Judge: Anne Richardson, Case: 23STCV03310, Date: 2024-04-08 Tentative Ruling

DEPARTMENT 40 - JUDGE ANNE RICHARDSON - LAW AND MOTION RULINGS
The Court issues tentative rulings on certain motions.The tentative ruling will not become the final ruling until the hearing [see CRC 3.1308(a)(2)]. If the parties wish to submit on the tentative ruling and avoid a court appearance, all counsel must agree and choose which counsel will give notice. That counsel must 1) email Dept 40 by 8:30 a.m. on the day of the hearing (smcdept40@lacourt.org) with a copy to the other party(ies) and state that all parties will submit on the tentative ruling, and 2) serve notice of the ruling on all parties. If any party declines to submit on the tentative ruling, then no email is necessary and all parties should appear at the hearing in person or by Court Call. 

Case Number: 23STCV03310    Hearing Date: April 8, 2024    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

I. Background

A. Pleadings

Plaintiffs Joshua Coffman and Sunnybyte, LLC (Sunnybyte) sue Defendants Ross Legal Corporation, Inc. (Ross Legal), Polina L. Ross, and Does 1 through 20 pursuant to an October 4, 2023, First Amended Complaint (FAC) alleging claims of (1) Legal Malpractice, (2) Breach of Contract, (3) Breach of Fiduciary Duty, (4) Fraud, (5) Conversion, (6) Violation of Cal. Civ. Code Section 1770(a)(5), and (7) Violation of Cal. Bus. & Prof. Code Section 17200.

The claims arise from the following allegations. Based on a July 30, 2018, legal agreement, Defendants represented Plaintiffs in relation to Coffman, et al. v. Shor, et al., Los Angeles Superior Court Case No. 18SMCP00096 (the Shor Litigation) and in relation to Sunnybyte, LLC v. Levy, et al., Los Angeles Superior Court Case No. 21STCV01387 (the Kindra Litigation). In that representation, Plaintiffs informed Defendants of Plaintiffs’ willingness to settle, desire to keep legal expenses low, and intent to pay legal fees from settlement proceeds. Defendants advised Plaintiffs to enter a settlement in the Shor Litigation (referred to as Litigation I in the FAC) in May 2021, with Plaintiffs entering the settlement on May 8, 2021.

Defendants also advised Plaintiffs to enter a settlement in the Kindra Litigation (Litigation II in the FAC) in December 2021, with Plaintiffs entering the settlement on December 12, 2021. Defendant Ross, through Ross Legal, allegedly incurred fees for unnecessary work and billed additional fees that were not contemplated by the parties’ agreement in relation to the Shor Litigation settlement, incurred between May 4, 2019, and January 18, 2022 (the Additional Fees). Defendants concealed their intent to bill the Additional Fees until after Plaintiff entered settlements in the Shor and Kindra Litigations to profit from the legal fees to be paid from those settlements, including the Additional Fees. Plaintiffs disputed the Additional Fees with Defendants and requested a full disbursement of the settlement funds from the Kindra Litigation, which had by that time been paid to Defendants. Defendants responded by terminating representation based on breach of the legal agreement through nonpayment of fees and mailing Plaintiffs the balance of the Kindra Litigation settlement ($4,779.84) in a check. That figure subtracted $13,146.83 for outstanding fees incurred prior to the Additional Fees and $27,073.33 to be placed “in trust pending the resolution of th[e] fee dispute,” seemingly the Additional Fees. Plaintiffs subsequently attempted to cash the $4,779.84 check mailed by Defendants, but the check bounced because Ross Corp.’s trust account—from which payment would be forthcoming—had been closed. Defendants are alleged to have converted the $4,779.84.

B. Motions Before the Court

On November 28, 2023, Defendants filed a demurrer to the FAC’s fourth and sixth causes of action.

That same day, Defendants filed a motion to strike challenging portions of the FAC’s seven causes of action based on a statute of limitations issue, as well as the FAC’s prayers for punitive damages and attorney’s fees.

On March 22, 2024, Plaintiffs filed an opposition to the demurrer and an opposition to the motion to strike.

On March 29, 2024, Defendants filed replies to the oppositions.

Defendants’ demurrer and motion to strike are now before the Court.

II. Requests for Judicial Notice

A. Demurrer

Per Defendants’ request, the Court takes judicial notice of: (1) the Complaint in this action; (2) the case summary and pleading for the Shor Litigation; and (3) the case summary and pleading for the Kindra Litigation. (Demurrer & MTS, Request for Judicial Notice (RJN), Exs. 1-5; Evid. Code, §§ 452, subds. (d), (h), 453, subds. (a)-(b).)

