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November 20, 2012

Filbin v. Fitzgerald (2012) 211 Cal.App.4th 154

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The First District holds that absent proof an underlying opponent would have settled on more favorable terms than the client ultimately accepted, a plaintiff cannot establish the element of causation of damages in a “settle and sue” malpractice claim .

James and Carolyn Filbin owned property where they stockpiled junk.  After a lengthy battle with County authorities, the County exercised its power of eminent domain to acquire the property.  The Filbins retained Herman Fitzgerald, an attorney with considerable experience in condemnation proceedings.  Less than one month prior to trial, the Filbins were required to respond to the County’s mandatory C.C.P § 1250.410 settlement offer.  Fitzgerald incorrectly advised the Filbins they were required to demand an amount less than their appraiser’s valuation.  The Filbins refused and discharged Fitzgerald less than three weeks prior to trial.  The Filbins claimed that Fitzgerald quit and sought a continuance.  Fitzgerald filed a contrary declaration, appeared in court on a motion to withdraw, and discussed the dispute leading to the discharge with the judge.

The Filbins engaged new counsel, who obtained new appraisals.  The underlying trial judge reluctantly granted a trial continuance.  During the underlying trial, the Filbins accepted the County’s offer, which was considerably less than any of their appraisals.

The Filbins sued Fitzgerald for malpractice and breach of fiduciary duty.  The Filbins claimed that the case was not properly prepared; Fitzgerald abandoned them on the eve of trial; and compromised the settlement value of their case.                        

The trial court found that Filbin was a difficult client but that Fitzgerald misstated the law in advising the Filbins that they were required to present a settlement demand lower than the appraisal of their valuation expert.  This led to a breakdown in the attorney-client relationship and Fitzgerald’s appearance before the underlying trial judge on an unnecessary motion to withdraw.  Fitzgerald misstated the law to the underlying trial judge who then believed Mr.  Filbin sought to deviate from the requirements of law.

The court found that Fitzgerald’s standard of care breaches were a legal cause of damage.  Fitzgerald’s cases typically resolved between 75% and 80% of his experts’ appraisal.  Although Filbin’s conduct rendered his case less valuable, he nonetheless would have received 70% of his expert’s original appraisal.

The Court of Appeal noted that legal malpractice requires a plaintiff prove duty, breach of the standard of care, proximate causal connection between the breach and the resulting injury; and actual loss or damage.

To prove causation of damage, the damage must follow the conduct to a legal certainty.  Proof of damages to a legal certainty is difficult to meet in any case and particularly so in “settle and sue” cases.  The amount of a compromise is often an educated guess about the amount that can be recovered at trial and what the opponent is willing to pay or accept.  The goal of a lawyer is to achieve a “reasonable” settlement, a concept that involves a wide spectrum of considerations and broad discretion.  Liability cannot be predicated on speculation that the attorney or another attorney could have secured a more advantageous settlement.  A client must establish the settlement fell outside the standard of care; the parameters of a reasonable settlement; and that the underlying parties would have agreed to and paid the “lost” settlement.

While the court would not flatly prohibit liability against former counsel for settlements, it noted the uncertainties and imponderables of settlement often preclude a client from establishing causation and damages to a legal certainty.

Fitzgerald fell below the standard of care when he mis-advised the Filbins about the amount of their settlement demand.  Although Fitzgerald’s motion to withdraw was unnecessary, the trial court did not find it was below the standard of care and, given the proximity to the trial date, it was probable the court would have wanted an explanation.  The record of the underlying trial court proceedings did not support the trial court’s conclusion that the underlying judge either accepted Fitzgerald’s incorrect statement of law as fact or that the judge believed Mr.  Filbin sought to deviate from the requirements of law.  Moreover, courts can absorb negative information about a litigant without developing bias.

Crucially, nothing Fitzgerald did, or failed to do, caused the Filbins to do anything to their detriment.  The Filbins did not follow Fitzgerald’s mistaken advice about the amount of their settlement demand.  In fact, they raised their demand over the amount of their appraiser’s valuation.  They secured new counsel and a trial continuance.  When they considered settlement months later, no past decision by Fitzgerald affected them; nothing prevented their new counsel from giving them impartial advice; and nothing precluded them from proceeding to trial.  The decision to settle was theirs alone, made with the assistance of new counsel, with no input from Fitzgerald.

The Filbins argued that Fitzgerald’s past successes established the value of the settlement they should have received.  However, they presented no proof that the County would have paid a dollar more than it did, or why the Filbins’ new counsel could not secure the higher settlement.  Thus, as a matter of law, there was no causal nexus between Fitzgerald’s representation and the Filbins’ subsequent decision to settle.

Comment: Under California law, one species of “settle and sue” cases require proof that the attorney’s conduct was below the standard of care resulting in a settlement far beyond the parameters of a reasonable settlement.  Further, the plaintiff must prove that the underlying opponent would have agreed to and paid or accepted a more favorable settlement, evidence usually impossible to acquire.  Alternatively, Clients must prove that the settlement was below the standard of care and that a result at trial would have been significantly more favorable than the settlement achieved.  Thus, while “settle and sue” cases are theoretically provable, the considerable obstacles render most claims untenable.



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