Give Seyfarth Shaw’s lawyers a moment to relish the fact they’re off the hook for $25.5 million in damages, not to mention more than $5.6 million in fees and interest.
Then let them start realizing
that today’s Second District Court of Appeal ruling that gave them that dancing-with-joy moment wasn’t very
kind to their law firm: It almost scoffed at their defenses to a celebrity’s
claim of legal malpractice.
When an appellate court says
a firm “unpersuasively seeks” to do something or a partner “knew” he should
have taken action that he didn’t take or that an argument was “simply wrong,”
that’s not something to write home about. Especially when the court remanded
the matter for another trial.
Blanks v. Seyfarth Shaw involved a malpractice suit that Billy
Blanks — the celebrity karate champion who developed the once all-the-rage Tae
Bo fitness routine — filed against Seyfarth Shaw and one of its L.A. partners,
William Lancaster.
Blanks had hired the firm to recover more than $10 million paid to certified public
accountant Jeffrey Greenfield, who had been acting as Blanks’ agent even though
he wasn’t licensed as required by the state’s Talent Agencies Act. Lancaster sued Greenfield in Los Angeles County Superior Court in November 1999, but three months later
the Second District ruled in another case that the state’s labor commissioner
had exclusive original jurisdiction over TAA matters.
Rather than file a complaint
with the labor commissioner, however, Lancaster continued trying to obtain discovery in the trial court. By the time Lancaster petitioned to the labor commissioner, in August 2000, one year and four weeks had passed since Blanks' last payment to Greenfield. The labor commissioner subsequently held that Today’s appellate ruling by
Justice Richard Aldrich affirmed that Blanks and Seyfarth were barred from recasting the case against Greenfield as a civil suit under
the state’s unfair competition law. Nor could he be saved by the discovery
rule, which extends the statute of limitations in civil cases. "The TAA includes an unambiguous requirement that actions colorably arising under the TAA ... must first be presented to the commissioner within one year," Aldrich wrote. "The failure to comply with this procedural requirement is an absolute bar to Blanks' UCL cause of action." But Aldrich also ruled that L.A. Superior Court Judge Susan Bryant-Deason had erred by instructing the jury to consider Blanks' $10.6 million in payments to Greenfield as a whole. Instead, the jury should have considered whether some of the payments were for services that didn't require a talent license. "This instructional error contravenes the law and usurped the jury's responsibility to determine causation and damages," Aldrich wrote. But he had a warning for Seyfarth (and the trial judge) on remand. Aldrich speculated that Seyfarth will argue that Lancaster’s decision to delay filing a TAA petition was “a reasoned choice” or a “prudent trial strategy.” But he
indicated that won’t be easy. “Although attorneys have wide
latitude in selecting strategy,” Aldrich wrote, “Seyfarth will have the burden
to explain why its choice to delay filing a TAA petition was based upon a
rational, professional judgment that would have been made by other reputable
attorneys in the community under the same or substantially similar
circumstances.” James Rosen, a partner with Beverly Hills’ Rosen Saba who represented Blanks, expressed disappointment at the ruling, but said he still expects to prevail at a new trial. “We have read and are still
digesting the points raised by the court of appeal,” he said. “But one thing
that becomes clear is that the original conduct by the defendant, which
generated the lawsuit, is still actionable, still deplorable. These actions
still justify that the plaintiffs pursue their rights.” And far from celebrating, J.
Stephen Poor, Seyfarth Shaw’s Chicago-based chairman and managing partner,
released a terse one-sentence comment: “We’re pleased that the court reversed
the trial court’s decision and we look forward to being fully vindicated in
this matter.”
— Mike McKee
This is just another chink into the rotting armor of the Talent Agencies Act.
“Engrained in our concept of due process is the requirement of notice. Notice is sometimes essential so that the citizen has the chance to defend charges. Notice is required before property interests are disturbed, before assessments are made, before penalties are assessed.” Lambert v. California, 355 U.S. 225 (1957).
Penalty provisions must state with sufficient clarity consequences of violating a statute in order to satisfy the constitutional requirements. United States v. Helmy, 951 F.2d 988, 993 (9th Circuit 1991).
“Where a statute fails to provide a penalty it has been uniformly held that it is beyond the power of the court to prescribe a penalty.” State v. Fair Lawn Service Center, Inc., 120 A.2d 233, 236 (N.J. 1956).
“Elementary notions of fairness enshrined in this Court's
constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment but also of the severity of the penalty that a State may impose.” BMW of America v Gore, 517 U.S. 559 (1995).
The Talent Agencies Act has no statute providing notice of the severity of penalty the State can impose. Thus, the meting out of penalties -- any penalty, stands against the clearly established law delineated by the above precedents.
And per Article 1, Section 10 of the United States Constitution, “No State shall enter into any …
Law impairing the Obligation of Contracts.” And when substantial impairments are found and challenged, the State or state agency that has impaired the contract must be able to show a significant and legitimate public purpose behind the regulation and show that the adjustment of the contracting parties’ rights and responsibilities of a character appropriate to the public purpose justifying the legislation's adoption.” Energy Reserves Corp. v Kansas P&L, 459 US 400, 412 (1983) quoting U.S. Trust Co. v New Jersey, 431 US 1, 22 (1997).
The only way to justify an adjudicator’s impairing contractual rights is when there is an adopted statute to justify and here there is none, so the voiding the manager's right to contract was unconstitutional.
Mr. Blanks should have been forced to pay all of his debt to his former manager, Mr. Greenfield, only the Labor Commissions unconstitutional enforcement let him off the hook. Hopefully Seyfarth Shaw will use these constitutional arguments to show that no matter how good or bad the lawyering was, Blanks got a better deal than justified, and therefore no more money deserves to change hands.
Posted by: RICK SIEGEL | February 20, 2009 at 10:08 PM