Opinion
B229947
01-31-2012
JOSEPH L. SHALANT, Plaintiff and Appellant, v. CLIENT SECURITY FUND COMMISSION FOR THE STATE BAR OF CALIFORNIA, Defendant and Respondent.
Joseph L. Shalant, in pro. per., for Plaintiff and Appellant. Office of General Counsel for the State Bar of California, Starr Babcock, Richard J. Zanassi and Tracey L. McCormick, for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BS125548)
APPEAL from a judgment of the Superior Court of Los Angeles County, Robert H. O'Brien, Judge. Affirmed.
Joseph L. Shalant, in pro. per., for Plaintiff and Appellant.
Office of General Counsel for the State Bar of California, Starr Babcock, Richard J. Zanassi and Tracey L. McCormick, for Defendant and Respondent.
Joseph L. Shalant appeals from the denial of his petition for writ of mandate under Code of Civil Procedure section 1094.5 seeking to reverse the decision of the Client Security Fund Commission of the State Bar of California (CSFC) granting the application of Stuart Smith for a $25,000 award from the Client Security Fund (CSF), a fund established in 1971 by the State Bar to reimburse victims of attorney malfeasance. (See Bus. & Prof. Code, § 6140.5, subd. (a).) We affirm.
Statutory references are to the Business and Professions Code unless otherwise indicated.
FACTUAL AND PROCEDURAL BACKGROUND
1. Shalant's Fee Agreement with Smith
The factual summary relating to the fee agreement and ensuing State Bar proceedings is taken from the opinion written by Division Four of this District in Shalant v. Smith (March 19, 2008, B197243), an unpublished decision in which Division Four affirmed the dismissal of Shalant's quantum meruit action against Smith seeking to recover the value of his services. The decision is citable pursuant to California Rules of Court, rule 8.1115(b).
In February 1998 Smith retained Shalant (who was then a licensed attorney) to research the viability of a medical malpractice claim Smith was considering prosecuting. Smith paid Shalant $5,000 for this service. A signed contract reflects this agreement.
Thereafter, without Smith's knowledge or consent, Shalant sent a document entitled "Notice of Claim for Medical Malpractice" to two physician defendants. Two months later he filed a lawsuit. In August 1998 Shalant told Smith he had filed the action; Smith asked Shalant to explain how he would be compensated for his services. Shalant responded he would represent Smith on a contingency fee basis, subject to the maximum fee permitted under the Medical Injury Compensation Reform Act (§ 6146 et seq.) (MICRA). This oral agreement was never reduced to writing.
Section 6146 governs contingency fee agreements in medical malpractice actions.
Section 6147 requires, among other things, that a contingency fee contract be in writing.
Smith's deposition in his medical malpractice suit was ultimately set for Tuesday, June 22, 1999. On Friday, June 18, 1999 Shalant sent Smith a letter by facsimile transmission stating Smith needed to pay an additional sum if Smith wanted Shalant to continue to represent him. Smith responded he would not agree to any modification of the original contingency fee agreement. The deposition went forward as scheduled; Shalant appeared for Smith. During the next few days the two men continued to discuss Shalant's fee. Shalant insisted that Smith pay him a $25,000 nonrefundable fee (to be credited against any contingency fee that might be due in the malpractice action) plus $10,000 for costs. Shalant stated he would ask to be relieved as counsel if Smith did not pay the $25,000. Smith's attempts to negotiate with Shalant were unsuccessful. On July 1, 1999 Smith, who was about to leave for an extended out-of-state medical treatment scheduled months earlier, sent Shalant a check for $25,000.
On September 1, 1999 Smith and Shalant signed a new written retainer agreement, which provided for the maximum contingent fee allowed by MICRA, a $25,000 nonrefundable fee and $10,000 for expert witness fees. In addition, the agreement stated: "Client hereby gives the attorney a lien on any recovery made in this case to the extent that the attorney is entitled to legal fees and reimbursement for costs advanced on client's behalf."
In December 2000 Smith discharged Shalant as his counsel. Shalant's responsive letter stated Smith would owe him no more money for services rendered. In March 2001 Smith's new counsel wrote Shalant demanding return of the $25,000 retainer because the September 1999 fee agreement violated the MICRA limits. Shalant refused to return the money. In June 2002 Smith settled his medical malpractice action for $500,000.
2. Shalant's Disbarment
The State Bar filed two disciplinary charges against Shalant based upon his professional relationship with Smith. First, the State Bar alleged Shalant had entered into an illegal fee agreement on September 1, 1999. Second, it alleged Shalant had committed an act involving moral turpitude, dishonesty or corruption. Following a hearing, the State Bar judge found both charges true. Shalant requested review of that decision.
Rule 4-200(A) of the Rules of Professional Conduct provides a member of the State Bar "shall not enter into an agreement for, charge, or collect an illegal or unconscionable fee."
