BIO PSYCHIATRIC TOXICOLOGY LABORATORY INC v. RADCLIFF WEST (1997)

Bio-Psychiatric-Toxicology Laboratory, Inc. (appellant) appeals from an adverse judgment after jury verdict on its cross-complaint for malpractice against its former attorneys, Radcliff & West and certain of that firm's partners (respondents).   Appellant assigns error in (1) an in limine ruling that respondents could not have committed malpractice by reason of their failure to raise a collateral estoppel defense in a lawsuit in which they represented appellants;  and (2) the giving of jury instructions that certain misconduct by appellant could constitute unclean hands, providing a complete defense to the malpractice claim.   We conclude that the challenged ruling and instructions were properly rendered, and affirm the judgment.¹

STATEMENT OF THE CASE

Between 1990 and 1992, respondents represented appellant in a Los Angeles County Superior Court case brought by Vanderbilt Dawson, Jr. (the Dawson case).   After the parties settled that case for $2 million, respondents sued appellant for unpaid legal fees, and appellant cross-complained for malpractice.   The jury awarded respondents $1 on their fee claim, and returned a verdict in their favor on the malpractice cross-complaint.   That phase of the judgment is the subject of this appeal.

1. The Dawson Case.

The Dawson case arose out of Dawson's discharge from his employment as a bus driver with the Southern California Rapid Transit District (RTD).   Appellant, a toxicological laboratory, performed employee drug-testing for RTD under contract.²  On October 18, 1988, Dawson, an 18-year RTD employee, underwent a urine testing as part of a biennial RTD physical examination.   Appellant collected and tested the specimen, and reported it positive for a cocaine metabolite.   Dawson underwent a second test on October 24 when on duty, and appellant reported that sample also positive for cocaine.   The RTD consequently discharged Dawson.   Represented by his union, he pursued and lost several administrative appeals, but the union ultimately undertook arbitration on his behalf against RTD under a collective bargaining agreement.

At the November 1990 arbitration, Dawson contested, among other things, the reliability and accuracy of appellant's urine testing, including the chain of custody of the samples.   Among those testifying for RTD in defense of the testing was Nissan Pardo, a director of appellant.   In a November 30, 1990 decision in favor of RTD, the arbitrator determined and found that Pardo's testimony had validated appellant's test results, which “should be accepted as stated;  thus, [Dawson] did have in his system on the two dates in question ․ the metabolite of cocaine.”   Accordingly, proper cause for discharge under the collective bargaining agreement was established.   Dawson did not file a petition to correct or vacate the arbitration award, nor did RTD seek judicial confirmation of it.

In April 1990, shortly after the arbitration demand was served, Dawson commenced the Dawson case, against RTD for wrongful discharge and negligent supervision of appellant, and against appellant for negligence in its collection, custody, testing, and analysis of the urine samples.   Dawson also charged both defendants with intentional infliction of emotional distress (IIED).   Appellant retained respondents to defend it.³  Respondents filed a series of demurrers, through the third amended complaint, ultimately eliminating the IIED claim.   With respect to the remaining, negligence claim, respondents' demurrer on grounds appellant owed no duty of care to Dawson was overruled, and respondents did not thereafter reiterate that contention.   As ultimately amended, the negligence cause of action alleged that appellant had improperly collected, stored, transferred, analyzed, and diagnosed Dawson's test sample, resulting in his termination by RTD and consequent economic and noneconomic damage.

In June and July 1991, Dawson's counsel deposed Pardo and certain others of appellant's employees.   Through these depositions, the following adverse facts were disclosed.  (1) At the arbitration hearing, Pardo had falsely testified that he held a master's degree in chemistry from the University of California at Los Angeles (in fact, he had no graduate degree), and that he had previously testified as a forensic toxicologist “[a] couple hundred” times, in both state and federal courts (he actually had so appeared only 20 to 30 times, mostly in unemployment hearings and never in federal court).  (2) At Pardo's direction, appellant had recently fabricated an additional page for the chain of custody record for Dawson's second test sample, supplementing the original, incomplete record, and listing persons who had not, in fact, handled the specimen.  (3) Additional, “internal” chain of custody records for both tests, never before mentioned, had previously existed but had been routinely destroyed.  (4) Dawson's urine samples also had been destroyed during the litigation, as had performance data on appellant's testing devices.

In light of this information, Dawson obtained leave to amend his complaint to include causes of action for negligent and intentional spoliation of evidence and IIED, with demands for punitive damages.   Appellant's demurrer to these claims was overruled, and the case was set for trial two months hence, in November 1991.   In the interim, appellant's expert witnesses reported that appellant's analysis of Dawson's second urine sample had been deficient and would be difficult to defend.

Before the discovery of appellant's falsification and destruction of evidence, a superior court judge had estimated the value of the Dawson case as up to $1.25 million.   Dawson now demanded $2 million to settle.   On respondents' recommendation, appellant agreed to that settlement, and the Dawson case was concluded in October 1991.

