Professional Liability News
Haight Brown
& Bonesteel has been dedicated to defending professionals throughout
the State of California
for over 40 years. We are pleased to provide you with our latest issue of
Professional Liability News, a
regular publication of Haight Brown & Bonesteel.
LAWYERS
Does Mediation Confidentiality Protect
The Attorney From Claims Of Negligence Arising Out Of A Settlement?
What is the potential impact
of mediation confidentiality on a claim by a former client against
his/her attorney arising out of a settlement reached at mediation?
Let’s assume an attorney and client attend mediation and, after a day
of negotiations and numerous conversations and meetings, the case is
settled. Later, the client files a lawsuit against the attorney claiming
there was negligent advice given by the attorney during the course of the
mediation. Does the confidentiality provision of Evidence Code, section 1115, et seq. preclude the admissibility of any discussions or
documents prepared for or during the mediation? What impact does this
provision have on the negligence claim against the attorney?
Evidence Code
section 1119 precludes the admissibility of anything said, or any writing
made, for the purpose of, in the course of, or pursuant to, a mediation
or mediation consultation. The scope of this mediation confidentiality
has been developing in California
over the past several years. In 2004, the California Supreme Court held
that documents used during mediation - if such documents were prepared
for, in the course of, or pursuant to mediation - were not
admissible. Rojas v. Superior Court, (2004) 33 Cal. 4th 407. Three years later, the California Court of Appeal addressed
the scope of the mediation confidentiality and held that matters directly
involved in the mediation on which the plaintiff based a subsequent
action were inadmissible, specifically finding that mediation briefs and
e-mails sent the day before mediation were inadmissible. Wimsatt v. Superior Court, (2007)
152 Cal.App.4th 137.
Based on this statutory
authority and case law, an attorney who is sued for negligence in
connection with a settlement reached at mediation may have the ability to
obtain a dismissal of the claim. Mediations typically will consist of
numerous discussions between and among the attorneys, clients and
mediator. These discussions are confidential. Arguably discussions which
take place before mediation, in the preparation for mediation are also
confidential. Likewise,
documents utilized during mediation, if not otherwise admissible are also
confidential and thus inadmissible in any subsequent civil action. As the
Wimsatt court stated, this may
result in a client having to forgo his legal malpractice lawsuit against
his own attorney.
The scope of California's
mediation confidentiality is currently being addressed by California's highest court in Cassel v. Wasserman, Comden, Casselman &
Pearson, LLP (Case No. S178914). The questions posed are whether the
private conversations of an attorney and client days before, but for the
purpose of the mediation, are entitled to the protection of the mediation
confidentiality and whether an attorney is considered to be a
"participant" for purposes of application of the
confidentiality.
The decision in Cassel may further expand the application of
mediation confidentiality and thus provide more protection to attorneys
in legal malpractice claims.
DIRECTORS & OFFICERS
The Potential
Demise Of The Business Judgment Rule That Protects Officers And Directors
Based primarily on Delaware law, California long ago established and
consistently applied the Business Judgment Rule which “presumes
that directors act in good faith, in the best interests of the
corporation, for a reasonable business purpose, and that they made an
informed decision.” The courts in both Delaware and California have
limited their scrutiny to what another court called the “apparent
integrity” of the procedures leading up to the decision in
question, and have “declined to evaluate the merits of the wisdom
of the transaction once it is shown … that in reaching the decision
the directors followed an appropriately deliberative process.”
In
the 2006 Walt Disney Company
derivative litigation, the payment of over $130 million severance to
Michael Ovitz upon exiting the Walt Disney Company, after a very short
employment period, was held protected by the Business Judgment Rule.
However, in the course of so holding, the Delaware Supreme Court noted
that the directors’ duty of good faith requires not only that they
refrain from acting against the interests of the corporation, but that
they also take affirmative action when those interests require it. While
stating it was not adopting a negligence standard, the Delaware Supreme
Court held liability can arise “where the fiduciary intentionally
fails to act in the face of a known duty to act, demonstrating a
conscious disregard for his duties.” In re Walt Disney Company derivative litigation, (2006) 900 A.2nd
27, 67.
Directors’
duty of loyalty can invade their duty of care, so that when directors and
officers conspire to commit stock option back-dating, or the directors
turn a blind eye to its occurrence, liability can exist. That is exactly
what was held by the Delaware Chancery Court in the Tyson Foods and Maxim
Integrated Products cases in 2006. Intentional wrongdoing may no
longer be the exception to the Business Judgment Rule.
As the conduct of some
directors and officers becomes more and more egregious in the eyes of the
public, the courts may pay heed to public sentiment and reduce, or even
greatly eliminate, the protection of the Business Judgment Rule. To the
extent existing D&O policies are written on the assumption that the Business
Judgment Rule provides substantial protection for both the insurer and
the insureds, that assumption may no longer be valid. Future underwriting
should take this into consideration.
RECENT LITIGATION SUCCESS
June 17, 2010,
Special Motion to Strike Pursuant to California's Anti-SLAPP Statute
Granted
John
Wilkerson, a partner in Haight Brown & Bonesteel’s
Riverside office, was retained to
represent an attorney who, along with his landlord client, was being sued
for maliciously prosecuting a commercial unlawful detainer action. The
complex underlying action not only involved the unlawful detainer action,
but also 10 causes of action by the tenants against the landlord. After a
three week jury trial, the tenants prevailed and were awarded approximately
$100,000. The malicious prosecution action soon followed.
Haight Brown & Bonesteel
made a special motion to strike pursuant to California's anti-SLAPP statute. The
Court granted the motion, striking the plaintiffs' complaint, on the grounds
that the plaintiffs could not show that the underlying unlawful detainer
action was prosecuted without probable cause. Our client is entitled to
his attorneys' fees for prevailing on the motion.
This document in intended to provide you
with general information about recent professional liability related
cases and issues. The contents of this document are not intended to
provide specific legal advice. If you have any questions about the
contents of this alert, please contact:
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Jennifer
Saunders
Los Angeles Office
310-215-7535
jsaunders@hbblaw.com
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Mort Rosen
Los Angeles Office
310-215-7511
mrosen@hbblaw.com
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John Wilkerson
Riverside Office
951-341-8300
jwilkerson@hbblaw.com
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or your preferred Haight Brown &
Bonesteel attorney. This communication may be considered advertising in
some jurisdictions.
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