Judge: Kevin C. Brazile, Case: 21STCV31624, Date: 2023-02-06 Tentative Ruling

Hearing Date: February 6, 2023

Case Name: Heidari Law Group, P.C. v. Najafi

Case No.: 21STCV23966

Matter: Demurrer

Moving Party: Defendants Mesriani & Associates, Sanaz Imani, and Rodney Mesriani

Responding Party: Plaintiffs Heidari Law Group, P.C. and Saman Ryan Heidari

Notice: OK

Ruling: The Demurrer is sustained as to the third, fifth, and sixth causes of 

action, but is otherwise overruled.  Leave to amend is denied.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly 

encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic. 

On July 27, 2022, Plaintiffs Heidari Law Group, P.C. (“HLG”) and Saman Ryan Heidari filed the operative First Amended Complaint (“FAC”) against Defendants Nina Najafi, Eric Bryan Seuthe, Law Offices Of Eric Bryan Seuthe & Associates, Mesriani & Associates, Sanaz Imani, and Rodney Mesriani for (1) breach of contract, (2) declaratory relief, (3) conspiracy to induce breach of contract, (4) breach of the covenant of good faith and fair dealing, (5) fraud, (6) conspiracy to commit fraud, (7) conversion, (8) conspiracy to commit conversion, (9) intentional interference with contract, (10) conspiracy to commit interference with contract, (11) constructive trust, (12) defamation per se, (13) malicious prosecution, (14) abuse of process, and (15) violation of the UCL.  

Among other things, Plaintiffs allege that they were counsel for Najafi in a lawsuit relating to an automobile collision (“Underlying Action”) and that Najafi—after obtaining new counsel—failed to pay a portion of her settlement proceeds to Plaintiffs, as required by their retainer agreement.

On October 19, 2022, Najafi, Seuthe, and Law Offices of Eric Bryan Seuthe & Associates filed an anti-SLAPP motion as to the FAC’s claims for malicious prosecution and abuse of process.  That same day, Defendants Rodney Mesriani and Mesriani & Associates filed a separate anti-SLAPP motion as to the same causes of action.  These anti-SLAPP motions are currently scheduled for February 14, 2023.

On January 13, 2023, Heidari and HLG dismissed the FAC’s thirteenth and fourteenth causes of action.

On May 16, 2022, Nina Najafi filed the Second Amended Cross-Complaint (“SACC”) against HLG and Heidari for (1) legal malpractice, (2) breach of fiduciary duty, and (3) fraud.  Najafi alleges that Cross-Defendants bungled her settlement.

On August 9, 2022, Heidari and HLG filed a Cross-Complaint against Mesriani & Associates and Rodney Mesriani for (1) indemnity, (2) partial indemnity, (3) equitable indemnity, and (4) contribution.  

Defendants Mesriani & Associates, Sanaz Imani, and Rodney Mesriani now demur to the entirety of the FAC for uncertainty, failure to state sufficient facts, and a pending action between the parties on the same cause of action.

When considering demurrers, courts read the allegations liberally and in context, and “treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.)  “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. 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 v. Mirda¿(2007) 147 Cal.App.4th 740, 747.)  It is error “to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.”  (Aubry v. Tri-City Hospital Dist.¿(1992) 2 Cal.4th 962, 967.)

1. Conspiracy Claims

Defendants first argue that the third cause of action for conspiracy is duplicative; that there is no separate cause of action for conspiracy; and that the conspiracy claims are barred by Civ. Code § 1714.10 and/or the agent’s immunity rule.

The third cause of action for conspiracy to cause breach of contract is indistinguishable from and duplicative of the tenth cause of action for conspiracy to interfere with contract.  

The sixth cause of action is for conspiracy to defraud.  The FAC fails to plead fraud with particularity (see infra), so there cannot be any derivative conspiracy theory.

Defendants argue that the remaining claims for conspiracy to cause interference and to convert are barred by Civ. Code § 1714.10 and/or the agent’s immunity rule.  

Civ. Code § 1714.10 states in relevant part,

(a) No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest or compromise a claim or dispute, and which is based upon the attorney’s representation of the client, shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes the claim for civil conspiracy to be filed after the court determines that the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action. The court may allow the filing of a pleading claiming liability based upon such a civil conspiracy following the filing of a verified petition therefor accompanied by the proposed pleading and supporting affidavits stating the facts upon which the liability is based. . . .

This does “not apply to a cause of action against an attorney for a civil conspiracy with his or her client, where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney's acts go beyond the performance of a professional duty to serve the client and involve a conspiracy to violate a legal duty in furtherance of the attorney's financial gain.”  (Civ. Code § 1714.10(c).)

“The second exception (CC § 1717(c)(2)) applies to actions taken in furtherance of the attorney's financial gain and means that through the conspiracy, the attorney derived economic advantage over and above monetary compensation received in exchange for professional services actually rendered on a client's behalf.”  (Cal. Judges Benchbook Civ. Proc. Before Trial § 12.198.)

