Opinion
A156351
09-15-2020
ANTOINETTE HARDSTONE, Plaintiff and Appellant, v. LONG & LEVIT, LLP, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (City & County of San Francisco Super. Ct. No. CGC-15-549114)
This appeal is from a judgment on stipulated facts in a legal malpractice case by Antoinette Hardstone against Long & Levit, LLP (L&L). Pursuant to an agreement that was not formally denominated an assignment, Hardstone granted to a third party various rights governing the pursuit of her claims against L&L, transferring nearly total control over her decision-making in the case as well as collection priority to the proceeds from any recovery.
The trial court granted L&L's motion for judgment and dismissed the case. The court concluded that the agreement is, in substance, an assignment of a legal malpractice claim, and that as a result, under Goodley v. Wank & Wank, Inc. (1976) 62 Cal.App.3d 389 (Goodley), it is invalid as violative of public policy. Without reaching the Goodley issue, we reverse. On remand, we shall direct Hardstone to join Doublevision Entertainment, LLC (Doublevision) as a party. Once Doublevision is joined, the action may proceed, subject to any constraints on Hardstone's ability to recover against L&L that may be imposed under the doctrine of judicial estoppel.
I. BACKGROUND
A. The Escrow Fraud Case
Hardstone was the owner and operator of Commercial Escrow Services, Inc. She had professional liability insurance through Navigators Insurance Company (Navigators), whose "eroding limits" policy required that Hardstone be provided with defense counsel and that she be indemnified against liability for up to $1,000,000 per policy period in the event of a lawsuit.
In 2010, Doublevision brought suit against Hardstone for mishandling an escrow. Doublevision's investors had deposited $250,000 with Commercial Escrow Services, Inc. for the benefit of Doublevision, but the funds were released by Hardstone at the behest of Indie Film Exchange Holdings and its principal, Franklin Clover. After a partial distribution to Clover, the funds remaining were then released to King Capital and Success Bullion USA, Inc., fake companies used by Clover and his associates to commit fraud, causing Doublevision and its investors to lose all of the deposit money.
Hardstone turned to Navigators for defense and indemnity, and Navigators appointed L&L to defend her. Hardstone and L&L entered into a written engagement agreement on December 28, 2010. Following various disagreements over the course of their attorney-client relationship, L&L ceased its representation of Hardstone on April 26, 2013, and withdrew from the Doublevision action. Represented at trial by Dimitriou & Associates, who appeared in the case less than two months before trial commenced, Hardstone suffered an adverse jury verdict of $1,500,000 in June 2013.
B. Doublevision's Agreements with Hardstone
After entry of judgment on the jury verdict, Hardstone signed three agreements with Doublevision substantially giving away her rights to pursue recovery against other parties for exposing her to the Doublevision judgment. Hardstone contends she did so because she needed money to pay the judgment against her, and because Doublevision threatened to enforce the judgment against her home. The first and second agreements assigned to Doublevision Hardstone's rights to seek recovery against Navigators for bad faith breach of its coverage obligations. Standing in Hardstone's shoes under that assignment, Doublevision sued Navigators in a diversity action in federal district court and obtained a $2,280,000 judgment.
The third of these agreements, denominated the "Collection Agreement," required Hardstone to initiate this current suit against L&L for legal malpractice and gave Doublevision control over various aspects of the litigation. Among other things, Hardstone granted Doublevision the right to prevent her from settling the case "without the written consent and approval of [Doublevision]" or to "commence any formal civil actions or arbitration proceedings as part of the Malpractice Litigation . . . [without] written approval from [Doublevision]."
Should the litigation against L&L generate a recovery, the Collection Agreement specifies how "those monies shall be allocated." For the allocation, it sets up an "order of priority" by which the proceeds will go first to Doublevision to cover "all of its outstanding fees and expenses related to its legal actions involving" Hardstone; second, "50-50" to Dimitriou & Associates, to pay its unpaid fees, and in an equal share to Doublevision, to pay down Hardstone's debt on the $1,500,000 judgment; third, to Doublevision, toward further payment of Hardstone's $1,500,000 judgment debt; and finally, if any surplus remains at that point, to Hardstone.
C. Hardstone's Case Against L&L
1. L&L's Motion for Judgment
Hardstone and L&L entered into an agreement to toll the statute of limitations on the legal malpractice claim on April 22, 2014. This agreement was extended three times, with a final expiration date of November 23, 2015. On that date, Hardstone initiated the current suit against L&L, alleging claims for legal malpractice, breach of fiduciary duty, breach of contract, and breach of the covenant of good faith and fair dealing.
