Pillsbury Madison & Sutro's
Violation of Fiduciary Responsibilities

 

 SUPERIOR COURT OF THE STATE OF CALIFORNIA

 FOR THE COUNTY OF ORANGE, CENTRAL JUSTICE CENTER
 

LOUIS A. DELMONICO, MAUREEN R. DELMONICO, ANDREW L. DELMONICO, SUSAN L. DELMONICO (by LOUIS A. DELMONICO), GREGORY L. DELMONICO (by LOUIS A. DELMONICO) and HELEN BELMONTE,

  Plaintiffs,

   v.

THE CITY OF ANAHEIM, METROPOLITAN WATER DISTRICT, THE COUNTY OF ORANGE and DOES 1 through 50,

  Defendants.
 

AND RELATED CROSS-ACTIONS.

 CASE NO.  718071

Assigned for All Purposes to
Judge TULLY H. SEYMOUR,
Department 30
 
 
 

PETITION FOR WRIT OF MANDATE

1.  INTRODUCTION.

 This Writ Petition brought by Plaintiffs/Petitioners Gerald M.
Steiner and Sandra J. Steiner (the "Steiners") seeks the immediate
reversal of an improper order by the Respondent trial court commanding
the Steiners to execute documents in furtherance of a global settlement
of the underlying lawsuit to which the Steiners do not consent and which
the Steiners do not want or, alternatively, commanding the court clerk
to execute those documents on the Steiners' behalf.  That order was
entered in response to a specific performance motion filed by Pillsbury
Madison & Sutro, LLP ("PMS"), counsel for the Steiners in this lawsuit
until very recently and, even to this day, counsel for the other
plaintiffs seeking to force the Steiners' acceptance of the settlement.
By filing and prosecuting the motion, PMS is now breaching its obvious
ethical duties to the Steiners and, at a minimum, is subject to
immediate disqualification.
  By granting this dispositive motion, however, the Respondent
trial court evaded the issue of whether PMS should now be disqualified
from representing the other Plaintiffs against the Steiners' interests
and, in effect, ordered specific performance of an attorney/client
retainer agreement between the Steiners and PMS purporting to require
the Steiners' consent to any settlement approved by 66% of the homeowner Plaintiffs represented in this case by PMS.  In so doing, the Respondent Court abused its discretion because (i) the Steiners never waived the present PMS per se conflict of interest (the potential for which was not disclosed in the retainer agreement) and, thus, it was improper for the Respondent Court to even reach the motion's merits, and (ii) the
settlement terms are inherently unfair and unreasonable to the Steiners
and, therefore, California law did not permit the Respondent court to
order specific performance. The real party Plaintiffs should have been
left to their remedies at law for breach of contract, if any.
 Immediate stay of the court's order (Exhibit "11" hereto) is
respectfully requested and required because (i) the Respondent Court
itself has stayed entry of its order only through and including June 15,
1999, and (ii) if the order is entered and enforced, the Steiners will
be irreparably prejudiced by forever losing their rights of action
against Defendants, and by the significant burden of the settlement,
which imposes an inadequate and costly Geological Hazard Abatement
District ("GHAD") and a related easement on their real property, and
minimizes their monetary damages in this action to some minuscule and
indeterminate portion of a $8-9 million settlement sum to be shared
among them and more than 400 other homeowner Plaintiffs - - grotesquely
inadequate compensation for what the Steiners reasonably estimate is
more than $1 million in damages to their home from the 1993 Anaheim
Hills landslide underlying this lawsuit.  The order is now stayed by
Respondent Court only through June 15, 1999.  This reviewing court's
further stay of entry of the order and/or enforcement of its terms
pending the finality of this court's writ and/or related orders is thus
respectfully requested.
 The Steiners have no plain, speedy and adequate remedy at law.
The Respondent court itself expressed that seeking the requested review would be appropriate, stating: "I think it will be very beneficial to
our jurisprudence if you would pursue the matter because I think that
it's an important issue of law." (Exh. "9".)
 The Steiners thus respectfully seek a Writ of Mandate commanding
the Respondent court to vacate its order and to enter a new and
different order denying the other Plaintiffs' Motion for
Injunctive/Specific Performance Relief.  The Steiners further request
that PMS be ordered disqualified from further representing any other
party to this lawsuit in connection with any matter adversely affecting
the Steiner's interests or, alternatively and at a minimum, that the
present order be vacated pending the hearing of the Steiners
presently-pending motion before the Respondent court to disqualify PMS.

