Judge: Gail Killefer, Case: BC722874, Date: 2022-08-31 Tentative Ruling

Case Number: BC722874    Hearing Date: August 31, 2022    Dept: 37

HEARING DATE:                 August 30, 2022

CASE NUMBER:                  BC722874

CASE NAME:                        Spiderworx Media LLC v. Harris e. Tulchin, et al.

TRIAL DATE:                        March 7, 2023

MOTION:                               Motion for Summary Judgment, or Summary Adjudication in the alternative

MOVING PARTIES:             Defendant and Cross-Complainants, Harris Tulchin and Harris Tulchin & Associates, Ltd.

OPPOSING PARTIES:          Plaintiffs, Spiderworx Media, LLC and An L.A. Minute, LLC

PROOF OF SERVICE:          OK

OPPOSITION:                       August 15, 2022

REPLY:                                  August 26, 2022

TENTATIVE:                         Defendants’ motion is denied. Defendants to provide notice.

Background

This case arises in connection with Harris E. Tulchin (“Tulchin”) and Harris Tulchin & Associates (“HTA”)’s (collectively “Tulchin Defendants”) alleged legal representation of Plaintiffs Spiderworx Media, LLC (“Spiderworx”); An L.A. Minute, LLC (“ALAM”); and Daniel Adams (“Adams”).  Plaintiffs allege that Defendants’ legal work included obtaining additional funding for the Film and that the need for a bridge or gap loan arose before the additional funding was available in the form of a loan from Pacific Mercantile Bank Loan (the “PMB Loan”).  According to Plaintiffs, a bridge loan funder was located, but Tulchin offered to provide $885,000 in funding for the gap loan instead and convinced Plaintiffs to abandon other bridge financing in favor of his own deal.  Tulchin allegedly demanded a security interest in the Film, the elements of the Film, and the proceeds of the Film; interest on the loan; a pledge of membership interests in ALAM; producer credit; legal services credit; and $1,000 for costs of providing the funding.   

Tulchin allegedly acted as Spiderworx’ lawyer in preparing the loan documents and charged Plaintiffs $10,000 in legal fees for doing so.  Tulchin allegedly also demanded power of attorney for the loan.  According to Plaintiffs, Tulchin did not advise them that the loan created a conflict of interest or advise them that they had a right to seek independent legal counsel or provide them with adequate time to seek independent legal counsel.   

Plaintiffs allege that Tulchin subsequently made it impossible for Plaintiffs to obtain a commitment from the new lender because Tulchin’s loan allegedly provided him with irrevocable first position on the collateral and because he refused to enter into a subordination agreement with any lender.  Plaintiffs further allege that Tulchin’s terms were predatory and worse than the terms of the bridge loan that he had convinced Plaintiffs to abandon.  According to Plaintiffs, they were able to obtain private funding to complete production in May 2017 based on Tulchin’s agreement to enter into a subordination agreement with a private financier, Cross-Defendant Alex Nazarenko (“Nazarenko”).  Tulchin, however, allegedly refused to sign the subordination agreement he had prepared after the private financier was engaged and promised first position on the Film.   

Plaintiffs further allege that Tulchin has breached fiduciary duties by sending Plaintiffs’ counsel a notice of disposition of collateral on September 13, 2018, indicating his intent to proceed with a sale of the Film; refusing to execute the proper union agreements for the Film; negotiating side deals to his favor over elements of the Film; making misrepresentations that prevented the Film’s distributor from preparing promotional materials in time for the Cannes Film Festival; making misrepresentations to the Film’s distributor cancelling the U.S. theatrical release to his benefit but the detriment of Plaintiffs and the other investors; and attempting to negotiate a side deal with the distributor to allow him to receive all the gross income from the Film. 

In the Complaint, Plaintiffs allege three causes of action for: (1) legal malpractice, (2) breach of fiduciary duty; and (3) declaratory relief. 

