Judge Loren G. Freestone, Case Number: 37-2023-00008083-CU-BC-CTL, Date: 2024-05-31 Tentative Ruling

Judge: Loren G. Freestone, Case: 37-2023-00008083-CU-BC-CTL, Date: 2024-05-31 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - May 30, 2024

05/31/2024 10:30:00 AM C-64 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Loren G. Freestone

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Civil - Unlimited Breach of Contract/Warranty Motion Hearing (Civil) 37-2023-00008083-CU-BC-CTL JEFFREY MAULDEN SOLE PROPRIETOR OF JM LEGAL MARKETING LLC VS FLOREK AND MORGAN LLC [IMAGED] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING Defendants Florek and Morgan LLC, Aaron Morgan, and Thomas Florek's motion for judgment on the pleadings as to the complaint filed by Plaintiff Jeffrey Maulden is DENIED.

Preliminary Matters Defendants' unopposed request for judicial notice of (1) California Rules of Professional Conduct 1-320, 5.4, and 7.2, (2) Missouri Rules of Professional Conduct 4-5.4 and 4-7.2, and (3) an order from Toce v. Rentch (S.D. Cal. Nove. 15, 2018) 2018 WL 5994598 are granted.

Analysis Defendants move for judgment on the pleadings on the basis that the Transvaginal Mesh Consulting Agreement, Mesothelioma Marketing Agreement, Round Up Agreement, and FM JM Legal Misc. Inv Agreement are essentially illegal fee sharing and referral agreements that violate rules of professional conduct.

A lawyer generally 'shall not share legal fees directly or indirectly with a nonlawyer or with an organization that is not authorized to practice law.' (Cal. Rules Prof. Conduct, rule 5.4(a); see In Matter of Bragg (Review Dept. 1997) 3 Cal. State Bar Ct. Rptr. 615, 619–621, 624–625; Matter of Gordon (Review Dept. 2018) 5 Cal. State Bar Ct. Rptr. 610, 617–619, 621–622; see also Mo. Rules Prof.

Conduct, rule 4-5.4(a); N.Y. Rules Prof. Conduct, rule 5.4(a); Ill. Rules Prof. Conduct, rule 5.4(a).) A lawyer also generally 'shall not compensate, promise or give anything of value to a person for the purpose of recommending or securing the services of the lawyer or the lawyer's law firm.' (Cal. Rules Prof. Conduct, rule 7.2(b); see generally Linnick v. State Bar (1964) 62 Cal.2d 17; see also Mo. Rules Prof. Conduct, rule 4-7.2(c); N.Y. Rules Prof. Conduct, rule 7.2(a); Ill. Rules Prof. Conduct, rule 7.2(b).) Maulden contends that the agreements are lawful consulting, marketing, and advertising agreements.

A lawyer may pay a 'nonlawyer third-party for goods and services provided to a lawyer or law firm,' provided the compensation is not 'determined as a percentage or share of the lawyer's or law firm's overall revenues or tied to fees in particular cases or legal matters.' (Cal. Rules Prof. Conduct, com. to rule 5.4.) A lawyer may also 'pay the reasonable costs of advertisements or communications' that are permitted by the rules, including payments to 'agents and vendors who are engaged to provide Calendar No.: Event ID: TENTATIVE RULINGS

3084802 36 CASE NUMBER: CASE TITLE: JEFFREY MAULDEN SOLE PROPRIETOR OF JM LEGAL 37-2023-00008083-CU-BC-CTL marketing or client-development services.' (Cal. Rules Prof. Conduct, rule 7.2(b)(1) & com. to rule 7.2; see also Mo. Rules of Prof. Conduct, rule 7.2(c)(1); N.Y. Rules Prof. Conduct, rule 7.1, com. to rule 7.2; Ill. Rules Prof. Conduct, rule 7.2(b)(1).) It is unnecessary to determine the nature of the agreements at issue. Even if Defendants are correct that the agreements violate the rules of professional conduct and therefore are illegal, it is not clear from the face of the complaint that the agreements are unenforceable as a matter of law.

Agreements between lawyers and non-lawyers that violate these rules of professional conduct are illegal. (See McIntosh v. Mills (2004) 121 Cal.App.4th 333, 344–346.) However, such agreements are nonetheless enforceable as long as the non-lawyer is not in pari delicto with the lawyer. (See Cain v. Burns (1955) 131 Cal.App.2d 439.) In Cain, a private investigator agreed to provide services to an attorney in exchange for an amount equal to 1/3 of the net fees the attorney received in such cases. (Cain, supra, 131 Cal.App.3d at pp.

440–441.) When the attorney failed to pay the investigator for his work on a case, the investigator sued.

(Id. at p. 441.) Although the plaintiff's compensation was to come out of the defendant's general fund, without regard to the particular money paid to the attorney in those cases, the court held the agreement violated the rule of professional conduct against fee splitting with nonlawyers. (Id. at pp. 441–442.) The attorney argued that the investigator therefore could not recover based on the illegal contract, but the court of appeal disagreed and affirmed the judgment in favor of the investigator explaining that such contracts 'may be enforced if the parties are not in pari delicto.' (Id. at pp. 442–444.) Emphasizing that 'the statute prohibiting fee-splitting prohibits only the attorney, not the layman,' the court held that the investigator was not in pari delicto with the attorney and therefore could enforce the agreement. (Ibid.) 'To permit the attorney to retain the moneys he promised to pay plaintiff would put a premium on the attorney's disregard of the rules made for his guidance and conduct.' (Id. at p. 444.) Defendants rely on McIntosh, which also involved a nonattorney (McIntosh) seeking to enforce an unlawful fee splitting agreement against an attorney (Mills), but reached a different result. McIntosh agreed to provide 'consulting services' to Mills in relation to two cases against Bank of America (where McIntosh used to work) in exchange for 15 percent of all attorney fees Mills earned from those cases.