On July 20, 2018, nearly three years after this suit commenced, L&L filed a motion for judgment based on stipulated facts. L&L argued that (1) the Collection Agreement was an impermissible assignment of a legal malpractice claim, (2) the suit was barred by judicial estoppel, and (3) the suit was barred by the statute of limitations. The trial court granted the motion on the first of these grounds—finding that the Collection Agreement was an invalid assignment in violation of public policy—but ruled that neither judicial estoppel nor the statute of limitations barred Hardstone's claims.
2. The Basis for the Trial Court's Ruling
In California, legal malpractice claims are generally not assignable as a matter of public policy. The seminal case is Goodley, supra, 62 Cal.App.3d 389. (See Musser v. Provencher (2002) 28 Cal.4th 274, 285; Kracht v. Perrin, Gartland & Doyle (1990) 219 Cal.App.3d 1019 (Kracht); 1 Mallen & Smith, Legal Malpractice (2020 ed.), Liability To The Nonclient—Negligence, § 7.25.) While recognizing that the Collection Agreement does not "literally assign Doublevision the right to pursue Hardstone's malpractice claims," the trial court agreed with L&L that Hardstone "is not practically[] in complete control of this case." The court found no California appellate authority addressing the precise question whether an agreement not denominated an assignment may be treated under the Goodley rule as tantamount to a prohibited assignment, but answered the question in the affirmative on this record, relying on out-out-state authority in doing so. (See Gurski v. Rosenblum & Filan, LLC (Conn. 2005) 885 A.2d. 163, 178 (Gurski).)
One court recently summed up the nonassignability of legal malpractice claims in California, placing the issue within the broader context of free assignability of causes of action generally, subject to a handful of exceptions, as follows: "Under California law, the exceptions to the general rule favoring assignability of causes of action include tort causes of action for wrongs done to the person, the reputation or the feelings of an injured party[,] [citation] [such as] slander, assault and battery, negligent personal injuries, seduction, [and] breach of marriage promise . . . . One basis for distinguishing between assignable and nonassignable tort causes of action relates to whether that cause of action survives the death of the injured party. [Citation.] Actions that survive death are assignable. [Citation.] [¶] Other exceptions include legal malpractice claims [under Goodley] and certain types of fraud claims. [Citation.] The [Goodley] rule that a cause of action for legal malpractice is not assignable is based on a number of public policy reasons, including protecting the attorney-client relationship. [Citation.] 'This view is predicated on the uniquely personal nature of legal services and the contract out of which a highly personal and confidential attorney-client relationship arises.' " (AMCO Ins. Co. v. All Solutions Ins. Agency, LLC (2016) 244 Cal.App.4th 883, 892.)
The holding in Goodley has been influential across the country. (See 1 Mallen & Smith, supra, § 7.25.) Courts in many states have adopted it, or a version of it. (Ibid.) Within this body of authority from other states, courts are divided on whether an agreement not formally labelled an assignment of a claim but rather as a transfer of an interest in the proceeds of a claim pursued nominally by the transferor may violate the policy against assignment of legal malpractice claims on the ground that, as a practical matter, it amounts to the de facto assignment of a claim. What appears to be a slight majority say yes, as the trial court did here. Compare Gurski, supra, 885 A.2d at page 178; Skipper v. ACE Prop. & Cas. Ins. Co. (S.C. 2015) 775 S.E.2d 37, 37-39 & fn. 1 (Skipper); Dong Wan Kim v. O'Sullivan (Wis. 2006) 137 P.3d 61, 64-65 (Kim); and Weiss v. Leatherberry (Fla.Dist.Ct.App. 2003) 863 So.2d 368, 372-373 with Bohna v. Hughes, Thorsness, Gantz, Powell & Brundin (Alaska 1992) 828 P.2d 745, 757-758; Weston v. Dowty (Mich.Ct.App.1987) 414 N.W.2d 165, 166-168; First Nat'l Bank v. Diane, Inc. (N.M.Ct.App. 1985), 698 P.2d 5, 14.