B. Motion to Strike

The Court notes that Defendants’ request for judicial notice is equally applicable to the discussion for the motion to strike because Defendants requested notice in relation to both motions. (Demurrer & MTS, RJN, pp. 1-3.)

III. Demurrer

A. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747; see Code Civ. Proc., § 430.10, subd. (e).) This device can be used only to challenge defects that appear on the face of the pleading under attack or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) To sufficiently allege a cause of action, a complaint must allege all the ultimate facts—that is, the facts needed to establish each element of the cause of action pleaded. (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 212, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) Thus, “[t]o survive a [general] demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.” (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872.) In testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-67.) A demurrer, however, “does not admit contentions, deductions or conclusions of fact or law.” (Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713.) When considering demurrers, courts read the allegations liberally and in context. (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal.App.4th 1216, 1228, disapproved on other grounds, Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162.) The face of the complaint includes exhibits attached to the complaint. (Frantz v. Blackwell (1987) 189 Cal.App.3d 91, 94.) If facts appearing in the exhibits contradict those alleged, the facts in the exhibits take precedence. (Holland v. Morse Diesel Intern., Inc. (2001) 86 Cal.App.4th 1443, 1447, superseded by statute on other grounds as stated in White v. Cridlebaugh (2009) 178 Cal.App.4th 506, 521.)

B. Analysis

1. Demurrer, FAC, Fourth Cause of Action, Fraud: OVERRULED.

a. Relevant Law

“[T]he elements of an action for fraud and deceit based on a concealment are: (1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage.” (Boschma v. Home Loan Center, Inc. (2011) 198 Cal.App.4th 230, 248 (Boschma); see also Roddenberry v. Roddenberry (1996) 44 Cal.App.4th 634, 665-666.)

“Every element of the cause of action for fraud must be alleged … factually and specifically[,] and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) At the same time, “less particularity [of pleading] is required where the defendant may be assumed to possess knowledge of the facts at least equal, if not superior, to that possessed by the plaintiff,” which certainly is the case here. (Burks v. Poppy Construction Co. (1962) 57 Cal.2d 463, 474.)

b. Pleadings and Parties’ Arguments

The fourth cause of action alleges fraud against all Defendants based on allegations that “Defendants willfully deceived Plaintiffs by withholding from Plaintiffs the information that Defendants intended to bill Plaintiffs for the Additional Fees,” where “[s]uch information was material to Plaintiffs’ decision to enter into the [Shor Litigation settlement] and the [Kindra Litigation Settlement].” (FAC, ¶¶ 46-49; see FAC, ¶¶ 13-30 [incorporated factual background].)

In their demurrer, Defendants argue that the FAC fails to allege what the alleged omission is, why Defendants were obliged (under a duty) to disclose their intent to collect fees after settling the Shor and Kindra Litigations, or the required specificity for reliance and damages. (Demurrer, pp. 6-7.)

In opposition, Plaintiffs argue that the fourth cause of action sufficiently alleges concealment of Defendants’ intent to bill fees beyond those contemplated by the parties at the time the Shor and Kindra Litigation settlements were entered, with Defendants concealing this information for financial profit (i.e., the fees from entering the settlements), Plaintiffs relying on that concealment by proceeding with settlements in the Shor Litigation and Kindra Litigation, and Plaintiffs incurring damages. Plaintiffs add that less particularity in pleading is required where the opposing party holds greater knowledge of the relevant facts to be alleged. (See Opp’n, pp. 3-4.)

In reply, Defendants reiterate arguments for why the concealment claim is insufficiently alleged and raise new arguments for why Plaintiffs’ opposition contentions are incorrect. (Reply, pp. 2-3.)

c. Court’s Determination

The Court finds in favor of Plaintiffs.

The FAC sufficiently alleges concealment, even without the benefit of diminished particularity in pleading rule discussed by Plaintiffs.

The FAC alleges concealment as summarized in the Background at Section I.A., summarizing paragraphs 13 to 30 and 46 to 49 of the FAC.

The Court concludes that the reliance element is not correctly construed by the moving papers, likely because the FAC alleges “Fraud” using the framework for a fraud by intentional misrepresentation rather than fraud by concealment claim. (FAC, ¶¶ 46-49.) The ‘reliance’ element of concealment is that “the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact.” (Boschma, supra, 198 Cal.App.4th at p. 248.) Here, the FAC as summarized in Section I alleges that Plaintiffs may have not proceeded with representation or entered the Shor Litigation and Kindra Litigation settlements had they been aware of the intent to bill additional fees, which the FAC characterizes as being induced, to whatever degree, for Defendants’ financial gain in legal fees to be paid from the settlements, e.g., the FAC alleges that Plaintiffs sought to keep legal fees down and entered the Shor Litigation and Kindra Litigation settlements in pursuit of that goal. (FAC, ¶¶ 16-20.)