(McIntosh, supra, 121 Cal.App.4th at p. 337.) When Mills failed to pay after one of the cases settled, McIntosh sued. (Ibid.) There was no dispute that the agreement violated the rule of professional conduct against fee splitting with nonlawyers and was therefore illegal. (Id. at pp. 344–346.) The dispute instead centered around whether the parties were in pari delicto such that the agreement was also unenforceable. (Id. at pp. 347–352.) The court explained that 'whether the parties are in pari delicto involves an analysis of the relative culpability of each.' (Id. at p. 349.) Based on the evidence presented, the court found Cain distinguishable and held that McIntosh was in pari delicto for two key reasons. (Id. at pp. 349–352.) First, although McIntosh was not an attorney, he had entered into the agreement with Mills by way of an agent (Anton) who was an attorney. (Id. pp. 339, 349–350.) Anton was bound by the rules of professional conduct and was aware of the prohibition on share fees with nonlawyers (id. at pp. 340, 350), and his knowledge was imputed to McIntosh by law (id. at p. 350). As summarized by the court: 'Thus, unlike Cain, in which the nonlawyer private investigator was presumably unaware of the illegal nature of the fee-sharing agreement, here another member of the State Bar actually entered into the contract with Mills on McIntosh's behalf. Furthermore and separate from that fact, Anton's awareness of the illegality is directly imputed to McIntosh. Under these facts, the parties are indeed in pari delicto, and McIntosh is barred from enforcing his agreement with Mills.

The court further explained that 'McIntosh's own conduct render[ed] him as legally blameworthy as Mills in the pursuit of the contract's objective.' (Id. at p. 351.) When negotiating the agreement, the parties took efforts to avoid a paper trail, keep the agreement secret from Bank of America and Mills' own law partners, and not share the details of the arrangement with McIntosh. (Id. at pp. 339–341.) Then, when deposed by Bank of America in the two cases on which he was consulting, McIntosh testified that he Calendar No.: Event ID: TENTATIVE RULINGS

3084802 36 CASE NUMBER: CASE TITLE: JEFFREY MAULDEN SOLE PROPRIETOR OF JM LEGAL 37-2023-00008083-CU-BC-CTL was not being compensated in connection with the litigation. (Id. at pp. 342–343.) As summarized by the court: 'The summary judgment record reveals that the parties jointly planned a scheme by which McIntosh would illegally share in the potential financial benefits of class action litigation. Special efforts were taken by all to shield McIntosh, not from the fact that he would be compensated for his work in assisting Mills prepare the litigation, but only from the precise details of the fee-sharing arrangement. The purpose of the parties' machinations was a deliberate effort to keep the existence of the fee-sharing agreement, and the details of the deal, from Bank of America and its counsel, and even from Mills' own law partners. Keeping the arrangement secret would hopefully avoid the potential impeachment of McIntosh by cloaking his testimony in the class litigation with a false sense of impartiality, and also in preventing the 'inappropriate' nature of the agreement from seeing the light of day.' 'As if this were not enough, McIntosh's dogged determination to stop the existence of the agreement from being revealed to Bank of America apparently led him to lie in his deposition. This is hardly a harsh assessment on our part, particularly given that McIntosh denied unequivocally that he was promised or told he would receive any remuneration as a result of his work on the case for Mills.' (Id. at p. 351.) The court noted that in many cases 'the issue of relative wrong very well may be a question of fact,' but based on 'the level and degree of McIntosh's own complicity in his admitted pernicious plot of deception to hire the fact that he was a party to a fee-sharing agreement demands a finding of in pari delicto as a matter of law. Having denied under oath an expectation of receiving compensation from Mills, the law will not countenance McIntosh's reversal of position, and reward his own malfeasance by recognizing a contractual right to compensation now.' (Id. at p. 352.) Unlike the defendant in McIntosh who moved for summary judgment based on evidence, Defendants here have moved for judgment on the pleadings and are limited to the facts pled in the complaint.

Based solely on the face of the complaint, this case is more like Cain and less like McIntosh. There are no allegations that Maulden knew that the agreements violated rules of professional conduct, nor any allegations that the agreements were negotiated by an attorney-agent who possessed such knowledge.

There are no allegations that the parties tried to keep the agreements a secret from any clients or defense counsel. And there are no allegations that Maulden has ever lied under oath about the agreements or denied their existence. Nor are there any other facts pled indicating that Maulden was equally as blameworthy as Defendants. To the extent any such facts exists, they are beyond the scope of this motion. As such, the court is unable to conclude that the parties are in pari delicto as a matter of law.

Conclusion Whether the parties are in pari delicto such that the agreements are unenforceable is a factual issue that cannot be decided by way of this motion for judgment on the pleadings. The motion is therefore denied.

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