Judge: Christopher K. Lui, Case: 23STCV15564, Date: 2023-09-29 Tentative Ruling
Case Number: 23STCV15564 Hearing Date: September 29, 2023 Dept: 76
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.
Plaintiffs allege that Defendant attorney Roe fraudulently induced them into changing the terms of their fee relationship from hourly to a contingency, by misrepresenting the hours of legal services he had performed, and the need for additional fees for services which he did not actually perform. Without Plaintiffs’ consent, Defendant Smythe allegedly agreed to share this contingent fee when Smythe associated into the underlying case. Defendants also allegedly settled the underlying case but held the funds hostage subject to an attorneys’ fees lien claim.
This lawsuit follows fee arbitration.
Defendants Michelle Smythe and Smythe Law Group, Inc., mistakenly sued as Michelle Smythe Law Group, Inc. demur to the Complaint and move to strike portions thereof.
TENTATIVE RULING
Defendants Michelle Smythe and Smythe Law Group, Inc., mistakenly sued as Michelle Smythe Law Group, Inc.’s demurrer to the Complaint is OVERRULED as to the second cause of action.
Defendants’
motion to strike is GRANTED without leave to amend as to the following:
¶ 8 (legal fees); Prayer, ¶ 2(8)(legal fees); Prayer, ¶ 3as to the Smythe
Defendants only, but DENIED as to third parties (legal fees), and DENIED as to
the remainder of the requests to strike.
Defendants Michelle Smythe and Smythe Law Group, Inc. are ordered to answer the remaining allegations of the Complaint within 10 days.
ANALYSIS
Demurrer
Meet and Confer
The Declaration of Lance A.
Selfridge reflects that Defendant’s counsel satisfied the meet and confer requirement
set forth in CCP § 430.41.
Discussion
Defendants
Michelle Smythe and Smythe Law Group, Inc., mistakenly sued as Michelle Smythe
Law Group, Inc. demur to the Complaint as follows:
1. Second Cause of Action (Declaratory
Relief with Preliminary Injunction).
Defendants
argue that the Complaint only alleges wrongdoing by Defendant Roe, but not by
the Smythe Defendants, and the Complaint does not allege that the Smythe
Defendants have any claim to receive any payment of attorneys’ fees from
Plaintiffs, so there are no facts to support the existence of an actual controversy
between Plaintiffs and the Smythe Defendants.
Defendants
also argue that no independent cause of action can arise from breach of an
attorney disciplinary rule.
"The rule that a complaint is to be
liberally construed is particularly applicable to one for declaratory relief.
[Citation.] It is the general rule that in an action for declaratory relief the
complaint is sufficient if it sets forth facts showing the existence of an
actual controversy relating to the legal rights and duties of the respective
parties . . . and requests that the rights and duties be adjudged. If these
requirements are met, the court must declare the rights of the parties whether
or not the facts alleged establish that the plaintiff is entitled to a
favorable declaration. [Citation.]" (Strozier v. Williams , 187 Cal.App.2d
528, 531-532 [9 Cal.Rptr. 683].)
"Since plaintiffs set forth facts showing
the existence of an actual controversy and have requested that these rights be
adjudged by the court in a matter in which the court is competent to grant
declaratory relief, they have stated a legally sufficient complaint. Upon
presentation of such complaint, a plaintiff is entitled to a declaration of his
rights, whether the declaration be favorable or adverse; thus in the instant
case the trial court's order sustaining the demurrer and its dismissal of the
action cannot be upheld upon the ground that plaintiffs pursued the wrong kind
of action. [Citations.]" (Citation omitted.)
"A complaint for declaratory relief
need not establish that the plaintiff is entitled to a favorable declaration,
and it is therefore improper to sustain a demurrer on that ground. The
sufficiency of the complaint to state facts which entitle the plaintiff to a
declaration in his favor is not an issue that can be raised by demurrer, but
can properly be raised only by answer. Thus, it has been pointed out that
it is rare that a demurrer is an appropriate pleading for the defendant to
file in an action for declaratory relief, it being more appropriate for the
defendant to admit the existence of the controversy, and if the defendant feels
that the plaintiff has not alleged the facts giving rise to the controversy
fully and accurately, or that the contentions between the parties are not
properly stated, he should plead such facts and contentions affirmatively as he
understands them to be, and seek explicit judicial confirmation of his
contentions." (Citation omitted.)
