the plaintiff’s motivation can at times help bring the case close to an early resolution.

If you have any questions or would like more information, please contact Peter Catalanotti at [email protected].

Can California Associate Attorneys Be Disciplined For Their Boss’s Misconduct?

Posted on: February 27th, 2019

By: Gregory Fayard

The answer to this question is yes, in certain circumstances. In November 2018, after 29 years, California enacted new rules of professional conduct for lawyers. The new rules have some major changes from the old rules. One of the biggest changes applies to associate attorneys who are just doing what their boss-lawyer tells them. But what if the associate’s boss is instructing the associate to do something obviously unethical? In that case, the associate can be disciplined by the State Bar. The new rule on this point is 5.2. For example, if the associate’s boss advises the associate to lie to a client, or forge a signature, or divulge client secrets, then those breaches are so obvious the associate could be disciplined. All California lawyers must comply with ethics rules, even if acting at the direction of another. The Nuremberg defense does not fly.

What about a close call? What if the associate’s boss tells the associate to do the bare minimum on a case? That order arguably violates a lawyer’s duty of diligence (Rule 1.3). Or, what if the associate’s boss orders an associate to do everything and anything on a file? That order might violate Rule 3.2 which says lawyers shall not do tasks whose substantial purpose is to prolong or cause needless expense. In these two situations, the ethical breach is an arguable question—a “close call” if you will. In these situations the California associate would have a good argument for not being disciplined.

The new California rules of professional conduct, however, have created a potentially awkward employment situation for associates: if the subordinate lawyer believes his or her supervisor’s solution to an ethics issue would violate an ethical rule, “the subordinate is obligated to communicate his or her professional judgment regarding the matter to the supervisory lawyer.”  (See Comment to Rule 5.2.)

What should California lawyers keep in mind, then?

  1. Don’t blindly follow directions from your supervisor without thinking of the ethical implications;
  2. Doing something obviously unethical can get you in trouble with the State Bar even if the direction came from your boss;
  3. You probably will not be disciplined if an ethical question can be answered more than one way;
  4. You may have to have a talk with your boss if he or she is doing something obviously unethical.

My next blog will discuss whether a supervising lawyer in California can be disciplined for an associate’s unethical lapse.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].

Georgia Court of Appeals Concludes the Term “Affiliate” is Ambiguous

Posted on: February 4th, 2019

By: Jake Carroll

In Salinas v. Atlanta Gas Light Company,[1] the Georgia Court of Appeals’ recently examined whether Georgia Natural Gas (“GNG”) and Atlanta Gas Light Company (“AGLC”) were “affiliates.” Both AGLC and GNG were owned and controlled, either directly or through an intermediary, by a company named AGL Resources, Inc.

In Salinas, AGLC sought to dismiss Plaintiff’s claims and compel arbitration. In support of its argument, AGLC relied on a term in GNG’s service agreement that required the Plaintiff to arbitrate any disputes with GNG’s “affiliates.” However, since the term “affiliate” was not defined in GNG’s agreement, the Court of Appeals looked at how the term “affiliate” is defined in the Georgia Code, Black’s Law Dictionary, and other jurisdictions, and ultimately determined that the term is ambiguous. The Court of Appeals construed the agreement against GNG—the drafter of the contract—and as a result, AGLC could not demand arbitration of Plaintiff’s dispute.

While the Court of Appeals did not set-out a specific definition for “affiliate,” the Court’s analysis provides a couple of practice tips to anyone involved in drafting, reviewing, or enforcing contracts, including commercial agreements, government contracts, or insurance policies.

  1. Define Your Terms: The Salinas Court may not have had to address the meaning of “affiliates” if the Agreement had defined the term. But, since the term was not defined, the Court looked elsewhere, including other jurisdictions, the Georgia Code, and the dictionary to determine its meaning. Including a definitions section is an easy way to set out the agreed-upon meaning of a term throughout a contract, and should not be overlooked.
  2. Be Explicit: If there is a certain sibling or parent corporation that should be a beneficiary of a contract, consider listing the specific “affiliates” to which the contract or agreement should apply.
  3. Check Your State’s Code: The Court noted that the term “affiliate” is defined over 20 times in the Georgia Code, and the definitions vary. For example, in the context of financial institutions, an affiliate is an entity that controls the election of a majority of directors, trustees of a financial institution, or an entity that owns or controls 50 percent or more of the financial institution. O.C.G.A. § 7-1-4 (1). In Georgia’s Corporations Act, the definition of affiliate is broader: “a person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a specified person.” O.C.G.A. § 14-2-1110 (1).[2] Depending on the type of corporate entity, “affiliate” may not include every entity in a corporate structure, and certain rules regarding ownership and control may be relevant.

If you need help with this issue, or any other commercial law questions, Jake Carroll practices construction and commercial law, is licensed to practice in Georgia and Florida, and is a member of Freeman Mathis & Gary’s Construction Law and Tort and Catastrophic Loss practice groups. He represents corporations and manufacturers in a wide range of litigation and corporate matters involving breach of contract, business torts, and products liability claims. He can be reached at [email protected].

[1] 347 Ga. App. 480; 819 S.E.2d 903 (2018).
[2] See also O.C.G.A. § 18-2-71 (1) (B) (“Affiliate” has multiple definitions, including “[a] corporation 20 percent or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the debtor or a person who directly or indirectly owns, controls, or holds with power to vote 20 percent or more of the outstanding voting securities of the debtor[.] …”).

What Are The Ethical Rules For Legal Blogs In California?

Posted on: February 1st, 2019

By: Greg Fayard

If you are a California lawyer and are thinking about starting a blog, keep these points in mind:

  1. Blogging by an attorney may be a communication subject to the requirements and restrictions of the Rules of Professional Conduct and the State Bar Act relating to lawyer advertising if the blog expresses the attorney’s availability for professional employment directly through words of invitation or offer to provide legal services, or implicitly through its description of the type and character of legal services offered by the attorney, detailed descriptions of case results, or both.
  2. A blog that is an integrated part of an attorney’s or law firm’s website will be a communication subject to the rules and statutes regulating attorney advertising to the same extent as the website of which it is a part.
  3. A stand-alone blog by an attorney, even if discussing legal topics within or outside the authoring attorney’s area of practice, is not a communication subject to the requirements and restrictions of the Rules of Professional Conduct and the State Bar Act relating to lawyer advertising unless the blog directly or implicitly expresses the attorney’s availability for professional employment.
  4. A stand-alone blog by an attorney on a non-legal topic is not a communication subject to the rules and statutes regulating attorney advertising and is not subject thereto simply because the blog contains a link to the attorney or law firm’s professional website. However, extensive and/or detailed professional identification information announcing the attorney’s availability for professional employment will itself be a communication subject to the ethical rules and statutes.

See California Rules of Professional Conduct 7.1 and 7.2 and Business and Professions Code sections 6157-6159.2; State Bar of California Standing Committee on Professional Responsibility and Conduct, Formal Opinion Interim No. 12-0006.

If you have any questions or would like more information, please contact Greg Fayard at [email protected].