Judge Bruce G. Iwasaki, Case Number: 23STCV28190, Date: 2024-07-15 Tentative Ruling

Case Name: Christie Kim Professional Law Corporation v. Pacific Coast Trial Law Firm, et al.

Tentative Ruling: The Demurrer to the First Amended Complaint is sustained in part and overruled in part. The Motion to Strike is moot.

This action arises from the alleged breach of a contract pertaining to legal services. On November 16, 2023, Plaintiff Christie Kim Professional Law Corporation (“Plaintiff”) filed a Complaint in this action.

On March 20, 2024, Plaintiff filed the operative First Amended Complaint against Defendants Pacific Coast Trial Law Firm (“Pacific Coast”) and Tongdan Xue alleging causes of action for: (1) Breach of Contract; (2) Interference with Contract; (3) Promissory Estoppel (Quantum Meruit); (4) Conversion; and (5) Unjust Enrichment.

On April 15, 2024, pursuant to a Request for Dismissal, Defendant Pacific Coast was dismissed from this action without prejudice.

On May 20, 2024, Defendant Tongdan Xue (“Defendant”) filed the instant demurrer to the first, third, fourth, and fifth causes of action in the FAC, as well as a motion to strike portions of the FAC.

On July 5, 2024, Plaintiff filed respective oppositions to the demurrer and motion to strike, to which Defendant replied on July 8, 2024.

Plaintiff’s respective oppositions to the demurrer and motion to strike were filed and served late. The oppositions should have been filed and served no later than nine court days prior to the hearing, or July 1, 2024. (Code Civ. Proc., § 1005, subd. (d).) Although filed and served late, the Court exercises its discretion and will consider the untimely opposition briefs. (Cal. Rules of Court, Rule 3.1300(d).)

A demurrer is an objection to a pleading, the grounds for which are apparent from either the face of the complaint or a matter of which the court may take judicial notice.¿(Code Civ. Proc., § 430.30, subd. (a); see also Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)¿The purpose of a demurrer is to challenge the sufficiency of a pleading “by raising questions of law.”¿(Postley v. Harvey (1984) 153 Cal.App.3d 280, 286.)¿“In the construction of a pleading, for the purpose of determining its effect, its allegations must be liberally construed, with a view to substantial justice between the parties.” (Code Civ. Proc., § 452.)¿The court “ ‘ “treat[s] the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law . . . .” ’ ”¿ (Berkley v. Dowds (2007) 152 Cal.App.4th 518, 525.)¿In applying these standards, the court liberally construes the complaint to determine whether a cause of action has been stated.¿(Picton v. Anderson Union High School Dist. (1996) 50 Cal.App.4th 726, 733.)

Where a demurrer is sustained, leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Ibid.) “If there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245.)

The First Amended Complaint (FAC) alleges: On June 28, 2018, Plaintiff law firm and Defendant Xue executed a written contract under which Defendant sought the legal services of Plaintiff to pursue recovery of personal injury claims. (FAC, ¶ 9.) Under the contract, if Defendant’s claim settled before a lawsuit was filed, Plaintiff would receive a fee equal to one-third of Defendant’s gross recovery. (FAC, ¶ 9.) If Defendant’s claim was resolved after a lawsuit was filed with the court and/or any arbitration or mediation, then Plaintiff would receive a fee equal to 40% of the gross recovery. (FAC, ¶ 9.) The contract provided that in the event Defendant Xue discharged Plaintiff, Defendant expressly agreed that Plaintiff shall have a lien against Defendant’s recovery for services rendered by Plaintiff prior to discharge. (FAC, ¶ 9.) If Plaintiff was discharged when the amount of Defendant’s recovery has been or was about to determined, then Plaintiff was entitled to either the 33 1/3% or 40% fee. (FAC, ¶ 9.)

