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Porter v. Wyner

April 8, 2010

JOHN PORTER ET AL., PLAINTIFFS AND APPELLANTS,
v.
STEVEN WYNER ET AL., DEFENDANTS AND RESPONDENTS.



APPEAL from an order of the Superior Court of Los Angeles County. Warren L. Ettinger, Judge. Reversed and remanded. (Los Angeles County Super. Ct. No. BC347671).

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

CERTIFIED FOR PUBLICATION

Introduction

Plaintiffs and appellants John Porter and Deborah Blair Porter (the Porters) appeal an order granting a motion for new trial in favor of defendants and respondents, Steven Wyner and Marcy Tiffany (Wyner Tiffany) following a jury verdict that (1) awarded Mrs. Porter $211,000 in back wages and the Porters $51,000 for breach of an attorney fee agreement; and (2) rescinded a release the Porters gave Wyner Tiffany regarding tax advice.

Wyner Tiffany had previously represented the Porters in a separate lawsuit brought by the Porters against the Manhattan Beach Unified School District and the California Department of Education. The instant lawsuit arose as a result of Wyner Tiffany's failure to follow through on a promise that was allegedly made to the Porters during a mediation of that underlying action wherein Wyner Tiffany promised to pay the Porters certain proceeds from their attorneys' fees. Though Wyner Tiffany initially objected to the admissibility of the communications made during the mediation of the underlying lawsuit, they later withdrew the objection. At trial, evidence of the communications between Wyner Tiffany and the Porters with respect to the promises made at the mediation were admitted. Approximately a month after the trial court entered judgment, it granted a motion for new trial because it believed the then newly decided case of Simmons v. Ghaderi (2008) 44 Cal.4th 570 (Simmons), mandated such a result.

Appellants claim the trial court erred in granting the new trial, as the communications between an attorney and its client do not fall within the purview of mediation confidentiality. Wyner Tiffany contend the trial court properly granted their motion for a new trial because the jury's consideration of confidential mediation communications created an irregularity in the proceedings statutorily mandating a new trial. Wyner Tiffany also cross-appeal, contending the trial court erred in ruling their motion for a judgment notwithstanding the verdict (JNOV) was moot.

We reverse the order granting a new trial and remand the matter back to the trial court to rule on the JNOV.

FACTS

1. Underlying Action

Wyner Tiffany are partners in a law firm that focuses on educational rights of disabled students. In 1999, the Porters retained Steven Wyner, then a sole practitioner, to assist in obtaining special education services for their son. Wyner filed a lawsuit in the federal district court (the underlying action) on behalf of the Porters and their son against the Manhattan Beach Unified School District (District) and the California Department of Education (Department). The district court dismissed the underlying action, but that dismissal was reversed by the Ninth Circuit Court of Appeals. (Porter v. Board of Trustees of Manhattan Beach (9th Cir. 2002) 307 F.3d 1064.)

After the reversal, Wyner obtained for the Porters a partial summary adjudication on liability and the appointment of a special master to oversee the Porter child's education.

2. Mediation and Settlement

Wyner Tiffany then brought a second motion for partial summary judgment on the Porters' behalf. Just before the second motion for partial summary judgment was to be heard in April 2005, the parties in the underlying action participated in a private mediation conducted by a retired judge.

The District and the Department were represented by their individual counsel of record and by attorney Robert Feldhake, acting as chief negotiator for the defense. Nineteen persons, excluding the mediator, signed a confidentiality agreement prepared by the mediation service. The confidentiality agreement expressly provided that the provisions of California Evidence Code sections 1115 through 1128 and 703.5 would apply to the mediation.*fn1

At the conclusion of the mediation session, the District and the Department signed a stipulation for settlement in which they agreed to fund up to $1,131,650 for the education of the Porters' son, to be overseen by the special master, and to pay $5,600,000 for general damages, special damages, attorney fees and costs.*fn2 Although it was not separately broken out in the stipulation, Wyner Tiffany and the Porters came to an understanding that $1,650,000 of the settlement would be allocated to attorney fees and costs. The stipulation for settlement did not include any provision waiving mediation confidentiality for purposes of enforcement, and proposed provisions for waiving mediation confidentiality were crossed out in the printed form.*fn3

3. Negotiation of Definitive Settlement Documents

Over the next three months, the parties negotiated over the form of the definitive settlement agreement.

A. Retention of Tax Attorney

A few days after the mediation meeting, Wyner Tiffany became aware of a possibility that the settlement proceeds the Porters were to receive might be taxable, and they so informed the Porters. Wyner Tiffany recommended that the Porters retain Robert Wood, an attorney who specialized in providing tax advice on litigation payments, to help structure the settlement. The Porters expressed their agreement, and, in early May 2005, Wyner Tiffany retained Wood to provide advice on minimizing the tax consequences of the settlement.

B. Agreement to Share Responsibility for Tax Attorney's Fees

In July 2005, the Porters signed an agreement whereby, in exchange for Wyner Tiffany paying one half of Wood's fees, the Porters agreed to release Wyner Tiffany from liability for any tax advice given the Porters.*fn4 Wyner Tiffany funded Wood's initial retainer.

4. Formal Settlement

In early August 2005, the parties to the underlying action executed a formal settlement agreement encompassing the terms negotiated at the mediation meeting. Under the definitive settlement agreement, the District and the Department agreed to deposit $1,131,650 in the special master's fund, pay $1,580,000 into a special needs trust being established for the Porters' son, pay $2,370,000 into an existing Porter family trust and pay Wyner Tiffany $1,650,000 for attorney fees and costs.

Paragraph 19 of the settlement agreement recited: "Upon the full execution of this Agreement, the Parties, and each of them, waive the terms and provisions of that certain Judicial Arbitration Mediation Service Confidentiality Agreement (California), dated April 26, 2005. The Parties acknowledge and agree that the terms and provisions of this Agreement are not confidential."*fn5

The Porters and Wyner Tiffany in the underlying action signed the settlement agreement as parties. Wyner signed at the end of the agreement on behalf of Wyner & Tiffany under the words, "APPROVED AS TO FORM."

The district court approved the settlement, including the payment of attorney fees, and issued a stipulated dismissal of the underlying action.

The settlement sums were deposited and paid by Wyner Tiffany in the underlying action as stipulated.

5. Subsequent Attorney-Client Dispute

After the underlying action was concluded, a dispute arose between the Porters and Wyner Tiffany over several matters, including Wyner Tiffany's failure to reimburse the Porters for the attorney fees and costs the Porters had previously paid and Wyner Tiffany's alleged rendering of incorrect tax advice to the Porters regarding settlement proceeds. The Porters also claimed Wyner Tiffany failed to pay Mrs. Porter for services she rendered as a paralegal in the underlying action out of the $1,650,000 Wyner Tiffany received in the settlement.

Wyner Tiffany asserted they were not required to reimburse the Porters for attorney fees and costs the Porters previously advanced because the amount Wyner Tiffany received under the settlement was less than the amount they could have claimed under a contingency fee provision in their retainer agreement. Wyner Tiffany further asserted they were not required to pay Mrs. Porter's fees as a paralegal from Wyner Tiffany's ...


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