Opinion
A098688.
10-23-2003
CAROL PRICE, Plaintiff and Appellant, v. HELLER EHRMAN WHITE & McAULIFFE et al., Defendants and Respondents.
Carol Price sued Heller Ehrman White & McAuliffe ("Heller Ehrman") for malpractice. The trial court granted summary judgment to Heller Ehrman based on the statute of limitations. Price appeals from the ensuing judgment. We reverse.
BACKGROUND
Prices claims centered around Heller Ehrmans role in assisting Price with a lawsuit she filed against a tenant, Ferro Corporation. Among other causes of action, Price sought to recover damages for environmental contamination on the property Ferro leased from Price. Prices complaint against Heller Ehrman alleged that she engaged the firm in 1992, the same year she filed the Ferro lawsuit, to evaluate the adequacy of prior environmental investigations performed for Price, determine the necessity for further investigation, select and supervise environmental consultants, recommend strategies for cleaning up the property, and provide litigation support to the attorneys handling the Ferro trial. Price contended Heller Ehrmans negligent performance resulted in a lack of admissible evidence to support her remediation cost recovery claims against Ferro. The trial began in February 1997, and her remediation claims were dismissed on March 17, 1997. In a special verdict on March 31, 1997, the jury found that Ferro had breached its lease but that Price failed to meet her burden of proving damages.
Heller Ehrman moved for summary judgment. Among other statute of limitations arguments, Heller Ehrman contended Price had sustained actual injury beginning in November 1996 and continuing through January 1997, when she paid fees to new environmental consultants and attorneys she hired after she became dissatisfied with the investigation performed by the consultants retained and supervised by Heller Ehrman. Heller Ehrman also argued Price was damaged by her obligation to pay fees to Heller Ehrman, which she claimed exceeded the value of the legal services she received. Therefore, Heller Ehrman asserted that the complaint, filed on March 13, 1998, was untimely under the one-year statute of limitation provided by Code of Civil Procedure section 340.6.
Further statutory references are to the Code of Civil Procedure.
The trial court agreed, finding that Price had sustained actual injury no later than February 1997, in the form of consultants and attorneys fees "to evaluate, critique and redo work previously performed by Heller Ehrman and/or by the consultant it recommended," and in the form of fees she paid to Heller Ehrman.
DISCUSSION
Our review is de novo; we apply the same analysis as the trial court, determining whether the moving papers establish a complete statute of limitations defense, and if so whether the response raises any triable issue of material fact. (§ 437c, subd. (p)(2); Orrick Herrington & Sutcliffe v. Superior Court (2003) 107 Cal.App.4th 1052, 1056-1057.)
Section 340.6 provides, in relevant part: "An action against an attorney for a wrongful act or omission . . . arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first. In no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist:
"(1) The plaintiff has not sustained actual injury."
Our Supreme Court examined the "actual injury" provision of section 340.6 at length in Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739 (Jordache ). "Under section 340.6, the one-year limitations period commences when the plaintiff actually or constructively discovers the facts of the wrongful act or omission, but the period is tolled until the plaintiff sustains actual injury. That is to say, the statute of limitations will not run during the time the plaintiff cannot bring a cause of action for damages from professional negligence. [¶] The test for actual injury under section 340.6, therefore, is whether the plaintiff has sustained any damages compensable in an action, other than one for actual fraud, against an attorney for a wrongful act or omission arising in the performance of professional services." (Jordache, 18 Cal.4th at p. 751.)
"There is no requirement that an adjudication or settlement must first confirm a causal nexus between the attorneys error and the asserted injury. The determination of actual injury requires only a factual analysis of the claimed error and its consequences. The inquiry necessarily is more qualitative than quantitative because the fact of damage, rather than the amount, is the critical factor. [Citations.] [¶] Of course, nominal damages will not end the tolling of section 340.6s limitations period. Thus, there is no basis for . . . concern that the statutory period will run once the plaintiff sustains the `first dollar of injury. Instead, the inquiry concerns whether `events have developed to a point where plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages. [Citation.] However, once the plaintiff suffers actual harm, neither difficulty in proving damages nor uncertainty as to their amount tolls the limitations period. [Citation.]" (Jordache, 18 Cal.4th at p. 752.)
