Judge: Christopher K. Lui, Case: 24STCV05635, Date: 2024-06-18 Tentative Ruling
Case Number: 24STCV05635 Hearing Date: June 18, 2024 Dept: 76
The following
tentative ruling is issued pursuant to Rule of Court 3.1308 at 1:31 p.m. on June 17, 2024.
Notice of intent
to appear is REQUIRED pursuant to California Rule of Court 3.1308(a)(1). The Court does not desire oral argument on
the motion addressed herein.
As required by
Rule 3.1308(a)(1), any party seeking oral argument must notify ALL OTHER
PARTIES and the staff of Department 76 by 4:00 p.m. on June 17, 2024.
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, oral argument may not be permitted.
Defendant ADLI Law Group, P.C.’s demurrer to the Complaint is SUSTAINED with leave to amend as to the first cause of action and OVERRULED as to the second and third causes of action.
Plaintiff is given 30 days’ leave to amend where indicated.
ANALYSIS
Demurrer To Complaint
Request For Judicial Notice
Defendant’s request for judicial notice of the engagement letter dated September 7, 2018 with the Reply is DENIED. Defendant did not explain why this was not submitted with opening brief. See discussion below. In any event, the Court’s ruling would not change even if the Court did take such judicial notice.
Meet and Confer
The Declaration of Jacob I. Mojarro reflects that the parties did not complete meet and confer efforts, but Plaintiff’s counsel did not want to engage in further meet and confer. This satisfies Civ. Proc. Code, § 430.41(a)(3)(B).
Discussion
Defendant ADLI Law Group, P.C. demurs to the Complaint as follows:
1. First Cause of Action (Professional Negligence).
Defendant argues that the scope of OH’s Engagement Letter with ADLI, did not include advice on how to invest or the presentation of investment opportunities. Moreover, ADLI expressly limited liability for services beyond terms of the Engagement Letter without the parties executing a mutual agreement. (Engagement Letter Par. 4.) Thus, Defendant argues, the Court should ignore the allegations in the Complaint inconsistent with the terms of the Engagement Letter.
Defendant
argues that the terms of the written retainer agreement are inconsistent with
the alleged terms of the agreement. Defendant did not submit a proper request
for judicial notice. Moreover, it was not even submitted to the Court and “the
existence of a contract between private parties cannot be established by
judicial notice under Evidence Code section 452, subdivision (h).” (Gould v.
Maryland Sound Industries, Inc. (1995) 31 Cal.App.4th 1137, 1145.) Needless to say, the Court will not take
judicial notice of the written retainer agreement, which was not attached as an
exhibit to the Complaint. If Defendant belatedly submits the request for
judicial notice, the Court will not consider it.
The trial court has discretion whether to accept new
evidence with the reply papers, in which case the other party must be given an
opportunity to respond. (See Alliant Ins.
Services, Inc. v. Gaddy (2008) 159 Cal.App.4th 1292, 1308; Plenger v. Alza Corp. (1992) 11
Cal.App.4th 349, 362, fn. 8.)
To state a cause of action for legal
malpractice, a plaintiff must plead “(1) the duty of the attorney to use such
skill, prudence, and diligence as members of his or her profession commonly
possess and exercise; (2) a breach of that duty; (3) a proximate causal
connection between the breach and the resulting injury; and (4) actual loss or
damage resulting from the attorney's negligence.” (Coscia v. McKenna
& Cuneo (2001) 25 Cal.4th 1194, 1199 [108 Cal. Rptr. 2d 471, 25 P.3d 670].)
Whether an attorney sued for malpractice owed a duty of care to the plaintiff
“is a question of law and depends on a judicial weighing of the policy
considerations for and against the imposition of liability under the
circumstances.” (Goodman v. Kennedy (1976) 18 Cal.3d 335, 342 [134 Cal. Rptr.
375, 556 P.2d 737].) In addressing the issue of breach, “‘the crucial inquiry
is whether [the attorney's] advice was so legally deficient when it was given
that he [or she] may be found to have failed to use “such skill, prudence, and diligence
as lawyers of ordinary skill and capacity commonly possess and exercise in the
performance of the tasks which they undertake.” [Citation.]’ [Citations.]”
(Dawson v. Toledano (2003) 109 Cal.App.4th 387, 397 [134 Cal. Rptr. 2d 689].)
(Martorana v. Marlin &
Saltzman (2009) 175 Cal.App.4th 685, 693.)
