A lawyer often is faced with a circumstance where an applicable point of law
is murky at best, or undecided at worst, and he or she must make a decision as
to what strategy to employ. Under these circumstances, there is always the
risk that the rug may be pulled out from under such lawyers because an appellate
court clearly decides the point of law as binding precedence while their case is
still midcourse. Is it legal malpractice if the appellate court decided
the point of law adverse to the position that the lawyer had chosen to take,
thus ruining his or her strategy and leading to his or her client’s
defeat? Whether it is or isn’t depends upon whether a principle of law,
referred by some courts as the judgmental immunity doctrine, applies to
determine whether an attorney breached the standard of care under the
circumstances.
The judgmental immunity defense is not technically an immunity in that it is
not an exemption from liability. Instead, it addresses the factual issue
of whether an attorney had breached the standard of care. This principle
excuses an attorney for an unfavorable result “if there was an ‘honest error in
judgment concerning a doubtful or debatable point of law.’” Moreover, this
doctrine recognizes that an “attorney does not ordinarily guarantee the
soundness of his or her opinions.” As a result, an attorney is not liable
for every mistake made. Instead, “an attorney must show that there were
unsettled or debatable areas of the law that were the subject of the legal
advice rendered and this advice was based upon ‘reasonable research in a effort
to ascertain relevant legal principles and to make an informed decision as to a
course of conduct based upon an intelligent assessment of the problem.’”
“Because attorneys must ‘possess knowledge of those plain and elementary
principles of law which are commonly known by well informed attorneys’ … as part
of the analysis the attorney must demonstrate that he or she has taken steps to
‘discover those additional rules of law which, although not commonly known, may
readily be found by standard research techniques.’” Exercise of an
attorney’s best judgment is alone insufficient; he or she must exercise that
judgment consistent with the standard of care.
The doctrine was recently revisited in a California appellate decision,
Blanks v. Seyfarth Shaw, 171 Cal.App.4th 336, 89 Cal.Rptr.3d
710 (2009). In Blanks, a three-judge panel of the California Court
of Appeals considered an appeal from a verdict of $10 million in compensatory
damages and $15 million in punitive damages. The defendant lawyers were
accused of legal malpractice, breach of fiduciary duty and fraudulent
concealment arising out of their representation of the individual plaintiff, a
celebrity client, in a suit against his talent agent. The trial court had
precluded the defendants from offering evidence to the jury in the nature of
expert testimony and testimony by the defendant lawyer to establish that he had
made a reasoned choice when he allowed the statute of limitations to run on one
claim.
Under California law, talent agents must be licensed under The Talent
Agencies Act. If an agent is unlicensed, as was the situation in the
underlying case, then the artist has one year after payment of any fee to that
agent in which to petition the Labor Commissioner for disgorgement. The
loser can take an appeal de novo to the state trial court.
Discovery at the Commissioner level, however, is limited.
Instead of petitioning the Commissioner, the defendant lawyer filed suit on
behalf of his client in state court. In addition to asserting a cause of
action for disgorgement under the TAA, the complaint also alleged 16 other
causes of action, including under California’s Unfair Competition Law. The
defendant lawyer admitted that he knew that the Commissioner had exclusive
jurisdiction for TAA claims, but he justified bringing that claim in state court
so that he could depose the agent before any hearing on the TAA claim before the
Commissioner. His stated concern was that, if he petitioned the
Commissioner, the state action would be stayed until the Commissioner ruled on
the petition, thus precluding his ability to depose the agent before the
Commissioner’s hearing took place.
He later did petition the Commissioner, but more than one year after the last
of the fees had been paid to the agent. He admitted knowledge of the
applicable one-year statute. But he justified the lateness by arguing
application of the discovery rule exception because the action was commence
within one year of when the artist discovered that his agent was
unlicensed. The Commissioner rejected this argument in disallowing an
approximately $10.6 million disgorgement claim.
An evidentiary hearing occurred before trial in the malpractice action on
plaintiff’s motion in limine to preclude any evidence germane to the judgmental
immunity defense. There, the defendant lawyer offered the unrebutted
testimony of an expert lawyer. This expert stated that the defendant
lawyer had not breached the duty of care in believing that the discovery rule
applies, as it does under present Pennsylvania case law, where discovery occurs
before the original statutory period has expired. The trial court
granted the motion, finding that the defendant lawyer had been negligent as a
matter of law, notwithstanding that the plaintiff had not sought that relief,
but sought only to exclude any testimony relevant to the judgmental immunity
defense.
The appellate court reversed, finding that the defendant lawyer should have
been given the opportunity to offer why his decision “to delay filing a TAA
petition was based upon a rational, professional judgment, that would have been
made by other reputable attorneys … under the same or substantially similar
circumstances.”
Ironically, the defendant’s strategy did not work—he waited too long to
notice the agent’s deposition before he was forced to petition the Commissioner
when, in his view, time was running out. But if he had fully researched
the relevant legal issues and especially if he had fully informed his client
that he proposed a strategy involving murky legal territory, the attorney might
enjoy the benefit of this doctrine. But the key is full advance disclosure
to the client coupled with the client’s consent.