Damages are also sufficiently alleged insofar, at the very least, Plaintiffs are alleging that they incurred additional legal fees that were not contemplated by the parties’ agreement.

Defendants’ demurrer is thus OVERRULED as to the fourth cause of action.

2. Demurrer, FAC, Sixth Cause of Action, Violation of Civil Code Section 1770(a)(5): SUSTAINED, with leave to amend.

a. Relevant Law

The Consumer Legal Remedies Act (CLRA) makes unlawful certain “unfair methods of competition and unfair or deceptive acts or practices” “by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer,” which include “[r]epresenting that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have.” (Civ. Code, § 1770, subd. (a)(5).)

b. Parties’ Arguments

The sixth cause of action alleges violation of subdivision (a)(5) of Civil Code section 1770 based on Defendants’ aforementioned conduct. (FAC, ¶¶ 54-58.)

In their demurrer, Defendants argue that legal services do not qualify as the types of “goods or services” contemplated by the CLRA in section 1770, subdivision (a)(5), citing Fairbanks v. Superior Court (2009) 46 Cal.4th 56, 60 (Fairbanks)—holding that insurance broker services were not subject to the CLRA—and other authorities in support of their arguments. (Demurrer, pp. 7-9.)

In opposition, Plaintiffs argue that Fairbanks limited itself to insurance broker services and that Defendants do not generally cite authority for the proposition that professional services generally are excluded from the CLRA. In favor of Plaintiffs’ interpretation of the CLRA, Plaintiffs argue that the plain language of subdivision (a)(5) includes “services” for “consumers,” that only one CLRA provision explicitly excludes legal services from its scope (subdivision (a)(24) of section 1770), and that case law holds that where the legislature has built exemptions into a statute, courts should not imply additional exemptions without clear legislative intent to the contrary. (Opp’n, 5-6, quoting Sierra Club v. State Bd. of Forestry (1994) 7 Cal.4th 1215, 1230-1231 (Sierra Club).)

In reply, Defendants argue that legal services do not fit into the CLRA’s definition of “consumer” or “services” as defined in Civil Code section 1761, subdivisions (b) and (d). Defendants also argue that the opposition ineffectively distinguishes Fairbanks and that Plaintiffs cannot refute that legal services are not “personal, family, or household” purposes for “consumer” purposes under the CLRA. (Reply, p. 3.)

c. Court’s Determination

The Court finds in favor of Defendants.

First, two points from Fairbanks are relevant here and were critical to the California Supreme Court’s determination.

The Supreme Court initially determined that “[a]n insurer’s contractual obligation to pay money under a life insurance policy is not work or labor, nor is it related to the sale or repair of any tangible chattel.” (Fairbanks, supra, 46 Cal.4th at p. 61.) Then, in looking into the legislative history of the CLRA, the Supreme Court noted that the CLRA was modeled after the National Consumer Act (NCA), which included services related to “insurance.” Important to the Supreme Court, the California legislature, in creating the CLRA as modeled on the NCA, chose to omit the NCA’s reference to “insurance” services as part of the scope of this State’s consumer remedies law, indicating that the CLRA did not include insurance services in its ambit. (Id. at pp. 61-62.)

The moving papers do not cite similar legislative history for legal services. And though the Court ultimately finds in favor of Defendants on this claim, the demurrer’s arguments relating to whether legal services can amount to “services” under the CLRA are not convincing. Defendants correctly note that CLRA “services” must relate to “personal, family, or household purposes (Civ. Code, § 1761, subd. (b)) but do not elaborate other than facially on how legal services are not “services” within a similar vein of reasoning as Fairbanks. (Demurrer, pp. 6-7.) And while the demurrer cites a number of authorities in favor of Defendants’ position regarding legal services and the CLRA, these are non-California decisions, which are persuasive at best and do not change the Court’s determination as to whether Fairbanks’s reasoning places legal services outside of the scope of the CLRA. (Demurrer, p. 7; People v. Leal (Jul. 25, 2023) 93 Cal.App.540 1143, 1157, fn. 1, citing People v. Bradley (1969) 1 Cal.3d 80, 86.) Instead, the Court agrees with the construction offered by Plaintiffs.

Second, as noted by Plaintiffs, Civil Code section 1770, subdivision (a)(24), explicitly exempts attorneys from that subdivision. (Civ. Code, § 1770, subd. (a)(24)(C).) Subdivision (a)(5)—on which the sixth cause of action is based—however, provides no similar exemption. (Civ. Code, § 1770, subd. (a)(5) [“Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that the person does not have”].)

