Monday, November 5, 2018
A lawsuit to collect unpaid legal fees was governed by Nevada rather than California law, according to a recent decision of the Nevada Supreme Court.
The client relied on a conflict to deny his obligation to pay
Edward Stolz owns several radio stations and other business interests. In 2012, Stolz approached Robert Schumacher, an attorney in Gordon Rees Scully Mansukhani LLP's (Gordon & Rees) Las Vegas office, about potentially representing him and some of his entities in pending litigation in Nevada. One of the matters they discussed was a lawsuit in California alleging Stolz's stations had not paid for the rights to the music it broadcasted. They additionally discussed whether Stolz could be indemnified by his insurance company. Stolz said that his insurer was The Hartford (Hartford), but that he did not have a policy that would indemnify him. Schumacher advised Stolz that Hartford was a Gordon & Rees client, and that the firm could not represent Stolz in any litigation against Hartford; however, Gordon & Rees could write Hartford a letter requesting that it assume Stolz's defense in that lawsuit. Gordon & Rees advised Stolz that if it wrote Hartford a letter, and Hartford denied the request, Stolz would have to seek other counsel if he wished to pursue Hartford further. When Hartford denied the request, Stolz hired an insurance coverage attorney recommended by Gordon & Rees, but never pursued litigation.
The client counterclaimed alleging malpractice but that claim was dismissed on statute of limitations grounds. The law firm prevailed in a jury trial.
On choice of law
We conclude that the district court correctly applied Nevada law. The incident in question—whether Gordon & Rees should have disclosed the Hartford conflict in writing before representing Stolz— occurred in Nevada. The fee agreement, in fact, was signed by the managing partner in Gordon & Rees's Las Vegas office. Additionally, Nevada has an interest in regulating Nevada attorneys and adjudicating disputes for Nevada businesses. Nevada and California have the same public policy interest here because the guidelines for the ethical conduct at issue are virtually the same in both states.
Moreover, Nevada did not adopt the ABA model rules choice of law provision, which would have required that conduct in connection with a matter pending before a tribunal be governed by the rules of the jurisdiction in which the tribunal sits, even though Nevada did adopt the ABA jurisdictional rule. Compare RPC 8.5, with Model Rules of Profl Conduct r. 8.5 (Am. Bar Ass'n 2017). The district court was correct in noting this when determining not to use the California Rules of Professional Conduct as jury instructions. Accordingly, we conclude the district court was correct in applying Nevada law.
The case is ROYCE INT'L BROAD. CORP. VS. GORDON & REES, LLP C/W 72148. (Mike Frisch)