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Court of Appeal:
Lawyers Could Be Liable for Not Telling of Client’s Misdeeds
By a MetNews Staff Writer
The agent’s immunity rule, under which an agent cannot be held liable for conspiring with the principal, will not shield the Los Angeles law firm of Lewis, Brisbois, Bisgaard & Smith and one of its partners in an action brought by an investor in a joint enterprise if it is proven, as pled, that the lawyers knew of their client’s fraud in connection with a similar past project and failed to disclose it, the Court of Appeal for this district held yesterday.
Justice Brian S. Currey authored the opinion, which was not certified for publication. It reverses Los Angeles Superior Court Judge Michael L. Stern’s order sustaining, without leave to amend, the demurrer of Lewis Brisbois and a partner in its Sacramento office, John P. Yung.
The defendants had represented Ray Brewer and his company, Green Energy. Dynastion, a Slovak limited liability company, agreed to participate with Green Energy in a joint venture in which each party would have a half interest.
Harnessing Electricity
A holding company was set up, into which Dynastion initially dumped $2 million. The company was to promote “anaerobic digesters” which would convert cow manure into electricity.
Brewer allegedly misappropriated the funds. After learning that Lewis Brisbois and Yung knew that Brewer had done the same thing in the past, Dynastion sued Brewer’s lawyers for aiding and abetting fraud and the holding company also alleged separate causes of action against them. Stern sustained a demurrer to Dynastion ’s cause of action on the basis of the agent’s immunity rule, and also because it did not obtain a pre-filing order required by Civil Code §1714.10 in actions alleging a civil conspiracy between an attorney and a client.
Currey’s Opinion
In reversing, Currey wrote:
“[A]n exception to the rule applies where, as here, the complaint alleges the attorney was aware of the client’s previous failure to perform in a similar joint venture.”
Such an awareness, he said, gives rise to an independent duty to reveal that earlier failure. The existence of an independent duty, he explained, is both a requirement of maintaining an action for civil conspiracy, and its existence is an exception to the pre-filing requirement of §1714.10.
Subd. (c) of that section says that gaining court permission to file a complaint “shall not apply to a cause of action against an attorney for a civil conspiracy with his or her client, where (1) the attorney has an independent legal duty to the plaintiff….”
Duty Arises
Currey recited that “[a]ttorneys are expected to stay within the bounds of the law in representing their clients,” and declared:
“[A]lthough Yung did not represent Dynastion, given the facts of this case, Yung and Lewis, Brisbois had an independent duty to Dynastion as the second investor in Brewer’s ‘digester’ enterprise, namely, the duty to ‘refrain from defrauding nonclients.’ ”
The case is Dynastion Energy v. Yung, B311960.
Hermosa Beach attorney Louis Shoch represented Dynastion.
Acting for Lewis Brisbois were two members of its Sacramento office, John S. Poulos and John Ternieden.
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