2004 Guide to Trial Support Services Employee Witnesses in Litigation
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2004 Guide to Trial Support Services Employee Witnesses in Litigation
2004 Guide to Trial Support Services FEBRUARY 2004, VOL.26, NO.11 / $3.00 EARN MCLE CREDIT Los Angeles lawyers Marshall S. Zolla and Deborah Elizabeth Zolla clarify the scope of the fiduciary duty between spouses page 20 Marital Duty Employee Witnesses in Litigation page 28 Song-Beverly Requirements page 10 The Learned Intermediary Doctrine page 16 Online Legislative Research page 40 Together We’re Stronger …and better able to fill your insurance needs The combined leverage, experience and resources of the Los Angeles County Bar Association and Aon are the surest way to get reasonable professional liability coverage. Many underwriters have fully or partially quit the business because of a reduction in surplus capital. Consequently, law firms face higher premiums for significantly reduced coverage...or no coverage at all, forcing them to go out of business! 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The LexisNexis Total Research System for California represents an extraordinary advance in legal research. It’s comprehensive, including such essential content for California attorneys as the California Official Reports, the Judicial Council of California Civil Jury Instructions (CACI), the Matthew Bender® Practice Guide, and California Forms of Pleading and Practice. It’s highly integrated and flexible, allowing you to move fluidly among the pertinent legal resources and public records relevant to each stage in the development of a case. And it’s easy to use, thanks to its powerful research tools for locating, analyzing, and using the information you need. Take your practice to the next level. Get the LexisNexis Total Research System for California attorneys. For more information, call 877.810.5324 and mention code 203030. LexisNexis and the Knowledge Burst logo are trademarks of Reed Elsevier Properties Inc., used under license. It’s How You Know is a trademark of LexisNexis, a division of Reed Elsevier Inc. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. © 2004 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. AL6675 page 20 Contents Los Angeles Lawyer departments The Magazine of the 10 Practice Tips The Song-Beverly Act from a manufacturer’s perspective By Timothy D. Kevane Los Angeles County Bar Association February 2004 Vol. 26, No. 11 16 Practice Tips The learned intermediary doctrine and DTC advertising By Christopher Q. Pham cover 40 Computer Counselor Where to conduct free federal legislative research online By Carole Levitt columns 9 Barristers Tips A new labor law enforcement measure By Princeton H. Kim 44 Closing Argument How to keep in-house counsel happy By Joel Grossman features 20 Marital Duty Conflicting court opinions and ambiguous statutes have left unclear the precise fiduciary duty between spouses when making investment decisions 42 Index to Advertisers 43 CLE Preview By Marshall S. Zolla and Deborah Elizabeth Zolla Marshall S. Zolla practices family law in Century City, and 28 Undesignated Hitters Deborah Elizabeth Zolla Federal and state rules of evidence have similar standards for determining when undesignated witnesses may offer opinion practices family law with Freid testimony and Goldsman in Century City. By David Martinez and Bree Arlyn-Pessin In “Marital Duty,” they sort Plus: Earn MCLE credit. MCLE Test No. 123, through the ambiguities in the sponsored by CourtCall LLC, appears on page 33. law defining spousal fiduciary duty. Their article begins on 37 Special Section page 20. 2004 Guide to Trial Support Services page 10 Cover photo: Tom Keller EMPLOYMENT DISPUTE MEDIATION CENTER Let experienced employment law litigator ROBERT D. COVIELLO assist you in the resolution of your employment dispute. SERVICES PROVIDED: FLAT FEE • All day mediation • No charge for additional time on same day OUR CENTRAL ORANGE COUNTY OFFICE OR YOURS • Will travel within the state at no additional fee LIBERAL CANCELLATION POLICY • No charge if cancelled within 72 hours of session EXPERIENCE • Knowledgeable in all areas of employment law; has litigated hundreds of employment matters representing both Plaintiffs and Defendants • No need to expend time educating the mediator OPINIONS BASED ON EXPERIENCE • The value, strengths, weaknesses and risks involved in a case • Full analysis of law, facts and defenses • Jury appeal/probability of a favorable outcome ROBERT D. COVIELLO Mr. Coviello has been actively practicing in Orange County for over 22 years. He has personally tried over 50 jury trials and has been lead counsel in several hundred arbitrations and mediations in employment related matters. He is an Arbitrator on the Employment Panel of AAA and the most recent past Chair of the O.C. Bar’s Labor and Employment Law Section. EMPLOYMENT DISPUTE MEDIATION CENTER (714) 557-7500 www.coviello-law.com 4 LOS ANGELES LAWYER / FEBRUARY 2004 LosAngelesLawyer VISIT US ON THE INTERNET AT www.lacba.org/lalawyer E-MAIL CAN BE SENT TO [email protected] EDITORIAL BOARD Chair JERROLD ABELES Articles Coordinator GARY RASKIN ANN M. AGUILAR DANIEL L. ALEXANDER HONEY KESSLER AMADO ETHEL W. BENNETT R. J. COMER CHAD C. COOMBS KEITH E. COOPER ANGELA J. DAVIS HEATHER DAVIS KERRY A. DOLAN GORDON ENG DANIEL A. FIORE JOSEPH S. FOGEL MICHAEL E. FOX STUART R. FRAENKEL MICHAEL A. GEIBELSON TED HANDEL DEAN HANSELL STEVEN HECHT KATHERINE M. HIKIDA JOHN P. LECRONE HYACINTH E. LEUS PAUL MARKS ELIZABETH MUNISOGLU RICHARD H. NAKAMURA JR. KAREN NOBUMOTO DENNIS PEREZ GERALD F. PHILLIPS EDWARD POLL THADDEUS M. POPE JACQUELINE M. REAL-SALAS NINA RIES SUE CAROL ROKAW KURT L. SCHMALZ JACOB STEIN CARMELA TAN BRUCE TEPPER PATRIC VERRONE JOEL B. WEINBERG STAFF Publisher and Editor SAMUEL LIPSMAN Senior Editor LAUREN MILICOV Associate Editor ERIC HOWARD Art Director LES SECHLER Director of Design and Production PATRICE HUGHES Advertising Director LINDA LONERO Account Executive MARK NOCKELS Advertising Coordinator WILMA TRACY NADEAU Administrative Coordinator MATTY JALLOW BABY LOS ANGELES LAWYER (ISSN 0162-2900) is published monthly, except for a combined issue in July/August, by the Los Angeles County Bar Association, 261 S. Figueroa St., Suite 300, Los Angeles, CA 90012, (213) 896-6503. Periodicals postage paid at Los Angeles, CA and additional mailing offices. Annual subscription price of $14 included in the Association membership dues. Nonmember subscriptions: $28 annually; single copy price: $3 plus handling. Address changes must be submitted six weeks in advance of next issue date. POSTMASTER: ADDRESS SERVICE REQUESTED. Send address changes to Los Angeles Lawyer, P.O. Box 55020, Los Angeles CA 90055. Copyright ©2004 by the Los Angeles County Bar Association. All rights reserved. Reproduction in whole or in part without permission is prohibited. Printed by Banta Publications Group, Liberty, MO. Member Business Publications Audit of Circulation (BPA). The opinions and positions stated in signed material are those of the authors and not by the fact of publication necessarily those of the Association or its members. All manuscripts are carefully considered by the Editorial Board. Letters to the editor are subject to editing. Let’s Celebrate the Soul in Solo Other lawyers say you’re a maverick. 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LOS ANGELES LAWYER IS THE OFFICIAL PUBLICATION OF THE LOS ANGELES COUNTY BAR ASSOCIATION 261 S. Figueroa Street, Suite 300, Los Angeles, CA 90012-2503 Telephone 213/627-2727 Visit us on the Internet at www.lacba.org ASSOCIATION OFFICERS: President ROBIN MEADOW President-Elect JOHN J. COLLINS Senior Vice President EDITH R. MATTHAI The Winning Edge TM Vice President/Treasurer CHARLES E. MICHAELS Assistant Vice President BERNARD E. LESAGE Assistant Vice President DANETTE E. MEYERS Assistant Vice President GRETCHEN M. NELSON Executive Director RICHARD WALCH PACIFIC C REST B ANK WANTS TO BE YOUR B USINESS B ANKING PARTNER As your local bank, Pacific Crest provides quality service— personalized to fit the special requirements of law professionals. Since 1974, Pacific Crest Bank has been putting clients first by delivering the customized products and service that businesses, entrepreneurs, and depositors expect. 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Indeed, for criminal client recently asked me an interestcases and even civil cases in federal courts, ing question: Why is there no stanthe requirement that there be unanimous dard jury instruction advising jurors outcomes places this power in the hands of in criminal cases that they have the option to every single juror. nullify the law by acquitting a defendant even With such authority comes the potential for though there is no dispute that he or she abuse. Abuse of the privilege and responsicommitted the crime? My immediate reaction bility of being a juror has been was that there would be chaos in Jerry Abeles is a demonstrated in fictional acthe criminal courts, with defense litigation partner in counts and in actual events in attorneys seeking sympathetic the Los Angeles ofrecent years. John Grisham’s juries to nullify everything from fice of Friedemann compelling novel Runaway Jury misdemeanor petty theft to O’Brien Goldberg & shows the dangers that can result felony driving under the influZarian LLP. He is the when jurors reach a verdict withence to capital murder. I noted chair of the 2003-04 out regard for the evidence or that if the uncontested evidence Los Angeles Lawyer jur y instr uctions. Granted, showed that a defendant regisEditorial Board. Grisham’s plot is sensationalized tered .16 on a Breathalyzer to enhance its impact. But how shor tly after driving his car many people expected O. J. across a median and plowing Simpson’s criminal trial to end as it did, much head-first into oncoming traffic, the jur y less after only hours of deliberation followshould not be given the option to express ing a year-long trial. It is hard to argue against their view that the legal DUI limit should be the view that the Simpson jury was sending a .20 instead of .08 by acquitting the defendant. message rather than rendering a verdict based Rather, the jurors should try to change the law only on the evidence presented. by petitioning the legislature instead of refusHaving been fortunate enough to sit on ing to convict someone who violated a validly two juries—one criminal and one civil—that enacted law. reached verdicts, I can attest to the feeling of In my client’s view, the problem is that power and duty with which jurors are vested. there are countless examples of validly I was most impressed by how the jurors enacted laws that are unjust or even abhorreviewed the physical evidence, critiqued rent. Laws in the United States during the inconsistencies in testimony, and commented last century mandated separation of races, on the conduct of the attorneys. Not one juror barred women from voting, and limited propindicated that the process was a burden or erty ownership by Asians, African Americans, seemed to take the responsibility casually. and Jews. Even today, legal scholars enuWhile it seems that we can all identify the merate various reasons why laws criminalizaberrational jury, the real news is how many ing possession of narcotics or prostitution times each day our jury system works the way should be eliminated. What prohibitions exist its creators envisioned. today that will seem offensive or outrageous While we have great confidence in our to our grandchildren? Will we be seen as juries and the jury system, our confidence is backward or intolerant for not recognizing gay based on jurors’ ability to work within the marriages? Will the Ten Commandments be defined parameters of the law. Eliminating commonplace in courthouses around the those parameters by allowing a jury to simply country, and will adult movies be sold at the ignore the law through a nullification instruclocal Wal-Mart? tion would undermine our confidence simulIf norms change over time—which, of taneously in the jur y system and the legcourse, they do and they will—and if our laws islative process. Jurors have a tough enough and the judges who interpret them also job applying the law to the facts. Let’s let change, then why not let the changes be led them do their job and leave the lawmaking to by a jury of our peers? We currently entrust the legislature. ■ jurors with extraordinary power, including the ability to impose billions of dollars in liability for corporate misfeasance and to send A contemporary downtown apartments Rooftop Pool & Garden Fitness Center with Skyline Views High Speed Internet • Direct TV European Washer/Dryer Designer Appliance Package High Ceilings • Berber Carpet Polished Concrete Floors in Select Units Granite Countertops • Concierge Gated Parking within the Building 24-Hour Courtesy Personnel On-Site Retail & Restaurant Wilshire @ Flower, Downtown LA STUDIO, ONE AND TWO BEDROOM APARTMENTS PHONE FAX 213 430 9112 213 430 9113 612 SOUTH FLOWER STREET LOS ANGELES, CA 90017 W W W. P E G A S U S A PA RT M E N T S . C O M 8 LOS ANGELES LAWYER / FEBRUARY 2004 barristers tips By Princeton H. Kim A New Labor Law Enforcement Measure The new Private Attorneys General Act may have unintended consequences hortly before his departure from office, Governor Gray Davis signed several hundred pieces of legislation, many of which went into effect on January 1, 2004. One of these, Senate Bill 796, the Private Attorneys General Act of 2004, dramatically expanded the scope of and potential for employment litigation in California. By augmenting public enforcement powers, this new law exposes employers to substantial penalties for Labor Code violations. SB 796, which was signed into law on October 12, 2003, creates a private right of action for the enforcement of civil penalties under the California Labor Code. Traditionally, the right to seek penalties for such violations belonged solely to the California Labor and Workforce Development Agency (LWDA). However, under the new law, “aggrieved employees” may now file suit to recover penalties on behalf of themselves and any other current or former employee similarly affected by an employer’s violation of the Labor Code. The Private Attorneys General Act defines an “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” The enforcement and penalty provisions of the new law contain five primary parts. First, if a civil penalty is not specifically provided in the Labor Code, the penalty will be $100 for each employee per pay period for the initial violation and $200 for each aggrieved employee per pay period for each subsequent violation. In other words, if a company employing 50 people violates one Labor Code provision over the course of two pay periods, the employer could be liable for $15,000 in penalties. Clearly, the amount and weight of these penalties vastly increases for companies that are employing thousands of workers throughout the state. Second, SB 796 provides, “If, at the time of the alleged violation, the person does not employ one or more employees,” the civil penalty is $500. (However, this provision conflicts with the rest of the statute because only persons who were employed by the alleged violator and against whom one or more of the alleged violations were committed can bring suit.) Third, in cases in which the LWDA has the discretion to assess a civil penalty, a court is authorized to exercise the same discretion, subject to the same limitations and conditions, in assessing a civil penalty under the Private Attorneys General Act. Fourth, if the amount of the civil penalty is already established by statute, that amount shall be enforced by the court in these actions. Fifth, the distribution of penalties recovered against employers by private individuals shall be based upon a 50 percent distribution to the state’s general fund, 25 percent distribution to the LWDA, and a 25 percent distribution to the aggrieved employees. The law also provides that prevailing individuals may recover an award of reasonable attorney’s fees and costs. Conversely, employers S may not recover any of these expenses, even in the successful defense of a meritless claim. It is unclear whether the statute’s provisions apply retroactively to litigation filed before January 1, 2004, but many plaintiffs’ attorneys have already sought to amend their pleadings to include causes of action for the enforcement of the penalties that are included in the new law. For employers, defending against these actions is another cost of doing business in California. It should also be noted that the statute does not require exhaustion of administrative steps before a private attorney general action may be filed. Employers do not have a good faith defense in these cases. As per se violations of the Labor Code, the lack of intent, mistake, or inadvertence on the part of the employer bears no relevance to the imposition of penalties. An obscure violation, such as failing to post proper notices, could result in staggering legal fees and penalties irrespective of whether the employer knew or should have known about the posting. Proponents of the statute argue that public agencies are unable to effectively enforce labor laws against the underground economy, which deprives the state of billions of tax dollars. Additionally, in view of the severity and frequency of the labor law violations that are allegedly taking place in California, the new law provides an incentive for assisting government agencies with their enforcement duties. On the other hand, opponents decry the new law as another remedy that is so disproportionate that it will cause a wave of abusive litigation comparable to what is associated with California’s Unfair Competition Act (Business and Professions Code Sections 17200 et seq.). Companies argue the statute places no restraint on the quality, quantity, or frequency of the litigation that may be brought. Challengers also claim the statute allows plaintiffs to file on behalf of a class without satisfying the requirements for class certification under Code of Civil Procedure Section 382. It is therefore not surprising that certain business organizations have labeled the new law as the “job killer” statute. The new public enforcement provisions of this law increase the exposure of California employers, but it is not yet Princeton H. Kim is an clear to what degree employees will enjoy associate at Winston increased protection against Labor Code & Strawn, LLP, and a violations. While the actual effect of the member of the new law remains to be seen, it promises Barristers Executive to become a source of discussion, debate, Committee. and litigation. ■ LOS ANGELES LAWYER / FEBRUARY 2004 9 practice tips By Timothy D. Kevane The Song-Beverly Act from a Manufacturer’s Perspective In California, ranty claims that arise in manufacturer-retailer-consumer transmanufacturers are actions. The act was adopted to benerequired to fulfill fit the consumer, reflecting the legislature’s response to product warranty pledges advertising of the time.2 It was intended to improve the lot of by specific means consumers in a way that was consistent with the Uniform Commercial Code.3 As the court of or years, Californians were appeal indicated, the act should plagued by consumer war- be interpreted in a way that is ranties requiring that “calculated to bring its benefits goods be sent out of the state for into action.”4 To this end, the act repair or replacement. Finally, in regulates war ranty terms; 5 1970, the legislature enacted the imposes service and repair obliSong-Beverly Consumer War- gations on manufacturers, disranty Act to help fulfill consumer tributors, and retailers that make expectations that products would express warranties; requires be repaired or replaced quickly specified information in express (and preferably locally). The pur- warranties; and broadens a buypose of the act is remarkably sim- er’s remedies to include costs, ple: “If you make a warranty, attorney’s fees, and penalties. The stand behind it.” 1 This basic act also sets standards regarding responsibility was often ignored who accepts responsibility for the once a manufacturer had sold its warranty, whether consumers products to a retailer. After pas- must ship products at their sage of the act, however, a man- expense to distant locations, how ufacturer’s responsibility for a long warranty repairs may take, product under warranty contin- and whether retailers can refuse to do work if they ued after the sale. Timothy D. Kevane are not fully reimAlthough the practices business bursed by manuprovisions of the litigation with facturers.6 act that are of Stapke & Harris, LLP, direct concern to The act does in Los Angeles. Mark consumers have not apply to all R. Stapke assisted been given subgoods but only to with this article. stantial attention in consumer goods— and out of the those primarily courts, those that used for personal concern and affect or household purthe relationship between retail- poses—that are sold in retail ers and manufacturers have been transactions.7 Under the act, the largely overlooked. As codified term “manufacturer” includes any in Civil Code Sections 1790 et individual or entity that makes seq., the act covers a wide range or assembles consumer goods.8 A of procedures, standards, and retailer or dealer is any individual requirements relating to war- or entity that sells consumer RICHARD EWING F 10 LOS ANGELES LAWYER / FEBRUARY 2004 goods to retail buyers.9 Furthermore, a manufacturer that sells the product out of state but ships it to the state may not be covered by the act.10 And in September 2003, the California Supreme Court indicated it would review the question of whether a manufacturer that sells goods in the state faces exposure under the act when the particular item in question was not bought in the state.11 Three Options for Manufacturers The warranty service provisions in the act apply to manufacturers that make express warranties for their products. 