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  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
  • Smith VS Hill Unlimited Civil document preview
						
                                

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- © © iungenny WILLIAM DeGARMO, ESQ. SB#60950 McCANN & LOGUE 1660 Hamilton Avenue, Suite 203 San Jose, CA 95125 Telephone No.: (408) 269-8787 ei LED Facsimile No.: (408) 269-2321 ALAMEDA COUNTY Attorney for Plaintiff, MICHAEL SMITH | SEP 2 6 2005 sExec.Off/Cletk By Ct faciy Va SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF ALAMEDA 10 MICHAEL SMITH, ) CASENO.: RG04 163436 11 ) Plaintiff, ) 12 v. ) MEMORANDUM OF POINTS ) AND AUTHORITIES IN OPPOSITION 13 JOHN E. HILL, MICHAEL GUTA, ) TO DEFENDANT’S MOTION FOR LAW OFFICES OF JOHN E. HILL, ). SUMMARY JUDGMENT 14 and DOES 1 to 100, ) . ) Date: October 3, 2005 15 Defendants. ) Time: 2:00 p.m. ) Department: 31 16 ) Judge: Hon. Steven A. Brick 17 BACKGROUND 18 This case arises out of the representation of the Plaintiff, Michael Smith, by the Law 19 Offices of John Hill, John Hill and Michael Guta (hereinafter collectively “Defendants”) in an action 20 for breach of contract and breach of fiduciary duty against Plaintiff's former employer. Plaintiff had 21 been one of a small group of shareholders who had entered into an agreement by which each would 22 retire at age sixty two selling their holdings to the company. Under this agreement Plaintiff would 23 have become the majority shareholder intime. The other shareholders voted to amend the agreement 24 in a way which would have prevented Plaintiff from gaining control of the company. Plaintiff 25 rejected the amendment and resigned from the company. 26 Upon Plaintiff's resignation, the defendants in the underlying case began making monthly 27 PAGE 1 28 NOTICE OF UNAVAILABILITY OF COUNSEL installment payments in amounts which were due under the shareholder agreement. The amendment to the shareholder agreement did not effect the buyout provision. Plaintiff received these checks and sent them to these Defendants upon their advise. These Defendants returned the checks uncashed. These Defendants made no effort to protect those payments, The defendants in the underlying action then established a bank account (hereinafter the “Comerica Account”) naming Plaintiff as beneficiary. Over the course of the litigation this account rose to some $250,000.00. Despite the fact that counsel for the underlying defendants told these Defendants that there were “no strings attached” to this account or those funds these Defendants continued to advise Plaintiff not to take the funds. At some point during the litigation the company making the payments experienced financial 10 difficulty and seized the funds in the Comerica Account. 11 When defendants drafted the complaint they chose to bring the action against those whom 12 Plaintiff felt were responsible as well astwo affiliated companies and a shareholder who had actually 13 voted against the amendment. When Plaintiff questioned this he was advised to “listen to his 14 lawyers”. When discovery revealed no evidence of liability on the part of the additional defendants 15 these Defendants stillrefused to dismiss them. The underlying Defendants were able to obtain 16 summary judgment. These Defendants appealed the summary judgments and losteach (in the appeal 17 regarding the corporate defendants these Defendants failed to file a proper appendix). These 18 judgments resulted in costs and attorney’s fees charged against Plaintiff. The requested attorney’s 19 fees were $350,000.00. The court withheld ruling on the amount of allowable attorne’s fees until the 20 conclusion of trial. 21 During their representation these Defendants conducted no paper discovery. They made no 22 requests for documents, served no interrogatories and obtained virtually no records. 23 Plaintiff became concerned about the quality of his representation and sought different 24 counsel. New counsel took the case one month before trial. When the new counsel discovered that 25 the economic expert retained by these Defendants had not been paid and that no report had been 26 prepared he was able to obtain a continuance and permission of the court to reopen discovery for the 27 PAGE 2 28 NOTICE OF UNAVAILABILITY OF COUNSEL limited purpose of retaining an economist. Ff Confronted at trialby the lack of financial records from the underlying defendants Plaintiff NO chose to settle the case for $250,000.00 plus waiver of the $350,000.00 in attorney’s fees. OQ In this action Plaintiff seeks $950,000.00 in damages. This amount represents $1.2 million settlement offer which was refused less the $250,000.00 which was recovered. DEFENDANTS’ MOTION DOES NOT ADDRESS ALL THE ISSUES