Source: https://mcphersonrane.com/articles/causation-the-forgotten-element-of-conflict-malpractice/
Timestamp: 2019-04-21 20:28:38+00:00

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In recent times, by far the most popular of all of the available species of legal malpractice claims has been and will most likely continue to be malpractice based upon a perceived conflict of interest. Particularly in the entertainment industry, such claims often arise from underlying transactional matters either because the attomey has entered into a business transaction with his or her client or because the attorney has represented two or more clients in the same transaction with competing interests.
Notwithstanding the relative sophistication of some entertainment clients, there are rules that protect all clients from the appearance of gross impropriety that most commentators agree naturally accompanies such business relationships. Those guidelines appear in the California Rules of Professional Conduct, specifically Rules 3-300 and 3-310. The Rules provide standards by which all attorneys who are licensed in Califomia must govern their conduct. Compliance with the Rules allows attorneys both to continue the privilege of practicing law in California and to avoid liability in a legal malpractice suit.
Of course, some experts maintain that the Rules set forth only a minimum standard. Strict compliance with the Rules will absolve attorneys of liability with the State Bar, but will not necessarily insulate them from legal malpractice liability.2 In any event, one thing is clear: non-compliance with the express terms of the Rules will expose an attorney both to disciplinary action by the State Bar and to malpractice liability.
The first Golden Rule and the best advice in any situation potentially involving Rule 3-300 is “DO NOT ENGAGE IN BUSINESS ACTIVITIES WITH YOUR CLIENTS.” The second Golden Rule in dealing with 3-300 is “DO NOT ENGAGE IN BUSINESS ACTIVITIES WITH YOUR CLIENTS.” There is a concomitant Golden Rule with respect to Rule 3-310. If one insists on violating the Golden Rule (which is designed only to reduce the likelihood of a malpractice claim, not to eliminate the possibility completely, which perhaps nobody can do with any degree of certainty), there are certain things that must be done before entering into the business relationship with your client.
Make no mistake about it, an attomey who does not do these things will get sued! There are many lawyers and clients in the entertainment industry who are conversant in the Rules. The instant that something goes wrong with a deal, they are quick to use the Rules to their advantage and to find a scapegoat for whatever went wrong. After all, who ever heard of a conflict/malpractice case arising out of a hugely successful motion picture or record that is destined to earn massive profits for years to come?
However, even the Golden Rules and pristine compliance with the Rules of Professional Conduct may not be enough to prevent malpractice suits in the first place, let alone insulate you from liability. But not to worry, there is still some semblance of hope, and that hope lies within the definition of malpractice itself.
In a simple case of legal malpractice (if there is such a thing), causation is not hotly disputed. For example, in a case in which an attomey allows a statute of limitations to run on his or her client’s claim, it is fairly easy to detennine who caused the client’s damages when a judge grants summary judgment and dismisses the client’s underlying claim (assuming that the client had a good case in the first place-which he must also prove).
A conflict/malpractice case, however, is more complicated, by definition. First, it can be extremely difficult to ascertain particular facts which are normally very easy to discover. For example, it is a formidable task to find information suggesting when the malpractice was or should have been discovered and when the actual damage occurred, both for statute of limitations purposes.
Where reasonable minds cannot differ regarding the causation issue, the question may be considered as a matter of law.14 A motion for nonsuit may therefore lie when, despite the presentation of ample evidence of negligence, the plaintiff cannot prove that the malpractice caused the damages now sought. In that case, it may be possible to exclude certain evidence of negligence by a motion in limine.
In a conflict/malpractice case involving an underlying entertainment transaction, it is not easy to prove that the plaintiff would not have lost all his money in the deal “but for” the conflict of interest and the failure to disclose adequately that conflict. This is not like proving an underlying personal injury claim after the defendant lawyer let the statute of limitations run.
* Partner of the entertainment and litigation firm of McPherson Kalmansohn, Century City, California.