12 Viewing the manufacturer as ulti- mately responsible for the quality of its goods, the act effectively provides the manufacturer with three means of addressing warranty claims. First, under Civil Code Section 1793.2(a)(1)(A), the manufacturer can maintain “sufficient service and repair facilities [that are] reasonably close to all areas where their consumer goods are sold to carry out the terms of those warranties….” For purposes of comparison, this option may be described as maintaining the manufacturer’s own repair facilities. Second, under the same section, the manufacturer can “designate and authorize in this state…independent service and repair facilities reasonably close to all areas where its consumer goods are sold to carry out the terms of the warranties.”13 This option may be described as contracting with independent facilities. If the manufacturer chooses either of these two options, Sections 1793.2(a)(1)(B) and 1793.3 provide general parameters for compensation of the facilities. As a third option, under Section 1793.2(a)(2) the manufacturer can choose what is characterized in the statute as a failure to act. Under this option, the manufacturer simply allows retailers to address warranty complaints. Under this choice, Section 1793.5 imposes liability on the manufacturer to the retailer that, without a formal service contract with the manufacturer, handles the claim. This option may be described as letting the retailers handle the claims. Under Section 1793.5, if a retailer “gives effect” to the manufacturer’s express warranties for its consumer goods, the manufacturer is liable to the retailer as follows: If a replacement of product is involved, “in an amount equal to the actual cost to the retail seller of the replaced goods, and cost of transporting the goods, if such costs are incurred plus a reasonable handling charge”; if the product is ser viced and repaired, “in an amount equal to that which would be received by the retail seller for like service rendered to retail consumers who are not entitled to warranty protection, including actual and reasonable costs of the service and repair and the cost of transporting the goods, if such costs are incurred, plus a reasonable profit.”14 Although the act does not require the manufacturer “to rent one foot of space or to hire one employee,”15 its requirements certainly impose a burden on the manufacturer.16 At worst, an out-of-state manufacturer could be obliged to sell its products without an express warranty.17 Indeed, a major manufacturer warned Governor Ronald Reagan before he signed the bill into law that it would “encourage harassment of legitimate manufacturers by some unscrupulous groups.”18 Other manufacturers decried the responsibility that they would bear for the errors and poor installation practices of dealers.19 Higher prices to consumers were also predicted to result from the act.20 However, these dire warnings were insufficient to prevent passage, and in reality, the burden of compliance can be minimal. Many manufacturers are able to comply with the act under the second option of contracting with independent facilities. In this manner, a manufacturer can create a statewide network of authorized retailers (a dealer network) that can adequately respond to consumer warranty complaints. In determining whether a dealer network complies with the act, courts may consider a variety of factors: the nature of the product; the language of the manufacturer’s express warranty; the operations of the dealer and services available; the dealer locations within a given geographic area; and the relationships among the manufacturer, the dealer, and the consumer—including their course of conduct in handling claims. Compliance through a retailer or dealer network allows a manufacturer to control the process for warranty claims handling and, potentially, to control the costs of service and repair. The act provides that if the manufacturer elects to designate repair facilities (option two), it may enter into warranty service contracts with the facilities.21 The contracts may provide for a fixed schedule of rates to be charged for warranty service or repair work. However, Section 1793.3 requires that these contracts contain terms that are remarkably similar (but not identical) to the provision in Section 1793.5, which describes the cost structure of the third option of letting the retailers handle the claims. Under this section, the manufacturer is required to reimburse the retailer at the same rate that the retailer receives for nonwarranty work. That is, if the manufacturer wishes to enter into contracts with its service and repair facilities, the contracts must essentially provide for reimbursement of the same items that are reimbursable under Section 1793.5.22 Curiously, the only terms in Section 1793.3(c) relating to the service contract provision concern service and repair of a defective product, not its replacement. Replacements have a slightly dif ferent compensation structure under Section 1793.5. While Section 1793.3 denies manufacturers complete freedom in negotiating their contracts with ser vice facilities,23 the law allows some leeway in negotiations between the manufacturer and the retailer. At the very least, the manufacturer is able to achieve some degree of certainty and limitation of its exposure for warranty claims handling by negotiating with independent service facilities or using its own service facilities. If the manufacturer chooses the third option—not to maintain service facilities in California—it is required to reimburse the retailer at the same rate the retailer receives for nonwarranty work. The intent of this part of the act is to “encourage manufacturers to provide service facilities in California.”24 Section 1793.2(a)(1)(B) provides only that a manufacturer “may” comply with the instate service and repair facility requirement by entering into service contracts. This permissive language leaves open the possibility that a manufacturer may comply with the service and repair facility requirement by means other than entering into fixed-rate contracts. Whatever type of contracts are employed, however, they must comply with Section 1793.3(c), which adopts some of the language of Section 1793.5, which covers the liabilities of manufacturers that choose to let the retailers handle the claims. Presumably, a manufacturer could enter into a contract but omit a fixed rate provision, thus avoiding Section 1793.3(c). If a manufacturer did so, however, the retailer could argue that the manufacturer is not free to negotiate around the terms of Section 1793.5, because the act states that any waiver of liability is unenforceable.25 Triggering Liability Two events trigger a manufacturer’s liability: product replacement and product repair. If a product is replaced, the manufacturer’s liability is equal to the cost of the replaced item, the cost of transportation, and a “reasonable handling charge.”26 While the first two costs appear straightforward, the term “reasonable handling charge” is not defined in the act, nor does legislative history shed much light on the term’s meaning. The manufacturer and the retailer may have differing views of what constitutes a reasonable handling charge. Factors to consider include the nature of the product, the nature of the defect and consumer claim, and the amount of time the retailer spends dealing with the consumer (receiving the claim) and the manufacturer (securing a replacement or a credit). The manufacturer’s role in the replacement process (including whether a manufacturer’s representative is available for consultation or direct handling) should also be considered. Of greater concern to manufacturers is the second event upon which their liability may be based—product service or repair. In that case, the manufacturer is liable for the amount the retail seller would receive “for like services rendered to retail consumers who are not entitled to warranty protection” including the “actual and reasonable costs” of the repair, transportation costs, and a “reasonable profit.”27 As with “reasonable handling charges,” the term “reasonable profit” is not defined in the act, but it clearly seeks to place some limitation on the manufacturer’s liability by equating the compensation to the rate the retailer would charge to a nonwarranty customer. The rationale of a similar limitation was examined in a case in Maine in which car dealers brought an action against Ford Motor Company protesting its war ranty reimbursement practices.28 In language similar to the California law, the Maine warranty claims statute obligates the franchisor to reimburse the franchisee for any parts used for warranty work at the retail rate that is customarily charged by that franchisee for the LOS ANGELES LAWYER / FEBRUARY 2004 11 same parts when they are not provided in satisfaction of a warranty.29 The court rejected the dealers’ suggestion the statute was intended to protect them rather than the consumer. The court stated that “warranty reimbursement levels would be at retail rates, in order to prevent nonwarranty customers from being charged prices much higher than the customary retail rates. Therefore, if anything, the statute was arguably meant to protect nonwarranty consumers from inflated prices charged by dealers that are attempting to maintain their average profit margins in the face of a manufacturer’s below-retail reimbursement rates.”30 Likewise, the California law is principally a consumer protection statute. It should be interpreted to protect all customers, whether or not service is provided under a warranty. Thus, the manufacturer liability provision should be interpreted to limit the dealer’s ability to charge excessive rates to the manufacturer so that the rates are not excessive when charged to the nonretail customer. This provision should therefore normalize rates charged to all consumers.31 Ironically, the act relies on the relationship between retailers and nonwarranty customers to limit the liability of manufacturers arising from warranty customers’ claims. Precisely what constitutes a “reasonable profit” for purposes of servicing and repairing a defective product can be subject to different readings. On the one hand, the actual and reasonable costs plus a reasonable profit could be read to mean a rate equal to that charged to nonwarranty customers. On the other, it could be read literally to mean the retailer may recover each separate, reimbursable item, plus a reasonable profit. No case has decided which interpretation is correct. Nevertheless, in determining which interpretation is appropriate in a given set of circumstances, a court should consider a number of factors: the type of product, the nature of the complaint, the amount of time and resources devoted to addressing the complaint, the costs incurred in repairing the defect, the involvement of the manufacturer in resolving the consumer’s complaint, industry custom and practice, and the cost of the product. In some cases, it may even be necessary to examine more detailed information concerning the retailer and its usual business operations to determine what may constitute a reasonable profit. Suppose a retailer sold and installed a defective product, making a profit of $100. The consumer reports a product defect covered by the warranty. If the retailer replaces the product, should the retailer receive another $100 profit on the replacement? Permitting such a profit would 12 LOS ANGELES LAWYER / FEBRUARY 2004 be a windfall. Costs that went into making the original sale (e.g., fixed overhead, advertising and marketing, floor time and miscellaneous transaction costs) would not necessarily be associated with the replacement transaction. This is because the retailer’s activities in handling a warranty complaint are different from its activities leading to the original sale. For instance, although an original sale may result from an advertisement, an unrelated warranty complaint seldom would. To avoid this potential problem, the manufacturer and the retailer may reach an agreement for a flat fee that would apply to every claim handled, similar to the approach for a handling charge. These flat fees are often a fixed percentage of the cost of the product, the actual labor cost, or even a flat monthly fee to cover all warranty work. If the claims history is adequate, such a fee could be reasonably negotiated. The problem with this approach, for the manufacturer and the retailer, is that claims handling is by nature case-specific. Many industries and products do not lend themselves to such broad formulas. Because of the disparities from one claim to the next and from retailer to retailer, the one-size-fitsall approach may not be workable. Perhaps the most sensible approach is to handle the claims on a case-by-case basis. When every claim is different, this approach benefits both parties because it allows them to examine the costs of warranty claims for particular products and the specific complaints that arise in connection with those products. However, such a case-specific examination carries with it the time and expense of claims examination and adjustment. These costs may exceed those caused by the inefficiency of a flat fee arrangement. Other Potential Problems To the extent a manufacturer’s product requires professional installation by the retailer, the manufacturer relies on the retailer in at least two ways: first, to detect any visible manufacturing defects prior to installation to avoid incurring costs and to avoid consumer aggravation; and second, to install the product according to applicable industry standards. Regarding the first issue—the detection of defects—cases may arise in which the retailer, as installer, may overlook a defect and proceed with installation. This may occur for a variety of reasons, ranging from an impatient consumer to the retailer’s negligence. The failure to detect defects unfortunately results in a potential liability to the manufacturer. For when the consumer submits a valid warranty complaint, the manufacturer may be obligated to either replace or service the product and compensate the retailer that installed the product, including a reasonable handling charge or reasonable profit. Thus, the law can provide an incentive for unscrupulous retailers and installers to overlook defects and install defective products. Doing so permits them to realize their profit on the original transaction and then generate a second compensation for handling the warranty claim that could have been avoided. Some manufacturers’ policies may provide that if a retailer installs a visibly defective product, the retailer is deemed to have accepted conforming goods.32 Regardless of whether a manufacturer maintains this policy, however, under the act, visible defects in an installed product may be a defense to a subsequent claim by the retailer for compensation. On the second issue, a retailer may be motivated to shift the blame for a product’s malfunction to the manufacturer, when in reality the consumer’s complaint can be traced to an installation error. To abuse the process, retailers may ignore installation standards in order to create profits through service calls. The notice provisions in the act are also fodder for dispute. Retailers are supposed to put manufacturers on notice of their purpor ted liability under Section 1793.5. However, the act does not specify a mechanism to do so. The problem arises because on the one hand the act states that its provisions cannot be waived,33 but on the other hand, the manufacturer is arguably entitled to rely on the course of business between it and the retailer, including whether the retailer actually submits a claim to the manufacturer for compensation under the act within a reasonable period of time. In an Ohio case, a dealer filed a complaint against Nissan Motor Corporation, alleging among other things that its warranty compensation policy violated the statute that governed warranty claims handling by dealers.34 Similar to the California law, the Ohio statute obligated the franchisor to compensate its franchisees for labor and parts used to fulfill warranties at the rates that the franchisee charged its retail customers for similar nonwarranty work.35 Nissan’s warranty manual set the rate at which Nissan would compensate its dealers for labor costs at the dealer’s retail customer labor rate and provided that reimbursement for parts would be at the dealer’s net cost plus a markup. The dealer contended that Nissan’s policy violated the statute, since it charged different markups on parts.36 The court rejected the claim. It recognized that the statute on its face imposed an affirmative duty on Nissan to pay retail rates for parts used in warranty service. But only if the dealer had actually made a claim for the Focused on Ingenuity Rutter Hobbs & Davidoff is a leader in intellectual property law. We guide our clients through the maze of federal and state laws governing the commercial use, registration, licensing and, in some cases, alleged infringement of trademarks, trade secrets, patents and copyrights. In both transactions and litigation, our attorneys take timely, effective and economical steps to identify and protect our clients' rights. 1900 Avenue of the Stars Suite 2700 Los Angeles CA 90067-4301 Tel: (310) 286-1700 www.rutterhobbs.com LOS ANGELES LAWYER / FEBRUARY 2004 13 MAKE WRONGFUL TERMINATION A PROFIT CENTER! Danz & Gerber will handle your referrals. National origin, age, sex, race, retaliation, federal false claims on behalf of employees. Please call to discuss your referral with senior partner Steve Danz. Statewide, main office in Sherman Oaks. (818) 783-7300. All fees paid in accordance with Rules of Professional Responsibility. 14 LOS ANGELES LAWYER / FEBRUARY 2004 retail rate and Nissan subsequently refused to honor that claim could the court have found a violation of the statute; in this case however, the dealer had not previously made a claim. The dealer argued that the statute nevertheless imposed a duty on Nissan to determine the dealer’s rates and to examine the claims submitted by the dealer to determine whether it was charging Nissan the correct amount. The dealer argued that with each claim, Nissan was obligated to review the claims that the dealer had submitted previously and, if the new claim was for less than the established standard, send the dealer a check for the difference. The court rejected that contention, interpreting the statute “as first requiring the dealer to present the appropriate claim to the manufacturer, and then requiring that the manufacturer pay the presented claim. It is an axiom of judicial interpretation that statutes be construed to avoid unreasonable or absurd consequences.”37 California appears to follow a key aspect of that court’s reasoning—specifically, that a claim under the act imposes a burden of “presentation” on the retailer. For example, in a recent case, after multiple efforts failed to fix a chronic automobile oil leak, a consumer filed a claim against Isuzu under the act for refusal to repurchase the car.38 In upholding an award against the manufacturer, the court reviewed the necessary elements of a plaintiff’s claim. These included a requirement that the vehicle be presented to the manufacturer for repair and the failure of the manufacturer to repair the nonconformity.39 The burden is on consumers to permit the manufacturer a “reasonable oppor tunity” to respond appropriately to the consumer’s claim. A potential plaintiff must first meet the so-called presentation element by presenting the problem to the manufacturer.40 In the Maine case, the court agreed with Ford’s argument that the dealers are first obligated to present an “adequately particularized claim” before bringing a lawsuit. The claim would need to inform the manufacturer of the pertinent facts and enable it to determine whether the claim should be approved or denied.41 These cases and reasonable statutory construction support the argument that before a retailer can sue for an alleged violation of the act, it must first present a particularized claim to the manufacturer.42 Some tension will exist between the presentation burden and the statute of limitations that has been held applicable to claims brought under the act.43 Manufacturers that sell goods in California backed by express warranties are well advised to examine the language of their warranties and their warranty claims compensation policies to make sure they are consistent with the Song-Beverly Consumer Warranty Act.44 In addition to their written terms, manufacturers should review their practices and procedures in the field. While compliance may add to the cost of doing business, a manufacturer’s long-term interests will be better served by minimizing exposure to litigation under the act and increasing goodwill in the consumer and retailer marketplace. ■ 1 Interview with Sean McCarthy in Sacramento, Cal. (June 26, 2003). McCarthy, who wrote the initial draft of the act, was Senator Alfred H. Song’s intern. 2 Murillo v. Fleetwood Enters., 17 Cal. 4th 985, 990 (1998); Kwan v. Mercedes Benz of N. Am., Inc., 23 Cal. App. 4th 174, 184 (1994); Jensen v. BMW of N. Am., Inc., 35 Cal. App. 4th 121 (1995). 3 Reveles v. Toyota By The Bay, 57 Cal. App. 4th 1139, 1154 (1997); telephone interview with Richard Thomson (July 28, 2003). Thomson was Song’s administrative assistant. 4 Kwan, 23 Cal. App. 4th at 184. 