Defendants have filed a Cross-Complaint alleging ten causes of action for: (1) intentional misrepresentation; (2) concealment; (3) breach of fiduciary duty; (4) tortious interference with contractual relations; (5) breach of contract; (6) breach of the implied covenant of good faith and fair dealing; (7) civil conspiracy; (8) accounting; (9) common count: money had and received; and (10) violation of Business and Professions Code, §§ 17200, et seq. (the Unfair Competition Law, “UCL”).  Defendants assert the cross-claims against Cross-Defendants Michael Flanders (“Flanders”), Nazarenko, Adams, Spiderworx, and ALAM.  Defendants assert the first through third and seventh through tenth causes of action against all Cross-Defendants; the fourth cause of action against Nazarenko; and the fifth and sixth causes of action against Spiderworx, ALAM, Adams, and Flanders. 

According to Defendants, Tulchin was a long-term friend of Adams who agreed to provide his entertainment contacts to Spiderworx and ALAM and their managers and members to support the film.  Defendants allege that Tulchin was fraudulently induced to provide a bridge loan on terms comparable to an offer made by BondIt Media Capital (“BondIt”) after BondIt requested information from Cross-Defendants, including information concerning the status of the closing of the principal loan and the financial status of ALAM and Spiderworx.   

On April 23, 2019, the court sustained cross-defendants’ demurrers to the third cause of action on the cross-complaint and to the fifth and sixth causes of action of the cross-complaint as to cross-defendant Adams. 

Tulchin and HTA filed a First Amended Cross-Complaint (“FACC”) on May 13, 2019. The FACC added causes of action for conversion and fraudulent transfer in violation of Civil Code §§ 3429, et seq. against all cross-defendants.  

On November 5, 2019 the court sustained cross-defendants’ demurrers to the fourth, fifth, sixth, seventh and eighth causes of action of the FACC. The cross-defendants’ demurrers were otherwise overruled, as well as cross-defendants’ motions to strike. Cross-complainants were granted leave to amend as to the breach of contract cause of action. On March 11, 2020, the court sustained Spiderworx Defendants and Nazarenko’s demurrers to the sixth cause of action of the SACC, with leave to amend.

On August 23, 2022, the court denied Nazarenko’s motion for summary judgment as to the Cross-Complaint. (“August 23 Order.”)

Tulchin Defendants now move for summary adjudication as to Plaintiff’s Complaint, as follows: 

1.      Issue 1: Plaintiffs’ first cause of action for legal malpractice is without merit as a matter of law because the claim is time-barred under Code of Civil Procedure section 340.6.

2.      Issue 2: Plaintiffs’ second cause of action for breach of fiduciary duty is without merit as a matter of law because the claim is time-barred under Code of Civil Procedure section 340.6

3.      Issue 3: Plaintiff’s third cause of action for declaratory relief is without merit as it is time-barred under Code of Civil Procedure section 340.6.

The court will address the parties’ arguments as to the causes of action individually.

Evidentiary Objections 

Objections to Declaration of Daniel Adams 

Sustained: 3-4 

Objection 1-2: overruled. This is not an evidentiary objection but an argument as to when damages had accrued in this action. Defendants’ cited authority even confirms the analysis as to when damages accrued, and the court disregards Defendants’ confusing analysis of “actual injury.”

“For purposes of section 340.6, ‘[a]ctual injury occurs when the client suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions.’ (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 742-743.) What matters is ‘discovery of the fact of damage, not the amount.’ (Laird v. Blacker (1992) 2 Cal.4th 606, 612 (Laird); see Jordache, at p. 752 [‘once the plaintiff suffers actual harm ... uncertainty as to the[] amount’ of damages does not toll limitations period].) As long as that amount is more than nominal (Jordache, at p. 752; Adams v. Paul (1995) 11 Cal.4th 583, 589 (lead opn. of Arabian, J.) (Adams)), actual injury exists even if the client has yet to ‘sustain[] all, or even the greater part, of the damages occasioned by his attorney's negligence’ (Budd v. Nixen (1971) 6 Cal.3d 195, 201); even if the client will encounter ‘difficulty in proving damages’ (Jordache, at p. 752); and even if that damage might be mitigated or entirely eliminated in the future (Laird, at p. 614 [possibility of relief on appeal does not eliminate ‘actual injury’]; Jordache, at p. 754 [‘an existing injury is not contingent or speculative simply because future events may affect its permanency ...’]; Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 227 [same] (Foxborough); cf. Laird, at p. 616 [confirming that injury need not be ‘irremediable’ to be ‘actual’]).” (Shaoxing City Maolong Wuzhong Down Products, Ltd. v. Keehn & Associates (2015) 238 Cal.App.4th 1031, 1036.)