Here, the prefiling requirement under Civ. Code § 1714.10 does not apply because Plaintiff pleads that Defendants sought to deprive Plaintiffs of 8% of the settlement in order to wrongfully split that amount amongst themselves.  (Civ. Code § 1714.10(c)(2).)

Further, under the agent’s immunity rule, “agents and employees of a corporation cannot conspire with their corporate principal or employer where they act in their official capacities on behalf of the corporation and not as individuals for their individual advantage.”  (Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39, 45.)  This rule, however, does not pertain to actual fraud or the situation in which an attorney has an underlying duty to the plaintiff.  (Pavicich v. Santucci (2000) 85 Cal.App.4th 382, 395.) 

The agent’s immunity rule would not apply because, again, the FAC alleges that the Mesriani Defendants were acting for their own financial advantage.  

The Demurrer is sustained as to the third and sixth causes of action, without leave to amend. 

The Demurrer is overruled as to the eighth and tenth causes of action.

2. Attorney-Client Privilege

Defendants, citing Solin v. O’Melveny & Myers, LLP (2001) 89 Cal.App.4th 451, 467 (“Solin”), argue all claims must be dismissed because their defense for this action would require that they breach the attorney-client privilege.  Solin, however, was not decided at the demurrer stage, and “such drastic action will seldom if ever be appropriate at the demurrer stage of litigation.”  (Gen. Dynamics Corp. v. Superior Court (1994) 7 Cal.4th 1164, 1190.)  

Rather, there are at least four factors that a court must consider, under General Dynamics and its progeny, before a court may dismiss a case on the ground that a defendant-attorney's due process right to present a defense would be violated by the defendant's inability to disclose a client's confidential information if the action were allowed to proceed. First, the evidence at issue must be the client's confidential information, and the client must be insisting that the information remain confidential. [Citation Omitted.] To the extent that the information is not confidential, no basis for dismissal exists. . . . Second, [the court must determine whether the] confidential information at issue [is] highly material to the defendants' defenses. . . . Third, before dismissing a case on due process grounds, the trial court must determine whether it is able to effectively use “ad hoc measures from [its] equitable arsenal,” including techniques such as “sealing and protective orders, limited admissibility of evidence, orders restricting the use of testimony in successive proceedings, and, where appropriate, in camera proceedings,” so as to permit the action to proceed. . . . Finally, a trial court should consider whether it would be “fundamentally unfair” to allow the action to proceed.

(Dietz v. Meisenheimer & Herron (2009) 177 Cal.App.4th 771, 794 (“Dietz”).)  Here, the 3-sentence analysis set forth by Defendants is not dispositive under Dietz.  Defendants’ privilege argument is currently rejected.

3. Fraud

“The elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638, internal quotation marks omitted.) 

“[F]raud must be pled specifically; general and conclusory allegations do not suffice. [Citations] Thus the policy of liberal construction of the pleadings . . . will not ordinarily be invoked to sustain a pleading defective in any material respect.  This particularity requirement necessitates pleading facts which show how, when, where, to whom, and by what means the representations were tendered.”  (Lazar v. Superior Court (1996) 12 Cal.4th 631, 645, internal quotation marks omitted.)  

Plaintiffs allege that Defendants “represented at various times that Defendant NAJAFI and Sahabeh Hashemnia voluntarily left representation by Plaintiff HEIDARI LAW GROUP and sought representation by MESRIANI LAW GROUP.  That Defendant NAJAFI, MESRIANI, MLG, and DOES 1 through 25 . . . were being duly substituted for Plaintiff herein with respect to the July 11, 2019 motor vehicle accident and claimants involved thereto . . . . That in reality, Defendants . . . made statements regarding the substitution procedure, governed by law and statute and the State Bar of California, which were in fact false and known to be false, instead procuring the claimants and their respective cases through the underhanded, illegal, and amoral practice of illegal solicitation, or ‘capping,’ through false promises of increased proportions of settlement recovery, cash incentives and/or ‘kick backs,’ and/or a scheme to obtain further recovery from Plaintiff directly through frivolous allegations and/or claims, amounting to a ‘shakedown’ to increase recovery for Defendant NAJAFI’s motor vehicle accident.”  (FAC ¶¶ 75-77.)  

The FAC fails to plead reliance, and most of the representations at issue are unclear.  The Demurrer is sustained, without leave to amend.

4. Intentional Interference with Contractual Relations

To prevail on a cause of action for intentional interference with contractual relations, a plaintiff must plead and prove (1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.  (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1148.)

Plaintiffs allege that “Defendants MESRIANI, MLG, and IMANI specifically disrupted performance of this contract by reducing, without authorization of any form, Plaintiff’s lien arising out of this contract with former client Defendant NAJAFI and did so under unethical and false pretenses, with the intent to further disrupt Plaintiff’s affairs by colluding and/or conspiring with Defendants EBS and EBS&A to setup a false, fraudulent scheme against Plaintiff and Plaintiff’s principal, Sam Ryan Heidari, in order to unjustly and fraudulently obtain additional sums of money through deceptive, unfair business practices in direct violation of California law as well as the Rules of Professional Responsibility.”

