UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
_____________________
No. 98-31360 _____________________
CURB RECORDS,
Plaintiff-Appellant,
versus
ADAMS & REESE L.L.P.; RICHARD GOINS; ATTORNEYS LIABILITY ASSURANCE SOCIETY, INC.,
Defendants-Appellees. _________________________________________________________________
Appeal from the United States District Court for the Eastern District of Louisiana (96-CV-2908-T) _________________________________________________________________
November 29, 1999
Before REYNALDO G. GARZA, JOLLY, and WIENER, Circuit Judges.
PER CURIAM:*
This legal malpractice case presents a question that will be
of interest to most lawyers: What duty does local counsel have to
bypass lead counsel and report directly to the client instances of
lead counsel’s misfeasance?
The plaintiff, Curb Records, Inc. (“Curb”), appeals the
summary judgment in favor of the defendants, Adams & Reese, L.L.P.,
Richard Goins (collectively, “Goins”), and Attorneys Liability
Assurance Society, Inc. This cause of action arises out of a prior
copyright action in which Curb’s lead counsel, Peter Strong of the
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4. California bar, hired Goins as counsel of record as required by
local rules. Strong specifically instructed Goins that his role
was limited to filing and forwarding pleadings, discovery, and
orders. Furthermore, he specifically instructed Goins not to deal
directly with the client. During the course of the litigation,
Strong, with the knowledge of Goins, failed to respond to a series
of court ordered discovery requests. Informed by Strong that these
failures were all part of a low profile litigation strategy, as
merely the holder of the stake in the controversy, Goins took no
action to inform the client. Ultimately, as a sanction, the court
struck Curb’s defenses to the underlying copyright action, forcing
Curb into a very unfavorable settlement. Following settlement of
the copyright claim, Curb filed the instant legal malpractice
action against Goins. The district court granted Goins’s motion
for summary judgment, finding no basis for a malpractice claim. In
doing so, it relied exclusively on general principles of contract
and agency law in holding that, when local counsel has been
specifically instructed by lead counsel to have no direct contact
with the client, local counsel does not have a duty to inform the
client of lead counsel’s discovery defaults. Curb now seeks review
of that ruling, arguing that Goins breached his professional duty
of care under Louisiana law. We hold that, under Louisiana law,
there is an inherent and nondelegable duty of care that requires
local counsel to inform its client of any known malfeasance or
misfeasance on the part of lead counsel, which, to an objective
2 reasonable attorney, would result in serious prejudice to the
client’s interests. Thus, the judgment of the district court is
reversed and the case is remanded for further proceedings.
I
A
Curb is a Tennessee corporation engaged in the business of
producing and distributing phonorecords containing various musical
works. In 1990, it began to distribute a phonorecord entitled
Aaron Neville’s Greatest Hits. Curb obtained a mechanical license
to reproduce some of the songs from Melder Publishing. Shortly
after Curb began distributing the phonorecord, George Davis and
various other songwriters filed a copyright infringement action
against it and Melder Publishing in the United States District
Court for the Eastern District of Louisiana (hereinafter “the Davis
matter”). The songwriters contended that they owned the copyrights
to nine of the ten songs contained on the phonorecord, and that
they had not licensed their rights to either Curb or Melder
Publishing. Earlier, upon having received notice of the dispute
over the ownership of the copyrights, Curb began withholding
royalty payments from Melder Publishing to avoid the risk of double
payment.
Upon receiving notice of the infringement suit, Curb sought
legal representation in the matter from Peter Strong, a California
3 attorney.1 Strong accepted the representation, but was required
to associate local counsel.2 Curb empowered Strong to retain local
counsel and authorized him to limit local counsel’s authority as he
saw fit.3 Strong contacted Richard Goins, a partner in the New
Orleans, Louisiana law firm of Adams & Reese, L.L.P., who accepted
the representation. Strong instructed Goins that his role as local
counsel would be limited to receiving discovery requests, pleadings
and court orders, and forwarding them to Strong. He also gave
Goins the responsibility of filing and serving pleadings and
documents, such as Strong might instruct. Further, Strong
explicitly instructed Goins that he was to have no direct contact
with Curb.