2. The Malpractice Case.

Four months after the settlement, respondents commenced suit against appellant for approximately $75,000 legal fees, allegedly owed in connection with the Dawson case and another matter.   Appellant responded by cross-complaining for malpractice in the defense of the Dawson case.⁴  As advanced at the time of trial, appellant's claim of malpractice involved respondents' failure to obtain an early, favorable adjudication of the negligence claim against appellant in the Dawson case, by asserting one or both of two legal positions by way of motion for summary judgment or judgment on the pleadings.

The first argument was that the arbitration award in favor of RTD and against Dawson collaterally estopped him from reasserting, against appellant in the Dawson case, the issues of whether appellant's tests were accurate and whether Dawson had had cocaine residue in his system.   Respondents had never raised this collateral estoppel defense.

Second, appellant asserted that respondents had negligently failed to obtain an adjudication, as a matter of law, that appellant had not owed Dawson a duty of care, the fundamental element of a negligence claim.   Although respondents had once asserted this contention on demurrer, without success, they had failed to cite two California cases that appellant contended should have been dispositive, Keene v. Wiggins (1977) 69 Cal.App.3d 308, 138 Cal.Rptr. 3 (Keene ) and Felton v. Schaeffer (1991) 229 Cal.App.3d 229, 279 Cal.Rptr. 713 (Felton ).  Keene held that a medical examiner engaged by a workers' compensation carrier did not owe a professional duty of care to the worker;  Felton held that a physician who had performed an examination of a job applicant for an employer owed no duty to the applicant to report accurately.  Felton was decided several months before the damaging disclosures about appellant, and appellant urged that it should then have served to obtain summary judgment.

At the commencement of trial, the court ruled on questions of law underlying the foregoing theories of malpractice.   Overruling respondents' motion in limine, the court held that Keene, supra, 69 Cal.App.3d 308, 138 Cal.Rptr. 3, and Felton, supra, 229 Cal.App.3d 229, 279 Cal.Rptr. 713, established that appellant had not owed a duty of care to Dawson, and that the jury would be permitted to consider evidence concerning whether respondents' failure to press that issue and cite those cases had constituted malpractice.⁵

On the other hand, the court ruled as a matter of law that the arbitration decision could not have served as collateral estoppel with respect to the Dawson case, primarily because, as the court saw it, the issues in the two proceedings were not identical.   Accordingly, the court ruled, “there will be no testimony from any expert with regard to whether or not the [respondents] should have in any fashion or form raised a defense ․ of res judicata and/or collateral estoppel.”

The case then proceeded to trial, with the cross-complaint for malpractice confined to respondents' failure to dispose of the Dawson case on the issue of duty.   Over appellant's objection, the court instructed the jury on the defense of unclean hands, advanced by respondents with reference to the falsification and destruction of evidence related to Dawson's drug tests.   In this connection, the court gave instructions requested by respondents, and rejected those defensively proposed by appellant.   The jury returned a verdict for respondents on the malpractice claim, while awarding them $1 damages on their complaint for legal fees.

DISCUSSION

1. Collateral Estoppel.

Appellant first contests the trial court's ruling that Dawson's labor arbitration could not have served as collateral estoppel with respect to his claims against appellant in the Dawson case, and therefore that respondents' failure to assert a collateral estoppel defense in that case could not have constituted malpractice.   Although intimating concern about an arbitrator's decision qualifying to create collateral estoppel, the court ruled not on that ground but rather on the ground that the issue decided in the arbitration had not been the same as those presented in the Dawson case.   As now explained, we agree with the court's determination of the collateral estoppel question, but not for the reason given.

 Collateral estoppel is an aspect of the doctrine of res judicata, operating to preclude relitigation of issues already determined.   “Traditionally collateral estoppel has been found to bar relitigation of an issue decided at a previous proceeding ‘if (1) the issue necessarily decided at the previous [proceeding] is identical to the one which is sought to be relitigated;  (2) the previous [proceeding] resulted in a final judgment on the merits;  and (3) the party against whom collateral estoppel is asserted was a party or in privity with a party at the prior [proceeding].’ ”  (People v. Sims (1982) 32 Cal.3d 468, 484, 186 Cal.Rptr. 77, 651 P.2d 321 (Sims ).)   As indicated by the latter element of this definition, collateral estoppel may be asserted against a party to the original proceeding by one who was not a party to that proceeding.  (Bernhard v. Bank of America (1942) 19 Cal.2d 807, 812, 122 P.2d 892.)

As between the labor arbitration and the subsequent Dawson case, the third element of collateral estoppel, identity or privity of parties, was not in contest.   Although Dawson's union had been the formal party to the arbitration against RTD, the union brought and prosecuted the arbitration as Dawson's representative, and respondents do not dispute that Dawson and the union stood in privity to each other.

