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It was considered a huge victory in 2001 when San Francisco’s Rudy, Exelrod & Zieff won about $90 million for a class of insurance adjusters who claimed they had been cheated out of overtime pay. But a year later, one of the adjusters sued the firm for malpractice, contending that it should have pursued an additional claim under the state’s unfair competition law, which might have secured an even bigger recovery. Alameda County Superior Court Judge James Richman threw out the suit on a demurrer, but on Tuesday three justices of the First District Court of Appeal reluctantly reinstated it. “While we may share the attorneys’ dismay that their efforts have been rewarded with this lawsuit rather than with the kudos they no doubt expected, and perhaps deserve,” Justice Stuart Pollak wrote, “we are nonetheless constrained to hold that plaintiff’s claim cannot be rejected out of hand.” Justices William McGuiness and Joanne Parrilli concurred. When the Rudy firm sued Farmers Insurance Exchange for the non-payment of overtime to some 2,400 adjusters and claims agents, it relied on arguments that the company had violated overtime rights laid out in the state’s Labor Code. Farmers had fought back by saying the employees were administrators exempt from the overtime regulations of the Industrial Welfare Commission. After a trial in 2001, jurors awarded more than $90 million in unpaid wages. In 2002, Stanley Janik filed a malpractice claim, saying that a larger recovery would have been possible if the class lawyers had looked to Business and Professions Code � 17200 — the state’s unfair competition law. The UCL would have permitted a recovery of wages for a four-year period, while the Labor Code claim was limited to three years. Rudy, Exelrod & Zieff argued that its duties to the plaintiffs were limited to the claims for which the class action was certified — an action under the Labor Code. The appeal court disagreed. “Although there is little precedent to guide us, we do not believe that the obligations of class counsel can be so narrowly circumscribed,” Pollak held. “We conclude that the attorneys’ obligations may extend beyond the claims as certified to related claims arising out of the same facts that class members reasonably would expect to be asserted in conjunction with the certified claims.” He and the other justices pointed out that they were not implying that the Rudy firm had failed to act with the “skill, prudence and diligence” required of lawyers. But the court held that the attorneys were “duty-bound to use reasonable care to fully protect the interests of the class. Whether they did so is a question of fact that cannot be disposed of on this demurrer.” Jeffrey Wilens, a lawyer at Yorba Linda’s Lakeshore Law Center who represented Janik, said he looked forward to going back to court to continue the case. He also said that while he wasn’t critical of the Rudy lawyers’ handling of the underlying case in general, he claimed they got a fee award of about $25 million. “If you are going to take the big case and get the big attorney fees,” he said, “the obligation is there.” The Rudy firm was represented by Murphy, Pearson, Bradley & Feeney partner Michael Bradley.

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