After defeat in a dispute over the price of mobile home lots in Oxnard, a branch of one of Ventura County’s most prominent land-owning families is suing its longtime law firm on allegations of malpractice the family claims cost it $9.8 million.
Terry McGrath Aggler and J.D. McGrath Farms LLC are among the plaintiffs suing Nordman Cormany Hair & Compton, the region’s one-time top firm that said in June it was being dissolved. The dispute revolves around the sale of the Hollwood Beach Mobilehome Park to its residents.
The suit claims that the park owners, who are a different branch of the McGrath family than the pick-your-own farm operators, were forced to sell the park for $12.5 million rather than $20.5 million because of a poorly drafted contract written by Nordman Cormany. It also claims the owners were forced to pay the park residents’ legal bills — $1.8 million — in a lawsuit over the final price that the owners lost.
Marc Charney, a former senior partner at Nordman Cormany, said that although the firm “is essentially out of business,” it does plan to defend the lawsuit.
Attorneys for Aggeler did not return repeated requests for comment.
The underlying transaction was a move by the park owners to sell it to residents and tapping a state program that provided low-cost financing to the residents, a process that started in mid-2003.
The preliminary agreements included value appraisals from 2003 and 2004 that estimated the value of the lots at between $110,000 and $150,000. The park owners claim that they intended — and told Nordman Cormany to write in a contract — that a new appraisal would take place after all the necessary approvals for subdividing the land were obtained, which took several years. By the time the lots were ready for re-appraisal 2007, the prices had nearly doubled to $198,875 to $240,800.
The park residents balked at the higher prices and filed a lawsuit in 2009 that alleged fraud and sought to enforce the original prices. Early in the lawsuit, the Ventura County Superior Court Judge Mark Borrell tentatively ruled in favor of the residents that the contract language did not call for a second value appraisal to set the final price. The park owners say that Nordman Cormany advised them “to assess the risk of a fraud judgment in the second phase of the [park residents’] litigation, and to consider the benefits of a settlement. … At no time did any attorney at NCHC advise [the park owners] to appeal Judge Borrell’s Tentative Decision.” The park owners say they settled based on that advice.
The park owners are likely to have a uphill battle proving legal malpractice, however.
According to an article by Denver-based attorneys John M. Palmeri and Franz Hardy in DRI, a legal industry magazine for defense lawyers, legal malpractice cases need to satisfy the “case within a case” standard. In a dispute over a lost lawsuit, that usually means the loser has to show that the original, underlying case would have been won but for the original attorney’s negligence.
But it’s much more complicated in transactions, where there are two sides interacting. In a 2003 decision called Viner vs. Sweet, the California Supreme Court ruled that the standard in transactions is that the person claiming malpractice must not only prove that their attorney left out a favorable term in a contract, but also that the other side of the contract negotiation would have accepted it if it were offered.
Also muddying the park owners’ case is that they gave up their chance to have the contract language re-interpreted by an appellate court. Judge Borrell’s decision was tentative and would not become final — and thus open to appeal — until the lawsuit had concluded. If the park owners had continued to fight the lawsuit, lost and then appealed, a higher court would have given the contract language a fresh look. But the park owners forfeited that chance when they opted to settle.
There is also the question of who is named in the lawsuit. The court documents claim that Nordman Cormany attorney Chris Kitasaki drafted the agreement to sell the park and Joel Mark and Laura Withrow represented the park owners when they were sued over prices. None of those attorneys, who have all moved on to new firms, were named as defendants.
Charney, who has not been involved in Nordman Cormany’s leadership for several years but is named as a defendant, said he was not involved in the transaction and didn’t oversee his colleagues’ work.
“I’m not sure why I was the lucky poster boy in this lawsuit,” Charney said. “We all did our own work.”