 The trial court held, however, that the arbitration and the Dawson case did not meet the first prerequisite for collateral estoppel, that the issues, already decided and later tendered for relitigation, be identical.   With this we disagree.   The court reasoned that there was no identity of issues because in the arbitration the stated issue was whether Dawson had been discharged for proper cause, whereas the ultimate issues presented by the Dawson case against appellant (before the discovery of its misconduct) involved questions of negligence:  duty, breach of duty, causation of damage, and so forth.

However, “The ‘identical issue’ requirement addresses whether ‘identical factual allegations' are at stake in the two proceedings, not whether the ultimate issues or dispositions are the same.”  (Lucido v. Superior Court (1990) 51 Cal.3d 335, 342, 272 Cal.Rptr. 767, 795 P.2d 1223 (Lucido ).)   So understood, there was a critical identity of issues respectively decided and presented by the arbitration and the Dawson case, namely whether appellant's testing correctly established that Dawson had cocaine residue in his body.   The arbitrator expressly decided that issue, and it also was presented and pivotal in Dawson's suit against appellant, which ultimately depended on the proposition that appellant had negligently and incorrectly reported the presence of the drug.

 Although identical issues were involved in the labor arbitration and the Dawson case, the trial court's ruling that respondents could not have successfully raised the arbitration decision as collateral estoppel was nevertheless correct.   The reason involves both the remaining prerequisite for collateral estoppel, that the prior proceedings have resulted in a final judgment on the merits, and the status and effect of private arbitration awards.

In its traditional application, collateral estoppel has arisen by virtue of the final judgment of a court in an action or proceeding.   In some cases, the doctrine has been extended to final decisions of administrative agencies, or other public judicial proceedings, as to which the circumstances of the adjudication and the context of its proposed application as a bar have satisfied relevant public policies.   For example, in Sims, supra, 32 Cal.3d 468, 186 Cal.Rptr. 77, 651 P.2d 321, the court held that the intrinsic judicial character and structure of a county “fair hearing” decision concerning welfare fraud qualified the decision for collateral estoppel use in a subsequent criminal case involving the same charge, and that the administrative decision otherwise met the three qualifications of collateral estoppel.   On the other hand, in Lucido, supra, 51 Cal.3d 335, 272 Cal.Rptr. 767, 795 P.2d 1223, the court distinguished Sims and declined to accord collateral estoppel effect, in a criminal case, to a superior court's decision in a probation revocation proceeding involving the same allegations.   Although finding that “[p]etitioner has arguably fulfilled the threshold requirements” for collateral estoppel (id. at p. 341, 272 Cal.Rptr. 767, 795 P.2d 1223;  see id. at p. 342, 272 Cal.Rptr. 767, 795 P.2d 1223), the court held that its application in this context would not, on balance, subserve relevant public policies, chiefly maintaining public confidence in the judicial system.

In contending that the arbitration decision qualified for collateral estoppel as a final judgment, appellant relies on Sims, supra, 32 Cal.3d 468, 186 Cal.Rptr. 77, 651 P.2d 321, and Lucido, supra, 51 Cal.3d 335, 272 Cal.Rptr. 767, 795 P.2d 1223, in both of which the court opined that the administrative and judicial decisions respectively at issue were final under the test for collateral estoppel, because the time for further judicial review of them had expired.   Appellant notes that under Code of Civil Procedure section 1288, Dawson's right to judicially contest the arbitrator's award expired in March 1991, while the Dawson case was still at the demurrer stage.   However, appellant's argument fails to take into account the fundamental difference between the prior adjudications considered in Sims and Lucido and the one asserted here:  the present decision was not the product of a public tribunal but rather was rendered in a private dispute resolution proceeding, created by contract.

This organic distinction of contractual arbitrations was recognized in one of the leading California cases concerning the utility of arbitration awards as collateral estoppel, Kahn v. Pelissetti (1968) 260 Cal.App.2d 832, 67 Cal.Rptr. 517 (Kahn ).   In that case, an injured bus passenger sued the uninsured automobile driver involved in the accident.   The passenger had lost an arbitration against her own automobile insurer, conducted under the policy's uninsured motorist arbitration provisions, as provided by Insurance Code section 11580.2.   The time for challenging that award having expired, the trial court granted the uninsured driver summary judgment on grounds of res judicata (collateral estoppel).

In assessing whether the arbitration award “should be treated as though it were a final judgment” for purposes of collateral estoppel (Kahn, supra, 260 Cal.App.2d at p. 834, 67 Cal.Rptr. 517), the Court of Appeal first observed that the award had not been judicially confirmed by judgment.  (See Code Civ. Proc., § 1287.4.)   The court noted that under Code of Civil Procedure section 1287.6, an unconfirmed contractual arbitration award “ ‘has the same force and effect as a contract in writing between the parties to the arbitration.’ ”   In this case, only the passenger and the insurer were parties to the arbitration, and to the constructive contract represented by the award.   The uninsured driver not having been such a party, the remaining question was whether he could “take advantage of [the contract] as a third party beneficiary.”  (Kahn, supra, at p. 834, 67 Cal.Rptr. 517.)

