The Sacramento Bee
A Sacramento jury on Thursday ordered former state Assemblyman Mike Cullen to pay $2.8 million to a former business client for legal malpractice.
Cullen, now an attorney in Sacramento, was the business attorney for Western Assurance Co. Inc. for eight years before being fired, according to attorney Jeffrey H. Ochrach.
Cullen was accused in the lawsuit of incompetence and violations of ethical rules that eventually cost the business owner, Martin Nemeth, half his company. Cullen, a Democrat, represented Long Beach from 1967 until 1978.
He did not return a message left at his office.
The legal case began five years ago when Cullen filed a suit against Western, claiming it owed him $450,000. He claimed that during his tenure with Western, he acted not only as an attorney, but as a salesman as well, and was therefore entitled to commissions.
But last July, a Sacramento Superior Court judge threw out Cullen’s suit, ruling that it was unethical for a company lawyer to seek sales commissions.
The malpractice allegation stemmed from Western’s business in recovering money in cases where clients overpaid Social Security taxes.
Western typically would review the records of a client and recover any FICA money that was paid out unnecessarily.
"This is a business that was started out of the couple’s home and grew to be very successful," Ochrach said.
In the malpractice case, Western Assurance charged that business strategies recommended by Cullen resulted in Nemeth losing half his profits to a company executive in Indiana.
According to the suit, Cullen advised Western not to require written contracts for the company’s highest paid executives – instead suggesting that they be retained as consultants.
That strategy left Western vulnerable, Ochrach said. By giving an Indiana executive a percentage of profits instead of having him on an employment contract, Western "in essence made him a partner," Ochrach said.
"That law is so well known, so fundamental, that Mr. Cullen, even if he was just a novice lawyer, should have known better. It’s so basic." Ochrach said.
After a business dispute, the Indiana executive, J.D. Connor, sued Nemeth and won the case, Ochrach said. The company ended up going into bankruptcy in 1991.