Judge Bruce G. Iwasaki, Case Number: 23STCV07478, Date: 2024-03-26 Tentative Ruling

Matter: Motion for Summary Judgment or, in the alternative, Motion for Summary Adjudication

Opposing Party: Plaintiff/Cross-Defendant Christopher Y. Chong, by Power of Attorney and through his Attorney-in-Fact, Harry Sloan

This is an action for declaratory relief. On April 4, 2023, Plaintiff Christopher Chong (Plaintiff or Chong) filed the instant action for declaratory relief, seeking – in relevant part – a judicial declaration that Mardirossian Akaragian LLP’s (Defendant Mardirossian) “claim to 45% of the settlement proceeds, which together with costs totals $2,761,458.62,” is neither a fair nor reasonable value of the legal services provided in this matter.

On May 30, 2023, Defendant/Cross-Complainant Mardirossian filed a Cross-Complaint for declaratory relief, seeking a judicial declaration of the amount of attorney’s fees and costs owed by Plaintiff Chong to Mardirossian.

Now, Defendant/Cross-Complainant Mardirossian moves for summary judgment, or, in the alternative, summary adjudication of the declaratory relief cause of action in the Complaint and in its Cross-Complaint. Plaintiff Chong filed an opposition.

Defendant Mardirossian’s motion for summary judgment to the Complaint is granted.

Defendant’s request for judicial notice of Exhibits 1-17 are granted. (Evid. Code, § 452, subd. (d), (h).)

Defendant’s objections to Plaintiff’s evidence is ruled as follows: Nos. 1-15, 17-20, 22, 24-38, 44-50 are overruled, Nos. 16, 21, 23, 39-43 are sustained.

A party may move for summary judgment “if it is contended that the action has no merit or that there is no defense to the action or proceeding.” (Code Civ. Proc., § 437c,¿subd. (a).) “[I]f 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,” the moving party will be entitled to summary judgment. (Adler v. Manor Healthcare Corp.¿(1992) 7 Cal.App.4th 1110, 1119.)

The moving party has the initial burden of production to make¿a prima facie¿showing of the nonexistence of any triable issue of material fact, and if he does so, the burden shifts to the opposing party to make¿a prima facie¿showing of the existence of a triable issue of material fact. (Aguilar v. Atlantic Richfield Co.¿(2001) 25 Cal.4th 826, 850; accord Code Civ. Proc., § 437c,¿subd. (p)(2).) A Defendant moving for summary judgment may meet its initial burden by proving that for each cause of action alleged, plaintiff cannot establish at least one element of the cause of action. (Code Civ. Proc., § 437c(p)(2).)

Defendant Mardirossian moves for summary judgment/adjudication of Plaintiff’s claim for judicial declaration asserted by Plaintiff in the Complaint for Declaratory Relief (filed 4/4/23) in favor of Mardirossian, and against Plaintiff, in the amount of $2,761,380.29.

In the alternative, Defendant/Cross-Complainant Mardirossian moves for summary adjudication of Mardirossian’s cause of action for declaratory relief asserted in its Cross-Complaint for Declaratory Relief (filed 5/30/23), because the amount of attorney’s fees and costs owed by Plaintiff to Mardirossian is $2,761,380.29 and there is no defense to the claim.

Lastly, Mardirossian requests a Court’s order granting summary adjudication to confirm that Mardirossian is entitled to prejudgment interest. With respect to this last request for relief, this issue is not an appropriate determination for summary adjudication on either the Complaint or Cross-Complaint. (Code Civ. Proc., § 437c, subd. (f)(1) [“A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty.”].)

By way of background, the undisputed facts show that, on May 6, 2016, Plaintiff Chong sustained permanent bodily injuries in a catastrophic rear-end motor vehicle accident when he was struck from behind by a truck. (DSS 1; Compl., ¶ 10.) In May of 2018, shortly before the expiration of the limitations period, Plaintiff retained Mardirossian on a contingency-fee basis to represent his interests in a personal injury action, and filed suit for strict products liability and negligence against Porsche AG and the driver, Jose Guzman Figueroa; specifically, on May 7, 2018, Defendant Mardirossian filed an action for personal injury on Plaintiff’s behalf, entitled Christopher Y. Chong v. Porsche AG, et al., Case No. BC705337. (DSS 2, 6 [RJN Ex. 12].) Defendant Sharpe Interior Systems, Inc. (Sharpe) was added by amendment to the complaint, filed on December 20, 2018. (DSS 6 [RJN’s Exs. 2, 12].)