The Kahn court concluded that the nonparty driver could not invoke the arbitration award in the manner of collateral estoppel.   Neither the insurance contract nor the award had been entered into with a view toward benefiting the driver.  “Therefore, viewing the unconfirmed award as a contract as we must under the statute, respondent is at most an incidental beneficiary thereof and cannot enforce its implied covenant that he is not liable to appellant.   [Citations.]”  (Kahn, supra, 260 Cal.App.2d at p. 835, 67 Cal.Rptr. 517.)

 Kahn thus teaches that a final but unconfirmed contractual arbitration award is to be viewed as a contract, as provided by statute.   Although binding between the parties, such an award may not automatically be utilized against one of them by a nonparty, as would be the case for a judicial judgment, unless the nonparty may properly be classified as a third party beneficiary of it.   There being no showing that appellant stood in that capacity with respect to Dawson's union arbitration award, this rationale would defeat appellant's argument that it was entitled to use that award as collateral estoppel, in the Dawson case.

Appellant contends, however, that Kahn, supra, 260 Cal.App.2d 832, 67 Cal.Rptr. 517, is fatally inconsistent with the Supreme Court's rulings about decisional finality for collateral estoppel purposes in Sims, supra, 32 Cal.3d 468, 186 Cal.Rptr. 77, 651 P.2d 321, and Lucido, supra, 51 Cal.3d 335, 272 Cal.Rptr. 767, 795 P.2d 1223.   But there is no inconsistency because, as noted, Sims and Lucido were concerned with whether collateral estoppel effect should be accorded to certain public adjudications under law, whereas the issues in Kahn, and here, concern whether a private arbitration decision, engendered by and legally characterized as a contract, may be utilized as collateral estoppel by a nonparty.

Only one California case besides Kahn, supra, 260 Cal.App.2d 832, 67 Cal.Rptr. 517, appears to have confronted this issue, and its holding ultimately is not inconsistent with Kahn.   In Thibodeau v. Crum (1992) 4 Cal.App.4th 749, 6 Cal.Rptr.2d 27 (Thibodeau ), two homeowners sued a subcontractor on account of an improperly constructed driveway.   The plaintiffs had already pursued an arbitration against the general contractor, pursuant to the construction contract, and had suffered a net adverse award, which had not been judicially confirmed.   In the succeeding lawsuit, the subcontractor asserted a defense of “estoppel,” which was disallowed.   On appeal, the court agreed with the subcontractor that the suit was barred by what it termed res judicata.

The court began its analysis with a sweeping declaration that “The doctrine of res judicata applies not only to judicial proceedings but also to arbitration proceedings.”  (Thibodeau, supra, 4 Cal.App.4th at p. 755, 6 Cal.Rptr.2d 27, citing Lehto v. Underground Constr. Co. (1977) 69 Cal.App.3d 933, 138 Cal.Rptr. 419.  (Lehto ).)  After measuring the issues in the arbitration against those in the lawsuit, the court confronted the plaintiffs' argument that the arbitration did not satisfy the element of a final judgment, because of its unconfirmed, contractual status.   Although agreeing “that ‘a contract in writing between the parties' is ordinarily not the same as a final judgment,” the court added, “But in several cases, the courts have viewed an unconfirmed arbitration award as the equivalent of a final judgment.”  (Thibodeau, supra, at p. 759, 6 Cal.Rptr.2d 27, quoting Code Civ. Proc., § 1287.6.) For this proposition, the court cited and quoted Lehto, supra, and Trollope v. Jeffries (1976) 55 Cal.App.3d 816, 128 Cal.Rptr. 115.   It then proceeded to distinguish Kahn, supra, 260 Cal.App.2d 832, 67 Cal.Rptr. 517, on grounds that in the instant case the construction contract containing the arbitration provision was linked to the subcontract, the parties had anticipated the involvement of subcontractors, “and the arbitration was intended to resolve disputes arising out of the work of such third parties.”  (Thibodeau, supra, 4 Cal.App.4th at p. 761, 6 Cal.Rptr.2d 27.)   Accordingly, the court held that the arbitration award could and did bear res judicata (i.e., collateral estoppel) effect.

Thibodeau is not inconsistent with Kahn, supra, 260 Cal.App.2d 832, 67 Cal.Rptr. 517, to the effect that an arbitration award may not be utilized by a third party as a bar unless that party's situation vis-à-vis the award is in the nature of a third party beneficiary of the contract it represents.  Thibodeau distinguished the scenario before it from that in Kahn, and ruled that under the latter's analysis the party asserting “estoppel” in Thibodeau was entitled to do so.