Request for Judicial Notice 

Plaintiffs request  that the court take judicial notice of the following in support of their opposition: 

1.      Exhibit C: Complaint for 1. Legal Malpractice; 2. Breach of Fiduciary Duty; 3. Declaratory Relief, filed in this action September 24, 2018.

2.      Exhibit D: Answer and Affirmative Defenses of Defendants and Cross-Complainants Harris Tulchin and Harris Tulchin & Associates, Ltd. to Plaintiffs’ Complaint, filed in this action January 11, 2019.

Plaintiff’s request is granted. The existence and legal significance of these documents are proper matters for judicial notice. (Evidence Code § 452, subds. (d), (h).)  

Discussion 

        I.            Legal Authority 

“The purpose of the law of summary judgment is to provide courts with a mechanism to cut through the parties' pleadings in order to determine whether, despite their allegations, trial is in fact necessary to resolve their dispute.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.)  CCP § 437c(a) provides: 

A party may move for summary judgment in any action or proceeding if it is contended that the action has no merit or that there is no defense to the action or proceeding.  The motion may be made at any time after 60 days have elapsed since the general appearance in the action or proceeding of each party against whom the motion is directed or at any earlier time after the general appearance that the court, with or without notice and upon good cause shown, may direct….  The motion shall be heard no later than 30 days before the date of trial, unless the court for good cause orders otherwise.  The filing of the motion shall not extend the time within which a party must otherwise file a responsive pleading. 

A motion for summary judgment may be granted “if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”  (CCP § 437c(c).)   

“The motion shall be supported by affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken.  The supporting papers shall include a separate statement setting forth plainly and concisely all material facts that the moving party contends are undisputed.  Each of the material facts stated shall be followed by a reference to the supporting evidence.  The failure to comply with this requirement of a separate statement may in the court’s discretion constitute a sufficient ground for denial of the motion.”  (CCP § 437c(b)(1); see also Cal. Rules of Court, rule 3.1350(c)(2) & (d).)   

In analyzing motions for summary judgment, courts must apply a three-step analysis: “(1) identify the issues framed by the pleadings; (2) determine whether the moving party has negated the opponent's claims; and (3) determine whether the opposition has demonstrated the existence of a triable, material factual issue.”  (Hinesley v. Oakshade Town Center (2005) 135 Cal.App.4th 289, 294 (Hinsley).)  CCP § 437c(p)(2) provides: 

A defendant or cross-defendant has met his or her burden of showing that a cause of action has no merit if the party has shown that one or more elements of the cause of action, even if not separately pleaded, cannot be established, or that there is a complete defense to the cause of action.  Once the defendant or cross-defendant has met that burden, the burden shifts to the plaintiff or cross-complainant to show that a triable issue of one or more material facts exists as to the cause of action or a defense thereto.  The plaintiff or cross-complainant shall not rely upon the allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to the cause of action or a defense thereto. 

The court must “view the evidence in the light most favorable to the opposing party and accept all inferences reasonably drawn therefrom.”  (Hinesley, 135 Cal.App.4th at p. 294; Dore v. Arnold Worldwide, Inc. (2006) 39 Cal.4th 384, 389 [Courts “liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party.”].)  A motion for summary judgment must be denied where the moving party’s evidence does not prove all material facts, even in the absence of any opposition (Leyva v. Sup. Ct. (1985) 164 Cal.App.3d 462, 475) or where the opposition is weak (Salasguevara v. Wyeth Labs., Inc. (1990) 222 Cal.App.3d 379, 384, 387).   