Because the Collection Agreement gives Doublevision the right to recover the predominate share of any recovery; the right to approve the substance and form of the asserted claims; the right to control the financial terms under which Hardstone's counsel may be compensated; the right to receive all discovery in the case; and the right to approve any settlement or dismissal of the case, the court concluded that the "central policy concerns" articulated in Goodley, as further elaborated in Kracht, are implicated here. The court rejected Hardstone's attempt to argue that the Collection Agreement is merely an assignment of proceeds from a legal malpractice claim, as distinguished from the assignment of a legal malpractice claim itself, concluding that to characterize it as merely a sharing of proceeds "circumvent[s] the policy barring assignments."
Hardstone attempted to salvage her right to pursue her claims by arguing that because Doublevision had never funded the lawsuit—an obligation she described as a contractual condition precedent—the Collection Agreement is of no force and effect and may simply be ignored. But Hardstone's own conduct undermined that argument. Hardstone had invited Doublevision, a stranger to the litigation, to a mandatory settlement conference, an act which seems unnecessary unless Doublevision had some interest in the outcome, or some control over the case. Unsurprisingly, the trial court declined to treat the Collection Agreement as inoperative, pointing out that it has a formal termination clause which may be triggered by the giving of notice of termination. In the absence of such a termination, the court observed, "the complete agreement continues in effect."
Without giving explicit consideration to whether the appropriate remedy for a violation of the Goodley rule might be to hold the Collection Agreement unenforceable while permitting Hardstone to pursue her malpractice claims independently of the invalid assignment, the court rejected that option and ordered the more drastic remedy of dismissal.
II. DISCUSSION
A. The Significance of Killian v. Millard
Following oral argument, we asked the parties to submit supplemental briefs addressing what impact, if any, Killian v. Millard (1991) 228 Cal.App.3d 1601 (Killian), has on this case. Killian was not discussed or cited by either party in the main briefs, or by the trial court. Although the trial court granted judgment to L&L on the ground that the Collection Agreement is invalid under Goodley, and although the proper application of Goodley has been the central focus of the parties' arguments in this appeal, we have concluded that, under Killian, the trial court had no power to address its enforceability on public policy grounds. Applying Killian here on appeal, we further conclude that we have no power to affirm the dismissal under Goodley, at least so long as the case remains in its current posture, without Doublevision present as a party.
Hardstone went beyond what we requested in our order seeking supplemental briefing and, along with its supplemental brief, offered a declaration from Douglas Dawson, who identifies himself as someone who "was a manager and member of Doublevision throughout its existence," along with a motion to take additional evidence under Code of Civil Procedure section 909. Dawson now swears that the Collection Agreement has been formally rescinded. Based on this declaration, Hardstone claims her appeal is moot. But in her supplemental brief, Hardstone also argues that "[i]f the trial court's order stands, there will be no proceeds in which Doublevision would share, . . . directly affecting its rights." That suggests some new contractual sharing arrangement may be in force, replacing the Collection Agreement.
Hardstone's motion to take additional evidence on appeal is denied. There is no basis to believe any formal rescission of the Collection Agreement could not have been effected before judgment was entered or that it qualifies as postjudgment evidence that was previously unavailable. (Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 123-124 [under Code of Civil Procedure section 909 "an appellate court may exercise its discretion to consider evidence that was not before the trial court" where, inter alia, "the evidence arose after judgment or was unavailable to the movant before judgment"].) The Dawson declaration appears, instead, to be an effort to defuse a potentially dispositive adverse ruling by disavowing a material fact that Doublevision stipulated would be part of the record on which the trial court ruled (i.e., that the Collection Agreement is binding on it). In the absence of any basis in the record to demonstrate that this appeal no longer presents a live controversy, we reject the suggestion of mootness. As further explained below, whether the Collection Agreement remains in force, whether it has been replaced by some new arrangement, and whether there remains a basis to apply Goodley, will be for the trial court to consider on remand.
In Killian, the plaintiff, Killian, had a breach of contract claim against Millard, but lacked funds to pursue it, so under a syndication agreement he sold units of participation in any profits generated by the litigation to a group of investors. (Killian, supra, 228 Cal.App. 3d at p. 1604.) Ruling on a motion in limine by Millard, the trial court voided the syndication agreement as a matter of public policy and entered judgment for Millard. (Ibid.) The Court of Appeal reversed, holding "(1) Millard lacked standing to attack the contract between the Syndicators and the Investors, (2) the trial court lacked the power to issue an order affecting the Investors because the matter was not properly raised by appropriate pleading, (3) the order issued by the court extended beyond the incidental powers granted to it for purposes of ensuring the orderly administration of justice." (Id. at p. 1607.)