And as quoted in the opposition papers: “Under the maxim of statutory construction, expressio unius est exclusio alterius, if exemptions are specified in a statute, we may not imply additional exemptions unless there is a clear legislative intent to the contrary. (Wildlife Alive v. Chickering (1976) 18 Cal.3d 190, 195[] […].)” (Sierra Club, supra, 7 Cal.4th at p. 1230; cf. People v. Superior Court of Riverside County (Jul. 28, 2022) 81 Cal.App.851, 875 (Riverside County) [distinguishing Sierra Club by determining that the court did not read an exemption into a statute, but rather reconciled an issue raised by interpretation of more than one statute].)

Here, no legal services exemption was written by the legislature into subdivision (a)(5) as with subdivision (a)(24), nor does the Court finds sufficient reasons to read such an exemption into the statute. The Court also finds no reason in Defendants’ papers to find to the contrary, either as based on the plain language of the CLRA, clear legislative history in support of Defendants’ position, or in reconciliation of the CLRA with another statute as with Riverside County. (Sierra Club, supra, 7 Cal.4th at p. 1230.)

Third, however, the Court determines that—for reasons other than those argued by Defendants—the legal services alleged in the FAC do not fall within the plain language of the CLRA “services” contemplated at section 1770, subdivision (a)(5).

In Fairbanks, a contractual obligation to pay monies in an insurance context did not amount to services under the CLRA because such an obligation was not “work or labor” for CLRA purposes. (Fairbank, supra, 46 Cal.4th at p. 61.)

In contrast, the FAC alleges that the services at issue were legal services (FAC, ¶¶ 13-30), which are necessarily services that require labor and work on the part of the attorney, facially satisfying Civil Code section 1761’s definition for “services.” (Civ. Code, § 1761, subd. (a)(2).)

However, under the statute those services must be for a purpose “other than a commercial or business use.” (Civ. Code, § 1761, subd. (a)(2).) And here, the Court has taken judicial notice of the pleadings in the Shor and Kindra Litigations, which show that Defendants’ legal services involved prosecuting Plaintiffs’ interests as plaintiffs in civil business disputes. (Demurer & MTS, RJN, Ex. 4 [pleading in Shor Litigation showing that the litigation involved a business dispute at, for example, paragraphs 15 to 25] & Ex. 5 [pleading in Kindra Litigation showing same at, for example, paragraphs nine to 16].) Because the services provided by Defendants in relation to the Shor and Kindra litigation thus appear to have arisen from business rather than personal, family, or household purposes, the legal services alleged in the FAC facially lie outside of the scope of the CLRA at section 1770, subdivision (a)(5). And because the parties’ papers do not dissect subdivision (a)(5) in this fashion, there are no countervailing arguments convincing the Court that the FAC alleges that the Shor and Kindra Litigation arose from personal, family, or household purposes.

Defendants’ demurrer is thus SUSTAINED, with leave to amend, where leave is granted based on the Court’s reasoning differing from the arguments raised in the parties’ papers, and to give Plaintiffs an opportunity to respond to the Court’s reasoning.

IV. Motion to Strike

A. Legal Standard

The court may, upon a motion or at any time in its discretion and upon terms it deems proper: (a) strike out any irrelevant, false, or improper matter inserted in any pleading; or (b) strike out all or any part of any pleading not drawn or filed in conformity with the laws of California, a court rule, or an order of the court. (Code Civ. Proc. § 436, subds. (a), (b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a pleading which is not essential to the claim is surplusage; probative facts are surplusage and may be stricken out or disregarded”].)

For the purposes of a motion to strike pursuant to Sections 435 to 437 of the Code of Civil Procedure, the term “pleading” generally means a demurrer, answer, complaint, or cross-complaint, (Code Civ. Proc., § 435, subd. (a)), and an immaterial allegation or irrelevant matter in a pleading entails (1) an allegation that is not essential to the statement of a claim or defense, (2) an allegation that is neither pertinent to nor supported by an otherwise sufficient claim or defense, or (3) a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint (Code Civ. Proc., § 431.10, subds. (b)(1)-(3), (c)).

B. Analysis

1. Motion to Strike, Complaint, Statute of Limitations: GRANTED, with leave to amend.

a. Relevant Law

Unless a complaint affirmatively discloses on its face that the statute of limitations has run, the general demurrer on these grounds must be overruled. (See Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 881 [“It must appear clearly and affirmatively that, upon the face of the complaint, the right of action is necessarily barred”].) Instead, “[t]he proper remedy ‘is to ascertain the factual basis of the contention through discovery and, if necessary, file a motion for summary judgment ….’ [Citation.]” (Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 325.)

