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James Filbin et al v. Herman H. Fitzgerald et al

November 20, 2012


Trial Court: San Mateo County Superior Court Trial Judge: Honorable Clifford Cretan (San Mateo County Super. Ct. No. CIV475712)

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


There is a type of attorney malpractice lawsuit known as a "settle and sue" case, which involves a former client suing after litigation has been settled. Depending on whether the disgruntled client was the plaintiff or the defendant in the antecedent lawsuit, the basis of the claim is that the settlement was less than it should have been, or more than it had to be, by reason of the negligence of the party's attorney. Obviously, the manner in which the underlying lawsuit was concluded will often make it problematic whether causation and damages can be established.

Here, the trial court awarded the former clients more than half a million dollars for the malpractice committed by their former attorney while representing them in an eminent domain proceeding. The court concluded that even though the attorney's negligence occurred prior to the eventual settlement--a settlement they agreed to while represented by a successor attorney--various actions by the attorney were below the standard of professional care and caused the clients to settle for $574,000 less than they would otherwise have received. The court further concluded that, notwithstanding his malpractice, the former attorney was entitled to recover approximately $242,000 for the quantum meruit value of his services.

Both sides have appealed. On the attorney's appeal from the malpractice judgment, we reverse, concluding that as a matter of law there is no causal connection between the attorney's assertedly negligent acts and omissions and the amount the clients received when they settled. On the clients' appeal from the quantum meruit judgment, we affirm.


The Property

In 1978, James and Carolyn Filbin purchased a 13-acre parcel of unimproved real property adjacent to what is now the San Luis Obispo Regional Airport. Thereafter, the Filbins began "stockpiling" material on their property, material subsequently described (by the San Luis Obispo County judge trying the eminent domain case) as "concrete, asphalt, and soil, as well as scrap metal, wood, inoperative vehicles, and other debris." The nature of the material apparently accounts for the various references to the property as a "junk place."

The Filbins' practice came to the unfavorable attention of county and state officials. The ensuing hostility fueled a lengthy chapter of administrative and legal proceedings, and even a misdemeanor criminal conviction with a probation violation. A dispute about the property's being rezoned soon after the Filbins' purchase aggravated matters. And in 2004 San Luis Obisbo County (the County) decided to acquire the property through eminent domain.

The Eminent Domain Action

On June 6, 2006, the County commenced judicial proceedings to acquire the property. After obtaining an order for immediate possession of the property (see Code Civ. Proc., § 1255.410),*fn1 the County's initial offer to purchase the property was $1,250,000.*fn2

The following month the Filbins retained Herman Fitzgerald*fn3 , an attorney with considerable experience in condemnation proceedings. Fitzgerald negotiated a "relocation settlement agreement" with the County, but the Filbins repudiated it. Fitzgerald made an investigation and concluded, contrary to Mr. Filbin's insistence, that there was nothing improper about the rezoning. Leslie J. Gilman, the appraiser engaged by Fitzgerald on behalf of the Filbins, valued the property at $4,535,000. Mr. Filbin, a former real estate broker, believed the property was worth between $12 million to $15 million.

In May 2007, as the case wended its way to trial, the court rejected a stipulation arranged between the parties that the stockpiled material would be included in fixing the value of the property. The court concluded that the Filbins' "wholesale disregard of local and state land use regulations" amounted to "a remarkable history of recalcitrance" and "a repetitive pattern of illegality" sufficiently egregious to warrant "an order prohibiting Filbin from presenting to the jury any evidence showing that the stockpiled material has a fair market value above zero." At the same time, "The County will be permitted to show the diminution in value, if any, due to negative abatement costs."