In an opinion filed May 18, 2005 the Review Department of the State Bar Court upheld the hearing officer's decision on both counts. The opinion explained Shalant had entered into an agreement charging and collecting an illegal fee because "section 6146 does not allow a contingent fee agreement in a medical malpractice case to provide for a non-refundable flat fee in addition to the statutory maximum contingent fee." (See Yates v. Law Offices of Samuel Shore (1991) 229 Cal.App.3d 583.) As to the second count, the Review Department found Shalant had engaged in abusive conduct because, three business days before Smith's June 1999 deposition, Shalant had insisted upon modifying the August 1998 oral retention agreement by adding the $25,000 nonrefundable fee and had threatened to withdraw if Smith did not consent. The Review Department concluded "the demand was abusive of Smith and constituted a coercive act involving moral turpitude." The Review Department recommended that Shalant, who had been disciplined on four previous occasions, be disbarred.
By order filed December 14, 2005, the California Supreme Court denied Shalant's petition for writ of review and ordered him disbarred.
California Rules of Court, rule 9.16(b) provides, "Denial of a review of a decision of the State Bar Court is a final judicial determination on the merits and the recommendation of the State Bar Court will be filed as an order of the Supreme Court."
3. The CSF Proceedings
On March 10, 2004 Smith submitted an application to the CSF seeking reimbursement of the $25,000 fee he had paid Shalant. After an investigation the CSFC issued a tentative decision on January 26, 2006 incorporating the findings of the State Bar Court. (See former CFS Rule 14(c).) Shalant submitted numerous objections, which Smith answered. On March 23, 2006 the CSFC issued a final decision rejecting Shalant's objections and concluding Smith had met the requirements for reimbursement under former CSF Rules 2 and 6.
Smith's application is governed by the CSF rules then in effect, which were promulgated in 1995. The current rules, which took effect January 1, 2010, have been substantially revised and renumbered and are not cited in this opinion.
Former CSF Rule 2 required an applicant to prove his or her loss was "caused by the dishonest conduct" of an active member of the State Bar. Further, "[a]ll payments from the Fund shall be a matter of grace and not of right and shall be in the sole discretion of the State Bar of California." Former CSF Rule 6(a) defined "dishonest conduct" as, among other examples, "[w]rongful acts committed by a lawyer in the nature of theft or embezzlement of money or the wrongful taking or conversion of money or property."
4. The Petition for a Writ of Mandate
On March 23, 2010 Shalant petitioned the superior court for a writ of mandate pursuant to Code of Civil Procedure section 1094.5 seeking reversal of the CSFC order granting Smith's application for reimbursement of the $25,000 fee. The petition alleged Shalant had been deprived of a fair trial and the CSFC had abused its discretion. In an opinion filed on December 16, 2010 the superior court denied the petition, ruling the legal conclusions of the CSFC were reasonable and its findings were supported by substantial evidence.
Shalant and counsel for the CSFC stipulated the filing of the petition four years after the issuance of the CSFC order was timely.
CONTENTIONS
Shalant contends the CSFC, like the State Bar Court, erroneously concluded his fee agreement with Smith violated MICRA. He also contends the factual findings by the CSFC are not supported by the record and his conduct was not "dishonest" within the meaning of former CSF Rule 6(a). Finally, although not at issue in the proceedings below, Shalant contends the CSF cannot recover the $25,000 payment from him without pursuing an action for subrogation against him and may not condition his reinstatement to the State Bar on payment of the charged amount.
DISCUSSION
1. Standard of Review
Code of Civil Procedure section 1094.5 governs judicial review by administrative mandate of any final order or decision rendered by a state or local agency. (Bixby v. Pierno (1971) 4 Cal.3d 130, 137.) Subdivision (b) of section 1094.5 provides that judicial review of such a decision shall "extend to the questions whether the [agency] has proceeded without, or in excess of jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the [agency] has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence."
Because a lawyer has no vested or fundamental interest in CSF disbursements, which are within the sole discretion of the CSFC, the superior court reviews the agency's decision for substantial evidence and does not apply the independent judgment rule. (Johnson v. State Bar (1993) 12 Cal.App.4th 1561, 1566-1567.) On appeal the superior court's judgment must be upheld if supported by substantial evidence (Gallup v. Board of Trustees (1996) 41 Cal.App.4th 1571, 1581), although we review de novo all questions of law (Gai v. City of Selma (1998) 68 Cal.App.4th 213, 219; Oldham v. Kizer (1991) 235 Cal.App.3d 1046, 1057).
2. Shalant Is Precluded from Relitigating the Legality of the Fee Agreement
Shalant challenges the CSFC determination his fee agreement with Smith violated MICRA on two grounds: First, he contends he is entitled to have an article VI court determine the issue—and none has yet done so; and, second, the decision in Yates v. Law Offices of Samuel Shore, supra, 229 Cal.App.3d 583 was wrongly decided and is, in any event, distinguishable.
Article VI, section 1, states in part: "The judicial power of this State is vested in the Supreme Court, courts of appeal, and superior courts, all of which are courts of record."