A statute of limitations starts to run once the cause of action “accrues,” and although a cause of action typically accrues when it is complete with all of its elements, a cause of action will at times be deemed to accrue at a later date, such as when the plaintiff did not discover and had no occasion to discover the cause of action until that later date, when the defendant fraudulently concealed the existence of a possible claim until that later date, or when the defendant committed multiple wrongs that ended on that later date. (Doe v. Roman Catholic Archbishop of Los Angeles (2016) 247 Cal.App.4th 953, 961.)

The statute of limitation for a professional negligence claim or another claim involving “[a]n action against an attorney for a wrongful act or omission, other than for actual fraud,” is “one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc., § 340.6, subd. (a).)

However, there can be a tolling of the statute of limitations for no more than four years if the “plaintiff has not sustained actual injury” or if “[t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred.” (Code Civ. Proc., § 340.6, subds. (a)(1), (2).) The one-year statute of limitations has been found to apply to breach of fiduciary claims as well. (Stoll v. Superior Court (1992) 9 Cal.App.4th 1362, 1368-69 [applying the one-year statute of limitations under Code of Civil Procedure section 340.6 to a breach of fiduciary duty claim in the context of legal malpractice].)  

b. Parties’ Arguments

In their motion to strike, Defendants argue that the FAC’s claims all arise from Defendants’ alleged omissions or other misconduct not involving actual fraud in the Shor Litigation and Kindra Litigation. As such, Defendants argue that the one-year statute of limitations set out in section 340.6 applies to all the claims alleged in the FAC that relate to the underlying litigation (as opposed to any transactional work done after the litigation). Defendants argue that the latest discovery date for the harm alleged here, as pleaded in the FAC, is February 7, 2022, per paragraph 22 of the FAC. Defendants also argue that any tolling per section 340.6 should extend only to December 2021, by which time both the Shor and Kindra Litigations were dismissed, meaning that no legal representation regarding those litigations could extend past that time. Based on these calculations, Defendants argue that the Complaint here was filed beyond the one-year statute of limitations, i.e., the last possible discovery date as February 7, 2022, and the representation ending in December 2021, both more than a year prior to this action being filed on February 14, 2023. Defendants argue that any correspondence mailed by Defendants to Plaintiffs on February 15, 2022—within the one-year limitations window—does not support legal representation here because that letter, as attached to the original Complaint in this action, shows that it merely related to transactional matters, which necessarily cannot relate to the specific subject matter of the Shor and Kindra Litigations. (Mot., pp. 6-12.)

In opposition, Plaintiffs argue against the imposition of a statute of limitations here. Plaintiffs argue that case law holds that the defect must be clear from the face of the pleadings, and that here, the FAC does not show on its face that any limitations period has run. Plaintiffs argue that the legal representation did not end when the Shor and Kindra Litigations were dismissed but rather, extended to February 15, 2022, as alleged in the FAC at paragraphs 22 to 25. (Opp’n, pp. 4-7.)

In reply, Defendants reiterate that ongoing representation related to the subject matter of a litigation is required for tolling purposes under section 340.6 and that the transactional matters addressed in the February 15, 2022, correspondence cannot fit that description. (Reply, pp. 2-3.)

c. Court’s Determination

The Court finds in favor of Defendants. The Court first discusses (a) section 340.6 as imposing the applicable statute of limitations, (b) why the FAC alleges no actual fraud, (c) the date of discovery alleged on the face of the FAC for harms stated therein, and (d) whether section 340.6 tolling applies to the allegations in the FAC. The Court then summarizes the conclusions it has drawn from these four discussions to formulate the ultimate disposition for this portion of Defendants’ motion to strike.

1. Code Civ. Proc., § 340.6 Sets the Applicable Limitations Period

First, the Court agrees that the FAC’s claims fall within the purview of section 340.6.

The FAC alleges concealment and misconduct by Defendants in relation to their representation of Plaintiffs in the Shor and Kindra Litigations, with no allegations of actual fraud based on intentional misrepresentations. (See FAC, ¶¶ 13-30.) Such allegations fall into the plain language of section 340.6, subdivision (a). And while concealment is typically a fraud claim, section 340.6, subdivision (a), only excludes actual fraud (misrepresentation) from its ambit. California case law is in accordance with this rule. (Quintilliani v. Mannerino (1998) 62 Cal.App.4th 54, 69-70 (Quintilliani) [constructive fraud and negligent misrepresentation within ambit of section 340.6, but intentional fraud is not]; Stueve Bros. Farms, LLC v. Berger Khan (2013) 222 Cal.App.4th 303, 321-322 [actual fraud supports claim beyond ambit of section 340.6].)

2. The FAC Fails to Allege Actual Fraud

Second, the Court clarifies why the FAC does not allege actual fraud.

For section 340.6 purposes, actual fraud means an intentional misrepresentation as opposed to constructive fraud or concealment. (Quintilliani, supra, 62 Cal.App.4th at pp. 69-70.)

