Beck v. Wecht

Opinion

The question presented by this case is whether one cocounsel may sue another for breach of fiduciary duty on the theory that the latter’s malpractice in handling their mutual client’s case reduced or eliminated the fees the former expected to realize from the case. There is a split of authority on this question. Pollack v. Lytle (1981) 120 Cal.App.3d 931 [ 175 Cal.Rptr. 81 ] (Pollack) recognized such a fiduciary duty, but Joseph A. Saunders, P.C. v. Weissburg & Aronson (1999) 74 Cal.App.4th 869 [ 87 Cal.Rptr.2d 405 ] (Saunders) rejected it as potentially inconsistent with counsel’s overriding

In December 1998, Beck filed a complaint against Wecht for breach of fiduciary duty to recover the fee he would have received had McBee and Wecht followed the Stephenses’ instructions and settled the case against General Motors for $6 million. In July 1999, Wecht filed a cross-complaint for indemnity, breach of fiduciary duty, comparative fault and breach of contract. Thereafter, American Equity intervened and sued Beck in subrogation, seeking contribution from Beck toward the settlement amount it paid on Wecht’s behalf. Each party successfully moved for summary judgment of the other’s claims. Both parties timely appealed from the orders granting summary judgment, and [the Court of Appeal] consolidated the appeals for oral argument and decision.

[In Beck’s appeal (case No. A092636), the Court of Appeal affirmed the trial court’s entry of summary judgment in favor of Wecht. In American Equity’s appeal (case No. A092221), the Court of Appeal affirmed the trial court’s entry of judgment in favor of Beck. We granted Beck’s petition for review; American Equity did not petition for review.]

As was mentioned, there is a split of authority with regard to the question whether one cocounsel may sue another for breach of fiduciary duty on the theory that the latter’s malpractice in handling their mutual client’s case reduced or eliminated the fees the former expected to realize from the case. Pollack, supra, 120 Cal.App.3d 931 , recognized such a fiduciary duty, while Saunders, supra, 74 Cal.App.4th 869 , rejected it as potentially inconsistent with counsel’s overriding duty to the client.

A. Pollack: Recognizing Fiduciary Duty Among Cocounsel

In Pollack, supra, 120 Cal.App.3d 931 , Pollack sued Lytle for breach of fiduciary duty, fraud, breach of contract, legal malpractice, and declaratory relief arising out of their joint representation of a client in a medical malpractice action. According to the allegations of the complaint, Pollack filed the medical malpractice action, but, because of a malpractice crisis,

The Court of Appeal concluded, over a strongly worded dissent, that Lytle’s relationship to Pollack as associate counsel was governed by agency principles, and that Lytle had breached his fiduciary duty to Pollack, entitling Pollack to indemnification. (Pollack, supra, 120 Cal.App.3d at pp. 940-943.) Although it acknowledged “the growing body of law which holds, as a matter of public policy, that a successor attorney owes no duty to his predecessor [citations]” {id. at p. 942), the majority found the policy rationale of those cases inapplicable to cases involving associate or concurrent counsel. “The roles of successor and associate attorneys are decidedly different. In the fulfillment of his duty of undivided loyalty to the client, a successor attorney must view the client’s situation as of the moment when he is engaged. Hence public policy requires that he not be subjected to any possible conflict of interest which may deter him from determining the best interests of the client by the possibility that he may be held liable for his acts by his predecessor. [Citation.] In contrast, an associate attorney acting as the agent of the principal attorney replaces no one, but acts at the behest of his principal, [f] Admittedly, he remains bound to act in the best interests of the client, but this creates no unavoidable conflict. Should he find that the principal attorney’s actions to date pose a potential danger to the client’s best interests, the agent-associate is dutybound to make the fullest disclosure of these material facts to the principal attorney. Since the principal attorney and the associate attorney each owes the same duty of loyalty to the client, the disclosure of information which reveals a potential danger to the client’s interests will normally prompt the principal attorney to act in protection of