The second ground for decision in Killian—which is jurisdictional, and thus may be raised at any time—is dispositive here. Under Killian, the trial court lacked power to void the Collection Agreement because Doublevision, one of the parties to the contract, was not before the court. (Killian, supra, 228 Cal.App. 3d at pp. 1606-1607.) Because of Doublevision's absence, we must conclude, following Killian, that the validity of the Collection Agreement was outside the issues framed by the operative pleadings in this case. On that ground alone, we will vacate the judgment for L&L. But despite our conclusion that the trial court lacked power to invalidate the Collection Agreement in Doublevision's absence, on this record we reach a conclusion different from that adopted by the Killian court with respect to the other two grounds for decision there.
On the facts presented in this case, L&L does have standing to attack the validity of the Collection Agreement. Unlike the syndication agreement in Killian, the Collection Agreement does more than grant Doublevision an interest in the case as a passive investor; it grants significant power to control the litigation. Doublevision has the power to approve the funding of the litigation and the compensation of Hardstone's counsel, the filing of the complaint, any decision to arbitrate, and any decision to dismiss or settle; it has access to discovery materials; and it has the ability to control the distribution of any recovery. Because these powers affect not just Hardstone, but L&L as well, we think L&L had standing to attack the validity of the Collection Agreement. Thus, we do not hold that the trial court's Goodley analysis was incorrect. We simply hold it was premature.
The trial court has the ability to bring Doublevision into this case. Unlike the situation in Killian, where the Court of Appeal saw no basis for the trial court to exercise direct authority over potentially affected third parties (Killian, supra, 228 Cal.App.3d at p. 1607), we think there is a basis to do so here. Doublevision is subject to compulsory joinder under Code of Civil Procedure section 389, subdivision (a). (Code Civ. Proc., § 389, subd. (a)(2)(ii) [compulsory joinder of any person whose absence may leave existing parties "subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest"]; Bank of the Orient v. Superior Court (1977) 67 Cal.App.3d 588, 595 ["[p]artial assignees are indispensable parties"]; see Taylor v. Sanford (1962) 203 Cal.App.2d 330, 347 [same].)
Since neither party has taken the position that Doublevision is subject to joinder but "cannot be made a party" for some reason—for example, neither it nor a legal successor exists any longer, or it is subject to bankruptcy protection—we need not address whether Doublevision may be deemed an indispensable party under Code of Civil Procedure section 389, subdivision (b).
Hardstone agrees that Doublevision may be joined either as a matter of compulsory joinder or under Code of Civil Procedure section 382, the permissive joinder rule. (Code. Civ. Proc., § 382 [joinder of a third party as a defendant when consent to join it as a plaintiff cannot be obtained under circumstance where "the question is one of a common or general interest"].) And she commits to making that happen if the case is remanded. For its part, L&L sees no need for joinder on any basis, contending Doublevision does not belong in the case because it has no right to sue L&L under a legally invalid assignment. But whether the Collection Agreement is legally valid or not, L&L claims it is tantamount to an assignment, and if it is an assignment, it is at most a partial assignment, which implicates Bank of the Orient v. Superior Court, supra, 67 Cal.App.3d 588, and Taylor v. Sanford, supra, 203 Cal.App.2d 330. Thus, Doublevision must be joined as a party, either under Code of Civil Procedure section 389 or Code of Civil Procedure section 382.
Despite the absence of Doublevision, L&L resists the inexorable consequences that flow from Killian and tries to turn that case to its advantage. Never mind all of the arguments advanced to date for dismissal under Goodley, L&L now argues. While conceding that Killian precluded the trial court from dismissing the case on public policy grounds in Doublevision's absence, L&L urges us to affirm the dismissal not because the Collection Agreement violates public policy, but because, under Killian, Hardstone is not the real party in interest and therefore lacks standing. In support of this argument, L&L relies on the first ground for decision in Killian, where the court there recognized that "only parties with a real interest in a dispute have standing to seek its adjudication." (Killian, supra, 228 Cal.App.3d at p. 1605; see Code Civ. Proc., § 367.)
