Judge: Elaine Lu, Case: 20STCV36064, Date: 2022-12-23 Tentative Ruling

Case Number: 20STCV36064    Hearing Date: December 23, 2022    Dept: 26

Superior Court of California

County of Los Angeles

Department 26

Procedural Background

On September 21, 2020, Plaintiffs Spotora & Associates, A.P.C. (“S&APC”) and Anthony J. Spotora (“Spotora”) (jointly “Plaintiffs”) filed the instant legal malpractice action.

On June 16, 2021, Plaintiffs filed a First Amended Complaint against Defendants Winget, Spadafora & Schwartzberg, LLP (“WS&SLLP”); Nationwide Insurance Company (“Nationwide”); Scottsdale Insurance Company (“Scottsdale”); Reif Law Group, P.C. (“RLGPC”); Greer & Associates, P.C. (“G&APC”), Bruce A. Fields, A.P.C., (“BAFPC”); James Greer (“Greer”); Brandon Reif (“Reif”); and Bruce Fields (“Fields”). 

On March 4, 2022, the Court sustained Defendants G&APC and Greer’s demurrer to the FAC and granted Plaintiff leave to amend between July 27, 2022 and August 5, 2022 due to the multiple pending demurrers to the First Amended Complaint set to be heard by July 26, 2022.  (Order 3/4/22.)  On May 26, 2022, the Court sustained Defendants WS&SLLP’s demurrer to the First Amended Complaint and granted Plaintiff leave to amend between July 27, 2022 and August 5, 2022.  (Order 5/26/22.)  On May 27, 2022, the Court sustained Defendants Fields and BAFPC’s demurrer to the First Amended Complaint with leave to amend between July 27, 2022 and August 5, 2022.  (Order 5/27/22.)  On July 15, 2022, the Court sustained Defendants Reif and RLGPC’s demurrer to the complaint with leave to amend between July 27, 2022 and August 5, 2022.  (Order 7/15/22.)  On July 26, 2022, the Court sustained Defendants Nationwide and Scottsdale’s demurrer to the First Amended Complaint with leave to amend.  (Order 7/26/22.) 

On August 12, 2022, Plaintiff filed the operative Second Amended Complaint (“SAC”) against Defendants Reif, RLGPC, Nationwide, and Scottsdale (collectively “Defendants”).  The SAC does not name the other named defendants of the FAC.[1]  The SAC asserts five causes of action for (1) Professional Negligence against Reif and RLGPC, (2) Breach of Written Contract against Nationwide and Scottsdale, (3) Breach of the Implied Covenant of Good Faith and Fair Dealing against all Defendants (Reif, RLGPC, Nationwide, and Scottsdale), (4) Violation of Business & Professions Code section 17200 against Reif and RLGPC, and (5) Promissory Estoppel against Reif and RLGPC. 

On September 9, 2022, Defendants Reif and RLGPC filed a demurrer to the SAC.  On September 30, 2022, Defendants Nationwide and Scottsdale filed a demurrer to the SAC.  On October 18, 2022, the Court consolidated the demurrers filed by these remaining Defendants to be heard on December 23, 2022.  (Minute Order 10/18/22.)  The parties stipulated that Plaintiff would file and serve a consolidated opposition by November 30, 2022 not to exceed 25 pages and Defendants would serve respective replies by December 7, 2022.  (Minute Order 10/18/22.)  On December 7, 2022, Defendants Nationwide and Scottsdale filed a reply.

No opposition has been filed.

Allegations of the Operative Complaint

The SAC alleges as follows:

            In 2017, Plaintiffs were named in a malpractice suit brought by a former client (the “2017 Action”).  (SAC ¶ 11.)  The 2017 action was frivolous because Plaintiffs “had only represented one (1) plaintiff for a period of a couple of weeks in 2017 and were never attorneys of record for any of the suing parties in any litigation matter.”  (SAC ¶ 11.) 

“Bruce A. Fields, A P.C., (‘BAFPC’) and/or Bruce Fields (‘FIELDS’) had worked on one of those party’s case and knew and/or should have known that there was not even a valid contract between said party and the affected parties in the underlying matter that led to the 2017 Action. Further that Greer & Associates, P.C. (‘G&APC’) and James Greer (‘GREER’) subsequently took over representation from S&APC. G&APC and GREER became the attorney of record for the client and later abandoned the client’s matter. G&APC and GREER’s clients later became the moving parties in the 2017 Action yet G&APC and GREER were not named as a Defendant in the 2017 Action despite being an indispensable party.”  (SAC ¶ 11.)