5 An express warranty is defined as a written statement in which the manufacturer “undertakes to preserve or maintain the utility or performance of the consumer good or provide compensation if there is a failure.…” CIV. CODE §1791.2(a). 6 Letter from Senator Alfred H. Song to Governor Ronald Reagan (Aug. 24, 1970). 7 CIV. CODE §1791(a). 8 CIV. CODE §1791(j). 9 CIV. CODE §1791(l); see also Atkinson v. Elk Corp., 109 Cal. App. 4th 739 (2003); and National R.V., Inc. v. Foreman, 34 Cal. App. 4th 1072, 1082 n. 11 (1995). California State Elecs. Ass’n v. Zeos Int’l, Ltd., 41 Cal. App. 4th 1270 (1996). 11 Cummins v. Superior Court, 109 Cal. App. 4th 1385 (2003) (ordered depublished), cert. granted, Cal. Sup. Ct. Case No. S117726 (Sept. 8 2003). 12 Civ. CODE §1793.2(a). 13 CIV. CODE §1793.2(a)(1)(A). The act defines “independent service and repair facility” as an individual or entity, not a manufacturer employee, that engages in the business of servicing and repairing consumer goods. CIV. CODE §1791(f). 14 CIV. CODE §1793.5. 15 Memorandum from Senator Song to Assembly Committee on Commerce and Public Utilities (Aug. 3, 1970). 16 In Song’s words, the bill imposes a burden on manufacturers, but only if they choose “to issue an express warranty and receive the benefit therefrom. If [they want] the benefit, the bill requires [manufacturers] to accept the related responsibility.” Letter and attachment from Senator Alfred H. Song to Governor Ronald Reagan (Aug. 24, 1970). 17 Id. 18 Telegram from Westinghouse Consumer Relations to Governor Ronald Reagan (Sept. 1, 1970). 19 Telegram from Zero Manufacturing Company to Governor Ronald Reagan (Sept. 10, 1970); Telegram from Day & Night Manufacturing Company to Governor Ronald Reagan (Aug. 21, 1970); Telegram from Zero Climate Manufacturing Company to Governor Ronald Reagan (Sept. 4, 1970). 20 Telegram from Arvin Industries to Governor Ronald Reagan (Aug. 28, 1970). 21 CIV. CODE §1793.2(a)(1)(B). 22 CIV. CODE §1793.3(c). 10 23 CIV. CODE §1793.2(a)(1)(B). Letter from Richard Thomson to Joseph Sedota (Sept. 21, 1971). 25 CIV. CODE §§1790.1, 1793.3(c). 26 CIV. CODE §1793.5(c). 27 CIV. CODE §1793.6. 28 Acadia Motors, Inc. v. Ford Motor Co., 844 F. Supp. 819 (D. Me. 1994), rev’d in part, 44 F. 3d 1050 (1st Cir. 1995). 29 Id., 844 F. Supp. at 822 n.1 (citing 10 M.R.S.A. §1176). 30 Id. at 1056 n. 9. 31 See also Jim White Agency Co. v. Nissan Motor Corp., 126 F. 3d 832, 836 (6th Cir. 1997). 32 See, e.g., COMM. CODE §2606. 33 See, e.g., CIV. CODE §1793.3. 34 Jim White Agency Co., 126 F. 3d 832. 35 Id. at 835-36. 36 Id. at 833. 37 Id. at 836. See also CIV. CODE §3542. 38 Oregel v. American Isuzu Motors, Inc., 90 Cal. App. 4th 1094 (2001). 39 Id. at 1101. 40 Id. at 1103. 41 Acadia Motors, Inc. v. Ford Motor Co., 844 F. Supp. 819, 828 (D. Me. 1994), rev’d in part, 44 F. 3d 1050 (1st Cir. 1995). 42 Murillo v. Fleetwood Enters., Inc., 17 Cal. 4th 985, 990 (1998). 43 Claims under the act are subject to a four-year statute of limitations. Krieger v. Nick Alexander Imports, Inc., 234 Cal. App. 3d 205 (1991). 44 The act did not trigger a nationwide trend. Only a few states—including Minnesota, Oregon, New Hampshire, and Rhode Island—have statutes that compare closely with the act. Many other states have similar statutes that are limited to motor vehicles. 24 LOS ANGELES LAWYER / FEBRUARY 2004 15 practice tips By Christopher Q. Pham The Learned Intermediary Doctrine and DTC Advertising Prescription drug adequate warnings regarding the use of the product and its risks. manufacturers may In its defense, a drug manufacturer invariably argues that it face added liability is shielded from liability under the learned intermediar y docfor ads directed trine, which is predicated on the cherished physician-patient relaat consumers tionship. Nevertheless, the courts have continued to struggle with the applicability of the learned oday, most people are intermediary doctrine under ciraccustomed to seeing cumstances in which drug manadver tisements for pre- ufacturers advertise directly to scription dr ugs during their the consumer. Who has the duty favorite television shows.1 These to adequately war n the conadvertisements feature prescrip- sumer—the physician under the tion dr ugs of all types, from learned intermediary doctrine or allergy medications to pills for the dr ug manufacturer that erectile dysfunction. According engages in DTC advertising? After decades of advertising to the U.S. General Accounting Office, an estimated 8.5 million only to health professionals, drug U.S. residents per year receiving manufacturers first sought apprescription dr ugs asked for proval from the Food and Drug them by name from their physi- Administration in 1983 to advercians after seeing an advertise- tise directly to the consumer ment. 2 Many people also are through broadcast media, including telecommuniaware that prescripChristopher Q. Pham cations and televition drugs may be is an associate in the sion. 3 A two-year purchased via the Products Liability Internet. voluntar y moraDepartment of the Direct-to-consutorium on DTC adLos Angeles office of mer (DTC) adververtising ensued, Sedgwick, Detert, tising by dr ug which the FDA Moran & Arnold LLP. manufacturers is lifted on September Two partners at the relatively new and, 9, 1985, stating that firm, Ralph Campillo not surprisingly, existing laws adeand Steven Di Saia, has sparked myrquately addressed assisted with this iad legal issues and the legal issues article. lawsuits. Indeed, if involving DTC ada prescription drug vertising.4 or medical device Federal regulacauses personal injury, plaintiffs tions distinguish print from typically seek a deep pocket and broadcast advertising.5 Under sue the manufacturer, employing Section 502(n) of the Food, Drug, a variety of legal theories and and Cosmetic Act, print adverclaims. These theories most often tisements for prescription drugs include the allegation that the and medical devices must include manufacturer failed to provide what Section 502(n) terms a T 16 LOS ANGELES LAWYER / FEBRUARY 2004 “brief summar y” containing a product’s indications, contraindications, and effectiveness.6 The brief summary requirement is easily satisfied by placing in an ad the warning language of the inserts found in FDA-approved labeling. In contrast, broadcast advertising (including radio, television, and the Internet) must contain the brief summary and what is termed a “major statement” presenting the results of clinical testing and the product’s major side effects.7 Until recent regulatory changes, the disclosure requirements of the brief summar y and the major statement made DTC advertising costprohibitive for drug manufacturers due to the limited space and time available to fulfill the requirements. In August 1999, the FDA issued its Guidance for Industry: Consumer-Directed Broadcast Advertisements.8 Instead of the brief summar y and the major statement, the FDA’s guidance suggests that DTC broadcast advertising, which is product specific, contain an “adequate provision,”9 which must include four elements: 1) a toll-free telephone number for consumers to obtain product information, 2) identification of a current publication that contains a summary of FDAapproved labeling for the product, 3) a statement advising consumers to consult with their health care provider, and 4) an Internet Web site address that contains product information.10 The object of the adequate provision is to ensure that consumers are informed of various resources to which they can refer for information that is required in the brief summary and major statement. By complying with the adequate provision prong in the FDA’s guidance, drug manufacturers essentially can satisfy the brief summary and major statement requirements and do so in a cost-effective manner. Thus the adequate provision provided the impetus for drug manufacturers to launch full-scale DTC advertising programs in broadcast media. Exceptions to the Doctrine Under the learned intermediary doctrine, a drug manufacturer only has the duty to provide warnings to the physician—not the patient—of foreseeable health risks associated with a drug.11 Clearly a physician is in the best position to understand a patient’s medical needs and to assess the benefits and risks posed by a particular drug.12 Thus, the physician is the “learned intermediary” between the drug manufacturer and the patient and is responsible for providing the necessary warnings to the patient.13 The learned intermediar y doctrine and its public policy implications have been adopted by “an overwhelming number of jurisdictions,” including California.14 With the publication of the Restatement (Third) of Torts in 1997, the American Law Institute adopted the learned intermediar y doctrine, but with several exceptions. 15 Specifically, the manufacturer may have a duty to warn the consumer directly if there is a “limited therapeutic relationship” between the physician and the patient, such as when “the physician or other health-care provider has a much-diminished role as an evaluator or decision-maker.”16 One specifically cited example in the restatement is the “administration of a vaccine in clinics where mass inoculations are performed.”17 The dilution of the physician-patient relationship when vaccines are dispensed at a clinic “without [the physician providing] the sort of individualized medical balancing of risks to the vaccinee” defeats the objective of the learned intermediary doctrine.18 However, outside the realm of mass immunizations in clinical settings, when a vaccination is performed by a physician who consults with the patient, the doctrine remains applicable and the drug manufacturer need only warn the physician.19 Courts also have carved out exceptions to the doctrine. Various courts have refused to apply the learned intermediary doctrine in personal injury actions involving oral contraceptives. The learned intermediary doctrine is inapplicable in that context because 1) the patient, not the physician, chooses to take the contraceptive, 2) minimal physicianpatient consultation is required, and 3) oral contraceptives are already federally regulated to a great extent, which ensures that a patient choosing to take oral contraceptives is doing so with informed consent.20 However, courts are split on whether to apply the learned intermediary doctrine to cases involving intrauterine devices (IUDs). The Fourth and Sixth Circuits have held that since IUDs are only available through a doctor’s prescription, the learned intermediary doctrine applies,21 but the Eighth Circuit has held that “IUDs, like other forms of birth control, are atypical from most prescription drug products because the treating physician generally does not make an intervening, individualized medical judgment in the birth control decision.”22 Additionally, when a drug manufacturer engages in excessive marketing of a drug or deemphasizes a drug’s side effects, courts have found that the manufacturer has waived the protection under the learned intermediary doctrine. In Stevens v. Parke, Davis & Company, the California Supreme Court held that “an adequate warning to the profession may be eroded or even nullified by over promotion of the drug through a vigorous sales program which may have the effect of persuading the prescribing doctor to disregard the warnings given.”23 The court found that the drug manufacturer encouraged its sales force to promote the drug by making personal visits to physicians’ offices, during which no verbal war nings were given, although written warnings were included in the brochures that were distributed to the physicians.24 The Stevens court further found that the drug manufacturer’s promotional “giveaways”—samples of the drug—also failed to include warnings of the drug’s side effects and contraindications.25 The court held that although a drug manufacturer may be in strict compliance with regulations and directives promulgated by the FDA, this compliance “[is] only minimal in nature and when the manufacturer or supplier knows of, or has reason to know of, greater dangers not included in the warning, its duty to warn may not be fulfilled.”26 The court found that the drug manufacturer “watered down” its warnings by overpromoting its drug with samples that hailed the effectiveness of the drug without mentioning the drug’s side effects.27 The Doctrine and DTC Is there a DTC exception to the learned intermediary doctrine? One court in one state says that there is: The New Jersey Supreme Cour t, in Perez v. Wyeth Laboratories, 28 accepted the invitation of the American Law Institute in the Restatement (Third) of Torts to rule on this issue. The restatement first summarizes the arguments for and against applying the learned intermediary doctrine to DTC advertising: Those who assert the need for adequate warnings directly to consumers contend that manufacturers that communicate directly with the consumers should not escape liability simply because the decision to prescribe the drug was made by the health-care provider. Proponents of the learned intermediary rule argue that, notwithstanding direct communications to the consumer, drugs cannot be dispensed unless a health-care provider makes an individualized decision that a drug is appropriate for a particular patient, and that it is for the health-care provider to decide which risks are relevant to the particular patient.29 The drafters of the Restatement (Third) of Torts ultimately refused to take a position on the debate and instead left it to “developing case law” to decide the fate of the learned intermediar y doctrine in connection with DTC advertising.30 Shor tly after the publication of the Restatement (Third) of Torts, the Fifth Circuit Cour t of Appeals in In re Norplant Contraceptive Products Liability Litigation rejected the DTC exception to the learned intermediary rule.31 The court was not persuaded by the plaintiffs’ argument that the “physician’s reduced role” in selecting a form of contraceptive for patients “invalidates the rationale of the learned intermediary doctrine because the patient cannot rely on the physician to provide an adequate warning.”32 The court held: Although it may be true that physicians may seek to provide greater freedom to their patients in selecting an appropriate form of contraception, Norplant is nevertheless a prescription drug. The record makes it clear that physicians play a significant role in prescribing Norplant and in educating their patients about the benefits and disadvantages to using it. [The plaintif fs’] argument therefore is unavailing.33 Less than three months after that opinion, in another case involving Norplant implants, the Perez court adopted the DTC exception to the learned intermediary doctrine.34 In Perez, the New Jersey Supreme Court held that the learned intermediary doctrine is inapplicable when prescription drugs are directly marketed to the consumer. The court found that DTC advertising “alters the calculus of the learned intermediary doctrine.”35 The court held that since Wyeth Laboratories directed its advertising campaign for Norplant—a contraceptive capsule implanted under the skin— at women, rather than physicians, the concept of the traditional physician-patient relationship does not apply. The Perez court held that the justifications for applying the learned intermediary doctrine—the complexity of the product information, the physician’s superior capability to communicate complex information, the manufacturers’ inability to communicate personally with an individual patient in order to understand the patient’s unique medical condition, and judicial reluctance to intrude on physician-patient relations—are eroded when a manufacturer communicates directly with the consumer.36 The court reasoned that the fact that drug manufacturers are choosing to communicate directly with consumers, rather than physicians, invalidates the notion that a physician, not a patient, decides whether a product should be used. Also, the court found that DTC advertising undermines the physician-patient relationship even when the advertising encourages consumers to consult first with a physician. Lastly, since the FDA requires detailed warnings in the package inserts of prescription drugs, the consumer may reasonably presume that such warnings are adequate.37 Therefore, the Perez court reasoned that a drug manufacturer who advertises directly to consumers cannot hide behind the shield of the learned intermediary doctrine if that manufacturer fails to provide adequate warnings to consumers. However, the Perez court also held that if the drug manufacturer complied with FDA labeling and advertising requireLOS ANGELES LAWYER / FEBRUARY 2004 17 Judgments Enforced Law Office of Donald P. Brigham 23232 Peralta Dr., Suite 204, Laguna Hills, CA 92653 P: 949.206.1661 F: 949.206.9718 [email protected] 18 LOS ANGELES LAWYER / FEBRUARY 2004 AV Rated ments, the manufacturer is entitled to a rebuttable presumption that the warning was adequate. The court cautioned that drug manufacturers should not be made the “guarantors against remotely possible, but not scientifically-verifiable, side-effects of prescription drugs, a result that could have a ‘significant anti-utilitarian effect.’” Thus a drug manufacturer’s compliance with FDA standards and regulations is dispositive of any claim of liability.38 While Perez was the first court to adopt the DTC exception to the learned intermediary doctrine, it also reinforced the rule that a manufacturer of a prescription drug or medical device is not required to warn a physician of ever y conceivable risk. 39 In Brown v. Superior Court, the California Supreme Court adopted the Restatement (Second) of Torts, Section 402A, Comment k by holding that manufacturers of prescription drugs or medical devices can only be liable under a products liability theory if they are found to have failed to warn of known dangers or dangers about which the manufacturers should have known. 40 A product manufacturer is not required to warn of risks that are unknown or risks that are commonly known to the medical community.41 Additionally, if a physician has specific knowledge of a risk associated with a drug or medical device, there is no liability to the manufacturer for a failure to warn because the manufacturer is not the cause of the injur y.42 California courts have since extended the Brown exception and granted Comment k protection specifically to all implanted medical devices that may only be sold to, or on the order of, physicians.43 As a matter of public policy, unless drug manufacturers are shielded from liability against claims of inadequate warning, the costs of litigating these claims would shift to the consumer and would thus make life-saving and life-improving drugs unaffordable.44 No other cour t has adopted the DTC exception recognized in Perez, so the influence of this one opinion remains to be seen. Presently, with the exception of New Jersey, 49 states, as well as the District of Columbia and Puerto Rico, have not addressed the applicability of the learned intermediary doctrine to DTC adverting.45 As the drafters of the Restatement (Third) of Torts noted, whether a DTC exception to the learned intermediary doctrine is adopted should be left in the hands of the courts. To date, most jurisdictions, including California, still support the traditional notion that the physician is the learned intermediary between the manufacturer and the patient, with few exceptions. Manufacturers, doctors, and consumers in California and the other jurisdictions in which courts have been silent about a DTC excep- tion must continue to wait for judicial guidance on this issue. ■ 1 In a recent survey of television viewers, 30 percent reported that they spoke to their physicians regarding a specific prescription drug they saw in a television advertisement. Among the 30 percent, 44 percent reported that their physicians prescribed the drug they requested. Kaiser Family Foundation, New Reports Show Impact of Direct-to-Consumer Advertising and Trends in Prescription Drug Spending and Utilization (Nov. 2001), available at http://www.kff.org/content /2001/20011129a/ (last visited Mar. 29, 2003). 2 Aparna Kumar, Doctors Split on Usefulness of Drug Advertising, L.A. TIMES, Jan. 14, 2003, at 12. 3 Lance S. Gilgore, A Consideration of Direct-to-Consumer Advertising of Prescription Drugs and Potential Legal Problems with the Brief Summary Requirement: Is the FDA’s Regulatory Authority Illusory?, 46 FOOD DRUG. COSM. L.J. 849, 851 (1991). 4 Direct-to-Consumer Advertising of Prescription Drugs; Withdrawal of Moratorium, 50 Fed. Reg. 36677 (Sept. 9, 1985). The moratorium was the result of the FDA’s request for further investigation and discussion of the effects on consumers of DTC advertising as they relate to existing FDA standards and regulations. 5 21 C.F.R. §202.1. 6 21 U.S.C. §352(n); 21 C.F.R. §202. 7 21 C.F.R. §202.1(e)(1). 8 Center for Drug Evaluation and Research, Food and Drug Administration, Guidance for Industry: ConsumerDirected Broadcast Advertisements (Aug. 1999), available at http://www.fda.gov. 9 Id. 10 Id. 11 Carlin v. Superior Court of Sutter County, 13 Cal. 4th 1104, 1126 (1996). 12 Carmichael v. Reitz, 17 Cal. App. 3d 958, 989 (1971). 13 See Sterling Drug, Inc. v. Cornish, 370 F. 2d 82, 85 (8th Cir. 1966) (in which a court first used the term “learned intermediary” to describe the role of the physician in the tripartite relationship between the drug manufacturer, the physician, and the patient. The court held that the drug manufacturer had a duty to warn the learned intermediary, not the patient, of a drug’s side effects.). 14 Pumphrey v. C.R. Bard, Inc., 906 F. Supp. 334, 338 (N.D. W.Va. 1995); Carmichael, 17 Cal. App. 3d at 989. 