Appeal from an order of the Superior Court of Orange County, Stephen J. Sunvold, Judge. Affirmed. (Super. Ct. No. 06CC00276).
The opinion of the court was delivered by: Sills, P. J.
CERTIFIED FOR PUBLICATION
Our Supreme Court has held that in-house attorneys may state retaliatory discharge claims against their employers as long as such claims "can be established without breaching the attorney-client privilege or unduly endangering the values lying at the heart of the professional relationship." (General Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1169 (General Dynamics).) It has also held that in-house attorneys come within the rubric of the attorney fee award provisions of Civil Code section 1717 (PLCM Group, Inc. v. Drexler (2000) 22 Cal.4th 1084 (PLCM)).*fn1
Today we face the related question of whether in-house attorneys come within the mandatory relief from default or dismissal provision of section 473 of the Code of Civil Procedure.*fn2 The question is, as far as we are aware, one of first impression in California. However, based on what the Supreme Court said in General Dynamics and in PLCM about the role of in-house attorneys, there can be no doubt about the answer: yes.
There is a wrinkle in this case, however, that requires a little more explication. Here, the in-house attorney who negligently allowed a $4 million default judgment to be taken against his company and his employer, a gas station chain, had the title of "Vice President and General Counsel." Thus, he was a corporate officer as well as being an in-house attorney. Should that make a difference?
We emphasize that we are, like the Supreme Court in Trope v. Katz (1995) 11 Cal.4th 274 (Trope), dealing with the text of a statute. Trope held that that attorneys representing themselves cannot obtain attorney fees under Civil Code section 1717 because the language of section 1717 used words like "fees" and "incurred." (See id. at pp. 279-280.) Such words revealed that the Legislature did not intend to allow attorneys representing themselves to obtain fees under section 1717. After all, attorneys representing themselves don't incur any fees to enforce a contract.
In the present case, we follow suit and similarly look to the language of the relevant statute, in this case section 473. And there is nothing in section 473 which suggests that in-house attorneys who are also officers of a corporation are somehow exempt from the operation of the mandatory provisions of the statute. The statute speaks of an "attorney's sworn affidavit attesting to his or her mistake," etcetera, leading to a default, and makes no differentiation between attorneys who are corporate officers and those who are not.
Accordingly, this court would thus have to read into section 473 an implied exception for in-house counsel who double as corporate officers. This case however -- this case of all cases -- is particularly inappropriate for the judicial creation of such an implied exception: There is a distinction between corporate counsel who provide "strictly legal services" to a corporation, and corporate counsel who "step out" of their role as "legal advisor" and provide services of a "nonlegal business nature." (See Friedman, Cal. Practice Guide: Corporations (The Rutter Group 2009) ¶ 6.1.1, p. 6-1, original italics omitted.) In this case, the in-house "general counsel" was only acting in his capacity as a lawyer, and providing only services of a legal nature, and was most certainly not acting in any role as a corporate officer. In fact -- and in violation of his duty as a lawyer -- he concealed the litigation from everybody else in the corporation. Because he was a lawyer, acting as a lawyer, there is no need for us to carve out, in this case, any implied exception in section 473 for in-house counsel who are also corporate officers. Here, because the in-house attorney was acting in his role as attorney, it is clear the trial court correctly set aside the default.
In December 2006, Maria Gutierrez filed a class action suit against G & M Oil Company, an operator of a chain of gas stations throughout California. The chain's stations include Chevron, Valero and Shell stations; in fact, G & M is, according to its Web site, one of the largest Chevron dealers in the nation. The company was founded by George Pearson who began by operating one gasoline station in Seal Beach in 1969, and, at least by 2008, remained "very much a family enterprise," still managed by Pearson and his family. According to points and authorities that would eventually be filed to obtain a default judgment, G & M has more than 125 gas stations, open all day and all night, and employs between four and seven cashiers at each station, who work shifts of eight hours. That works out, according to those points and authorities, to between 500 and 875 "full time equivalents." The word "equivalents" was presumably chosen because some cashiers may work more than one shift: We may thus presume that the company has upwards of 500 employees.
Gutierrez's class action suit alleged that G & M's employment policies toward its cashiers violated wage and hour laws. In particular, she alleged that the cashiers weren't paid for the time they spent counting money and closing out registers, and weren't given meal breaks required by law.
Michael Gray is part of Pearson's family, related to Pearson by Pearson's first marriage. Gray's father is, in fact, G & M's chief financial officer. Gray himself was the gas station chain's vice president and general counsel, and had been so since 2001. At all times from March 2001 to January 2009 he was the registered agent for service of process for the company, and hence authorized to receive all pleadings and legal documents on its behalf. In fact, he had been the company's only in-house attorney since 2001, and would continue to be until January 2009.
In a conversation with Gutierrez's attorney, Gregory Karasik, on January 4, 2007, Gray agreed to accept service of the complaint by regular mail. Karasik mailed him a copy of the complaint that day.
After receiving the original summons and complaint, Gray decided to handle the defense of the case himself. He did not send a copy of the pleadings to any other officer, director, manager, or employee of the company, never talked to, or otherwise let on to anyone else at the company that it had been sued for alleged wage and hour violations. He kept it from, according to his declaration when read in conjunction with the firm's Web site, the fellow members of the Pearson clan who otherwise ran the company. Nor did any of his fellow officers, managers or family members find out about it. The litigation was his little secret.
Gray attended no less than two case management conferences over the next year, but Gray took no action to otherwise defend the case. Remarkably, the record contains no less than three separate requests for default: One filed on the original complaint on June 12, 2007, then another default request on September 10, 2007 in the wake of a first amended complaint, and finally a third default request, based on a lack of a response to the second amended complaint, on January 8, 2008.
In May 2008, default having been taken four months earlier, Gutierrez successfully sought an order requiring the company to provide the name and home address of every employee in Gutierrez's class -- again served directly on Gray -- and in August successfully obtained an order holding G & M in contempt for not providing the list. Gray did nothing to oppose that order, nor did he show up at the hearing, despite service of notice.
In September 2008, patience exhausted, Gutierrez's counsel requested entry of a default judgment. A judgment was obtained in early ...