But in effect, this is L&L's Goodley argument in different garb. "If this case is not dismissed," L&L argues, "the implication will be that the arrangement between Hardstone and Doublevision to assign the proceeds of the litigation to Doublevision is allowed as a means to circumvent the rule against the assignment of legal malpractice actions." "This case would become a roadmap for clients and their litigation counsel to evade the sound public policies prohibiting such assignments," we are told. That is the circumvention rationale relied on in many of the de facto assignment cases. (See ante, fn. 2.) We understand the concern, but if L&L wishes to mount a defense that the action should be dismissed outright on a de facto assignment theory—a result that, to date, has divided the appellate courts in other states to have addressed the question—we think Doublevision should be present, along with Hardstone, to defend the bona fides of the challenged contract. Accordingly, we decline the invitation to reinvent the rationale for the Goodley rule by affirming for lack of standing rather than violation of public policy. To resolve the standing issue L&L raises under Killian, we need go no further than to hold that Hardstone retains enough of an interest in her claims against L&L under the Collection Agreement (fettered and subordinate though that interest may be) to give her standing to pursue these claims in her own right.
Compare Tate v. Goins, Underkofler, Crawford & Langdon (Tex.Ct.App. 2000) 24 S.W.3d 627, 634 (reversing summary judgment against plaintiff who agreed to share a portion of his recovery with third party on the ground that defense judgment for defendant law firm was "improper because it completely abrogated his right to bring a malpractice claim"); Botma v. Huser (Ariz.Ct.App. 2002) 39 P.3d 538, 542 ("[a]though neither [plaintiff's] malpractice claim nor its proceeds are assignable, his malpractice claim does survive the invalid assignment"); Revolutionary Concepts, Inc. v. Clements Walker PLLC (N.C.Ct.App. 2013) 744 S.E.2d 130, 134 (["plaintiff's] attempted assignment was invalid, . . . [but] the trial court erred in holding that [he] no longer had standing to assert the malpractice claims as they remained with him, and we reverse and remand . . . on this issue") with Gurski, supra, 885 A.2d 163 (adopting Goodley rule against assignability of legal malpractice claims, reversing ruling to the contrary, and directing entry of judgment for defendant law firm); Skipper, supra, 775 S.E.2d at pages 38-39 (same); and Kim, supra, 137 P.3d at pages 63-66 (same).
B. Judicial Estoppel
Among the policy concerns articulated by courts applying the Goodley rule is that assignments of legal malpractice claims to former adversaries are " 'fraught with illogic' [citation] and unseemly arguments." (Kracht, supra, 219 Cal.App.3d at p. 1025, quoting Jackson v. Rogers & Wells (1989) 210 Cal.App.3d 336, 348.) That is because these arrangements often lead to a reversal of positions, with the assignee abandoning the position it took in the underlying litigation and taking a new position more aligned with its economic interest (i.e., going from the position that the assignor was liable to it, to a position that but for the negligence of the assignor's attorney, the assignor should not have been found liable, and thus it deserved no recovery in the first place). This creates a potential for collusion, manipulation of evidence, and harm to the integrity of the judicial system because of side-switching by lawyers whose true allegiance appears to be only to themselves. (See Gurski, supra, 885 A.2d at pp. 173-176, footnotes omitted.)
Because attorneys are dutybound not to take advocacy positions based on artifice or falsehood and must place client interests ahead of their own, suffice it to say the appearance created by side-switching in the Goodley context runs counter to ethical fundamentals governing the legal profession. To address this policy concern and others articulated in Goodley, we shall leave it to the trial court on remand to determine whether, once Doublevision is joined a party to the case, there remains a need to address the enforceability of the Collection Agreement (or any replacement for it) under Goodley. Whether or not L&L's Goodley defense must be addressed again on remand, however, it seems to us that (1) the equitable doctrine of judicial estoppel may offer a more fitting way to address concerns about side-switching, and (2) from a remedy standpoint in bringing about substantial justice between L&L and Hardstone, the doctrine of equitable estoppel is definitely more fitting than the blunt instrument of dismissal.