The Complaint alleges that Plaintiff diligently arranged for Defendant to get treatment, opened negotiation with the carrier, and obtained an offer of $275,000.00 and fulfilled its duties under the contract. (FAC, ¶ 10.) Defendant then terminated the representation and retained Pacific Coast as counsel. (FAC, ¶ 11.) The case was litigated for an additional time and settled for approximately $400,000.00. (FAC, ¶ 11.) Plaintiff requested its fee per the contract because when the representation was transferred, the case was about to settle with the carrier and Plaintiff had entered into final negotiations. (FAC, ¶12.) Defendant refused to pay the money due to Plaintiff and has not paid any of the fee due to date. (FAC, ¶ 13.) Plaintiff alleges that it has been damaged by Defendant’s breach in paying the amount due under the contract for either the agreed percent of the final settlement, or the agreed percentage of the last offer of the carrier in negotiations before representation switched. (FAC, ¶ 14.) Plaintiff alleges that it “has been damaged by the failure of [Defendant] to pay $91,945.46, the contingency fee due under the terms of the contract in the situation where representation is terminated after the case is about to settle” and costs. (FAC, ¶ 15.)

To state a cause of action for breach of contract, Plaintiff must be able to establish “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 821.)

Plaintiff alleges that Defendant failed to pay the fee due pursuant to the $275,000.00 offer. (FAC, ¶¶ 8-15.) The terms of the contract articulated in the FAC, however, do not entitle Plaintiff to a percentage of an offer. Rather, Plaintiff is entitled to a percentage of gross recovery. Nothing in the contract entitles Plaintiff to thirty-three and one-third percent (33 1/3%) of the $275,000.00 offer. Thus, Defendant cannot be liable for a purported breach that was not a contractual term.

However, the Court notes that the FAC alleges that “the case was litigated for an additional time, and settled for approximately $400,000.” (FAC, ¶ 11.) Thus, based on the terms of the contract, Plaintiff is entitled to some percentage of the recovery. Plaintiff explicitly alleges that when the case was transferred, the case was about to settle. (FAC, ¶ 12.) The contract provides that “if an attorney is discharged when the amount of a client’s recovery has been or is about to be determined” then Plaintiff is entitled to either 33 1/3% or 40% of Defendant’s gross recovery. (FAC, ¶ 9.) As such, Plaintiff is entitled to a portion of Defendant’s recovery.

The Court therefore finds that the first cause of action in the FAC does state a valid cause of action for breach of contract. The demurrer to the first cause of action is overruled.

“Quantum meruit refers to the well-established principle that the law implies a promise to pay for services performed under circumstances disclosing that they were not gratuitously rendered. To recover in quantum meruit, a party need not prove the existence of a contract, but it must show the circumstances were such that the services were rendered under some understanding or expectation of both parties that compensation therefor was to be made.” (Chodos v. Borman (2014) 227 Cal.App.4th 76, 96, citations and quotation marks omitted.) “[I]n order to recover under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant.” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248.)

Pursuant to the third cause of action, Plaintiff alleges that: a contingency fee agreement was entered into to represent Defendant, and she incurred costs on her behalf and performed substantial work and achieved significant benefits in prosecution of the claim. (FAC, ¶ 23.) This resulted in substantial value to Defendant and her claim under such contract for professional services. (FAC, ¶ 23.) Plaintiff was required to spend an extraordinary amount of time and resources in settling Defendant’s property damage claim, in addition to corresponding with and arranging for Defendant to acquire the professional services of medical providers. (FAC, ¶ 23.) The prelitigation work of Defendant’s case was completed by Plaintiff, which included the drafting and sending of a formal demand letter and negotiating to settle Defendant’s case. (FAC, ¶ 23.)

Plaintiff also alleges that before a lawsuit was filed but after an initial offer of settlement for $275,000.00, Defendant discharged Plaintiff and retained the services of Defendant Pacific Coast. (FAC, ¶ 24.) Plaintiff sent a Notice of Attorney’s Lien to Defendant Pacific Coast on March 6, 2020, for the reasonable value of Plaintiff’s services for $91,945.46 and costs incurred. (FAC, ¶ 24.) Thereafter, Defendant through Defendant Pacific Coast, settled her claim with the opposing party’s insurer for $450,000.00, which Defendant Pacific Coast collected on behalf of Defendant. (FAC, ¶ 25.) Plaintiff demanded payment “from [D]efendant’s attorney firm for the fair and reasonable sum of $91,945.46 or the work performed and costs incurred on [Defendant’s] behalf, from June 2018 to March 2020; but, to date, neither the whole nor any party [sic] has been paid, and there is now due and unpaid from Defendants to Plaintiff.” (FAC, ¶ 26.)