            Plaintiffs forwarded the malpractice claim to their malpractice insurance carrier Nationwide who assigned WS&SLLP to defend Plaintiffs in the 2017 Action.  (SAC ¶¶ 12-13.)   WS&SLLP assigned Reif as the attorney to represent Plaintiffs in the 2017 Action, but a dispute arose between WS&SLLP and Reif in which Reif left to start his own firm RLGPC.  (SAC ¶¶ 14- 15.)  Plaintiffs were left in the dark during this period.  (SAC ¶ 14.)  Nationwide then transferred Plaintiffs’ action to RLGPC and Reif to defend.  (SAC ¶ 15.)

            “RLGPC and REIF represented [Plaintiffs] until September 6, 2019 when extremely concerned S&APC and AJS requested the professional courtesy of their cooperation in the pivotal weeks ahead but otherwise expressly terminated the services of RLGPC and REIF to engage and substitute-in new representation. When [Plaintiffs] spoke with RLGPC and REIF prior to their receipt of said terminating email, funds remained in [Plaintiffs’] policy. After receipt of said email, the policy was alleged exhausted. [Plaintiffs] consequently paid said newly engaged defense counsel out-of-pocket. Only days before the Mandatory Settlement Conference RLGPC and REIF next reneged on cooperating and abandoned S&APC and AJS case entirely. RLGPC and REIF filed a Notice of Disassociation, serving opposing counsel and thereby jeopardizing [Plaintiffs’] case further. To add insult to injury, RLGPC and REIF continued to represent FIELDS via [Plaintiffs’] policy despite its express terms granting all rights and authority to the policy to [Plaintiffs]. Had [Plaintiffs’] policy not been exhausted by FIELDS (having no right to indemnification) and RLGPC and REIF’s incompetent representation and excessive billing (at least $90,000.00), [Plaintiffs] could have gone to trial and won. However, because of RLGPC and REIF’s negligence and having exhausted Plaintiffs insurance policy cap [Plaintiffs] were forced financially to settle at the Mandatory Settlement Conference [] on September 26, 2019.”  (SAC ¶ 16.) 

            “Then, eleven (11) months later, [Plaintiffs] received invoices from RLGPC and REIF dated through June 2019 totaling more than $80,000.00 for services allegedly provided to FIELDS (without Plaintiffs’ permission or authorization) by RLGPC and REIF. RLGPC and REIF in the course of their representation breached their duty to Plaintiffs by failing to join or even depose indispensable necessary parties, G&APC and GREER, and knew and/or should have reasonably known and/or discovered as attorney of record for two years prior to being replaced that there was not even a valid contract to give Plaintiff in the 2017 Action the right to bring forth their egregiously frivolous claims. The original loan agreement in that matter was between Vernon Property Group Inc. and the Lender not [the underlying] Plaintiff Gill (who sued Plaintiffs) and that should have been determined immediately in the lawsuit not 2 years and $200,000.00 plus fees and costs to Plaintiffs from Plaintiff’s insurance policy.”  (SAC ¶ 16.) 

            “Plaintiffs are informed and believe and thereupon allege that as a direct result of the negligent acts and omissions of RLGPC and REIF (causation) Plaintiffs have been severely financially damaged and certainly would have obtained a substantially better if not exponentially better legal result in the form of a Judgment against the underlying [plaintiff Gill] had they been provided with competent legal representation.”  (SAC ¶ 17.)

            Reif and RLGPC “exhausted plaintiff’s carrier’s fees/costs $250,000 coverage, another additional $25,000 exhausted in days over 1100 hours in fee charges without even getting to trial on a case that should have been dismissed by a preliminary OSC or MJOP. And because of their negligent representation S&APC and AJS’s Nationwide/Scottsdale insurance premium increased 45% in 2018, and; increased 80% in 2019 and S&APC and AJS will have to continue to pay ‘high-risk’ coverage until at least 2024.”  (SAC ¶ 18.)

            Plaintiffs entered into a malpractice insurance agreement with Nationwide and Scottsdale.  (SAC ¶ 20, Exh. 1.)  In 2017, Nationwide and Scottsdale breached this insurance agreement “by failing to provide competent legal counsel and monitor the changing of legal representation and billing for legal matters rendered allegedly on Plaintiff’s behalf throughout the underlying action.”  (SAC ¶ 22.)

Request for Judicial Notice

            With their moving papers, Defendants Reif and RLGPC request judicial notice of the following:

1.      The SAC in the instant action

2.      The May 31, 2022 Minute Order in the instant action

3.      The July 15, 2022 Tentative Order and Minute Order in the instant action.

Defendants Nationwide and Scottsdale request judicial notice of the following:

A.    Substitutions of Attorney filed on March 13, 2019 in Gil, et. al. v. Law Offices of Spotora and Associates, LASC Case Number BC664657

B.     Notice of Settlement and Settlement Agreement filed on September 25, 2019 in Gil, et. al. v. Law Offices of Spotora and Associates, LASC Case Number BC664657

As the Court may take judicial notice of court records and actions of the State, (See Evid. Code, § 452(c)(d)), Defendants’ unopposed requests for judicial notice are GRANTED.  However, the Court does not take judicial notice of the truth of assertions within. (See Herrera v. Deutsche Bank National Trust Co. (2011) 196 Cal.App.4th 1366, 1375.)