15 RESTATEMENT (THIRD) OF TORTS, Products Liability §6(d) (1997). 16 Id. at §6, cmt. b. 17 Id. at §6, cmt. e; see, e.g., Brazzell v. United States, 788 F. 2d 1352, 1358-59 (8th Cir. 1986) (The government was directly liable to the consumers for failure to warn that prolonged muscle soreness is a possible side effect of swine flu vaccine.); Davis v. Wyeth Labs., 399 F. 2d 121, 130 (9th Cir. 1968) (Manufacturer of polio vaccine was directly liable to consumers for failure to warn that contracting polio is a side effect of polio vaccine.). 18 Reyes v. Wyeth Labs., 498 F. 2d 1264, 1276 (5th Cir. 1974), cert. denied, 419 U.S. 1096 (1974). 19 Plummer v. Lederle Labs., 819 F. 2d 349, 356-7 (2d Cir. 1987), cert. denied, 484 U.S. 898 (1987). 20 Stephens v. G.D. Searle, 602 F. Supp. 379, 380-81 (E.D. Mich. 1985); Odgers v. Ortho Pharm. Corp., 609 F. Supp. 867, 874-75, 878-79 (E.D. Mich. 1985). 21 Odom v. G. D. Searle & Co., 979 F. 2d 1001 (4th Cir. 1992); Beyette v. Ortho Pharm. Corp., 823 F. 2d 990 (6th Cir. 1987). 22 Hill v. Searle Labs., 884 F. 2d 1064, 1070 (8th Cir. 1989). 23 Stevens v. Parke, Davis & Co., 9 Cal. 3d 51, 65 (1973). Id. at 58. 25 Id. 26 Id. at 65. 27 Id. at 66. 28 Perez v. Wyeth Labs., 734 A. 2d 1245, 1248-49 (N.J. 1999). 29 RESTATEMENT (THIRD) OF TORTS, Products Liability §6, cmt. e (1997). 30 Id. 31 In re Norplant Contraceptive Prods. Liab. Litig., 165 F. 3d 374, 378-79 (5th Cir. 1999). 32 Id. at 379. 33 Id. 34 Perez v. Wyeth Labs., 734 A. 2d 1245, 1248-49 (N.J. 1999). 35 Id. at 1254. 36 Id. at 1255. 37 Id. at 1256. 38 Id. at 1259. 39 Plenger v. Alza Corp., 11 Cal. App. 4th 349, 362 (1992). 40 Brown v. Superior Court, 44 Cal. 3d 1049, 1068-69 (1989). 41 Carlin v. Superior Court of Sutter County, 13 Cal. 4th 1104, 1116 (1996). 42 Plenger, 11 Cal. App. 4th at 362. 43 See, e.g., Artiglio v. Superior Court, 22 Cal. App. 4th 1388, 1396-97 (1994) (breast implants); Hufft v. Horowitz, 4 Cal. App. 4th 8, 16-17 (1992) (penile implants); Plenger, 11 Cal. App. 4th at 362 (IUDs). 44 Brown, 44 Cal. 3d at 1065-66. 45 Allen Wong, Recent Developments in Health Law: Harvard Law & Health Care Society: Products Liability: The Fate of the Learned Intermediary Doctrine, 30 J.L. MED. & ETHICS 471 (Fall 2002). 24 IMMIGRATION CONSULAR PROCESSING EMPLOYER SANCTIONS (I-9) DESIGN CORPORATE IMMIGRATION POLICIES EXPERT TESTIMONIAL SERVICES TEMPORARY WORK VISAS Intra-Company Transfers Entertainers & Sports Professionals NAFTA (North American Free Trade Agreement) Visas Professionals & Investors Blue/White Collar Employee Immigration Assistance LAW LABOR CERTIFICATIONS FAMILY RELATED PETITIONS OUTBOUND VISA CAPABILITY IMMIGRATION RELATED DUE DILIGENCE in Mergers & Acquisitions & Corporate Restructuring Don’t Play Around When I t C o m e s To I m m i g r a t i o n L a w Newport Beach 4685 MacArthur Court, Suite 400 Newport Beach, CA 92660 phone 949-251-8844 fax 949-251-1545 email [email protected] AV Rated Los Angeles 6310 San Vicente Blvd., Suite 415 Los Angeles, CA 90048 phone 323-936-0200 fax 323-936-4488 email [email protected] www.hirson.com • also in San Diego, CA • Phoenix, AZ • Las Vegas, NV • New York, NY • Wilton, CT • Toronto, Canada David Hirson and Mitchell L. Wexler are certified by the State Bar of California Board of Legal Specialization as specialists in Immigration and Nationality Law. All matters of California state law are provided by active members and/or under the supervision of active members of the California State Bar. LOS ANGELES LAWYER / FEBRUARY 2004 19 By Marshall S. Zolla and Deborah Elizabeth Zolla Marital Duty There is no doubt that a fiduciary duty exists between spouses in California, but the scope of that duty has become a much debated legal issue. Changing standards emanating from the courts and arguably inconsistent legislative enactments have created great uncertainty as to what is or should be the governing standard of the fiduciary duty owed by one spouse to the other. Anything less than a careful and thorough reading of recently amended Family Code Section 721 will not shed clarifying light on whether the prudent investor rule does or does not apply between spouses. The current ambiguity in this regard has created frustration for lawyers and confusion for clients. Recognition of a duty between spouses began over 40 years ago, with Vai v. Bank of America,1 in which the California Supreme Court held that “because of his management and control over the community property, the husband occupies the position of trustee for his wife in respect to her one-half interest in the community assets.” From then until today, courts and the legislature have twisted and turned in their respective efforts to define an equitable standard of duty between spouses. In 1973, the court of appeal held that the fiduciary duty did not extend to all the husband’s business dealings with community property but was to be limited to property settlements with his wife.2 In 1975, the legislature enacted Civil Code Section 5125, which provided equal management and control of community property and reduced the spousal duty to “good faith.” In 1979, the California Supreme Court spoke again,3 this time to limit the period during which the spousal duty exists to the time prior to filing a petition for dissolution. As a result, the court held, “from the time that wife filed her petition seeking dissolution of the marriage…her relationship with her husband was an adversary one. Any obligation of trust between them [is] terminated.”4 The supreme court held that the mere disclosure of an asset was sufficient and that further information regarding the nature or value of the asset was not necessary.5 Still, notwithstanding the end of an obligation of trust, in 1983, the court of appeal recognized that a duty of good faith re- Marshall S. Zolla, a State Bar certified specialist in family law, practices in Century City. Deborah Elizabeth Zolla practices family law with the firm of Freid and Goldsman in Century City. The authors acknowledge the research assistance and analysis provided by Joel P. Schiff and Jeffrey M. Imerman and wish to thank Honey Kessler Amado for her invaluable comments. 20 LOS ANGELES LAWYER / FEBRUARY 2004 RON OVERMYER Current state law often creates a Hobson’s choice when a spouse decides between separate and community property to fund an investment opportunity mained on the husband as a fiduciary for his wife beyond the date of the parties’ separation as to those community assets remaining in his control.6 In re Marriage of Stevenot7 set forth a restrictive interpretation of spousal duties. The standard of fiduciary duty, compared with a standard of “good faith” at a certain stage of the relationship, juxtaposed with a confidential relationship prior to the date of separation, created an ambiguous mix of definitions and standards. What Stevenot did not do was to discuss and explain the nature, scope, and meaning of the fiduciary duty between spouses before filing a dissolution proceeding. In 1991, applicable sections of the Civil Code were amended to replace the good faith standard with a heightened duty of care between spouses, making applicable the rules governing fiduciary rela- tionships.8 The ambiguity which had by then evolved, however, required definition and distinction between the standards of good faith and fiduciary duty. An attempted clarification came in 1994 in In re Marriage of Reuling,9 in which the court of appeal explained that “given a stated judicial distinction between the two standards and the subsequent change in the statutory language from ‘good faith’ to ‘fiduciary duty,’ we may reasonably infer that the Legislature intended by the 1991 amendments to replace a lesser standard with one deemed higher.”10 A stricter standard of spousal fiduciary duty emerged at the dawn of the new century. In re Marriage of Brewer & Federici11 heightened the fiduciary duty and shifted the burden of disclosure to the spouse in a superior position to obtain records or financial information from which an asset could be valued.12 In Re Marriage of Duffy At the time of the 2001 decision in In re Marriage of Duffy, Family Code Section 721 set forth the fiduciary duties between spouses. The statute specifically excluded Probate Code Section 16040 from the definition of spousal fiduciary duties. The duty of care mandated by Section 16040 is synonymous with the level of care required by the prudent investor rule.13 Section 16040 requires a trustee to administer a trust with “reasonable care, skill, and caution under the circumstances then prevailing that a prudent person acting in a like capacity would use….”14 In re Marriage of Duffy15 reversed the trial court and held that a spouse generally is not bound by the prudent investor rule and does not owe to the other spouse the duty of care that one business partner owes to another.16 The Duffy facts illustrate this point and are helpful in better understanding the practical impact this case would have on the duty that spouses owe to each other. Vincent and Patricia Duffy were married in 1962. For 34 years, between 1963 and 1997, Vincent made investments in real estate, business ventures, and vacation property. The trial court found that Vincent made investments without consulting his wife or obtaining her input and failed to tell her how he was funding the investments, ignored some of her requests for financial information, and treated her in a curt and dismissive manner that had the effect of discouraging further questioning. The trial court determined that Vincent breached his fiduciary duty to his wife and ordered him to pay her approximately $400,000 in damages.17 Vincent appealed the trial court’s finding of breach of his fiduciary duty; Patricia appealed the trial court’s denial of her request for fees. The Second District affirmed in part and reversed in part. The court of appeal dealt with the degree of Patricia’s requests and the degree of Vincent’s refusals to respond. The appellate panel concluded that Vincent had a duty to disclose financial information, but Patricia had a corresponding duty to request information. The court determined that the trial court had erred in concluding that Vincent breached his fiduciary duty of disclosure to Patricia. According to the court of appeal, “[A] spouse generally is not bound by the prudent investor rule and does not owe to the other spouse the duty of care one business partner owes to another….To summarize, [Vincent Duffy did not owe Patricia Duffy] a duty of care in investing the community assets. Inasmuch as [he owed her] no duty of care, he cannot have breached that duty.”18 The legislature reacted swiftly to the Duffy decision with enactment of Senate Bill 1936. Although this amendment to Family Code Section 721, which became effective January 1, 2003, consisted of only six words and four numbers,19 it has produced a torrent of debate and uncertainty. There is a good reason why so much confusion on this topic has arisen. The language of Section 721 is seemingly inconsistent with the uncodified section of the statute. For example, the leg22 LOS ANGELES LAWYER / FEBRUARY 2004 islature on one hand appears to exclude the prudent investor rule by stating at the beginning of the statute: Except as provided in Section…16047 of the Probate Code [which defines and embodies the prudent investor rule], in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other.20 However, just a few lines later, in the same statute, the legislature appears to include the prudent investor rule in uncodified Section 2 in stating: It is the intent of the Legislature in enacting this act to clarify that Section 721 of the Family Code provides that the fiduciary relationship between the spouses includes all of the same rights and duties in the management of community property as the rights and duties of unmarried business partners managing partnership property, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, and to abrogate the ruling in In re Marriage of Duffy (2001) 91 Cal. App. 4th 923, to the extent that it is in conflict with this clarification.21 Many who adopt the view that the amended statute has inconsistent provisions argue that the legislature intended to exclude the prudent investor rule.22 Their argument rests on the fact that the legislature failed to specify in Section 2 of the uncodified provision which of the two holdings in Duffy it intended to abrogate.23 According to this viewpoint, the legislature did not abrogate the Duffy holding that the prudent investor rule did not apply.24 This is a legitimate argument because it attempts to harmonize the two seemingly inconsistent provisions. A better reasoned basis for this position eliminates the fog that has hovered over the statute since its enactment. Careful reading of the cross references in Section 721 to the Probate and Corporations Codes clarifies the legislature’s intent. Prior to Duffy and the enactment of SB 1936, the legislature excluded Probate Code Section 16040 (the duty of care contained in the prudent investor rule) from the definition of spousal fiduciary duties. With the enactment of SB 1936, the legislature also excluded Probate Code Section 16047 from the definition of spousal fiduciary duties. By excluding Section 16047 in the newly amended statute, the legislature affirmed the Duffy holding that spouses do not owe a duty of care to each other as nonmarital business partners do. The legislature, rather than abrogating Duffy’s exclusion of the prudent investor rule, opted for a more moderate set of duties encompassed by amended Section 721’s cross-reference to Corporations Code Section 16404.25 Section 16404 requires business partners to refrain from “engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of the law.”26 By adding to Section 721 a reference to Corporations Code Section 16404, the legislature intended that spouses would owe each other a duty of care. However, it would be the degree of care owed between nonmarital business partners instead of the duty of care mandated by Probate Code Section 16040. For example, under Corporations Code Section 16404, a spouse’s conduct would have to be more egregious to breach the fiduciar y duty. Mere negligence, which would be sufficient to hold spouses accountable under Probate Code Section 16040, would not be sufficient under Corporations Code Section 16404. Thus, the legislature made clear that spouses do indeed owe each other a duty of care, however, a lesser duty than the one rejected in Duffy. This argument explains the debatable inconsistency in the provisions of Section 721. It allows Duffy’s exclusion of the prudent investor rule to stand and clarifies which holding in Duffy the legislature intended to abrogate in Section 2 of the uncodified part of the statute. Meaningful support exists for the view that the prudent investor rule does not apply as part of the fiduciary duty between spouses in the new statutory language. Although no published court of appeal case has yet dealt with these issues, two recent unpublished California appellate opinions, In re Marriage of Fell27 and In re Marriage of McGuire,28 share the conclusion that the prudent investor rule does not apply. In addition, well-reasoned commentary substantiates the position that the prudent investor rule does not and should not apply to the duty between spouses.29 On the other hand, if one wanted to argue that the prudent investor rule does and should apply, the core argument would rest on five spe- cific words added to Section 721. SB 1936 added the language “including, but not limited to” when referring to the duties set for th in Family Code Section 721(b)(1)-(3).30 “By not limiting the right of spouses to sue each other for only the rights specifically enumerated in Family Code Section 721(b), the new code section allows spouses to sue each other for breach of fiduciary duty even though [it is] not specifically listed in Family Code Section 721(b).”31 If the statute expressly “excludes” the prudent investor rule, however, the general language of “including, but not limited to” does not bring it back. In statutory construction, the specific controls over the general.32 On the other hand, the position that the fiduciary duty described in amended Section 721 is the same as contained in the prudent investor rule is strengthened in the introduction to SB 1936.33 However, this minority viewpoint leads to numerous interpretive problems and would open the door to endless litigation. Regardless of how one reads Section 721—to include or exclude the prudent investor rule—much can and should be done to clarify the existing law. Despite the fact that one respected family law attorney recently wrote that the new amendments “have added a welcome clarity to understanding spousal fiduciary duty,”34 few would disagree that more clarity is needed. The legislature should state explicitly whether the prudent investor rule applies. It would be even more constructive if the legislature would enact language stating affirmatively what the fiduciary duty between spouses is, rather than continually obfuscating the issue with convoluted cross-references to the Family, Corporations, and Probate Codes.35 The Shifting Burden of Proof In re Marriage of Haines firmly established the doctrine in California that when one spouse alleges a breach of fiduciary duty, the burden shifts to the accused spouse to prove that he or she has not committed the breach.36 There are two different theories under which courts have reached this conclusion. One theory appears in the context of undue influence and the other arises within the ambit of constructive fraud. According to Family Code Section 721(b), transactions between a husband and a wife are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take unfair advantage of the other.37 In Haines, a case involving undue influence, the wife deeded her interest in a residence to her husband in exchange for his cosignature on a loan to purchase an automobile.38 At the trial, the wife argued that she only deeded away her interest in the residence because of undue influence. The court held she had the burden of proving this allegation and had failed to do so.39 The court of appeal reversed the trial court, observing that, although spouses have the right to enter into transactions, when an interpersonal transaction advantages one spouse, the law presumes the transaction to have been induced by undue influence.40 The reasoning supporting this judicially created presumption is that spouses are subject to special rules that control the actions of persons occupying confidential relations with each other.41 Because of these special rules, the burden is placed on the advantaged spouse to prove by a preponderance of the evidence that no undue influence was exerted and that the transaction was made freely and voluntarily with a complete understanding of the effect of the transfer.42 Based on this determination, the Haines court emphasized that the trial court should have placed the burden of proof on the husband, the advantaged spouse, and not on the wife.43 A recent important case illuminating this principle, In re Marriage of Delaney,44 held that the Haines presumption of undue influence overcomes the presumptions in Family Code Section 2581 (that property acquired during marriage in joint tenancy is community property) and Evidence Code Section 662 (that an owner of legal title to property owns the full beneficial title). In Delaney, one spouse gained an advantage over the other in a property transaction in which the husband’s separate property house was transferred by grant deed to the husband and wife as joint tenants incident to obtaining a home improvement LOS ANGELES LAWYER / FEBRUARY 2004 23 loan. The trial court set aside the deed, and the court of appeal affirmed, relying on the Haines presumption of undue influence in transactions between spouses. The Delaney opinion restated the requisite burden to overcome the presumption of undue influence in an interspousal transaction in straightforward language that underscores the difficulty in overcoming the presumption: [I]t was Wife’s burden to establish that Husband’s transmutation of the Property to joint tenancy was freely and voluntarily made, with full knowledge of all the facts, and with a complete understanding of the effect of a transfer from his unencumbered separate property interest to a joint interest as Husband and Wife.45 One can now legitimately argue that Delaney has raised the bar to overcoming the Haines presumption of undue influence. The Haines standard of preponderance of the evidence to rebut the presumption remains, but Delaney’s language and holding emphasize the strength of the presumption of undue influence and the current difficulty of overcoming it. Creative practitioners, responding to these developments, may consider addressing and attempting to overcome the presumption of undue influence in a postnuptial agreement incident to a material interspousal transfer or transmutation of property interests. Another recent California case focusing on the burden of proof issue is In re Marriage of Lange.46 Lange held that a rebuttable presumption arises when one spouse obtains an advantage over the other spouse in a community property transaction.47 This result occurs because a fiduciary generally obtains an advantage if his or her position is improved, he or she obtains a favorable opportunity, or he or she otherwise gains, benefits, or profits in an interspousal transaction.48 In Lange, the husband executed a promissory note and deed of trust to his wife. The court held as a matter of law that the wife received an advantage or benefit from her husband’s execution of the promissory note and deed of trust because she then became a secured creditor, entitled to a 10 percent