Judge Christopher K. Lui, Case Number: 22STCV24567, Date: 2023-09-14 Tentative Ruling

Pursuant to California Rule of Court 3.1308(a)(1), the Court does not desire oral argument on the motion addressed herein. Counsel must contact the staff in Department 76 to inform the Court whether they wish to submit on the tentative, or to argue the matter. As required by Rule 3.1308(a), any party seeking oral argument must notify ALL OTHER PARTIES and the staff of Department 76 of their intent to appear and argue.

Notice to Department 76 may be sent by email to smcdept76@lacourt.org or telephonically at 213-830-0776.

Per Rule of Court 3.1308, if notice of intention to appear is not given, the Court may adopt the tentative ruling as the final ruling.

Plaintiff client alleges that, as a result of the underlying litigation, Defendant attorneys took 50 percent of the damages award collected and all of the statutory fee award, thereby depriving Plaintiff of $1,750.355.48.

Defendants Ebby S. Bakhtiar, P.C. and Ebby S. Bakhtiar’s motion for summary adjudication is GRANTED as to Issue No. 1 re: the first cause of action, Issue No. 2 re: the second cause of action, and Issue No. 3 re: the fifth cause of action.

Defendants’ request that the Court take judicial notice of the following is GRANTED per Evid. Code, § 452(d)(court records):

1. Attached hereto as Exhibit “1” is a true and correct copy of the Complaint filed on July 29, 2022 in the present action, Ramirez v. Ebby Bakhtiar, P.C. et al., LASC Case No. 22STCV24567.

2. Attached hereto as Exhibit “2” is a true and correct copy of the Notice of Entry of Judgment filed on June 24, 2019 in the matter of Ramirez v. Jack In The Box, Inc., et al., LASC Case No. BC593619.

3. Attached hereto as Exhibit “3” is a true and correct copy of the Acknowledgment of Satisfaction of Judgment, filed on August 5, 2020, in the matter of Ramirez v. Jack In The Box, Inc., et al., LASC Case No. BC593619.

Pursuant to Civ. Proc. Code, § 473(q), the Court declines to rule upon the objections, which are asserted against evidence which the Court does not deem to be material to the disposition of this motion.

10. As set forth in the Fee Agreement, Defendants’ fees were to be the greater of either the statutory fee award or 50 percent of the total amount recovered.

11. Defendants successfully prosecuted the Underlying Action and obtained a substantial verdict for Ramirez. After post-judgment motions, the judgment for damages in Ramirez’s favor including interest was $3,500,709.48.

14. Contrary to the terms of the Fee Agreement, Defendants collected both 50 percent of the damages award and all of the statutory fee award in the Underlying Action.

$1,750,354, and Defendants took the balance of $6,162,008.87. Under the terms of the Fee Agreement, Ramirez should have received not less than $3,500,709.48. Accordingly, Ramirez was damaged in the amount of $1,750,355.48.

Underlying Action in an email communication from an agent working on the annuity she selected at the end of July 2020.

17. Critically, Defendants never told Ramirez of the total amount recovered on her behalf in the Underlying Action.

ISSUE ONE: Bakhtiar is entitled to summary adjudication in his favor and against Plaintiff on the first cause of action for Breach of Contract because it is barred by the statute of limitations pursuant to Code of Civil Procedure § 340.6(a).

25. The Fee Agreement provided for how Defendants’ fee would be calculated from the recovery in the Underlying Action.

26. In breach of the terms of the Fee Agreement, Defendants took $1,750,355.48 more in fees than the Fee Agreement provided.

27. As a direct result of Defendants’ breach of contract, Ramirez has incurred damages of $1,750,355.48, and other damages, the precise amount of which will be proven at trial.

Case law dictates that the applicable statute of limitations to this cause of action is Civ. Proc. Code, § 340.6, which provides in pertinent part:

(a) An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within 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. . . . Except for a claim for which the plaintiff is required to establish the plaintiff’s factual innocence, the time for commencement of legal action shall not exceed four years except that the period shall be tolled during the time that any of the following exist:

(2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred.

(3) The attorney willfully conceals the facts constituting the wrongful act or omission when those facts are known to the attorney, except that this subdivision shall toll only the four-year limitation.

(4) The plaintiff is under a legal or physical disability that restricts the plaintiff’s ability to commence legal action.

(5) A dispute between the lawyer and client concerning fees, costs, or both is pending resolution under Article 13 (commencing with Section 6200) of Chapter 4 of Division 3 of the Business and Professions Code. As used in this paragraph, “pending” means from the date a request for arbitration is filed until 30 days after receipt of notice of the award of the arbitrators, or receipt of notice that the arbitration is otherwise terminated, whichever occurs first.

