Corporate officer can use attorney status to obtain relief from default class action judgment

My condolences to my colleague, Greg Karasik.  After almost two years of attempting to elicit some form of meaningful response from the defendant in Gutierrez v. G & M Oil Company, Mr. Karasik obtained something you don't see every day, a default judgment in a class action.  Sadly, that judgment of about $4 million was set aside by the trial court after it concluded that Michael Gray, Vice President and General Counsel for the defendant, could use his own neglect to set aside the default that he, in his capacity as corporate officer, knew about all along.  The Court of Appeal (Fourth Appellate District, Division Three) in Gutierrez v. G & M Oil Company (May 7, 2010) affirmed the decision.

The Court observed that the issue was one of first impression:

Today we face the related question of whether in-house attorneys come within the mandatory relief from default or dismissal provision of section 473 of the Code of Civil Procedure. The question is, as far as we are aware, one of first impression in California. However, based on what the Supreme Court said in General Dynamics and in PLCM about the role of in-house attorneys, there can be no doubt about the answer: yes.

There is a wrinkle in this case, however, that requires a little more explication. Here, the in-house attorney who negligently allowed a $4 million default judgment to be taken against his company and his employer, a gas station chain, had the title of “Vice President and General Counsel.” Thus, he was a corporate officer as well as being an in-house attorney. Should that make a difference?

Slip op., at 2.  Concluding that the issue was one of statutory construction, the Court found that "there is nothing in section 473 which suggests that in-house attorneys who are also officers of a corporation are somehow exempt from the operation of the mandatory provisions of the statute."  Slip op., at 3.

The opinion examines at some length the operation of section 473 as it pertains to in-house counsel.  I can credit the Court for a well-reasoned and well-written analysis (aside: though I regularly disagree with Division Three, there are some very good writers in that Division of the Fourth Appellate District).  Still, it is a disappointing outcome where an attorney that is also an officer of a company can avoid imputation of knowledge to the company by claiming that he was wearing his attorney hat.