Morrison Law Journal


The Morrison Law Journal February 2019 Where It Is Common Knowledge: Court Of Appeal Rules That Common Knowledge Theory May Excuse A Plaintiff In A Professional Liability Case From Designating An Expert Witness Where The Alleged Failure By The Professional Defendant Can Be Determined Based On The Knowledge Of A Lay Person By: Edward F. Morrison, Jr., Esq. Larry A. Schwartz, Esq.
In most professional liability cases, expert witness testimony is required in order to establish the standard of care. Indeed, the failure to designate an expert witness can be fatal to a professional liability claim. But what if the failure by the defendant is obvious? Is an expert witness still required? That question was answered in the case of Ryan v. Real Estate of the Pacific, Inc. (2019) Westlaw 926101 ("Ryan case"), a residential real estate broker dispute where plaintiffs' counsel failed to designate an expert witness and suffered summary judgment based on the failure to designate. While summary judgment was granted by the trial court, the Court of Appeal reversed on a common knowledge theory. The facts of the Ryan case are as follows. Daniel Ryan and Patrician Ryan owned a high end home in La Jolla near the Pacific Ocean (with Ocean views) and wished to sell it. The Ryans entered into a listing agreement with Real Estate of the Pacific, Inc. doing business as Pacific Sotheby's International, David Schroedl and David Schroedl & Associates ("Broker Defendants"). The Broker Defendants listed and marketed the property. During an open house hosted by David Schroedl, the Ryans' next door neighbor, Hany Girgis, informed Schroedl that Girgis intended to substantially remodel his home and that the remodel would permanently obstruct the westerly ocean view of the Ryans' home. Shortly thereafter, a couple, Ney and Luciana Morinho (the "Morinhos") purchased the property for $3,860,000 with the Broker Defendants receiving $96,500 at the close of escrow as their commission for the sale. At no time prior or during the escrow, in the real estate disclosures, or in any conversation, did the Broker Defendants disclose Girgis' extensive remodeling plans. The day after the close of escrow, the Morinhos' interior decorator spoke with Girgis and was advised of the extensive remodeling plans. Immediately thereafter, the Morinhos attempted to rescind the real estate sales transaction. The Ryans, who claimed that they were unaware of the plans by their next door neighbors, and based on the advice of the Broker Defendants, refused to rescind the purchase of the real estate sales contract. The Morinhos then demanded arbitration pursuant to the terms of their real estate sales contract and sought rescission of the contract or, in the alternative, damages. The Morinhos alleged that the Broker Defendants knew about the Girgis' construction plans and failed to disclose this information (and that 1 such information was imputed to the Ryans). That dispute went to arbitration between the Morinhos and the Ryans, only. Following the arbitration, the Arbitrator ordered that the real estate purchase be rescinded, with the Ryans returning the $3,860,000 purchase price to the Morinhos, and also ordered the Ryans to pay prejudgment interest, costs and attorney's fees in excess of $1 million. The Ryans then filed suit against the Broker Defendants seeking to recover the money they had to pay to the Morinhos and damages caused by the Broker Defendants' alleged negligence. The Ryans alleged six causes of action, including Negligence, Breach of Fiduciary Duty, Breach of Implied Covenant of Good Faith and Fair Dealing, Equitable Indemnity and Apportionment, Common Count – Mistaken Receipt, and Common Count – Money Had and Received. The foundation of the Ryans' claims were that the Broker Defendants were aware of Girgis' construction plans and did not inform them or the Morinhos. However, counsel for the Ryans took the position that no expert witness need be designated based on the findings and the award of the Arbitrator. The Broker Defendants then moved for Summary Judgment on the basis that the Ryans could not prove an essential element of all causes of action against the Broker Defendants, namely that they breached their duty to the Ryans. In that regard, the Defendants argued that all six of the Ryans' causes of action were premised on professional negligence and, as such, the causes of action were barred because "[e]xpert testimony is required to prove or disprove that the defendant performed in accordance with the prevailing standard of care." See, Kelley v. Trunk (1998) 66 Cal.App.4th 519. The trial court granted summary judgment. On appeal, the Ryans abandoned their theory that they were not required to designate an expert witness, but then argued, for the first time, the "common knowledge theory." The common knowledge theory states that an expert witness is not needed to establish the standard of care in a professional negligence cause of action when the conduct required by the particular circumstances is within the common knowledge of a layman. See, Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992. Based on the record before it, the Court of Appeal ruled that the common knowledge theory involved a question of law based on undisputed facts that could be raised for the first time on appeal and further ruled that, because California law does not require an expert witness to prove professional malpractice in all circumstances, the Ryans could be excused from having failed to designate an expert witness. The Court went on to rule that conduct of the Broker Defendants, i.e., the failure to disclose highly material information, involved circumstances within the common knowledge of a lay person. Quoting the Court: "Put differently, anyone who hired a real estate broker to sell her home, would expect that broker to share 2 The Court of Appeal went on to rule that the Broker Defendants had not satisfied their initial burden of showing that the causes of action lacked merit and reversed Summary Judgment. The Ryan case is important in that it does demonstrate, at least in somewhat extreme cases, that otherwise required expert witness testimony may not be required. This in no way suggests that expert witnesses should not be designated by parties to a professional liability dispute (and they should be in almost all cases), but the Ryan case demonstrates that there are situations where a party may be excused from its obligation to designate. About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com. Publication Note: The Morrison Law Group wishes to disseminate this publication to all clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be removed from the distribution list, or wishes to have a colleague added, please contact Jim Van Dusen at The Morrison Law Group at 213 356-5504 or vandusen@morrisonlawgroup.com. Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter. 3

In most professional liability cases, expert witness testimony is required in order to establish the standard of care. Indeed, the failure to designate an expert witness can be fatal to a professional liability claim. But what if the failure by the defendant is obvious? Is an expert witness still required?