Legal Standard

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal 3d 311, 318.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts “give the complaint a reasonable interpretation, and read it in context.”  (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice.  (Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.”  (SKF Farms v. Superior Ct. (1984) 153 Cal. App. 3d 902, 905.)  “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.”  (Hahn, supra, 147 Cal.App.4th at 747.) 

Meet and Confer Requirement

Code of Civil Procedure § 430.41, subdivision (a) requires that “[b]efore filing a demurrer pursuant to this chapter, the demurring party shall meet and confer¿in person or by telephone¿with the party who filed the pleading that is subject to demurrer for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer.” The parties are to meet and confer at least five days before the date the responsive pleading is due and if they are unable to meet the demurring party shall be granted an automatic 30-day extension.  (CCP § 430.41(a)(2).)  The demurring party must also file and serve a declaration detailing the meet and confer efforts.  (Id.¿at (a)(3).)¿ If an amended pleading is filed, the parties must meet and confer again before a demurrer may be filed to the amended pleading.  (Id.¿at (a).) 

Defendants have satisfied the meet and confer requirement.  (Wilson Decl. ¶¶ 2-4, Exh. A; Rojas Decl. ¶¶ 3-7.)

Discussion

            Defendants Reif and RLGPC demurrer to the first, third, fourth, and fifth causes of action.  Defendants Nationwide and Scottsdale demurrer to the second, and third causes of action.

First Cause of Action: Legal Malpractice

            Defendants Reif and RLGPC contend that the first cause of action fails to allege causation or damages.

“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.’ [Citation.]”  (Kumaraperu v. Feldsted (2015) 237 Cal.App.4th 60, 66.) 

Here, the SAC alleges that Defendants Reif and RLGPC represented Plaintiffs in the underlying 2017 Action.  (SAC ¶¶ 13-15.)  On September 6, 2019, Plaintiffs terminated Defendants Reif and RLGPC.  (SAC ¶ 16.)  After their termination, Defendant Reif and RLGPC notified Plaintiffs that the insurance funds had been exhausted.  (SAC ¶ 16.)  Defendant Reif and RLGPC then “abandoned” Plaintiffs before the Mandatory Settlement Conference.  (SAC ¶ 16.)  Because the funds had been exhausted, Plaintiffs had to pay newly engaged Defense Counsel out-of-pocket and were forced to “financially settle” at the Mandatory Settlement Conference.  (SAC ¶ 16.)  If the policy funds had not been exhausted, Plaintiffs would have been able to prevail at trial and won.  (SAC ¶ 16.)  Further, Reif and RLGPC failed to join G&APC and Greer as indispensable parties or to depose them.  (SAC ¶ 16.)  “Defendants RLGPC and REIF should have legally advised S&APC and AJS to file a Cross-Complaint against the underlying plaintiff(s) in the Gil action[.]”  (SAC ¶ 17.)  Reif and RLGPC damaged Plaintiffs by “exhaust[ing] plaintiff’s carrier’s fees/costs $250,000 coverage, another additional $25,000 exhausted in days over 1100 hours in fee charges without even getting to trial on a case that should have been dismissed by a preliminary OSC or MJOP.”  (SAC ¶ 18.)

These allegations are insufficient to state a claim for legal malpractice.  The SAC alleges five purported breaches (1) that Defendants Reif and RLGPC “abandoned” Plaintiffs before the settlement conference, (2) that Defendants Reif and RLGPC exhausted insurance funds in representing Fields, (3) that Defendants Reif and RLGPC failed to join Greer and G&APC as parties or depose them, (4) failed to advise Plaintiffs to file a cross-complaint, and (5) that Defendants Reif and RLGPC should have resolved the matter in a “preliminary OSC or MJOP.”

As to the first breach, based on the allegations of the SAC, Reif and RLGPC did not abandon Plaintiffs.  Plaintiffs clearly allege that Plaintiffs terminated Reif and RLGPC before the Mandatory Settlement Conference.  (SAC ¶ 16.)  Though Plaintiffs claim that Reif and RLGPC “reneged on cooperating and abandoned [Plaintiffs’] case entirely,” (SAC ¶ 16), no explanation is provided as to what Reif and RELGPC had an obligation to do or not do after Plaintiffs being terminated Reif and RELGPC or what cooperation Reif and RELGPC initially provided but then stopped providing.  Similarly, the claim that “RLGPC and REIF filed a Notice of Disassociation, serving opposing counsel and thereby jeopardizing [Plaintiffs’] case further[,]” (SAC ¶ 16), is nonsensical.  After Plaintiffs terminated Reif and RELGPC, Reif and RLGPC were required to notify and serve opposing counsel of Plaintiffs’ termination of Reif and RLGPC. 