interest on her husband’s obligation. As the court explained, the wife was charged with dispelling the presumption of undue influence and, because she failed to do so, the note and the deed of trust were held unenforceable.49 These cases are intensely fact-driven. In re Marriage of Friedman50 provides a good example of a case in which a factual showing rebutted the presumption of undue influence. Friedman upheld a postnuptial agreement on the ground that the Haines presumption of undue influence was dispelled by the evidence. The husband met his burden of showing that his wife was “not induced to execute the postnuptial agreement through mistake, undue influence, fraud, misrepresentation, or any other breach of the Friedman’s confidential relationship” and that there was no “taint” to the agreement.51 Burden of proof issues also arise in breach of fiduciary duty claims that involve constructive fraud. In fact, a finding of constructive fraud formed part of the basis for the holding in Haines. Similarly, in In re Marriage of Baltins, the court held that “constructive fraud comprises all acts, omissions, and concealments involving breach of legal or equitable duty, trust, or confidence, and resulting in damage to another.”52 Numerous law review articles echo the logic and arguments of the courts.53 In contrast to these cases, the court of appeal, in Bono v. Clark,54 recently held that the presumption of wrongdoing does not arise simply from the disappearance of a community asset. As in cases involving undue influence, in this area of the law the inquiry is particularly fact-intensive. Bono upheld a trial court’s determination that the wife had failed to carry her burden of proof that her husband inappropriately disposed of assets. According to this opinion, the mere absence of personal property assets years after separation is insufficient to raise an inference that the husband disposed of them inappropriately.55 Critics of the holding in Bono have argued that if it can be demonstrated that certain marital assets exist on the date of separation and are in the possession of one spouse, it becomes that spouse’s obligation to account for them. If he or she cannot do so, then that party should be charged for their value. To hold otherwise, opined one commentator, makes a mockery of the concept of fiduciary duty because the spouse in possession of real or personal property should bear full responsibility.56 Potential Breaches of Fiduciary Duty An inherent tension has long existed when one spouse chooses between separate property and community property to fund investment opportunities presented during marriage. As the duty of spouses toward each other has been heightened from disclosure to good faith and then to fiduciary duty, this tension has increased. Proposed resolution of this conflict is often addressed in prenuptial agreements. But once married, the fiduciary duty one spouse owes the other makes this tension a Hobson’s choice (given the vagaries of the nature and extent of factual disclosures between married partners illustrated by Duffy) because of the present uncertainty in the nature and scope of spousal fiduciary duties. In Duffy, the court put it this way: “A breach of loyalty could occur simply from seizing an excellent investment opportunity for the benefit of one’s personal property rather than for the benefit of the community estate.”57 The duty of loyalty to one’s spouse and to the community has been infused into the fiduciary duty obligation.58 If no notice is given to the other spouse and marital property is utilized for an investment, undisclosed profits are susceptible to a claim of breach of fiduciary duty, with possibly draconian results.59 If community property is not properly handled, and the investment loses value, losses are susceptible to a claim of breach of the fiduciary duty owed to the other spouse, and a charge for the lost funds may be imposed against the mismanaging spouse.60 A recent case illustrates the dilemma. In In re Marriage of Destein,61 the husband had historically successfully invested the bulk of his sep24 LOS ANGELES LAWYER / FEBRUARY 2004 arate property in growth assets, specifically non-income-producing real estate. The trial court imputed investment earnings for purposes of calculating child support. On appeal, the husband contended that the trial court was not entitled to second-guess his reasonable investment strategy. The court of appeal rejected his argument and upheld the trial court’s ruling. The Destein opinion cites case authority from other jurisdictions and text authority to support its reasoning and conclusion that the historic allocation of assets to growth, rather than income, does not preclude imputation of income to such assets.62 This type of second-guessing of marital investment philosophy and decision making, if applied to a prudent investor rule between spouses, could create endless litigation between spouses and requires courts to act as investment advisers. Another recent appellate decision, In re Marriage of Hixson, restricted the requirement for disclosing and sharing business opportunities that are presented to just one spouse.63 The trial court held that the ex-husband was not required to share a postjudgment investment opportunity with his ex-wife because, based on Family Code Section 2102(a), the asset had been distributed by a stipulated judgment.64 However, there was no indication in the opinion that the asset had “actually been distributed” as required by Section 2102(b), and continuation of the fiduciary duty until distribution, as required by that section, should have been discussed and considered.65 The surprisingly restrictive opinion in the Hixson case teaches the lesson that duration of the spousal fiduciary duties after separation and even judgment must be carefully examined under both Family Code Section 2102(a) and Section 2102(b). It is difficult enough in California for intended spouses to negotiate and sign an enforceable prenuptial agreement. Statistics tell us it is even harder to stay married. Now we see that even during marriage, California spouses are confronted with a combustible mix of disclosures, decisions, and duties that affect their money, investments, businesses, and financial well-being. Ultimately, their emotional well-being is at stake when the complexities of legislative enactments and judicial interpretation are made known to them. Professional representatives, including attorneys, accountants, business managers, investment advisers, and financial planners have a duty and responsibility to inform clients of their rights and responsibilities during all stages of a relationship. It is no longer acceptable to wait until things go wrong, to advise clients after the fact of the new rules and standards. As the court of appeal recently observed: “Judicial decisions in family law cases have lasting effects on the parties’ homes, familial relationships, and families.”66 The new rules and standards, amended statute, spirited current debate, and changing and often inconsistent judicial interpretations are too critically important to overlook when providing advice to clients. Professional excellence and responsibility to clients deserve no less commitment than faithful and continuing study and critique of this evolving and important area of the law. ■ ✒ Litigation support ✒ Expert witness ✒ Forensic accountants ✒ Family law matters ✒ Business valuations ✒ Loss of earnings ✒ Damages TRUST DEED FORECLOSURES When you need more than just numbers... you can count on us... Contact Michael Krycler PHONE (818) 995-1040 FAX (818) 995-4124 E-MAIL [email protected] VISIT US @ www.KETW.COM 15303 VENTURA BOULEVARD, SUITE 1040 SHERMAN OAKS, CALIFORNIA 91403 Witkin & Eisinger we specialize in the Non-Judicial of obligations secured by real property Aor trealForeclosure and personal property (mixed collateral). When your client needs a foreclosure done professionally and at the lowest possible cost, please call us at: 1-800-950-6522 We have always offered free advice to all attorneys. & WITKIN EISINGER, LLC RICHARD G. WITKIN, ESQ. ✦ CAROLE EISINGER Local and National Forensic Accounting, Damages and Litigation Services WHITE, ZUCKERMAN, WARSAVSKY, LUNA, WOLF & HUNT CERTIFIED PUBLIC ACCOUNTANTS 1 Vai v. Bank of Am., 56 Cal. 2d 329, 15 Cal. Rptr. 71 (1961). 2 Bank of Calif. v. Connolly, 23 Cal. 3d 590, 600, 153 Cal. Rptr. 423 (1973). 3 Id. 4 Id. 5 Id. 6 In re Marriage of Munguia, 146 Cal. App. 3d 853, 195 Cal. Rptr. 199 (1983). 7 In re Marriage Stevenot, 154 Cal. App. 3d 151, 202 Cal. Rptr. 116 (1984). 8 CIV. CODE §§5103, 5125, 5125.1. 9 In re Marriage of Reuling, 23 Cal. App. 4th 1428, 28 Cal. Rptr. 2d 726 (1994). 10 Id. 11 In re Marriage of Brewer & Federici, 93 Cal. App. 4th 1334, 113 Cal. Rptr. 2d 849 (2001). 12 Id. 13 PROB. CODE §§16045-16054. Probate Code §16040 mandates the same standard of behavior as the prudent investor rule, but is not called the “prudent investor rule” and falls outside the Uniform Prudent Investor Act. 14 PROB. CODE §16040. 15 In re Marriage of Duffy, 91 Cal. App. 4th 923, 111 Cal. Rptr. 2d 160 (2001). 16 Id. 17 Id. 18 Id. The Duffy court’s reference to a duty of care is the equivalent of the prudent investor rule. 19 FAM. CODE §721(b) (amended effective Jan. 1, 2003). The following is the text of the prior version of Family “Industry Specialists For Over 15 Years” Marital Dissolution Commercial Damages Real Estate Personal Injury Fraud Bankruptcy Appraisal Experts SERVICES INCLUDE: • Business Valuations Real Estate and Personal Injury • Tracing of Assets, Cash Flow Available Litigation and Marital Dissolution for Support, Standard of Living, • Expert Witness Testimony for Business, • Experienced Experts with Advanced Degrees and Professional Certifications • Mergers and Acquisitions • Damages Analysis of Lost Profits and Pre/Post Separation Accounting • Fraud Investigations • A Full Service Accounting and Tax Planning Department Earnings Call Barbara Luna, Paul White, Jack Zuckerman, Fred Warsavsky, Drew Hunt or Bill Wolf 14455 Ventura Boulevard, Suite 300, Sherman Oaks,California 91423 Tel: (818) 981-4226 Fax: (818) 981-4278 333 City Boulevard West, 17th Floor, Orange, California 92868 Tel: (714) 939-1781 Fax: (714) 938-3874 Toll Free (866) 981-4226 www.wzwlw.com E-mail: [email protected] Free In-House MCLE Presentations & Initial Consultations LOS ANGELES LAWYER / FEBRUARY 2004 25 ISABEL R. COHEN JUDGE OF THE S U P E R I O R C O U R T, R E T I R E D PRIVATE DISPUTE RESOLUTION APPOINTMENT AS MEDIATOR, ARBITRATOR, REFEREE, SPECIAL MASTER, AND JUDGE PRO TEM FAMILY LAW AND CIVIL EXECUTION OF PRE-MARITAL AGREEMENTS 4929 WILSHIRE BOULEVARD, SUITE 410 LOS ANGELES, CALIFORNIA 90010-3818 26 LOS ANGELES LAWYER / FEBRUARY 2004 TELEPHONE (323) 465-5336 FACSIMILE (323) 465-2590 Code §721 indicating changes enacted by SB 1936: § 721 Contracts with each other and third parties; fiduciary relationship (a) Subject to subdivision (b), either husband or wife may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried. (b) Except as provided in Sections 143, 144, 146, and 16040 and 16047 of the Probate Code, in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 15019, 15020, 15021, and 15022 16403, 16404, and 16503 of the Corporations Code, including, but not limited to the following: (1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying. (2) Rendering upon request, true and full information of all things affecting any transaction which concerns the community property. Nothing in this section is intended to impose a duty for either spouse to keep detailed books and records of community property transactions. (3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property. Sec. 2: It is the intent of the Legislature in enacting this act to clarify that Section 721 of the Family Code provides that the fiduciary relationship between the spouses includes all of the same rights and duties in the management of community property as the rights and duties of unmarried business partners managing partnership property, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, and to abrogate the ruling in In re Marriage of Duffy (2001) 91 Cal. App. 4th 923, to the extent that it is in conflict with this clarification. 20 Id. 21 Id. 22 Garrett C. Dailey, Fiduciary Duty and the Prudent Investor Rule: Legislature Continues Efforts to Define Marital Duties, ATTORNEY’S BRIEFCASE 94-97 (2003); Garrett C. Dailey, Prudent Investor Rule Does Not Apply to Investment Decisions Made During Marriage—Yet, FAMILY L. NEWS, Summer 2003, at 5-6. 23 Id. 24 Id. 25 Id. 26 CORP. CODE §16404 27 In re Marriage of Fell, 2003 WL 21380860 (Cal. App. 2d Dist., June 16, 2003) (unpublished). 28 In re Marriage of McGuire, 2002 WL 177279 (Cal. App. 2d Dist., Aug. 1, 2002) (unpublished) (decided prior to Jan. 1, 2003, the date the amendment to FAM. CODE §721 became effective.) 29 Dailey, supra note 22. 30 Peter M. Walzer & Gregory W. Herring, What Words Don’t You Understand–Fiduciary or Duty? In Amending Family Code Section 721, the Legislature Gives Unhappy Couples One More Thing to Fight About, FAM. L. NEWS, Winter 2003, at 5-7. 31 Id. 32 CODE CIV. PROC. §1859. 33 The introduction states: “[T]his bill would subject a husband or wife that enters into any real property transaction with the other to those general rules governing fiduciary relationships where the transaction involves the administering of a trust.” Unfortunately, this explanatory language is confusing. The reference to only real property makes no sense, inasmuch as Section 721 otherwise expressly applies to all property transactions. Nonetheless, this language undeniably expresses an intent to apply the prudent investor rule to marital transactions. 34 Diana Richmond, Clarifying the Marital Partnership, CAL. FAM. L. MONTHLY, Feb. 2003, at 43-46. 35 See FAM. CODE §721; PROB. CODE §§143, 144, 146, 16040, 16047; and CORP. CODE §§16403, 16404, 16503. 36 In re Marriage of Haines, 33 Cal. App. 4th 277, 39 Cal. Rptr. 2d 673 (1995). 37 FAM. CODE §721(b). 38 Haines, 33 Cal. App. 4th at 284. 39 Id. at 297. 40 Id. at 293. 41 Id. 42 Id. at 295-297; H OGOBOOM & K ING , C ALIFORNIA PRACTICE GUIDE TO FAMILY LAW Ch. 8-B at 559-74 (2002). 43 Haines, 33 Cal. App. 4th at 297. 44 In re Marriage of Delaney, 111 Cal. App. 4th 991, 4 Cal. Rptr. 3d 378 (2003). 45 Id. at 999-1000. 46 In re Marriage of Lange, 102 Cal. App. 4th 360, 125 Cal. Rptr. 2d 379 (2002). 47 Id. 48 Id. 49 Id. 50 In re Marriage of Friedman, 100 Cal. App. 4th 65, 122 Cal. Rptr. 2d 412 (2002). 51 Id. 52 In re Marriage of Baltins, 212 Cal. App. 3d 66, 260 Cal. Rptr. 403 (1989). See also Estate of Cover, 188 Cal. 133 (1922). 53 Bradley L. Adams, The Doctrine of Fraud on the Community, 49 BAYLOR L. REV. 445 (1997); Alexandria Streich, Spousal Fiduciaries in the Marital Partnership: Marriage Means Business but the Sharks Do Not Have a Code of Conduct, 34 IDAHO L. REV. 367 (1997). Both law review articles support the argument that the presumption of constructive fraud shifts the burden of proof. 54 Bono v. Clark, 103 Cal. App. 4th 1409, 128 Cal. Rptr. 2d 31 (2002), rev. denied. 55 Id. 56 Dailey, supra note 22. 57 In re Marriage of Duffy, 91 Cal. App. 4th 923, 937, 111 Cal. Rptr. 2d 160 (2001). 58 Richmond, supra note 34. 59 In re Marriage of Rossi, 90 Cal. App. 4th 34, 108 Cal. Rptr. 2d 270 (2001). 60 In re Marriage of Hokanson, 68 Cal. App. 4th 987, 80 Cal. Rptr. 2d 699 (1998). 61 In re Marriage of Destein, 91 Cal. App. 4th 1385, 111 Cal. Rptr. 2d 487 (2001). 62 Id. at 1394-96. 63 In re Marriage of Hixson, 111 Cal. App. 4th 1116, 4 Cal. Rptr. 3d 483 (2003), reh’g denied, petition for rev. filed (Nov. 4, 2003). 64 Id.; FAM. CODE §2102(a). 65 Hixson, 111 Cal. App. 4th 1116; FAM. CODE §2102(b). 66 Settlemire v. Superior Court, 103 Cal. App. 4th 1150, 127 Cal. Rptr. 2d 381 (2002); JUDICIAL COUNCIL OF CALIFORNIA, ADMINISTRATIVE OFFICE OF COURTS, REPORT OF THE SUBORDINATE JUDICIAL OFFICER WORKING GROUP ON SUBORDINATE JUDICIAL OFFICERS DUTIES AND TITLES 22 (2002). COMPETENT REAL ESTATE BROKERAGE ■ Specializing in helping attorneys and their clients buy and sell real estate in bankruptcy, probate, family, and real estate law ■ Experienced negotiator with legal background ■ Licensed broker, California Department of Real Estate ■ Call for LACBA member discount O FFICE : (818) 905-7111 EXT. 251 TODD RUBINSTEIN, J.D., BROKER ASSOCIATE O FFICE : (310) 820-2229 F ACSIMILE : (818) 905-7299 E MAIL : [email protected] REAL ESTATE ARBITRATOR • Over 30 years experience as a real estate lawyer dealing with industrial, commercial, office and shopping centers including purchases, sales, leasing, ground leasing, financing, development, joint ventures, construction, brokerage, title insurance, easements and protective covenants. • 18 years as counsel to the forms committee of the American Industrial Real Estate Association, publishers of the AIR ease and purchase forms. • Real estate law and ADR lecturer on CA State Bar sponsored programs, the extension Arthur Mazirow divisions of UCLA, UCI, UCSB and various educational and realty organizations. • AAA Commercial Panel Member. Tel 310-255-6114 Fax 310-391-4042 Email [email protected] 3415 S. Sepulveda Blvd, Los Angeles CA 90034 got ebriefs? 15,000+ Los Angeles County Bar Association members receive free online case summaries each day—Are you one of them? THE DAILY EBRIEFS—the Association’s online summaries of published appellate court decisions issued over the previous 24 hours—are emailed each weekday afternoon exclusively to Association members. What’s more, the Daily EBriefs, which include links to the full text of each opinion (posted on the Internet as a PDF file), are FREE! Do we have your current email address? To receive the Daily EBriefs, Association members can send their name and current email address to [email protected] or call the LACBA Member Service Department at 213/896-6560. get the competitive edge—get ebriefs LOS ANGELES LAWYER / FEBRUARY 2004 27 MCLE ARTICLE AND SELF-ASSESSMENT TEST Sponsored by By reading this article and answering the accompanying test questions, you can earn one MCLE credit. To apply C OURTCALL® LLC Telephonic Court Appearances for credit, please follow the instructions on the test answer sheet on page 33. By David Martinez and Bree Arlyn-Pessin Undesignated HITTERS When employees are used as witnesses, practitioners need to carefully consider whether the employees will be offering expert testimony or undesignated lay opinions T he outcomes of trials are increasingly dependent upon expert testimony. As a result, comprehensive knowledge of the procedures required to properly identify expert witnesses in state and federal courts is crucial. Failure to abide by the Federal Rules of Civil Procedure, the Federal Rules of Evidence, the Califor nia Code of Civil Procedure, and the California Evidence Code may result in an unexpected and unnecessary failure of proof at trial. Perhaps nowhere are the expert witness procedures more complex than in the case of parties’ employees who have expert knowledge of some kind. The procedures are complicated by the analyses required to determine which opinions are expert and which are merely percipient. Thus counsel must be familiar with the scope of permissible opinion testimony in state and federal cour ts by 28 LOS ANGELES LAWYER / FEBRUARY 2004 employees not designated as experts in light of the often blurry distinction between expert and percipient opinion testimony. The general rule in federal court is that nondesignated witnesses, including employees, are barred from providing expert opinion testimony at trial pursuant to Rules 702, 703, or 705 of the Federal Rules of Evidence. Rather, under Rule 701 of the Federal Rules of Evidence, a nondesignated employee may only provide testimony at trial in the form of opinions or inferences that are rationally based on the perception of the witness and helpful to a clear understanding of the witness’s testimony. Distinguishing between expert and lay opinion testimony, however, is not always clear, because lay witnesses frequently have been permitted to provide opinion testimony based on technical or specialized knowledge. This trend, however, will most likely be mod- ified by the recent addition of subsection (c) to Rule 701 of the Federal Rules of Evidence and its accompanying commentary. Still, clarification of the distinction between expert and lay opinion testimony is particularly critical in light of the extensive expert disclosure requirements of the Federal Rules of Civil Procedure and the penalties for failing to abide by those requirements.1 Expert discovery in federal courts is governed by Rule 26(a)(2) of the Federal Rules of Civil Procedure, which states, in relevant part: “[A] party shall disclose to other parties the identity of any person who may be used at trial to present evidence under Rules 702, 703 or 705 of the Federal Rules of Evidence.”2 David Martinez and Bree Arlyn-Pessin are associates in the Los Angeles office of Robins, Kaplan, Miller & Ciresi LLP, where they specialize in complex civil litigation. In turn, Rule 702 provides that parties may introduce opinion testimony at trial predicated on “scientific, technical, or other specialized knowledge.”3 Under Rule 26(a)(2)(B), employees who are identified as expert witnesses under Rule 26(a)(2)(A) and who either 1) have been retained or specially employed to provide expert testimony in the case, or 2) whose duties as employees of the party regularly involve giving expert testimony—in other words, these employees are in-house experts—must disclose a wide range of information. An expert witness is required to produce and sign a report that includes: a complete statement of all opinions; the basis and reasons for the opinions; all