Whether the fee agreement violated MICRA was an issue necessarily decided in the disciplinary proceedings before the State Bar. The Supreme Court's summary denial of Shalant's petition for review of the State Bar Review Department's decision recommending his disbarment constituted a final judicial decision as to the issues raised in that proceeding, which included the legality of the fee agreement under MICRA. As the Supreme Court explained in In re Rose (2000) 22 Cal.4th 430, "the State Bar Act expressly recognizes and reserves to this court the judicial power over attorney discipline." (Id. at p. 442, citing § 6087.) Indeed, California Rules of Court, rule 9.16(b) (former rule 954(b)) specifies "the State Bar Court's recommendation of disbarment or suspension shall be filed as an order of this court upon our denial of a petition to review the State Bar Court decision." (Rose, at p. 442.) "[I]n deciding whether to grant a petition for review pursuant to [former] rule 954(a), we undertake a judicial determination whether the attorney should be disciplined as recommended by the State Bar Court." (Rose, at p. 443.)
Necessarily, therefore, in upholding the State Bar Review Department's recommendation of disbarment, the Supreme Court made a final judicial determination of the illegality of the fee agreement, at least with respect to Shalant, which precludes Shalant from now relitigating the issue. Issue preclusion is appropriately applied when the following conditions are established: The issue sought to be precluded from relitigation must be "'identical to that decided in a former proceeding'"; it must have been actually "'litigated'" and "'decided'" in the former proceeding; it must be "'final and on the merits'"; and "'the party against whom preclusion is sought must be the same as, or in privity with, the party to the former proceeding.'" (Jackson v. Yarbray (2009) 179 Cal.App.4th 75, 93, quoting Lucido v. Superior Court (1990) 51 Cal.3d 335, 341 (Lucido); accord, Pacific Lumber Co. v. State Water Resources Control Bd. (2006) 37 Cal.4th 921, 943.)
Each of these conditions is met here. Shalant vigorously defended the legality of his fee agreement under MICRA in the State Bar Court, which concluded the agreement violated MICRA's restrictions on contingent fees in medical malpractice cases. The Supreme Court's summary denial of Shalant's petition for review, which was a final judicial decision, necessarily decided that issue against Shalant. (See Lucido, supra, 51 Cal.3d at p. 342 [issue was "necessarily decided" if it was not "'entirely unnecessary'" to judgment in prior proceeding].) Pursuant to California Rule of Court, rule 9.16(b), that decision was final and conclusive as to Shalant. Nothing more is required. (See Castillo v. City of Los Angeles (2001) 92 Cal.App.4th 477, 481-84 [applying Lucido factors to find issue preclusion when litigant sought to relitigate issue determined in prior administrative proceeding].)
3. Substantial Evidence Supports the CSFC's Finding Shalant Engaged in Dishonest Conduct
Principles of issue preclusion do not apply to the CSFC's finding Shalant had engaged in dishonest conduct within the meaning of former CSF Rule 6(a), notwithstanding the State Bar's conclusion his misconduct constituted moral turpitude within the meaning of section 6106. Both findings, of course, may be premised upon the same underlying facts, and the CSFC predicated its finding of dishonest conduct on the factual findings of the State Bar Court in the disciplinary proceeding. Those findings are amply justified by the record and are sufficient to support the CSFC's conclusion Shalant's extraction of the illegal fee, and the manner in which he forced its payment, constituted dishonest conduct.
Section 6106 provides, "The commission of any act involving moral turpitude, dishonesty or corruption, whether the act is committed in the course of his relations as an attorney or otherwise, and whether the act is a felony or misdemeanor or not, constitutes a cause for disbarment or suspension." As discussed above, former CSF Rule 6(a) defined "dishonest conduct" to include "[w]rongful acts committed by a lawyer in the nature of theft or embezzlement of money or the wrongful taking or conversion of money or property."
4. No Issue Exists in This Case As to Shalant's Reimbursement of the $25,000 Fee to the CSFC or the State Bar's Ability To Predicate His Readmission to the Bar on Payment of the Outstanding CSF Award
Shalant raises numerous extraneous issues, including an attempt to secure an advisory opinion from this court that the State Bar, which is not a party here, may not premise his readmission to the Bar on payment of the fee imposed by the CSFC. (See § 6140.5, subd. (c).) The only issue before this court is whether the superior court abused its discretion in denying Shalant's petition for writ of mandate seeking to reverse the CSFC's award of $25,000 to Smith. (See State Bar v. Statile (2008) 168 Cal.App.4th 650, 672.) It did not.
In Shalant v. Smith (Mar. 19, 2008, B197243) [nonpub. opn.], Division Four of this Court affirmed the dismissal of Shalant's unjust enrichment claim against Smith as time-barred. We express no view in this opinion whether Shalant is entitled to offset the value of his services provided to Smith in the medical malpractice action in any subsequent action filed by the CSFC to recover the $25,000 it has paid to Smith.
DISPOSITION
The judgment is affirmed. The CSFC is to recover its costs on appeal.
PERLUSS, P. J.
We concur:
WOODS, J.
ZELON, J.