As to the second breach of exhausting the insurance funds in representing Fields, the SAC fails to allege how this is a breach of Reif and RLGPC’s duties to Plaintiffs.  The insurance contract attached to the SAC clearly denotes that the policy covers Plaintiffs and “any other person or law firm in rendering or failure to render professional services for others on your behalf for whose covered act you are legally responsible[.]”  (SAC, Exh. 1 at § I.)  No explanation is given as to how Fields was connected to the underlying 2017 Action.  The only allegation provided is that Fields “ha[d] no right to indemnification.”  (SAC ¶ 16.)  However, this is merely aa legal contention without any factual allegations to support it. “The court does not … assume the truth of contentions, deductions or conclusions of law.”  (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967.)  Moreover, no explanation is provided as to why, after Plaintiffs terminated Reif and RLGPC, it would have been a breach of Reif and RLGPC’s duties to Plaintiffs to continue representing Fields -- a separate party that Reif and RLGPC had been representing before being terminated by Plaintiffs.  

As to Defendants Reif and RLGPC’s third claimed breach of duty by failing to join G&APC and Greer as indispensable parties, it is completely unclear how joining G&APC and Greer as indispensable parties would have achieved a better result for Plaintiffs in the underlying action.  Similarly, no explanation is provided as to why deposing G&APC and Greer was necessary or relevant.  Further, Plaintiffs allege only that Defendants Reif and RLGPC were hired to defend Plaintiffs in the 2017 Action.  (SAC ¶¶ 13-15.)  The SAC does not allege that Reif and RLGPC were also retained to file a cross-complaint against G&APC and Greer.  Nor does the attached insurance policy to the SAC provide that counsel provided by insurance coverage would be responsible for representation as to any cross-complaint.  (SAC, Exh. 1.)  Rather, the insurance policy expressly covers only defense claims -- not cross-complaints.  (SAC. Exh. 1 at §§ I(a), IV.)

Similarly, as to the fourth claimed breach for failing to advise Plaintiffs to file a cross-complaint, Defendants Reif and RLGPC were not hired to file a cross-complaint or advise on cross-complaints for Plaintiffs but instead only to defend Plaintiffs in the 2017 action.
            Finally, as to the fifth claim breach that Defendants Reif and RLGPC should have resolved the 2017 action in “preliminary OSC or MJOP,” the SAC fails to provide any factual basis or reason to support that conclusion. A preliminary Order to Show Cause is generally not a dipositive hearing where the Court dismisses parties.  While the underlying plaintiff in the 2017 Action could have dismissed Plaintiffs at such a hearing, no facts are alleged as to why that should have happened or how any act or inaction by Reif and RLGPC played any role in whether the underlying plaintiff of the 2017 Action would have elected to dismiss Plaintiffs at such an OSC hearing.  Likewise, a motion for judgment on the pleading may have been dispositive, but as this Court has previously noted, “the judicially notice Court record of the 2017 Action, Defendants Reif and RLGPC did take many actions to defend Plaintiffs in the 2017 Action including filing multiple demurrers and a motion for summary judgment.”  (Order 7/15/22; RJN Exh. 3, [italics].)  Absent clear and specific allegations clarifying what exactly Defendants Reif and RLGPC failed to raise that would have been dispositive on a demurrer or judgment on the pleading, the judicially noticed record clearly denotes that such a motion would have been unsuccessful. (RJN Exh. 3.) 

In addition, the SAC fails to allege any harm caused by Reif and RLGPC.  The SAC alleges that Reif and RLGPC harmed Plaintiffs because they “exhausted plaintiff’s carrier’s fees/costs $250,000 coverage, another additional $25,000 exhausted in days over 1100 hours in fee charges without even getting to trial on a case that should have been dismissed by a preliminary OSC or MJOP. And because of their negligent representation [Plaintiffs’] Nationwide/Scottsdale insurance premium increased 45% in 2018, and; increased 80% in 2019 and [Plaintiffs] will have to continue to pay ‘high-risk’ coverage until at least 2024.”  (SAC ¶ 18.)

As to the exhaustion of coverage, there is no allegation that Reif and RLGPC did not earn the exhausted funds.  In fact, the underlying 2017 Action involved heavy litigation by Reif and RLGPC on behalf of Plaintiffs.  (Order 7/15/22; RJN Exh. 3.)  As to the increase in insurance premiums, there is no allegation as to how Reif and RLGPC’s representation caused the increase in premiums other than conclusory legal contentions that Reif and RLGPC were negligent in unspecified ways.  Plaintiffs allege that they would have gone to trial and won if Reif and RLGPC had not exhausted the insurance funds.  (SAC ¶ 16.)  However, Plaintiffs did not lose in the underlying 2017 Action.  The action settled with the underlying 2017 Action dismissed without any payment by Plaintiffs.  (RJN Exh. B, [Settlement Agreement].)   Given the settlement resulted in a complete dismissal, Plaintiffs fail to indicate how going to trial and “winning” would have been a better result. 