data or other information considered by the witness; any exhibits to be used as a summary of or in support of the opinions; the witness’s qualifica- tial expert disclosures must take place at least 90 days before the trial date, with rebuttal expert disclosures occurring within 30 days of the presentation of an initial expert disclosure to which rebuttal is sought. In view of these disclosure requirements, the failure to designate a party’s employee as an expert witness and/or provide the required disclosures may require exclusion of any expert opinions at trial under Rule 37(c) of the Federal Rules of Civil Procedure.9 For example, in Simplex, Inc. v. Diversified Energy Systems, Inc., the Seventh Circuit upheld the district court’s preclusion of the proposed expert testimony of the defendant’s employee, reasoning that the plaintiff “would have been disadvantaged severely if it were confronted for the first time at trial by previously undisclosed experts. If Diversified intended to proffer its employees as experts at trial, it was Manufacturing Division v. Benton Harbor Engineering: The prototypical example of the type of evidence contemplated by the adoption of Rule 701 relates to the appearance of persons or things, identity, the manner of conduct, competency of a person, degrees of light or darkness, sound, size, weight, distance, and an endless number of items that cannot be described factually in words apart from inferences….Other examples of this type of quintessential Rule 701 opinion testimony include identification of an individual, the speed of a vehicle, the mental state or responsibility of another, whether another was healthy, the value of one’s property, and other situations in which the differences between fact and opinion blur and it is Courts are split over whether employees whose duties do not regularly involve giving expert testimony must produce reports under Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure. tions, including a list of all publications authored by the witness in the preceding 10 years; the compensation to be paid to the witness; and a list of all cases in which the expert has testified in the preceding four years.4 However, courts are split over whether employees whose duties do not regularly involve giving expert testimony must produce reports under Rule 26(a)(2)(B). While at least one court has held that these employees need not provide reports under the plain meaning of Rule 26(a)(2)(B),5 others have held that an employee who does not regularly provide expert testimony but who is offered to testify at trial necessarily has been “specially employed” to provide such testimony and thus must submit the report required under the rule.6 Outside the context of employees, perhaps the best example of witnesses who are experts but need not submit to the extensive reporting requirements of Rule 26(a)(2)(B) are treating physicians who are percipient fact witnesses.7 Still, all identified experts whose opinions may be offered at trial must submit to a deposition,8 even if they are not required to comply with the reporting requirements of Rule 26(a)(2)(B). Finally, Rule 26(a)(2)(C) governs the timing of expert disclosure. The rule provides alternatives: All discovery shall be conducted in the sequence directed by the court, or ini- obligated to disclose that fact….”10 Similarly, the First Circuit in Prentiss & Carlisle Company, Inc. v. Koehring-Waterous Division of Timberjack, Inc. held that employee testimony that requires expert qualifications is properly excludable if the employee has not been designated as an expert witness.11 Rules 701 and 702 of the Federal Rules of Evidence Whether and what type of testimony a nondesignated employee can offer at trial fundamentally depends on whether the testimony falls under Rule 701 or Rule 702 of the Federal Rules of Evidence. Rule 701 provides the parameters of permissible lay opinion testimony: If the witness is not testifying as an expert, the witness’ testimony in the form of opinions or inferences is limited to those opinions or inferences which are (a) rationally based on the perception of the witness, (b) helpful to a clear understanding of the witness’ testimony or the determination of a fact in issue, and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702. In drawing a distinction between Rules 701 and 702, federal courts often have relied on the Third Circuit’s opinion in Asplundh difficult or cumbersome for the examiner to elicit an answer from the witness that will not be expressed in the form of an opinion. These cases, it is important to add, all meet the core definitional terms of Rule 701—the opinion is based upon personal knowledge, is rationally based thereon, and is helpful to the trier of fact.12 Conversely, under Rule 702: If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.13 Relying on the plain meaning of Rule 701, courts routinely have allowed employees and other lay witnesses to render lay opinion testimony on a variety of topics when the testimony is based on personal knowledge and helpful to the trier of fact.14 However, some courts have stretched the scope of Rule 701 by allowing employees to give lay opinion LOS ANGELES LAWYER / FEBRUARY 2004 29 testimony that appears to closely approach expert opinion under Rule 702. For example, in Teen-Ed, Inc. v. Kimball International, Inc., the Third Circuit held that opinions by the plaintiff’s accountant and bookkeeper on the calculation of the plaintiff’s purported lost profits were properly allowed under Rule 701: The personal knowledge of appellant’s balance sheets acquired by Zeitz as Teen-Ed’s accountant was clearly sufficient under Rule 602 to qualify him as a witness eligible under Rule 701 to testify to his opinion of how lost profits could be calculated and to inferences that he could draw from his perception of Teen-Ed’s books. The fact that Zeitz might have been able to qualify as an expert witness on the use of accepted accounting princi- apply a brake to the trend toward allowing lay opinion testimony that closely approximates expert opinion: Rule 701 has been amended to eliminate the risk that the reliability requirements set forth in Rule 702 will be evaded through the simple expedient of proffering an expert in lay witness clothing. Under the amendment, a witness’ testimony must be scrutinized under the rules regulating expert opinion to the extent that the witness is providing testimony based on scientific, technical, or other specialized knowledge within the scope of Rule 702….By channeling testimony that is actually expert testimony to Rule 702, the amendment also ensures that a party will not evade the expert witness disclosure requirements set forth in part of the subject matter of the lawsuit. Such an expert should be treated as an ordinary witness.24 These dual criteria provide federal court practitioners with a sound framework to evaluate and develop case strategy regarding the identification of employees as expert or percipient trial witnesses. Code of Civil Procedure Section 2034 In California state courts, expert disclosure is governed by Code of Civil Procedure Section 2034. A demand to exchange expert witness information must be made no later than the 10th day after the initial trial date has been set, or 70 days before that trial date, whichever is later.25 Since Section 2034 does not expressly permit courts or counsel to extend the time for making a demand, failure In state court in California, Code of Civil Procedure Section 2034(a)(2) specifically requires parties designating employees as expert witnesses to automatically provide an expert witness declaration. ples in the calculation of business losses should not have prevented his testifying on the basis of his knowledge of appellant’s records about how lost profits could be calculated from the data contained therein.15 Similarly, in Soden v. Freightliner Corporation, the Fifth Circuit permitted a lay witness to opine that the design of a truck was dangerous and defective. 16 Moreover, in Simplex, the court noted that certain employees had been permitted to give opinions regarding the inadequacy of a prototype with reference to particular technical specifications. The opinions were based on the employee’s knowledge and familiarity with the contract specifications. 17 Other examples of admissible lay opinion testimony include testimony by employees regarding future lost profits,18 testimony concerning the percentage of the plaintiff’s losses resulting from the failure of heat-treating furnaces,19 and testimony regarding the likelihood of injuries under particular circumstances.20 Notably, however, subsection (c) of Rule 701 was added by amendment in 2000. The subsection expressly limits lay opinion testimony to that which is “not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” The Advisory Committee Notes on the 2000 amendments to Rule 701 show the intention of the drafters to 30 LOS ANGELES LAWYER / FEBRUARY 2004 Fed. R. Civ. P. 26 and Fed. R. Crim. P. 16 by simply calling an expert witness in the guise of a layperson.21 The drafters also explained, “The amendment makes clear that any part of a witness’ testimony that is based upon scientific, technical, or other specialized knowledge within the scope of Rule 702 is governed by the standards of Rule 702 and the corresponding disclosure requirements of the Civil and Criminal Rules.” 22 Perhaps most impor tantly, the drafters also reconciled prior decisions permitting lay witnesses to provide highly technical testimony by explaining that such testimony is admissible not because of the witnesses’ experience, training, or specialized knowledge within the realm of expert witnesses but because of the particularized knowledge that the witnesses have as a result of their positions in a business.23 Indeed, consistent with this commentary, the Advisory Committee Notes that accompany Rule 26(b)(4) of the Federal Rules of Civil Procedure suggest a bright-line rule for distinguishing between expert and lay witness testimony: It should be noted that the subdivision does not address itself to the expert whose information was not acquired in preparation for trial but rather because he was an actor or viewer with respect to transactions or occurrences that are to make a timely demand may constitute a waiver of the right to present expert testimony at trial. Once a demand is made, Section 2034(a)(1) requires that each party identify the name and address of every person whose expert opinion that party expects to offer at trial, or provide a statement that the party does not presently intend to offer expert testimony.26 A party must designate any witness who will offer opinion testimony on a subject sufficiently beyond common experience to assist the trier of fact.27 The designation must include not only those experts specially retained to provide testimony at trial but also individuals who may render opinions based on information perceived prior to litigation, including information acquired in the course of their job duties. In addition, unlike federal courts, Section 2034(a)(2) specifically requires parties designating employees as expert witnesses to automatically provide an expert witness declaration under Section 2034(f)(2).28 In practice, lawyers seldom provide a declaration for employees who will offer testimony in the form of expert opinion at trial. Notably, however, Section 2034(a)(2) requires the production of an expert declaration by a party’s employee ir respective of whether the employee is “retained” by the party. The declaration, which must be submitted C OURTCALL® LLC Telephonic Court Appearances Lawyers can stop spending their time and their clients’ money traveling to Court by making a CourtCall Appearance. 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GLENDALE BLVD., SUITE 101, LOS ANGELES 90026 Anita Rae Shapiro SUPERIOR COURT COMMISSIONER, RET. PRIVATE DISPUTE RESOLUTION PROBATE, CIVIL, FAMILY LAW PROBATE EXPERT WITNESS TEL/FAX: (714) 529-0415 CELL/PAGER: (714) 606-2649 E-MAIL: [email protected] http://adr-shapiro.com FEES: $300/hr 32 LOS ANGELES LAWYER / FEBRUARY 2004 under penalty of perjury, is significantly less burdensome than its federal analog and only requires: a brief narrative of the expert’s qualifications and the general substance of the expert’s testimony; a representation that the expert has agreed to testify at trial; a representation that the expert will be sufficiently familiar with the pending action to submit to a meaningful oral deposition concerning the expert’s expected trial testimony, including the expert’s opinion and its basis; and a statement of the expert’s hourly and daily fee for providing deposition testimony and for consulting with the retaining attorney.29 Thus, if a party intends to offer employee expert witness testimony at trial, it must designate the employee and provide the accompanying declaration. But how does counsel determine whether the employee will be called to offer “expert” testimony? The standards for expert qualifications under the California and federal rules are very similar.30 Under Evidence Code Section 720(a), any person is qualified to testify as an expert if he or she has special knowledge, skill, experience, training, or education sufficient to qualify him or her as an expert on the subject to which his or her testimony relates. Further, a determination of expertise is driven by the nature of the subject at issue. Expertise is not a rigid classification based on formal education or certification.31 Also, “work in a particular field is not an absolute prerequisite to qualification as an expert in that field.”32 A similar controlling question applies in federal and state courts: Is the subject of inquiry one of common knowledge that people of ordinary education would reach a conclusion as intelligently as the witness, or is the matter beyond common experience that expert opinion would assist the trier of fact?33 In other words, does the employee’s testimony add anything to the jury’s common knowledge? If the answer is yes, counsel should designate the employee and provide a declaration. The employee-expert scenario is not analogous to the situation involving a nonretained treating physician as discussed by the California Supreme Court in Schreiber v. Estate of Kaiser.34 The state supreme court held that a treating physician is not a retained expert for purposes of Section 2034(a)(2).35 Therefore, a treating physician need not provide an expert witness declaration in order to testify regarding a plaintiff’s injuries and prognosis, or even regarding the standard of care or causation. However, if the treating physician provides testimony concerning matters that are outside the scope of the work he or she performed in treating the patient, then the physician is treated as a retained expert and counsel must comply with the declaration MCLE Answer Sheet #123 This Los Angeles Lawyer MCLE self-study test is sponsored by C OURTCALL® LLC Telephonic Court Appearances MCLE Test No. 123 The Los Angeles County Bar Association certifies that this activity has been approved for Minimum Continuing Legal Education credit by the State Bar of California in the amount of 1 hour. 1. In federal courts, employees who have not been designated as experts can provide expert opinion testimony at trial based on their perceptions. True. False. 2. In federal courts, employees designated as expert witnesses and whose duties as employees of a party regularly involve giving expert testimony do not need to prepare and produce signed reports regarding the basis and reasons for their opinions. True. False. 3. In federal courts, treating physicians are considered percipient witnesses and do not need to submit to the extensive reporting requirements of Rule 26(a)(2)(B) of the Federal Rules of Civil Procedure. True. False. 4. In federal courts, initial expert discovery must be completed 60 days before trial. True. False. 5. In federal courts, rebuttal expert disclosures are due as directed by the court or, alternatively, 30 days after initial expert disclosure is completed. True. False. 6. In federal courts, a treating physician designated as an expert does not need to submit to a deposition. True. False. 7. A federal court may preclude a party’s employee from offering expert testimony at trial if the party fails to properly designate the employee as an expert. True. False. 8. In federal courts, lay witnesses may render lay opinion testimony if it is based on personal knowledge and helpful to the trier of fact. True. False. 9. Relying on Rule 701 of the Federal Rules of Evidence, some courts have allowed nondesignated employees to provide highly technical opinion testimony at trial. True. False. 10. Rule 701 of the Federal Rules of Evidence was amended in 2000 to specifically limit lay opinion testimony to what is “not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” True. False. 11. In federal courts, failure to abide by expert disclosure requirements may require exclusion of testimony in pretrial proceedings. True. False. 12. In California state courts, only experts specially retained to offer opinion testimony at trial need to be designated. True. False. 13. In California state courts, if an employee is designated as an expert, an expert declaration is required. True. False. 14. California state courts have discretion to grant leave to file belated expert disclosures. True. False. 15. In California state courts, a nondesignated expert may provide testimony to impeach foundational facts underlying the opposing party’s expert opinions. True. False. 16. In California state courts, formal education, certification, or work in a particular field are not absolute prerequisites to qualification as an expert in that field. True. False. 17. In California state courts, if an employee’s testimony consists of information beyond common experience and would assist the trier of fact, the employee should be designated as an expert witness. True. False. 18. In California state courts, the identity of an employee providing strictly factual testimony does not need to be disclosed in the course of expert discovery. True. False. 19. In California state courts, the treating physician may provide trial testimony concerning matters outside the scope of the work he or she performed in treating the patient without being designated as an expert. True. False. 20. In California state courts, expert witness disclosure requirements apply to expert testimony in pretrial proceedings. True. False. UNDESIGNATED HITTERS Sponsored by CourtCall LLC Name Law Firm/Organization Address City State/Zip E-mail Phone State Bar # Instructions for Obtaining MCLE Credits 1. Study the MCLE article in this issue. 2. Answer the test questions opposite by marking the appropriate boxes below. Each question has only one answer. Photocopies of this answer sheet may be submitted; however, this form should not be enlarged or reduced. 3. Mail the answer sheet and the $15 testing fee ($20 for non-LACBA members) to: Los Angeles Lawyer MCLE Test P.O. Box 55020 Los Angeles, CA 90055 Make checks payable to Los Angeles Lawyer. 4. Within six weeks, Los Angeles Lawyer will return your test with the correct answers, a rationale for the correct answers, and a certificate verifying the MCLE credit you earned through this self-assessment activity. 5. For future reference, please retain the MCLE test materials returned to you. Answers Mark your answers to the test by checking the appropriate boxes below. Each question has only one answer. 1. ■ True ■ False 2. ■ True ■ False 3. ■ True ■ False 4. ■ True ■ False 5. ■ True ■ False 6. ■ True ■ False 7. ■ True ■ False 8. ■ True ■ False 9. ■ True ■ False 10. ■ True ■ False 11. ■ True ■ False 12. ■ True ■ False 13. ■ True ■ False 14. ■ True ■ False 15. ■ True ■ False 16. ■ True ■ False 17. ■ True ■ False 18. ■ True ■ False 19. ■ True ■ False 20. ■ True ■ False LOS ANGELES LAWYER / FEBRUARY 2004 33 For all your personal and professional real estate needs (including probate sales) CALL: LILLIAN WYSHAK (310) 273-0223 CERTIFIED TAX SPECIALIST —Residential and Commercial— A broker who speaks your language REALTOR • ATTORNEY • CPA We Understand Bankruptcy OVER 25 YEARS OF SUCCESS The Legal Side and The Human Side Clients troubled by debts? We are experts at: • Debt Restructuring Plans • Chapters 7, 11, and 13 Relief • Conservative Asset Protection Refer your clients with confidence: • AV Rating • Free Consultations • Reasonable Fees Professional, Compassionate Solutions Laurence D. Merritt Attorney at Law Phone: 818.710.3823 • email: [email protected] Internet: www.legalknight.com Formerly with Merritt & Hagen 34 LOS ANGELES LAWYER / FEBRUARY 2004 requirements of Section 2034(f)(2). Conversely, employee experts must provide a declaration under Section 2034(f)(2) merely by virtue of their status as employees. Exceptions Not all is lost if counsel fails to disclose under the various federal and state rules. For example, in federal court, a party may avoid exclusion of its employee’s testimony under Rule 37(c) of the Federal Rules of Civil Procedure by showing either substantial justification for the failure to disclose or by establishing that the nondisclosure was harmless.36 Moreover, parties need not make Rule 26(a)(2) disclosures for those employees acting solely as consulting experts.37 California state courts also have discretion to grant leave to file tardy expert disclosures. Under Section 2034(l), the court will consider the breadth of prejudice to the other party and the nature and extent of the moving party’s mistake, inadvertence, surprise, or excusable neglect, as well as the party’s promptness in bringing the matter to the court’s attention.38 Moreover, certain exceptions to the disclosure requirements may also permit a party’s undesignated employees to provide certain opinion testimony at trial. Under Section 2034(m), a party may present an undesignated expert called specifically to testify to the falsity or nonexistence of any foundational facts relied upon by an opposing expert. However, this undesignated expert may not offer testimony that contradicts the opposing expert’s opinion.39 In Stark v. City of Los Angeles, the court of appeal held that an undesignated expert could provide opinion testimony to impeach the foundational facts underlying the opposing party’s expert opinions on the audibility of a police siren: “Although a party may not call an expert witness merely to express an opinion contrary to that expressed by another expert, a party may impeach by showing the falseness of any matter upon which the expert based his opinion.”40 Further, parties need not disclose the identity of employees who will provide strictly factual testimony. In Stone v. Foster, the defendant in a medical malpractice suit arising from a cosmetic procedure called another doctor who had performed a previous cosmetic procedure on the same patient.41 In precluding the doctor from testifying at trial, the trial court explained that the doctor had not been disclosed as an expert. The court of appeal reversed and explained that the defendant did not seek to elicit any opinion testimony (regarding, for example, the standard of care) but instead properly sought to obtain percipient testimony on whether the plaintiff was aware of the risk of the cosmetic procedure. In addition, expert witness disclosure requirements apply only for trial purposes. In Kennedy v. Modesto City Hospital, the trial court refused to consider the declaration of an undesignated expert and granted summar y judgment. 