Of course, judgments sustaining general
demurrers to declaratory relief actions have been upheld where the trial court,
in effect, has exercised its discretionary power to deny a declaration despite
the existence of a controversy "where its declaration or determination is
not necessary or proper at the time under all the circumstances." (Citations
omitted.) Similarly, where a complaint sets forth a good cause of action for
declaratory relief regarding only a disputed question of law, declarations on
the merits unfavorable to a plaintiff have been upheld although such
determinations were made in the form of a judgment sustaining a demurrer. (Citation
omitted.)
(Jefferson, Inc. v. Torrance
(1968) 266 Cal.App.2d 300, 302-03 [bold emphasis added].)
Here, Plaintiffs allege as follows
against the Smythe Defendants:
47. The terms of the settlement included a release
of all claims by everyone against AmGUARD, payment by AmGUARD of the settlement
amount to the Plaintiffs new attorneys, delivery of an amount of 1/3 of the jury verdict
amount by check jointly payable to Defendant Roe, Defendant Smythe and
Defendant Smythe Law Group, Inc. in trust, and with full reservation of Plaintiffs' rights to dispute that the
defendants should receive any payment at all, and that an additional $62,754
would remain in Plaintiffs counsel's trust account until mutual agreement; or
order of a court. No party to this action - released any other party to this action
from any claim.
.
. .
52. Plaintiffs seek a declaratory judgment from
the Court that, alternatively, 1) Exhibit A is an unenforceable agreement and
void due to the fraud of Defendant Roe such that he and Defendant Smythe and/or
Defendant Smythe Law Group, Inc. should immediately return
to Plaintiffs all money delivered to them in trust and/or for disputed
fees and all costs, with interest thereon, . . . 2) That Exhibit A 1s legally unenforceable by Defendant Roe
because it had as one of its essential subjects the illegal objective of Defendant
Roe being paid legal fees to which he was not entitled and that he is,
therefore, not entitled to any contingent fee or other fee: pursuant to Civil
Code §1608 such that he
and Defendant Smythe and/or Defendant Smythe Law Group, Inc. should
immediately return to Plaintiffs all money delivered to them in trust and/or
for all disputed feels and all costs, with interest thereon, or, alternatively that Defendant Roe alone
is entitled to a quantum meruit fee and
direct litigation costs, if any at all; . . . 5) That Defendants Smythe and/or
Defendant Smythe Law Group, Inc., by willfully violating Rules of Professional
Conduct 2-200 and/or 1.5.1 are entitled to no fees or costs from Plaintiffs,
and must return all such fees and costs paid by Plaintiffs or delivered in trust
to them by Plaintiffs, with interest from the time of payment; 6) That Defendants Smythe and Smythe Law Group, Inc. must look
solely for any compensation for any services rendered on behalf of Plaintiffs
to Defendant Roe; . . .
(Complaint, ¶¶ 47, 52 [bold emphasis
added].)
These allegations are sufficient to state
a cause of action for declaratory relief against the Smythe Defendants, even if
the eventual declaration is adverse to Plaintiffs. (See Jones v. Daly (1981) 122 Cal.App.3d
500, 511.) A demurrer does not
lie to only part of a cause of action or a particular type of damage or remedy.
(See Kong v. City of Hawaiian Gardens
Redevelopment Agency (2003) 108 Cal.App.4th 1028, 1046; PH II, Inc. v. Superior Court (Ibershof)
(1995) 33 Cal.App.4th 1680, 1682.)
The proper procedure is to bring a motion to strike the substantively
defective allegation. (Id. at 1682-83.)
The
demurrer to the second cause of action is OVERRULED.
Motion To Strike
Meet
and Confer
The Declaration of Lance A.
Selfridge reflects that Defendant’s counsel satisfied the meet and confer requirement
set forth in CCP § 435.5.
Discussion
Defendants
Michelle Smythe and Smythe Law Group, Inc., mistakenly sued as Michelle Smythe
Law Group, Inc. move to strike portions of the Complaint as follows:
1. The
following material appearing in paragraph 52 from the body of the
complaint:
“1)
Exhibit A is an unenforceable agreement and void due to the
fraud of
Defendant Roe such that he and Defendant Smythe and/or Defendant
Smythe
Law Group, Inc. should immediately return to Plaintiffs all money
delivered
to them in trust and/or for disputed fees and all costs, with interest
thereon,
or, alternatively that Defendant Roe is entitled to a quantum meruit
fee if
any at all plus must reimburse Plaintiffs for costs they paid that were
not
directly related to litigating the AmGUARD Case.”
