Judge: Andrew E. Cooper, Case: 23CHCV01483, Date: 2025-02-21 Tentative Ruling

Case Number: 23CHCV01483    Hearing Date: February 21, 2025    Dept: F51

Dept. F-51¿¿ 

Date: 2/21/25

Case #23CHCV01483

LOS ANGELES SUPERIOR COURT

NORTH VALLEY DISTRICT

DEPARTMENT F-51

MOTION FOR SUMMARY JUDGMENT

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Motion Filed: 10/28/24                                                                      NON-JURY TRIAL: 5/5/25

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MOVING PARTY: Defendants Jay William Smith; and David M. Robinson (collectively, “Defendants”)

RESPONDING PARTY: Plaintiff Compound Development LLC (“Plaintiff”)¿

NOTICE: OK¿ 

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RELIEF REQUESTED: An order granting summary judgment or summary adjudication in favor of Defendants on Plaintiff’s complaint.

TENTATIVE RULING: The motion is denied.

REQUEST FOR JUDICIAL NOTICE: Defendants’ request for judicial notice is granted as to the existence, but not the substance, of Exhibits 1–3 and 8.

Plaintiff is reminded that “If the opposing party contends that additional material facts are pertinent to the disposition of the motion, those facts must be set forth in the separate statement. … Each fact must be followed by the evidence that establishes the fact. Citation to the evidence in support of each material fact must include reference to the exhibit, title, page, and line numbers.” (Cal. Rules of Ct., rule 3.1350(f)(3).) Defendants are reminded that “No reply or closing memorandum may exceed 10 pages.” (Cal. Rules of Ct., rule 3.1113(d).)

Failure to comply with these requirements in the future may result in papers being rejected, matters being placed off calendar, matters being continued so documents can be resubmitted in compliance with these requirements, documents not being considered and/or the imposition of sanctions.

BACKGROUND

Plaintiff alleges that on 12/7/22, it entered into a legal services agreement with Defendant Jay William Smith to represent Plaintiff in Los Angeles Superior Court Case No. 19STCV08264. (Compl. ¶ 5.) Plaintiff alleges that all communications regarding the retainer and legal representation were conducted between Plaintiff and Defendant David M. Robinson, and the retainer fee was paid to Robinson’s personal account. (Id. at ¶¶ 6–8.) Plaintiff alleges that neither Defendant “notified Plaintiff in writing or verbally that ROBINSON is a disbarred attorney from April 14, 2011 at any time.” (Id. at ¶ 9.)

Plaintiff alleges that it learned that 11 Motions to Compel Discovery had been filed against it in LASC Case No. 19STCV08264 due to Defendants’ failure to respond to discovery requests on behalf of Plaintiff. (Id. at ¶¶ 12–14.) “Plaintiff has been harmed in amounts of $7,500.00 in legal fees paid, plus interest at 7% per annum, plus another $30,000.00 in legal fees to retain new counsel with the need to expedite file review in 19STCV08264 where 11 motions to compel are still on calendar that need to be opposed as well as the discovery requests answered, plus punitive damages in the amount of $100,000.00 for the purposeful and malicious act of concealing the fact that the de facto individual performing 95% of the representation of Plaintiff, ROBINSON, is a disbarred attorney whom is forbidden to be the sole client contact, to give legal advice, and to accept legal fees directly into their own personal account.” (Id. at ¶ 15.)

On 5/22/23, Plaintiff filed its complaint, alleging against Defendants the following causes of action: (1) Fraud; (2) Violation of Business & Professions Code § 17200; (3) Breach of Fiduciary Duty; and (4) Negligent Misrepresentation.

On 10/28/24, Defendants filed the instant motion for summary judgment. On 1/30/25, Plaintiff filed its opposition. On 2/10/25, Defendants filed their reply.

ANALYSIS

The function of a motion for summary judgment or adjudication is to allow a determination as to whether an opposing party cannot show evidentiary support for a pleading or claim and to enable an order of summary dismissal without the need for trial. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) Code of Civil Procedure section 437c, subdivision (c) “requires the trial judge to grant summary judgment if all the evidence submitted, and ‘all inferences reasonably deducible from the evidence’ and uncontradicted by other inferences or evidence, show that there is no triable issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” (Adler v. Manor Healthcare Corp. (1992) 7 Cal.App.4th 1110, 1119.) “The function of the pleadings in a motion for summary judgment is to delimit the scope of the issues; the function of the affidavits or declarations is to disclose whether there is any triable issue of fact within the issues delimited by the pleadings.” (Juge v. County of Sacramento (1993) 12 Cal.App.4th 59, 65, citing FPI Development, Inc. v. Nakashima (1991) 231 Cal.App.3d 367, 381–382.) 