Intentional misrepresentation involves “(1) a knowingly false representation by the defendant; (2) an intent to deceive or induce reliance; (3) justifiable reliance by the plaintiff; and (4) resulting damages.” (Service by Medallion, Inc. v. Clorox Co. (1996) 44 Cal.App.4th 1807, 1816.)

Allegations of fraud “must be pled with more detail than other causes of action.” (Apollo Capital Fund, LLC v. Roth Capital Partners, LLC (2007) 158 Cal.App.4th 226, 240.) “Every element of the cause of action for fraud must be alleged … factually and specifically[,] and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect. [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216, superseded by statute as stated in Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 242.) A plaintiff pleading fraud must allege facts showing “how, when, where, to whom, and by what means” the allegedly fraudulent representations were tendered. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) “[G]eneral and conclusory allegations do not suffice.” (Small v. Fritz Cos., Inc. (2003) 30 Cal.4th 167, 184 [citations omitted].)

Here, the FAC alleges intentional misrepresentations relating to the Additional Fees, i.e., Defendants intentional misrepresented the fees to be charged for the Shor and Kindra Litigations and concealed the fact that more in fees would be charged from Plaintiffs. (FAC, ¶¶ 7-9 [cited in Opp’n, p. 8 to support actual fraud], 55-56, 60-61 [“As described [in prior paragraphs in the FAC], Defendants made multiple misrepresentations to Plaintiffs about Defendants’ legal services, the value of those legal services, and the advisability of certain litigation tactics”].) Such allegations are only generally stated and do not detail how the representations relating to fees were made, when those representations were made in relation to Shor Litigation and when they were made in relation to the Kindra litigation, where Defendants made those misrepresentations, and by what means were the misrepresentations made, e.g., orally, through written form in a letter, electronic communication or otherwise, or through some other form.

Such allegations thus fail to meet the particularity required of intentional misrepresentation claims and consequently fail to support actual fraud for section 340.6 purposes.

3. The FAC’s Latest Date of Discovery is Feb. 8, 2022

Third, the Court agrees that the FAC alleges a sufficient basis to find that Plaintiffs discovered their alleged harms in relation to the Shor and Kindra Litigations as of, at the latest, February 8, 2022, when Plaintiffs disputed the Additional Fees. (See FAC, ¶¶ 22-23.)

4. The FAC Fails to Allege Bases for Section 340.6 Tolling

Fourth, the Court determines that, for tolling purposes under section 340.6, subdivision (a)(2), legal representation objectively ended upon dismissal of the Shor and Kindra Litigations, i.e., no later than May and December 2021 respectively, for which reason tolling does not extend Defendants’ liability for conduct occurring prior to February 14, 2022.

“The test for whether the attorney has continued to represent a client on the same specific subject matter is objective, and ordinarily the representation is on the same specific subject matter until the agreed tasks have been completed or events inherent in the representation have occurred. [Citation.]” (Crouse v. Brobeck Phleger & Harrison (1998) 67 Cal.App.4th 1509, 1528 (Crouse).) “The continuing-representation provision [of section 340.6] applies only when the continuing representation involves the specific subject matter as to which the negligence occurred, and is not applicable when there is a continuing relationship between the client and the attorney involving only unrelated matters. [Citation].” (Ibid.)

Here, the Court has taken judicial notice of the dockets for the Shor and Kindra Litigations (Section II supra) and has independently confirmed dismissal of both actions. The Shor Litigation was dismissed with prejudice by Department N of the Santa Monica Courthouse on May 10, 2021. (LASC No. 18SMCP00096, 5/10/21 Minutes.) And the Kindra litigation was dismissed without prejudice by Department 58 at the Stanley Mosk Courthouse on December 8, 2021. (LASC No. 21STCV01387, 12/8/21 Minutes.) This shows that the subject matter of both litigations had concluded by December 2021. And while the Court may generally not take judicial notice for the truth of matters presented for judicial notice (Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375), the Court may take judicial notice of the legal effect deriving from those matters. (Julian Volunteer Fire Co. Assn. v. Julian-Cuyamaca Fire Protection Dist. (2021) 62 Cal.App.5th 583, 600.) Here, the purpose of judicial notice is the legal effect derived from records of this Superior Court in relation to the representation alleged in the pleadings, i.e., no representation after December 2021 relating to the subject matter of the Shor and Kindra Litigations.