42 The cour t of appeal reversed and held that references to “trial,” “trial date,” and “testify at trial” per vade Section 2034 and “the Legislature had in mind the exclusion of expert testimony offered by noncomplying parties at trial, not at a pretrial proceeding.”43 The reasoning of this decision likely applies with equal force to any pretrial expert testimony. Conversely, however, Rule 37(c) of the Federal Rules of Civil Procedure appears to proscribe the use of testimony by nondesignated experts at trial as well as “at a hearing, or on a motion….”44 Given the increasing importance of expert testimony at trial, it is crucial that a party determine early in a case whether it will rely on its employees to provide trial testimony, and, if so, the nature and extent to which its employees will provide expert testimony. Compliance with expert disclosure rules will minimize unnecessary motion practice and avoid problems of proof at trial. ■ CORPORATE LAW EXPERT WITNESS 34 Years Experience in the Boardroom • Member, Corporations Committee of the Business Law Section, State Bar of California • Author, Lecturer, Consultant • Editor of the Southern California Law Review Rogers, Sheffield campbell, llp B. Keith Martin, Esq. caltech bsee • usc jd (805) 963-9721 [email protected] www.high-techlawyer.com 1 See FED. R. CIV. P. 26(a)(2), 37(c). See FED. R. CIV. P. 26(a)(2)(A). 3 See FED. R. EVID. 702. Further, Rule 703 provides that the facts or data on which the opinion is based may be made known to the expert at or before the trial and need not be admissible if reasonably relied on by experts in the particular field. See FED. R. EVID. 703. In turn, Rule 705 states, “The expert may testify in terms of opinion or inference and give reasons therefor without first testifying to the underlying facts or data, unless the court requires otherwise. The expert may in any event be required to disclose the underlying facts or data on cross-examination.” See FED. R. EVID. 705. 4 See FED. R. CIV. P. 26(a)(2)(B). 5 See Navajo Nation v. Norris, 189 F.R.D. 610, 613 (E.D. Wash. 1999). 6 See Kw Plastics v. United States Can Co., 199 F.R.D. 687, 690 (M.D. Ala. 2000); Minnesota Mining & Mfg. Co. v. Signtech USA, Ltd., 177 F.R.D. 459, 460-61 (D. Minn. 1998). 7 See ADVISORY COMMITTEE NOTES TO RULE 26(a)(2) (“The requirement of a written report in paragraph (2)(B), however, applies only to those experts who are retained or specially employed to provide such testimony in the case or whose duties as an employee of a party regularly involve the giving of such testimony. A treating physician, for example, can be deposed or called to testify at trial without any requirement for a written report.”). See also Sipes v. United States, 111 F.R.D. 59, 61 (S.D. Cal. 1986) (“The Court further rules that it is improper to name treating physicians as expert witnesses where the information and opinions possessed by said physicians was obtained by virtue of their roles as actors or viewers of the transactions or occurrences giving rise to the litigation….Said physicians are percipient fact witnesses, and as such, the information and opinions they possess should be freely accessible to both parties to the present litigation, as would be the case with any other ordinary fact witness.”). 8 See FED. R. CIV. P. 26(b)(4)(A). 9 See FED. R. CIV. P. 37(c) (“A party that without substantial justification fails to disclose information required 2 LOS ANGELES LAWYER / FEBRUARY 2004 35 by Rule 26(a) or 26(e)(1)…is not, unless such failure is harmless, permitted to use as evidence at a trial, at a hearing, or on a motion any witness or information not so disclosed.”). 10 See Simplex, Inc. v. Diversified Energy Sys., Inc., 847 F. 2d 1290, 1292-93 (7th Cir. 1988). 11 See Prentiss & Carlisle Co., Inc. v. Koehring-Waterous Div. of Timberjack, Inc., 972 F. 2d 6, 8-9 (1st Cir. 1992); see also Rosemount, Inc. v. Beckman Instruments, Inc., 727 F. 2d 1540, 1549 (Fed. Cir. 1984) (affirming district court’s refusal to allow witness not listed as expert to testify concerning tests of a product involved in patent litigation). 12 Asplundh Mfg. Div. v. Benton Harbor Eng’g, 57 F. 3d 1190, 1196-98 (3d Cir. 1995) (internal citations omitted). 13 See FED. R. EVID. 702. 14 United States v. Lawson, 653 F. 2d 299, 303 (7th Cir. 1981) (Opinion testimony regarding defendant’s sanity was properly admitted.); United States v. McCullah, 745 F. 2d 350, 352 (6th Cir. 1984) (Testimony that tractor was hidden was admissible.). See also United States v. Sweeney, 688 F. 2d 1131, 1145-46 (7th Cir. 1982) (concluding that a PCP and methamphetamine drug user could testify as to identity of these drugs based on his prior use and knowledge and his sampling of the substance in question); United States v. Ranney, 719 F. 2d 1183, 1189 & n.11 (1st Cir. 1983) (permitting defrauded investors to testify regarding their investment); Neff v. Kehoe, 708 F. 2d 639, 643-44 (11th Cir. 1983) (reversing the exclusion of lay opinion testimony about the value of stolen coins). 15 Teen-Ed, Inc. v. Kimball Int’l, Inc., 620 F. 2d 399, 403 (3d Cir. 1980). 16 Soden v. Freightliner Corp., 714 F. 2d 498, 510-12 (5th Cir. 1983). 17 Simplex, Inc. v. Diversified Energy Sys., Inc., 847 F. 2d 1290, 1292-93 (7th Cir. 1988). State Office Sys., Inc. v. Olivetti Corp. of Am., 762 F. 2d 843, 845-46 (10th Cir. 1985). 19 Joy Mfg. Co v. Sola Basic Indus., Inc., 697 F. 2d 104, 110-12 (3d Cir. 1982). 20 Eckert v. Aliquippa & S. R.R. Co., 828 F. 2d 183, 185 n.5. (3d Cir. 1987). 21 See ADVISORY COMMITTEE NOTES TO 2000 AMENDMENTS TO FED. R. EVID. 701 (internal citations omitted). See also Joseph, Emerging Expert Issues under the 1993 Disclosure Amendments to the Federal Rules of Civil Procedure, 164 F.R.D. 97, 108 (1996) (noting that “there is no good reason to allow what is essentially surprise expert testimony,” and that “the Court should be vigilant to preclude manipulative conduct designed to thwart the expert disclosure and discovery process.”). 22 See ADVISORY COMM. NOTES TO 2000 AMENDMENTS TO FED. R. EVID. 701. 23 Id. 24 See ADVISORY COMMITTEE NOTES TO FED. R. CIV. P. 26(b)(4). 25 CODE CIV. PROC. §2034(b). 26 CODE CIV. PROC. §2034(f)(1); Kalaba v. Gray, 95 Cal. App. 4th 1416, 1419 (2002). 27 See EVID. CODE §801. 28 CODE CIV. PROC. §2034(a)(2), (f)(2); Bonds v. Roy, 20 Cal. 4th 140, 144 (1999); Kalaba, 95 Cal. App. 4th at 1421. 29 See CODE CIV. PROC. §2034(a)(f)(2)(A)-(E). 30 Compare EVID. CODE §720(a) with FED. R. EVID. 702. 31 Estate of Toomes, 54 Cal. 509, 514 (1880). 32 Osborn v. Irwin Mem’l Blood Bank, 5 Cal. App. 4th 234, 274 (1992). 33 See EVID. CODE §801; People v. Hernandez, 70 Cal. App. 3d 271, 280-81 (1977); People v. Arguello, 244 Cal. App. 2d 413, 420 (1966). 34 Schreiber v. Estate of Kaiser, 22 Cal. 4th 31 (1999). 18 35 Id. at 34-37. See FED. R. CIV. P. 37(c)(1); Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F. 3d 1101, 1106 n.1 (9th Cir. 2001); In re TMI Litig., 922 F. Supp. 997, 1003-04 (M.D. Pa. 1996) (Exclusion requires a showing of bad faith or failure to disclose when trial was imminent or in progress.). See also FED. R. CIV. P. 26(e) (discussing duty to supplement incomplete or incorrect disclosure information). 37 See FED. R. CIV. P. 26(b)(4)(B) (providing that the facts known by consultants and their opinions are discoverable under a showing of “exceptional circumstances”). 38 CODE CIV. PROC. §2034(l). 39 CODE CIV. PROC. §2034(m). 40 Stark v. City of Los Angeles, 168 Cal. App. 3d 276, 287 (1985), superseded by statute as stated in Thomas v. City of Richmond, 9 Cal. 4th 1154, 1161-62 (1995); CODE CIV. PROC. §2034(m). See also Kennemur v. State of Cal., 133 Cal. App. 3d 907, 921-22 (1982); Mizel v. City of Santa Monica, 93 Cal. App. 4th 1059, 1067-68 (2001) (rejecting purported impeachment expert because undisclosed expert was expected to render contrary opinion, not to contradict underlying factual foundation of physician’s direct testimony); Fish v. Guevara, 12 Cal. App. 4th 142, 145-46 (1993). 41 Stone v. Foster, 106 Cal. App. 3d 334, 351-52 (1980). 42 Kennedy v. Modesto City Hosp., 221 Cal. App. 3d 575, 580-81 (1990). 43 Id. at 582. 44 See FED. R. CIV. P. 37(c). See also Quevedo v. TransPac. Shipping, Inc., 143 F. 3d 1255, 1258 (9th Cir. 1998) (upholding district court’s exclusion of expert testimony in summary judgment proceedings based on party’s failure to designate the expert on a timely basis, and granting summary judgment). 36 PLEASE SUPPORT THOSE THAT SUPPORT THE LOS ANGELES COUNTY BAR ASSOCIATION! CLINICA PARA LOS LATINOS • SERVING THE LATIN COMMUNITY NORIEGA CHIROPRACTIC CLINICS, INC. Is proud to announce the Grand Opening of SAN FERNANDO HEALTH CENTER 500 S. BRAND BOULEVARD SAN FERNANDO, CA 91340-4002 (818) 838-1158 Personal Injury and Worker’s Comp cases accepted on lien basis. *MONTEBELLO HEALTH SERVICES 901 W. Whittier Blvd. Montebello, CA 90640 (323) 728-8268 EL MONTE HEALTH CENTER 2163 Durfee Rd. El Monte, CA 91733 (626) 401-1515 HUNTINGTON PARK HEALTH CENTER 3033 E. Florence Ave. Huntington Park, CA 90255 (323) 582-8401 POMONA HEALTH CENTER 1180 N. 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Anglo-American Court Reporters have been in business in London for almost 40 years and have specialized in U.S. depositions for all major U.S. firms of attorneys based in London, Europe, and the United States. They provide American-trained machine writers, computer-assisted transcription, and have realtime capability. Conference rooms available. ASCII, WordPerfect, and Amicus diskettes, plus condensed transcripts and keyword indexing provided. American video by U.S.-trained videographer. Video Synchronization. Discounts for long depositions. Interpreters. Leave your deposition request on voicemail at 01144 1483 236387. Expedited and daily transcripts on prior request. Many testimonials available, including U.S. Embassy, London. Fellow, British Institute of Verbatim Reporters certified, plus 23-year members of the National Court Reporters’ Association of the USA. See display ad on page 39. BEN HYATT CERTIFIED DEPOSITION REPORTERS 18226 Ventura Boulevard, Suite 103, Tarzana, CA 91356, (818) 343-7040, fax (818) 343-7119. Contact Ben Hyatt. Ben Hyatt Certified Deposition Reporters provides deposition reporters locally and internationally, with an emphasis on 24/7 personal service and complex litigation management. Benefits include use of Ben Hyatt Internet-based transcript repository, as well as all LACBA members receive a 10% discount in Los Angeles County and 5% discount elsewhere. Call (888) 272-0022 to request our Desktop Scheduler, or log on to www.benhyatt.com. JONNELL AGNEW & ASSOCIATES 744 East Walnut Street, Pasadena, CA 91101, (626) 568-9854, fax (626) 568-9987. Contact Jonnell Agnew. Court reporting/videotaping services, competitive prices while upholding the highest standards of professional ethics and quality control. LiveNote service provider, Realtime reporting with LiveNote hookup, RealLegal Transcript, Publisher Bundles/Binder now available. 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From discovery to verdict to final appeal, OTR provides customized presentation support services and equipment configurations for any litigation communications challenge and venue in the United States. On The Record, Inc.TM— The Trial Presentation Professionals. See display ad on page 39. THE CARDOMON GROUP 3605 West MacArthur Boulevard, Suite 702, Santa Ana, CA 92704, (800) 298-4336, fax (714) 540-9562, e-mail: [email protected]. Web site: www .cardomon.com. Contact Mike Jordan. The Cardomon Group has been providing both litigation and trial support services to the California legal community (as well as nationwide) for over 18 years. Our services include video deposition and production services (delivered direct to CD ROM), trial presentation consulting, trial technicians, trial presentation equipment rentals, text-to-video synchronization, document imaging, PowerPoint/Shockwave programming…and more! When it comes to price, professionalism, quality and fast turnaround…we are the BEST! We’ll see you in the courtroom. For more information, visit our Web site: www.cardomon.com. TRIALGRAPHIX 261 South Figueroa Street, Suite 100, Los Angeles, CA 90012, (213) 621-4400, (888) 269-9211, fax (213) 621-4411, e-mail: [email protected]. TrialGraphix is a national litigation consulting firm that specializes in exhibits, technologies, and trial consulting services. Our consultants help you identify effective case themes, establish settlement positions, and develop persuasive visual presentations. TrialGraphix has complete production facilities in Los Angeles, New York, Washington, D.C., Chicago, Atlanta, and Miami. You can be confident in our ability to assist you throughout the life cycle of your case. Call (213) 621-4000 or visit www.trialgraphix.com. DEMONSTRATIVE EVIDENCE EXECUTIVE PRESENTATIONS, INC. 3345 Wilshire Boulevard, Suite 1234, Los Angeles, CA 90010, (213) 480-1644, fax (213) 480-1838. Web site: www.executivepresentations.com. Specializing in design consulting, computer-generated demonstrative evidence, and digital trial presentations for great lawyers, including animation, photography, and legal video services. Experienced consultants/artists who understand how to visually simplify and enhance case themes using the latest computer technology to create and produce all presentations in-house. Unmatched quality and outstanding service. TRIALGRAPHIX 261 South Figueroa Street, Suite 100, Los Angeles, CA 90012, (213) 621-4400, (888) 269-9211, fax (213) 621-4411, e-mail: [email protected]. TrialGraphix is a national litigation consulting firm that specializes in exhibits, technologies, and trial consulting services. Our consultants help you identify effective case themes, establish settlement positions, and develop persuasive visual presentations. TrialGraphix has complete production facilities in Los Angeles, New York, Washington, D.C., Chicago, Atlanta, and Miami. You can be confident in our ability to assist you throughout the life cycle of your case. Call (213) 621-4000 or visit www.trialgraphix.com. VISION SCIENCES RESEARCH CORPORATION 130 Ryan Industrial Court, Suite 105, San Ramon, CA 94583, (800) 426-6872, e-mail: [email protected]. Web site: www.visualforensics.com. Contact Arthur P. Ginsburg, Ph.D. Internationally recognized vision scientist for visibility analysis, visual perception, human factors, and vision malpractice legal cases. Over 12 years as expert consultant to legal, industry, and government agencies for vision and visibility related pedestrian, vehicular, airplane, work, and medical malpractice cases. Demonstrative evidence analysis. 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DEPOSITION SUMMARIES STEVE FISHER DEPOSITION SUMMARIES 545 East Cypress Avenue, Unit A, Burbank, CA 91501, (818) 563-4496, e-mail: sfisher444@sbcglobal .net. Web site: www.deposummary.com. Contact Steve Fisher. Providing comprehensive, accurate, and easy-to-read deposition summaries for all types of civil cases since 1987. For rate information and summary samples, please visit www.deposummary.com. DOCUMENT MANAGEMENT paperlessUSA, INC. 26500 West Agoura Road, Suite 545, Calabasas, CA 91302, (818) 706-2303, fax (818) 706-7728, e-mail: [email protected]. Web site: www .paperlessusa.com. Contact Paul E. Stansen, Esq., CEO. FIND IT NOW. paperlessUSA empowers clients to put their finger on the data they need NOW! We provide industry-leading document management service solutions, including scanning and integration of a multiplicity of file formats in easy-to-navigate Internet Browser visual displays, all without proprietary software, through a powerful combination of innovative technology and a staff of dedicated attorney professionals! See display ad on page 39. EXPERT REFERRAL SERVICE PRO/CONSUL TECHNICAL AND MEDICAL EXPERTS 1945 Palo Verde Avenue, Suite 200, Long Beach, CA 90815, (800) 392-1119, fax (562) 799-8821, e-mail: [email protected]. Web site: www.expertinfo.com. Contact Rebecca deButts. Right expert right away! We are listed and recommended by the A.M. Best Company. 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You can be confident in our ability to assist you throughout the life cycle of your case. Call (213) 621-4000 or visit www.trialgraphix.com. QUESTIONED DOCUMENTS RILE & HICKS, Forensic Document Examiners HOWARD C. RILE, JR. AND A. FRANK HICKS 100 Oceangate, Suite 670, Long Beach, CA 908024312, (562) 901-3376, fax (562) 901-3378. Web site: www.asqde.org/rile or /hicks.htm. Diplomates, American Board of Forensic Document Examiners. Members, ASQDE, SWAFDE, SAFDE; Fellow AAFS. Combined 55+ years’ experience in examination and evaluation of disputed documents, including handwriting and signatures (wills, deeds, checks, etc.) medical records, business records, typewriting, printing, and/or other business machine processes, alterations, indentations, obliterations, and ink and paper questions. Fully equipped darkroom and laboratory, including VSC-4C and ESDA. Testified more than 500 times. TRANSLATION SERVICES VERDICT SUCCESS (310) 545-7914, fax (310) 545-7913. Contact Cynthia R. 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We work as a part of your trial team to integrate document images, photographs, graphics, video, animation, and other exhibits into a clear and convincing computerbased courtroom presentation. From discovery to verdict to final appeal, OTR provides customized presentation support services and equipment configurations for any litigation communications challenge and venue in the United States. On The Record, Inc. TM— The Trial Presentation Professionals. See display ad on page 39. MOLLY MURPHY TRIAL CONSULTANT/ MEDIATOR 1541 Ocean Avenue, 2nd Floor, Santa Monica, CA 90401, (310) 458-7720, fax (310) 458-7298, e-mail: [email protected]. Web site: www .jury-trialconsultant.com. Contact Molly M. Murphy. 