That question was answered in the case of Ryan v. Real Estate of the Pacific, Inc. (2019) Westlaw 926101 ("Ryan case"), a residential real estate broker dispute where plaintiffs' counsel failed to designate an expert witness and suffered summary judgment based on the failure to designate. While summary judgment was granted by the trial court, the Court of Appeal reversed on a common knowledge theory.

The facts of the Ryan case are as follows. Daniel Ryan and Patrician Ryan owned a high end home in La Jolla near the Pacific Ocean (with Ocean views) and wished to sell it. The Ryans entered into a listing agreement with Real Estate of the Pacific, Inc. doing business as Pacific Sotheby's International, David Schroedl and David Schroedl & Associates ("Broker Defendants"). The Broker Defendants listed and marketed the property. During an open house hosted by David Schroedl, the Ryans' next door neighbor, Hany Girgis, informed Schroedl that Girgis intended to substantially remodel his home and that the remodel would permanently obstruct the westerly ocean view of the Ryans' home. Shortly thereafter, a couple, Ney and Luciana Morinho (the "Morinhos") purchased the property for $3,860,000 with the Broker Defendants receiving $96,500 at the close of escrow as their commission for the sale. At no time prior or during the escrow, in the real estate disclosures, or in any conversation, did the Broker Defendants disclose Girgis' extensive remodeling plans. The day after the close of escrow, the Morinhos' interior decorator spoke with Girgis and was advised of the extensive remodeling plans.

Immediately thereafter, the Morinhos attempted to rescind the real estate sales transaction. The Ryans, who claimed that they were unaware of the plans by their next door neighbors, and based on the advice of the Broker Defendants, refused to rescind the purchase of the real estate sales contract. The Morinhos then demanded arbitration pursuant to the terms of their real estate sales contract and sought rescission of the contract or, in the alternative, damages. The Morinhos alleged that the Broker Defendants knew about the Girgis' construction plans and failed to disclose this information (and that

such information was imputed to the Ryans). That dispute went to arbitration between the Morinhos and the Ryans, only. Following the arbitration, the Arbitrator ordered that the real estate purchase be rescinded, with the Ryans returning the $3,860,000 purchase price to the Morinhos, and also ordered the Ryans to pay prejudgment interest, costs and attorney's fees in excess of $1 million.

The Ryans then filed suit against the Broker Defendants seeking to recover the money they had to pay to the Morinhos and damages caused by the Broker Defendants' alleged negligence. The Ryans alleged six causes of action, including Negligence, Breach of Fiduciary Duty, Breach of Implied Covenant of Good Faith and Fair Dealing, Equitable Indemnity and Apportionment, Common Count – Mistaken Receipt, and Common Count – Money Had and Received. The foundation of the Ryans' claims were that the Broker Defendants were aware of Girgis' construction plans and did not inform them or the Morinhos. However, counsel for the Ryans took the position that no expert witness need be designated based on the findings and the award of the Arbitrator.

The Broker Defendants then moved for Summary Judgment on the basis that the Ryans could not prove an essential element of all causes of action against the Broker Defendants, namely that they breached their duty to the Ryans. In that regard, the Defendants argued that all six of the Ryans' causes of action were premised on professional negligence and, as such, the causes of action were barred because "[e]xpert testimony is required to prove or disprove that the defendant performed in accordance with the prevailing standard of care." See, Kelley v. Trunk (1998) 66 Cal.App.4th 519. The trial court granted summary judgment.

On appeal, the Ryans abandoned their theory that they were not required to designate an expert witness, but then argued, for the first time, the "common knowledge theory." The common knowledge theory states that an expert witness is not needed to establish the standard of care in a professional negligence cause of action when the conduct required by the particular circumstances is within the common knowledge of a layman. See, Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992. Based on the record before it, the Court of Appeal ruled that the common knowledge theory involved a question of law based on undisputed facts that could be raised for the first time on appeal and further ruled that, because California law does not require an expert witness to prove professional malpractice in all circumstances, the Ryans could be excused from having failed to designate an expert witness. The Court went on to rule that conduct of the Broker Defendants, i.e., the failure to disclose highly material information, involved circumstances within the common knowledge of a lay person. Quoting the Court:

"Put differently, anyone who hired a real estate broker to sell her home, would expect that broker to share

The Court of Appeal went on to rule that the Broker Defendants had not satisfied their initial burden of showing that the causes of action lacked merit and reversed Summary Judgment.

The Ryan case is important in that it does demonstrate, at least in somewhat extreme cases, that otherwise required expert witness testimony may not be required. This in no way suggests that expert witnesses should not be designated by parties to a professional liability dispute (and they should be in almost all cases), but the Ryan case demonstrates that there are situations where a party may be excused from its obligation to designate.

About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com.

Publication Note: The Morrison Law Group wishes to disseminate this publication to all clients and colleagues of the Firm who wish to receive it. Should any recipient desire to be removed from the distribution list, or wishes to have a colleague added, please contact Jim Van Dusen at The Morrison Law Group at 213 356-5504 or vandusen@morrisonlawgroup.com.

Disclaimer Note: The legal article presented above is intended to provide general information which may be of interest or use to clients and colleagues of The Morrison Law Group and should not be construed as legal advice on any matter.