1 The record indicates that Carey J. C. Agajanian, a lawyer and personal advisor to Mike Curb, the owner of Curb Records, informed Strong that Curb had decided that it would simply cease payment of royalties to anyone pending the outcome of the litigation. Further, the legal strategy that Curb intended to pursue was to sit back and let the competing claimants to the copyrights resolve the matter among themselves. Strong was thus instructed by Agajanian to do little or nothing in this case, because Curb was comfortable that any potential liability was capped by federal statute. 2 Uniform Local Rule of the United States District Court for the Eastern, Middle, and Western Districts of Louisiana 83.2.5 states: “In all cases before this court, any party who does not appear in proper person must be represented by a member of the bar of this court, except as set forth below.” Id. at 83.2.5. The Local Rules go on to delineate an exception for visiting attorneys who are admitted to the court to appear in a particular case pursuant to a motion by a member of the bar or upon the entry of an ex parte order by the court. Id. at 83.2.6. 3 The record is undisputed and the district court held that “Strong was given complete and total authority in handling the Davis matter by Curb, which included the retention of [Goins] as local counsel.” Curb, 1998 W.L. 120365, * 11 (E.D.La. 1998).
4 During the course of discovery, the Davis plaintiffs
propounded discovery requests to Curb through Goins, who promptly
forwarded the requests to Strong. At some point in early 1995,
Goins received notice of a series of discovery defaults. During a
nine-month period in 1995, the district court entered a series of
discovery orders directing Curb to respond to the plaintiffs’
discovery requests or risk having their defenses stricken. Goins
forwarded all of these notices to Strong. Additionally, the court
imposed monetary sanctions on Curb for failing to respond to its
discovery orders. Goins forwarded these orders to Strong, and
Strong paid the fines by personal check. The record is unclear
whether Strong told Curb about these sanctions, and whether Goins
was told that Strong was keeping Curb abreast of these
developments.
B
On September 29, 1995, the Davis plaintiffs filed a motion to
strike Curb’s defenses. On October 11, 1995, Strong defended Curb
at a hearing on the plaintiffs’ motion to strike the defendant’s
defenses. On October 17, 1995, the court granted the plaintiffs’
motion and struck Curb’s defenses.
After settling the Davis matter,4 Curb filed the instant legal
4 Curb settled the Davis matter for approximately $650,000. Because Curb’s defenses were struck by the district court, it could not argue that it was not a “wilful infringer” and thus limit the Davis plaintiffs’ recovery to “infringers profits” under section 504 of the Copyright Act of 1976. See 17 U.S.C. § 504 (West 1999). Thus, Curb’s liability in the Davis matter was increased from the
5 malpractice action against Goins. Goins sought summary judgment.
In defending against the malpractice action, Goins argued, first,
that no malpractice had occurred: Under the instructions given to
them by lead counsel--that they were to have no direct contact with
the client--they had no duty to bypass lead counsel and communicate
directly with the client regarding lead counsel’s failure to
respond to discovery orders. Second, Goins argued that, in any
event, no damages resulted from the breach of this duty: Curb’s
loss of its defenses resulted solely from its deliberate choice of
a particular legal strategy--that it would simply ride out the
litigation until there was a resolution as to the ownership of the
copyrights to the music.
Curb contended that there were numerous issues of material
fact that precluded summary judgment, including: (1) the authority
and responsibilities of Goins as the attorney and fiduciary of
Curb; (2) the negligence, fault and breach of fiduciary and legal
duties by Goins; (3) the proportionate fault of Goins; and (4) the
scope and extent of damages Goins caused to Curb.
Nevertheless, the district court, relying on fundamental
principles of contract and agency law, granted summary judgment for
Goins, holding:
There is no doubt to this Court that Curb empowered Strong, without limitation, to handle the Davis matter.
relatively small amount of statutory damages provided under section 504 to nearly $800,000, the amount of gross revenues generated by the infringing phonorecord.
6 Strong was the mandate (agent/attorney) for Curb. Acting on behalf of Curb, Strong retained defendants as local counsel, but specifically limited their contact with Curb. Based upon the mandate created between Strong and the defendants, defendants were specifically instructed to not contact Curb directly. This was a specific limitation on their mandate. Moreover, the record and evidence indicated defendants’ participation in discovery was minimal. Strong was in complete charge of discovery and he was the one responsible for the defaults attributable to Curb. The Court refuses to imply a duty that simply does not exist. Goins and A & R had absolutely no superior duty to disregard and violate the terms of their mandate with Strong. . . . This Court finds A & R and Goins had no duty to violate the terms of their mandate with Strong and communicate directly with Curb. Absent a duty to act, there can be no negligence.
Curb Records, Inc. v. Adams and Reese, L.L.P., 1998 WL 120365, *12
(E.D.La. 1998). Curb filed a timely notice of appeal.5
II
We review the district court’s granting of summary judgment de
novo, applying the same standards applied by the district court.
See Jones v. Sheehan, Young & Culp, P.C., 82 F.3d 1334, 1337 (5th
Cir. 1996). Summary judgment is proper when there is no genuine
issue as to any material fact, and the moving party is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp.
v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986).