(b) In an action based upon an instrument in writing, the effective date of which depends upon some act or event of the future, the period of limitations provided for by this section shall commence to run upon the occurrence of that act or event.

In light of these observations, we conclude that section 340.6(a)'s time bar applies to claims whose merits necessarily depend on proof that an attorney violated a professional obligation in the course of providing professional services. In this context, a “professional obligation” is an obligation that an attorney has by virtue of being an attorney, such as fiduciary obligations, the obligation to perform competently, the obligation to perform the services contemplated in a legal services contract into which an attorney has entered, and the obligations embodied in the State Bar Rules of Professional Conduct. By contrast, as the Court of Appeal observed, section 340.6(a) does not bar a claim for wrongdoing—for example, garden-variety theft—that does not require proof that the attorney has violated a professional obligation, even if the theft occurs while the attorney and the victim are discussing the victim's legal affairs. Section 340.6(a) also does not bar a claim arising from an attorney's performance of services that are not “professional services,” meaning “services performed by an attorney which can be judged against the skill, prudence and diligence commonly possessed by other attorneys.” (Quintilliani v. Mannerino (1998) 62 Cal.App.4th 54, 64 [72 Cal. Rptr. 2d 359] (Quintilliani).)

Both parties disagree, at least in part, with this holding. Lee observes that the Legislature in enacting section 340.6(a) was primarily concerned with legal malpractice. In her view, section 340.6(a) applies only when an attorney is “acting as an attorney”—that is, only when an attorney performs services that require a license to practice law. Lee thus urges us to distinguish between legal and nonlegal services, and to hold that section 340.6(a) does not apply to claims based on an attorney's provision of nonlegal services that are merely incidental to the practice of law. Because safely keeping and timely returning client funds is merely incidental to a lawyer's provision of legal services, Lee argues, section 340.6(a) does not apply to her lawsuit.

This view falters on the statutory text, which speaks of wrongful conduct “arising in the performance of professional services,” not merely legal services. (§ 340.6(a), italics added.) To be sure, section 340.6(a) does not apply to claims involving an attorney's provision of services unrelated to the practice of law, such as concert promotion. (See Quintilliani, supra, 62 Cal.App.4th at p. 64.) But the attorney-client relationship often requires attorneys to provide nonlegal professional services such as accounting, bookkeeping, and holding property in trust. (See Prakashpalan, supra, 223 Cal.App.4th at p. 1122, fn. 4.) Indeed, the training and regulation that make the practice of law a profession, as well as the grounds on which an attorney may be disciplined as an attorney, include professional obligations that go beyond duties of competence associated with dispensing legal advice or advocating for clients in dispute resolution. (See, e.g., Rules Prof. Conduct, rule 4-100 [governing an attorney's handling of a client's property].) In light of the Legislature's intent that section 340.6(a) cover more than claims for legal malpractice, the term “professional services” is best understood to include nonlegal services governed by an attorney's professional obligations.

Plaintiff's first amended complaint contains numerous allegations of alleged misconduct by defendants in the handling of the personal injury action, including that defendants “wrongfully” paid themselves fees and that the fee agreement violated Business and Professions Code section 6147. Nevertheless, in her arguments before this court, plaintiff disavows any claim that the fee agreement was unconscionable or that defendants were not entitled to the 40 percent fees set forth in the fee agreement. Rather, plaintiff argues that her contract-based claims are based on the “alternative” allegations in her pleading that assume the validity of her agreements with defendants, and that she has only pled “garden-variety” breach of contract claims; claims that are based on defendants' withholding and converting additional funds from the settlement monies beyond the fees to which they were entitled under the fee agreement.

Plaintiff argues therefore that section 340.6(a) does not apply to her contract claims because they are not based on the quality of defendants' legal services, but on their breach of nonprofessional obligations generally owed by all persons who enter into contracts. In so arguing, plaintiff relies in large part on language in Lee where the Supreme Court explained that “[m]isconduct does not ‘aris[e] in’ the performance of professional services for purposes of section 340.6(a) merely because it occurs during the period of legal representation or because the representation brought the parties together and thus provided the attorney the opportunity to engage in the misconduct. To hold otherwise would imply that section 340.6(a) bars claims unrelated to the Legislature's purposes in enacting section 340.6(a)—for example, claims that an attorney stole from or sexually battered a client while the attorney was providing legal advice.” (Lee, supra, 61 Cal.4th at p. 1238.)

