Tuesday, September 3, 2019
Page 1
Court of Appeal:
Affidavit of Fault Ineffective Where Attorney Owns Defaulting Entity
Lawyer Can’t Invoke Mandatory Relief Provision of CCP §473(b) in Seeking Relief From Default for Client, a Marijuana Collective, Where She Is Sole Owner, Lone Director of It, Majority Says
By a MetNews Staff Writer
Div. Two of the First District Court of Appeal has held, in a 2-1 decision, that the provision for mandatory relief from default in Code of Civil Procedure §473(b), based on an attorney’s affidavit of fault, does not apply where the defaulting defendant is a company controlled by the attorney.
The majority’s opinion, filed Thursday, is based on the legal proposition that an attorney, who is in pro per, cannot invoke the provision because he or she is not an innocent client, whom the section is designed to protect, and on the view that the facts in the case support the trial court’s finding that attorney Karen Kissler and her medical marijuana collective are “one and the same.”
The legal proposition contradicts an assumption expressed on June 11 by Court of Appeal Justice William W. Bedsworth of the Fourth District’s Div. Three in Lasalle v. Vogel. There, an attorney, Joanna T. Vogel, who was sued for malpractice, did not file a timely answer and a default was taken; she sought an order setting aside the default under the discretionary provision of §473(b).
Bedsworth observed:
“There was no ‘falling on the sword’ affidavit of fault that might have triggered application of those provisions of section 473 requiring a set-aside when an attorney confesses fault.”
Richman Dissents
The First District’s opinions were filed Thursday. Justice Therese M. Stewart authored the majority opinion, joined in by Presiding Justice J. Anthony Kline, while Justice James Richman dissented.
Richman did not discuss the legal proposition put forth in the majority opinion. Rather, he asserted that the facts do not show a unity of identity as between Kissler and the cooperative, “Alternatives.”
The dissenter also disputed the majority opinion’s conclusion that that denial of discretionary relief under §473(b) to Alternatives, as well as to Kissler—who was sued as an individual and doing business as “Karen Kissler, Esquire”—was not an abuse of discretion.
Mandatory relief was sought only as to Alternatives.
The default was based on Kissler’s failure to file a timely answer, instead insisting there had been improper service.
Inapplicability to Attorneys
Explaining why an attorney in pro per may not obtain relief by executing an affidavit of fault, Stewart said:
“To decide whether the mandatory relief provision in the statute applies in this situation, when an attorney is in essence representing herself, we begin with the statutory language. The mandatory relief prong of section 473(b) refers to ‘an attorney’s sworn affidavit attesting to his or her mistake, [etc.]” and a “resulting default” or “default judgment” entered “against his or her client.” (Italics added.) By its terms, the statute distinguishes between the attorney and the client and presupposes they are not ‘one and the same.’ The statutory language thus fails to support defendants’ position.”
“The statutory purposes also suggest no reason for its application here…. If the attorney and client had no separate existence, there is no ‘innocent client’ to protect; rather, the error that caused the default is that of both the attorney and the client, acting inextricably together….Nor is the malpractice prevention purpose served by application of the mandatory relief provision in this circumstance. There is no risk of an attorney suing herself for malpractice.”
Like reasoning appears in the 2008 opinion in Esther B. v. City of Los Angeles, authored by then-Justice (now Presiding Justice) Frances Rothschild of this district’s Div. One. Stewart remarked:
“Esther B. is thus on all fours and supports the trial court’s decision here.”
No Separate Identity
Stewart declared that substantial evidence supported the trial court’s finding that Alternatives had no identity separate from that of Kissler. She noted that Kissler was the founder of Alternatives, its sole corporate officer, and makes all of the decisions for the entity.
“The trial court’s determination in this case that Kissler and Alternatives were ‘one and the same’ in effect means Alternatives was self-represented,” she wrote.
Neither Stewart’s opinion nor the dissent uses the term “alter ego.”
Richman’s Dissent
Richman insisted that in appearing at a case management conference, Kissler “did so at least in part in her capacity as the attorney for her client, Alternatives, a corporation—which, not incidentally, must appear in court only through its attorney.”
He wrote:
“The evidence—the undisputed evidence—was that Alternatives was incorporated on January 11, 2010 as a Nonprofit Mutual Benefit Corporation under the Corporations Code. It was comprised of over 21,000 members, who were ‘akin to shareholders,’ and was ‘a licensed and permitted brick and mortar cannabis dispensary.’ And in accordance with the Attorney General’s Guidelines for mutual benefit corporations, Alternatives returned its profits back to its members, after deducting for salaries, overhead and other expenses—facts, the majority concedes, supported by the evidence.”
Richman maintained that “there was a fundamental demarcation of roles: Kissler was the ‘attorney’ and Alternatives was the ‘client.’ ”
He commented that Sonoma Superior Court Judge Peter K. Ottenweller “simply got it wrong in deciding that ‘she cannot avail herself’ of the mandatory relief provision of Code of Civil Procedure, section 473,” elaborating in a footnote:
“Judge Ottenweller’s choice of words ‘she’ and ‘herself’ in his decision in place of the words ‘Alternatives’ and ‘itself,’ shows how he misconstrued the matter: ‘she,’ Kissler, was not the party moving to vacate on mandatory grounds; Alternatives was.”
Discretionary Relief
The minute order from the case management conference says:
“No later than July 22, 2016, a default must be filed for Defendant Karen Kissler ind. & dba Karen Kissler Esq. unless an answer has been filed.”
She did not proceed to file an answer. In seeking discretionary relief under §473(b), Kissler claimed there was an excusable mistake on her part as to what the minute order meant.
Stewart noted that two judges of the Sonoma Superior Court “found defendants’ conduct, far from excusable, was knowing and deliberate, that is, not a mistake at all,” and said that the “record here amply supports the trial court’s findings.”
As Richman saw it:
“Kissler’s fundamental position was that the minute order was “confusing” and “susceptible to being misinterpreted”—a position, of course, with which I strongly agree….”
He went on to say:
“Certainly the minute order was unclear. Call it confusing. Or ambiguous. Or vague. It obviously was subject to interpretation.”
Decision Delayed
Div. One apparently struggled over the case. The case was taken under submission upon the conclusion of oral argument on May 3 and, under a state constitutional provision, the justices had 90 days to render a decision.
On July 24, the order of submission was vacated, with the court explaining:
“Due to the novelty and complexity of the issues presented, the court has concluded that additional time is required for full consideration of this appeal, therefore submission of the above-entitled cause is vacated and it is hereby ordered resubmitted for a period not to exceed sixty days.”
In Thursday’s dissent, Richman makes reference to a remark by him in an earlier draft, in reaction to the majority’s “original” opinion.
Kissler said yesterday:
“We agree entirely with Justice Richman’s well-reasoned dissent. We are evaluating our options regarding next steps to pursue.”
The case is McClain v. Kissler, 2019 S.O.S. 2346.
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