In sum, it is not clear what Reif and RLGPC failed to do that Plaintiffs contend a more competent attorney would have done in the 2017 Action that would have resulted in a better outcome for Plaintiff in 2017 Action.  Further, it is unclear what harm – if any – Plaintiffs suffered.  Accordingly, Reif and RLGPC’s demurrer to the first cause of action is SUSTAINED.

Second Causes of Action: Breach of Contract

            Defendants Nationwide and Scottsdale assert that the second cause of action fails because there is no allegation that Defendants Nationwide and Scottsdale breached the agreement, and there is no claim of damages.

“The elements of a cause of action for breach of contract are: ‘(1) the contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to plaintiff.’”  (Coles v. Glaser (2016) 2 Cal.App.5th 384, 391 [internal citations omitted].)

            Here, the SAC alleges that Plaintiffs entered into an agreement for legal malpractice insurance with Defendants Nationwide and Scottsdale.  (SAC ¶ 20, Exh. 1.)  After Plaintiffs were sued for malpractice in the 2017 Action, Defendants Nationwide assigned WS&SLLP and later Reif and RLGPC to defend Plaintiffs under the insurance policy.  (SAC ¶¶ 13-15.)  Plaintiffs allege that Defendants Nationwide and Scottsdale breached the agreement “by failing to provide competent legal counsel and monitor the changing of legal representation and billing for legal matters rendered allegedly on Plaintiff’s behalf throughout the underlying action.”  (SAC ¶ 22.) 

            Thus, the SAC alleges that Defendants Nationwide and Scottsdale did not deny the claim and provided coverage for the 2017 Action.  Rather, the SAC contends that Nationwide and Scottsdale breached the insurance agreement by providing incompetent counsel in the underlying action.  However, there is no explanation as to how WS&SLLP or Reif and RLGPC were incompetent in the 2017 Action.  As to WS&SLLP, the FAC alleges merely that WS&SLLP was assigned to represent Plaintiffs in the 2017 Action, WS&SLLP assigned an attorney to represent Plaintiffs, there was a period of weeks without communication, and WS&SLLP was substituted out for the attorney that was already representing Plaintiffs.  (SAC ¶¶ 13-15.)  As to Reif and RLGPC, as discussed above with the first cause of action, the SAC fails to allege any breaches of duty.  Moreover, there is no allegation as to how Plaintiffs could have obtained a better legal result or what that better legal result would have been had Defendants Reif and RLGPC not been “negligent.”  As noted in the judicially noticed record, Plaintiffs settled the 2017 Action without paying any settlement.  (RJN Exh. B.)  Given the settlement resulted in a complete dismissal, Plaintiffs fail to indicate how proceeding to trial and “winning” would have achieved a better result for Plaintiffs.

            In sum, Defendants Nationwide and Scottsdale provided coverage, and Plaintiffs settled the 2017 Action without paying any settlement amount. Thus, Plaintiffs fail to allege damages or breach caused by Defendants Nationwide and Scottsdale.

            Further, the insurance policy attached to the SAC notes that Nationwide is not a party to the insurance agreement and thus could not be in breach of an agreement of which Nationwide was not a part.  (SAC Exh. 1.)  Accordingly, Defendants Nationwide and Scottsdale’s demurrer to the second cause of action is SUSTAINED.

Third Cause of Action: Breach of the Implied Covenant of Good Faith and Fair Dealing

            Defendants Reif and RLGPC assert that the third cause of action fails because the FAC fails to allege a contract between Plaintiffs and Defendants Reif and RLGPC.  Defendants Nationwide and Scottsdale assert that the third cause of action against them fails because the breach of contract claim fails, and the claim is barred by the statute of limitations.

“The covenant of good faith and fair dealing, implied by law in every contract, exists merely to prevent one contracting party from unfairly frustrating the other party's right to receive the benefits of the agreement actually made.”  (Guz v. Bechtel Nat. Inc. (2000) 24 Cal.4th 317, 349.)  “It cannot impose substantive duties or limits on the contracting parties beyond those incorporated in the specific terms of their agreement.”  (Id. at pp.349–350.)  Accordingly, “[a] breach of the implied covenant of good faith is a breach of the contract.”  (Thrifty Payless, Inc. v. The Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1244.)  Therefore, “[a] breach of the covenant of good faith and fair dealing does not give rise to a cause of action separate from a cause of action for breach of the contract containing the covenant.”  (Smith v. International Brotherhood of Electrical Workers (2003) 109 Cal.App.4th 1637, 1645, Fn.3.)

Moreover, “[a] ‘breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself’ and it has been held that ‘[b]ad faith implies unfair dealing rather than mistaken judgment....’ [Citations.]”  (Careau & Co., supra, 222 Cal.App.3d at p.1394.) 

