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California Bar Journal - Official Publication of the State Bar of California

APRIL 2013

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DECEMBER 2010 | Earn one hour of MCLE Credit in Legal Ethics

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Oops! Lawyer mistakes and remedial action

California Joan offers some advice on excusable neglect, mandatory relief and other options for making nice with a client when you make a mistake
By ELLEN R. PECK 2010. All rights reserved. Every great mistake has a halfway moment, a split second when it can b e recalled and perhaps remedied. Pearl Buck (1892-1973) Red in the face, Meryl Terpitude bolted into California Joans office, slammed the door closed and in a hoarse croak blurted, Ive made a huge mistake on my biggest clients case, Cali! I am totally ruined! Meryl sat with his head in his hands, inconsolable. Meryl recounted that he had represented Bigg Corp. against Gigantic Co. in a contract dispute. After bitterly contested litigation, Bigg won at trial and prevailed when Gigantic appealed. Bigg was awarded lots of attorneys fees. Before filing a motion for fees on appeal, Meryl attempted a settlement with Gigantics counsel. Meryl and Gigantics counsel stipulated in writing to three continuances of the date for filing the motion. Peck My first mistake was failing to file the written stipulations with the court as required by California Rule of Court, rule 3.1702(c)(2), Meryl admitted. (Burns v. Moore (2010) 184 Cal.App.4th 1406, 1411) When our settlement negotiations were at an impasse, I was in Europe on another case. The Iceland volcano blew; I could not get back to California to file the motion and because of the chaos, communications via telephone and e-mail were difficult so that I could not get through to anyone else to file the motion for me, Meryl wailed. I filed the motion as soon as I could, with a request for late filing. Gigantics counsel denied that she had granted the extensions and argued that the motion was not timely. The court has denied my motion. Bigg, my biggest client, is going to be so furious. What can I do? Meryl, our duties of loyalty and competence to the client compel us to find a means of protecting our clients interests, Cali said. She offered some suggestions: One means is Code of Civil Procedure, 473, subdivision (b) (473(b)). This statute permits a trial court to relieve a party from a judgment, dismissal, order or other proceeding taken against him or her through his or her mistake, inadvertence, surprise or excusable neglect. The section provides for both mandatory and discretionary relief. Mandatory relief is available whenever an application for relief is made no more than six months after entry of judgment, is in proper form, and is accompanied by an attorneys sworn affidavit attesting to his or her mistake, inadvertence, surprise or neglect . . . If your motion meets the mandatory requirements of 473(b), the trial court does not have discretion to refuse relief. The primary purpose of the mandatory relief provision is to alleviate the hardship on parties who lose their day in court due solely to an inexcusable failure to act on the part of their attorneys. In addition to relieving an innocent client of the consequences of an attorneys fault, other purposes are to place the burden on counsel (by admitting fault and paying the costs) and to discourage additional litigation in the form of malpractice actions by the defaulted client against the errant attorney, Cali said. (Carmel, Ltd. v. Tavoussi (2010) 175 Cal.App.4th 393, 399-400, 403) Meryl paled. Do I have to file an affidavit admitting fault in a public proceeding? No, Cali answered. Relief under 473(b) can be based either on (1) an attorney affidavit of fault for mandatory relief or (2) declarations or other evidence showing mistake, inadvertence, surprise or excusable neglect, for which only discretionary relief is available. (Weil & Brown, CAL. PRAC. GUIDE: CIV. PRO. BEFORE TRIAL 5:290 (The Rutter Group 2010)) So, Meryl reasoned, if I am sure that my mistakes are excusab le, it may be enough to seek discretionary relief and avoid paying any costs involved. However, if there is any doubt, in order to get the best possible result for the client, I should not rely upon the discretion of the trial court. (Id., 5:291)

December 2010

SAMPLE TEST QUESTIONS

BELOW ARE SAMPLE QUESTIONS FROM THIS MONTH'S MCLE SELF-ASSESSMENT TEST. 1. Opposing counsel agreed in writing to extend Lawyers time to file a motion for attorneys fees on appeal. Nonetheless, Lawyer neither filed the stipulation, as required by the California Rules of Court, nor timely filed the motion. This is inexcusable neglect. True False

2. Mandatory relief from a judgment of default is generally available whenever an application for relief is made no more than six months after entry of judgment, is in proper form and is accompanied by an attorneys sworn affidavit attesting to his or her mistake, inadvertence, surprise or neglect. True False