As far as the February 15, 2022, correspondence, that communication only shows a letter indicating termination of representation and temporary disposition of the Kindra Litigation settlement funds. (Complaint, Ex. 3.) Nothing in that letter shows that substantive representation in the Shor and Kindra litigations was ongoing, negating any “continuous representation” for section 340.6 tolling purposes through February 15, 2022. And though the February 15, 2022, correspondence is not attached to the operative FAC, the Court may nevertheless consider it as part of the pleadings. As highlighted by the reply, the original Complaint attached a copy of the February 15, 2022, correspondence. And under the sham pleading doctrine, Plaintiffs’ failure to attach the February 15, 2022, correspondence to the FAC is immaterial insofar as the Court may consider that correspondence as part of the pleadings absent a satisfactory explanation from Plaintiffs for why the Court should not do so (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425), something Plaintiffs do not raise in their opposition.

5. Summary of Court’s Determinations and Disposition

Based on the above determinations, the Court concludes that the FAC shows on its face that all seven claims are, in part, defectively stated insofar as they are premised on conduct alleged to have occurred before February 14, 2022 relating to the underlying litigation. This is because:

(1) This action was filed on February 14, 2023;

(2) All seven claims in the FAC are subject to the limitations period in Code of Civil Procedure section 340.6, subdivision (a), because they amount to an “action against an attorney for a wrongful act or omission, other than for actual fraud;”

(3) As clarification, the FAC fails to allege actual fraud because any intentional misrepresentations alleged against Defendants in the FAC are only generally stated and do not contain the particularity required of fraud claims;

(4) Thus, the FAC only sufficiently alleges causes of action arising from Defendants’ wrongful acts or omissions insofar as they are based on conduct alleged to have occurred within a year of the filing of this action—i.e., on or after February 14, 2022—unless (a) the date of discovery for Plaintiffs’ injuries is reasonably alleged to have taken place on or after February 14, 2022, or (b) the FAC alleges bases for section 340.6 tolling that would extend Defendants’ liability for conduct occurring before February 14, 2022, to February 14, 2022 or some later date;

(5) The latest reasonable date of discovery for Defendants’ wrongful acts and omissions in relation to the Shor and Kindra Litigations, as alleged on the face of the FAC, is February 8, 2022, when Plaintiffs disputed the Additional Fees, i.e., prior to February 14, 2022, and thus, outside of the statute of limitations window;

(6) The FAC fails to allege bases for section 340.6 tolling for conduct alleged to have occurred prior to February 14, 2022, because the specific subject matter of the Shor and Kindra Litigations respectively concluded in May and December 2021, when settlements were entered in those actions and the Superior Court dismissed those cases, for which reason tolling not applicable February 15, 2022; and

(7) Based on the above determinations, the FAC only viably states claims for injuries against Defendants for wrongful acts or omissions arising from legal representation on or after February 14, 2022.

Defendants’ motion is thus GRANTED as to striking from the FAC Complaint (a) ¶ 16 in its entirety [wrongful act or omission prior to Feb. 14, 2022, based on below standard representation], (b) ¶¶ 18-19 in their entirety [wrongful act or omission prior to Feb. 14, 2022, based on Additional Fees], (c) the allegations “[o]nce again, … Fees,” at 5:22-6:2 [Additional Fees], (d) the allegations “[n]one … period,” from 6:12-15 [Additional Fees], and (e) ¶¶ 23, 29, 47-49, 55-56, 58, 60-63 in their entirety [below standard representation or Additional Fees prior to Feb. 14, 2022].

Defendants’ motion is granted with leave to amend based on different avenues to curing the pleadings, e.g., actual fraud allegations or clarification on date of discovery or tolling.

2. Motion to Strike, Complaint, Punitive Damages: GRANTED, with leave to amend.

a. Relevant Law

“In an action for the breach of an obligation not arising from contract, where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice, the plaintiff, in addition to the actual damages, may recover damages for the sake of example and by way of punishing the defendant.” (Civ. Code, § 3294, subd. (a); College Hospital Inc. v. Superior Court (1994) 8 Cal.4th 704, 725 (College Hospital) [explaining amendments requiring “despicable” conduct for malice and oppression].)

When the defendant is a corporation, ‘[a]n award of punitive damages … must rest on the malice of the corporation’s employees’” specifically, “the oppression, fraud, or malice perpetrated, authorized, or knowingly ratified by an officer, director, or managing agent of the corporation,” where a managing agent “include[s] only those corporate employees who exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy.’” (Wilson v. Southern California Edison Co. (2015) 234 Cal.App.4th 123, 164, citations omitted.)

A motion to strike is properly granted when a complaint fails to allege facts to state a prima facie claim for punitive damages under the standards of the statute. (Turman v. Turning Point of Cent. California, Inc. (2010) 191 Cal.App.4th 53, 63.) Alleging an intentional tort alone is not enough to support a claim for punitive damages, nor are conclusory allegations that merely parrot the language of the statute. (Grieves v. Superior Court (1984) 157 Cal.App.3d 159, 166; Blegen v. Superior Court (1981) 125 Cal.App.3d 959, 963.)

b. Court’s Determination

The FAC seeks punitive damages pursuant to Civil Code section 1780, subdivision (a)(4), i.e., under the CLRA. (FAC, ¶¶ 58, Prayer, ¶ 3.)