DENIED.
As discussed in connection with the
demurrer, this allegation properly supports the declaratory relief cause of action.
2. The following material appearing in
paragraph 52 from the body of the
complaint:
“2) That
Exhibit A in unenforceable by Defendant Roe because
it had as
one of its essential subjects the illegal objective of Defendant Roe
being
paid legal fees to which he is not entitled and to which he is, therefore,
not
entitled to any contingent fee or other fee pursuant to Civil Code § 1608
such that
he and Defendant Smythe and/or Defendant Smythe Law Group,
Inc.
should immediately return to Plaintiffs all money delivered to them in
trust
and/or for all disputed fees and costs, with interest thereon, or,
alternatively
that Defendant Roe is entitled to a quantum meruit fee and direct litigation
costs, if any at all.”
DENIED.
As discussed in connection with the
demurrer, this allegation properly supports the declaratory relief cause of action.
3. The
following material appearing in paragraph 52 from the body of the
complaint:
“3) That
Exhibit A was voidable by the Plaintiffs for failure to
comply
with Business & Professions Code § 6147 and was voided such that,
therefore,
Defendant Roe is entitled to at most a quantum meruit fee without
any costs
not directly related to the costs of litigation and recoverable under
the Code
of Civil Procedure.”
DENIED. This does not pertain to the moving Smythe Defendants and
appears to be proper as to Defendant Roe.
4. The following material appearing in
paragraph 52 from the body of the
complaint:
“4) That
having been discharged by the Plaintiffs many weeks
before
the Plaintiffs having received any money, and the fact that the
Plaintiffs
only received money despite the intentional interference with their
rights to
do so by the defendants, Defendant Roe is only entitled to a fee
reasonable
under those circumstances and must repay Plaintiffs for any costs
not
directly related to the AmGUARD lawsuit.”
DENIED. This does not pertain to the moving Smythe Defendants and
appears to be proper as to Defendant Roe.
5. The following material appearing in
paragraph 52 from the body of the
complaint:
“5) That
Defendants Smythe and/or Defendant Smythe Law
Group,
Inc., by willfully violating Rules of Professional Conduct 2-200
and/or
1.5.1 are entitled to no fees or costs from Plaintiffs, and must return
all fees
and costs paid by Plaintiffs or delivered in trust to them by Plaintiffs,
with
interest from the time of payment.”
DENIED.
As discussed in connection with the
demurrer, this allegation properly supports the declaratory relief cause of action.
Plaintiff is not seeking to base a cause of action on the alleged violation of
the rules of professional conduct, but rather as a basis to avoid paying fees
and costs to the Smythe Defendants.
Indeed, Rules of Professional Conduct, rule 1-100 as
approved in 1988 (11 years after the Kinnamon decision)
now expressly states: "These rules are not intended to create new
civil causes of action. Nothing in these rules shall be deemed to create,
augment, diminish, or eliminate any substantive legal duty of lawyers or the
non-disciplinary consequences of violating such a duty." (Citation omitted.)
(Ross v. Creel Printing & Publ'g Co., Inc. (2002) 100 Cal.App.4th 736, 746 [bold
emphasis added].)
6. The
following material appearing in paragraph 52 from the body of the
complaint:
“6) That
Defendants Smythe and Smythe Law Group, Inc. must
look
solely for any compensation for any services rendered on behalf of
Plaintiffs
to Defendant Roe.”
DENIED.
As discussed in connection with the
demurrer, this allegation properly supports the declaratory relief cause of action.
7. The
following material appearing in paragraph 52 from the body of the
complaint:
“7) That
Plaintiffs are entitled to be reimbursed for their legal
fees and
costs in having to obtain the benefit of the AmGUARD settlement,
to be
paid jointly and severally by the named plaintiffs herein.”
DENIED.
Defendants
argue that this request violates the American Rule that each side must bear
their own legal fees unless otherwise provided by contract or statute, and the
tort of another doctrine does not apply. Defendants argue that Plaintiffs have
not suffered damages wrongfully caused by the Smythe Defendants.