An ethical breach of a rule of professional conduct does not give rise to an independent cause of action. (Ross v. Creel Printing & Publ'g Co., Inc. (2002) 100 Cal.App.4th 736, 746-48.)
Here, Plaintiff only alleges that he
retained Defendants ADLI and Mitchell to represent him with regard to general
business matters. (Complaint, ¶ 8.) Plaintiff does not allege what legal advice
or representation Defendants provided to Plaintiff which was below the
professional standard of care. Rather, Plaintiff alleges that Defendants did
not disclose their financial interest (Complaint, ¶¶ 8 – 23), which is a breach
of the duty of loyalty (discussed below), but not itself legal malpractice:
8. Beginning in the summer of 2018,
Plaintiff retained ADLI and Mitchell to represent him with regard to general
business matters. Mitchell was
Plaintiff’s point-person at ADLI and became his go-to attorney for legal
services of all sorts. Plaintiff later
also retained MLF for additional representation with general business
matters.
9. In the course of this
representation, on multiple occasions, Defendants presented Plaintiff with
investment opportunities involving the financing of ventures involving
restauranteur Philip Camino (the “Camino Investments” or “Underlying Matter”).
10. At all times, Plaintiff understood
that Defendants were representing him in connection with his consideration of
the Camino Investments.
11. Defendants encouraged Plaintiff to
participate in the Camino Investments and led Plaintiff to believe that
Defendants had done adequate due diligence as to the viability of the ventures
and the reliability and character of Philip Camino.
12. Acting on the recommendation of
Defendants, as his attorneys, Plaintiff decided to participate in the Camino
Investments by investing, loaning, or otherwise advancing funds in ventures
including, but not limited to, 1071 Glendon Partners LLC, 13050Sushi, LLC,
Camino
Industries, LLC, EB Venice LLC,
EarthBar Venice LLC, Lionize1114 LLC, and Path Galleries LLC, among other
entities.
13. In total, Plaintiff invested well
more than $2 million in various Camino
Investments.
14. With regard to only one of these
investments, involving Lionize1114 LLC, did Mitchell belatedly disclose that he
had a sweat equity arrangement for partial ownership of the company.
15. Unbeknownst to Plaintiff,
Mitchell himself was participating in the other Camino Investments and had a
secret equity share in the profits of these ventures. On information and belief, Mitchell may have
also had additional secret kickback arrangements with Philip Camino.
16. Also unbeknownst to Plaintiff, on
information and belief, Defendants, or some of them, were representing
Philip Camino with regard to the Camino Investments while also representing
Plaintiff, without disclosing or obtaining a waiver of the conflict of interest.
17. On information and belief,
Defendants intentionally concealed Mitchell’s ownership interest in the
Camino Investments to take advantage of Plaintiff and induce him to put money
into the Camino Investments for the purpose of benefiting Defendants and
others, including Philip Camino, rather than because such investments were in
Plaintiff’s best interests.
18. If Plaintiff had known that
Mitchell had an ownership interest in the Camino Investments, and/or if he had
known that Defendants were representing Philip Camino, Plaintiff would have
approached the Camino Investments with a much higher level of vigilance and
scrutiny, transacting with Defendants and Philip Camino at arm’s length, and he
would have retained independent counsel and insisted on more stringent due
diligence prior to investing, among other things.
19. In the alternative, if Plaintiff
had known that Mitchell had ownership interests in the Camino Investments, he
would not have participated at all.
20. In late October, 2023, Plaintiff
for the first time discovered that Defendants had concealed Mitchell’s
ownership interests in the Camino Investments, as described above, as far back
as the beginning of 2019 (well before Plaintiff’s investments).
21. While representing Plaintiff in the
Underlying Matter, Defendants, among other things: failed to act competently,
properly, or diligently in their representation of Plaintiff; failed to act
within the applicable standard of care with respect to transactional business
law and negotiations; failed to properly communicate with Plaintiff; failed to
properly advise Plaintiff;
failed to effectuate the intentions and
objectives of Plaintiff with respect to the Underlying Matter; failed to make
sure the transactions involving the Camino Investment were fair and reasonable
to Plaintiff; failed to disclose Mitchell’s ownership and pecuniary interest in
the Camino Investments, in writing; failed to ensure that Plaintiff was
represented by an independent lawyer with regard to the Camino Investments;
failed to advise Plaintiff in writing to seek the advice of an independent
lawyer for the Camino Investments; failed to obtain written consent from
Plaintiff regarding Mitchell’s ownership interests in the Camino Investments;
and otherwise failed to protect Plaintiff’s rights.
