Judge: Curtis A. Kin, Case: 22STCV03830, Date: 2022-10-18 Tentative Ruling

Case Number: 22STCV03830    Hearing Date: October 18, 2022    Dept: 72

DEMURRER

Date:                                                                                       10/18/22 (9:30 AM)               

Case:                                                                                                   Christopher Brandlin et al. v. Marc Robinson et al. (22STCV03830)

TENTATIVE RULING:

Cross-defendant Marc Robinson’s Demurrer to Cross-Complaint is OVERRULED.

Cross-defendant Marc Robinson demurs to the Cross-Complaint and its two causes of action for breach of contract and declaratory relief. 

I.                   MEET AND CONFER

Cross-complainant Baker, Burton & Lundy, P.C. (“BB&L”) contends that the demurrer was not accompanied by a meet and confer declaration, as required by CCP § 430.41(a)(3)(A). The declaration filed with the moving papers only serves to authenticate documents that Robinson contends supports his arguments. Nevertheless, in the reply, Robinson attaches emails evidencing an effort to meet and confer before filing the demurrer. (Armstrong Reply Decl. ¶ 2 & Ex. 1.) Accordingly, the Court rules on the merits of the demurrer. Robinson is admonished to comply with the Code of Civil Procedure in future filings.

II.                TIMELINESS

BB&L also contends that the demurrer is untimely filed. According to the proof of service attached to the Cross-Complaint, Robinson was served the Cross-Complaint by mail on May 27, 2022. On June 17, 2022, BB&L served a notice of errata containing exhibits that were to be attached to the Cross-Complaint. Based on the service of the notice of errata, Robinson’s deadline to file a demurrer was July 22, 2022. (CCP § 430.40(a) [30 days from service of complaint to demur], CCP § 1013(a) [five calendar days added for service by mail].) The demurrer was untimely filed on August 4, 2022.

Robinson does not address the timeliness argument in the reply. In a meet and confer email between counsel, Robinson’s counsel argued that the deadline to file a demurrer was 60 days from the date of service because counsel requested a “demurrer conference.” (Armstrong Reply Decl. ¶ 2 & Ex. 1.) Counsel did not cite any authority for this proposition, and no authority appears to exist. When the parties cannot meet and confer before the demurrer is due, the demurring party can file a declaration on or before the deadline that states why the parties could not meet and confer, after which a 30-day extension of time to file the demurrer is automatically granted. (CCP § 430.41(a)(2).) However, no such declaration was ever filed.  

Nevertheless, the Court has discretion to consider the demurrer. (Jackson v. Doe (2011) 192 Cal.App.4th 742, 749.) The Court elects to resolve the demurrer on the merits.

III.             BUSINESS & PROFESSIONS CODE § 6147

Robinson argues that the retainer agreement upon which BB&L seeks its contingency fees is void for failure to fully comply with Business & Professions Code § 6147(a)(3) and (a)(4). (Cross-Compl. ¶¶ 5, 12-17, 60 & Ex. 1.)

Section § 6147(a)(3) states that a contract for attorney representation on a contingency fee basis must include a “statement as to what extent, if any, the client could be required to pay any compensation to the attorney for related matters that arise out of their relationship not covered by their contingency fee contract.” However, the retainer agreement provides that the attorney representation covers only the actions set forth in the first page of the agreement (i.e., the prosecution of a lawsuit to invalidate all deeds conveying the specified real property to Cesar M. Michel). (Cross-Compl. Ex. 1 at 1, 3.) The retainer agreement further provides, “[I]f, for any reason, Client desires Attorneys to file any additional or independent action, or to enter into additional or independent negotiations based upon a separate incident or transaction from that set forth in the first paragraph hereof, even though indirectly related to such event or incident, Client will be required to pay Attorneys additional fees for such representation, which fees shall be negotiable between Attorneys and Client.” (Cross-Compl. Ex. 1 at 3.) The retainer agreement clearly explains that Robinson would be required to pay BB&L additional attorney fees for representation exceeding the scope of the prosecution to invalidate deeds set forth in the first page of the retainer agreement, as required by Business & Professions Code § 6147(a)(3).

