Los Angeles County Super. Ct. No. BC400560 APPEAL from a judgment of the Superior Court of Los Angeles County, Carl J. West, Judge. Reversed.
The opinion of the court was delivered by: Kitching, J.
CERTIFIED FOR PARTIAL PUBLICATION*fn1
This is a class action brought by plaintiff and appellant Luis Gutierrez on behalf of himself and all other persons who were represented by defendants and respondents Thomas V. Girardi and his law firm Girardi & Keese (collectively G&K) in a previous lawsuit by employees of Lockheed Corporation (Lockheed) against Lockheed and other defendants (Lockheed Action). Gutierrez appeals from a judgment following an order granting G&K's motion for summary judgment.
Over a period of about 10 years, G&K negotiated settlements with most of the defendants in the Lockheed Action on behalf of Gutierrez and other plaintiffs in that action. Gutierrez received a series of payments as his share of the settlement proceeds. Subsequently, three of the non-settling defendants in the Lockheed Action filed a motion for summary judgment against Gutierrez on the ground that his action was barred by the statute of limitations. The motion was granted and judgment was entered in the Lockheed Action against Gutierrez with respect to the non-settling defendants.
The gravamen of Gutierrez's allegations in this action is that G&K misappropriated part of the settlement funds paid by the settling defendants for the benefit of Gutierrez and other class members. Gutierrez asserts causes of action for breach of fiduciary duty and money had and received against G&K.
The trial court granted G&K's motion for summary judgment on the grounds that Gutierrez could not prove the elements of causation and damages in both of his causes of action because his claims against the settling defendants in the Lockheed Action would have been barred by the statute of limitations had the settling defendants asserted them. In other words, the trial court concluded that because the statute of limitations objectively barred Gutierrez's causes of action in the Lockheed Action, as a matter of law he could not prevail in his causes of action against G&K. This was error.
In many cases when a client sues his or her attorney for wrongdoing in connection with litigation (e.g. for breach of fiduciary duty or professional negligence), the merits of the underlying case must be adjudicated. This is because in order to prove the element of causation the client must show that he or she objectively would have obtained a better result in the underlying case in the absence of the attorney's breach or negligence. The trial court thus must conduct a "trial within a trial" of the underlying case.
In this case, by contrast, a trial within a trial is not necessary. This is because the merits of the Lockheed Action need not be decided in order to determine whether G&K's alleged misappropriation of the settlement proceeds caused Gutierrez damages. G&K allegedly misappropriated the settlement proceeds after the settlement agreements were executed. At that point, as to the settling defendants, the case was over. The settling defendants could no longer raise any defenses, including their statute of limitations defense. Therefore, if the misappropriation allegations against G&K are true, G&K's conduct caused Gutierrez to incur damages regardless of whether the settling defendants could have raised a statute of limitations defense prior to settling the case.
The trial court's judgment was based on the erroneous assumption that the settling defendants' statute of limitations defense barred Gutierrez's claim against G&K. We reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
1. Gutierrez's Workers' Compensation Claim
Gutierrez worked for Lockheed for over 30 years beginning in 1973. On March 6, 1987, Gutierrez filed a workers' compensation claim. It alleged that Gutierrez suffered injury to his "entire body including psyche" from "stress & strain with toxic exposure" while working as a flight line mechanic at Lockheed.
On October 28, 1988, Gutierrez and numerous other Lockheed employees in Los Angeles County filed a complaint against Lockheed and other corporate defendants. The complaint alleged that the plaintiffs sustained personal injuries from their exposure to toxic chemicals while working at Lockheed's facilities.*fn2 It further alleged that the defendants manufactured, formulated, supplied, distributed or sold the toxic chemicals that caused the plaintiffs' injuries. The complaint set forth fraudulent concealment, strict liability and negligence causes of action.
When the complaint in the Lockheed Action was filed, the attorney for the plaintiffs was Timothy A. Larson. At some point during the Lockheed Action G&K became counsel for Gutierrez and the other plaintiffs. According to Gutierrez, G&K did not have a fee agreement with Gutierrez in connection with the Lockheed Action.
Between approximately 1991 and 2001, the plaintiffs reached "general settlements" with various defendants (the settling defendants) in the Lockheed Action. The settlements totaled approximately $131 million. G&K received the settlement funds and controlled all disbursements. From October 1991 to February 2001, Gutierrez received 13 settlement checks from G&K totaling $81,310.41.
On April 18, 2002, three defendants in the Lockheed Action (the non-settling defendants) filed a motion for summary judgment against Gutierrez. That motion argued the one-year statute of limitations barred Gutierrez's action.
On June 7, 2002, the trial court granted the non-settling defendants' motion. The court found that Gutierrez had "inquiry knowledge" of his claims against the non-settling defendants when he filed his workers' compensation claim against Lockheed more than a year before the commencement of the Lockheed Action. Accordingly, the court ruled that the one-year statute of limitations barred Gutierrez's personal injury claims against the non-settling defendants and that said defendants were entitled to judgment as a matter of law.
3. Gutierrez's Allegations in this Action
On October 23, 2008, Gutierrez commenced this action by filing a complaint against G&K. Gutierrez filed a first amended complaint on February 20, 2009, which is the operative pleading in this case.
The first amended complaint states that this is a class action brought by Gutierrez on behalf of himself and all other persons who were represented by G&K in the Lockheed Action. It sets forth causes of action for breach of fiduciary duty and money had and received.
The first amended complaint does not allege that the amount of the settlement obtained by G&K was inadequate. Rather, it alleges that G&K breached its fiduciary duty and committed other wrongful acts "with respect to the handling and distribution of the settlement funds generated" in the Lockheed Action "that were owing" to Gutierrez and other class members by, inter alia, "[d]isbursing and/or withholding from distribution" to Gutierrez and class members "as costs amounts and/or items not properly chargeable as costs"; "[d]isbursing and/or utilizing" Gutierrez's and class members' funds for G&K's "own individual interests" without plaintiffs' "knowledge or consent"; failing and refusing to "promptly disburse" to Gutierrez and other class members their "proportional share of the settlements"; failing to maintain Gutierrez's and other class members' funds in interest-bearing trust accounts; and "[m]anaging" Gutierrez's and class members' funds "in a way to maximize profits for [G&K] at the expense of said plaintiffs." In total, the first amended complaint alleges, G&K "received money believed to be in excess of $20 million that was intended to be used for the benefit of" Gutierrez and other class members.
4. G&K's Motion for Summary Judgment
On September 30, 2009, G&K filed a motion for summary judgment or, in the alternative, summary adjudication. G&K argued that Gutierrez could not prove that he sustained damages proximately caused by G&K's conduct in the Lockheed Action because Gutierrez's underlying claims against the settling defendants were time barred.
G&K also argued that the doctrine of unclean hands barred Gutierrez's claims against G&K. This argument was based on G&K's contentions that Gutierrez falsely asserted in his workers' compensation claim and in the Lockheed Action that he suffered injuries from exposure to toxic chemicals while working at Lockheed, and that Gutierrez failed to disclose his claims against G&K to the bankruptcy court in his 2009 personal bankruptcy case.
On January 6, 2010, the trial court granted G&K's motion for summary judgment. The court found that Gutierrez could not establish the elements of causation or damages because the statute of limitations barred his claims against the settling defendants. In granting the motion, the court relied primarily on Slovensky v. Friedman (2006) 142 Cal.App.4th 1518 (Slovensky), which we shall discuss in detail post. The court also expressly stated that it did not ...