On the other hand, Thibodeau's broad statements about the applicability of res judicata to arbitration awards, and the status of such awards as final judgments, are not supported by the authorities on which they were based.   Lehto, supra, 69 Cal.App.3d at page 939, 138 Cal.Rptr. 419, which Thibodeau cited for both propositions, considered only whether a series of labor arbitration awards were “conclusive” as between the parties, so as to bar the employee from suing to challenge them.   Although the court descriptively stated that “Once a valid award is made by the arbitrator, it is conclusive on matters of fact and law and all matters in the award are thereafter res judicata” (Lehto, supra, at p. 939, 138 Cal.Rptr. 419), no issue about collateral estoppel or its components was presented, and the court ultimately upheld the employee's complaint, under federal labor law, against the challenge it was barred by his failure timely to petition to vacate the awards.   And Trollope v. Jeffries, supra, 55 Cal.App.3d 816, 128 Cal.Rptr. 115 decided only “that the principles governing acceptance of the benefits of a judgment, order or decree apply with equal force to an arbitration award.”  (Id. at p. 824, 128 Cal.Rptr. 115.)

In addition to Thibodeau, supra, 4 Cal.App.4th 749, 6 Cal.Rptr.2d 27, appellant cites three federal cases.   Two of them neither hold nor intimate that an arbitration award bears collateral estoppel effect for the benefit of a nonparty.   Rather, they evince the more limited proposition that a final arbitration award will be given conclusive effect, between the parties to it, when a discharged employee loses a labor arbitration against the employer and then sues it for wrongful termination.  (Sanders v. WMATA (D.C.Cir.1987) 819 F.2d 1151, 1156-1157;  Ivery v. United States (6th Cir.1982) 686 F.2d 410, 414 [applying “the general rule favoring the finality of arbitration decisions between the same parties”].)   Although the third federal case, Wellons, Inc. v. T.E. Ibberson Co. (8th Cir.1989) 869 F.2d 1166, did endorse the use of an arbitration award as collateral estoppel by a nonparty, that decision was not based on California law, nor does it provide any reason for so construing California law.⁶

Rather, we find persuasive the views taken in Kahn, supra, 260 Cal.App.2d 832, 67 Cal.Rptr. 517, and ultimately not departed from by Thibodeau, supra, 4 Cal.App.4th 749, 6 Cal.Rptr.2d 27.   A final arbitration award is conclusive between the parties with respect to their dispute, and preclusive of any attempt by one of them to reopen its merits by litigation against the other party.   Whether or not the award technically constitutes “res judicata” in this respect, its effect is the same.   However, in its very binding fashion, the award remains, in effect, “a contract ․ between the parties to the arbitration” (Code Civ. Proc., § 1287.6).   Although the parties are strictly bound by and to their agreement to accept the award as a final resolution of the dispute between them, that bargain does not necessarily contemplate a nonparticipating third party's taking advantage of its results, by barring the arbitrating party from judicial resolution of a dispute with the nonparty, as to which there was no agreement to arbitrate.   For a nonparty to the arbitration agreement and award to obtain “issue preclusion” based on the award, the nonparty must stand in relation to it as in effect a third party beneficiary, so that such use of the award can reasonably and confidently be said to have been within the contemplation of the parties.   This understanding preserves significant policies and incentives of arbitral finality (see Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9-10, 10 Cal.Rptr.2d 183, 832 P.2d 899), while taking into account both the parties' and nonparties' contractual expectations.

Accordingly, collateral estoppel by the arbitration was not, strictly speaking, available to appellant in the Dawson case.   Moreover, as a nonparty to the arbitration award and an independent contractor with RTD, appellant was not shown to have been within the contemplated benefit of the RTD-union collective bargaining agreement under which the arbitration occurred.   Appellant thus was not entitled to assert the award preclusively.   The trial court therefore did not err in deciding that respondents' failure to pursue a collateral estoppel defense for appellant could not have constituted malpractice.

 Appellant urges an alternative theory (also articulated below), that respondents could be deemed to have committed malpractice by failing to seek to have RTD confirm the arbitration award judicially, thus creating a traditional judgment to be invoked as collateral estoppel.   This theory too fails, for the reason that collateral estoppel requires that an issue be actually decided in the proceeding, and the factual issues concerning the validity of appellant's testing and its results would not have been decided in the hypothetical proceeding to confirm the award.   As stated in Trollope v. Jeffries, supra, 55 Cal.App.3d at p. 824, 128 Cal.Rptr. 115, “the essential adjudication in an arbitration proceeding is the award.   The function of the court is limited to confirming the award as made, or to correct and confirm it as corrected, or to vacate it within the limitations and as provided by the statutes.”   Under those statutes (Code Civ. Proc., § 1285 et seq.), the court may not revisit or reconsider the arbitrator's determinations, for error of law or fact.   (Moncharsh v. Heily & Blase, supra, 3 Cal.4th at p. 11, 10 Cal.Rptr.2d 183, 832 P.2d 899;  see id. at pp. 12-13, 10 Cal.Rptr.2d 183, 832 P.2d 899.)   In short, a judgment confirming the award would not have decided, or involved the court's determining, the underlying factual issues.   Respondents' failure to pursue confirmation of the award therefore could not be seen as malpractice, because it did not deprive appellant of a tenable defense.