Business & Professions Code § 6147(a)(4) states that the contingency fee contract for non-medical malpractice cases must include a “statement that the fee is not set by law but is negotiable between attorney and client.” The retainer agreement states: “Client understands that the hourly rate and contingent fee percentage is not set by law, but is negotiable between Attorneys and Client.” (Cross-Compl. Ex. 1 at 2.) The retainer agreement complies with Business & Professions Code § 6147(a)(4).

IV.             RULE OF PROFESSIONAL CONDUCT 3-300

Robinson also argues that, because the retainer agreement required that hourly fees be paid, BB&L was required to advise Robinson of the right to have independent counsel review the agreement. “[A]n attorney who secures payment of hourly fees by acquiring a charging lien against a client's future judgment or recovery has acquired an interest that is adverse to the client, and so must comply with the requirements of rule 3–300 [now Rule of Professional Conduct 1.8.1(b)],” or else the lien is unenforceable. (Fletcher v. Davis (2004) 33 Cal.4th 61, 71.)

However, the lien set forth in the retainer agreement secures the contingency payment of a portion of “all monies collected by way of settlement, compromise, verdict, judgment or award,” not the hourly fees. (See Cross-Compl. Ex. 1 at 1-2 [“The Client hereby assigns and sets over to the Attorneys as a lien that portion of the gross proceeds so recovered which is equal to the amount of fees due to Attorneys or set forth above”].) Accordingly, Rule of Professional Conduct 3-300, in effect at the time the retainer agreement was signed, does not apply to the retainer agreement at issue.

V.                UNCONSCIONABILITY & JUDICIAL ESTOPPEL

Robinson next contends that the fees that BB&L aims to collect is unconscionable. (See Former Rule of Professional Conduct 4-200(A) [“A member shall not enter into an agreement for, charge, or collect an illegal or unconscionable fee”].) BB&L is seeking 40% of the net sales proceeds from the sale of the subject property, or $368,242.94. (Cross-Compl. ¶¶ 44, 46.) Robinson cites no authority for the proposition that a 40% contingency fee is unconscionable as a matter of law.

Robinson compares the amount of the lien claimed by BB&L to the amount of attorney fees awarded in the underlying litigation. This amount does not appear in the Cross-Complaint or its exhibits. “[A] demurrer based on an affirmative defense will be sustained only where the face of the complaint discloses that the action is necessarily barred by the defense.”  (Stella v. Asset Management Consultants, Inc. (2017) 8 Cal.App.5th 181, 191; Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 396.) Robinson attaches the judgment from the underlying litigation. (Armstrong Decl. ¶ 3 & Ex. B.) In a demurrer, the court considers only the four corners of the complaint, as well as matters that may be judicially noticed, and assumes the truth of the allegations in the pleading. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Robinson did not request judicial notice of the judgment, as required by Evidence Code § 453.

Even if the Court were to consider the judgment, the amount of attorney fees awarded, $17,390.00, appears to have been calculated based on the default fee schedule set forth in Local Rule 3.214(a) and the damage award of $1,550,000. (See Local Rule 3.214(a) [attorney fees for damages over $100,000 is “$2,890 plus 1% of the excess over $100,000”]; Compl. ¶¶ 29, 30 [judgment entered on default].) Robinson’s invocation of judicial estoppel is unavailing.  To begin with, although judicial estoppel may bar a party from later taking a contrary position, the party to this action is not the same.  (See Owens v. County of Los Angeles (2013) 220 Cal.App.4th 107, 121 [element of judicial estoppel includes the same party taking two inconsistent positions in judicial proceedings].)  In the prior action, BB&L obtained the judgment and attorney’s fees for its client Robinson, who was the party.  Here, BB&L is the party seeking attorney’s fees in a different amount.  Moreover, even if judicial estoppel could apply, the judgment from the prior action does not evidence what position BB&L took regarding any claim of contingency fees. Thus, there is no showing of a contrary position taken by BB&L in this litigation.