As to each claim as framed by the complaint, the defendant moving for summary judgment must satisfy the initial burden of proof by presenting facts to negate an essential element, or to establish a defense. (Code Civ. Proc., § 437c, subd. (p)(2); Scalf v. D. B. Log Homes, Inc. (2005) 128 Cal.App.4th 1510, 1519–1520.)  

Once the defendant has met that burden, the burden shifts to the opposing party to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto. To establish a triable issue of material fact, the party opposing the motion must produce substantial responsive evidence. (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 163.) Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.” (Dore v. Arnold Worldwide, Inc.¿(2006) 39 Cal.4th 384, 389.)

A.    Legal Malpractice

As a preliminary matter, Defendants argue that “in this case the three causes of action for breach of fiduciary duty, violation of California Business and Professions Code section 17200 and negligent misrepresentation, all are alleged to have arisen from the conduct of Mr. Smith in his representation of Compound. Therefore, they are all subsumed by the theory of legal malpractice.” (MSJ 8:7–10, citing Quintilliani v. Mannerino (1988) 62 Cal.App.4th 54, 65.)

In Quintilliani, the Court of Appeal stated that “an injury suffered by reason of a defendant’s conduct gives rise to a single cause of action, regardless of how many theories are pled by the complaint. … Where the injury is suffered by reason of an attorney’s professional negligence, the gravamen of the claim is legal malpractice, regardless of whether it is pled in tort or contract.” (62 Cal.App.4th at 65, quoting Kracht v. Perrin, Gartland & Doyle (1990) 219 Cal.App.3d 1019, 1022.) While the Quintilliani court agreed with this finding, it ultimately concluded that it did not apply to bar the plaintiff’s negligence cause of action for statute of limitations purposes. (62 Cal.App.4th at 66.) The Kracht court’s analysis was in the context of assignability of legal malpractice claims, and clarified that legal malpractice claims involve “acts requiring professional ‘judgment calls.’” (219 Cal.App.3d at 1022, citing Jackson v. Rogers & Wells (1989) 210 Cal.App.3d 336, 346.)

Here, Defendants argue that Plaintiff’s second, third, and fourth causes of action amount to legal malpractice, and should be analyzed as such. The Court disagrees. Here, while Plaintiff’s complaint includes allegations about Defendants’ professional negligence (Compl. ¶¶ 11–15), the Court finds that the gravamen of Plaintiff’s claims arise out of Defendants’ alleged concealment of Robinson’s status as a disbarred attorney, while conducting virtually all correspondence between the parties through Robinson during Defendants’ representation of Plaintiff in the underlying case. (Compl. ¶¶ 27–47.) Accordingly, the Court finds that Plaintiff’s second, third, and fourth causes of action do not arise out of Defendants’ professional negligence.

B.     Fraud; Negligent Misrepresentation

Plaintiff’s first and fourth causes of action respectively allege Fraud and Negligent Misrepresentation against Defendants. “One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage which he thereby suffers.” (Civ. Code § 1709.) The elements in a cause of action for fraud are: (1) a misrepresentation (false representation, concealment or nondisclosure); (2) knowledge of its falsity (or “scienter”); (3) intent to defraud (i.e., to induce reliance); (4) justifiable reliance; and (5) resulting damage. (Philipson & Simon v. Gulsvig (2007) 154 Cal.App.4th 347, 363.)

The elements of a cause of action for negligent misrepresentation include “[m]isrepresentation of a past or existing material fact, without reasonable ground for believing it to be true, and with intent to induce another’s reliance on the fact misrepresented; ignorance of the truth and justifiable reliance on the misrepresentation by the party to whom it was directed; and resulting damage.” (Hydro-Mill Co., Inc. v. Hayward, Tilton & Rolapp Ins. Associates, Inc. (2004) 115 Cal.App.4th 1145, 1154 [quotations omitted].)

Here, Defendant argues that “there was no misrepresentation at any time by Mr. Robinson; nor was there a concealment of a material fact by Mr. Smith as Mr. Smith advised Compound of Mr. Robinson’s bar status in writing acknowledged by Compound.” (MSJ 12:16–18.) Defendants proffer an unsigned retainer agreement, dated 12/7/22, addressed and emailed to Plaintiff’s principal, which states: “CLIENT ACKNOWLEDGES THAT THE FIRM ENGAGES NON-LICENSED ATTORNEYS FOR ASSISTANCE IN THEIR CASES, INCLUDING, BUT NOT LIMITED TO, DAVID ROBINSON, WHO SHALL BE PAID BY THE FIRM AND SHALL NOT BE AN ADDITIONAL COST TO CLIENT.” (Ex. 1 to MSJ [emphasis in original].) Defendants also proffer a 12/8/22 reply email from Plaintiff’s principal, confirming receipt. (Ex. 2 to MSJ.)

