Judge: Joseph Lipner, Case: 22STCV35268, Date: 2024-07-16 Tentative Ruling

Case Number: 22STCV35268    Hearing Date: July 16, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Plaintiffs and Cross-Defendants Ibiere N. Seck (“Seck”) and Seck Law, P.C. (“Seck Law”) (collectively, “Plaintiffs”) demur to the First Amended Cross-Complaint (“FACC”) filed by Cross-Complainants Dunn Law P.C., d/b/a the Cochran Firm (the “Cochran Firm”) and Brian T. Dunn (collectively, “Cross-Complainants”).

The Court SUSTAINS the demurrer to the fifth claim WITHOUT LEAVE TO AMEND.

The Court SUSTAINS the demurrer to the remaining claims WITH LEAVE TO AMEND.  Cross-Complainants may amend within 20 days.

Background

This case relates to a dispute over a fee sharing agreement between attorneys.

Seck is an individual lawyer previously employed by the Cochran Firm.  Her law firm, Seck Law, and her previous employer, the Cochran Firm, entered into an agreement on October 29, 2019 with respect to the end of Seck’s employment with the Cochran Firm and how compensation would be handled for cases that Seck worked on prior to her departure  (the “Agreement”).

Plaintiffs’ complaint alleges the following.  One of the matters covered under the Agreement was John Doe v. The Rock Corona, et al. (Case No. RIC 1901347) (the “Doe Matter”). Under the Agreement, the Cochran Firm is entitled to a specified percentage of the net attorney’s fees for the Doe Matter. On May 20, 2021, the Doe Matter settled. The net attorney’s fees from the settlement were to be divided evenly between Plaintiffs and another law firm called Taylor & King, which was Plaintiffs’ co-counsel. The attorney’s fees necessary to satisfy Plaintiffs’ obligation to the Cochran Firm were supposed to come out of Plaintiffs’ portion of the fees. The Cochran Firm had previously placed a lien on the Doe Matter, and Plaintiffs therefore asked Defendant to approve a distribution of the attorney’s fees so that Taylor & King could distribute the fees to Plaintiffs and the Cochran Firm. The Cochran Firm refused to approve the distribution.

Cross-Complainants allege the following in the FACC. Seck falsely told Dunn, the Cochran Firm’s managing partner, that she had been close personal friend of the family members of the plaintiff in the Doe Matter since before the events giving rise to the Doe Matter occurred. Seck told Dunn that the Doe plaintiff had chosen to follow her to her new law firm, Seck Law. In truth, Seck had not known the Doe plaintiff or his family until the Doe plaintiff reached out to the Cochran Firm through their telephone hotline.  The Cochran Firm relied on Seck’s false representation and therefore received a smaller share of the attorney’s fees from the Doe Matter than it would otherwise have received. Also, Seck associated in Taylor & King on the Doe Matter during her employment at the Cochran Firm in violation of the Cochran Firm’s policies.

For the purposes of this demurrer, the Court accepts the allegations in the Cross-Complaint as true.

Plaintiffs filed this action on November 3, 2022, raising claims for (1) breach of contract; and (2) declaratory relief.

Cross-Complainants filed a Cross-Complaint on April 25, 2024. Cross-Complainants filed the FACC, the operative cross-complaint, on April 29, 2024, raising claims for (1) fraud; (2) conversion; (3) intentional interference with prospective economic advantage; (4) negligent interference with prospective economic advantage; (5) breach of fiduciary duty; and (6) unjust enrichment.

Plaintiffs demurred to the FACC on July 9, 2024. Cross-Complainants did not file an opposition.

