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Shaffery v. Wilson7/28/2000
CERTIFIED FOR PUBLICATION
APPEAL from a judgment of the Superior Court of Los Angeles County, Marvin M. Lager, Judge.
Affirmed.
To the chorus of cases decreeing that a lawyer sued by a former client for professional negligence cannot seek indemnity from the lawyer subsequently retained by the client on the same matter, we add a variation on a familiar refrain: When a lawyer whose fees were paid by his client's insurer is sued by the insurer for malpractice, the lawyer may not seek indemnity from the lawyers retained by the insurer to "monitor" the same case.
FACTS
An employee sued his employer, J&J;Snack Foods Corp., for sexual harassment. J&J; as the insured under a $1 million employment practices liability policy issued by Lexington Insurance Company, had coverage for sexual harassment claims. J&J;retained John Shaffery (and others included in our subsequent references to Shaffery) to defend the harassment case and paid Shaffery's fees until the deductible amount of the Lexington policy was satisfied, then tendered defense of the case to Lexington. Lexington agreed to defend J&J;and entered an agreement with Shaffery for his continued representation of J&J; Lexington also hired the firm of Wilson, Elser, Moskowitz, Edelman & Dicker LLP (WEMED) to act as "monitoring counsel" for the harassment case (the fine points of the relationship between Lexington and WEMED have yet to be resolved).
There were pretrial settlement discussions. The employee demanded $400,000. The case did not settle (the fine points about the amount offered on behalf of J&J;have yet to be resolved) and the case went to trial (with Shaffery representing J&J;. The employee won (a jury gave him $5 million). J&J;fired Shaffery and retained a new lawyer who settled the harassment case for about $2.75 million. J&J;then sued Lexington, alleging a bad faith refusal to settle for less than the policy's $1 million limits. The parties settled, with Lexington paying about $2.9 million to J&J;
Lexington then sued Shaffery for legal malpractice, alleging that Shaffery had been negligent in the manner in which he defended the harassment case. Shaffery answered and later cross-complained against WEMED for indemnity. Shaffery alleges that, assuming his negligence contributed to J&J;s loss in the harassment case, so too did WEMED's negligence in failing to oversee the work done by Shaffery. WEMED demurred, contending that, for public policy reasons, Shaffery could not sue WEMED. Over Shaffery's opposition, the demurrer was sustained without leave to amend. Shaffery appeals.
DISCUSSION
Shaffery contends his claims against WEMED are not barred by the policy considerations barring a lawyer's lawsuit against predecessor counsel. We disagree.
A.
In Goodman v. Kennedy (1976) 18 Cal.3d 335, a lawyer who had represented a corporation was sued for malpractice by plaintiffs who had purchased stock in the corporation. Our Supreme Court held that the lawyer's duty of care to his client, the corporation, did not extend to the plaintiffs, who were not clients and who dealt at arm's length with the corporation. (Id. at pp. 342-345.) As the court put it, " o make an attorney liable for negligent confidential advice not only to the client who enters into a transaction in reliance upon the advice but also to the other parties to the transaction with whom the client deals at arm's length would inject undesirable self-protective reservations into the attorney's counseling role. The attorney's preoccupation . . . with the possibility of claims based on mere negligence (as distinct from
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