Preview
MAYALL HURLEY, P.C.
WILLIAM J.GORHAM III
CA State Bar No. 151773
NICHOLAS F. SCARDIGLI
FEB 24 2020
CA State Bar No. 249947
2453 Grand Canal Boulevard, Second Floor
Stockton, California 95207-8253
£&
JAKE Ci iAT TE RS
Telephone (209) 477-3833 EXECUTIVE OFFICER @ C
- a ve LER
Facsimile (209) 473-4818
By: C. Vallan-Brown, Deputy
Nn
Attorneys for Bankruptcy Trustee ge
NH
Kimberly J. Husted
|
SUPERIOR COURT OF CALIFORNIA, COUNTY OF PLACER
10
JANET AND RICHARD BUHLER, AND Case No. SCV0036850
11 CHAPTER 7 BANKRUPTCY TRUSTEE
KIMBERLY J. HUSTED (Real Party in
12 Interest), PLAINTIFF BANKRUPTCY TRUSTEE
KIMBERLY HUSTED’S MANDATORY
13 Plaintiffs, SETTLEMENT CONFERENCE
STATEMENT
14
vs. Date: March 6, 2020
15 Time: 8:30 a.m.
THE FRANK LAW GROUP, P.C.; BRETT E. Trial: March 23, 2020
16 ROSENTHAL; BORTON PETRINI, LLP;
BRADLEY A. POST; and DOES 1-20,
17 inclusive,
18
Defendants.
19
20 PARTIES AND REPRESENTATION
21 Plaintiff, Bankruptcy Trustee Kimberly Husted, is represented by William J. Gorham, III
22 Esq. of Mayall Hurley, PC, of Stockton, California.
23 Defendants Frank Law Group and Brett Rosenthal are represented by James A. Murphy,
24 Esq., and Kristin Iversen, Esq. of Murphy, Pearson, Bradley & Feeney, of San Francisco,
25 California.
26 FACTS
27 This legal malpractice action against Frank Law Group, P.C., and Brett Rosenthal
28 (“Defendants”) is brought by Bankruptcy Trustee Kimberly Husted (“Trustee”) as an asset of a
PlaintiffBK Trustee Husted’s Mandatory Settlement Conference Statement
Page 1of 6
Bankruptcy Case by Defendants’ former clients, Richard and Janet Buhler (the “Buhlers”). The
claims against Defendants arise out their representation of the Buhlers as “personal counsel,” to
protect their assets against liability in excess of their auto insurance in connection with an
automobile accident on March 17, 2011, which caused catastrophic injuries Mark Jones, and
consortium injuries to Melanie Jones who were plaintiffs in the case Jones et al v. Buhler et al,
Amador County Superior Court Action Number 11-CV-7618 (“Underlying Action.’’)
The Underlying Action ended with a judgment for $1.5 million against both Buhlers,
driver Janet Buhler and passenger Richard Buhler. As hard as it is to fathom, Defendants
requested Richard be added as a defendant based on their indefensible plan that adding Richard
10 would somehow trigger the Buhlers’ homeowners insurance coverage. Defendant Rosenthal, who
11 is admittedly not a coverage lawyer, devised the plan, and did so without even first reviewing the
12 applicable homeowners policy language. Defendant Rosenthal’s apparent belief was that since
13 Richard Buhler had uttered that it“looked like” a vehicle at the subject intersection wanted Janet to
14 proceed into the intersection, homeowners’ coverage would apply. Had Defendants reviewed the
15 policy, or consulted a coverage lawyer (both of which are part of the standard of care), they
16 certainly would, or at least should, have understood that the homeowners policy issued by AMCO,
17 like all such policies, specifically and definitively excluded coverage for bodily injury or damage
18 arising out of a motor vehicle accident. Predictably, AMCO denied coverage, and Richard Buhler
19 became a Defendant.
20 It became worse for Richard as Defendants later advised the Buhlers that, “without
21 question”, they would be better off stipulating to damages of $1.5 million, waiving their right to a
ze jury trial in favor of a court trial,and making Richard and Janet jointly liable in the event either
2a was held liable — in lieu of a jury trial on liability and damages. They made this recommendation
24 knowing that Janet was certainly liable, and that $1.5 million dollars would financially wipe out the
25 Buhlers. Because of this latter fact, there simply was nothing “better off’ about the stipulation,
26 particularly for Richard, who was now on the hook for driver Janet’s liability and, but for
oa Defendants’ negligence, would not have been a party to the Underlying Action.