VI.             CIVIL CODE § 1671

Robinson also contends that, under Civil Code § 1671, BB&L cannot impose contractual penalties for making late payments on a debt. BB&L contends that the contingency fee is an unenforceable penalty for failing to pay the hourly rates. (Greentree Financial Group, Inc. v. Execute Sports, Inc. (2008) 163 Cal.App.4th 495, 497 [liquidated damages clause in settlement agreement must bear “reasonable relationship to the range of actual damages the parties could have anticipated would flow from a breach of” the settlement agreement].)

This is a new argument in reply that the Court declines to consider. (See American Drug Stores, Inc. v. Stroh (1992) 10 Cal.App.4th 1446, 1453 (“Points raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.”)

Even if the Court were to consider this argument, Civil Code § 1671(b) states that “a provision in a contract liquidating the damages for the breach of the contract is valid unless the party seeking to invalidate the provision establishes that the provision was unreasonable under the circumstances existing at the time the contract was made.” BB&L alleges that the retainer agreement allowed it to elect to convert Robinson’s retainer agreement to a full contingency agreement if Robinson could not remain current with hourly billings and that such agreement provides for a 40% contingency. (Cross-Compl. ¶¶ 15, 28.) After providing Robinson opportunity to provide a retainer that would cover the outstanding attorney fees, Robinson failed to pay the required retainer. (Cross-Compl. ¶¶ 23-28.) Accordingly, BB&L elected to switch Robinson to a full contingency under the retainer agreement. (Cross-Compl. ¶ 28.)

Based on these allegations, for pleading purposes, the contingency fee is not a liquidated damage for failure to pay the hourly fees, but a valid exercise of a contractual option based on plaintiff’s failure to pay the hourly rates. (Cross-Compl. Ex. 1 at 2.) The alleged breach of contract arises from Robinson’s failure to pay the contingency fee after BB&L exercised the option to convert the retainer agreement to a 40% contingency, not Robinson’s failure to pay the hourly fees. (Cross-Compl. ¶¶ 48, 62.)

VII.          STATUTE OF LIMITATIONS

Robinson argues that this action is time-barred. With respect to the first cause of action for breach of contract, Robinson fails to show that the retainer agreement is void. Accordingly, a four-year statute of limitations applies for actions based on written contracts. (CCP § 337(a).)

“[A] cause of action to recover compensation for services rendered under a contingent fee contract does not accrue until the occurrence of the stated contingency.” (Fracasse v. Brent (1972) 6 Cal.3d 784, 792.) Because the contingency fee is based on “monies collected,” the contingency occurs when Robinson collected monies. (Cross-Compl. Ex. 1 at 1.) Here, Robinson did not collect any monies until July 13, 2021 when the subject property was sold. (Cross-Compl. ¶ 43.) The Cross-Complaint was filed on May 27, 2022, within four years of July 13, 2021.

With respect to the second cause of action for declaratory relief, “The duration of the limitations period applicable to a declaratory relief action is determined by the nature of the underlying obligation sought to be adjudicated.” (Snyder v. California Ins. Guarantee Assn. (2014) 229 Cal.App.4th 1196, 1208.) Here, the declaratory relief cause of action is based on BB&L’s alleged right to enforce its lien pursuant to the retainer agreement. (Cross-Compl. ¶¶ 49-53 [Robinson disputes amount owed under retainer agreement].) Accordingly, the same four-year statute of limitations for the breach of contract cause of action applies to the declaratory relief cause of action. Because the breach of contract cause of action is timely asserted, the declaratory relief cause of action is also timely asserted.

Based on the allegations of the Cross-Complaint, the Cross-Complaint is timely filed.

VIII.       CONCLUSION

The demurrer is OVERRULED. The Court notes that Robinson filed an Answer to the Cross-Complaint on August 5, 2022.