In opposition, Plaintiff argues that its principal “acknowledged receipt of the email but not the retainer.” (Pl.’s Opp. Sep. Stmt. 5:10–11.) “The document also fails to identify Robinson as being a disbarred attorney whom committed client fraud. ‘Non-licensed’ is insufficient disclosure.” (Id. at 5:3–5.) Plaintiff therefore argues that “Defendants concealed this crucial specific information that ROBINSON was disbarred for theft of client funds/fraud and instead tried to tamp down the disclosure to merely state that ROBINSON was ‘non-licensed’ to induce Plaintiff into agreeing to be represented by Defendants and for ROBINSON to be directly paid for legal representation services.” (MSJ Opp. 9:21–24.) In support of its argument, Plaintiff proffers the sworn declaration of its principal, stating that “neither ROBINSON nor SMITH notified Plaintiff in writing or verbally that ROBINSON is a disbarred attorney from April 14, 2011 for theft of client funds at any time.” (Decl. of Matt Kim ¶ 8.) “Had COMPOUND known that they were paying legal fees to an LLC bank account belonging to a disbarred former attorney for theft of client funds COMPOUND would not have done said transaction.” (Id. at ¶ 10.)

The Court further notes that Defendant Smith concedes that Plaintiff did not sign the retainer agreement containing the provision stating that Robinson is a “non-licensed attorney.” (Decl. of Jay W. Smith ¶¶ 11–12.) Based on the foregoing, the Court finds that Defendants have not met their initial burden to present facts to negate an essential element of Plaintiff’s first and fourth causes of action. A triable issue exists as to both the form and the sufficiency of Defendants’ representation regarding Robinson’s disbarment. Accordingly, the motion is denied as to Plaintiff’s first and fourth causes of action.

C.    Unfair Business Practices

Plaintiff’s second cause of action alleges that Defendants violated Business and Professions Code section 17200 et seq. (the “UCL”). To set forth a claim for unfair business practices in violation of the UCL, a plaintiff must establish that the defendant was engaged in an “unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising” and certain specific acts. (Bus. & Prof. Code, § 17200.)

“In essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” (People ex rel. Bill Lockyer v. Fremont Life Ins. Co. (2002) 104 Cal.App.4th 508, 515.) A plaintiff alleging an “unfair” business practice under the UCL must show that the defendant’s conduct is “tethered to an underlying constitutional, statutory or regulatory provision, or that it threatens an incipient violation of an antitrust law, or violates the policy or spirit of an antitrust law.” (Graham v. Bank of America, N.A. (2014) 226 Cal.App.4th 594, 613.) “‘Fraudulent,’ as used in the statute, does not refer to the common law tort of fraud but only requires a showing members of the public ‘are likely to be deceived.’” (Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 618.)

Here, Defendants argue that Plaintiff’s counsel “referred the matter to the California State Bar which the State Bar concluded after having reviewed the matter that there was no further action warranted and that the matter was closed.” (MSJ 13:5–7,  citing Ex. 7.) Defendants contend that therefore, “if Mr. Robinson had not engaged in actionable conduct then Mr. Smith certainly did not either.” (Id. at 15:2–3; Decl. of David Robinson ¶¶ 5 – 6 [“That letter shows that there was no improper activity engaged in by me while working for Mr. Smith on the Yang v. Compound case.”].)

The Court finds this argument inapposite, and is not persuaded that a letter from the State Bar stating that the matter was closed, without any further explanation or findings, provides a complete defense from Plaintiff’s Unfair Business Practices cause of action. Therefore, the Court finds that Defendants have failed to meet their initial burden to present a defense to Plaintiff’s second cause of action. Accordingly, the motion is denied on these grounds.

D.    Breach of Fiduciary Duty

Plaintiff’s third cause of action alleges Breach of Fiduciary Duty against Smith. “The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.) “An attorney owes all clients … duties of undivided loyalty and diligence, among other fiduciary duties.” (White Mountains Reins. Co. of America v. Borton Petrini, LLP (2013) 221 Cal.App.4th 890, 902.)

Here, Defendants argue that “the focus of the Breach of Fiduciary Duty cause of action is that Mr. Smith failed to properly respond to the discovery propounded on Compound.” (MSJ 3:19–20.) The Court disagrees, and reiterates its finding that the gravamen of Plaintiff’s claims arise out of Defendants’ alleged concealment of Robinson’s status as an attorney disbarred for conversion of client funds, “with ROBINSON being the sole contact communicating strategy and updates to Plaintiff” throughout the attorney-client relationship. (Compl. ¶¶ 34–37.)

Based on the foregoing, the Court finds that Defendants have failed to meet their initial burden to present a defense to Plaintiff’s third cause of action. Accordingly, the motion is denied on these grounds.

CONCLUSION

The motion is denied.