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By Lance J. Rogers
Class action lawyers whose lucrative settlement proposal melted away when two former co-counsel launched competing class actions have no cause of action against their former colleagues for the lost potential contingent fee from the would-be settlement, the Massachusetts Appellate Court ruled Sept. 14 (Bartle v. Berry, Mass. App. Ct., No. 10-P-1235, 9/14/11).
In an opinion by Justice Kent B. Smith, the court ruled that the claims could not stand because the plaintiff lawyers could not establish that the rival lawsuits, which led the class action defendant to back away from the proposed settlement, were filed for an improper purpose.
Smith agreed with the trial court's conclusion that the breakaway lawyers' primary duty was to their new clients, which trumped whatever duty they owed to their former colleagues.
This obligation to current clients also prevents any liability to the lawyers' former client, a class representative, for allegedly hindering settlement of the original action, the court added.
Several bottled water companies hired attorneys Jan R. Schlichtmann, Thomas Sobol, and Garve W. Ivey Jr. to sue Nestle Waters North America Inc. (Nestle) for allegedly misrepresenting the source and quality of water it sold under the “Poland Spring” label. Those lawyers were subsequently joined by attorneys Kevin Berry and Christopher H. Bartle, who each represented individual Nestle competitors.
The case expanded when the lawyers agreed to represent a class of consumers who allegedly were affected by the Nestle representations. Lori Ehrlich was chosen to be the class representative in that component of the litigation.
When Schlichtmann—the lawyer portrayed by actor John Travolta in the 1999 movie A Civil Action—negotiated a settlement proposal with Nestle on both the consumer and the competitor claims, Sobol and Ivey objected to the terms. They were later fired by Ehrlich.
Soon thereafter, Sobol and Ivey were retained by a new set of consumer plaintiffs to pursue separate class action litigation against Nestle. Berry's client terminated its relationship with Schlichtmann and joined the Sobol and Ivey group.
Sobol and Ivey soon began publishing materials on a special website devoted to their class action litigation.
When Nestle learned of the competing class actions, it withdrew its settlement proposal in the Ehrlich litigation, causing Schlichtmann and Bartle to lose millions of dollars in anticipated legal fees.
Bartle and Schlichtmann each sued Berry, Sobol, Ivey, and others for tortious interference with economic relations, civil conspiracy, breach of contract, and breach of the implied covenant of good faith and fair dealing, stemming from the filing of the competing class actions and the lost settlement opportunity.
Schlichtmann raised additional claims for negligence and breach of fiduciary duty; Ehrlich joined Schlichtmann's suit.
After the lawsuits were consolidated with related litigation, the trial court granted summary judgment against Bartle, Schlichtmann, and Ehrlich, ruling as a matter of public policy that the defendant attorneys had an overriding duty to their own clients that trumped any obligation they might have owed to their former co-counsel and to their former client Ehrlich.
The appellate court affirmed.
As a threshold matter, the court noted agreement with the principle that an attorney owes undivided loyalty to his client—not co-counsel—and that many courts have adopted a bright-line rule prohibiting lawsuits between co-counsel over the loss of fees. It cited Beck v. Wecht, 48 P.3d 417, 18 Law. Man. Prof. Conduct 392 (Cal. 2002), Scheffler v. Adams & Reese LLP, 950 So. 2d 641, 23 Law. Man. Prof. Conduct 104 (La. 2007), Mazon v. Krafchick, 144 P.3d 1168, 22 Law. Man. Prof. Conduct 548 (Wash. 2006), and Horn v. Wooster, 165 P.3d 69, 23 Law. Man. Prof. Conduct 402 (Wyo. 2007).
According to the court, Massachusetts recognized this principle in Cavicchi v. Koski, 855 N.E.2d 1137, 22 Law. Man. Prof. Conduct 552 (Mass. App. Ct. 2006), by articulating “a strong public policy in protecting a client's right to seek advice and change counsel without subjecting new counsel to liability for tortious interference by former counsel.”
In view of this strong authority, the court observed, Bartle and Schlichtmann were compelled to frame their lawsuits in terms of interference with contract and civil conspiracy—which the trial court characterized as an “end-run.”
The appellate court took no stance on the lower court's characterization, but found that the judge ruled correctly when relying on principles of public policy to find that the defendants were not liable to the plaintiffs.
The interference with business relationship claim fails, the court ruled, because the plaintiffs failed to show that the defendant lawyers used improper means in causing Nestle to break off the settlement negotiations. Regardless of what motive drove the defendants, the court said, as a matter of public policy the filing of the rival class actions was not improper and violated no duty to the plaintiff lawyers.
Although the court in Cavicchifound improper means in a lawyer's making defamatory comments about his rival, there was no such impropriety here, the court said.
Filing the competing class actions and posting common interest materials on the internet may have led Nestle to call off the deal, but those actions were not improper, Smith stated.
The civil conspiracy claim falls apart, the court continued, because a defendant cannot conspire to do something—in this case, file a competing lawsuit—that is protected as a matter of public policy.
“Schlichtmann points to no authority supporting his contention that the defendant attorneys' alleged misconduct formed the underlying tortious conduct required to establish a conspiracy claim brought by a nonclient,” Smith wrote.
The breach of contract claim against Berry fails, the court added, because Berry did not sign any of the class counsel agreements. The argument that Berry should be obligated because he “acted as if he were bound” did not sway the court.
The breach of contract claims against Sobol and Ivey based on their supposed revelation of confidential materials on their website collapses, the court said, because Schlichtmann did not establish that his loss was caused by that alleged breach instead of the filing of the competing class actions.
Ehrlich's appeal was rejected because the court said she could not show any compensable damages. Nor did Sobol and Ivey breach their duty to her as a former client after she fired them, the court added. Their duty was to the class as a whole which—when they filed the rival suits—did not conflict with any duty owed to Ehrlich individually, Smith explained.
Bartle was represented by Dana Alan Curhan, Boston. Schlichtmann, Boston, represented himself.
Appearing for Berry was Steven W. Kasten of Yurko, Salvesen & Remz, Boston. Michael E. Mone of Esdaile, Barrett & Esdaile, Boston, represented Sobol and other defendants.
Full text at http://op.bna.com/mopc.nsf/r?Open=kswn-8lrqkp .
Copyright 2011, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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