California Fellows Suzelle Smith & Don Howarth Secure $10 Million Verdict in Legal Malpractice Case

(Litigation Commentary & Review)

Suzelle Smith and her law partner, Don Howarth of Howarth & Smith represented plaintiff JP Hyan in a lawsuit against Los Angeles firm, Rutter, Hobbs & Davidoff to jury verdict on June 15, 2011. Mr. Hyan was a highly compensated executive at Lowe Enterprises Inc. from 1993-1997. Mr. Hyan had brought the Los Angeles County Employees Retirement Account ("LACERA") business to Lowe. Lowe was an investment manager on certain real estate housing investments ("Housing Program"). Part of Mr. Hyan's negotiated compensation from Lowe was 10% of the gross revenues Lowe received from the LACERA housing account.

In 1997, Mr. Hyan changed his status at Lowe from employee to consultant. He hired Frank Hobbs from the firm Rutter, Hobbs & Davidoff ("RHD") to negotiate the contracts memorializing his change in status and including protection for his ongoing 10% of the fees in the event Lowe should transfer or sell the LACERA housing account. RHD assured Mr. Hyan that his stream of income was protected in the event of any transfer of the Housing Program due to "successors and assigns" language in the contract. For 10 years, Mr. Hyan received his 10% share, amounting to more than $11 million.

In 2006, Lowe sold the housing account and the new owner, Tri Pacific, stopped paying Mr. Hyan's fees. Mr. Hyan returned to RHD for legal advice when his payments were cut off. RHD told Mr. Hyan that the 1997 contract they drafted required Lowe or TriPacific to continue paying due to the "successors and assigns" clause and that Mr. Hyan should retain RHD to sue Tri Pacific. The matter went to binding arbitration and Mr. Hyan lost. A judgment of over $500,000 was entered in favor of TriPacific, because RHD had inserted an attorney’s fees provision in the 1997 contract.

RHD charged Mr. Hyan for over $700,000 in fees for their handling of the arbitration. Mr. Hyan sued RHD and Franks Hobbs for professional negligence, breach of fiduciary duty, breach of contract and punitive damages. Mr. Hyan's economic damages included over $3 million in past revenues and over $5 million present value in future revenues for 5 years, as well as the RHD fees and the value of the Tri Pacific judgment.

On defendants’ motion the court bifurcated the action, sending the breach of fiduciary duty and punitive damages claims to binding arbitration. After a five week jury trial, a verdict of $10,155,559 (to the dollar the amount plaintiff sought) on the professional negligence claim was returned in favor of Mr. Hyan. The breach of fiduciary duty and punitive damages claims will be arbitrated by ADR.

Suzelle Smith, Fellow of the Litigation Counsel of America, is a partner and co-founder of the Los Angeles, California law firm of Howarth & Smith. Ms. Smith has extensive complex litigation, class action, professional malpractice, products liability, and business law experience and has tried numerous complex cases to verdict, representing both plaintiffs and defendants. In 2010, Ms. Smith was awarded the Top Corporate White Collar Crime Defense Counsel Award. Ms. Smith was selected as one of the top ten litigators in the United States for 1997 by the National Law Journal; in 2004 she was named as one of "America’s Top 50 Women Litigators," in 2005 and every year thereafter she was named an one of California’s "Super Star" litigators. Ms. Smith received a Bachelor of Arts summa cum laude, with special distinction in Political Science, in 1975 from Boston University and a Master of Philosophy in 1977 from Oxford University. From 1978-1980, she served as a Legislative Assistant to United States Senator Howell Heflin. In 1983, she received her Juris Doctorate from the University of Virginia School of Law, Order of the Coif. Ms. Smith is a Lecturer in Law and Visiting Fellow of Lady Margaret Hall, Oxford University, England. She is also a Trustee of the University of Virginia Law School and a member of the Advisory Council of The American Ditchley Foundation.

California Fellow Don Howarth is a partner and co-founder of the Los Angeles law firm of Howarth & Smith. Mr. Howarth has extensive litigation experience and has tried numerous high-profile cases and class actions to verdicts. He represents both plaintiffs and defendants. Mr. Howarth received a Bachelor of Arts magna cum laude from Harvard College, and earned a Juris Doctor cum laude from Harvard Law School, as well as a Masters in Public Policy from the Kennedy School of Government at Harvard University. Mr. Howarth served as a Law clerk for the Honorable Shirley M. Hufstedler, United States Court of Appeals, Ninth Circuit. Mr. Howarth is admitted to practice in California as well as the United States Court of Appeals, Ninth Circuit, United States District Courts, Central, Southern and Northern Districts of California, and the Supreme Court of the United States. Mr. Howarth is an elected Fellow of the American College of Trial Lawyers, of the International Academy of Trial Lawyers, and of the American Bar Foundation; a member of the American Bar Association, Litigation Section and Contributor to the Litigation Journal; a certified Provider for Continuing Legal Education in Litigation for the State Bar of California, of which he is a member; a featured speaker for ATLA and CTLA; a member of the Federal Bar Association and the Los Angeles County Bar.