That is, the FAC states Mesriani Defendants falsely stated to the settling insurer that Plaintiffs’ lien was smaller than it actually was, so as to receive a greater share of the settlement for themselves.  This seems sufficient.  (See Weiss v. Marcus (1975) 51 Cal.App.3d 590, 596 [“The sixth count (interference with contractual relationship) . . . alleged: the lien contract between plaintiff and Oran was a valid and existing contract . . . ; said defendants had knowledge of the lien contract; defendants, intending to induce breach of that contract, advised Oran that neither he nor they were obliged to withhold, from the proceeds of the settlement in Oran v. Novick, any sums which were due plaintiff; in breach of his lien contract with plaintiff, Oran refused to pay plaintiff the sum due him for legal services rendered; such breach of contract was caused by defendants' unjustified and wrongful conduct, and by reason thereof, plaintiff was damaged in the sum of $6,750.”].)

Defendants argue that the litigation privilege applies.  The litigation privilege set forth in Civ. Code § 47 generally applies “to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action.”  (Silberg v. Anderson (1990) 509 Cal.3d 205, 212.)   Statements made in anticipation of litigation are subject to the litigation privilege.  (Briggs v. Eden Council for Hope and Opportunity (1999) 19 Cal.4th 1106, 1115.)  The “principle purpose of [the litigation privilege] is to afford litigants . . . the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions.”  (Id. at p. 213.) 

The primary statement at issue is the false statement to the insurer that Plaintiffs’ lien was only 25% of the settlement when it was 33.3%.  The Court was not able to locate any authorities applying the litigation privilege under the factual circumstances here.  

Several cases instead indicate potential liability: “Under Miller v. Rau (1963) 216 C.A.2d 68, 30 C.R. 612, an attorney who disburses funds to a client despite notice of a third party's contractual right to those funds may be liable for conversion. (47 C.A.4th 305.) (b) The Miller rule has been applied in a case involving an attorney's failure to pay an equitable lien against his client's settlement proceeds (47 C.A.4th 306, discussing McCafferty v. Gilbank (1967) 249 C.A.2d 569, 57 C.R. 695, 1 Summary (11th), Contracts, § 742), as well as in cases involving the failures of a successor attorney and a liability insurer to pay the fee liens of prior attorneys (47 C.A.4th 306, 307, discussing Weiss v. Marcus (1975) 51 C.A.3d 590, 124 C.R. 297, supra, § 185, and Siciliano v. Fireman's Fund Ins. Co. (1976) 62 C.A.3d 745, 133 C.R. 376).”  (1 Witkin, Cal. Proc. 6th Attys § 325 (2022).)

Some cases instead relate to the application of the manager’s privilege.  (See Los Angeles Airways, Inc. v. Davis  (9th Cir. 1982) 687 F.2d 321, 326 [“Attorneys are frequently called upon by their clients to provide advice regarding the validity of contracts and the consequences of their breach. An attorney can claim the protection of the privilege to induce breach of contract, subject to its qualifications, when he provides his advice in the course of his representation of a client.”].)  However, this issue largely comes down to motive, which is factual.  (See id. at p. 327 [“[W]hen a manager induces a breach in the hopes that he himself might fill the resultant economic void, he acts not as a servant, i.e., as one upholding his masters best interests, but rather as a naked competitor, devoid of the protections accorded those who labor under standards of fidelity, good faith and fiduciary responsibility.”].)

Defendants also argue that the interference claim is premature because the settlement funds have not yet been disbursed.  This, however, is not apparent from the FAC.

5. Conversion

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.  (Burlesci v. Petersen (1998) 68 Cal.App.4th 1062, 1066.)  

“[A]ttorneys may maintain conversion actions against those who wrongfully withhold or disburse funds subject to their attorney’s liens.”  (Plummer v. Day/Eisenberg, LLP (2010) 184 Cal.App.4th 38, 45.)  This is precisely the thrust of the FAC.  Therefore, the Demurrer is overruled as to the conversion claim.

6. Unjust Enrichment

Defendants lastly argue that unjust enrichment is not a cause of action.  The FAC’s labels are not determinative.  Defendants have failed to explain why a cause of action has not been stated wherein unjust enrichment would be the remedy for Defendants obtaining profits from Plaintiffs’ services.  Therefore, the Demurrer to the unjust enrichment claim is overruled.

7. Summary

The Demurrer is sustained as to the third, fifth, and sixth causes of action, but is otherwise overruled.  Leave to amend is denied.  The Request for Judicial Notice is granted.

Moving parties to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear by LACourtConnect rather than in person due to the COVID-19 pandemic.