We do not agree that Lee requires reversal in this case. Plaintiff's position is directly contradicted by Lee in which the court explained that “the [*292] attorney-client relationship often requires attorneys to provide nonlegal professional services such as accounting, bookkeeping, and holding property in trust. [Citation.] Indeed, the training and regulation that make the practice of law a profession, as well as the grounds on which an attorney may be disciplined as an attorney, include professional obligations that go beyond duties of competence associated with dispensing legal advice or advocating for clients in dispute resolution. [Citation.] In light of the Legislature's intent that section 340.6(a) cover more than claims for legal malpractice, the term ‘professional services’ is best understood to include nonlegal services governed by an attorney's professional obligations.” (Lee, supra, 61 Cal.4th at p. 1237.) Plaintiff's effort to characterize her contract claims as arising from breaches of “ordinary,” “nonlegal” duties is unavailing.

Plaintiff contends that Lee focuses on the “proof” necessary to establish a client's claim against a former attorney as determinative of what statute of limitations applies. She contends her allegations are sufficient for the pleading stage and that she is entitled to demonstrate, on the merits, that her claims do not rely on proof that defendants violated professional obligations and are therefore not time-barred.

Lee held that “section 340.6(a)'s time bar applies to claims whose merits necessarily depend on proof that an attorney violated a professional obligation in the course of providing professional services. In this context, a ‘professional obligation’ is an obligation that an attorney has by virtue of being an attorney, such as fiduciary obligations, the obligation to perform competently, the obligation to perform the services contemplated in a legal services contract into which an attorney has entered, and the obligations embodied in the State Bar Rules of Professional Conduct.” (Lee, supra, 61 Cal.4th at pp. 1236–1237.)

Plaintiff's contract claims are based on defendants' alleged misconduct in allocating the settlement funds in the personal injury action, either because they incorrectly calculated the litigation costs, or because they breached their fiduciary duties to her by intentionally manipulating those charges in order to recover more money than that to which they were entitled. There is no other fair reading of the pleading and the attached exhibits. In this case, plaintiff will not be able to establish her contract claims against defendants without demonstrating they breached professional duties owed to her, or nonlegal services closely associated with the performance of their professional duties as lawyers. Section 340.6(a) therefore applies.

Plaintiff alleges she discovered the false charges that form the basis of her claims no later than December 2011, and therefore she was on notice at that time that defendants had wrongfully withheld funds from her. Her failure to file this action within one year after that discovery is fatal to her claims.

(Foxen v. Carpenter (2016) 6 Cal.App.5th 284, 290-92 [bold emphasis and underlining added].)

Thus, because Plaintiff admits that she discovered the total amount Defendants collected as attorney’s fees in July 2020, but she did not file this action until July 29, 2022, this cause of action is time-barred by Civ. Proc. Code, § 340.6.

Plaintiff’s argument presented for the first time in opposition that Defendant concealed that he did not have legal malpractice insurance coverage for the underlying lawsuit is irrelevant for purposes of this motion for summary adjudication. Nowhere does the Complaint mention the absence of legal malpractice coverage as an issue. Plaintiffs cannot defeat summary judgment by showing a triable issue as to an unpled theory. “The complaint serves to delimit the scope of the issues before the court on a motion for summary judgment [citation], and a party cannot successfully resist summary judgment on a theory not pleaded.” (Citation omitted.)” (Bosetti v. United States Life Ins. Co. in City of New York (2009) 175 Cal.App.4th 1208, 1225 [bold emphasis added].) See also Van v. Target Corp. (2007) 155 Cal.App.4th 1375, 1387: “[A] summary judgment motion is directed to the issues framed by the pleadings. [Citations.] Those are the only issues a motion for summary judgment must address. [Citations.]” (Citation omitted.)”

(Tsemetzin v. Coast Federal Savings & Loan Assn. (1997) 57 Cal.App.4th 1334, 1342 [italics in original, bold emphasis added].)

“A sufficient motion cannot be successfully resisted by counterdeclarations which create immaterial factual conflicts outside the scope of the pleadings; counterdeclarations are no substitute for amended pleadings.” (AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1065 [225 Cal. Rptr. 203], italics added.) If plaintiffs wanted to raise new factual issues not embraced by their pleading, they should have sought leave to amend before the hearing on the Regents' motion. (Leibert v. Transworld Systems, Inc. (1995) 32 Cal.App.4th 1693, 1699 [39 Cal. Rptr. 2d 65]; 580 Folsom Associates v. Prometheus Development Co. (1990) 223 Cal.App.3d 1, 18 [272 Cal. Rptr. 227].)

(Shugart v. Regents of University of California (2011) 199 Cal.App.4th 499, 508 [bold emphasis and underlining added].)

As such, the motion for summary adjudication as to Issue No. 1 re: the first cause of action is GRANTED.

ISSUE TWO: Bakhtiar is entitled to summary adjudication in his favor and against Plaintiff on the second cause of action for Conversion because it is barred by the statute of limitations pursuant to Code of Civil Procedure § 340.6(a).