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We work as a part of your trial team to integrate document images, photographs, graphics, video, animation, and other exhibits into a clear and convincing computerbased courtroom presentation. From discovery to verdict to final appeal, OTR provides customized presentation support services and equipment configurations for any litigation communications challenge and venue in the United States. On The Record, Inc.TM— The Trial Presentation Professionals. See display ad on page 39. VISUAL EQUIPMENT FOR TRIALS ON THE RECORD, INC. 5777 West Century Boulevard, Suite 1415, Los Angeles, CA 90045, (310) 342-7170, fax (310) 3427172, e-mail: [email protected]. Contact Ken Kotarski. On The Record, Inc.TM (OTR) is a full service litigation support firm specializing in the preparation and presentation of evidentiary material at trials as well as other dispute resolution proceedings. We work as a part of your trial team to integrate document images, photographs, graphics, video, animation, and other exhibits into a clear and convincing computerbased courtroom presentation. From discovery to verdict to final appeal, OTR provides customized presentation support services and equipment configurations for any litigation communications challenge and venue in the United States. On The Record, Inc.TM— The Trial Presentation Professionals. See display ad on page 39. This is the beauty of same-day fax filing. Stress. Less. Fax & File is Now Call 1-415-491-0606 or visit www.onelegal.com LOS ANGELES LAWYER / FEBRUARY 2004 39 computer counselor By Carole Levitt Where to Conduct Free Federal Legislative Research Online sion of the USC is official. The three sites all use the same code (prepared by the Law available for free Revision Counsel of the House of Representatives), but the research of House site is more up-to-date than the others and goes back unannotated further in time (to 1988). In most cases, therefore, the House site is federal codes the preferred choice. However, each site offers features that the hen starting research, others do not, so deciding which some attorneys prefer site to use often depends on how to delve into case law much information one has and first, while others prefer to begin what type of information one with statutory law. Those who hopes to gather. For instance, if a begin with statutor y research researcher only has the popular may typically read a print copy name of an act, the Cornell site is of an annotated code to find the the best, since only Cornell offers relevant statutes and case anno- a popular name table. Once the tations. Unfortunately, however, code section is identified on the many law firms are canceling table at the Cornell site, the their print subscriptions (if they researcher who also needs to find had them at all) and relying on recent amendments could visit online sources. On free Web the House site, since it is more sites, moreover, annotated codes up-to-date. At the House site, however, are simply nonexistent. On the other hand, free, unannotated recent amendments are only codes online are full-text search- noted when the researcher runs a citation search able and even easy Carole Levitt, (and not, for examto use. attorney and presiple, a search for a There are three dent of Internet For key word). ThereWeb sites that offer Lawyers (www fore, once a key access for free to .netforlawyers.com) word search is searchable dataprovides Internet complete and the bases of the United research MCLE citation for the States Code: 1) the seminars and eleccode section is Government Printtronic marketing identified, it is pruing Of fice’s Web consultation. dent to perform a site, GPO Access, citation search as at www.gpoaccess well. Even after .gov/uscode/index .html, 2) Cornell Law School’s doing so, however, the House site LII site at www4.law.cornell.edu only displays a note indicating /uscode, and 3) the House of that the section has been Representatives site (which is amended. The note does not found at http://uscode.house.gov include or link to the text of the /usc.htm). None of these sites is amendment and only makes refan official site. Only the print ver- erence to the public law number Different sites are W 40 LOS ANGELES LAWYER / FEBRUARY 2004 of the amendment. Next, the researcher must search by the public law number at the Library of Congress’s Thomas site (http ://thomas.loc.gov) to read the full text of the amendment. At the Cornell site, one does not have to run a separate citation search to learn about updates; they are noted on a key word search. Checking for updates appears to be easier at the Cornell site, although researchers should note that I have found the updates feature at the Cornell site not always to be working. The House site offers several other useful features. It has a strong search engine that allows Boolean searches by key word, phrases, topics, citations, or combinations thereof. A topic search allows one to enter a word, such as “grape” to locate all code sections about grapes, even if the word “grape” is not used. For example, a topic search for “grape” might also find code sections about wine. Boolean (“and,” “or,” “not”) and proximity (“near,” “adjacent”) terms can refine the search, along with what are called wild cards. Question marks replace a specific number of characters. Typing in “int??city” indicates a search for any word that begins with “int” followed by any two characters and ends with “city.” The search results may include “intercity” and “intracity.” On the other hand, an asterisk wild card indicates an unlimited number of characters. For example, “child*” indicates a search for “child,” “child’s,” “children,” and “childish,” among other terms. In addition, the House site allows users to download portions of the code, and various clas- sification tables help researchers to find sections of the code that have been recently affected by newly enacted laws or to correlate citations of public laws and Statutes at Large into their current USC citations. Researchers can also search for sections that contain a reference to another title and section. Browsing the Code One of the most frequent complaints about online statutory research is that researchers are unable to page through nearby sections as they can with a book. For example, if they search for 18 USC 22 and then want to go to Section 21 or 23 to see if either relates to Section 22, they must conduct a new search for each section. Fortunately, the House and Cornell versions of the code both allow users to go back and forth between sections, as with a book. At the House site, this is accomplished by providing back and forth arrows on the top left of each page. (These are not the same arrows as those on the browser’s control bar.) At the Cornell site, this navigational feature is accomplished by providing links on the top right of each page. The GPO site does not offer this feature. The Boolean searching at Cornell’s site is not as sophisticated, but it has some very useful search features that are not found at the House site. The most useful of these is the automatic linking to those r ules or regulations—in the Code of Federal Regulations—that are related to a given code section. This feature is activated by clicking on Parallel Authority once a section is displayed. At the Cornell site, researchers can also appreciate being able to browse the code by section (as in a print version), search by popular name, and key word search all titles simultaneously or one title only. Legislative History Research Two major government sites contain searchable databases of federal legislative materials that can aid research on legislative intent. The first is GPO Access (found at www.gpoaccess.gov/index.html), which contains the full text of bills back to 1993 and bill histories back to 1983. The second is the Library of Congress’s Thomas site, which contains the full text of bills back to 1989 and bill histories (click on Summaries and Status) back to 1973. The GPO site is the more useful site when the researcher does not know when the bill was introduced. The advantage of searching at GPO is that one can search a bill through all Congresses back to 1993. The Thomas site, on the other hand, requires the researcher to select the Congress before searching for bills. Bills can only be searched by bill number, key word, or phrase at the GPO site, while Thomas offers additional ways to perform a search, including date, sponsor name, date of introduction, stage in legislative process, and committee. Public laws also can be searched back to 1973 on Thomas. They also are available at the GPO site back to 1995 and can be searched by key word, phrase, USC or Statutes at Large citations, or bill or public law numbers. Committee reports can be searched at the Thomas site back to 1995. A search for “class action” at Thomas in the 108th Congress found hits in 21 committee reports. One of these was a 100-page report on the proposed class action bill. Committee reports are not available at the GPO site. On Thomas, the Congressional Record is searchable by words, phrases, index words, date, and name of sponsor back to 1989, while on the GPO site it is searchable back to 1994 by volume number, section, issue date, page number, key words, phrases, or bill number or roll-call vote number. The Internet has brought a tremendous amount of statutory and legislative information to the attorney’s desktop. With some digging, one can search as far back as 1973 and find legislative information almost in real time. Although searching the USC and legislative history online can be daunting, especially at first, doing the same type of research with print materials is even more daunting. Online research offers many advantages, and one of these is that substantial research can be performed at no cost. This can be a boon to a researcher on a strict budget. ■ Legislative Intent. You probably seldom need it. But when the need does arise, it can be crucial to winning your case. Tracking down sources of information can be a frustrating and time consuming process. When legislative history is important to your case it can be very cost effective to engage our professional expertise to research the history and intent of the statutes or administrative enactments at issue in your case. When you call, you can explain what you need, or tell me your situation and I can make suggestions on possible approaches. You can draw on my years of experience, so you will know what is likely to be available on your topic. You will get a precise quote for the cost of the project. When you authorize us to proceed, the report will be in your office on the date you specify. JAN RAYMOND LEGISLATIVE HISTORY & INTENT COMPUTER FORENSICS Certified Data Discovery • • • • • • Hidden/deleted file recovery Docs, Graphics, E-mail Internet use & Date Codes Expert Witness Testimony Litigation Support Full Forensic Computer Lab 909-780-7892 DATACHASERSINC.COM OFFICE SPACE —SOUTHERN CALIFORNIA— FREE EXECUTIVE SUITE OFFICES GUIDE Eighty-page booklet lists over 150 buildings in Los Angeles, Orange, San Diego Counties and the Inland Empire that offer executive suites. Guide includes office prices, amenities offered, photos, maps, and contacts. Toll Free (888) 676-1947 Fax (530) 750-0190 ■ E-mail: [email protected]. www.naj.net State Bar #88703 MAILED THE SAME DAY ORDERED. CALL 24 HOURS • (800) 722-5622 JACK TRIMARCO & ASSOCIATES POLYGRAPH/INVESTIGATIONS, INC. 9454 Wilshire Blvd. Sixth Floor Beverly Hills, CA 90212 (310) 247-2637 Jack Trimarco - President Former Polygraph Unit Chief Los Angeles F.B.I. (1990-1998) CA. P.I. # 20970 Member Society of Former Special Agents Federal Bureau of Investigation 1361 Avenida De Aprisa Camarillo, CA 93010 (805) 383-8004 email: [email protected] www.jacktrimarco.com Former Polygraph Inspection Team Leader Office of Counter Intelligence U.S. Department of Energy LOS ANGELES LAWYER / FEBRUARY 2004 41 IndextoAdvertisers 42 LOS ANGELES LAWYER / FEBRUARY 2004 Anglo-American Court Reporters, p. 39 Arthur Mazirow, p. 27 Tel. 01144 20 7264 2088 www.a-acr.com Tel. 310-255-6114 e-mail: [email protected] Aon Direct Admin./LACBA Prof. Liability, Inside Front Cvr Laurence D. Merritt, p. 34 Tel. 800-634-9177 www.attorneys-advantage.com Tel. 818-710-3823 www.legalknight.com AT&T Wireless, Inside Back Cover MyCorporation.com, p.1 Tel. 213-253-2400 www.attwireless.com Tel. 888-692-6771 www.mycorporation.com Law Office of Donald P. 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Presented by Judge Aurelio Munoz and Judge Emilie H. Elias as well as trial lawyers, this program offers a general overview of the court. It provides an opportunity for those who attend to learn successful pretrial and trial techniques and how to avoid common pitfalls in the courtroom. The program will take place at the Los Angeles Superior Court, 111 North Hill Street, Downtown. On-site registration will begin at 8 A.M., with the program continuing from 8:30 A.M. to 4:30 P.M., with lunch at noon. The registration code number is 008400 (7091B28). $45—CLE+PLUS members $85—all others $95—all at-the-door registrants 6 CLE hours The Duty to Defend in Title Insurance ON TUESDAY, FEBRUARY 17, the Title Insurance Subsection of the Real Property Section will present a program titled “Bad Faith and the Duty to Defend Under a Policy of Title Insurance.” This program will cover the “reasonable” investigation, the duty of defense and SLAPP Suits and Anti-SLAPP Motions The Nuts and Bolts of Employment Law ON WEDNESDAY, FEBRUARY 11, the Land Use Planning and Environmental Law Subsection of the Real Property Section will present a program on Strategic Lawsuit Against Public Participation (SLAPP) suits. Speakers Brant H. Dveirin and Michael S. Simon will discuss how an early motion can be filed to strike a SLAPP suit. The anti-SLAPP statute helps to protect citizens’ rights to protest development projects, but the statute has been applied outside the development project context. The program will take place at the LACBA/Lexis Publishing Conference Center, 281 South Figueroa Street, Downtown. Parking at the Figueroa Courtyard Garage is $7 with LACBA validation. On-site registration will begin at 11:45 A.M. and lunch at noon, with the program continuing from 12:30 to 1:30 P.M. The registration code number is 803LB11. CLE+PLUS members may attend for free (meal not included). The prices below include the meal. $45—Real Property Section members $55—LACBA members $65—all at-the-door registrants 1 CLE hour ON SATURDAY, FEBRUARY 14, the Labor and Employment Law Section will present a comprehensive seminar featuring prominent employment attorneys as speakers. Topics include employment contracts, discrimination, harassment, disability, leaves of absence, and wage-hour rules. Maria C. Rodriguez will moderate, and six sessions will feature speakers Marvin E. Krakow, Arthur F. Silbergeld, Arnold Peter, Nedy A. Williams, Marcus A. Mancini, Ann Kane Smith, Lynne Davis, Margery Somers, Drew Alexis, Eddie Washington, David D. Kadue, and Matthew Righetti. The seminar will take place at Southwestern University School of Law, 675 South Westmoreland Avenue in Los Angeles. On-site registration will begin at 8:30 A.M., with the program continuing from 9 A.M. to 12:30 P.M. The registration code number is 008417. $50—CLE+PLUS members $100—Labor and Employment Law Section members $135—LACBA members $170—All others 3.25 CLE hours Buss in the context of a title policy, selection of counsel under Cumis and Civil Code Section 2860, and practical claims handling and trial techniques. The program will take place at the Los Angeles Athletic Club, 431 West Seventh Street, Downtown. On-site registration will begin at 11:30 A.M. and lunch at noon, with the program continuing from 12:30 to 1:30 P.M. The registration code number is 803LB17. CLE+PLUS members may attend for free (meal not included). The prices below include the meal. $65—Real Property Section members $75—LACBA members $85—all at-the-door registrants 1 CLE hour The Los Angeles County Bar Association is a State Bar of California MCLE approved provider. To register for the programs listed on this page, please call the Member Service Department at (213) 896-6560 or visit the Association Web site at http://forums.lacba.org/calendar.cfm. For a full listing of this month’s Association programs, please consult the February County Bar Update. LOS ANGELES LAWYER / FEBRUARY 2004 43 closing argument By Joel Grossman How to Keep In-House Counsel Happy Corporate clients depend on outside counsel for professional courtesy fter spending 15 years as the head of Sony Pictures’ in-house litigation and labor relations groups, I have seen it all when it comes to how outside counsel relate to their in-house counterparts. Pleasing in-house counsel requires more than just being a good lawyer; you also need to pay close attention to the client’s needs beyond the use of your legal skills. The following advice, drawn from my experiences, indicates some of the ways to ensure a smooth relationship with in-house counsel. Submit bills with no surprises. It sounds simple, even obvious, but lawyers often forget that clients should not be surprised by the amount of time spent on a case or the identity of the lawyers charging time. Clients who think that a matter is generating only minimal billing time will be most unhappy if the bill reveals that two or three lawyers are working on the matter almost full-time. Similarly, after meeting a partner and perhaps an associate or two, a client will not be pleased to find another half-dozen, unknown names billing time. The best practice is to make sure that the client has a realistic idea of how much work is going into the file and who is doing it. Provide pleadings to the client in draft form in sufficient time to make changes. In-house lawyers generally like to review pleadings before they are filed. They are overseeing the matter, and they want the chance to mark up the document just as a partner might want to mark up an associate’s draft. More important, the client may know certain facts that the outside lawyer does not and may be able to correct mistakes. Also keep in mind that inside counsel’s time may be at a premium. A draft that arrives two hours before the filing deadline may, technically, provide enough time to review it, but if the attorney has a previous meeting scheduled with the CEO, those two hours are of no use. Give inside counsel a day or two to review the pleadings so that enough time remains to make changes. Keep inside counsel involved in all strategic planning. It is critical for inside counsel to participate in the decision-making process on strategic questions. If outside counsel is considering removal to federal court or filing a demurrer or motion to dismiss, inside counsel may have special knowledge that would militate against taking these steps. For example, an outside attorney may want to base a summary judgment motion on a fact that the client does not want to become part of a public record. Advise in-house counsel when speaking to the client’s executives. There are often good reasons why outside counsel needs to speak directly with company executives, perhaps even without in-house counsel present. But in-house counsel must be kept abreast of all such communications, lest they look foolish to their internal clients. Return phone calls or e-mails promptly. Returning phone calls or e-mails promptly isn’t just courteous, it’s critical. You simply have A 44 LOS ANGELES LAWYER / FEBRUARY 2004 no way of knowing whether the call is about a trivial matter or one that is truly important, and you cannot rely on the caller to tell you which it is in the message. Invite in-house counsel to attend depositions or court hearings. While in-house lawyers are surely not needed at every deposition or court hearing, they can and do add a lot. If nothing else, think of it as your chance to make a good impression. Don’t change horses in midstream. If you have been telling your client for a long time that you will be the trial lawyer, he or she does not want to hear that someone else (no matter how good a lawyer) will be substituting for you. Unless you are in the hospital, try the case. Stick to the budget, or if you cannot, tell the client as soon as possible. The biggest problem with budgets is not making a poor estimate when first preparing one; the biggest problem is failing to alert the client as soon as it becomes clear that the budget needs to be revised. Any client can accept the fact that unexpected developments require a revised budget, but clients cannot accept huge bills that arrive with no prior warning. Don’t talk to the media or bar association without client authorization. Many companies have strict policies about who can talk to the media or speak publicly about company matters. When a press inquiry comes to you, always consult your client first, and let him or her decide who, if anyone, will return the call. And after the case concludes, do not assume that your client will be happy for you to speak on the matter at a bar association meeting. Ask first. Keep the big picture—repeat business—in mind at all times.Your greatest accomplishment is to achieve a long and prosperous relationship with a good client, not what happens in a single case. That, put simply, is the big picture. Consider how you would respond if you Joel Grossman is a were asked to represent a party in an mediator and action adverse to your client’s subsidiary arbitrator affiliated or sister company on a matter completely with ADR Services, unrelated to the client’s business. There Inc., in Century City, may not be a technical conflict of interest, specializing in but your representation adverse to the employment and client’s sister company may embarrass entertainment inside counsel. At the very least, discuss litigation. the issue in advance and seek clearance. If you are denied clearance, remember the big picture. ■ When your association membership saves you money on wireless service, it’s an easy call to make. Members of the Los Angeles County Bar Association can save with AT&T Wireless. Choose from a range of already affordable calling plans and get a 5% discount on qualified wireless service charges each month. TO SIGN UP AND SAVE CALL: 1 800 459-6524 © 2003 AT&T Wireless. All Rights Reserved. General requirements: Requires credit approval, $36 Activation Fee, annual contract, $175 cancellation fee and a compatible phone. Subject to service terms and conditions and the calling plan brochure for the specific plan you choose. Service not available for purchase or use in all areas. May not be available with other offers. 5% Discount: Available only to active members of associations participating in the AT&T Wireless Association Program or its predecessor. Discount is activated only when you call the toll-free membership verification number listed above. Discount is only available on select AT&T Wireless digital calling plans and only applies to qualified charges as defined in your association’s AT&T Wireless Services Wireless Association Agreement. It may take up to 90 days for the discount to appear on your account. Other terms, conditions and restrictions apply—contact your association or your local AT&T Wireless Account Representative. Skip the maze. Go with amazing in statute research. Announcing Westlaw® StatutesPlus™ You now have access to the fastest, most accurate and comprehensive online statute research tool available. Westlaw StatutesPlus offers you advanced ways to find, verify, read and interpret statutes with remarkable efficiency. That means amazingly direct and accurate paths to the information you seek. Differences that matter. Experience it yourself! Visit west.thomson.com/westlaw/statutesplus or call 1-800-762-5272 today. © 2003 West, a Thomson business L-304983/12-03