Accordingly, “[i]f the allegations do not go beyond the statement of a mere contract breach and, relying on the same alleged acts, simply seek the same damages or other relief already claimed in a companion contract cause of action, they may be disregarded as superfluous as no additional claim is actually stated. Thus, absent those limited cases where a breach of a consensual contract term is not claimed or alleged, the only justification for asserting a separate cause of action for breach of the implied covenant is to obtain a tort recovery.”  (Id. at p.1395.)  However, tort recovery for breach of contract, even in bad faith, is limited solely to claims for breach of an insurance contract.  (Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 87-103; See also Erlich v. Menezes (1999) 21 Cal.4th 543, 552–553, [“In holding that a tort action is available for breach of the [implied covenant of good faith] in an insurance contract, we have “emphasized the “special relationship” between insurer and insured, characterized by elements of public interest, adhesion, and fiduciary responsibility.’”)

Claims against Defendants Reif and RLGPC

Here, the SAC alleges in relevant part that that Plaintiffs entered into an agreement for legal malpractice insurance with Defendants Nationwide and Scottsdale.  (SAC ¶¶ 20, 27, Exh. 1.)  Defendants RLGPC and Reif are not alleged to be parties to the Agreement.  Thus, there can be no breach of contract by Defendant RLGPC and Reif nor breach of the implied covenant of good faith and fair dealing by Defendant RLGPC and Reif.  There is no basis for this claim to be raised against RLGPC and Reif.  Accordingly, Defendants RLGPC and Reif’s demurrer to the third cause of action is SUSTAINED.

Defendants Nationwide and Scottsdale: No Breach of Contract

As to Defendants Nationwide and Scottsdale, the SAC alleges that Defendants Nationwide and Scottsdale provided coverage, and Plaintiffs settled the 2017 Action without paying any settlement amount. Thus, Plaintiffs fail to allege damages or breach caused by Defendants Nationwide and Scottsdale.  As there is no breach or damages from the underlying agreement, there can be no bad faith breach of the agreement.  Accordingly, Defendants Nationwide and Scottsdale’s demurrer to the third cause of action is SUSTAINED.

Nationwide and Scottsdale: Statute of Limitations

“A demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred.  In order for the bar ... to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.”  (Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42, [internal citations omitted].) 

“[A] tort action against an insurer for bad faith is subject to the two-year limitations period of section 339, subdivision 1.”  (Richardson v. Allstate Ins. Co. (1981) 117 Cal.App.3d 8, 13.)  Due to the COVID-19 pandemic, the statutes of limitations for civil actions were further extended.  “Notwithstanding any other law, the statutes of limitations and repose for civil causes of action that exceed 180 days are tolled from April 6, 2020, until October 1, 2020.” (Emergency rule 9(a); See Judicial Council of Cal., Advisory Com. com., Emergency rule 9 [“Emergency rule 9 is intended to apply broadly to toll any statute of limitations on the filing of a pleading in court asserting a civil cause of action”].)

“The statute of limitations usually commences when a cause of action ‘accrues,’ and it is generally said that ‘an action accrues on the date of injury.’”  (Vaca v. Wachovia Mortgage Corp. (2011) 198 Cal.App.4th 737, 743, [internal citations omitted].)  Moreover, the limitations period begins to run from the date of loss and is tolled from the date the insured reports the claim until the insurer unequivocally denies the claim in writing. (Prudential-LMI Com. Ins. V. Superior Court (1990) 51 Cal.3d 674, 678– 679.)  “‘A tolling provision suspends the running of a limitations period.’ [Citation.] In other words, ‘the limitations period stops running during the tolling event, and begins to run again only when the tolling event has concluded. As a consequence, the tolled interval, no matter when it took place, is tacked onto the end of the limitations period, thus extending the deadline for suit by the entire length of time during which the tolling event previously occurred.’ [Citation.]”  (Committee for Sound Water & Land Development v. City of Seaside (2022) 79 Cal.App.5th 389, 403.) 

In addition, “[a]n important exception to the general rule of accrual is the “discovery rule,” which postpones accrual of a cause of action until the plaintiff discovers, or has reason to discover, the cause of action.”  (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807.)  “The discovery rule only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action. The discovery rule does not encourage dilatory tactics because plaintiffs are charged with presumptive knowledge of an injury if they have ‘information of circumstances to put [them] on inquiry’ or if they have ‘the opportunity to obtain knowledge from sources open to [their] investigation.’ [Citation.] In other words, plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.”  (Id. at pp.807–808 [internal citations omitted].)  However, “[i]n order to rely on the discovery rule for delayed accrual of a cause of action, ‘[a] plaintiff whose complaint shows on its face that his claim would be barred without the benefit of the discovery rule must specifically plead facts to show (1) the time and manner of discovery and (2) the inability to have made earlier discovery despite reasonable diligence.’  In assessing the sufficiency of the allegations of delayed discovery, the court places the burden on the plaintiff to ‘show diligence’; ‘conclusory allegations will not withstand demurrer.’”  (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808 [internal citations omitted].)