2.   PETITION.

 Petitioners allege:
 1. Plaintiffs and Petitioners Gerald M. Steiner and Sandra
J. Steiner ("Steiners") are individuals residing in Orange County,
California.  They are two of more than 400 individually-named Plaintiffs
in an consolidated action pending in Respondent Orange County Superior
Court.  The lead case for that consolidated action is captioned LOUIS A.
DELMONICO, MAUREEN R. DELMONICO, ANDREW L. DELMONICO, SUSAN L. DELMONICO
(by LOUIS A. DELMONICO), GREGORY L. DELMONICO (by LOUIS A. DELMONICO)
and HELEN BELMONTE, Plaintiffs, v. THE CITY OF ANAHEIM, METROPOLITAN
WATER DISTRICT, THE COUNTY OF ORANGE and DOES 1 through 50, Defendants,
Case No. 718071 (the "Action").  All of the 400+ individual Plaintiffs
in the consolidated action other than the Steiners presently are being
represented by Pillsbury Madison & Sutro, LLP ("PMS").  As explained
below, until on or about June 8, 1999 PMS also represented the Steiners.
The real parties in interest herein include those Plaintiffs, numbering
in excess of 400 individuals and representing ownership of approximately
250 homes in Anaheim Hills, other than the Steiners; they are too
numerous to individually identify here.  A true and correct copy of the
Fifth Amended Complaint ("Complaint") filed in the Action (which the
Steiners understand is the presently operative complaint for the lead
case in the Action) is attached as Exhibit "1" and incorporated by this
reference.
 2. In addition to the Plaintiffs other than the Steiners,
the other real party in interest herein is the City of Anaheim which,
Steiners are informed and believe, is the remaining settling Defendant
in this lawsuit.
 3. Essentially, the Fifth Amended Complaint ("Complaint")
arises out of the January 17, 1993 landslide in Anaheim Hills,
California, which effectively decimated the structural integrity and/or
economic value of approximately 250  homes owned by Plaintiffs
(including the Steiners) and/or the land on which the homes are
situated.  In numerous causes of action sounding in negligence and other
torts, the Complaint (Ex. "1", like the other complaints filed in this
consolidated Action) alleges that the Defendant real parties in interest
and others were wholly or partially responsible for the economic,
emotional distress and other damages sustained by the Plaintiffs
(including the Steiners), either by permitting development in an area
known to have been subject to ancient landslides and to be geologically
unstable or, through the installation and/or operation of faulty sewers,
pipes or other water conduits whose leakage contributed to the
instability of the land underlying the homes and surrounding area, or
otherwise.  The Steiners reasonably estimate that the damages they alone
have sustained aggregate in excess of $1.1 million for loss of value of
their home (which they believe was worth at least $1.2 million before
the landslide and has since been appraised with a $50,000 value), plus
additional damages for severe emotional harm resulting from their
eviction on the night of the landslide, their inability to ever return
to live at their residence, and their subsequent six months of living in
a warehouse adjoining their workplace while seeking a place to live.
The Steiners reasonably believe that actual economic damage to all
Plaintiffs in loss of their homes' collective value may well exceed $100
million.
 4. In August 1998, trial of this lawsuit commenced.  The
Steiners are informed and believe that following the swearing of the
first witness and the asking of a few foundational questions, the trial
recessed in order for settlement discussions to take place before a
court-appointed special master.  In the course of the next several
months, a settlement agreement was crafted which, if final and binding,
in pertinent part would require the following:
 a. Defendants and/or their insurance carriers would
contribute an aggregate $15.5 million settlement sum, of which $3.5
million would be allocated for the initial funding of a Geological
Hazard Abatement District ("GHAD") enacted under the auspices of the
City of Anaheim pursuant to Public Resources Code §26500 et seq, over
the area of Anaheim Hills affected by the landslide (and encompassing
Plaintiffs' homes) for the purpose of operating and maintaining a system
of wells which purportedly would help to stabilize the land on which the
directly-affected homes are located;
 b. A handful of the homeowners (specifically including the
Steiners) will be required to grant access and other easements over
their individual properties to the Defendants City of Anaheim and/or the
GHAD, with no guarantee of any compensation for those easements; and
 c. Following PMS's acquisition from the remaining $12
million of the settlement sum of PMS's $3-4 million contingency fee, the
