Perseverance Pays in ‘Loser’ Case : Courts: Lawyer Marc Stern refused to give in as two giant law firms buried him under paper. The result: a sad lesson about our legal process, but a victory for his client after 12 long years.

A dried piranha sticks to a window at San Diego lawyer Marc Stern’s small office, the mark of his growing reputation as an eccentric but tenacious courtroom tough. If things are slow, he shows up for work in jeans, brings his dog along and cuts out early if the surf is up.

“I usually get the cases no one else will handle,” he said.

Gray, Cary, Ames & Frye is the biggest, most prestigious, law firm in the city. Higgs, Fletcher & Mack is another of San Diego’s legal powerhouses. The two firms handle legal work for some of the state’s most prominent businesses, including the Auto Club of Southern California.

It took 12 years and four lawsuits, but a few weeks ago Stern finally toughed it out in his battle against the legal heavyweights and the insurance giant.

A San Diego Superior Court jury awarded $1.7 million in punitive damages to Stern’s clients, a father and son injured in a 1979 car crash, finding that the insurance company sat on evidence that could have ended the case for far less, far earlier.

“I hate to say this, but this is a case about how some companies and law firms abuse the legal process, to wear people down,” Stern said.

The case also shows why the courts are beset by lawsuits involving insurance claims, and why there is a building clamor for reform, Stern said.

This simple case of a car crash--an everyday kind of accident--could have ended with a $38,000 payment years earlier. And, when it takes 12 years to resolve a simple case, only the most stubborn litigants prevail.

Above all, a lawyer in a small office needs persistence to prevail against the big firms, Stern said. Gray, Cary has 190 lawyers. The Higgs firm has about 70. “They tried to paper me to death,” Stern said.

Neither Gray, Cary nor the Higgs firm was hit in the $1.7-million verdict. But the law firm knew about the critical evidence, since one of its lawyers actually uncovered a key piece of it. The Auto Club had that evidence right in its files, but never offered to settle, not even for a dime, Stern said.

“It’s no secret that Gray, Cary, Ames & Frye is a large, powerful law firm in San Diego. The attorneys and partners in that firm have large, large egos to match the size of the firm,” said Jan Merna, a San Diego lawyer who was foreman of the jury that returned the $1.7-million verdict.

“When (the Gray, Cary lawyers) were faced with a relatively small claim and an attorney who can be considered a noodge ,” Merna said, using the Yiddish word that loosely translates as “pest” to describe Stern, “that did not put them in a mood to be amicable and settle the case without the necessity of going to trial.”

William S. Boggs, the partner at the Gray, Cary firm who handled the case, could not be reached for comment. Friday, the Auto Club posted a $2.5-million bond--1 1/2 times the verdict, as state law requires--to pursue a new trial.

The entire case revolves around one issue--whether a drunk driver had been living with his uncle and aunt, a San Diego couple. The facts of the crash were not in dispute.

About 5:30 a.m. on June 24, 1979, Jose (Pepe) Ceballos Garcia, 24, somehow maneuvered his car south onto the northbound connector ramp from Interstate 5 to Interstate 8.

The Mexican migrant from Guadalajara crashed into a car driven by Richard Torres, a South Bay dry cleaner who was then 45. He was out for some early-morning fishing with his son, Anthony Torres, then 14.

Richard Torres suffered a gash on his forehead that needed 60 stitches and plastic surgery. Anthony Torres’ leg was broken.

Ceballos, who was shaken but not badly hurt, had a blood-alcohol level of 0.21%, well above the legal limit, court records show. He was convicted of drunk driving and spent a year at a county work farm. Then, Stern said, he was deported to Mexico.

The owner of the 1979 Ford Thunderbird that Ceballos was driving was Fidel Rubalcaba, a Mission Valley man married to Ceballos’ aunt, according to court records. The Auto Club provided Rubalcaba’s liability insurance, with added coverage for drivers allowed to use the Thunderbird and relatives driving the car.

Neither Ceballos nor his aunt or uncle could be reached for comment.

A few months after the accident, Richard and Anthony Torres sued Ceballos, the first of the four lawsuits. The insurance company denied coverage for Ceballos and, in April, 1983, the courts entered a $38,000 default judgment against Ceballos.

Since he was gone from the country, however, there was no way to collect that money. That prompted the second suit, filed May 16, 1983, against the Auto Club.

That summer, Stern entered the case, fresh out of law school at a San Diego firm handling the case for Richard and Anthony Torres. “It was told to me that this was a loser case,” he said. At times, it seemed that way.

An arbitrator found in favor of the defense. Then it turned out that the second suit was not filed in the precise legal terms it should have been, so it was dismissed.

In April, 1985, Stern filed suit again--No. 3. When he left the law firm to go solo, he took the case with him.