Citing a minority view among courts in other states that have declined to follow Goodley or adopt a version of it (e.g., New Hampshire Ins. Co. v. McCann (Mass. 1999) 707 N.E.2d 332, 335-337); Hedlund Mfg. Co. v. Weiser (Pa. 1988) 539 A.2d 357, 359), Hardstone argues that even if the holding in Goodley otherwise applies, the public policy considerations discussed in it are "outdated and far-fetched," and that, were we to so hold, it would "not alter the landscape in any material way" because of the changing nature of the profession. We do not agree. Even if we did, our Supreme Court has referred to Goodley as " 'established law' " in California. (Musser v. Provencher, supra, 28 Cal.4th at p. 287 [quoting Fireman's Fund Ins. Co. v. McDonald, Hecht & Solberg (1994) 30 Cal.App.4th 1373, 1380].) The Supreme Court having placed its imprimatur on the Goodley rule, it is not for us to "depart from settled law" (Fireman's Fund Ins. Co., supra, at p. 1383) or substitute our assessment of the salience in today's legal marketplace of policy judgments expressed in Goodley about the legal profession. Subject to a "narrow exception" (White Mountains Reinsurance Co. of America v. Borton Petrini, LLP (2013) 221 Cal.App.4th 890, 892, 909), applied case-by-case in circumstances where an assignment is merely an aspect of a larger commercial transaction (ibid.)—an exception that does not apply here—we have no doubt that the holding in Goodley retains its vitality.
"Judicial estoppel is an equitable doctrine designed to maintain the integrity of the courts and to protect the parties from unfair strategies. [Citations.] The doctrine prohibits a party from asserting a position in a legal proceeding that is contrary to a position he or she successfully asserted in the same or some earlier proceeding. [Citations.] 'This doctrine rests on the principle that litigation is not a war game unmoored from conceptions of ethics, truth, and justice. It is quite the reverse. Our adversarial system limits the affirmative duties owed by an advocate to his adversary, but that does not mean it frees him to deceive courts, argue out of both sides of his mouth, fabricate facts and rules of law, or seek affirmatively to obscure the relevant issues and considerations behind a smokescreen of self-contradictions and opportunistic flip-flops.' [Citation.] [¶] The elements of judicial estoppel are '(1) the same party has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.' [Citations.] Even if the necessary elements of judicial estoppel are satisfied, the trial court still has discretion to not apply the doctrine." (Owens v. County of Los Angeles (2013) 220 Cal.App.4th 107, 121; see Jackson v. County of Los Angeles (1997) 60 Cal.App.4th 171, 181-183.)
Although the application of judicial estoppel is discretionary (Minish v. Hanuman Fellowship (2013) 214 Cal.App.4th 437, 449), we think the trial court erred as a matter of law in failing to recognize that the doctrine may be employed here. Hardstone assigned Doublevision the right to pursue her rights against Navigators, and Doublevision successfully recovered substantial damages from it in her name. Those damages—stipulated by the parties there to be $2,280,000—included Hardstone's $1,500,000 judgment indebtedness to Doublevision, plus accrued interest, costs and attorney fees. In closing argument in the Navigators trial, Doublevision's counsel told the jury it was better for Navigators to have to bear the burden of paying the $2,280,000 so that Hardstone would not be "stuck" with it. The jury responded by awarding Doublevision $2,280,000. Because that award includes the same damages Hardstone now seeks to recover from L&L, she may be barred under the doctrine of judicial estoppel from seeking any damages that are duplicative of the damages previously recovered by Doublevision in the Navigators case.
This stipulated damages figure did not include the attorney fees Doublevision incurred in pursuing the Navigators case itself, which Doublevision attempted to recover under Brandt v. Superior Court (1985) 37 Cal.3d 813. Doublevision was unsuccessful in adding so-called Brandt fees to its claimed damages because Judge Alsup barred it from doing so as a preclusionary sanction for failing to provide discovery. The attorney fees element of the stipulated damages appears to have been the outstanding fees that, by the time of the Navigators trial, Hardstone still owed to Andrew Dimitriou, the attorney who replaced L&L in Doublevision's case against Hardstone and represented her at trial, and to Joel Gumbiner, the attorney specializing in insurance coverage who represented Hardstone in her efforts to negotiate coverage issues with Navigators.
The trial court ruled that the first element of the judicial estoppel doctrine—inconsistent position-taking—is not satisfied because Doublevision is not a party to this litigation. We disagree with that analysis. Wholly aside from the fact that, on remand, Doublevision will shortly become a party, its party status in this case is not determinative. What counts are the conflicting positions taken by Hardstone. Doublevision pursued Hardstone's rights in the Navigators case and, as a result, Hardstone may be held to account for positions Doublevision took in doing so. It was literally "stand[ing] in the shoes of Ms. Hardstone" in that case, asserting her rights, the federal district judge who presided over the Navigators trial, Judge William Alsup, instructed the jury there. Hardstone therefore may be estopped from taking positions in this case that are inconsistent with positions taken by Doublevision in its suit against Navigators, since as a legal matter, by virtue of the assignment, Doublevision's litigating positions there were her positions.