3. The purpose of 473(b)s mandatory relief provision is to alleviate the hardship on parties who lose their day in court due solely to an inexcusable failure to act on the part of their attorneys. True False

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The advantages and disadvantages of relying on the discretionary

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The advantages and disadvantages of relying on the discretionary provisions are illustrated by two recent cases, Cali said. True False

To complete the test, you must pay a $25 fee online. Click the button below and follow the First, the case of Burns v. Moore (2010) 184 Cal.App.4th 1406 which we onscreen instructions. discussed at the summer retreat [California Bar Journal (August 2010) Ghosts and goblins can haunt your practice] is remarkably like your case. In Burns, the appellate court held that a motion for relief for excusable neglect should be granted. It held that the reliance upon the representations of opposing counsel, even in the face of a failure to comply with a court rule, was excusable neglect. It also held that failure to timely file a motion for attorneys fees thereafter due to evacuation because of Californias wildfires was also excusable neglect. Your being trapped in Europe because of the Iceland volcano may also be excusable. (Id., 1411-1416) But in the recent employment discrimination case, Henderson v. Pacific Gas and Electric Co. (2010) 187 Cal. App. 4th 215, the Court of Appeal for the Fifth District declined to find excusable neglect. In that case, plaintiffs counsel, due to the press of other business, assigned the preparation of an opposition to a summary judgment motion to a paralegal who was awaiting admission to the California bar. But the lawyer did not properly supervise the paralegal, who was unable to file any opposition on time. The court determined that the attorneys failure to supervise the paralegal or work on the opposition until the eleventh hour was inexcusable. The client then lost the ability to file an opposition to the motion for a summary judgment, with judgment entered against her. Meryl, perceiving a ray of salvation in the air, asked, Does a 473 motion apply to every kind of matter? No, Cali said, listing matters within and outside the scope of mandatory relief. First, mandatory relief under 473(b) is not available if the clients misconduct was a contributing cause of the default. (Lang v. Hochman (2000) 77 Cal.App.4th 1225, 1251-1252)