Plaintiff has sufficiently alleged that she did work for Defendant pursuant to a contingency fee agreement and that such work incurred a benefit on Defendant.

However, although not raised by the parties, “[a] plaintiff may not . . . pursue or recover on a quasi-contract claim if the parties have an enforceable agreement regarding a particular subject matter.” (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1388.) A cause of action for quantum meruit “is a quasi-contract claim for the reasonable value of services rendered.” (Jogani v. Superior Court (2008) 165 Cal.App.4th 901, 909.) A plaintiff is prohibited from alleging a quasi-contract cause of action where a plaintiff’s “breach of contract claim [pleads] the existence of an enforceable agreement and their [quantum meruit] claim [does] not deny the existence or enforceability of that agreement.” (Klein v. Chevron U.S.A., Inc., supra, 202 Cal.App.4th 1342, 1389-90.)

In analyzing a demurrer, the Court construes a complaint “liberally by drawing reasonable inferences from the facts pleaded.” (Rodas v. Spiegel (2001) 87 Cal.App.4th 513, 517.) Thus, based on the allegations of the FAC, an inference is created that Plaintiff is alleging that Defendant breached the contract that gives rise to the third cause of action. (FAC, ¶¶ 22-27.) In fact, the third cause of action references the agreement between the parties. (FAC, ¶ 22.) Plaintiff, however, does not deny the validity or existence of the agreement between the parties pursuant to the third cause of action. (FAC, ¶¶ 22-27.) Plaintiff cannot allege a claim for quantum meruit where Plaintiff has failed to deny the existence or enforceability of the agreement between Plaintiff and Defendant. (Klein v. Chevron U.S.A., Inc., supra, 202 Cal.App.4th 1342, 1389-90.)

Accordingly, the demurrer to the cause of action for quantum meruit is sustained.

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) “[A] mere contractual right of payment, without more, will not suffice . . .” to state a cause of action for conversion. (Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, 45.)

The Court finds that the fourth cause of action for conversion is insufficiently alleged. (FAC, ¶¶ 28-31.) Plaintiff alleges that former defendant Pacific Coast intentionally withheld and converted Plaintiff’s funds for its own use. (FAC, ¶¶ 29, 31.) There is no allegation that Defendant converted Plaintiff’s funds. (FAC, ¶¶ 28-31.)

As such, the fourth cause of action in the FAC for conversion against Defendant Xue fails to state sufficient facts. The demurrer to this cause of action is sustained.

Defendant contends that the demurrer to the fifth cause of action for unjust enrichment should be sustained because such cause of action is not a recognized cause of action. Plaintiff contends that some courts have recognized a cause of action for unjust enrichment.

The Court finds that Plaintiff’s citation to Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105 is inapposite because such case does not stand for the principle that unjust enrichment is a standalone cause of action. (Id. at p. 1132.)

Moreover, the Court notes that “California does not recognize a cause of action for unjust enrichment.” (Hooked Media Group, Inc. v. Apple Inc. (2020) 55 Cal.App.5th 323, 336.)

“The court may, upon a motion made pursuant to Section 435, 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. (b) Strike out all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court.”¿(Code Civ. Proc. § 436.) “Immaterial” or “irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim or a demand for judgment requesting relief not supported by the allegations of the complaint. (Code Civ. Proc. § 431.10, subds. (b)(1)-(3).)

Defendant moves to strike allegations of punitive damages as to the fourth cause of action for conversion in the FAC. Based on the Court finding that the conversion cause of action is insufficiently alleged, the motion to strike is moot.

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