In May 2022, Defendant Mardirossian negotiated a settlement on Plaintiff’s behalf for the insurers’ policy limits, the sum of $6,015,000. (DSS 8.) Plaintiff does not dispute this fact but disputes Mardirossian’s authority to do so. (PSS 8.) A final version of the Release related to the settlement was reached on May 26, 2022. (DSS 12.) On July 20, 2022, attorney Eric George, acting on Plaintiff’s behalf, notified Mardirossian that its representation of Plaintiff Chong was terminated. (DSS 13.)

Thereafter, Defendant Mardirossian asserted a claim to 45% of the gross recovery or $2,706,750.00 in legal fees based on its Retainer Agreement with Plaintiff. (DSS 3, 25.)

Plaintiff’s Complaint for declaratory relief seeks a Court determination of the proper allocation of a settlement proceeds between Plaintiff Chong and his former counsel, Defendant Mardirossian, which provided litigation services on a contingency-fee basis. (Compl., ¶¶ 16-17.) Specifically, Mardirossian claims it is entitled to a 45% contingency fee pursuant to the retainer agreement – 20% of which is claimed by Defendant and Cross-Complainant Gerald Kroll – which together with reimbursement of costs would amount to $2,761,458.62. (Compl., ¶¶ 16-17.)

The Complaint alleges that the 45% contingency fee does not apply here because Plaintiff terminated Mardirossian and as result of this termination Mardirossian may only recover a “reasonable” value of the legal services provided in Plaintiff personal injury action. (See Compl., ¶¶ 16-20.)

The Complaint states a single cause of action for declaratory relief, which is governed by Code of Civil Procedure section 1060. Pursuant to this statute, “[a]ny person interested under a written instrument ... who desires a declaration of his or her rights or duties ... may ... bring an original action ... for a declaration of his or her rights and duties ... including a determination of any question of construction or validity arising under the instrument....” (Code Civ. Proc., § 1060.)

In moving for summary judgment/adjudication, Defendant Mardirossian relies on the language in the parties’ “Agreement of Employment of Counsel” (Retainer Agreement). The Retainer Agreement states in relevant part:

(a) The fees to be paid to Us on Your case will be 40% of the gross recovery, whether by settlement award, and/or judgment, if the claim is resolved within 365 days of the day You sign this Agreement (the day You sign this Agreement is evidenced on page 5 of this Agreement) and 45% of the gross recovery, whether by settlement, award, and/or judgment, at any time thereafter. [The term “gross recovery” means that total of all amounts received by settlement and/or judgment, before subtraction of any and all costs set forth in Paragraph (6).]

(c) In the event of our discharge or withdrawal, as provided in Paragraph 8, You agree to pay [Mardirossian] the reasonable value of the legal services provided by US to you if You receive a settlement, arbitration award and/or judgment in Your favor in this matter. Such a fee would then be determined by considering the following Fracasse v. Brent factors . . ..” (DSS 3 [Ex. 1 [Retainer Agreement, ¶ 1(a), (c)] [bold added].)

The Retainer Agreement also contains a fee sharing provision with attorney Jerry Kroll, authorizing Mardirossian to share 20% of the attorney’s fees with Kroll. (DSS 4.) The Retainer Agreement also provides that “Attorneys will advance all costs, disbursements, and litigation expenses associated with this matter. Client(s) will reimburse Attorneys for such advanced costs and expenses upon settlement, . . .” (DSS 5.)

Relying on the language in the Retainer Agreement, Defendant Mardirossian takes the position that it is entitled to 45% of the settlement amount it negotiated, which are the reasonable fees under the circumstances.