     II.            Factual Summary 

As part of the August 23 Order, the court set forth the relevant factual circumstances as follows:

“Tulchin is ‘successful entertainment lawyer and business consultant, author, and film producer with over 30 years of experience in the business and entertainment industry.’ ... in 2015, Tulchin, on behalf of Malabar Films, LLC, made a proposal for the potential engagement of an actor in a film entitled “An LA Minute” to be directed by Daniel Adams, an HTA client and longtime friend of Tulchin.

... in 2015, ‘Tulchin received emails from Adams advising him that ‘the Nashville guys’ created Spiderworx Media LLC (“Spiderworx”), which would be the company making offers and that Spiderworx had opened an account at Bank of America.’

As part of the project, Cross-Defendant Michael Flanders was the managing member of Spiderworx, which in turn, was the managing member of An LA Minute, LLC. (“ALAM”). ... Tulchin further worked with Adrian Ward of Pacific Mercantile Bank to procure a production loan for the film. ... which ultimately was not executed. (MF 21-30.) In the meantime, ...’Tulchin loaned $750,000 to HTA to fund a bridge loan to Spiderworx but Tulchin was not a party to the loan.’ ‘The bridge loan agreement entered into by HTA as Lender, and by Spiderworx and ALAM, as Borrowers, was dated November 10, 2016 and entered into on or about November 14, 2016 (the “HTA Bridge Loan Agreement”).’...

‘The HTA Bridge Loan Agreement granted HTA a first priority security interest and lien in all right, title, and interest in and to the Picture; any gross receipts arising therefrom; any and all tax credits, subsidies, and rebates; and any and all assets of ALAM or Spiderworx arising from or related to the Picture.’ It also ‘provided that all gross revenues and other receipts from the exploitation of the Picture and all tax credits, rebates, and subsidies were assigned to HTA until’ all expenses and the loan was paid in full. ‘HTA required ALAM, by its managing member, Spiderworx, to appoint HTA as ALAM’s attorney-in-fact pursuant to the HTA Bridge Loan Agreement.’ ‘HTA required Spiderworx, to pledge and assign its managing membership interest in ALAM to HTA as a condition of the HTA Bridge Loan Agreement.’ The parties dispute whether this created a conflict of interest for Tulchin....” (August 23 Order, 7-8.)(internal citations omitted)

Here, Plaintiffs further allege that an attorney-client relationship existed between Plaintiffs and HTA, and point to the Bridge Loan Agreement as an interested transaction wherein HTA did not comply with Rules of Professional Conduct, Rule 3-300. (Complaint ¶¶8-16.) Tulchin Defendants “disputes even the existence of an attorney-client relationship at the time the events in question occurred.” (Motion, 8-9, n.1.)

The parties here further agree that on May 17, 2017, Adams, as managing member of Spiderworx, corresponded through email to state “I understand there has been a Pre-CAMA agreement negotiated between Hyde Park and Spiderworx by Harris Tulchin. Please note that my clients have not seen a copy of this agreement, and they, and their investors must approve it before it is fully agreed upon, and Mike Flanders must sign it on behalf of the company.” (UMF 7.)

Following that email correspondence, on May 18, 2017, the parties agree Plaintiffs executed a revocation of the power of attorney provided to HTA in connection with the Bridge Loan Agreement. (UMF 8.)

The parties also agree that on May 27, 2017, Adams, as managing member of Spiderworx, wrote the following correspondence:

“You made an agreement with Harris Tulchin, not with us. He illegally negotiated and signed the deal with you without consulting us. He abused his position as our attorney at the expense of the production and the investors. He no longer represents us, and any deal you think you might have is null and void. Additionally, if you attempt to alienate us any further from the elements of our film, you are opening yourself up to liability.