Justice Johnson dissented from the majority on the ground that no rational distinction could be made between the duties running to successor attorneys and those running to cocounsel. “There is a substantial body of law concerning the liability of attorneys who sue each other in connection with common clients. A fiduciary relationship has not heretofore been recognized, and, regardless of legal theory asserted, there has emerged a recurring theme; a client’s right to the undivided loyalty of his or her attorneys must be protected, even when the result of such rule is the denial of an attorney’s cause of action against another attorney.” (Pollack, supra, 120 Cal.App.3d 931 , 945 (dis. opn. of Johnson, J.).) “Regardless of context, the -underlying rationale . . . , that the possibility of a cause of action for indemnity in legal malpractice cases, whether sought against a predecessor or successor attorney, would create such potentially burdensome conflicts of interest for an attorney representing a client, public policy dictates that such a cause of action should be barred.” (Id. at p. 948.) Recognizing a fiduciary duty between cocounsel would increase the exposure of attorneys to liability, Justice Johnson concluded, “placing them in an untenable position of divided loyalties to their clients and associated counsel.” (Id. at p. 949.)

B. Saunders: Rejecting Fiduciary Duty Among Cocounsel

In Saunders, supra, 74 Cal.App.4th 869 , the plaintiff, an attorney, and the defendant, another law firm, had jointly represented a group of hospitals in

In Mason, the plaintiff attorney alleged that he had transferred two cases to the defendant attorneys on the written understanding he would share in the contingency fee the client had agreed to pay; that the defendants failed to exercise their best efforts to either settle the cases or bring them to trial prior to the running of the statute of limitations; and that as a result of the defendants’ misconduct, the plaintiff lost his share of the fee the cases should have yielded. (Mason, supra, 77 Cal.App.3d at pp. 63-64.) The Mason court rejected the assertion that the defendants owed the plaintiff a duty. “It is fundamental to the attorney-client relationship that an attorney have an undivided loyalty to his clients. [Citation.] This loyalty should not be diluted by a duty owed to some other person, such as an earlier attorney. While, as a practical matter, both the client and the former attorney stand to benefit from any recovery in the client’s action, their interests are not identical. For example, in the cases transferred from plaintiff to defendants there was a cross-action against the client, Mr. Lawson. Depending on the circumstances, the client’s interests may best be served by withdrawing from the dispute and allowing the statute of limitations to run. On the other hand, the former attorney, not exposed to any potential liability on the cross-action, may prefer to gamble for any recovery by pursuing the matter to settlement or judgment. It would be inconsistent with an attorney’s duty to exercise independent professional judgment on behalf of his client to impose upon him an obligation to take into account the interests of predecessor attorneys.” (Id. at pp. 66-67.)

The Mason court noted the adverse consequences that would flow from the recognition of the asserted duty. “If the law were to recognize duties, such as are suggested here, between successive attorneys representing the same client, a multitude of litigation could be spawned with an attendant adverse impact on attorney-client relationships. Every lawyer could blame his problems in a lawsuit on his predecessors. Every lawyer referring a case to another lawyer would be in a position to claim that the negligence of the

As we discussed above, the majority in Pollack found the policy rationale of Mason inapplicable to the situation of associate counsel. “The roles of successor and associate attorneys are decidedly different. In the fulfillment of his duty of undivided loyalty to the client, a successor attorney must view the client’s situation as of the moment when he is engaged. Hence public policy requires that he not be subjected to any possible conflict of interest which may deter him from determining the best interests of the client by the possibility that he may be held liable for his acts by his predecessor. [Citation.] In contrast, an associate attorney acting as the agent of the principal attorney replaces no one, but acts at the behest of his principal.” (Pollack, supra, 120 Cal.App.3d at p. 942.)