28 What happened to Richard Buhler is not the only suit Defendants walked their clients into.
PlaintiffBK Trustee Husted’s Mandatory Settlement Conference Statement
Page 2 of 6
The Buhlers request for legal service from Defendants, as evidenced by the intake sheet they filled
out at Defendants’ office, was for “protecting assets.” The Buhlers had their home and 3 rental
properties, and their insurer had advised them to seek personal counsel to assist them as to their
liability in excess of their insurance. Defendants signed them up, and oversaw the Buhlers’
borrowing against their rentals, and gifting their adult children large sums of money, as well as
selling one of their homes to their adult son. Defendants’ incorrect advice was that this would be
“ok” ifthey had a gifting history and the sale was for market value. That advice ignores that the
first “badge of fraud” under the Uniform Fraudulent Transfer Act (“UFTA”) is transactions with
“4nsiders,” including family. Cal. Civ. Code § 3439.04(b)(1). Defendants then advised the Buhlers
10 that were going to subject them to an examination of assets in the Underlying Action, after Janet
11 Buhler’s deposition (something they were under no legal obligation to do). The Joneses’ attorney
12 was incensed by learning of the transfers and demanded, on threat of filing an UFTA action, that
13 the Buhlers provide records of the transfers. Again based on advice of Defendants, the Buhlers did
14 so and the UFTA suit against the Buhlers followed in short order. As Defendant Rosenthal put it in
15 email, the “shell game” soured any opportunity for settlement. Curiously, Defendant Rosenthal
16 does not see his role in the “shell game,” and now claims the asset moves were made against his
17 advice (albeit there is no writing whatsoever in his file that corroborates his position). Moreover,
18 his friend, and fellow attorney, Larry Cox, Esq. testified that Defendant Rosenthal admitted to him
19 that he was behind the transfers, to which Mr. Cox replied to Defendant Rosenthal, “I wish you had
20 not done that.”
21 In addition to souring the opportunity for settlement through the asset transactions,
22 Defendants failed to take advantage of opportunities to achieve settlement. Most notable are the
23 failure to attempt to purchase reimbursement/subrogation rights held by Kaiser, and the failure to
24 attempt to negotiate an assignment of rights in exchange for a covenant not to execute at a time
25 when the Joneses’ counsel raised his belief that the Buhlers’ carrier had not acted in good faith.
26 Defendants have contended that no such opportunities existed. However, as the Joneses were suing
27 the Buhlers’ auto insurer (Ameriprise) through a declaratory relief action and as a judgment
28 creditor under Insurance Code § 11580(b)(2), the Buhlers consulted with Dean F. Cooper, Esq.,
PlaintiffBK Trustee Husted’s Mandatory Settlement Conference Statement
Page 3 of 6
who obtained their legal files, and authored a lengthy and well documented letter on April 22,
2015, setting forth numerous mistakes he believed had been made. From this, Mr. Cooper was able
to negotiate a deal that actually provided for the Buhlers to stipulate to set aside the judgment as to
Janet Buhler, and permit the Joneses to ask the trial court to hear evidence and find the actual
damages suffered by the Joneses. The Joneses contend that the $1.5 million dollar agreement was
reached on false representations. The $1.5 million award against Richard Buhler was left
DD
undisturbed. The trialcourt then set the award against
NY
Janet Buhler at $4.9 million. The point is
that there was an opportunity to negotiate
Oo
that was missed by Defendants.
There is more, including
So
the fact that none of the conflicts of interest along the way were
10 spotted or resolved, but for purposes of liability,it is suggested that this presents enough risk of an
11 adverse verdict against Defendants for them to negotiate towards resolution short of trial.
12 With respect to damages, Defendants cling to the notion that the judgment is not an actual
13 damage caused by their conduct. What Defendants really are trying to accomplish is to look past
14 the judgment to the issue of collectability. For reasons set forth below, Trustee Husted believes
15 that any attempt at arguing collectability would be improper as a matter of law.
16 FACTUAL STIPULATIONS
17 None at this time.
18 CONTESTED ISSUES OF FACT/DAMAGES
19 1. Whether Defendants’ provided asset protection advice that led to the transfers of
20 property by the Buhlers to their adult children?
21 2. Did Defendants conduct fall below the applicable standard of care?
22 3. Were the judgments against Richard and/or Janet Buhler caused by Defendants failure
23 to act within the standard of care?
24 4. Whether, if itis proven that the negligence of Defendants caused the judgments against
25 Richard and Janet Buhler, the damages are the judgments?
26 CONTESTED LEGAL ISSUES
27 As referenced, Plaintiff BK Trustee Husted submits that the critical legal issue is whether
28 the Defendants will be permitted to “look beyond” the judgments to the issue of collectability.
PlaintiffBK Trustee Husted’s Mandatory Settlement Conference Statement
Page 4 of 6
Plaintiff believe that the judgments are actual damages in and of themselves, and any attempt to
ask the jury to ignore, disregard, or monetize them at less than the stated value would be legally
improper.
The malpractice cases that discuss “collectability” are cases in which a lawyer commits
malpractice and his or her plaintiff client’s case. In such instances, the plaintiff would receive a
windfall if the malpractice damages were damages that could not have been paid had the
malpractice not occurred. Indeed, but for causation fails in such instances. But the courts are
careful to limit the holdings to like cases:
However, the element of collectability does not apply to every legal malpractice
action. An attorney’s liability “as in other negligence cases, is for all damages
10 directly and proximately caused by his negligence (citation omitted). It is only
where the alleged malpractice consists of mishandling a client’s claim that the
11
plaintiff must show proper prosecution of the matter would have resulted in a
12 favorable judgment and collection thereof. (Emphasis added.) DiPalma v.