Second, mandatory relief may not be available if the mistake was a result of a lawyers deliberate tactical choice. (CIV. PROC. BEFORE TRIAL, 5:295.2.) In a recent case, Standard Microsystems Corp. v. Winb ond Electronics Corp. (2009) 179 Cal.App.4th 868, 897, two foreign corporations were served by mail in their respective countries with a complaint by a plaintiff for misappropriation of trade secrets. The foreign defendants sought counsel from a litigation attorney, who opined that the service by mail had not been effective to confer jurisdiction over defendants. He also counseled them that they were not required to answer the complaint under U.S. law and did not advise defendants of the possibility of moving to quash service, which would have shielded them against a default. When the clients sought mandatory relief against a default, the trial court found that the defaults were the result of a calculated client and attorney strategy resting on a mistake of law, which was not within the statute. The appellate court determined that the attorneys mistake of law was neither strategic nor tactical and that the clients default was solely a result of their attorneys fault. Third, mandatory relief is available for defaults entered by the clerk; defaults entered by the court (Matera v. McLeod (2006) 145 Cal.App.4th 44, 67); dismissals which are the procedural equivalent of a default by depriving a client-party of a day in court; failure to amend or file pleadings within the time ordered by the court; or failure to oppose a dismissal motion. (CIV.PROC.BEFORE TRIAL, 5:299 - 5:299.2.) Fourth, mandatory relief does not apply to judgments or orders based on a determination of the merits, after a party has had his or her day in court. In the recent Henderson case, the court also ruled that mandatory relief was not available for a failure to file an opposition to a summary judgment motion because the statute does not apply to summary judgments. (Henderson, supra, at 226-229; see also Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 681 no mandatory relief due to failure to adequately oppose a motion for summary judgment.) Fifth, mandatory relief does not apply to prevent dismissal of litigation for failure to comply with relevant statutes of limitations (Life Sav. Bank v. Wilhelm (2000) 84 Cal.App.4th 174, 178; see also Tackett v. City of Huntington Beach (1994) 22 Cal.App.4th 60, 64-65 no mandatory relief from claim-filing requirement under the Government Claims Act); for delay in service of summons; after demurrer sustained with leave to amend; based on lapse of the statute of limitations; or for discovery violations. (Gotschall v. Daley (2002) 96 Cal.App.4th 479, 483-484) Since 473(b) requires an affidavit of fault, I must file a declaration under penalty of perjury, Meryl concluded. (See CCP2015.5.) What else do I need to know? Cali responded: An application for mandatory relief based on attorney fault must be filed no more than six months after entry of judgment. Also, when granting this relief, the court must direct the attorney to pay reasonable compensatory legal fees and costs to the opposing counsel or parties. (CCP 473(b)) Additionally, the court may impose sanctions against the attorney at fault, including (1) payment of monetary sanctions up to $1,000 to opposing parties; (2) payment of up to $1,000 to the State Bar Client Security Fund; or (3) other relief as appropriate. (CCP 473(c)(1)(A), (B) & (C).) Do I have to tell the client about my mistake? Meryl asked. Yes, Cali said, you have to tell your client about significant developments in a clients representation. (Bus. & Prof. C.,6068(m); rule 3-500, California Rules of Professional Conduct) Additionally, at least one case has stated in dicta that attorneys have a fiduciary obligation to disclose material facts to their clients, an obligation that includes disclosure of acts of malpractice. (Beal Bank, SSB, v. Arter & Hadden, LLP (2007) 42 Cal.4th 503, 514) Meryl, game plan in mind, ran off to discuss the matter with his client. The phone rang. It was Irving Counsel, vice president and general counsel to Goode GAS Stations (GAS), which owned and operated 1,000 Gas stations in California. Help, Cali! Counsel said. I really screwed up. Irving told Cali that Wanda Worker had filed an employment wage and hour class action against GAS, which was properly served upon Irving as GAS agent for service of process. After review of the complaint, Irving decided to represent GAS himself. He did not send the complaint to other GAS officers, directors or managers and he did not tell them about the litigation. Irving made some appearances in the action, but failed to file GAS answer. A default judgment was obtained and filed. What should I do, Cali? Irving asked. Cali recounted to Irving the advantages of filing a 473(b) motion she had described to Meryl. Your case is almost identical to the recent case of Gutierrez v. G&M Oil Company Inc. (2010) 184 Cal.App.4th 551, wherein the appellate court affirmed a trial courts order vacating a default judgment under 473(b), Cali said. What about my status an in-house counsel? Irving asked. Is GAS able to obtain relief when the fault is due to an employee who is

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What about my status an in-house counsel? Irving asked. Is GAS able to obtain relief when the fault is due to an employee who is an in-house counsel and not privately retained outside counsel? Since you were the only attorney representing GAS in the class action, GAS may still obtain equal relief as with outside counsel, Cali answered. (Id., pp. 562-564) Is my dual role as a manager and officer, in addition to my services as general counsel, likely to affect the success of the motion? Irving asked. Not if the default entered against GAS was the result of your neglect of your duties solely as an attorney, rather than as a corporate officer, she said. (Id., p. 565) After Irving hung up to work to obtain relief from his clients default, Cali reflected on what she should do about the mistake on a clients matter on her desk. The words of her friend, Steve Lewis, echoed in her ears: If you find yourself in a hole because you made a mistake on a clients matter, stop digging! After Cali experienced the normal emotional response (i.e., her professional life flashing before her eyes), she realized that professional responsibility is responsiveness. This includes the primary duty to determine how she could protect her clients interests, even from the adverse consequences of her mistake. Section 473(b) is one powerful tool to protect a clients interests, but there are others. Cali decided to explore the different options for correcting her mistake. Because of emotional involvement in a matter where a lawyer believes that he or she is at fault, consulting with a specialist in the area of claims repair or in the subject matter of the law where the mistake was committed is very helpful in examining the range of solutions. Once she determined the reasonable remedial alternatives, she vowed to communicate promptly the facts and circumstances of the mistake to the client; to discuss the consequences to the clients interests; to discuss the various reasonable alternatives for action; and, as a matter of risk management, to refer the client to independent counsel. If the client so desired, Cali vowed to promptly carry out the clients instructions for remedial action. Paraphrasing Andrew V. Mason, Cali thought, Admit your errors before someone else exaggerates them in a legal malpractice action. Ellen R. Peck, a former State Bar Court judge, is a sole practitioner in Escondido and a co-author of The Rutter Group California Practice Guide: Professional Responsib ility.

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