The trial court noted the "oddity" of Hardstone "proceed[ing] now to secure further damages" from L&L "caused by the same underlying lawsuit . . . with proceeds assigned, again, to Doublevision." But we find that to be more than an oddity. To us, it appears to be an indication that Doublevision and Hardstone, collectively, as allied parties in different lawsuits, are seeking to recover twice for the same damages. We recognize that the explanation for this may be that, after Doublevision was blocked from claiming $1,200,000 in attorney fees incurred for its pursuit of the Navigators case, it appears to have paid these fees first (either directly to its lawyers or by reimbursing itself ), before applying any of the Navigators' recovery to Hardstone's debt, thus leaving Hardstone only a small fraction of the proceeds from the Navigators' recovery available as a "net" credit against her judgment debt. But if that is what Doublevision chose to do with the Navigators' recovery, with Hardstone's acquiescence, the consequences of its choice may not be visited upon L&L.
The parties have stipulated that after payment of attorney fees and costs incurred in its action against Navigators, Doublevision's net recovery was only $200,000.
Whatever position Doublevision now takes to justify an accounting that leaves any amount of Hardstone's judgment debt outstanding appears to be contrary to its litigating position in the Navigators trial. In closing argument in the Navigators case, counsel for Doublevision, Ryan Lapine, told the jury that rather than allow Hardstone to be "stuck" with the $1,500,000 judgment debt, Navigators should pay it. Lapine made this argument after Dawson testified at trial, on cross-examination, as follows: "Q: . . . So you got [Hardstone] to sign this assignment that required her to cooperate, and you kept [it] in force, not dismissing it, the judgment and the liens against her property, right? [¶] A: Correct. [¶] Q: Did you agree with her that if you won in this lawsuit, this jury finds against my client, awards a big award, that then you would release the judgment? [¶] A: The judgment would be satisfied at that point. Of course we would release it." (Italics added.) Hardstone, too, testified that this was her understanding. Then, after the jury rendered its $2,280,000 award, Doublevision committed to Judge Alsup that it would release its judgment lien against Hardstone.
Taken together, these positions by Doublevision in the Navigators trial—representations by Lapine giving the impression that Hardstone would be relieved of her judgment debt as a result of the jury's award, and testimony on that point by both Dawson and Hardstone—appear to be irreconcilable with Hardstone's attempt in this case to claim the same make-whole damages that Doublevision recovered in the Navigators case. To be sure, statements made by the parties in their supplemental briefs quite clearly suggest that, despite the recovery generated by the Navigators case, and despite the arguments, representations, and testimony Doublevision relied upon to obtain that recovery, Doublevision never filed any acknowledgement of satisfaction of judgment, and Hardstone never demanded one. Why that never happened is a mystery. We see nothing on this record to convince us why she should be unable to avail herself of it—and, if necessary, seek to compel the filing of an acknowledgement of the complete satisfaction of her debt. (Code Civ. Proc., § 724.050, subd. (d); see Horath v. Hess (2014) 225 Cal.App.4th 456, 468 [acknowledgment of satisfaction may be compelled where judgment creditor agreed to accept a certain amount in satisfaction of judgment debt].)
Hardstone argues that, to the extent Doublevision took the position before the jury in the Navigators case that she would be relieved of her judgment debt if the jury awarded the stipulated damages amount of $2,280,000, that was a legal position, and the doctrine of judicial estoppel applies only to changes of factual position. (ABF Capital Corp. v. Berglass (2005) 130 Cal.App.4th 825, 832 ["[t]he inconsistent position generally must be factual in nature"].) Whether this is correct as a categorical proposition is debatable. (See Levin v. Ligon (2006) 140 Cal.App.4th 1456, 1468.) But even assuming it is, the position taken by Doublevision in the Navigators case that we focus on as contradictory—which had to do with the extent to which the money awarded by the jury would redound to Hardstone's benefit—was factual in nature, which is how Judge Alsup understood it when he made sure to obtain a commitment from Doublevision's counsel after trial that it would, in fact, carry out what it told the jury it would do and release the lien against her.