remaining estimated $8-9 million would be allocated as damages to be
distributed among the 450+ homeowners (including Steiners) following
some indefinite period of fact finding, negotiation, mediation and/or
arbitration.
 5. At all relevant times, the Steiners have refused to
accept this settlement, and the Steiners have never signed any documents
whereby they approve the settlement.  The settlement would be unfair,
unjust and unreasonable to the Steiners because (i) the GHAD's
operations would not involve genuine mitigation against the future
catastrophic resumption of the landslide; rather, the GHAD operations
are only to involve dewatering, and once the initial $3.5 million
settlement allocation for GHAD funding expires, the homes within the
GHAD ambit (including that of the Steiners) would be subject to taxation
for future GHAD operations, thereby lowering the value of the Steiners'
home even further; (ii) the Steiners' property is the only one known to
them which would be burdened by a "variable" easement (i.e., of
indefinite dimension) over a genuinely useable former garden area of
their property, thereby further decreasing the value of their home; and
(iii) the Steiners' anticipated share of the settlement sum balance
allocated to the homeowners, if calculated on a pro rata basis, would be
only an estimated $40,000 to $50,000, or only between 4% and 5% of the
amount of their economic losses alone.  The Steiners presently do not
believe that any monetary compensation they might derive from the
present proposed settlement and a later arbitration/mediation among the
homeowners would be adequate to compensate them for their injuries.
 6. The proposed settlement agreement, by its terms, is to
be effective only if 100% of the homeowners have agreed to its terms and
signed all settlement documents pertaining to it.  The Steiners are
informed and believe that they are the only Plaintiff homeowners who
refuse to consent to the settlement and who have not signed the
settlement documents..
 7. Early in 1999, the Respondent Court in the Action
granted a motion under Code of Civil Procedure §877.6 for determination
that the proposed settlement is in good faith.  Prior to filing and/or
arguing the motion for that order, PMS had not obtained written approval
by the Steiners of the settlement.
 8. On May 24, 1999, in the course of a hearing before the
court-appointed Special Master for the Action pertaining to the
Steiners' refusal to consent to the settlement, Petitioner Gerald M.
Steiner stated that he and his wife no longer considered themselves to
be represented by PMS.  Nevertheless, substitutions of attorney (true
and correct copies of which are attached as Group Exhibit "2" and
incorporated by this reference), whereby PMS's representation of the
Steiners would cease, were not signed by Steiners or their new counsel
until some days later.  They were submitted to the Respondent court for
filing on June 2, 1999 and finally filed by the court on June 8, 1999.
Accordingly, Steiners are informed and believe that until June 8, 1999,
PMS remained the Steiners' counsel of record in the Action.
 9. In the interim, on May 26, 1999, PMS, on behalf of the
Plaintiff real parties in interest and against the interests of the
Steiners, filed and personally served on the Steiners a motion for an
injunction, essentially seeking specific performance by the Steiners of
a written attorney/client fee agreement between the Steiners, on the one
hand, and PMS, on the other hand, which PMS believes requires the
Steiners to sign the settlement agreement and related settlement
documents pertaining to this Action.  A true and correct copy of the
moving papers is attached as Exhibit "3" and incorporated by this
reference. Exhibit "A" to those moving papers is in relevant part a copy
of that agreement.; the last 6 pages of Exhibit "F" to Exhibit "8",
identified below, constitute a complete copy of the retainer agreement
actually signed by the Steiners on or about April 7, 1993.  PMS and its
present clients contend that the Steiners are obligated to approve the
settlement and sign the relevant documents needed to put the settlement
into effect because of a provision (on pages 5-6 of the Retainer
Agreement) which, PMS contends, requires the Steiners to approve any
agreement approved by 66% of the other homeowners.  PMS has represented that such approval by the other plaintiffs has been obtained.  As evidenced and argued in the Steiners' opposition papers (a true and
correct copy of which is attached as Exhibit "4" and incorporated by
this reference), however, specific performance cannot properly be
awarded because (among other reasons set forth therein) (i) the
consideration from the settlement to the Steiners would be inadequate