That is, the evidence shows that it negotiated a final settlement agreement and release (Settlement) with Sharpe in the underlying action on May 26, 2022. (DSS 8-12; see also RJN Ex. 5, 3:5-20.)[1] Then, on July 20, 2022, Plaintiff notified Mardirossian that its representation of Plaintiff was terminated. (DSS 13.) On August 9, 2022, Sharpe filed a motion in Chong v. Porsche for an Order enforcing the settlement. (DSS 14.) On August 19, 2022, Plaintiff Chong signed the Settlement/Release that had been finalized by Mardirossian. (DSS 18.) On that same day, Chong also signed a Substitution of Attorney replacing Mardirossian with attorney Eric George. (DSS 19.) On August 22, 2022, Plaintiff’s counsel, Eric George, represented in court that the at the matter had been settled, and agreed to dismiss the case with prejudice. (DSS 21.) These facts are undisputed.

Although Defendant Mardirossian acknowledges that it was terminated prior to Plaintiff’s execution of the Settlement it negotiated, Defendant Mardirossian argues that Plaintiff ratified the Settlement – unaltered and with attorney George’s approval – a few months later on August 19, 2022.

In a civil matter, a client generally has a unilateral right to control the outcome of his or her case, including the “right to settle or refuse to settle a claim.” (In the Matter of Guzman (Review Dept. 2014) 5 Cal. State Bar Ct. Rptr. 308, 314.) Defendant maintains that Plaintiff ratified the settlement by signing it and accepting the proceeds.

“ ‘Ratification is the voluntary election by a person to adopt in some manner as his own an act which was purportedly done on his behalf by another person, the effect of which ... is to treat the act as if [it was] originally authorized by him. [Citations.]’ ” (Estate of Stephens (2002) 28 Cal.4th 665, 673.) Ratification may occur expressly or by conduct that is consistent with voluntary affirmation. (Rakestraw v. Rodrigues (1972) 8 Cal.3d 67, 73.) The conduct must “be truly voluntary in character ... there can be no adoption if the act ... is done only because the purported principal is obligated to minimize his losses caused by the agents' wrongful act.” (Ibid.)

In Alvarado Community Hosp. v. Superior Court (1985) 173 Cal.App.3d 476, the court of appeal held that, “[w]here an attorney purports to accept a settlement offer without his client's consent, the client has two options. First, the client may decide the unauthorized settlement was nonetheless a beneficial bargain and seek to ratify his attorney's acceptance. Alternatively, the client may determine the settlement was not beneficial, seek to disavow it and proceed with a lawsuit.” (Id. at p. 479.)

Here, the evidence is undisputed that Plaintiff ratified the Settlement Agreement. Therefore, argues Defendant, it is entitled to 45% of the gross recovery, or $2,706,750.00 in legal fees under the Retainer Agreement – which under these circumstances it contends, is “the reasonable value of the legal services provided.”

In support of this argument, Defendant Mardirossian relies on Fracasse v. Brent (1972) 6 Cal.3d 784 and its progeny, including Joseph E. Di Loreto, Inc. v. O'Neill (1991) 1 Cal.App.4th 149 [affirming summary judgment for lawyer who was awarded 40% contingent fees after fully performing all obligations and terminating the representation].

In Fracasse, our Supreme Court affirmed the judgment of the trial court sustaining the defendant client’s demurrer to the plaintiff attorney’s suit for damages. The client had discharged the attorney without cause in a personal injury lawsuit prior to judgment. The attorney sought the full fee specified in the contingency agreement rather than the reasonable value of the services he provided to the client. The Supreme Court concluded that the action was premature because the personal injury matter had not yet been resolved, the client had not yet obtained a recovery, and thus there was no way to determine the reasonable value of the attorney’s services.

The Fracasse court summarized its holding as follows: “[A]n attorney ... discharged without cause is entitled to recover the reasonable value of his services rendered to the time of discharge.... We further hold that the cause of action to recover compensation for services rendered under a contingent fee contract does not accrue until the occurrence of the stated contingency.” (Id. at p. 792.) “To the extent that such discharge occurs ‘on the courthouse steps,’ where the client executes a settlement obtained after much work by the attorney, the factors involved in a determination of reasonableness would certainly justify a finding that the entire fee was the reasonable value of the attorney’s services.” (Fracasse, supra, 6 Cal.3d at p. 791.)