IN THE FIRST CAUSE OF ACTION Plaintiff contends, in the First Cause of Action, that Defendants brought parties into the 10 action when there was no evidence to support their inclusion (Complaint para. 21). While this may 11 have been tactically acceptable at the time of filing itceased to be so after discovery. Plaintiff was 12 concerned from the beginning about the inclusion of these parties (Separate Statement of Undisputed 13 Facts Nos. 34(a) and 34©)). The failure to timely dismiss these parties caused Plaintiff to be assessed 14 attorney’s fees in the amount of $350,000.00. The fees resulted from the defendants in the underlying 15 case prevailing on two separate motions for summary judgment and then prevailing on the appeals 16 of each motion. These Defendants so negligently handled the second appeal that it was dismissed 17 out of hand for failure to file a proper appendix (DeGarmo Declaration Ex. 1). 18 As for rejecting the settlement offer of over $1,200,000.00 this would have been a 19 reasonable strategy if Defendants had actually prepared aproper case. However, as late as one month 20 before trial Defendants had stillnot paid an expert Economist nor did they have a report from an 21 Economist (DeGarmo Declaration Exhibit 2). This was a seven to eight figure case whose value 22 depended entirely on the value of the company at the time of Plaintiffs resignation and the projected 23 value at the time Plaintiff would have become the majority stockholder. Additionally these 24 Defendants had done no requests for documents. As a result of Defendants failure to request 25 documents the Economist hired by new trial counsel had no way of determining with any degree of 26 certainty either of the values so critical to proving damages (DeGarmo Second Declaration). 27 PAGE 3 28 NOTICE OF UNAVAILABILITY OF COUNSEL bs DEFENDANTS MISSTATE THE SECOND ISSUE Defendants’ admit that they received sizable checks from the underlying defendants (Separate Statement of Undisputed Facts No. 39). These checks were drawn in favor of Plaintiff. The checks were mailed to plaintiff who sought advise from Defendants regarding the disposition of these checks. Defendants advised Plaintiff not to cash the checks (Separate Statement of Undisputed Facts No. 39) Plaintiff sent the checks to Defendants with the full expectation that, as his lawyers they would protect the funds. In fact, the Defendants made no attempt to protect the funds by depositing them in their trust account, rather, they simply returned the checks to the defendants in the underlying case (Separate Statement of Undisputed Facts No. 40). The checks were placed in an 10 account owned by the defendants in the underlying action, the “Comerica Account”. The funds in 11 this account were removed and lost prior to the ultimate settlement. Plaintiff has retained Jonathon 12 Arens, a qualified expert in legal malpractice who isprepared to testify that the failure of Defendants 13 to take steps to protect those funds which would amount to over $250,000.00 was below the 14 standard of care for an attorney in this area. 15 THE INTERNAL REVENUE DEMAND IS STILL IN FORCE 16 Defendants attempt to avoid responsibility for the unpaid assessment of the Internal 17 Revenue Service by asserting that Plaintiff has not yet had to pay.. While itis true that Plaintiff is 18 stilldisputing the assessment the IRS is stillattempting to collect the taxes, interest and penalties. 19. The deposition testimony of Ellie Smith (Plaintiff's wife) is that she contacted Defendant Guta 20 and was given tax advise (Separate Statement of Undisputed Facts No. 46). Defendants dispute 21 that Mr. Guta actually gave tax advise (Defendants’ Memorandum of Ps and As pg 10 line 24). 22 There are only three possible outcomes to the IRS assessment. First, that the plaintiff has to pay. 23 Second that the Plaintiff continues to dispute the claim through his tax accountant (and perhaps 24 ultimately a tax attorney) and prevail. In which case Plaintiff ismerely damaged the cost of 25 professional representation. Third, that Plaintiff continues to dispute the claim and loses. In this case 26 Plaintiff is damaged the cost of representation as well as the taxes, interest and penalties. 