(CN) – A California appeals court reversed a $25 million legal malpractice judgment against the filing attorneys in a legal dispute between Tae Bo founder Billy Blanks and his former business manager.
Blanks won $10 million in compensatory damages and $15 million in punitive damages after a jury found that the fitness guru’s former attorneys, William H. Lancaster and Seyfarth Shaw LLP, had missed an important filing deadline.
The firm was supposed to file a petition with the Labor Commissioner, alleging that Blanks’ former manager, Jeffrey Greenfield, violated the Talent Agencies Act (TAA) by booking gigs for Blanks without a talent agent’s license.
Greenfield had evolved from Blanks’ accountant to his business manager and agent, but their relationship soon soured. Blanks accused Greenfield of mishandling several gigs, including television projects called “Tae Bo Squad” and “Battle Dome.” Greenfield also allegedly let a multimillion-dollar infomercial deal fizzle and then took a cut of the profits after it was successfully negotiated by attorneys.
The TAA required Blanks to file his petition with the commissioner within a year of the contested payments. Greenfield received his last payment on Aug. 2, 1999, but lead attorney Lancaster didn’t file the TAA claim until Aug. 28. Instead, Lancaster filed a lawsuit in superior court, alleging 17 causes of action based on the claim that Greenfield must return the $10.6 million he was paid because he wasn’t licensed.
When Blanks discovered that the claims were time-barred, he agreed to settle the case in 2003 by accepting $225,000 plus a $25,000 charitable contribution.
Blanks accused Lancaster of purposely delaying the Labor Commissioner petition in order to inflate legal fees, causing him to miss the filing deadline. As a result, Blanks said, the commissioner stopped short of ordering Greenfield to disgorge the $10.6 million he received from Blanks.
Lancaster and Seyfarth Shaw appealed the $25 million judgment on two legal theories: 1) that Blanks’ lawsuit included an unfair competition claim, which carries a four-year statute of limitation that trumps the TAA’s one-year deadline; and 2) that Blanks failed to show that he was entitled to the full $10.6 million in payments, when only the unlicensed services Greenfield provided could be severed from the contract.
On the first theory, the 2nd District Court of Appeal determined that the time frame for the unfair competition claim does not apply to the TAA claims.
“We hold that by this argument,” Justice Aldrich wrote, “Seyfarth unpersuasively seeks to circumvent the comprehensive statutory scheme in which the Legislature has given exclusive original jurisdiction to the Labor Commissioner with regard to TAA claims.”
The court added that the firm’s failure to file the claim within a year barred the unfair labor claim.
But the court sided with Seyfarth Shaw over the doctrine of severability. The California Supreme Court, recognizing the thin line between agents and managers, held that an agent/manager can get paid for the services he or she provided legally, even if the agent also performed one or more services without a license.
“[I]t was the jury’s responsibility to determine how a reasonable Commissioner would have addressed severability, had Seyfarth timely filed a TAA petition with the Commissioner,” the court concluded.
“Thus, the trial court’s instructional error relating to the doctrine of severability infected the entire trial and the judgment must be reversed.”