...

In my personal opinion, Harris is out of control and there is no hope of us ever coming to a resolution, and thus you need to look to Harris for any claim for money, as he pulled you into this mess.”

(UMF 9.)

As alleged in their Complaint, these correspondences relate to alleged conduct by Tulchin Defendants. (Complaint ¶¶21-27.) Namely, they regard a “side letter with a postproduction house named Cinevision, that gave [Tulchin] sole control over elements of the film. Tulchin refused and stonewalled, after repeated requests to share that postproduction contract with Spiderworx or its representatives... The owner of Cinevision revealed to [Plaintiffs] that Tulchin falsely represented to him that [Tulchin] was an officer of Spiderworx and had full authority to execute the contract and side letter,” which Plaintiffs allege to be untrue. (Complaint ¶26.) Plaintiff also allege Tulchin Defendants interfered with their agreement with the distributor of the film, Hyde Park, and tried to negotiate a “Pre-CAMA” (Collections Account Management Agreement) “with Hyde Park wherein Tulchin would receive all gross income from the movie,” without Plaintiffs’ knowledge. (Id.)

Tulchin Defendants dispute the entirety of these allegations. (Motion, 9, n.1.)

  III.            Analysis  

A.     First Cause of Action: Professional Negligence (Legal Malpractice)

The elements of a claim for¿professional¿negligence¿are: “(1) the duty of the¿professional¿to use such skill,¿prudence, and diligence as other members of his¿profession commonly¿possess and exercise; (2) a breach of that duty; (3) a¿proximate causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the¿professional's negligence.” (Paul v.¿Patton¿(2015) 235 Cal.App.4th 1088, 1095.)¿ 

CCP § 340.6 (a), an action against an attorney for a “wrongful act or omission,” other than for actual fraud, shall be commenced within one year after “the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.¿“  

As part of the August 23 Order, this court noted that “[t]he parties heavily dispute the existence of an attorney-client relationship, the formation and terms of any bridge loans provided, as well as the conduct of Tulchin and HTA in putting forth and executing their bridge loan to Spiderworx and ALAM.” (August 23 Order, 11.) The court further found,

“As such, the court has found that there are triable issues with regard to whether an attorney-client relationship existed, whether [Tulchin Defendants] engaged in any misconduct in violation of the Rules of Professional Conduct, whether any such misconduct affected the equities between the parties, and whether any such misconduct has caused harm to Cross-Defendant [Nazarenko] in such a manner that justifies imposing a complete defense at this stage of the litigation. The court cannot weigh evidence to make such determinations at this junction.” (Id.) 

In moving for summary adjudication, Tulchin Defendants contend section 340.6 bars Plaintiffs’ claims as to all causes of action due to the statute of limitations for these claims. (Motion, 8-9.) Tulchin Defendants further contend that any disputes regarding the existence of an attorney-client relationship “are immaterial to this motion, where HTA’s task is to demonstrate why Plaintiffs’ claims, as they have framed them, are barred as a matter of law.” (Motion, 9, n.1.) However, Tulchin Defendants then confusingly do not explain as to why such disputes are immaterial, before concluding that section 340.6 and its statute of limitations applies to these circumstances. (Motion, 13-14.)

CCP § 340.6(a) states in relevant part:

(a) An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first. If the plaintiff is required to establish the plaintiff’s factual innocence for an underlying criminal charge as an element of the plaintiff’s claim, the action shall be commenced within two years after the plaintiff achieves postconviction exoneration in the form of a final judicial disposition of the criminal case. Except for a claim for which the plaintiff is required to establish the plaintiff’s factual innocence, the time for commencement of legal action shall not exceed four years except that the period shall be tolled during the time that any of the following exist:

(1) The plaintiff has not sustained actual injury.

(2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred.

(3) The attorney willfully conceals the facts constituting the wrongful act or omission when those facts are known to the attorney, except that this subdivision shall toll only the four-year limitation.