22. Plaintiff’s participation in the
Camino Investments has caused Plaintiff to suffer significant financial
losses. Philip Camino has stopped making
payments on loans and has effectively disappeared, abandoning the ventures in
which Plaintiff invested and leaving Plaintiff to scramble to salvage any
value.
23. As a result of the foregoing
conduct, omissions, and breaches of duty, Plaintiff suffered actual damages
including, without limitation: loss of funds invested, advanced, or loaned in
connection with the Camino Investments, which funds would not have been
invested but for
Defendants’ conduct, omissions, and
breaches of duty; ongoing costs related to efforts to salvage the ventures and
mitigate Plaintiff’s losses; and pre- and post-judgment interest.
(Complaint, ¶¶ 8 – 23 [bold emphasis added].)
Because Plaintiff has not alleged that Defendants were negligent in providing legal advice or representation, this cause of action is not adequately pled.
The demurrer to the first cause of action is SUSTAINED with leave to amend.
2. Second Cause of Action (Breach of Fiduciary Duty).
Defendant
argues that the Engagement Letter shows that ADLI was never in a fiduciary
relationship with respect to providing investment advice to Plaintiff.
" 'The relation between attorney
and client is a fiduciary relation of the very highest character, and binds the
attorney to most conscientious fidelity--uberrima fides.' [Citations.] Among
other things, the fiduciary relationship requires that the attorney respect his
or her client's confidences. [Citations.] It also means that the attorney
has a duty of loyalty to his or her clients. [Citations.]" ( Zador
Corp. v. Kwan, supra, 31 Cal. App. 4th 1285, 1293.)
(Cal Pak Delivery, Inc. v.
United Parcel Service, Inc. (1997) 52 Cal.App.4th 1, 11 [bold emphasis
added].)
(McDaniel
v. Gile (1991) 230 Cal.App.3d 363, 373.)
[A] “violation of the Rules of
Professional Conduct does not, in and of itself, render an attorney liable for
damages. [Citations.]” (Stanley v. Richmond (1995) 35 Cal.App.4th 1070, 1097 [41 Cal. Rptr.
2d 768].) In a tort action for breach of fiduciary duty or professional negligence, however, the rules
may inform the scope of an attorney's duty. (Slovensky v.
Friedman (2006) 142 Cal.App.4th
1518, 1534–1535 [49 Cal. Rptr. 3d 60].)
(Prakashpalan v. Engstrom, Lipscomb & Lack
(2014) 223 Cal.App.4th 1105, 1128.)
Here, an
alleged breach of the duty of loyalty and violation of applicable Rules of
Professional Conduct is adequately pled relative to Defendants’ undisclosed
financial interests in the investments. (Complaint, ¶¶ 31, 32.) This duty need
not be imposed by contract, but is imposed as a matter of law by virtue of the
fiduciary relationship.
The
demurrer to the second cause of action is OVERRULED.
3. Third
Cause of Action (Breach of Contract).
“The elements of a breach of
contract claim are that a contract was formed; that the plaintiff did
everything required by the contract; that the defendant did not do something
required by the contract; and that the plaintiff was harmed as a result. (Citation
omitted.)” (CSAA Ins.
Exch. v. Hodroj (2021) 72
Cal.App.5th 272, 276.)
The Complaint alleges at ¶ 37:
37. Implied in the agreement was
that Defendants agreed to perform legal services in a manner consistent with
the fiduciary relationship of attorney and client and in a manner consistent
with the standard of practice ordinarily followed by other attorneys in good
standing practicing the areas of the law at issue in the Underlying Matter in
their communities.
(Complaint, ¶ 37
[bold emphasis added].)
(Retired Emps. Ass'n of Orange Cty., Inc. v.
Cty. of Orange (2011) 52
Cal. 4th 1171, 1178-79.)
Plaintiff
sufficiently pleads that performing the contract consistent with fiduciary
principles was an implied term of the contract. As discussed above, breach of
fiduciary duty is sufficiently pled. Because the term is alleged as implied,
the fact that it did not appear in the language of the written retainer is not
dispositive. This cause of action is likewise adequately pled for purposes of
this demurrer.
The
demurrer to the third cause of action is OVERRULED.
Plaintiff
is given 30 days’ leave to amend where indicated.