Judge Gail Killefer, Case Number: 24STCV21021, Date: 2025-01-02 Tentative Ruling

TENTATIVE: Defendant’ demurrer is sustained with leave to amend. Plaintiff is granted 10 days leave to amend. The court sets the OSC RE: Amended Complaint for February 5, 2025, at 8:30 a.m. The Court also advances the Case Management Conference (“CMC”) scheduled for January 16, 2025, to today, and continues the CMC to February 5, 2025, at 8:30 a.m.

On August 13, 2024, Angelina Leo aka Angelina Nia, Steven Nia, and W1 Inc. (collectively “Plaintiffs”) filed a Complaint against Matt Mickelson (“Defendant”) and Does 1 to 10 alleging two causes of action for (1) breach of contract and (2) legal malpractice.

Defendant now demurs to the Complaint. Plaintiff opposes the Motion. The matter is now before the court.

The court may take judicial notice of “official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States,” “[r]ecords of (1) any court of this state or (2) any court of record of the United States or of any state of the United States,” and “[f]acts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452, subds. (c), (d), and (h).) “Taking judicial notice of a document is not the same as accepting the truth of its contents or accepting a particular interpretation of its meaning.” (Joslin v. H.A.S. Ins. Brokerage (1986) 184 Cal.App.3d 369, 374.)

Exhibit 1: The Case Summary for the action styled Lucky International Technology, Inc. v. Steven Nia, Los Angeles Superior Court Case No. 20STCV48450 (the “Underlying Action”).

Exhibit 2: The substitution of attorney filed on October 19, 2022 in the Underlying Action.

Exhibit 3: The order granting attorney’s motion to be relieved as counsel filed on August 15, 2023 in the Underlying Action.

Exhibit 4: The substitution of attorney filed on September 27, 2023 in the Underlying Action. A true and correct copy of this document is attached hereto as Exhibit 4.

Exhibit 5: The substitution of attorney filed on October 2, 2023 in the Underlying Action.

Exhibit 6: The second amended cross-complaint filed on November 27, 2023 in the Underlying Action.

Exhibit 7: The stipulation for dismissal and order filed on July 11, 2024 in the Underlying Action.

Exhibit 8: The certificate of surrender filed on behalf of W1 Inc. with the California Secretary of State on October 19, 2021.

Demurrer[1]

Where pleadings are defective, a party may raise the defect by way of a demurrer. (Coyne v. Krempels (1950) 36 Cal.2d 257, 262.) A demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters.¿ (CCP, § 430.30(a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) In evaluating a demurrer, the court accepts the complainant’s properly pled facts as true and ignores contentions, deductions, and conclusory statements. (Daar v. Yellow Cab Co. (1976) 67 Cal.2d 695, 713; Serrano v. Priest (1971) 5 Cal.3d 584, 591.) Moreover, the court does not consider whether a plaintiff will be able to prove the allegations or the possible difficulty in making such proof. (Fisher v. San Pedro Peninsula Hospital (1989) 214 Cal.App.3d 590, 604.)

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 complainant to show the Court that a pleading can be amended successfully. (Ibid.)

Defendant asserts that Plaintiff W1 lacks the capacity to maintain this action because it is a non-qualified foreign corporation. California Corp. Code § 2105 states that “[a] foreign corporation shall not transact intrastate business without having first obtained from the Secretary of State a certificate of qualification.” “A foreign corporation ... which transacts intrastate business without complying with section 2105 shall not maintain any action or proceeding upon any intrastate business so transacted in any court in this state, ... ” (Corp. Code, § 2203(c).)