and unfair, and (ii) the Retainer Agreement did not disclose to the
Steiners that any settlement agreement might ever encompass a net future financial and legal detriment to the Steiners of substantial amount as would result from the settlement's implementation.
 10. In filing this motion and prosecuting it to hearing, and
in continuing to further represent the real party in interest Plaintiffs
against the interests of the Steiners, PMS has been, and is now, in
flagrant violation of its most basic ethical and fiduciary obligations
to the Steiners.   Simply put, PMS has a monstrous conflict of interest
between itself and its present clients, on the one hand, and the
Steiners, on the other hand.   PMS continues to seek the courts'
assistance in forcing the Steiners to settle this case when the Steiners
do not want to do so, so that PMS can collect its multi-million dollar
contingency fee.
 11. At all relevant times, PMS has continued to deny that it
has any conflict of interest because, PMS contends, the first headlined
paragraph in the Retainer Agreement (Exhibit "F" to Exhibit "8" herein)
purportedly discloses the possibility of the present conflict and the
consequences to the Steiners should that conflict arise.  PMS contends
that by signing the Retainer Agreement, the Steiners waived the present
conflict.  In truth, however, a review of the "conflict" portion of the
Retainer Agreement reveals that there is no such adequate disclosure of
the possibility that if the Steiners' interests and those of PMS's other
clients, or of PMS itself, ever conflicted, PMS would represent the
interests of any of the other plaintiffs, or its own interests, against
the Steiners; thus, by signing the retainer agreement the Steiners did
not waive the present conflict, nor could they have waived any conflict
of which no express prior disclosure had been made.  PMS has resisted
disqualification, and will not withdraw from its present representation
of parties adverse to the Steiners.
 12. Attached respectively as Exhibits "5" and "6" are true
and correct copies of the Rule 378 Declarations by counsel for,
respectively, Steiners and the PMS Plaintiffs in connection with the
injunction motion.  Attached as Exhibits "7" and "8" and incorporated by
this reference are, respectively, true and correct copies of the reply
points and authorities and supporting evidence filed by the PMS
plaintiffs in connection with the injunction/specific performance
motion.
 13. On June 10, 1999, the injunction motion was heard before
the Respondent Court (the Honorable Tully H. Seymour, Judge, presiding). An original transcript of the proceedings therein is attached as Exhibit "9" and incorporated by this reference.
 14. Prior to the hearing of the motion on the same date,
Steiners filed, and personally served, their Motion to Disqualify PMS
from continuing to represent the Plaintiff real parties in interest
against the Steiners' interests.  A true and correct copy of those
moving papers is attached as Exhibit "10" and incorporated by this
reference.  The motion essentially is based on the same facts and PMS
wrongdoing noted above.  At the hearing of the injunction motion, the
Respondent Court was specifically advised of its filing, and Steiners
requested the Respondent Court to continue hearing of the injunction
motion until July 13, 1999 (the date set for hearing of the
disqualification motion, and the earliest hearing date available to the
Steiners consistent with the court's calendar and a prior order in this
case requiring at least 20 days' notice of motions).  The Steiners
believe that the merits of the PMS Plaintiff clients' injunction motion
should not even be reached until the PMS disqualification issue had been
adjudicated.
 15. At the hearing, although the Respondent Court initially
determined to "treat [PMS] as having a potential conflict" (Ex. "9",
6:11), Respondent court then regrettably declined to either order
disqualification, to stay hearing of the motion pending resolution of
the disqualification issue at the hearing of the Steiners' motion to
disqualify PMS, or to deny the injunction motion.  Instead, the
Respondent court sidestepped the disqualification issue by stating that
it was asserting jurisdiction over the matter under Code of Civil
Procedure §§128(a)(5) and 187, and then granting the injunction motion,
both on the grounds advanced in the PMS moving papers, and on its own
motion pursuant to Code of Civil Procedure §664.6 ( on the latter
grounds only tentatively, pending the potential submission by the
Steiners of supplemental opposition on the latter ground alone.  In
light of the very brief present stay period, however, no such
supplemental brief will be filed in the Respondent court.)   A true and
correct copy of the court's order (without exhibits, although the