In July 2007, with trial less than a month away, the Filbins had to decide on the mandatory settlement offer required by section 1250.410*fn4 (section 1250.410). This was just after the Gilman appraisal was completed. Fitzgerald advised the Filbins that "the law requires" that the property owners' settlement offer be "less than what the appraisal opinion to be testified will be." This advice was set forth in a letter to the Filbins dated July 24, 2007, which reads in pertinent part as follows:

"The Eminent Domain Law requires that both sides make an effort to try to settle the case prior to trial. This is done by way of an exchange of an offer and a demand from the parties. The property owner must file with the Court and serve upon the County a demand to settle the case and the County must file an offer to settle and serve it upon the property owner 20 days before trial, which will be July 31. The law generally requires that the property owner must make his demand to settle in a figure less than what the appraisal opinion to be testified will be and that the County must raise its offer to settle over and above what its appraisal testimony will be in Court. The significance of the 'Final Offer' and 'Final Demand' is that the Court has the discretion to award litigation expenses consisting of attorney fees, witness fees, and appraisal fees to the property owner . . . . if the Court determines that the offer made by the County is unreasonable and the demand made by the owner(s) is reasonable, all viewed in light of the jury verdict. This is completely discretionary with the trial judge and there is no statutory standard by which the judge can make such a determination. The decisional law (that is the cases that are reported on appeal) generally indicate that in order to be reasonable, the public agency should raise its offer somewhere between 10% and 25% and, correspondingly, the property owner must reduce its demand by the same corresponding 10% to 25% reduction. I stress, however, that the law does not require any type of percentage change, but only that the Court make a finding that the public agency's offer is unreasonable and that the property owner's demand is reasonable, all viewed in light of the jury verdict. Although these rules may be fairly clear on the[ir] face, the application of these rules varies from judge to judge and there is no way to predict just exactly what would happen." (Italics added.)

The Filbins refused to settle for less than the amount of the Gilman appraisal, and actually wanted to increase it to $9.1 million. They also wanted to get a new appraisal. Because this was contrary to Fitzgerald's advice, and because the Filbins refused to budge, Fitzgerald was discharged as their counsel. It was July 31, 2007, less than three weeks before trial.

The Filbins filed a declaration in which they advised the court that Fitzgerald had quit as their attorney. They also filed an application for a continuance. Fitzgerald responded with a letter advising the court: "In the later afternoon of July 31, 2007, defendant James P. Filbin discharged this office . . . . I will appear at the presently scheduled Trial Readiness Conference on Friday, August 3, 2007 . . . in order to enter the discharge on the record pursuant to Code of Civil procedure section 284."

On August 2, the County increased its offer to $1.8 million.*fn5

The following day, August 3, the date of the readiness conference, San Luis Obispo Judge Charles S. Crandall conducted an in camera hearing about Fitzgerald's discharge. Fitzgerald had filed his own declaration advising Judge Crandall that he had not quit but had been discharged, and was forwarding the case file to the Filbins' new counsel. Fitzgerald later testified how he came to speak at the readiness conference about his discharge: "Mr. Filbin advised the Court that his position was compromised and that I had sold him out. The Court asked me . . . if I wanted to respond to that, and I did respond to it."*fn6

The Filbins engaged new counsel, William Brewer, the lawyer Mr. Filbin told Judge Crandall on August 3 was already "studying the matter." Mr. Brewer promptly commissioned two additional appraisals, another by Gilman and one by a new appraiser, Thomas Diamond. Gilman's second effort, made with an "extraordinary assumption" concerning rezoning of the property, specified the parcel's value at $6.8 million. Operating with the same assumption, Diamond's number was $7.1 million. The Filbins' final settlement demand was $5.8 million.

Notwithstanding his indicated disinclination, Judge Crandall did grant the Filbins a continuance, but with the strict proviso that the case would be "frozen," with no information or discovery generated subsequent to Fitzgerald's discharge allowed at the trial, now set for October; and the Filbins would be bound by Fitzgerald's stipulation that the property was not improperly rezoned.

Trial was under way when, on October 19, 2007, the Filbins' accepted the County's offer of $2,561,215.51 plus accrued interest of $48,588.85. Allowing for the amount already withdrawn by the Filbins, and other claims, the net to the Filbins was $1,411,215.51.

The Malpractice Action

In August 2008, the Filbins commenced this action in San Mateo Superior Court against Fitzgerald with a complaint for "attorney malpractice" and "breach of fiduciary duty." Fitzgerald responded with a cross-complaint to recover the quantum ...

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