“Section 2203, subdivision (c) imposes a penalty upon the foreign corporation which does not qualify to transact intrastate business as required by section 2105 and merely provides that until it does so, it shall not maintain any suit or action in any court of this state; it simply forbids the exercise of a small part of the corporate powers, except on the specified conditions.” (United Medical Management Ltd. v. Gatto (1996) 49 Cal.App.4th 1732, 1741 (United Medical).) An unregistered corporation, upon registering, is “restored to full legal competency and [has] its prior transactions given full effect.” (Ibid; see also Perlas v. Mortgage Elec. Registration Systems, Inc. (N.D. Cal., Aug. 6, 2010, No. C 09-4500 CRB) 2010 WL 3079262, at *7.)

“The defendant bears the burden of proving: (1) the action arises out of the transaction of intrastate business by a foreign corporation; and (2) the action was commenced by the foreign corporation prior to qualifying to transact intrastate business.” (United Medical, supra, 49 Cal.App.4th at p. 1740.) “For purposes of qualification of a foreign corporation, ‘transact intrastate business means entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.’ [Citation].” (United Systems of Arkansas, Inc. v. Stamison (1998) 63 Cal.App.4th 1001, 1007; see also Corp. Code, § 191(a).)

Here, Defendant fails to meet his burden of showing this action arising out of an attorney-client relationship that was entered into in California with a California attorney was sufficiently repeated and successive that it constituted intrastate business and requires Plaintiff W1 to register with the California Secretary of State. While the Defendant relies on Neogard Corp. v. Malott & Peterson-Grundy (1980) 106 Cal.App.3d 213 for the proposition that a foreign corporation that contracts with California business needs to be registered, the transactions in Neograd are distinguishable from the single transaction involved in this action. The Neograd Court agreed that Neograd required registration with the California Secretary of State because of its repeated and successive transactions with “manufacturer's representatives residing in this state,” “[i]t sent sales representatives intrastate to induce construction contracts between California project designers and California waterproofing subcontractors,” “[i]t entered into contracts with such subcontractors and utilized this fact to induce contracts between the in-state parties,” and “[i]t signed contracts in-state to guarantee these projects and provided in-state supervision when defects appeared.” (Id. at p. 226.)

Since this action arises out of a single contract and not out of repeated and successive transactions, the action does not involve intrastate business, and the court fails to find that Plaintiff W1 is required to register with the California Secretary of State to maintain this action under Corp. Code § 2105.

The demurrer as to Plaintiff W1’s lack of capacity to maintain this action is overruled.

The elements of a claim for breach of contract are: “(1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant's breach, and (4) the resulting damages to the plaintiff.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal. 4th 811, 821.) In addition, the complaint must demonstrate damages proximately caused by the breach. (St. Paul Ins. v. American Dynasty (2002) 101 Cal.App.4th 1038, 1060.) Furthermore, “the complaint must [also] indicate on its face whether the contract is written, oral, or implied by conduct.” (Otworth v. Southern Pac. Transportation Co. (1985) 166 Cal.App.3d 452, 458-59 citing CCP, § 430.10(g).)

“If the action is based on alleged breach of written contract, the terms must be set out verbatim in the body of the complaint or a copy of the written agreement must be attached and incorporated by reference.” (Harris v. Rudin, Richman & Appel (1999) 74 Cal.App.4th 299, 308.) Alternatively, “a plaintiff may plead the legal effect of the contract rather than its precise language.”¿ (Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.)¿¿“[A]ll essential elements of a breach of contract cause of action [] must be pleaded with specificity.”¿(Levy v. State Farm Mutual Automobile Ins. Co. (2007) 150 Cal.App.4th 1, 5.)

The Complaint alleges that Defendant agreed to represent the Plaintiffs in the case entitled Lucky International Technology, Inc. v. Steven Nia, et al., Los Angeles County Superior Court Case No. 20STCV48450 (the “Underlying Action”), in which Plaintiffs were the Defendants and Cross-Complainants. (Compl. ¶ 10.) “Defendant MICKELSON breached the agreement by failing to adequately work up case, including discovery and client interviews, and maintain case file, criticizing Plaintiffs' case before Judge and opposing counsel, undervaluing case in violation of his duties of loyalty and confidentiality, and by signing a stipulation that restricted the causes of action Plaintiffs could litigate.” (Id. ¶ 11.) “Defendant's failures to investigate facts of case, conduct discovery, and negative representations to the court and opposing counsel predictably led to a settlement amount that was less than it should have been.” (Id. ¶ 12.)