Steiners understand that the exhibits to the proffered order constitute
the same as those in the group exhibit attached as Exhibit "B" to
Exhibit "3" hereto, the PMS Plaintiffs' moving papers) is attached as
Exhibit "11" and incorporated by this reference.   The Respondent court
stayed entry of the order for five days only (i.e., through June 15,
1999 only); additionally, the Respondent court essentially invited the
Steiners to seek the review now requested, stating: "I think it will be
very beneficial to our jurisprudence if you would pursue this matter
because I think it's an important issue of law" [presumably referring to
the conflict presented here between the public policy requiring an
attorney's undivided loyalty and fidelity to his client and the public
policy favoring settlements].  (See, Exh. "9".)
 16. In so ruling, the Respondent court erred and abused its
discretion because (i) PMS's conflict of interest was and remains
flagrant, unfair and violative of the State Bar Rules of Professional
Conduct, and the Respondent court's discretion properly could only have
been exercised in favor of disqualifying PMS or, at a minimum,
refraining from hearing the injunction motion until the disqualification
issue could be fully determined on noticed motion, (ii) no inchoate
principle of judicial "inherent powers" like those Respondent invoked
allows a trial court to sidestep the essential conflicts issue to reach
a desired result (i.e. the completion of the settlement of a large
complex multiparty action and elimination of the case from the
Respondent's docket) when the Legislature has promulgated specific
procedures and prerequisites for resolving disputes of the type before
the Respondent court and now before this reviewing court, and (iii) the
Respondent court failed to properly apply the principles of Civil Code
§3391, under which the Steiners' specific performance of the Retainer
Agreement could not properly be ordered..
 17. The Steiners have no plain, speedy and adequate remedy for Respondent Court's error and PMS's ongoing wrongdoing.  Unless this
reviewing Court determines that in truth PMS has a conflict of interest
and is acting in violation of its ongoing fiduciary responsibilities to
the Steiners and vacates the injunction order, either the Steiners will
be forced to sign the settlement documents (Group Exh. "B" to Exh. "3"
hereto), thereby forever relinquishing their claims and suffering the
injustice of a settlement which will unfairly burden their property and
inadequately compensate them, or pursuant to the Respondent court's
order the Court Clerk will execute those documents with the same
resulting detriment to the Steiners.  The Steiners' right to appeal from
a judgment of dismissal following execution of the settlement documents
is not an adequate remedy because during the months or years between
filing their notice of appeal and the appeal's finality, PMS will
collect its ill-gotten contingency fee, the settlement proceeds will be
distributed and unrecoverable thereafter , and the Steiner property will
irremediably sustain the net burdens of the GHAD and the easement and,
thereby, will have even less value than now.  Further, PMS will remain
forever unpenalized for its blatant conflict of interest and breach of
ethical dutiesThe public policy of this state counsels that lawyers
like PMS who have grotesquely divided loyalties as PMS does in this
Action should be punished, not rewarded, for acting against the
interests of clients and/or former clients like the Steiners.

 WHEREFORE, the Steiners pray:
1. For a Writ of Mandate to issue (i) commanding the
Respondent Court to vacate its June 10, 1999 order and to either refrain
from ruling on the injunction motion until the Steiner's motion to
disqualify PMS is heard, or to enter a new and different order denying
the injunction motion and disqualifying PMS from further representing
any party to this lawsuit against the Steiners' interests or,
alternatively, (ii) commanding the Respondent court to show cause before
this Court, at a time and place then or thereafter to be specified, why
it has not done so and why a peremptory writ should not issue;
2. For an immediate stay of the Court's June 10, 1999 order
pending the resolution and finality of this Writ Petition and/or of any
subsequent writ or order;
3. For costs of this proceeding, including but not limited
to reasonable attorney's fees as may be allowed by case or statutory law
or by agreement of the parties; and
4. For such other and further relief as may be just and
proper.

Dated:  June ___, 1999   HART, KING & COLDREN

    By______________________________
       Robert S. Coldren
       Andrew M. Sussman
       Attorneys for Petitioners and Plaintiffs
 


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