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Martorana v. Marlin

July 1, 2009

RON MARTORANA, PLAINTIFF AND APPELLANT,
v.
MARLIN & SALTZMAN ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from a judgment of the Superior Court of Los Angeles County. Yvette M. Palazuelos, Judge. Affirmed in part and reversed in part. (Los Angeles County Super. Ct. No. BC378988).

The opinion of the court was delivered by: Zelon, J.

CERTIFIED FOR PUBLICATION

Appellant Ron Martorana ("Martorana") was a class member in a prior wage and hour class action filed against his former employer, respondent Allstate Insurance Company ("Allstate"), by counsel from several law firms -- respondents Marlin & Saltzman, Louis M. Marlin, and Stanley D. Saltzman, and respondents Rex Parris Law Firm, R. Rex Parris, Robert Parris, Schwartz Daniels & Bradley, Arnold Schwartz, and Marcus Bradley (collectively "Class Counsel"). A settlement of the class action was approved by the Los Angeles County Superior Court, but Martorana did not recover any portion of the settlement because he failed to timely submit a claim form. Martorana then filed the instant action against Allstate and Class Counsel ("Respondents"), alleging that Respondents were negligent in failing to take action to contact Martorana before the claim filing deadline to determine why he had not filed a claim form and to make sure that he was aware of the need to timely do so. Respondents filed demurrers to Martorana's complaint, which the trial court sustained.

Martorana now appeals the trial court's orders sustaining the demurrers of Class Counsel and granting Allstate's request for sanctions pursuant to Code of Civil Procedure section 128.7.*fn1 For the reasons set forth below, we hold that the trial court did not err in sustaining Class Counsel's demurrers without leave to amend, but did err in awarding sanctions to Allstate.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

I. The Underlying Class Action

On November 27, 2000, Class Counsel filed a class action suit against Allstate on behalf of all current and former claims adjusters, seeking overtime pay and related penalties under the California Labor Code (Sekly v. Allstate Insurance Company, Los Angeles County Superior Court Case No. BC240813) (the "Sekly action"). After several years of litigation, the parties in the Sekly action agreed to a class action settlement totaling $120 million. As a senior claims adjuster for Allstate, Martorana was a member of the class and was entitled to receive approximately $65,000 as his portion of the settlement provided that he submit a timely claim form.

On September 13, 2005, the trial court in the Sekly action granted preliminary approval of the settlement. In so doing, the court approved the parties' proposed settlement notice, which the claims administrator was required to send, along with a claim form and a request for exclusion form, to each class member at his or her last known address by first class mail. The settlement notice provided that class members had 75 days in which to submit claim forms or exclusion requests, and 30 days in which to file and serve written objections. Any claim submitted by December 7, 2005 was to be deemed timely, and any claim submitted between December 7, 2005, and February 28, 2006, could be approved for payment in the discretion of a referee selected by the parties. However, any claim submitted after February 28, 2006 was to be rejected as untimely regardless of the reason for the late filing. On November 7, 2005, following a fairness hearing, the trial court in the Sekly action granted final approval of the class action settlement, finding that the settlement was "fair and adequate and . . . the result of arms length negotiations between the parties."

In accordance with the settlement agreement, the claims administrator mailed the judicially-approved settlement notice to all class members, including Martorana. Martorana does not allege that he failed to receive the settlement notice, or the accompanying claim form, within the claim filing period. Rather, he alleges that he did not submit a claim form until some time after February 28, 2006, because he had been diagnosed with prostate cancer and was experiencing the physical effects of his diagnosis and treatment. Because Martorana did not timely submit a claim, he did not receive any portion of the Sekly action settlement.

II. The Negligence And Malpractice Action

On October 12, 2007, Martorana filed the instant action against Allstate and Class Counsel. His original complaint alleged a negligence claim against both Allstate and Class Counsel and a legal malpractice claim solely against Class Counsel. In his original complaint, Martorana asserted that Allstate and Class Counsel owed a duty to the class as a whole to establish a settlement notice procedure whereby class members who had not responded to the notice would be contacted prior to the claim filing deadline to ascertain the reason why they had not submitted a timely claim form. Martorana further asserted that Class Counsel owed a duty to Martorana individually to take reasonable steps to contact him about his failure to file a claim and to make sure that his claim form was timely submitted.

Allstate and Class Counsel demurred to Martorana's original complaint. In its demurrer, which was both filed and served on February 13, 2008, Allstate also sought monetary sanctions against Martorana and his attorney pursuant to section 128.7. In support of the request for sanctions, Allstate's attorney, Andrew Paley ("Paley"), submitted a declaration attaching his prior correspondence with Martorana's counsel. In a January 8, 2008 letter to Martorana's attorney, Paley stated that the action against Allstate was frivolous because Allstate owed no duty of care and that Allstate would seek sanctions against both Martorana and his counsel under section 128.7 unless they dismissed the complaint with prejudice. On January 29, 2008, Martorana's attorney responded via email, summarily rejecting Allstate's request for a dismissal.

On March 20, 2008, the trial court sustained Allstate's demurrer to the original complaint without leave to amend and granted its request for sanctions in the amount of $4,800. In awarding sanctions against both Martorana and his attorney, the trial court noted that the complaint against Allstate, who had been an adverse party in the prior class action, "was so completely devoid of merit that the court finds it was filed to harass, annoy, or vex Allstate." The trial court also sustained Class Counsel's demurrers to the original complaint, but granted Martorana leave to amend the cause of action for legal malpractice. The court rejected Class Counsel's argument that judicial approval of a class action settlement automatically absolved attorneys for the class of any malpractice liability. The court reasoned that Class Counsel conceivably could be liable if they had an active role in Martorana's failure to timely file a claim. Because it was "unclear to what extent counsel may have been responsible, if at all, for Martorana's failure," the court concluded that Martorana "must allege more facts . . . on this issue."

On April 9, 2008, Martorana filed a first amended complaint, asserting a single cause of action against Class Counsel for legal malpractice. In his amended complaint, Martorana alleged that Class Counsel owed him a duty of care because they knew he was a class member and how to contact him, knew that he had not responded to the settlement notice by filing either a claim form or an exclusion request, and knew that his overtime claim against Allstate would be released if he did not timely submit a response. Martorana further alleged that Class Counsel breached its duty by (1) failing to negotiate a procedural mechanism in the settlement agreement whereby Class Counsel would be notified before the claim filing deadline as to which class members had not yet responded, and (2) failing to contact Martorana directly ...


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