In a case in which plaintiff businesses brought a negligence claim against a natural gas company for purely economic losses resulting from a massive, months-long natural gas leak, the Supreme Court concluded that a proper assessment of competing considerations in light of its precedent suggests, and the extent of consensus across other jurisdictions confirms, that claims for purely economic losses suffered from mere proximity to an industrial accident create intractable line-drawing problems for courts. So such claims are best not treated as compensable in negligence. Liability in negligence for purely economic losses is the exception, not the rule. The Supreme Court saw no workable way to limit geographically who may recover purely economic losses. Without one, the dangers of indeterminate liability, over-deterrence, and endless litigation are at their apex.
Judgment of court of appeal affirmed.
In an appeal from a default judgment entered by the Superior Court of Santa Clara County, California, an attorney filed a motion to substitute himself in place of respondent judgment creditor as respondent. Appellant judgment debtor opposed the motion. The lawyer California judgment debtor had also sued the attorney, who had represented him in the action, for malpractice.
While the appeal from the default judgment was pending, the judgment creditor assigned to the attorney, for some undisclosed consideration, her interest in the default judgment. The court held that the proposed substitution violated multiple rules of professional conduct as well as the California Business and Professions Code. It also violated the attorney’s fiduciary duty to the judgment debtor. Even though the attorney no longer represented the judgment debtor, he continued to owe the judgment debtor the duty to protect their prior confidential relationship. The attorney was not only attempting to represent the opposing side, he was trying to be the opposing side in the very same litigation in which he represented the judgment debtor. There was more than merely a substantial legal and factual relationship between the prior representation and the current appeal. The attorney possessed confidential information adverse to the judgment debtor that would be compromised if his motion were granted. The attorney’s disregard for his ongoing fiduciary duties to his former client in favor of his own personal gain was without precedent, and sanctions were appropriate.
The court denied the motion and awarded sanctions to the judgment debtor against the attorney and his counsel.