Synopsis: Plaintiff sought damages against law firm and an environmental consultant for breach of fiduciary duty and professional negligence. After settling with the environmental consultant before trial for $200,000, plaintiff was awarded $168,000 in damages and $37,783 in costs following a 22 day jury trial.
Case Type: Breach of Fiduciary Duty, Professional Negligence (Attorney Malpractice)
Case Name: Paulsen v. Lanahan & Reilley
Case Number: SCV-245288
Date: July 22, 2011
Trial Type: Jury
Trial Length: 22 days
Verdict for: Partial Plaintiff (2 individual attorney defendants received defense verdicts)
Attorney for Plaintiff: Robert A. Nellessen, Esq., Santa Rosa, CA
Attorney for Defense: George Ziser, Esq., Kendall A. Layne, Esq. – Lewis Brisbois, Bisgaard & Smith LLP, San Francisco, CA – Scott Steever, Lanahan & Reilley, Santa Rosa, CA
Judge: Honorable Mark Tansil
Facts: Plaintiffs purchased property on which had been located a gas station. Plaintiffs hired Defendant Environmental Consultant to assist in removing the tanks and obtaining reimbursement from the State Water Board. Defendant Consultant located and removed one small underground waste oil tank, but failed to locate the two large underground gas storage tanks. The Consultant submitted to the State Water Board an application for approval of cleanup costs. The state rejected the application, citing deficiencies in the Consultant’s reports. Consultant referred Plaintiffs to Defendant law firm, which allegedly held itself out as a specialist in environmental law, to assist in obtaining reimbursement from the State Water Board.
Defendant Law Firm began corresponding with the State Water Board on Plaintiffs’ behalf. At some point, it became clear that the two underground gas tanks had been removed by the previous owners. Testing showed that the tanks had leaked, and that both the soil and ground water were contaminated. After Defendant Consultant prepared an estimate of $582,000 for the cleanup cost, the State Water Board decided that Plaintiffs would receive only 50% reimbursement for the cleanup because they were not the owner of the tanks at the time of the first leak.
Defendant Law Firm, on behalf of Plaintiffs, initiated a lawsuit against the previous property owners for 50% of the cleanup costs. Defendant Consultant performed the cleanup. The day before trial, the claims against the previous owner’s property was settled for $15,000 and a waiver of attorney’s fees. As part of the settlement, the previous owners signed an assignment of any rights to reimbursement from the cleanup fund. The State Water Board accepted the assignment, but decided that Plaintiffs were entitled to 100% of the costs incurred only for work performed after the assignment; any work done before the assignment would be reimbursed at 50%. Defendant Law Firm pursued an appeal of that decision, but to no avail. Plaintiffs sued Defendants for breach of fiduciary duty and professional negligence.
Defendant Law Firm also represented Plaintiffs with respect to the sale of the property for $1.1 million. The terms of the sales contract required that the property be cleaned up within a specified period. The sale was canceled after this term was not met.
Damages/Injuries: Plaintiffs alleged damages of $1.1 million for professional negligence and breach of fiduciary duty. They also sought $215,000 they had paid Defendants in attorneys’ fees, and $351,064 in unreimbursed cleanup costs.
Contentions: Plaintiffs claimed that Defendants failed to disclose several conflicts of interest, including: the Consultant was one of the Law Firm’s clients and primary sources of referral income; and the Consultant was involved in three different lawsuits in which the Law Firm represented him. These three suits were ongoing when Defendant Law Firm was appearing before the State Water Board on Plaintiffs’ behalf. Plaintiffs claimed that the Law Firm did not disclose that the previous owners made several attempts to settle the lawsuit against them, and that they settled the case without advising Plaintiffs until four months later. Plaintiffs contended further that the Law Firm refused to turn over Plaintiffs’ client file until a year after litigation ensued.
Defendant Law Firm asserted that 1) there were no conflicts which required disclosure; 2) their representation of Plaintiffs on all areas was within the standard of care; and 3) they did not breach fiduciary duties.
Result: The jury returned a verdict of breach of fiduciary duty and professional negligence against Defendant Law Firm, awarding $168,300, after adjustment for Plaintiffs’ 40% comparative fault. Plaintiffs were also awarded costs in the sum of $37,783. Plaintiffs advise that they have appealed the Court’s decision not to award expert fees based on Plaintiffs’ CCP § 998 Offers, and the refusal to allow any evidence of the attorneys’ alleged fraud.
Settlement Negotiations: Defendant contends that Plaintiffs’ demand before trial was in excess of $600,000, and that Defendant offered $125,000 with an indication of more if Plaintiffs came to $200,000. Plaintiffs contend they twice served CCP § 998 Offers for $199,999. After Plaintiffs’ case and after judgment of non-suit on Plaintiffs’ $1.1 million claim, Defendants offered $325,000 and Plaintiffs contend they demanded $400,000 with an indication they would accept a lesser amount.
Experts for Plaintiff:
Carleton L. Briggs, Esq. – California Water Quality Control Board (Ethical Behavior of Attorneys)
Dave Charter, P.E. (Actual Knowledge of Defendant Attorneys)
Hans Herb, Esq. & REA (Actual Knowledge of Breach of Fiduciary Duty)
Richard Zitrin, Esq. (State Bar Ethical Rules)
Experts for Defense:
Mark Tuft, Esq. (State Bar Ethical Rules)
Nicole Gleason, Esq. (Standards for Environmental Attorneys)
Submitted by: Sergio Romero, student at Empire College School of Law.