Generally, each party bears the cost of employing an
attorney unless a statute or an agreement between the parties provides
otherwise. (Citations omitted.) Pursuant to their inherent equitable powers,
the courts have carved out several exceptions to this rule, including one
commonly known as the "tort of another" or "third party
tort" exception. (Citations omitted.) Under this exception, "A person
who through the tort of another has been required to act in the protection of
his interests by bringing or defending an action against a third person
is entitled to recover compensation for the . . . attorney's fees . . . thereby
suffered or incurred." (Citations omitted.) As explained in Prentice, this
exception is applicable to situations ". . . where a defendant has
wrongfully made it necessary for a plaintiff to sue a third person.
[Citations.] In this case we are not dealing with 'the measure and mode of compensation
of attorneys' but with damages wrongfully caused by defendant's improper
actions." (Citation omitted.) The attorney fees recoverable as damages in
such cases are described as "reasonable compensation for attorney's fees
incurred." (Citation omitted.)
(Heckert v. MacDonald (1989) 208 Cal.App.3d 832, 836-37 [bold
emphasis added].)
Here, ¶¶
45, 46 allege that the Smythe and Roe Defendants’ conduct—filing an attorney’s
lien in the underlying case—caused AmGuard not to pay the settlement amount,
which resulted in Plaintiffs having to hire counsel to file a motion to enforce
the settlement, which motion was not heard.
45. Even
after being ¿red, Defendants Roe and Smythe continued to hold the Plaintiff’s settlement
money hostage by virtue of the lien claim, and/or the agreement with counsel for
AmGUARD, and required Plaintiffs to engage counsel to enforce the settlement
agreement and expunge the lien. The actions by Defendants Roe and Smythe, who
were fully aware that their clients were financially destitute and living on
borrowed ¿nds, delayed payment of the settlement proceeds to Plaintiffs for at
least 58 days, and required Plaintiffs to spend thousands of dollars in legal
fees and costs to ¿ght their own attorneys wrongful conduct and adverse
positions.
46. Shortly before the motions to expunge the
illegal lien and to specifically enforce the settlement were to be heard, the
named defendants here, in the Plaintiffs, and AmGUARD reached a partial
settlement.
(Complaint, ¶¶ 45, 46.)
While
these attorney’s fees might not be a great amount, they would constitute
attorney’s fees incurred in filing a motion against a third party—AmGuard—to enforce
a settlement agreement which the Smythe and Roe Defendants allegedly caused
AmGuard to breached. As such, the request for attorney’s fees as damages is
proper.
8. The
following material appearing in paragraph 52 from the body of the
complaint:
“8) That
each named defendant shall reimburse Plaintiffs for
their
legal fees and costs incurred in bringing and prosecuting this case
against
each of the others based upon the separate torts of the named
defendants.”
GRANTED
without leave to amend.
There is
no contractual or statutory basis to recover attorney’s fees against the Smythe
Defendants for instituting this action against the Smythe Defendants.
9. The following material appearing in
paragraph 52 from the body of the
complaint:
“9) for a
Preliminary and then Permanent injunction enjoining
each named
defendant from dissipating or hypothecating in any way any
money
delivered in trust to them by Plaintiffs from the proceeds of the
AmGUARD
settlement.”
DENIED.
Because the
funds are being held in trust, it cannot be said that the requested injunctive
relief is improper or moot. The Smythe Defendants claim that there is no
indication they will take the funds does not render the request moot.
“While voluntary
cessation of conduct may be a factor in a court's exercise of its
equitable jurisdiction to issue an injunction, it is not determinative … .” (Citation
omitted.)” (Robinson v. U-Haul Co. of California (2016) 4 Cal.App.5th
304, 315.)
MATERIAL
APPEARING IN PARAGRAPH 2 FROM THE PRAYER OF THE
COMPLAINT
10. The
following material appearing in paragraph 2 from the prayer of the
complaint:
“1)
Exhibit A is an unenforceable agreement and void due to the
fraud of
Defendant Roe such that he and Defendant Smythe and/or Defendant
Smythe
Law Group, Inc. should immediately return to Plaintiffs all money
delivered
to them in trust and/or for disputed fees and all costs, with interest
thereon,
or, alternatively that Defendant Roe is only entitled to a quantum
meruit
fee if any at all plus reimburse Plaintiffs for costs they paid that were
not
directly related to litigating the AmGUARD Case.”