In concluding that Goins owed no duty under Louisiana law to
5 There was no hearing and no live testimony, either in open court or by way of deposition. The case was decided on affidavits alone.
7 inform Curb of lead counsel’s failure to respond to court ordered
discovery, the district court, as we have noted, relied solely on
general principles of contract and agency law. The district
court’s holding can be reduced to the following: The attorney-
client relationship is contractual in nature, and the duties owed
by the attorney to his client are defined wholly by the terms of
that contract.6 A review of Louisiana case law reveals that this
holding does not comport with established precedent. For example,
in Cattle Farm, Inc. v. Abercrombie, 211 So.2d 354 (La.Ct.App. 4th
Cir. 1968), the court held:
In no other agency relationship is a greater duty of trust imposed than in that involving an attorney’s duty to his client. . . . The law leaves no uncertainty in defining the character of duty which an attorney owes to his client. The relationship of attorney and client is more than a contract. It superinduces a trust status of the highest order and devolves upon the attorney the imperative duty of dealing with the client only on the
6 The district court stated: “In Louisiana, the attorney-client relationship is defined and limited by any contractual agreement between the lawyer and the client as to the scope of the representation.” See Curb, 1998 WL at *2. The district court cited Grand Isle Campsites, Inc. v. Cheek, 262 So.2d 350 (La. 1972), as the sole basis in support of this contention. In Cheek, the Louisiana Supreme Court addressed whether an attorney, who was hired to check title to property and pass an act of sale, also had a duty to investigate how the parties arrived at the sales price for the property. Id. at 30. The court rejected the plaintiffs argument that such a duty existed, stating: “The agreement or consent of an attorney to perform work for a party on a particular matter or transaction does not create an attorney-client relationship as regards other business or affairs of the client.” Id. at 29 (citing Delta Equipment and Construction Co. v. Royal Indemnity Co., 186 So.2d 454 (La.Ct.App. 1st Cir. 1966)). The issues presented by the instant case are obviously distinct from those presented in Cheek. Thus, the district court’s reliance on the Louisiana Supreme Court’s holding in Cheek is misplaced.
8 basis of the strictest fidelity and honor.
Id. at 365 (citations omitted & emphasis added).
Similarly, in Corceller v. Brooks, 347 So.2d 274 (La.Ct.App.
4th Cir. 1977), the court expressly rejected the contention that a
legal malpractice action is based on a breach of contract stating:
[W]e find no merit to plaintiff’s contention that this malpractice suit is one based on breach of contract. Though it is true that a contractual agreement between [the parties] established the attorney-client relationship, this contract of employment merely gave rise to the attorney’s legal duty to exercise at least the degree of care, skill, and diligence which is exercised by prudent practicing attorneys in his locality.
Id. at 277. The Corceller court concluded by stating that any
malpractice action must be based on the “act or omission which is
below the standards of similar practitioners in the community.”
Id.
Thus, Louisiana precedent indicates that the district court
erred in relying solely on general principles of contract and
agency law in defining the duties owed by Goins to Curb. Louisiana
law makes clear that the duties owed by an attorney to his client
transcend the bounds of an ordinary contractual relationship. We
thus turn to resolve the professional duty under Louisiana law that
local counsel would owe its client under the circumstances of this
case.
The case before us, as we have noted, is a legal malpractice
claim. Under Louisiana law, to assert a claim for legal
9 malpractice the plaintiff must demonstrate (1) that there was an
attorney-client relationship, (2) that the attorney was guilty of
negligence or professional impropriety in the relationship with the
client, and (3) that the attorney’s misconduct resulted in harm to
the client. See Francois v. Reed, 714 So.2d 228, 229-30
(La.Ct.App. 1st Cir. 1998)(citing Finkelstein v. Collier, 636 So.2d
1053, 1058 (La.Ct.App. 5th Cir. 1994)). To succeed on a negligence-
based malpractice claim, the plaintiff must demonstrate that the
attorney failed to exercise the degree of care, skill, and
diligence that would be exercised by a prudent practicing attorney
in his locality. See Nelson v. Waldrup, 565 So.2d 1078, 1079
(La.Ct.App. 4th Cir. 1990)(citing Ramp v. St Paul Fire & Marine
Ins. Co., 269 So.2d 239 (La. 1972)). Of course, there can be no
cognizable negligence absent a duty to act.
Thus, the issue presented here is whether under Louisiana law
there exists an inherent and nondelegable duty requiring local
counsel to report directly to its client any known instances of
malfeasance or misfeasance on the part of lead counsel. This issue
has not been squarely addressed by the Louisiana courts.