29. Ramirez had a right to possess the $1,750,355.48 of the recovery in the Underlying Action.

30. Defendants converted and otherwise took control of the $1,750,355.48 of the recovery in the Underlying Action for their own use.

31. As a direct result of the conversion by Defendants stated herein, Ramirez has incurred damages of $1,750,355.48, and other damages, the precise amount of which will be proven at trial.

The gravamen of this claim is the same as the first cause of action for breach of contract, because Plaintiff’s claim to entitlement to the $1,750,355.48 is based upon Defendants’ contractual entitlement to attorney’s fees that did not include the $1,750,355.48.

"In ruling upon the applicability of a statute of limitations, it has been recognized that courts will look to the nature of the rights sued upon rather than to the form of action or to the relief demanded. Neither the caption form, nor prayer of the complaint will conclusively determine the nature of the liability from which the cause of action flows. Instead, the true nature of the action will be ascertained from the basic facts . . . ." ( H. Russell Taylor's Fire Prevention Service, Inc. v. Coca Cola Bottling Corp. (1979) 99 Cal. App. 3d 711, 717 [160 Cal. Rptr. 411].)

[C]ourts routinely bar causes of action, including for breach of written contract, [*67] where the gravamen rule dictates a shorter statute of limitations. (E.g., Foxen v. Carpenter (2016) 6 Cal.App.5th 284, 291–292 [211 Cal. Rptr. 3d 372] [breach of contract and other claims against attorneys arose from professional services and were barred by the one-year limitations rule in § 340.6]; (Citations omitted.)

The motion for summary adjudication as to Issue No. 2 re: the second cause of action is GRANTED.

ISSUE THREE: Bakhtiar is entitled to summary adjudication in his favor and against Plaintiff on the fifth cause of action for Rescission of Contract because it is barred by the statute of limitations pursuant to Code of Civil Procedure § 340.6(a).

51. The Fee Agreement is unconscionable due to the excessive fees provisions and the confusing and complex terms of the fees provisions.

52. The Fee Agreement is unconscionable due to the means by which the Firm performed under the Fee Agreement as to the disbursement of the recovery in the Underlying Case.

53. The Fee Agreement is voidable due to misrepresentations and concealments[1] including, but not limited to, those stated herein, upon which Ramirez relied in connection with entering into the Fee Agreement and continuing with the Firm’s legal representation.

54. For these reasons and other statutory violations to be proven, the Fee Agreement is voidable pursuant to Business & Professions Code section 6147.

55. Accordingly, by statute and equity, Ramirez is entitled to rescission of the Fee Agreement.

However, Plaintiff could not have been fraudulently induced to enter into a Fee Agreement by representations and concealments made long after Plaintiff had entered into the fee agreement. The only misrepresentations and concealments concern Defendants taking the excessive fee contrary to their contractual entitlement. This is an alleged breach of contract causing Plaintiff damages in the amount of $1,750,355.48, which does not constitute a ground for rescission under Civ. Code, § 1689[2].

For the reasons discussed above, the gravamen of this cause of action comes within the purview of Civ. Proc. Code, § 340.6 and is time-barred.

The motion for summary adjudication as to Issue No. 3 re: the fifth cause of action is GRANTED.

[1] The alleges misrepresentations are as to the total recovery in the Underlying Action being $3,500,709.48 instead of $7,912,362.87, and the concealment was as to the fact that Defendants were taking both 50% of the judgment, as well as the entire fee award. (Complaint, ¶¶ 13, 34, 35, 45, 46.)

[2]

(a) A contract may be rescinded if all the parties thereto consent.

(b) A party to a contract may rescind the contract in the following cases:

(1) If the consent of the party rescinding, or of any party jointly contracting with him, was given by mistake, or obtained through duress, menace, fraud, or undue influence, exercised by or with the connivance of the party as to whom he rescinds, or of any other party to the contract jointly interested with such party.

(2) If the consideration for the obligation of the rescinding party fails, in whole or in part, through the fault of the party as to whom he rescinds.

(3) If the consideration for the obligation of the rescinding party becomes entirely void from any cause.

(4) If the consideration for the obligation of the rescinding party, before it is rendered to him, fails in a material respect from any cause.

(5) If the contract is unlawful for causes which do not appear in its terms or conditions, and the parties are not equally at fault.

(6) If the public interest will be prejudiced by permitting the contract to stand.

(7) Under the circumstances provided for in Sections 39, 1533, 1566, 1785, 1789, 1930 and 2314 of this code, Section 2470 of the Corporations Code, Sections 331, 338, 359, 447, 1904 and 2030 of the Insurance Code or any other statute providing for rescission.

Cal. Civ. Code § 1689 (Deering)