27 PAGE 4 28 NOTICE OF UNAVAILABILITY OF COUNSEL 7 That Defendants dispute that Mr. Guta gave Plaintiff tax advise (through Ellie Smith who does the taxes) is a triable issue of material fact for a jury. The IRS assessment and damages flowing therefrom is also a triable issue of material fact for ajury. THE COST ORDER AND ATTORNEY’S FEES ARE PROVABLE DAMAGES The prevailing party in the underlying litigation was entitled to recover attorney’s fees and costs. Three of the six named defendants were successful in motions for summary judgment The court awarded costs. Counsel for those defendants then requested $350,000.00 inattorney’s fees. This amount was disputed and the court withheld ruling on the amount until after trial as the 10 prevailing party at trialmight receive an offset. The $350,000.00 demand was stillcurrent at the time 11 of settlement and constituted apart of that settlement. These Defendants argue that the court would 12 never have allowed the full $350,000.00. They argue that the amount is“speculative”. This is untrue. —————— 13 The $350,000.00 was used as an actual offset to damages in the final settlement. Defendants argue 14 that the actual award of costs was quite small. The only award was in favor of Lyle Kelsey. As Mr. 15 Kelsey represented only one sixth of the defendants the court reduced the cost bill by five sixths. 16 The court had not yet ruled on the two corporate defendants who also prevailed. Using the same 17 logic these defendants represented one third of the total. Combined the successful defendants 18 represented half ofthe total.Even if you apply the courts cost logic to the fee demand the total is still 19 $1 75,000.00. 20 Defendants are in error when they say these damages are speculative. Damages do not 21 have to be certain to be recoverable. Defendants confuse speculative damages with damages which 22 are merely difficult to prove. Ifdamages are ascertainable, they are recoverable regardless of the 23 difficulty of proving them (Brown v. Critchfield (1980) 100 Cal App3d 858, 872 161 Cal Reptr 544). 24 Even an imprecise estimate of damages issufficient to support a claim for legal malpractice 25 (Piscitelli v. Friendenberg (Cal App 4 dist 2001) 87 Cal. App.4th 1514, 1518 105 Cal Rptr 2" 88) 26 27 PAGE 5 28 NOTICE OF UNAVAILABILITY OF COUNSEL .' : e @ SMITH CAN EASILY DEMONSTRATE A MORE FAVORABLE RESULT BUT FOR DEFENDANT’ NEGLIGENCE At the time Plaintiff retained Defendants he had a settlement offer of over $1,200,000.00. This was lost. The defendants in the underlying action put $250,000.00 in an account for the benefit of Plaintiff. These Defendants failed to protect those funds and they were lost. These Defendants pursued parties without evidence to support their action. The resulting summary judgments and lost appeals resulted in $350,000.00 in attorney’s fees. The failure of Defendants to request corporate records crippled successor trial counsel (Second Declaration of William 10 DeGarmo). The failure of these Defendants to even have an economic report on the eve of trial or 11 to prepare a proper appendix on appeal shows their cavalier attitude toward Plaintiff's case. 12 13 THERE ARE TRIABLE ISSUES OF FACT 14 California Code of Civil Procedure Section 437c provides that asummary 15 |judgment motion may only be granted where there are no triable issues of fact. In weighing the 16 question the court must resolve all doubts as to whether there is a triable issue of fact in favor of the 17 party opposing the motion (McIntosh v. Mills App Dist 2 2004) 117 Cal. App. 4" 333, 18 17 Cal Rptr 66). In this case there are numerous triable issues of fact. Was it negligent for 19 Defendants to fail to protect the $250,000.00 in the Comerica account? Was ita breach of fiduciary 20 i duty? Plaintiff isprepared to offer expert testimony that itwas. Was itnegligent for Defendants to 21 fail to dismiss defendants against whom they had no evidence? In light of (Zamos v. Stroud (2004) 22 32 Cal4th 958 wherein the Supreme Court stated: 23 “Malicious prosecution, we hold includes continuing to prosecute 24 a lawsuit discovered to lack probable cause.” 25 It isat least negligent if not worse. Was itnegligent to file an appeal without a proper appendix? 26 Were the damages flowing from the summary judgments and failed appeals a result of the negligence 27 PAGE 6 28 NOTICE OF UNAVAILABILITY OF COUNSEL a .' 6 @ . of Defendants? Each of these isa triable issue of fact for a jury to decide. Further, Defendants argue that the $350,000.00 would somehow become another amount or gone away (Defendant’s Ps and As pg 15 lines 14-18). Plaintiffs will offer testimony of Kevin McLean, trial counsel in the underlying case, that the $350,000.00 was included in the settlement at full value. The calculation of these damages is a matter for testimony and the discretion of the jury. In short there anumerous triable issues of fact for a jury to decide. CONCLUSION As cited above a summary judgment motion can only be granted where there are no triable issues of fact. As this case demonstrates numerous triable issues of fact, the motion 10 should be denied. 11 12 13 Dated: September 2B, 2005 AGE 14 tfDeGARMO, — ESQ. Attorney for Plaintiff, 15 MICHAEL SMITH 16 17 18 19 20 21 22 23 24 25 26 27 PAGE 7 28 NOTICE OF UNAVAILABILITY OF COUNSEL