Consequently, we are required to make an Erie guess.7
C
The Louisiana Supreme Court repeatedly has held that under
Louisiana Rules of Professional Conduct, an attorney owes a duty to
7 See Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).
10 his client “to exercise at least that degree of care, skill, and
diligence exercised by prudent practicing attorneys in his
locality.” Ramp v. St. Paul Fire & Marine Ins. Co., 269 So.2d 239
(La. 1972); see also, Jenkins v. St. Paul Fire & Marine Ins. Co.,
422 So.2d 1109 (La. 1982). The duty of care, skill, and diligence
owed by an attorney in a particular case generally must be
established through expert testimony. See Greiserman v. MacDonald,
893 F.2d 787, 793 (5th Cir. 1990)(stating that “expert testimony is
necessary to establish the standard of care”); Houillon v. Powers
and Noss, 530 So.2d 680, 682 (La.Ct.App. 4th Cir. 1988). Only in
cases of “obvious” or “egregious” negligence that would be readily
apparent to a lay person, or such egregious acts that would
establish negligence as a matter of law, will expert testimony not
be required to establish the duty owed by counsel to its client.
See Nelson v. Waldrup, 565 So.2d 1078, 1079 (La.App. 4th Cir.
1990)(citing Ramp, 269 So.2d at 239)); Greiserman, 893 F.2d at 794.
D
Curb offered into evidence the declaration of Jack Martzell,
a noted and respected attorney in the Eastern District of
Louisiana, to establish the standard of care owed by local counsel
under the circumstances presented here.8 We focus on two specific
8 Both the record and Note 4 of the district court’s opinion indicate that Curb attempted to submit additional evidence on the issue of local counsel’s duty to inform the client of misfeasance or malfeasance on the part of lead counsel, but such attempts were deemed untimely by the district court and forbidden. See Curb, 1998 WL at *10. On remand, timeliness should not be a problem.
11 duties outlined in Martzell’s statement that are relevant to our
determination today. First, he stated that “the standard of
practice in the Eastern District of Louisiana for the fulfilling of
the attorney’s fiduciary duty to his client precludes reliance on
outside counsel for a corporate client to excuse contact with the
client on discovery matters and compliance with scheduling orders.”
Second, he stated that “the fiduciary obligation, as generally
understood in the Eastern District of Louisiana, includes advising
a client in a manner to protect it from itself.” Thus, he stated
that it is generally understood that “there is an obligation to
police the client’s activities insofar as they may be negligently
or intentionally in derogation of the law, rules or court orders.”
Based on these duties, and local counsel’s failure to notify Curb
of the discovery defaults, Martzell concluded that “the acts and
omissions of Richard Goins and Adams and Reese violated the
standard of practice for counsel of record and trial attorneys in
the Eastern District of Louisiana and caused harm to Curb Records,
Inc., in the Davis litigation.”9
9 Although Martzell’s statement is helpful in determining whether under the standards of practice in the Eastern District of Louisiana an attorney has an inherent and nondelegable duty to report directly to its client any known instance of malfeasance or misfeasance on the part of lead counsel, it fails to fully take into account the specific factual circumstances in this case. For example, the statement does not discuss the effect, if any, an assertion by lead counsel that a particular avenue is to be pursued as a matter of legal strategy may have on the duty of local counsel. Thus, Martzell’s statement is helpful only at the general level in deciding the duty owed in this particular case.
12 Goins did not offer any expert testimony; nor did they seek to
depose Martzell. Instead, they relied exclusively on the evidence
establishing the expressly limited role for which they were
retained, to demonstrate as a matter of law that they did not
breach their duty of care owed to Curb. In support of this
contention, Goins has been unable to cite to any case law on point.
We have likewise found none.
E
Our own inquiry has revealed some limited support in the
Louisiana cases for the testimony of Curb’s expert. In Dixon v.
Perlman, 528 So.2d 637 (La.Ct.App. 2d Cir. 1988), the Louisiana
Court of Appeals for the Second Circuit stated that: “[T]he duty of
the attorney may extend to the protection of his client’s own
substandard conduct, carelessness, or error.” Id. at 642 (citing
Meyers v. Imperial Cas. Indem. Co., 451 So.2d 649 (La.Ct.App. 3d
Cir. 1984)). Similarly, in Smith v. Becnel, 396 So.2d 444
(La.Ct.App. 4th Cir. 1981), the court held that an attorney must
use due care to insure that the decision of the client “[is] made
only after the client has been informed of relevant circumstances.”
