California law requires a court to grant a party relief from a default or dismissal if the party is innocent of any wrongdoing and the default or dismissal is solely the result of the mistake, surprise, or neglect of that party’s attorney. In Gutierrez v. G & M Oil Company, Inc., the California Court of Appeal held that this same principle applies if the mistake is made by an in-house attorney who is also an officer of a corporate party.
In Gutierrez, the plaintiff filed a class action wage and hour claim against a company that owned a chain of gas stations. The complaint was received by the company’s in-house attorney who also was corporate vice president. He never told anyone else at the company and tried to handle the matter completely on his own. However, he did very little besides show up at two case management conferences. Ultimately, the attorney’s failure to do anything led the court to enter a $4 million default judgment against the company. At that point, the in-house counsel told the CEO of the company, who immediately hired outside counsel. The outside counsel obtained an order setting aside the default based on the in-house counsel’s neglect.
On appeal, the plaintiff argued that because of the in-house counsel’s dual role as an attorney and an officer of the company, the company was not innocent of any wrongdoing. The Gutierrez court rejected this argument, relying on two cases discussing the relationship between in-house counsel and the company for whom counsel works. The first decision held that in-house counsel has an attorney-client relationship with the company. The second decision held that when a company was successful in litigation permitting the recovery of attorney’s fees, the company could recover for the time spent by in-house counsel. Based on these prior decisions, the Gutierrez court concluded that a company should not be placed at a disadvantage by virtue of using in-house counsel. Accordingly, relief based on attorney mistake or neglect is mandatory whether the attorney works in-house or serves as outside counsel.