(4) The plaintiff is under a legal or physical disability that restricts the plaintiff’s ability to commence legal action.

(5) A dispute between the lawyer and client concerning fees, costs, or both is pending resolution under Article 13 (commencing with Section 6200) of Chapter 4 of Division 3 of the Business and Professions Code. As used in this paragraph, “pending” means from the date a request for arbitration is filed until 30 days after receipt of notice of the award of the arbitrators, or receipt of notice that the arbitration is otherwise terminated, whichever occurs first.

Tulchin Defendants contend section 340.6 applies to all claims in Plaintiffs’ Complaint, and further confirms, “section 340.6 applies whenever a claim arises from a defendant’s exercise of professional duties or nonlegal services associated with a defendant’s professional duties as an attorney.” (Motion, 14; citing Foxen v. Carpenter (2016) 6 Cal.App.5th 284, 292; Austin v. Medicis (2018) 21 Cal.App.5th 577, 585; Connelly v. Bornstein (2019) 33 Cal.App.5th 783.)

Tulchin Defendants next contend that the one-year limitations period of section 340.6 is triggered by “the discovery of the facts constituting the wrongful act or omission, not by his discovery that such facts constitute [a cause of action].” (Motion, 14-15; citing Peregrine Funding, Inc. v. Sheppard Mullin Richter & Hampton, LLP (2005) 133 Cal.App.4th 658, 685.) As such, Tulchin Defendants contend “Plaintiffs’ managing member and principal sent numerous communications throughout May, June, and August 2017 wherein he laid out Plaintiffs’ supposed claims of relief, sometimes in minute detail,” which occurred “over a year before they filed this action on September 14, 2018.” (Motion, 15-16.)

Tulchin Defendants further contend that, at the latest, agreements which “negatively impacted them” were entered into “by May 2017.” (Motion, 17.) Lastly, Tulchin Defendants contend that the lack of an ongoing mutual relationship between Plaintiffs and Tulchin Defendants shows that Plaintiffs’ claims cannot be tolled. (Motion, 17-18.)

In opposition, Plaintiffs contend Tulchin Defendants have not met their burden to “produce sufficient admissible evidence to demonstrate that no other outcome is possible,” and therefore “Tulchin’s evidentiary presentation is entirely deficient and fails to establish when Plaintiffs injury such that any claim against Tulchin accrued and the statute of limitations began to run—the separate statement does not even try to muster evidence of this fact.” (Opp., 4-5.) Further, Plaintiffs explain that Tulchin “waived the statute of limitations [affirmative defense] when it was not properly pleaded and cannot raise any defense based thereon.” (Id.)

Plaintiffs point to CCP § 458 to contend Tulchin Defendants have waived their statute of limitations affirmative defense. (Opp., 5-6.)  CCP § 458 provides:

“In pleading the statute of limitations, it is not necessary to state the facts showing the defense, but it may be stated generally that the cause of action is barred by the provisions of section _____________(giving the number of the section and subdivision thereof, if it is so divided, relied upon) of the Code of Civil Procedure; and if such allegation be controverted, the party pleading must establish, on the trial, the facts showing that the cause of action is so barred.”

Plaintiffs further contend that section 458 must be strictly applied. (Motion, 6; citing Davenport v. Stratton (1944) 24 Cal.2d 232, 247.) Here, Plaintiffs argue Tulchin Defendants’ failure to cite section 340.6 in their Fifteenth Affirmative Defense shows “Tulchin has not complied with section 458 and has not pleaded any statute of limitations defense... Tulchin waived the statute of limitations defense by failing to plead it.” (Opp., 6; RJN, Exh. D.)

Next, Plaintiffs contend “Tulchin’s argument is that the damage element of all causes of action against him accrued at the time the loan documents were signed.” (Opp., 8.) However, Plaintiffs argue “Tulchin does not cite any proposed undisputed material fact based on that paragraph. The separate statement includes no such proposed undisputed fact;” and Tulchin Defendants’ cited paragraph of the Complaint purportedly showing injury only “describes the terms of the loan documents and that they were onerous. It does not state (i) that Plaintiffs suffered an injury at that time; (ii) that Tulchin’s duties as an attorney had an impact on how or if the transaction could occur; or (iii) that any part of the claim had accrued at that time. Paragraph 20 does not even include a date.” (Id.)