2. Unclean Hands.

Appellant's second set of contentions concerns the trial court's allowance of an unclean hands defense by respondents.   Appellant asserts error in both the court's ruling that appellant's misconduct in connection with the Dawson case qualified for consideration as unclean hands, and the particular instructions the court gave and refused with respect to that defense.   Both contentions concern the requirement that, to be considered as unclean hands, a party's misbehavior must relate to the transaction in suit and to the adversary party.

 Unclean hands is an equitable doctrine that bars relief to a litigant who has “violated conscience, good faith or other equitable principles in his prior conduct.”  (Fibreboard Paper Products Corp. v. East Bay Union of Machinists (1964) 227 Cal.App.2d 675, 727, 39 Cal.Rptr. 64 (Fibreboard ).)   In modern times the doctrine has been held applicable to suits for legal as well as equitable relief.  (Id. at pp. 727-728, 39 Cal.Rptr. 64;  see also Unilogic, Inc. v. Burroughs Corp. (1992) 10 Cal.App.4th 612, 619-620, 12 Cal.Rptr.2d 741 (Unilogic ).)   Among the dimensions of unclean hands is that “The misconduct which brings the ․ doctrine into operation must relate directly to the transaction concerning which the complaint is made, i.e., it must pertain to the very subject matter involved and affect the equitable relations between the litigants.”   (Fibreboard, supra, at p. 728, 39 Cal.Rptr. 64.)   In other words, “ ‘The misconduct must infect the cause of action before the court.’ ”  (Moriarty v. Carlson (1960) 184 Cal.App.2d 51, 57, 7 Cal.Rptr. 282;  accord, Pond v. Insurance Co. of North America (1984) 151 Cal.App.3d 280, 290, 198 Cal.Rptr. 517.)

 The trial court permitted the jury to consider unclean hands as a defense to appellant's malpractice claim, by reason of appellant's conduct of falsifying and destroying evidence in the Dawson case-the chain of custody records, urine sample, and machine test data-as well as Pardo's false testimony in the arbitration.   Appellant contends this was error regardless of the existence and seriousness of its misconduct.   Appellant reasons that its misconduct was directed only against Dawson, not respondents, and that the misconduct was unrelated to, and in part occurred after, the matters in suit below, which appellant sees as being respondents' allegedly negligent failure to successfully assert the defense of no duty early in the Dawson case.

Appellant views the matter too narrowly.   Appellant's falsification and destruction of evidence was not merely “directed at Dawson.”   All of it occurred during the Dawson case, and was arguably, if not certainly, intended to influence the outcome of that case.   Moreover, appellant's conduct was practically directed at respondents' defense of the case, and it plainly had an effect on it.   Once unveiled, appellant's misconduct put respondents in the position of having to defend not just a negligence case, but one saddled with evidence and causes of action for intentional tampering with evidence.   That, in turn, directly implicated the present malpractice case.   This case did not concern simply whether respondents had improperly failed to obtain a dismissal of the Dawson case in early 1991.   The ultimate issue was whether respondents were responsible for the $2 million settlement of that case, which occurred after, and at least partly because of, appellant's misconduct in the case.   Thus, appellant's misconduct was both directed at respondents' handling of the underlying case and deeply interconnected with the present one.  (See Blain v. Doctor's Co. (1990) 222 Cal.App.3d 1048, 1063-1064, 272 Cal.Rptr. 250 [legal malpractice claim barred by unclean hands where client's wrongdoing in underlying case was cause of the injuries and damages alleged].)

Thus, in contending that its misconduct was beyond the ambit of an unclean hands defense, “[appellant] takes an unreasonably narrow view of the unclean hands doctrine.   Certainly, there must be a connection between the complaint and the equitable defense:  ‘The trial of the issue relating to clean hands cannot be distorted into a proceeding to try the general morals of the parties.’  [Citation.]  ‘A person is not placed forever entirely outside the protection of the law in a particular transaction, because, forsooth, some time in the distant past he was guilty of an improper act.’  [Citation.]  But the doctrine does apply ‘if the inequitable conduct occurred in a transaction directly related to the matter before the court and affects the equitable relationship between the litigants․'  [Citation.]   In short, ‘[t]he misconduct must infect the cause of action before the court.’  [Citation.]”  (Unilogic, supra, 10 Cal.App.4th at p. 621, 12 Cal.Rptr.2d 741.)