The Saunders court was not convinced by the Pollack majority. “With all due respect. . . , we do not find this analysis persuasive. The duty of both the associate and the successor attorney is the same: to serve the best interests of the client.” (Saunders, supra, 74 Cal.App.4th at p. 873.) “[Recognizing a duty on the part of cocounsel as urged by Saunders would be inconsistent with counsel’s duty to exercise independent judgment on behalf of the client. Saunders argues that here, Weissburg’s duty to its clients was precisely the same as its duty to cocounsel, so that Weissburg was faced with no conflict. Yet the record indicates that the clients were satisfied with Weissburg’s representation, while Saunders was not. That surely indicates that recognition of a duty on the part of Weissburg to its cocounsel potentially conflicts with Weissburg’s duty to its clients of undivided loyalty and total devotion to their interests. Indeed, the Mason court envisioned just this situation in observing that ‘Public confidence in the legal system may be eroded by the spectacle of lawyers squabbling over the could-have-beens of a concluded lawsuit, even when the client has indicated no dissatisfaction with the outcome.’ (Mason v. Levy & Van Bourg, supra, 77 Cal.App.3d at p. 67.)” (Saunders, at p. 874.)

C. Public Policy Concerns: Avoiding Conflicts of Interests and Protecting the Confidentiality of Attorney-client Communications

Recognizing a fiduciary relationship among cocounsel, the Pollack majority concluded, “creates no unavoidable conflict” between the duty cocounsel

Saunders is an example of the sort of case in which the potential for conflict is palpable. In Saunders, while the hospitals, the mutual clients, were satisfied with the settlement of their lawsuit against the Medicare program, the plaintiff attorney complained that his cocounsel had structured the settlement in a manner that maximized his own fees by favoring hospitals not subject to the contingency fee agreement between the cocounsel. {Saunders, supra, 74 Cal.App.4th at pp. 870-871, 874.) Structuring the settlement differently might have better satisfied the aggrieved cocounsel, but to the detriment of the clients. The most cynical views of the legal profession would be confirmed by recognition of a fiduciary duty on the part of cocounsel to maximize one another’s fees.

Like the Saunders court, the Court of Appeal in this case found Mason more persuasive than Pollack. “We, too, are convinced that the policy reasons expressed in Mason are valid in the cocounsel context presented here. As happened in Saunders, cocounsel Beck’s dissatisfaction with the handling of the Stephenses’ case by Wecht and McBee points up the myriad conflicts that may arise among attorneys representing the same clients, and the resulting inability to consider only the clients’ best interests. To avoid any detriment to the jointly represented client, it is imperative that no collateral duties arise to interfere with the duty of ‘undivided loyalty and total devotion’ owed to the client. (Saunders, supra, 74 Cal.App.4th at p. 874[, quoting Mason, supra, 77 Cal.App.3d at p. 67].) Thus, the trial court correctly granted summary judgment for Wecht, because, as a matter of law, he owed no fiduciary duty to Beck.”

Beck objects there was, in fact, no conflict in this case between the duty that his cocounsel Wecht assertedly owed him and the duty Wecht unquestionably owed their mutual clients, the Stephenses—Wecht owed both of

With regard to the concern that the attorney-client privilege might be jeopardized, Beck argues that the attorney-client privilege was not jeopardized in this case because the clients, the Stephenses, waived the privilege by filing malpractice actions against Wecht and McBee, by testifying about their communications with Wecht and McBee in their depositions, and by failing to object when Wecht testified about his communications with them in his deposition. Wecht concedes “it happened in this case that the clients waived the [attorney-client] privilege, and that the work product privilege was not a factor.” However, Wecht points out, it will not always be the case that the client will waive the privilege by filing a malpractice suit. Indeed, the clients in Saunders were satisfied with the representation afforded them by the attorney sued by his cocounsel for breach of fiduciary duty. (Saunders, supra, 74 Cal.App.3d at p. 874.)

Beck’s effort to distinguish his case on the facts raises a fundamental question. Should this issue—whether cocounsel owe one another a fiduciary duty to conduct their joint representation in a manner that does not dimmish or eliminate the fees each expects to collect—be decided on a case-by-case basis? We think not. The better approach, we conclude, is a bright-line rule refusing to recognize such a fiduciary duty. Accordingly, we disapprove Pollack v. Lytle, supra, 120 Cal.App.3d 931 , insofar as it is inconsistent with the views expressed herein.

The judgment of the Court of Appeal is affirmed.

George, C. J., Kennard, J., Baxter, J., Werdegar, J., Chin, J., and Moreno, J., concurred.