In Jordache, the defendant attorneys (Brobeck) were sued for failing to investigate and advise Jordache regarding its insurance coverage for the defense of a third-party lawsuit. In April 1987, new counsel advised Jordache of potential coverage. In December 1987, Jordache retained another firm to pursue its coverage claims. Over three years after the third-party suit was filed, Jordache formally tendered defense of the action to its insurers. It then sued the insurers in February 1988, seeking reimbursement for $30 million it had spent defending the third-party suit. Both the third-party suit and Jordaches coverage suits settled in 1990. The trial court granted Brobeck summary judgment in the ensuing malpractice action, finding that Jordache had sustained actual injury when it lost millions of dollars spent defending the third-party suit before tendering the defense to its insurers. The Court of Appeal reversed, holding that actual injury did not occur until the coverage action settled. (Jordache, 18 Cal.4th at pp. 744-747.)
The Supreme Court disagreed. "[T]he undisputed facts established that Jordache sustained actual injury as a result of Brobecks alleged neglect no later than December 1987. By then, Jordache had lost millions of dollars — both in unpaid insurance benefits for defense costs in the Marciano action and in lost profits from diversion of investment funds to pay these defense costs. As Brobeck asserts, these damages were sufficiently manifest, nonspeculative, and mature that Jordache tried to recover them as damages in its insurance coverage suits." (Jordache , 18 Cal.4th at p. 752.) However, the high court did not insist that the actual injury determination is necessarily unrelated to the resolution of related litigation. To the contrary, "[t]he allegations of attorney error in a particular cases factual setting may lead to a finding that actionable injury occurred only when a related action was adjudicated." (Id . at p. 755.)
The Jordache court discussed two such cases. In Sirott v. Latts (1992) 6 Cal.App.4th 923, the plaintiff doctor claimed his attorneys misadvised him that he need not pay for an extension of his medical malpractice insurance when he retired. The doctor was sued for malpractice, and had to pay for the defense himself. The defendant attorneys unsuccessfully attempted to have his malpractice insurance reinstated. The Court of Appeal held the doctor was injured not only when he incurred attorney fees to defend himself in the malpractice action, but also when an arbitration award rejected his attempt to have his insurance reinstated. (Id . at pp. 928-929.) The Supreme Court characterized this as "an instance where the propriety of the attorneys advice or actions depended on the outcome of a claim by or against a client." (Jordache, 18 Cal.4th at p. 759.)
The court also observed: "In these circumstances, the claim may have to be resolved in order for the client to know that the attorney erred. The pertinent inquiry there may not be when the plaintiff sustained actual injury, but when the plaintiff discovered, or reasonably should have discovered, the facts constituting a wrongful act or omission. (§ 340.6, subd. (a).)" (Jordache, 18 Cal.4th at p. 759.) As we discuss below, however, the client may be aware of the facts, suspect that the attorney erred, and even incur fees in an attempt to rectify the suspected error, without sustaining actual injury sufficient state a malpractice claim against the attorney.
Similarly, in Baltins v. James (1995) 36 Cal.App.4th 1193, plaintiff husband and wife claimed the defendant attorney misadvised them about the transfer of properties pending the husbands appeal from an order setting aside a community property settlement with his former wife. After the order was affirmed, the husband was found to have breached his fiduciary duties and his reimbursement claims were denied. (Id. at pp. 1197-1199.) The court held that plaintiffs faced only the threat of future harm at the time the property was improperly transferred. Any error in the attorneys advice "was not determinable, and had no effect, until following his advice resulted in the adverse judgment in the dissolution action. [Citations.]" (Id . at p. 1208.) The Supreme Court noted "the alleged negligence in Baltins v. James was that the attorney predicted incorrectly how a court would resolve an issue in the future. Thus, the propriety of the legal advice, and hence the existence and effect of error, depended on the future resolution of the issue adversely to the client." (Jordache, 18 Cal.4th at p. 761.)