An analogous situation was presented in Pond v. Insurance Company of North America, supra, 151 Cal.App.3d 280, 198 Cal.Rptr. 517.   There an insurer had unsuccessfully sued an insurance agent for indemnity of a settlement of a case for which the agent had procured the policy, but the insurer had contended there was no coverage.   During the coverage and indemnity cases, the agent concealed evidence, and made false statements, concerning what he had known and informed the insured about the scope of coverage.   This misconduct came to light when the agent sued the insurer for malicious prosecution of the indemnity claim.   The insurer then asserted the defense of unclean hands, on grounds the agent's misconduct had caused it to settle the liability suit to its detriment.   The trial court granted the insurer summary judgment, and the Court of Appeal affirmed, agreeing that the agent was guilty of unclean hands as a matter of law.   Addressing the issue presently raised by appellant, the court stated:  “Here it is obvious that Pond's activities in INA's indemnity suit against him relate directly to the malicious prosecution action before the court because the indemnity suit is the entire basis of Pond's claim.”  (Id. at p. 290, 198 Cal.Rptr. 517.)

A holding that the facts of this case warranted submission of the defense of unclean hands to the jury does not, as appellant suggests, pose a broad and unwarranted impediment to legal malpractice litigation.   Appellant asserts, “Under [respondents'] theory of unclean hands, any lawyer sued for professional negligence in unsuccessfully defending a tort case ․ need only point to his or her client's terrible tortious conduct towards the underlying tort plaintiff in order to obtain a jury instruction on unclean hands.”   But this argument is a straw man:  it fails to recognize the very necessity for misconduct directed toward counsel and the underlying case that appellant otherwise asserts.

Thus, a doctor who only committed malpractice would not be barred by unclean hands from suing his malpractice lawyer;  but if he also perjured himself at his deposition, he might be.  (Cf. Blain v. Doctor's Co., supra, 222 Cal.App.3d 1048, 272 Cal.Rptr. 250.)   An insurance agent guilty of negligence, or an intentional tort, against an insurer would not ipso facto be chargeable with unclean hands towards his defense counsel;  but if he also concealed evidence and made false answers to interrogatories in the underlying case, he might be.  (Cf. Pond v. Insurance Company of North America, supra, 151 Cal.App.3d 280, 198 Cal.Rptr. 517.)   And a laboratory that negligently reported that an employee had drugs in his system would not be barred by unclean hands from recovering the resultant settlement with the employee from its lawyer in a malpractice case.   But if the laboratory undermined its and the lawyer's defense, and enhanced its exposure, by perjury, fabricating evidence, and destroying evidence, it might well be.   That is all that the trial court decided in this case.   Our approval of that ruling is neither novel nor productive of unwarranted exemptions from legal malpractice liability.

 We turn to appellant's objections to the jury instructions regarding unclean hands.   As appellant concedes, the court correctly instructed that “A litigant has unclean hands when he has acted unfairly, unconscionably or in bad faith in his conduct relating to the claims for which he now comes to the court for relief.”   However, appellant assigns error in the fact that the instructions told the jury that respondents had the burden of proving not only that appellant's prior misconduct constituted unclean hands under this test, but also that it “relate[d] to Vanderbilt Dawson's claims in his underlying lawsuits against [appellant].”   Appellant urges that this element identified the wrong claims (Dawson's as opposed to appellant's) as to which appellant's misconduct had to be related.

We discern no prejudicial error.   As noted, the court properly and sufficiently instructed that in order to constitute unclean hands the misconduct had to relate to appellant's present claims.   The further charge that the misconduct also had to relate to Dawson's claims imposed, if anything, a superfluous additional burden of proof on respondents.   It would have been for them, not appellants, to complain about the interjection of this element.

 Appellant also claims error in the instructions' failure to state in so many words that the misconduct had to affect the “equitable relations” between appellant and respondents.   Although this terminology has been used in appellate opinions describing the elements of unclean hands, the underlying concept was adequately conveyed by the wording the court did use.   In its original formulation, the “equitable relations” phraseology was employed to explain the concept that the misconduct must directly relate to the transaction or matter in suit.  (Fibreboard, supra, 227 Cal.App.2d at p. 728, 39 Cal.Rptr. 64, quoted ante, p. 861.)   The court here stated that precept.   Additional language about “equitable relations” would not have made the matter any clearer to the jury;  it probably would have been opaque, if not indeed confusing.

Appellant proposed several instructions of its own concerning unclean hands, and it asserts finally that three of them should have been given.   Two of these instructions emphasized the distinction between respondents and Dawson as the required object of appellant's misconduct, while the third included language regarding the prejudicial nature of conduct constituting unclean hands.   To the extent that the concepts propounded by these instructions were valid, they were sufficiently expressed in the instructions the court did give, and further instructional elaboration was unnecessary.

 Our conclusion that the trial court did not err in its submission of the issue of unclean hands to the jury means that we need not decide the final issue, adduced by respondents in their purported cross-appeal, of whether the court erroneously determined the “duty” issue in appellant's favor.   However, we briefly address that question, because our determination that the court erred in this respect renders any arguable error with respect to unclean hands harmless, the “duty” ruling being at the center of the charge of malpractice remaining after collateral estoppel.  (See Code Civ. Proc., § 906.)