Legal Standard

As a general matter, 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 pleading alone, and not the evidence or facts alleged.” (E-Fab, Inc. v. Accountants, Inc. Servs. (2007) 153 Cal.App.4th 1308, 1315.) The court assumes the truth of the complaint’s properly pleaded or implied factual allegations. (Ibid.) The only issue a demurrer is concerned with is whether the complaint, as it stands, states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)

Where a demurrer is sustained, 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. (Ibid.; Lewis v. YouTube, LLC (2015) 244 Cal.App.4th 118, 226.) However, “[i]f there is any reasonable possibility that the plaintiff can state a good cause of action, it is error to sustain a demurrer without leave to amend.” (Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 245).

Discussion

Fraud – First Claim

“The elements of fraud are (a) a misrepresentation (false representation, concealment, or nondisclosure); (b) scienter or knowledge of its falsity; (c) intent to induce reliance; (d) justifiable reliance; and (e) resulting damage.” (Hinesley v. Oakshade Town Ctr. (2005) 135 Cal.App.4th 289, 294.)

The facts constituting the alleged fraud must be alleged factually and specifically as to every element of fraud, as the policy of “liberal construction” of the pleadings will not ordinarily be invoked. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645.) To properly allege fraud against a corporation, the plaintiffs must plead the names of the persons allegedly making the false representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written. (Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 157.)

Cross-Complainants fail to meet this standard. The Cross-Complaint does not allege where, when, or how Seck represented that she had a previous relationship with the Doe plaintiff’s family. The allegations presented are insufficient to put Plaintiffs on notice of the contents claim that they need to defend.

Furthermore, Cross-Complainants fail to allege causation. The FACC contains no allegation that Cross-Complainants undertook a detrimental course of action in response to Plaintiffs’ representations that resulted in Cross-Complainants being entitled to a smaller fee amount.

For both of these reasons, the FACC fails to state a claim for fraud.

The Court sustains the demurrer to this claim with leave to amend.

Conversion – Second Claim

“Conversion is the wrongful exercise of dominion over the property of another. The elements of a conversion claim are: (1) the plaintiff’s ownership or right to possession of the property; (2) the defendant’s conversion by a wrongful act or disposition of property rights; and (3) damages.” (Lee v. Hanley (2015) 61 Cal.4th 1225, 1240.) “It is not necessary that there be a manual taking of the property; it is only necessary to show an assumption of control or ownership over the property, or that the alleged converter has applied the property to [their] own use.” (Oakdale Village Group v. Fong (1996) 43 Cal.App.4th 539, 544.)

Cross-Complainants allege that “the attorneys’ fees in the ‘Doe Matter’ have yet to be distributed, and remain held in trust pursuant to SECK LAW’S claimed entitlement to said fees.” (FACC ¶ 6.) Cross-Complainants have therefore pled that Plaintiffs have not exercised control or ownership over the fees at issue, negating the second element.

The Court sustains the demurrer to this claim with leave to amend.

Intentional Interference with Prospective Economic Advantage – Third Claim

The elements of a claim for intentional interference with prospective economic advantage include “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional or negligent acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404 [citations, brackets, and quotation marks omitted].) Further, “the alleged interference must have been wrongful by some measure beyond the fact of the interference itself. For an act to be sufficiently independently wrongful, it must be unlawful, that is, it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Ibid. [citation, ellipsis, and quotation marks omitted].)

Cross-Complainants have not alleged causation. As discussed under the fraud claim, there is no explanation as to how the alleged representations that Seck was a close friend of the Doe plaintiff’s family led to the disruption of Cross-Complainants’ opportunity to represent the Doe plaintiff. The same is true for the allegations that Seck associated with Taylor & King on the Doe Matter before leaving Dunn Law – Cross Complainants do not explain how this disrupted the relationship.