Plaintiffs then contend that,

“the terms of the loan documents presented issues for Plaintiffs, but those issues were only contingent and speculative until Tulchin actually acted upon them in September 2018. The Complaint alleges it was Tulchin’s attempt to enforce his lien that caused damage, not the loan documents themselves. There was nothing “remedial” that could have been done to seek recompense for Tulchin’s conduct unless and until Tulchin sought to enforce. Tulchin’s motion fails to establish any loss or injury to Plaintiffs that occurred before September 2018.”

(Opp., 11.)

Plaintiffs argue they “immediately sought relief in Court as soon as Tulchin threatened to impinge on their rights” and as such, their claims “first accrued when Tulchin claimed the lien sale provisions of the loan documents had been triggered, not when the loan documents were signed.” (Opp., 11.)

In reply, Tulchin Defendants agree that their Answer fails to identify section 340.6 when asserting that Plaintiffs’ claims are time-barred. (Reply, 6-7.) However, Tulchin Defendants correctly identify that since the affirmative defense has been met on the merits during a summary judgment proceeding, the court may consider the deficiently pled affirmative defense. (Reply, 6-7; citing Wang v. Nibbelink (2016) 4 Cal.App.5th 1, 10.)

Tulchin Defendants further contend that as they have satisfied their burden at this motion, Plaintiffs bear the burden of establishing a tolling of actual injury. (Reply, 9.)  Their burden here, however, is to “present evidence that supports each element of its affirmative defense, which would also be its burden at trial.” (Acosta v. Glenfed Development Corp. (2005) 128 Cal.App.4th 1278, 1293.) While Tulchin Defendants have concluded that that section 340.6, and its one-year limitations period, apply here, Defendants have failed to present evidence to this court which contradicts this court’s earlier findings that several triable issues of fact relating to the professional services provided to Plaintiffs by Tulchin Defendants, a necessary prerequisite to the enforcement of Defendants’ affirmative defense.

Next, Tulchin Defendants contend Plaintiffs’ misconstrue Defendants’ position, which is that the agreement “involved a lien that immediately diminished Plaintiffs’ rights and remedies, constituting actual injury under section 340.6.” (Reply, 11.) However, Tulchin Defendants fail to provide further supporting authority for such contention. Instead, Tulchin Defendants cite Jordache to suggest that the only relevant inquiry remains the fact of the damage. (Reply, 11; citing Jordache, supra, 18 Cal.4th at 751.) However, as Tulchin Defendants’ other supporting authorities conclusively show:

“For purposes of section 340.6, ‘[a]ctual injury occurs when the client suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions.’ (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 742-743.) What matters is ‘discovery of the fact of damage, not the amount.’ (Laird v. Blacker (1992) 2 Cal.4th 606, 612 (Laird); see Jordache, at p. 752 [‘once the plaintiff suffers actual harm ... uncertainty as to the[] amount’ of damages does not toll limitations period].) As long as that amount is more than nominal (Jordache, at p. 752; Adams v. Paul (1995) 11 Cal.4th 583, 589 (lead opn. of Arabian, J.) (Adams)), actual injury exists even if the client has yet to ‘sustain[] all, or even the greater part, of the damages occasioned by his attorney's negligence’ (Budd v. Nixen (1971) 6 Cal.3d 195, 201); even if the client will encounter ‘difficulty in proving damages’ (Jordache, at p. 752); and even if that damage might be mitigated or entirely eliminated in the future (Laird, at p. 614 [possibility of relief on appeal does not eliminate ‘actual injury’]; Jordache, at p. 754 [‘an existing injury is not contingent or speculative simply because future events may affect its permanency ...’]; Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 227 [same] (Foxborough); cf. Laird, at p. 616 [confirming that injury need not be ‘irremediable’ to be ‘actual’]).” (Shaoxing City Maolong Wuzhong Down Products, Ltd. v. Keehn & Associates, supra, 238 Cal.App.4th at 1036.)