Hardstone does not wholly disagree, at least to the extent she was entitled to acknowledgement of partial satisfaction for Doublevision's net recovery in the Navigators case. She contends it was an oversight that no demand for an acknowledgment of satisfaction was made and none was filed. According to L&L, on the other hand, the fact no such acknowledgment was ever demanded or filed is evidence of collusion. Perhaps it is. But whatever the explanation for Hardstone's failure to take steps to protect her interests, if the trial court, in its discretion on remand, decides to invoke the doctrine of judicial estoppel, she will be estopped from claiming any duplicative, previously awarded damages—whether Goodley applies or not. Whether, in that scenario, Hardstone would have any claims against L&L left to pursue, we cannot say. Apart from the components of the damages award that Doublevision already persuaded a jury to give it in the Navigators case, it is difficult to tell on this record whether Hardstone would still have a basis to seek recovery from L&L.
C. Statute of Limitations
L&L argues, finally, that we should affirm the trial court's judgment in its favor on the alterative ground that Hardstone's legal malpractice claim against L&L is barred by the statute of limitations. We do not agree.
The limitations period for legal malpractice in California is one year following accrual of the claim (Code Civ. Proc., § 340.6, subd. (a)) and the statute of limitations is tolled while the defendant attorney continues to provide legal services for the plaintiff client (Code Civ. Proc., § 340.6(a)(2)). Here, the stipulated facts indicate that L&L continued to provide legal services for Hardstone until April 25, 2013. On April 22, 2014, Hardstone and L&L agreed to a further tolling period, and then extended that further tolling period twice, so that ultimately it ran through November 23, 2015. Hardstone filed her complaint on November 23, 2015.
Relying on Flake v. Neumiller & Beardslee (2017) 9 Cal.App.5th. 223, L&L contends the tolling period began on April 19, 2013, the day it gave Hardstone notice that it was going to file a second motion to withdraw. L&L argues that, under the holding in Flake, in a unilateral withdrawal situation, once notice is given that would put a reasonable client on notice that the client cannot expect additional services, the statute of limitations period is no longer tolled.
The trial court correctly distinguished Flake as a fact-specific situation in which, after the client suffered an adverse result in a trial, the attorney gave notice it was going to withdraw in circumstances in which it was clear no further services would be provided. The termination of L&L's engagement, on this record, lacks any such clarity. L&L's billing records show that, even after giving notice a second time that it would move to withdraw prior to trial, L&L still continued to represent her for a period (just as it had after the Fall 2012 motion to withdraw was granted). The trial court agreed with Hardstone on this point, and ruled that L&L's services continued after it gave notice of withdrawal until April 25, 2013.
According to L&L, its continued representation was merely to carry out ethically obligatory transition services while Hardstone's representation was transferred to new counsel, and she had no reasonable expectation of continued services during that period. But upon an examination of L&L's billing records (which were attached as an exhibit to the stipulated facts), the trial court found that (1) L&L did not begin communicating with successor counsel until April 29, 2013, and (2) the services rendered up until that date were in connection with a settlement conference. These subsidiary findings as well as the ultimate determination that L&L continued representing Hardstone until April 25, 2013, are supported by the record.
In addition to arguing that L&L continued to represent her until April 25, 2013, Hardstone argues in the alternative that the key date is August 6, 2013, when judgment was rendered against her in the Doublevision case after the loss at trial. It was only then, she argues, that she suffered damage. This raises the issue of claim accrual. Here, the rule is that a legal malpractice claim accrues when the client knows facts that are sufficient to put her on notice that her counsel has breached its duty to her. (Code Civ. Proc., § 340.6, subd. (a); Lee v. Hanley (2015) 61 Cal.4th 1225, 1229.). The trial court did not address this alternative argument from Hardstone. Nor shall we. Even assuming Hardstone's claim against L&L accrued sometime prior to the date of L&L's announced intention to withdraw, the limitations period on her claim was tolled through April 25, 2013, and thus, under the parties' successive tolling agreements, through November 23, 2015.
III. DISPOSITION
The trial court's order granting L&L's motion for judgment is reversed in part and affirmed in part, the judgment entered in favor of L&L is vacated, and the case is remanded for further proceedings consistent with this opinion. The parties shall bear their own costs on appeal.
STREETER, Acting P. J. WE CONCUR: TUCHER, J.
BROWN, J.