            Here, as the SAC alleges, the earliest Plaintiffs would have discovered that Reif and RLGPC negligently represented the action would have been when the action was settled and the claimed damages arose – i.e., on approximately September 26, 2019.  Given the COVID-19 tolling, the deadline to timely file the instant claim for breach of the covenant of good faith and fair dealing would have been March 23, 2022.  As the instant action was file on September 21, 2020, the claim for breach of the covenant of good faith and fair dealing is clearly not barred by the statute of limitations.  Accordingly, Defendants Reif and RLGPC’s demurrer to the third cause of action is not sustained on the additional grounds of statute of limitations.

Fifth Cause of Action: Promissory Estoppel

            Defendants RLGPC and Reif assert that no promissory estoppel has been alleged against them.

            “The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.’”  (Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734 [internal citations omitted].)  “A cause of action for promissory estoppel is a claim in equity that substitutes reliance on a promise for consideration ‘in the usual sense of something bargained for and given in exchange.’”  (Fleet v. Bank of America N.A. (2014) 229 Cal.App.4th 1403, 1412–1413 [internal citation omitted].) 

            Here, the SAC merely alleges “that in 2014 and thereafter through the underlying action Defendants RLGPC and Reif made specific promises to plaintiff that were clear and unambiguous in their terms regarding the competent legal defense of the underlying action.”  (SAC ¶ 38.)  Plaintiffs relied on these promises.  (SAC ¶ 40.)  There is no allegation as to what these clear and unambiguous promises were.  The SAC merely points to nearly five years and states that some specific promises were made regarding competent legal defense.  Moreover, as noted above, Plaintiffs have not sufficiently alleged that the legal defense was not competent in the 2017 Action.

            Accordingly, Reif and RLGPC’s demurrer to the fifth cause of action is SUSTAINED.

Fourth Cause of Action: Violation of Business and Professions Code § 172000

            Defendants RLGPC and Reif assert that the fourth cause of action fails because there is no allegation of unlawful, unfair, or fraudulent business practices.

California’s Unfair Competition Law (“UCL”).   The purpose of the UCL “is to protect both consumers and competitors by promoting fair competition in commercial markets for goods and services. [Citation.]” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 949.)  Thus, the UCL prohibits unlawful, unfair or fraudulent business acts or practices.  (Bus. & Prof. Code, § 17200.)  “The Legislature intended this ‘sweeping language’ to include ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’” (Bank of the West v. Sup. Ct. (1992) 2 Cal.4th 1254, 1266.)  “A plaintiff alleging unfair business practices under these statutes must state with reasonable particularity the facts supporting the statutory elements of the violation.” (Khoury v. Maly's of California, Inc. (1993) 14 Cal.App.4th 612, 619.)

“Because the statute is framed in the disjunctive, a business practice need only meet one of the three criteria to be considered unfair competition.”  (Durell v. Sharp Healthcare (2010) 183 Cal.App.4th 1350, 1359.)  Section 17200’s “unlawful” prong “borrows violations of other laws ... and makes those unlawful practices actionable under the UCL.”  (Klein v. Chevron U.S.A., Inc. (2012) 202 Cal.App.4th 1342, 1383.)  “[V]irtually any law or regulation—federal or state, statutory or common law—can serve as [a] predicate for a ... [section] 17200 ‘unlawful’ violation.’ ”  (Ibid.)  “A business practice is “fraudulent” within the meaning of section 17200 if it is “likely to deceive the public.”  (Id. at p.1380.) “‘A business practice is unfair within the meaning of the UCL if it violates established public policy or if it is immoral, unethical, oppressive or unscrupulous and causes injury to consumers which outweighs its benefits.’ [Citation.]”  (Nolte v. Cedars-Sinai Medical Center (2015) 236 Cal.App.4th 1401, 1407–1408.)  The determination of whether a business practice is unfair involves an examination of that practice’s impact on its alleged victim, balanced against the reasons, justifications, and motives of the alleged wrongdoer.  (Ibid.)  In brief, the court must weigh the utility of the defendant's conduct against the gravity of the harm to the alleged victim.  (Nolte, Supra, 236 Cal.App.4th at pp. 1407–1408; Cf. Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at 1365 [“[u]nfair” business practices are those which offend an “established public policy” that is tethered to “specific constitutional, statutory, or regulatory provisions”]; Morgan v. AT & T Wireless Services, Inc. (2009) 177 Cal.App.4th 1235, 1254–1255.)