Because the Court has sustained Defendants’ demurrer to the FAC’s CLRA claim (see Section III.B.2.c. discussion supra), the punitive damages prayer has no supporting cause of action. For these reasons, the prayer for punitive damages is “a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint” (Code Civ. Proc., § 431.10, subds. (b)(3), (c)), making the prayer immaterial, and subject to a motion to strike.

Defendants’ motion to strike is thus GRANTED as to striking Plaintiffs’ prayer for punitive damages pursuant to Civil Code section 1780, subdivision (a)(4), alleged in the FAC at 12:6.

3. Motion to Strike, Complaint, Attorney’s Fees: GRANTED, with leave to amend.

a. Relevant Law

Attorney fees are only recoverable when authorized by contract, statute or law. (Code Civ. Proc. 1033.5, subd. (a)(10).) Otherwise, regardless of who prevails in litigation, each party must bear his or her own attorneys’ fees—a proposition known as the American Rule. (Alyeska Pipeline Service Co. v. Wilderness Society (1975) 421 U.S. 240, 247; Trope v. Katz (1995) 11 Cal.4th 274, 278-279 [“California follows what is commonly referred to as the American rule, which provides that each party to a lawsuit must ordinarily pay his own attorney fees. [Citation.] The Legislature codified the American rule in 1872 when it enacted Code of Civil Procedure section 1021, which states in pertinent part that ‘Except as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties ….’ [Citation.]”].)

b. Court’s Determination

The FAC prays for attorney’s fees pursuant to Civil Code section 1780, subdivision (a)(5), i.e., under the CLRA, and pursuant to Code of Civil Procedure section 1021.5. (FAC, ¶¶ 58, 63, Prayer, ¶¶ 4-5.)

Because the Court has sustained Defendants’ demurrer to the FAC’s CLRA claim (see Section III.B.2.c. discussion supra), the CLRA attorney’s fees prayer has no supporting cause of action. For these reasons, the CLRA-based prayer for attorney’s fees is “a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint” (Code Civ. Proc., § 431.10, subds. (b)(3), (c)), making the prayer immaterial, and subject to a motion to strike.

The same conclusion is warranted for the prayer for attorney’s fees pursuant to Code of Civil Procedure section 1021.5. Section 1021.5 permits recovery of fees in relation to the enforcement of important rights affecting public interest. (Code Civ. Proc., § 1021.5.) The FAC prays for this relief in relation to the FAC’s unfair competition claim. (FAC, ¶¶ 63, Prayer, ¶ 5.) Yet, the opposition fails to mention section 1021.5, let alone explain why this statutory section should support fees in relation to an unfair competition claim. Under these circumstances, the Court determines that the section 1021.5-based attorney’s fees prayer is “a demand for judgment requesting relief not supported by the allegations of the complaint or cross-complaint” (Code Civ. Proc., § 431.10, subds. (b)(3), (c)), making the prayer immaterial, and subject to a motion to strike.

Defendants’ motion to strike is thus GRANTED as to striking Plaintiffs’ prayer for attorney’s fees pursuant to Civil Code section 1780, subdivision (a)(5), and Code of Civil -Procedure section 1021.5, alleged in the FAC at 12:7-10.

V. Conclusion

A. Demurrer

Defendants Ross Legal Corporation Inc. and Polina L. Ross’s Demurrer to First Amended Complaint is OVERRULED in part and SUSTAINED in part as follows:

(1) OVERRULED as to the First Amended Complaint’s fourth causes of action; and

(2) SUSTAINED, with leave to amend, as to the First Amended Complaint’s sixth cause of action.

B. Motion to Strike

Defendants Ross Legal Corporation Inc. and Polina L. Ross’s Motion to Strike Portions of the First Amended Complaint is GRANTED as follows:

(1) GRANTED, with leave to amend, as to striking from the First Amended Complaint (a) ¶ 16, (b) ¶¶ 18-19 in their entirety, (c) the allegations “[o]nce again, … Fees,” at 5:22-6:2, (d) the allegations “[n]one … period,” from 6:12-15, and (e) ¶¶ 23, 29, 47-49, 55-56, 58, 60-63 in their entirety;

(2) GRANTED, with leave to amend, as to striking the prayer for punitive damages located in the First Amended Complaint at 12:6; and

(3) GRANTED, with leave to amend, as to striking the prayers for attorney’s fees located in the First Amended Complaint at 12:7-10.