DENIED
for the reasons discussed above.
11. The
following material appearing in paragraph 2 from the prayer of the
complaint:
“2) that
Exhibit A in unenforceable by Defendant Roe because
it had as
one of its essential subjects the illegal objective of Defendant Roe
being
paid legal fees to which he is not entitled and to which he is, therefore,
not
entitled to any contingent fee or other fee pursuant to Civil Code § 1608
such that
he and Defendant Smythe and/or Defendant Smythe Law Group,
Inc.
should immediately return to Plaintiffs all money delivered to them in
trust
and/or for all disputed fees and costs, with interest thereon, or,
alternatively
that Defendant Roe is entitled to a quantum meruit fee and direct
litigation
costs, if any at all.”
DENIED
for the reasons discussed above.
12. The following material appearing in
paragraph 2 from the prayer of the
complaint:
“3) that
Exhibit A was voidable by the Plaintiffs for failure to comply with Business
& Professions Code § 6147 and was voided such that, therefore, Defendant
Roe is entitled to at most a quantum meruit fee without any costs not directly
related to the costs of litigation and recoverable under
the Code
of Civil Procedure.”
DENIED. This does not pertain to the moving Smythe Defendants and
appears to be proper as to Defendant Roe.
13. The following material appearing in
paragraph 2 from the prayer of the
complaint:
“4) that
having been discharged by the Plaintiffs many weeks
before
the Plaintiffs having received any money, and the fact that the
Plaintiffs
only received money despite the intentional interference with their
rights to
do so by the defendants, Defendant Roe is only entitled to a fee
reasonable
under those circumstances and must repay Plaintiffs for any costs
not
directly related to the AmGUARD lawsuit.”
DENIED. This does not pertain to the moving Smythe Defendants and
appears to be proper as to Defendant Roe.
14. The following material appearing in
paragraph 2 from the prayer of the
complaint:
“5) the
Defendants Smythe and/or Defendant Smythe Law Group, Inc. are entitled to no
fees or costs from Plaintiffs, and must return all fees and costs paid by
Plaintiffs or delivered in trust by Plaintiffs, with interest from the time of
payment.”
DENIED.
As discussed in connection with the
demurrer, this allegation properly supports the declaratory relief cause of action.
15. The following material appearing in
paragraph 2 from the prayer of the
complaint:
“6) that
Defendants Smythe and Smythe Law Group, Inc. must
look
solely for any compensation for any services rendered on behalf of
Plaintiffs
to Defendant Roe.”
DENIED. As discussed in connection with
the demurrer, this allegation properly supports the declaratory relief cause of
action.
16. The
following material appearing in paragraph 2 from the prayer of the
complaint:
“7) That
Plaintiffs are entitled to be reimbursed for their legal
fees and
costs in having to obtain the benefit of the AmGUARD settlement
jointly
and severally by the named plaintiffs herein.”
DENIED
for the reasons discussed above.
17. The
following material appearing in paragraph 2 from the prayer of the
complaint:
“8) That each
named defendant shall reimburse Plaintiffs for
their
legal fees and costs incurred in bringing and prosecuting this case
against
each of the others based upon the separate torts of the named
defendants.”
GRANTED
without leave to amend.
There is
no contractual or statutory basis to recover attorney’s fees against the Smythe
Defendants for instituting this action against the Smythe Defendants.
18. The
following material appearing in paragraph 2 from the prayer of the
complaint:
“9) for a
Preliminary and then Permanent injunction enjoining
each
named defendant from dissipating or hypothecating in any way any
money
delivered in trust to them by Plaintiffs.”
DENIED
for the reasons discussed above.
19. The
following material appearing in paragraph 3 from the prayer of the
complaint:
“For
legal fees and costs incurred to prosecute of [sic] defend
claims
against each named defendant and/or third parties under the doctrine
of “tort
of another.”
GRANTED
without leave to amend as to the Smythe Defendants; DENIED as to third
parties (for the reasons discussed above).
The
Smythe Defendants are ordered to answer the remaining allegations of the Complaint
within 10 days.