The trial court ruled that, based on two decisions by Division One of the Fourth Appellate District, respondents could have obtained dismissal of the Dawson case, when it was grounded only on negligence, on the premise that appellant did not owe a duty of care to Dawson with respect to his urinalyses and their results.   In our view, the cases on which the court relied, Keene, supra, 69 Cal.App.3d 308, 138 Cal.Rptr. 3, and Felton, supra, 229 Cal.App.3d 229, 279 Cal.Rptr. 713, do not establish that proposition, and would not have sufficed to do so in 1990 or 1991.

Both Keene, supra, 69 Cal.App.3d 308, 138 Cal.Rptr. 3, and Felton, supra, 229 Cal.App.3d 229, 279 Cal.Rptr. 713, involved actions against physicians.   Both decisions were based on the necessity of a physician-patient relationship to a duty of care in evaluating an individual's medical condition.  (Keene, supra, at pp. 313-315, 138 Cal.Rptr. 3;  Felton, supra, at pp. 234-236, 279 Cal.Rptr. 713.)   Both held that a person examined on behalf of and for the benefit of a workers' compensation insurer (Keene ) or a prospective employer (Felton ) could not sue the physician for negligence in diagnosis.  Keene stressed that it was unforeseeable that such an examinee would rely on the compensation doctor's report to the employer.   (Keene, supra, at p. 314, 138 Cal.Rptr. 3.)  Felton largely followed Keene.  (See Felton, supra, at pp. 234-238, 279 Cal.Rptr. 713.)

We cannot agree with the trial court that these two cases established an absence of duty by appellant to Dawson, or that citation of them would have produced such a ruling.  Keene, supra, 69 Cal.App.3d 308, 138 Cal.Rptr. 3, and Felton, supra, 229 Cal.App.3d 229, 279 Cal.Rptr. 713, specifically concern the relationship that must exist with a doctor to establish a professional duty of care.  (6 Witkin, Summary of Cal. Law (9th ed.   1989) Torts, § 776, pp.   116-117 [Keene ], (1996 supp.) pp.   31-32 [Felton ].)   The scope and objects of a clinical laboratory's duties of care are by no means necessarily the same.  “A case-by-case approach is required.”   (Keene, supra, at p. 313, 138 Cal.Rptr. 3.)   Furthermore, with respect to a laboratory that undertakes to test for drugs a public transit employee whose employment will be compromised by an affirmative finding, the factors traditionally relevant to whether a duty of care should be recognized point predominantly if not entirely in favor of its recognition.  (See Rowland v. Christian (1968) 69 Cal.2d 108, 112-113, 70 Cal.Rptr. 97, 443 P.2d 561.) ⁷

It is unnecessary to render an extended ruling on the question of appellant's duty to an employee like Dawson, a question that has not yet been addressed in this state's common law.   What we do conclude is that Keene, supra, 69 Cal.App.3d 308, 138 Cal.Rptr. 3, and Felton, supra, 229 Cal.App.3d 229, 279 Cal.Rptr. 713, do not establish that there was no such duty, and respondents would not have obtained such a ruling by citing those cases.   It follows that appellant could not have suffered any legal prejudice by the trial court's allowance of the defense of unclean hands.

DISPOSITION

The judgment is affirmed.   The cross-appeal is dismissed.   Respondents shall recover costs.

FOOTNOTES

FOOTNOTE.  

1.   Respondents have filed a cross-appeal, contesting the court's resolution of another legal issue underlying the claim for malpractice.   Respondents raise the issue for its contingent impact on retrial in the event the judgment is reversed;  it also could be relevant to whether other asserted error was prejudicial (see Code. Civ. Proc., § 906).   From either perspective, however, the issue is not a proper basis for cross-appeal, because respondents do not seek to disturb the judgment.   The cross-appeal therefore will be dismissed.  (See Jones v. Los Angeles Community College Dist. (1988) 198 Cal.App.3d 794, 814, 244 Cal.Rptr. 37.)

2.   References to appellant will occasionally include certain affiliated entities that are not parties to the judgment.

3.   Dawson had previously filed a related suit which had been removed to federal court, where the state-law claims were dismissed without prejudice to recommencement in state court.

4.   The cross-complaint also contained an essentially identical claim for breach of fiduciary duty.

5.   It is this determination that is the subject of respondents' purported cross-appeal.

6.   The same is true of Robinson v. Hamed (1991) 62 Wash.App. 92 [813 P.2d 171], which applied a discharged employee's adverse arbitration award against claims he then brought against both the employer and a third party.

7.   “[T]he major ones are the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.”  (Id. at p. 113, 70 Cal.Rptr. 97, 443 P.2d 561.)

BRANDLIN, Associate Justice.* FN* Assigned by the Chairperson of the Judicial Council.

NOTT, Acting P.J., and ZEBROWSKI, J., concur.