1. Edwin F. McPherson, Conflicts in the Entertainment Industry. . .Not!, THE ENTERTAINMENT AND SPORTS LAWYER, Vol. Io, Number 4, Winter I993; cf J. Anderson and D. Miller, Professional Responsibility lol – A Response to “Conflicts in the Entertainment Industry . . . Natl,” THE ENTERTAINMENT AND SPORTS LAWYER, Vol. ll, Number 2, Summer I993.
2. For instance, some expert witnesses maintain that, notwithstanding the general consensus that a requirement of a written disclosure has always been considered the better and more onerous means by which to ensure that a client knows and understands the nature of the conflict, a separate oral explanation of the nature of the conflict should also be required. However, there is no suppon for this proposition in the Rules of Professional Conduct and little, if any, support in the causes.
3. CAL. RULES OF PROFESSIONAL CONDUCT Rule 3-300 (I994).
5. Williams v. Wraxall, 39 Cal. Rptr. 2d 658. 663 (Ct. App. I995) (citing Jackson v. Johnson, 7 Cal. Rptr. 2d 482, 484-85 (Ct. App. 1992)); see also Budd v. Nixen, 491 P.2d 433, 436 (Cal. I971); Purdy v. Pacific Auto. Ins. Co., 203 Cal. Rptr. 524, 533 (Cr. App. I984).
6. Smith v. Lewis, 530 P.2d 589, 597 (Cal. I975) (citing Pete v. Henderson, 269 P.2d 78, 79 (cal. Ct. App. 1954)); DiPaIma v. setdman, 33 cal. Rptr. 2d 219 (Cr. App. I994).
7 Skopp v. Weaver, 546 P.2d 307, 3 Io (Cal. I976); United Community Church v. Garcin, 282 Cal. Rptr. 368, 373 (Ct. App. 1991): McDonald v. John P. Scripps Newspaper, 257 Cal. Rptr. 473, 475 (Ct. App. I989).
8. Agnew v. Parks, 343 P.2d ll8 (Cal. Ct. App. I959); see also Garcia v. Superior Coun, 50 Cal. 3d 728, 737, 789 P.2d 960 (Cal. I990); Committee on Children’s Television, Inc. v. General Foods Corp., 673 P.2d 660, 674 (Cal. I983); Williams, 39 Cal. Rptr. 2d al 664 (“A ‘complete causal relationship‘ between the fraud or deceit and the plaintiffs damages is required”); Wallis v. Farmers Group. lnc., 269 Cal. Rptr. 299, 308 (Ct. App. I990); Nagy v. Nagy, 258 Cal. Rptr. 787, 790 (Ct. App. I989) (“Fraudulent representations which work no damage cannot give risc to an action at law.”).
9. United Community Church, 282 Cal Rptr. at 373. Mitchell v. Gonzales, 819 P.2d 872, 878-79 (Cal. l99l); Osborn v. Irwin Memorial Blood Bank, 7 Cal. Rptr. 2d lol, Io7-08 (Cl. App. I992). ld.; see also Williams, 39 Cal. Rptr. 2d at 658; Sukoff v. Lemkin, 249 Cal. Rptr. 42, 44 (Cr. App. I988).
10 Duane v. Zachariah, 28 Cal. Rptr. 2d 88, 9l (Ct. App. I994); see also Bromme v. Pavitt, 7 Cal. Rptr. 2d 608, 6l4 (Ct. App. I992): Dumas v. Cooney, l cal. Rptr. 2d 534, 589 (Cr. App. 1991).
13. Budd v. Nixen, 491 P.2d 433, 436 (cal. 1971); Bromine v. Pavin, 7 cal. Rptr. 2d at 6l4; Cottle v. Superior Court, 5 Cal. Rptr. 2d 882, 897 (Ct. App. I992); Dumas v. Cooney, l Cal. Rptr. 2d at 589.
14. Budd, 491 P.2d at 436.

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