However, as noted in the opposition, the portion of Fracasse that Defendant so heavily relies upon is dicta.[2] Fracasse contemplated the possibility that the reasonable value of the discharged attorney’s service may be the entire contingency fee in circumstances in which the client discharges the attorney “ ‘on the courthouse steps' “ and then “executes a settlement obtained after much work by the attorney.” (Fracasse, supra, 6 Cal.3d at p. 791.) Said another way, the holding merely suggests that – in the case of the last-minute discharge of an attorney – “the an agreed-upon fee will often overlap with the “reasonable value” of the lawyer's services if the lawyer is discharged after the material terms of the settlement are reached.” (Ellerd v. County of Los Angeles (C.D. Cal., Feb. 4, 2010, No. CV 05-1211 SVW (CWX)) 2010 WL 11679622, at *3.)

Nonetheless, for the reasons stated above, “the occurrence of the stated contingency” occurred here where there was a final Settlement reached by Defendant – during the course of its employment by Plaintiff – which Plaintiff then ratified after replacing Defendant law firm. Thus, as argued by Defendant, “the contingency fee of 45% is the quantum meruit or reasonable value of the service it provided.” (Reply 5:18-19.)

In opposition, Plaintiff poses numerous questions related to the issues in this case (Opp., 7:10-9:1). However, these questions do not create triable issues of material facts in dispute and do not shift Plaintiff’s burden on summary judgment. Moreover, most of these questions are irrelevant to the resolution of this motion for summary judgment.

Rather, the relevant issues are Plaintiff’s contention that he did not agree to the settlement of his case and did not agree to the specific terms that Mardirossian negotiated on Plaintiff’s behalf. Plaintiff’s evidence shows that Plaintiff – though his power of attorney, Sloan – instructed Mardirossian not to settle unless Plaintiff received a net seven-figure settlement; a net of $2.5-$3 million was expressly identified. (PSS 37.)[3]

However, Plaintiff’s argument ignores his ratification of the Settlement. As noted above, Defendant (on this motion) does not dispute that Plaintiff did not agree to the May 2022 Settlement that Mardirossian negotiated. (PSS 33-34.) However, this same Settlement and Release was subsequently signed by Plaintiff on August 19, 2022. (DSS 18.)

Rather, relevant to the motion for summary judgment is Plaintiff’s contention that Plaintiff lacked “any real choice” in signing a settlement agreement on August 19, 2022. Plaintiff, however, provides speculation without evidence. The Opposition argues Defendant’s settlement negotiation “put plaintiff in an impossible position. Mardirossian was certainly not going to try the case; it had made clear that it had already earned its almost $2.8 million fee. Who else would take a case that was approaching the 5-year deadline, least of all one in which the existing liens were already approximately 95% of the policy limits? Abandoned with the claimed liens almost equal to what Mardirossian asserted was the maximum achievable recovery, Plaintiff had no alternative but to finally accept the $6 million sum.” (Opp. 22:6-11.) But Plaintiff’s characterization of being in an impossible situation is exaggerated. He could have disavowed the Settlement and face trial. His new attorney, Mr. George, advised otherwise. Chong’s motives for ratifying the settlement are irrelevant, and fail to raise a triable issue of material fact in dispute. (See PSS 1-66.)

First, Section 4(f) of the Retainer Agreement provides for the payment of 20% of any fee recovery to attorney Gerald Kroll. (PSS 63.)

Plaintiff argues that this term is invalid under Rule 1.5.1 of the Code of Professional Responsibility unless Mardirossian and Kroll entered into their own written agreement contemporaneously with the Chong engagement agreement, and unless this did not increase the fee to Plaintiff. The Opposition argues that “Plaintiff has seen no evidence that either one of these requirements have been met, and Mardirossian does not assert that they have.” However, Plaintiff’s opposition argument does not shift Plaintiff’s evidentiary burden on the summary judgment; that is, it is Plaintiff’s burden to submit evidence of its position that the Retainer Agreement was voidable. Further, the Reply addresses the requirements of compliance with Rule of Professional Conduct Rule 1.5.1 and additionally notes that this newly raised argument challenging the Retainer Agreement was not previously raised by Plaintiff during discovery. (Reply, 6:4-28; Akaragian Decl., Exh. 4.]