The Complaint fails to state when the contract was entered into and if it is oral or written. The Defendant provides proof, via judicial notice, that he withdrew as counsel in the Underlying Action. The Complaint is devoid of facts as to why Defendant’s error was not curable by later counsel and what specific discovery Defendant failed to uncover that would have resulted in settling the case for a lesser amount. Any facts not alleged in the Complaint are presumed not to exist. (Schick v. Lerner (1987) 193 Cal.App.3d 1321, 1327.)

“The elements of a cause of action in tort for professional negligence are: the duty of the professional to use such skill, prudence and diligence as other members of the profession commonly possess and exercise; a breach of that duty; a proximate causal connection between the negligent conduct and the resulting injury; and actual loss or damage resulting from the professional's negligence.” (Burgess v. Superior Court¿(1992) 2 Cal.4th 1064, 1066–1067.) “[I]n a legal malpractice action, whether a court or jury decides the issue of causation ‘does not turn on the identity or expertise of the trier of fact, but whether the issues are predominately questions of fact or law.’ ” (Mireskandari v. Edwards Wildman Palmer LLP (2022) 77 Cal.App.5th 247, 265.)

Defendant asserts that the second cause of action fails because Plaintiff fails to allege ‘but for’ causation. In a legal malpractice action, “[t]he plaintiff must prove, by a preponderance of the evidence, that but for the attorney's negligent acts or omissions, he would have obtained a more favorable judgment or settlement in the action in which the malpractice allegedly occurred.” (Namikas v. Miller (2014) 225 Cal.App.4th 1574, 1582.) While the court agrees with the Plaintiffs that they are not required to prove their allegations at the pleading stage, they are still required to allege specific facts to show Defendant’s acts or omissions proximately caused them to settle for a lesser amount. (See Stevens v. Superior Court (1986) 180 Cal.App.3d 605, 609–610 [“Whether the plaintiff will be able to prove the pleaded facts is irrelevant to ruling upon the demurrer.”].)

The Complaint fails to allege what discovery and client interviews the Defendant failed to take and why they prejudiced the Plaintiffs’ case in the Underlying Action. (Compl., ¶ 16.) The Complaint fails to explain why such deficiencies were not curable by subsequent counsel and fails to state what causes of action the Defendant failed to pursue due to a signed stipulation and why Plaintiff could have prevailed on those causes of action if they had been properly litigated. (Id.) The Complaint fails to specify what specific criticism Defendant made before the Judge and opposing counsel in the Underlying Action that prejudiced the case leading to a lower settlement.

In the absence of such fact, the court cannot find that Plaintiffs have pled sufficient facts to show that but for Defendant’s lack of due care, the Plaintiffs would have obtained a higher settlement. (See Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1528; Thompson v. Halvonik (1995) 36 Cal.App.4th 657, 662–664.)

Defendant’ demurrer is sustained with leave to amend. Plaintiff is granted 10 days leave to amend. The court sets the OSC RE: Amended Complaint for February 5, 2025, at 8:30 a.m. The Court also advances the Case Management Conference (“CMC”) scheduled for January 16, 2025, to today, and continues the CMC to February 5, 2025, at 8:30 a.m.

[1] CCP § 430.41 requires the Parties to meet and confer prior to filing a demurrer. The Parties failed to meet this requirement. “Any determination by the court that the meet and confer process was insufficient shall not be grounds to overrule or sustain a demurrer.” (CCP, § 430.41(a)(4).) As the failure to meet and confer does not constitute grounds to overrule a demurrer, the court continues on to the merits.