1 Apr

Causation in Professional Liability Cases: A Key Issue Often Overlooked on Dispositive Motions

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California has seen an increase in professional liability claims in recent years, in large part a result from the significant downturn in our economy. When business deals go awry, the participants often look to cast blame on their professional advisors: their accountants, lawyers, or real estate agents, to name a few. Causation is one of the most pivotal and hotly-contested issues in a professional liability case and should always be carefully examined by the defense. Challenging causation is essential in every professional liability case where – as is often the case – the unwanted result would likely have occurred irrespective of any alleged wrongful conduct by the professional.

Causation in a Professional Negligence – the General Rule. In order to establish liability, a plaintiff must always demonstrate that his or her injuries were caused by the act of the defendant. (Sindell v. Abbott Laboratories (1980) 26 Cal.3d 588, 597-598.) California law is clear that in the context of claims against professionals for services rendered, the “mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm … does not suffice to create a cause of action for negligence….” (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 749–750; Fritz v. Ehrmann (2006) 136 Cal.App.4th 1374, 1381.) Unless “the client suffers appreciable harm as a consequence of the professional’s negligence, the client cannot establish a cause of action for malpractice.” (International Engine Parts, Inc. v. Feddersen & Co. (1995) 9 Cal.4th 606, 614; see also Sahadi v. Scheaffer (2007) 155 Cal.App.4th 704, 715.)

To establish causation in typical professional malpractice cases, a plaintiff must prove actual causation, that is, but for the defendant’s negligence, the plaintiff would not be harmed.1 (See, e.g., Viner v. Sweet (2003) 30 Cal.4th 1232, 1241.) California law also requires, as a general rule, expert testimony establishing that the defendant’s negligence caused the plaintiff’s damages. (See, e.g., Scott v. Rayhrer (2010) 185 Cal. App. 4th 1535, 1542.) It is not enough for the plaintiff’s standard of care expert to simply opine that the defendant acted below the standard of care without linking that conduct to the plaintiff’s injury. The plaintiff must offer an expert opinion that contains a reasoned explanation illuminating why the facts have convinced the expert, and therefore should convince the jury, that it is more probable than not the negligent act was a cause-in-fact of the plaintiff’s injury. (Jennings v. Palomar Pomerado Health Sys., Inc. (2003) 114 Cal. App. 4th 1108, 1118.) As explained below, this is not always an easy task in professional liability matters.

Why Causation Can Be Difficult to Prove in Professional Liability Cases. The causation element in professional malpractice cases deserves heightened scrutiny because of the context in which such cases often arise. As explained by the California Supreme Court in Viner v. Sweet, supra, 30 Cal.4th at p. 1241:

When a business transaction goes awry, a natural target of the disappointed principals is [the professional advisor] who arranged or advised the deal. Clients predictably attempt to shift some part of the loss and disappointment of a deal that goes sour onto the shoulders of persons who were responsible for the underlying [professional] work. Before the loss can be shifted, however, the client has an initial hurdle to clear. It must be shown that the loss suffered was in fact caused by the alleged … malpractice. It is far too easy to make the …advisor a scapegoat for a variety of business misjudgments unless the courts pay close attention to the cause in fact element, and deny recovery where the unfavorable outcome was likely to occur anyway, the client already knew the problems with the deal, or where the client’s own misconduct or misjudgment caused the problems. It is the failure of the client to establish the causal link that explains decisions where the loss is termed remote or speculative.

(Ibid. [addressing a malpractice claim against attorneys].)

California courts are clear that in professional negligence cases, “the crucial causation inquiry is what would have happened if the defendant… had not been negligent. This is so because the very idea of causation necessarily involves comparing historical events to a hypothetical alternative.” (Id. at p. 1242 (italics in original).)

Consider, for example, a situation in which an attorney advised a client regarding the purchase of a business. The attorney’s primary role was to prepare the purchase and sale agreement. The client/purchaser is subsequently unhappy with the purchase, believing the seller was not forthright about the value of the business. The client sues the seller for fraud and breach of contract and also sues the attorney for malpractice. The client is seeking the cost of the business as damages. The question becomes: did the attorney’s role in the transaction (preparing and sale agreement) cause the plaintiff’s damages? And, in the absence of the attorney’s actions, would the client have suffered damages? The answer to these questions is likely no. The client would have purchased the business in the absence of the alleged malpractice and cannot claim that the attorney’s actions caused his damage.

Consider yet another example. Two separate entities (A and B) engage the same accountant for their individual tax and bookkeeping services. Those entities are also equal partners in a joint venture and engage the same accountant to perform similar accounting services for the joint venture. Entity A later takes the position that the joint venture terminated and instructs the accountant to prepare the accounting to reflect the termination. The accountant informs Entity B of Entity A’s position and prepares the accounting as instructed. Entity B disagrees with Entity A’s position and ultimately sues Entity A for breach of contract and sues the accountant for professional negligence, seeking damages consisting of lost partnership proceeds from both defendants. The question becomes: did the accountant’s act in following Entity A’s instruction cause Entity B’s lost partnership proceeds, or would Entity B have suffered those damages irrespective of the accountant’s actions? In order to prove causation against the accountant, Entity B will have to present expert testimony establishing “but for” the accountant’s alleged negligent act, Entity B would not have suffered the lost partnership proceeds. This will prove very difficult for Entity B and its expert unless the evidence suggests the accountant somehow influenced Entity A’s decision to treat the joint venture as terminated or conspired with Entity A to harm Entity B.

Practice Pointer. Because California courts are properly cautious about making professionals guarantors of their clients’ faulty business judgment, professionals and their attorneys must take great care to analyze and possibly challenge causation in a professional liability case. Causation is a question of law for the court when the relevant facts are not disputed. “Expert testimony positing a mere possibility of such causation is not enough; and when the matter remains one of pure speculation or conjecture, or the probabilities are at best evenly balanced, it becomes the duty of the court to direct a verdict for the defendant.” (Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 775–776.) Thus, this issue is properly addressed on dispositive motions, including motions for summary judgment and motions for nonsuit.

Please feel free to contact Traci S. Lagasse (tlagasse@albblaw.com), Cary A. Kinkead (ckinkead@albblaw.com) or Kelly D. Folger (kfolger@albblaw.com) at Andrews Lagasse Branch + Bell LLP with any questions you may have regarding your organization’s professional and general liability needs.