Thus, as defined by Laird, “discovery of the fact of damage” remains the relevant inquiry for the court, not when the diminution of rights occurred as Tulchin Defendants wrongly assert. (Reply, 11-12.) As such, even though Plaintiffs allege that the “onerous” terms of the Bridge Loan Agreement and other third-party agreements as alleged impaired their rights, injury to Plaintiffs and their rights accrued upon their discovery of the fact of such alleged damage. (Reply, 13-14; citing Complaint ¶¶19-20.)

However, Tulchin Defendants fail to provide any supporting authority as to why section 340.6’s one year limitations period can be applied here. As explained in their opposition, Plaintiffs correctly show,

“As alleged in the Complaint, making a loan was not professional legal services (although, separately, Tulchin did provide legal services in connection with the loan and charged Plaintiffs for those services). Tulchin actually disputes his own argument that the loan transaction was the provision of the legal services such that section 340.6 would apply, and does so in his motion here: ‘HTA disputes even the existence of an attorney-client relationship at the time the events in question occurred.’ Tulchin cannot argue this issue both ways. By Tulchin’s own argument, section 340.6 cannot apply because there was no attorney-client relationship in connection with the loan documents. In reality, there was a continuous attorney-client relationship from before the time the loan documents were signed until several months after. The issue is that making a loan is not the professional service an attorney would usually provide.” (Opp., 12-13.)

Here, the court has already found several triable issues of material fact to exist as to whether an attorney-client relationship exists between the parties since Tulchin Defendants continue to dispute whether any legal services were provided. Yet, Tulchin Defendants conclude that section 340.6’s limitations period applies for their affirmative defense to Plaintiffs’ claims. Further, the parties dispute when the “discovery of the fact” of the damage to Plaintiffs’ rights were made, and also dispute what actual injuries were accrued. Therefore, triable issues exist not only as to the application of section 340.6(a), but also to the elements of the affirmative defense here.

For these reasons, Tulchin Defendants’ motion is denied as to the first issue.

B.     Second Cause of Action: Breach of Fiduciary Duty

“The elements of a cause of action for breach of fiduciary duty are: (1) the existence of a fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the breach.” (Stanley v. Richmond¿(1995) 35 Cal.App.4th 1070, 1086.)¿ Code of Civil Procedure, section 340.6 subdivision (a)’s one-year statute of limitations applies to claims whose merits “necessarily depend on proof that an¿attorney violated a professional obligation in the course of providing professional services.” (Lee v. Hanley (2015) 61 Cal.4th 1226, 1236-1237.)  

Because the court has denied Tulchin Defendants’ motion as to the first cause of action, the court further denied Tulchin Defendants’ motion as to the second cause of action.

C.     Third Cause of Action: Declaratory Relief

California Courts have recognized that “[t]he existence of an ‘actual controversy relating to the legal rights and duties of the respective parties,’ suffices to maintain an action for declaratory relief.”¿ (Ludgate Ins. Co. v. Lockheed Martin Corp.¿(2000) 82 Cal.App.4th 592, 605 (Ludgate).)¿ “Any person interested under a written instrument, ... or under a contract, or who desires a declaration of his or her rights or duties with respect to another, or in respect to, in, over or upon property,¿ ... may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court ... for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract."¿ (Ibid., quoting CCP § 1060.)¿¿¿¿ 

As discussed above, the court denies the motion as to the first and second causes of action. Thus, an actual controversy sufficient to sustain a declaratory judgment cause of action exists.  

For these reasons, Tulchin Defendants’ motion is denied as to the third cause of action. 

Conclusion

Tulchin Defendants’ motion is denied. Plaintiffs to provide notice.