“‘[O]n November 2, 2004, Proposition 64 passed, amending [Business and Professions Code] section 17204 to delete language expressly authorizing any person acting for the interests of the general public to bring a UCL cause of action, and to add language expressly authorizing ‘any person who has suffered injury in fact and has lost money or property as a result of such unfair competition’ to bring a UCL cause of action.’ [Citation.]”  (Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1335.)

Here, the SAC fails to allege any unlawful, unfair, or fraudulent conduct by Defendants RLGPC and Reif.  Rather, the SAC merely alleges that:

RLGPC and REIF’s actions, omissions and wrongful billing practices towards Plaintiff constituted a “unfair” business practice in violation of California Business and Professions Code section 17200. RLGPC and REIF continued to represent FIELDS via S&APC’s policy despite its express terms granting all rights and authority to the policy to AJS. Had S&APC’s policy not been exhausted by FIELDS (having no right to indemnification) and RLGPC and REIF’s incompetent representation and excessive billing (at least $90,000.00), S&APC and AJS could have gone to trial and won. All of RLGPC and REI’s billing invoices for representation of Plaintiff’s in the underlying matter were submitted to Nationwide and paid by Nationwide not Scottsdale. However, because Nationwide and Scottsdale paid the overbilled invoices of RLGPC and REIF and by doing so exhausted Plaintiffs insurance policy cap of $250,000.00 S&APC and AJS were forced financially to settle at the Mandatory Settlement Conference (“MSC”) on September 26, 2019. Then, eleven (11) months later, S&APC and AJS received invoices from RLGPC and REIF dated through June 2019 totaling more than $80,000.00 for services allegedly provided to FIELDS (without Plaintiffs’ permission or authorization) by RLGPC and REIF.

(SAC ¶ 34.)

These allegations are insufficient to allege that the billing by Defendants Reif and RLGPC was an unfair business practice.  First, there is no allegation that the billing was inaccurate.  Rather, the claim is that some of the funds were used to represent Fields in the underlying action.  Notably, the insurance contract attached to the SAC clearly denotes that the policy covered Plaintiffs and “any other person or law firm in rendering or failure to render professional services for others on your behalf for whose covered act you are legally responsible[.]”  (SAC, Exh. 1 at § I.)  No explanation is given as to how Fields was connected to the underlying 2017 Action.  The only allegation provided is that Fields “ha[d] no right to indemnification.”  (SAC ¶ 16.)  However, this is merely aa legal contention without any factual allegations to support it. “The court does not … assume the truth of contentions, deductions or conclusions of law.”  (Aubry, supra, 2 Cal.4th at p.967.)  Absent factual allegations indicating some circumstance that Fields representation should not have been funded by Plaintiffs’ insurance proceeds, the SAC fails to allege that the billing practices of Reif and RLGPC are unfair.

Regardless, Plaintiffs do not allege any basis for standing to bring a UCL claim.  As noted above, there is no claim of injury.  The underlying action settled without payment by Plaintiffs.  (RJN Exh. B.)  Thus, the exhaustion of the insurance funds is irrelevant as Plaintiff could not have achieved a better outcome regardless of the amount of the insurance funds spent. 

            Accordingly, RLGPC and Reif’s demurrer to the fourth cause of action is SUSTAINED.

Leave to Amend

Leave to amend must be allowed where there is a reasonable possibility of successful amendment. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the plaintiff to show the court that a pleading can be amended successfully. (Goodman v. Kennedy, supra, 18 Cal.3d at p.348; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) 

            Here, the Court has already sustained the complaint on many if not all of the same grounds as previously raised.  The SAC does not address the issues that the Court has previously noted.  Moreover, Plaintiffs have not even filed an opposition opposing the instant motion.  Accordingly, the Court concludes that there does not appear to be a reasonable possibility of successful amendment, and Plaintiffs fail to show that the SAC can be successfully amended.  Accordingly, leave to amend is DENIED.

CONCLUSION AND ORDER

            Based on the foregoing, Defendants Nationwide Insurance Company and Scottsdale Insurance Company’s demurrer to the second and third causes of action of the second amended complaint is SUSTAINED WITHOUT LEAVE TO AMEND.

            Defendants Brandon Reif and Reif Law Group, P.C.’s demurrer to the first, third, fourth, and fifth causes of action of the Second Amended Complaint is SUSTAINED WITHOUT LEAVE TO AMEND.

            Defendants are to file proposed judgments within 10 days of notice of this order.

            The parties are ordered to file case management statements and to appear for a case management conference on January 13, 2023 at 8:30 am.  In their case management statements, each party must address whether each of the seven pending motions relates only to the complaint and may be taken off calendar.  If any of the seven pending motions relates only to the complaint and not to the cross-complaint, the moving party may withdraw the motion by immediately cancelling the CRS reservation.

Moving Parties are to give notice and file proof of service of such.

DATED: December 23, 2022                                                 ___________________________

                                                                                          Elaine Lu

                                                                                          Judge of the Superior Court