Right for Lawyers to Sue Each Other at Issue in Case
By AMANDA BRONSTAD
A case born out of a Hollywood divorce and now pending before the California Supreme Court could determine whether accountants and lawyers have the right to sue one another after a deal goes awry.
The outcome of the L.A. case, which has yet to be reviewed by the court, hinges on the decision in a separate case before the court that completed oral arguments April 3. That case, in which a final decision is due next month, is expected to resolve whether lawyers can sue their co-counsel.
Should the court decide in the first case that co-counsel can sue each other, it would pave the way for the ruling to be extended to accountants who are retained by law firms for advice and professional opinions.
“Can you blame another lawyer who worked on the same transaction for the loss the client suffered?” said Harry Chamberlain, head of the appellate practice at Stephan Oringher Richman & Theodora PC in Century City.
“If I replace ‘co-counsel’ with ‘accountant,’ that’s not a big step. The court believes some of the threshold issues in lawyer v. lawyer will impact accountants,” said Chamberlain, who represents the California Society of CPAs in a friend of the court filing before the Supreme Court in the co-counsel case.
The case arising from the divorce arose from the split of Deborah Pratt and Donald P. Bellisario, the writer, producer and director of television shows “Magnum PI,” “Airwolf” and “Quantum Leap.”
After the 1994 divorce, which was handled by law firm Wasser Rosenson & Carter, Pratt discovered a number of Bellisario’s pension plans, retirement accounts and TV licensing fees had been excluded from the settlement. She sued Wasser for malpractice, as well as Gursey Schneider & Co. LLP, the accounting firm that Wasser retained to review Bellisario’s financial records. Chamberlain is also representing Gursey Schneider.
Wasser won its case; Gursey Schneider did not. Gursey Schneider filed suit against Wasser in 1999 to recover the $2.5 million it paid to Pratt.
The Los Angeles Superior Court threw out the case, but an appellate court reversed the ruling, claiming Gursey Schneider has a right to sue Wasser.
The Supreme Court’s decision could end 25 years of confusion as to whether California lawyers and other professionals, such as accountants, can sue one another in disputes arising from joint representation.
Twenty-five years ago, the California courts created a doctrine called the “successor counsel” limitation. The doctrine expressly said that a lawyer who was sued for malpractice and replaced at the client’s request cannot pursue the lawyer who replaced him to assume a share of the malpractice judgment.
That doctrine has been expanded over the years to protect attorneys from suits filed by their co-counsel. Because of that, most attorneys have been under the impression that they can’t sue their co-counsel or expert professionals.
As a result, cases don’t come up very often. While no one keeps statistics on such lawsuits, some lawyers estimate only a handful have taken place during the past 10 years. Until now, none have reached the California Supreme Court.
Legal or not, some attorneys haven’t sued their co-counsel because they believe they shouldn’t.
“Usually the defendants will attempt to present a united defense,” said Bruce Friedman, a professional liability attorney at Alschuler Grossman Stein & Kahan LLP. “Once the defendants begin to point fingers at each other, the plaintiff will have allies. Even in Enron, I can’t think of any of the law firms or accounting firm suing each other. I think the defendants in those cases want to preserve their right to do that in the future, but they don’t want to point the finger at anybody else right now.”
These claims become much more likely, however, after the case is over, Friedman said.
They are also more likely in cases that involve a number of experts or other attorneys, such as divorces of wealthy individuals, corporate deals or lawsuits.
“You could see a number of cases where lawyers and experts work together, a whole slew of cases that experts or other professionals are involved in,” said Cheryl Orr, a Los Angeles partner at Musick Peeler & Garrett LLP, who represents the Wasser law firm in the Gursey Schneider case.
“If you have a rule that allows people to get around (the “successor counsel” limitation), you will see an increase in lawsuits.”
Lawyers often seek out co-counsel and the services of accountants and other professionals, particularly in complex or highly specialized litigation.
Two of the three cases now before the Supreme Court involve divorces.
“Family law lawyers have to use experts,” said Steven Mindel, a certified family law specialist at Feinberg Mindel & Kline LLP in West L.A. “They need them to appraise properties, analyze tax returns and prepare tax returns. As a result, if the family law lawyer is held responsible for one of the accountants or experts they hire, and has no recourse to sue the expert.”
Those in favor of allowing lawyers to sue one another said it protects one lawyer from being responsible for the acts of another professional. They want the Supreme Court to rule on a case by case basis, leaving open the possibility of suing one another.
But those who argue against such lawsuits said a lawyer cannot adequately represent his client if he is concerned about getting sued by a fellow attorney on the case. They are pushing for the Supreme Court to issue a ruling that clarifies why lawyers should not be able to sue their co-counsel.
“The answer isn’t to have a string of lawyers back and forth suing everyone involved in the mess,” Orr said.