Sheller v. The Superior Court Of Los Angeles County

71 Cal. Rptr.3d 207 (2008)

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Nature of the Case

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Facts

Class actions were being pursued against D alleging that D committed unfair business practices in connection with D's universal life and flexible premium universal life insurance policies. Ps alleged that the insurance policies were set up so that D would collect premiums from policyholders that were insufficient to keep the policies in force-resulting in either an untimely lapse of the policies or a substantial increase in premiums. The initial complaint was filed on November 5, 2003. The named plaintiff, Pauline Fairbanks, was a Farmers insured and also a Farmers agent. At the time the complaint was filed, Fairbanks was represented by Attorney Scott A. Marks, who is a California attorney. P, who is admitted to practice in Texas, was pursuing a similar class action against D in Texas. On February 2, 2004, D filed an application to appear pro hac vice as lead counsel on behalf of Fairbanks in the instant action. The application was granted. The trial court suggested that Fairbanks might not be an ideal class representative for the insureds, as she had also been a D agent. P then sent a written communication to some 350 D policyholders, seeking additional class representatives. It stated in part; 'If accepted, you are paid for your time in an amount set by the judge.” D filed an ex parte motion for a temporary restraining order preventing counsel from sending further precertification communications to potential members of the class, or, in the alternative, to prevent any such communications without prior court approval. D supported its motion with an expert declaration to the effect that both the September 2003 letter and the June 2005 flyer violated the California State Bar Rules of Professional Conduct. A hearing on D's ex parte motion was held and P was present. The trial court expressed concern that “there seems to be some hucksterism going on here by plaintiffs.” The court found the statement, “If accepted, you are paid for your time in an amount set by the judge” to be both inappropriate and simply untrue. Not only are class representatives not always entitled to recover, they may in fact be liable for court costs if the defendant prevails. P admitted it was his standard practice to tell people that they could lose. The court stated that P “just admitted a bait and switch to me.” The court believed the misrepresentation to be intentional. The trial court restrained P from any further precertification communications with potential class members without court preapproval. The trial court indicated its intention to sanction P in some manner. P's expert had suggested, in her declaration, that “a reprimand would be the maximum penalty to be appropriately imposed in this matter.” P argued that the prohibition on further precertification contact with the class without court approval would be sufficient. D which had incurred over $140,000 in fees on this issue, argued that, if P's pro hac vice status was not revoked, he should at least be ordered to compensate D for its attorney's fees. The court declined to revoke P's pro hac vice status. The court imposed on P the responsibility to pay two-thirds of D's attorney's fees, $95,009, as a condition of retaining his pro hac vice status. The trial court formally reprimanded P for his conduct. P appealed.