Seldman, (1994) 27 Cal.App.4" 1499, 1507.
13
14 In Communale v. Traders & General Ins. Co., (1958) 50 Cal.3d 654, 660-661, the Supreme
15 Court held that insurance carriers are responsible for judgments in excess of the policy limits when
16 they breach the implied covenant of good faith and fair dealing — even though such damages were
17 in excess of the what was available in the firstinstance. The Supreme Court held: “The allowance
18 of a recovery in excess of the policy limits will not give the insured any additional advantage but
19 merely place him in the same position as if the contract had been performed.” Jd. at 661. The same
20 principle should apply to a lawyer’s whose malpractice causing a judgment to a client that he or
21 she would not otherwise have — the only way to right the wrong is to eliminate the judgment —
22 which is done by payment of the judgment.
23 HIGHEST OFFER AND LOWEST DEMAND
24 Defendants have a declining asset (by defense fees and costs) insurance policy, with a
25 starting limit of $1,000,000.00. At mediation, and most recently in 2020, Defendants refused to
26 disclose what remains on the policy. Without knowing the exact number of the demand, the lowest
27 demand by Plaintiff was a December 19, 2019 demand for the remaining policy limits.
28 Defendants highest offer was for $100,001.00 on December 30, 2019.
PlaintiffBK Trustee Husted’s Mandatory Settlement Conference Statement
Page 5 of 6
INSURANCE LIMITS
As said, because Defendants refuse to disclose the remaining limits, Plaintiff does not know
what, if anything, is leftoff of the insurance policy.
DISPUTE RESOLUTION
The parties mediated before retired Judge Richard Gilbert. Through that process, Plaintiff
settled with Defendants Borton Petrini and Bradley Post, but were unable to make progress towards
settlement with remaining Defendants Frank Law Group and Brett Rosenthal.
PROBLEMS PREVENTING SETTLEMENT
Nothing known to Plaintiff other than the usual disagreements regarding risk and value.
10
11 DATED: February 21, 2020 MAYALL HURLEY, A.P.C.
3
13
WILLIAM J.
GORHAM III,Attorneys for
14 Plaintiff Bankruptcy Trustee Kimberly J. Husted
15
16
17
18
19
20
21
22
23
24
25
26
27
28
PlaintiffBK Trustee Husted’s Mandatory Settlement Conference Statement
Page 6of 6
~ ~
BK Trustee Husted v. The Frank Law Group, P.C., et al.
Placer County Superior Court Case No.: SCV0036850
PROOF OF SERVICE
I,the undersigned, certify and declare as follows:
I am over the age of eighteen years and not aparty tothis action. My business address is 2453
Grand Canal Boulevard, Stockton, California 95207 that is located in the county where the mailing and/or
delivery below took place.
On February 21, 2020, Iserved the following document:
PLAINTIFF BANKRUPTCY TRUSTEE KIMBERLY HUSTED’S MANDATORY
ND
SETTLEMENT CONFERENCE STATEMENT
addressed to:
CO
James A. Murphy Heather L. Rosing
Kristin L. Iversen Earll M. Pott
oO
MURPHY, PEARSON, BRADLEY & David M. Majchrzak
10 FEENEY KLINEDINST PC
88 Kearny Street, 10th Floor 501 West Broadway, Suite 600
11 San Francisco, CA 94108-5530 San Diego, CA 92101
12 Attorneys for Defendants Attorneys for Defendants
The Frank Law Group, P.C. and Rosenthal Borton Petrini, LLP and Post
13
1 BUSINESS PRACTICE TO ENTRUST DEPOSIT TO OTHERS: I am readily familiar with the
14 business practice atmy place of business for collection and processing of correspondence for mailing
with the United States Postal Service. Correspondence so collected and processed is deposited with
15 the United States Postal Service that same day in the ordinary course of business. On the date
specified below, at my place of business at Stockton, California a copy of the document described
16 above was placed for deposit in the United States Postal Service in a sealed envelope, with postage
fully prepaid addressed to the individuals and/or entities mentioned above; and that envelope was
17 placed for collection and mailing on that date following ordinary business practice.
18 O BY EXPRESS SERVICE CARRIER: On the date specified below, I directed to be deposited in a
box or other facility regularly maintained by Federal Express or delivered to a courier or driver
19 authorized by said express service carrier to receive documents, a copy of the document mentioned
above, in an envelope designed by the said express service carrier,with delivery fees paid or provided
20 for, addressed to the individuals and/or entities mentioned above.
21
1 BY FAX TRANSMISSION: On the date specified below, I directed to be transmitted by facsimile
22 transmission machine the documents described above. The above-described transmission was reported
as complete without error by a transmission report issued by the facsimile transmission machine upon
23 which the said transmission was made immediately following the transmission.
24 I certify and declare under penalty of perjury under the laws of the State of California that the
foregoing is true and correct.
25
Executed on February 21, 2020, atStockton, California.
26
27
28
Proof of Service - 1