Lawyer's Advice Merely Bad, Not a Tactical Move, Calif. Court Finds

Sometimes an attorney's bad advice is just bad advice, not shrewd legal strategizing gone awry.

That's what California's 6th District Court of Appeal concluded Tuesday when it reversed a trial court judgment and set aside defaults issued against two foreign microchip marketers.

Executives at Winbond Electronics Corp. of Taiwan and its corporate relative, Winbond Israel, were relying on the advice of their California attorney when they declined to respond to summons and complaints mailed to them by U.S.-based Standard Microsystems Corp. in 2007, the unanimous three-justice panel wrote.

The judges rejected the idea that the default was a strategic move by the defendant, or its Akin Gump Strauss Hauer & Feld attorney, Yitai Hu.

"Any suggestion that defendants -- or Hu -- deliberately incurred a default for tactical reasons is like suggesting that a person who has been run over by a speeding train must have deliberately leapt in front of it," Presiding Justice Conrad Rushing wrote. "Such things happen, of course, but we have a term for them: suicide. No one jumps in front of a train to slow it down."

Hu told Winbond leaders that the mail service did not confer jurisdiction over either company, so neither had to answer to Standard Microsystems' charge that Winbond had used ill-gotten trade secrets to "clone" Standard microchips for sale to Hewlett-Packard, according to the court.

In January 2008, a Santa Clara County Superior Court clerk recorded defaults against the Winbond companies. Four months later, a trial court judge granted a limited injunction against Winbond.

Winbond retained new attorneys and filed a motion for relief with the trial court judge, arguing that Hu had improperly counseled them not to answer the summons. But Santa Clara County Judge James Emerson denied Winbond's motion, suggesting that the company's actions may have actually been a calculated effort to delay legal proceedings.

The 6th District panel, however, said Winbond derived no benefit from a default. And the justices in Standard Microsystems v. Winbond Electronics, H033266, noted that Hu never discussed pursuing a motion to quash the service, a tactic that could have more effectively delayed a lawsuit if that was Winbond's true motivation.

Standard Microsystems had argued that a California statute barring litigants from asking a court for the same relief twice should have prevented Winbond from prevailing. But the appellate court said that the case more appropriately turns on a different statute, Code of Civil Procedure §473(b), which mandates relief from default when that default was the result of an attorney's "mistake, inadvertence, surprise, or neglect."

Hu, who left Akin Gump last year, conceded in an affidavit that he had offered bad advice to Winbond and its chief counsel, T.Y. Huh.

Standard Microsystems was "trying to hang on to a windfall" by portraying Winbond's move as a sinister tactic, said Raymond Cardozo, the Reed Smith partner representing Winbond. "The whole idea is, you can't make the client suffer for the mistakes of the attorney."

Dechert attorney Chris Scott Graham, who represented Standard Microsystems, had not seen the appellate court's ruling Tuesday afternoon and deferred comment.

Standard Microsystems' lawsuit against Winbond now goes back to "square one," Cardozo said, as the merits of the initial claim have never been weighed by a court.