Id. at 445. This case law is in accord with Curb’s expert
regarding local counsel’s duty to insure that the client is not
being misguided or relying on erroneous advice that will result in
an uninformed or unadvised decision.
Additionally, Louisiana Rules of Professional Conduct speak
directly to counsel’s duty to keep the client informed of
13 significant developments during the course of the representation.
Louisiana Rule of Professional Conduct 1.410 imposes upon counsel
the duties “to keep [the] client reasonably informed about the
status of [the] matter” and to “give the client sufficient
information to participate intelligently in decisions concerning
the objectives of the representation and the means by which they
are to be pursued.” La. Rules of Prof. Cond. 1.4. Further,
Louisiana Rule of Professional Conduct 1.311 imposes upon counsel
the duty to “act with reasonable diligence and promptness” in
carrying out the duties owed to its client. La. Rules of Prof.
Cond. 1.3.
F
It is clear that none of the authority cited above addresses
the precise question presented by the instant case--specifically,
the obligation of an attorney with secondary responsibility for a
10 Louisiana Rule of Professional Conduct 1.4 states:
(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information. (b) The lawyer shall give the client sufficient information to participate intelligently in decisions concerning the objectives of the representation and the means by which they are to be pursued, to the extent the client is willing and able to do so.
La. Rules of Prof. Cond. 1.4.
11 Louisiana Rule of Professional Conduct 1.3 states: “A lawyer shall act with reasonable diligence and promptness in representing a client.” La. Rules of Prof. Cond. 1.3.
14 case to report directly to the client any malfeasance or
misfeasance on the part of lead counsel when he is under express
instructions not to communicate with the client. However, after
reviewing the relevant case law, the Louisiana Rules of
Professional Conduct, and the statement of Mr. Martzell, we believe
that Louisiana would conclude that, as a matter of law, local
counsel in the Eastern District of Louisiana owes an inherent
nondelegable duty to report directly to its client any known
instances of malfeasance or misfeasance on the part of lead counsel
that an objectively reasonable lawyer in the locality would
conclude are seriously prejudicial to the client’s interests.
We should observe that, generally speaking, it is clear that
when the client has vested lead counsel with primary responsibility
for controlling and conducting the litigation, local counsel’s
direct obligations to the client are substantially lessened.
Further, there is no duty under Louisiana law or local practice
that would require local counsel to notify the client that it
disagrees with the professional judgment exercised and/or
strategies pursued by lead counsel so long as those judgments and
strategies lie somewhere on the spectrum of norms. But we
nevertheless think that Louisiana Rules of Professional Conduct do
not allow local counsel to turn a blind eye toward the willful
disregard of court orders by lead counsel when it should be evident
to him that such conduct will seriously prejudice the client’s
interests.
15 We recognize the potential concerns that are raised by the
imposition of such a duty. We note with approval the observations
of the Eighth Circuit when discussing this duty of care under
Minnesota law:
Local counsel does not automatically incur a duty of care with regard to the entire litigation. When the client vests lead counsel with primary responsibility for the litigation, the duty of local counsel is limited. Were the law otherwise, the cost involved in retaining local counsel would increase substantially. Confronted with a duty to monitor lead counsel’s handling of the litigation, local counsel would be bound to review all manner of litigation documents and ensure compliance with all deadlines. Out-of-state litigants would be forced to pay a local attorney to review lead counsel’s work. Given the skyrocketing cost of litigation, the duplication of effort and increased fees that would result from such a rule foster problematic public policy.
Macawber Engineering, Inc. v. Robson & Miller, 47 F.3d 253, 257-58
(8th Cir. 1995). Nonetheless, in a situation in which it is clear
to a reasonable attorney that substantial prejudice will occur to
the client as a result of lead counsel’s malfeasance or
misfeasance, we think that the duty of care under Louisiana law
requires local counsel to notify the client of lead counsel’s
action or inaction, irrespective of instructions, excuses, or
strategies of lead counsel.
III
In sum, we conclude that the district court erred by relying
solely on general principles of contract and agency law to decide
this case and in granting summary judgment dismissing this legal
malpractice action. Instead, we hold that, pursuant to Louisiana
16 law, local counsel has an inherent and nondelegable duty to report
directly to its client any known instances of malfeasance or
misfeasance on the part of lead counsel that an objectively
reasonable lawyer in the locality would conclude are seriously
prejudicial to the client’s interests. The case must be
reconsidered in that light. Accordingly, the summary judgment
granted by the district court is REVERSED, and the case is REMANDED
for further proceedings not inconsistent with this opinion. We
should note that we express no further opinion on any of the
aspects of the ultimate merits of this legal malpractice claim.
REVERSED and REMANDED.