Furthermore, Cross-Complainants do not identify a wrongful act leading the Doe Plaintiff to follow Seck to her new firm. “[A] client has an absolute right to substitute one attorney for another for any reason …; it is immaterial that such a substitution will work to the purported detriment of the original attorney.” (Kallen v. Delug (1984) 157 Cal.App.3d 940, 950.) And “[u]nder the privilege of free competition, a competitor is free to divert business to himself as long as he uses fair and reasonable means.” (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1153.) “[T]he competition privilege is defeated only where the defendant engages in unlawful or illegitimate means.” (San Francisco Design Center Associates v. Portman Companies (1995) 41 Cal.App.4th 29, 42.) The mere fact that Seck did not know the Doe plaintiff or his family prior to Dunn Law’s engagement on the Doe Matter does not give rise to an inference that Seck obtained the Doe Plaintiff’s business unlawfully. It is equally likely, under the facts as alleged, that the Doe Plaintiff chose to go to Seck Law of his own accord.

The Court sustains the demurrer to this claim with leave to amend.

Negligent Interference with Prospective Economic Advantage – Fourth Claim

“The elements of negligent interference with prospective economic advantage are (1) the existence of an economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s knowledge (actual or construed) that the relationship would be disrupted if the defendant failed to act with reasonable care; (4) the defendant’s failure to act with reasonable care; (5) actual disruption of the relationship; and (6) economic harm proximately caused by the defendant’s negligence.” (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1005.)

As discussed under the intentional interference claim, Cross-Complainants have failed to plead a wrongful act by Plaintiffs. Cross-Complainants have also failed to plead causation from any wrongful act to the Doe plaintiff’s choice of Seck or to Cross-Complainants’ receipt of a reduced fee.

The Court sustains the demurrer to this claim with leave to amend.

Breach of Fiduciary Duty – Fifth Claim

“The elements of a cause of action for breach of fiduciary duty are the existence of a fiduciary relationship, breach of fiduciary duty, and damages.” (Oasis West Realty, LLC v. Goldman (2011) 51 Cal.4th 811, 820.)

Cross-Complainants allege that Seck owed a duty of loyalty to Dunn Law as an employee and former employee. (FACC ¶¶ 28-29.) However, a mere employment relationship is inadequate to produce a fiduciary duty. “[A]n officer who participates in management of the corporation, exercising some discretionary authority, is a fiduciary of the corporation as a matter of law. Conversely, a ‘nominal’ officer with no management authority is not a fiduciary.” (Gab Bus. Servs. v. Lindsey & Newsom Claim Servs. (2000) 83 Cal.App.4th 409, 420-421.) Cross-Complainants have not pled that Seck participated in the management of Dunn Law. In fact, Cross-Complainants plead that Seck worked in the capacity of an associate attorney, instead. (FACC ¶¶ 7, 14.) Cross-Complainants have not alleged a fiduciary duty.

Cross-Complainant’s allegations that Seck was an associate attorney during her time at Dunn Law indicates that leave to amend would likely be futile. Cross-Complainants have not opposed the motion or explained how amendment could cure this claim’s defects.

The Court sustains the demurrer to this claim without leave to amend.

Unjust Enrichment – Sixth Claim

“The elements for a claim of unjust enrichment are receipt of a benefit and unjust retention of the benefit at the expense of another. The theory of unjust enrichment requires one who acquires a benefit which may not justly be retained, to return either the thing or its equivalent to the aggrieved party so as not to be unjustly enriched.” (Lyles v. Sangadeo-Patel (2014) 225 Cal.App.4th 759, 769, quotation marks and citations omitted.)

Notably, “[u]njust enrichment is not a cause of action”; it is simply “a restitution claim.” (Hill v. Roll International Corp. (2011) 195 Cal.App.4th 1295, 1307; see also Melchior v. New Line Productions, Inc. (2003) 106 Cal.App.4th 779, 793 [“there is no cause of action in California for unjust enrichment”].)

While a restitution claim can stand on its own, the only basis that Cross-Complainants allege for acquisition of an unjust benefit is breach of the fiduciary duty of loyalty. As discussed above, Cross-Complainants have failed to plead the existence of a fiduciary duty.

The Court sustains the demurrer to this claim with leave to amend.