Do Not Settle. Do Not Collect a Contingency Fee. Go Straight to the State Bar.

Amjadi v. Brown, No. G059069 (D4d3 Aug. 30, 2021)

Sometimes clients won’t settle when their lawyers think they should. No matter how much you explain to them that it’s a good deal, that it’s better than anything they could expect even if they win at trial, or that they are letting emotional issues get in the way of what litigation is really about: money, they just won’t come around to your view of the situation. But if you didn’t want to deal with that, you should have told the interviewers at OCI that you want to be a capital markets lawyer. Because, as fools who decided to pursue a life in litigation, clients who don’t take our settlement advice are an occupational hazard we just need to suck up and deal with. 

Lots of strategic and tactical decisions in litigation belong to the attorney, not the client. But not settlement. Rule 1.2 of the Rules of Professional Conduct unequivocally states that a “lawyer shall abide by a client’s decision whether to settle a matter.” 

The plaintiff lawyers here (working on a contingency, no less) thought they could end around that rule by putting in their retainer agreement that the client delegated them the authority to decide if and when to settle, so long as the lawyers thought it was in the client’s interests. Bad idea.

Not only is that prohibited by the RPCs, cases have found that frustrating a client’s authority on when and under what terms to settle can constitute “moral turpitude.” So this all results in the Court of Appeal invalidating a settlement entered over the client’s objection, the Court declaring the retainer agreement void, and the lawyers being reported to the state bar, not just for the retainer agreement, but also for disclosing a bunch of client confidences in the course of the dispute over the settlement.

Reversed.

Shady, Shady Stuff

Lofton v. Wells Fargo, No. A136626 (D1d3, as modified Nov. 20, 2014)

There are two wage-and-hour cases against Wells Fargo. One is a class action. The other is a 600 plaintiff mass joinder case with no certified class. One is in LA, the other in San Francisco. Although they are not coordinated, both cases allegedly resolve at the same mediation. The deal was that the class will settle for $19 million, the 600 plaintiffs will opt out, and then the 600 will settle for $6 million.

But when it comes time to get approval, the individuals don’t opt out. Instead, they file claims in the class settlement, apparently because that’s what their lawyers tell them to do. And nobody tells the court during the approval process that the individual case attorneys—the appropriately named “Initiative Legal Group”—now contend that the whole $6 million was to address their attorneys’ fees.

When one of the individual plaintiffs gets word of ILG’s initiative to steal the settlement fund from their clients, he sues ILG for breach of fiduciary duty. He also intervenes in the (already approved) class action case and gets a TRO from that court preventing ILG from dissipating the $6 million. 

The court here affirms that injunction, finding: (1) that issuing the TRO was within the trial court’s ongoing jurisdiction over a class action settlement under Code of Civil Procedure § 664.6, which includes the authority to act in equity; (2) that the trial court did not abuse its discretion in issuing the TRO; (3) that ILG’s constitutional and privacy objections are bogus; and (4) that ILG’s Evidence Code § 1152 settlement privilege objections were harmless or unfounded.

Affirmed.

Quantum Meruit for Attorney Can't Include a Lodestar Multplier

Chodos v. Borman, No. B252446 (D2d5 as modified, July 9, 2014)

An attorney sues his client to collect fees for representations in two divorce cases and a Marvin action. But, contrary to Business & Processions Code §§ 6147 and 6148, he never got a signed agreement. That limits him to quantum merit. After trial, the jury found that the attorney had done 1,800 hours of work and that his reasonable rate was $1,000 an hour. It then, as permitted by the court’s instructions, applied a lodestar multiple of five, ultimately awarding $7.8 million. The court here reverses, finding that a lodestar multiplier cannot be applied in awarding an attorney quantum meruit for services performed without a written fee agreement. To do so could reward attorneys for breaching their ethical obligations to get client fee agreements in writing.

Reversed.

I'm from the Company, and I'm Here to Help...

Yanez v. Plummer, No. C070726 (D3 Nov. 5, 2013)

Plaintiff was a witness to a workplace accident. He gave two written statements in litigation over that accident, one of which suggested that he actually saw the injured party slip and fall on some oil. But while preparing for his deposition plaintiff told the company’s attorney—who was also representing plaintiff at the deposition in his individual capacity—that he had not actually seen the fall. The attorney told the plaintiff that he would protect him at the deposition and that the company would not punish him for truthful testimony. At the deposition, the injured worker’s counsel elicited that the plaintiff did not see the fall, and went no further. But then on redirect, the company lawyer brought out the prior written statement that suggested plaintiff had actually seen the fall, effectively impeaching his own client. 

Plaintiff was subsequently disciplined and fired for giving dishonest testimony. In addition to suing the company for wrongful termination, Plaintiff sued the attorney for malpractice.  The attorney moved for summary judgment arguing that plaintiff could not establish a breach of duty or causation. Although the trial court agreed, the court of appeal reversed. The evidence was sufficient to create a dispute of fact that the attorney had an unwaived conflict of interest between the plaintiff and the company. And there was at least a fact dispute that the attorney’s decision to impeach the plaintiff in the deposition with his prior written statement was, in fact, a but-for and proximate cause of the plaintiff’s termination. 

Reversed and remanded.