This time, Stern decided not to worry about proving whether Ceballos had permission to drive the T-Bird, since that was more difficult to prove. Instead, Stern concentrated on showing that Ceballos was covered as a relative.

Every insurance policy in California extends coverage to relatives who live with the insured person. Stern contended that meant Ceballos.

Stern pointed out that, at the accident scene, Ceballos gave the Rubalcaba address to police as his own and told them that he worked for Rubalcaba, and that his girlfriend lived a block away.

Stern tracked down that woman. She said that she had been to the Rubalcaba house with Ceballos to get “his” keys, and that he kept clothes, jewelry and a portable stereo there.

In a June, 1985, letter to the Auto Club, attorney Boggs said the woman’s testimony “will not be helpful.” But there was no offer of a settlement.

Before he left the country, Ceballos said under oath that he had stayed at the Rubalcaba house two or three days at a time for the three months before the accident. He lived in Tijuana, he said.

Fidel Rubalcaba told the lawyers that Ceballos stayed overnight at his house once or twice a week, when Ceballos was working at San Diego Jack Murphy Stadium. His wife, Estela Rubalcaba, said she did not know the last time Ceballos had stayed at the house.

Stern learned that Fidel Rubalcaba, who used to manage the novelty concessions stands at the stadium, got Ceballos a job working there. Ceballos worked under an assumed name and with a fake Social Security number.

It turned out that Ceballos was an illegal immigrant whose Tijuana address does not exist.

Stern suggested to Boggs that Ceballos’ immigration status gave the family a motive to shade the truth when discussing where Ceballos lived. Still, there was no settlement offer.

Most civil cases in San Diego Superior Court, about 95%, settle before trial. Usually, a lawsuit is too expensive to fight when it’s over a small amount.

This car crash, for instance, turned out to be worth about $38,000. Top partners at Gray, Cary charge more than $300 an hour. By the time the case first went to trial, Gray, Cary had spent $48,588, according to files in the case.

More than seven years after the accident, in October, 1986, the case went to trial. A San Diego Superior Court jury deliberated for 80 minutes before finding the Auto Club liable for $38,563. With interest and about $3,000 worth of court costs, the total was $54,937, according to court records.

A few weeks later, Stern asked the Auto Club to pay for all the court costs, nearly $7,300, that Richard Torres had advanced to investigate the case.

State law demands that an insurance company investigate a case when it appears that a policy covers someone alleged to be one of its drivers. Since the jury had found the Auto Club liable, Stern argued that Richard Torres should be reimbursed for underwriting the investigation.

The Auto Club refused to pay more than the $3,000, Stern said. So he brought lawsuit No. 4, filed Dec. 31, 1986, alleging that the insurance company had treated the claim in bad faith. The defense of the case shifted to the Higgs firm and came to rest on a single document.

Court rules require opposing sides in civil suits to exchange what they know before a trial.

When Stern got the Auto Club’s file, he saw a July 23, 1985, memo written by Gray, Cary lawyer Guillermo Marrero, which had been forwarded to the insurance company by Boggs on Aug. 21, 1985.

Marrero wrote that he had spoken by telephone with Ceballos’ mother, who said Ceballos had been living with Rubalcaba and added that “she could not understand why Mr. Rubalcaba stated otherwise.”

Marrero also spoke with Ceballos’ brother, Alejandro, who said Pepe had been living with his uncle, the memo said. Alejandro added that his brother told him he had been visited in jail by “one of Mr. Rubalcaba’s friends and pressured into saying that he did not live with Mr. Rubalcaba.”

At that point, way back in 1985, the Auto Club should have stopped fighting the lawsuit on the grounds that Ceballos did not live with his uncle, said an expert witness in the case. It was “outrageous” for the insurer to fight on, said San Diego lawyer James Roberts, an expert in insurance cases.

Gray, Cary had not given Stern the memo before the 1986 trial. It claimed the memo was nothing more than an attorney’s working papers, which the rules permit to remain confidential. But the memo surfaced in the insurance company files.

“I’ve been working with the Auto Club for 10 years, and I have the highest regard for how they handle cases and their consideration of their insureds,” Marrero said last week. “This one case, taken out of context, is unfair to them.”

Jeffrey Spring, an Auto Club spokesman in Los Angeles, said the insurance company is convinced that it handled the case properly.

Richard Torres said he completely disagreed. The Auto Club “left us out to dry, for us to take care of our problems ourselves,” he said. “We weren’t at fault. I get mad every time I talk about it. It was a very bad situation, and they handled it badly.”

A few weeks ago, the bad faith case went to a San Diego Superior Court jury. On Dec. 2, after less than two hours of deliberations, it socked the Auto Club for $4,251 in damages, $30,000 for emotional distress and $1.7 million in punitive damages.

“It took us a long time, but we finally got to a jury,” Stern said. “And every time these good old boys are going to come up against a jury, they’re going to lose.”