Section 12 of the Retainer Agreement provides that Plaintiff gave Defendant Mardirossian “full Power of Attorney to demand, receive, sue, or settle” his case. (PSS 64.) Plaintiff, citing Amjadi v. Brown (2021) 68 Cal.App.5th 383, suggests that this provision is void. (Id. at 389 [“an attorney may not settle a client’s case over the client’s objection and any provision of a retainer agreement purporting to give an attorney such authority violates the Rules of Professional Conduct and is void.”].) It is unclear how this analysis is material to Defendant’s motion for summary judgment where Defendant’s do not rely on this provision to argue a Settlement was executed. As discussed, Defendant relies on Plaintiff signing the Settlement Agreement and accepting its benefits.

Finally, Plaintiff suggests that Mardirossian breached its contract with Plaintiff. Specifically, the Retainer Agreement required it to consult with Plaintiff before, not after, reaching a settlement. Section 12 provided that “We (Mardirossian), will consult with You (Mr. Chong) prior to … accepting any settlement offers.” (PSS 65.)

Plaintiff cites Brown v. Grimes (2011) 192 Cal.App. 4th 265, which stated “When a party’s failure to perform a contractual obligation constitutes a material breach of the contract, the other party may be discharged from its duty to perform under the contract.” (Id. at 277-278.)

This breach of contract argument, however, does not address the issue of waiver of the breach through Plaintiff’s ratification of the Settlement.

Plaintiff’s opposition claim that Defendant Mardirossian’s work was “shoddy” is also undeveloped and lacking in evidence. (Opp., 17:26-19:12.) This argument fails to raise any triable issue of material fact.

Finally, Plaintiff injects a vague claim of fraud that is entirely undeveloped. Plaintiff asserts that Mardirossian knew that – even with Plaintiff’s substantial contributory negligence in connection with the May 6, 2016 accident – it was possible and perhaps likely that Plaintiff would nevertheless obtain a judgment far in excess of the $6 million policy limits for which Mardirossian settled. (PSS 66.)

This opposition argument is just that – argument. There is no evidentiary showing of fraud. There is only an opinion of a lien specialist stating “despite overwhelming comparative fault [90%+] because of the gross damages so far exceed their limits – even a finding of 10% liability would leave their insured exposed to an excess verdict.” (PSS 66.) However, this expert representation post-dates the Settlement that Mardirossian’s negotiated – negating any element that Mardirossian knew it made a false statement to Plaintiff. Moreover, this expert representation was made on June 1, 2022 – after the purported settlement had been negotiated. Further, Plaintiff offers no evidence of what representation was made to Plaintiff and when that induced his detrimental reliance. This fraud argument does not raise a triable issue of material fact.

This claim involves the same analysis and issues as the Cause of Action for Declaratory Relief in the Complaint. However, as relief is sought in the alternative to this claim, the motion for summary judgment on the Complaint renders this motion for summary adjudication moot.

The motion for summary judgment on the Complaint is granted. Defendant Mardirossian Akaragian LLP is to prepare, serve and lodge a proposed Judgment.

[1] Defendant Sharpe Interior Systems, Inc. (Sharpe) sent a proposed release; the release was sent back and forth between Sharpe and Defendant Mardirossian with revisions until a final version was agreed upon on May 26, 2022. (DSS 9-12.)

[2] The significance of dicta depends on the source. (See Hubbard v. Superior Court (1997) 66 Cal. App. 4^th 1163, 1169 [Justice Kaus “gave some sage advice to trial judges…: Generally speaking, follow dicta from the California Supreme Court”].)

[3] In a related argument, the opposition suggests the value of the Settlement was different from the time it was negotiated by Mardirossian to when Plaintiff’s new counsel, Elliss George, undertook substantial work to reduce Plaintiff’s other liens. According to the Opposition, Ellis George worked for more than a year to obtain a recovery for Plaintiff well in excess of $2 million by reducing other liens, whereas the recovery obtained by Plaintiff at the time Mardirossian declared victory was in the $300,000 range. However, according to the Reply, Plaintiff signed the settlement before his current attorneys negotiated a single lien. Thus, Plaintiff’s claim that Ellis George added substantial value may be true but does not inform on Plaintiff’s ratification of the Settlement. (Opp., 24:19-24.)

Department 58