In Jordache, on the other hand, there was no claim of negligence in predicting the result of a future adjudication, or other misadvisement. Brobeck was charged only with omissions, in failing to investigate insurance coverage or offer any appropriate advice. Jordache admitted it had discovered these omissions before it sued its insurers. No further proceeding was required to determine whether Brobecks actions were proper, and its neglect had the immediate effect of requiring Jordache to pay its defense costs in the third-party action, with the consequent loss of investment opportunities. (Jordache, 18 Cal.4th at pp. 760, 761.)
Here, Heller Ehrmans moving papers contended Price sustained actual injury when she was billed for the services of Baker & McKenzie, another law firm, and Levine Fricke, environmental consultants recommended by Baker & McKenzie, between November 1996 and February 1997. Heller Ehrman also argued that Price was damaged by Heller Ehrmans own fees, which she claimed exceeded the value of their services. According to Heller Ehrman, these expenses were occasioned by Prices "belie[f] that Heller Ehrman had erred when it advised her that there was no significant environmental contamination at the properties and that no cleanup was required." Heller Ehrmans statement of material facts on the actual injury issue was not disputed in any material way by Price.
Did Price have a viable malpractice claim against Heller Ehrman based on the expenditure of fees to further prepare her case against Ferro? We think not. Were that the case, any client who becomes dissatisfied with her attorney and obtains new counsel would have a malpractice claim, regardless of the actual consequences of the prior representation. Price was not required to obtain new counsel or new environmental consultants, as Jordache was required to defend itself against a third-party action. Heller Ehrmans moving papers showed that she took those steps on her own initiative, because she suspected more investigation needed to be done. A client may not manufacture a malpractice cause of action merely by suspecting defective representation, retaining new counsel, and claiming the new counsels fees as damages. The client must be able to show that, but for the negligence of the attorney, a better result could have been obtained in the underlying action. (Orrick Herrington & Sutcliffe v. Superior Court , supra, 107 Cal.App.4th at p. 1057.) While impairment or diminution of a right or remedy may constitute actual injury, the client may not sue based only on speculation that a right or remedy has been impaired. (Jordache, 18 Cal.4th at p. 750.)
Here, while Price learned from her new consultants that the prior investigation supervised by Heller Ehrman was, in their opinion, inadequate, her claim against Ferro was not impaired in any determinable way. It may have been a meritless claim in the first place, in which case Heller Ehrman would have caused no harm. It may have been a meritorious claim, rescued by the efforts of successor counsel and consultants, but not in the end damaged by Heller Ehrman if its efforts proved useful to its successors. Or it may have been a meritorious claim impaired by Heller Ehrmans incompetence, at least to the extent Price was required to spend more than she should have spent in fees. None of these possibilities, however, was actualized before Prices claims against Ferro were resolved. Unlike Jordaches right to an insurer-funded defense, which either existed or not when the third-party action began, Prices right to recover from Ferro was yet to be determined. (Compare Jordache, 18 Cal.4th at p. 753.)
In the moving papers addressing the issue of Prices discovery of Heller Ehrmans negligent performance, Heller Ehrman noted that new consultants recommended further investigation in November 1996 and January 1997, and that before trial began Price was told by Levine Fricke that the Regional Water Quality Control Board had "indicated" that remediation work would be required on her properties.
In cases where the underlying litigation settles, a malpractice plaintiff must put on a "case-within-a-case" to show that a better result would have been obtained but for the defendants negligence. (Orrick Herrington & Sutcliffe v. Superior Court, supra, 107 Cal.App.4th at p.1057.) It would be absurd, however, to require such a showing while the underlying litigation is pending. This is a case in which the propriety of Heller Ehrmans representation depended on the outcome of the litigation for which Price retained Heller Ehrmans services. Heller Ehrmans factual showing was insufficient to establish that Price sustained actual injury more than a year before she filed her complaint.
DISPOSITION
The judgment is reversed. Price shall recover her costs on appeal.
We concur: McGuiness, P. J., and Corrigan, J.