Judge: Mark A. Young, Case: 22SMCV02512, Date: 2023-09-27 Tentative Ruling
Case Number: 22SMCV02512 Hearing Date: February 13, 2024 Dept: M
CASE NAME: Rosenbaum v.
Lebowsky, et al.
CASE NO.: 22SMCV02512
MOTION: Demurrer
to the First Amended Complaint
HEARING DATE: 2/13/2024
Legal
Standard
A
demurrer for sufficiency tests whether the complaint states a cause of action.
(Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context. 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 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. (CCP §§
430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate
facts sufficient to apprise the defendant of the factual basis for the claim
against him. (Semole v. Sansoucie
(1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit
contentions, deductions or conclusions of fact or law alleged in the pleading,
or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen
(1964) 226 Cal.App.2d 725, 732, internal citations omitted.)
A
special demurrer for uncertainty is disfavored and will only be sustained where
the pleading is so bad that defendant cannot reasonably respond—i.e., cannot
reasonably determine what issues must be admitted or denied, or what counts or
claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s
of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if
the pleading is somewhat vague, “ambiguities can be clarified under modern
discovery procedures.” (Ibid.)
Any party, within the time allowed
to respond to a pleading may serve and file a notice of motion to strike the
whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule
3.1322(b).) The court may, upon a motion or at any time in its discretion and
upon terms it deems proper: (1) strike out any irrelevant, false, or improper
matter inserted in any pleading; or (2) strike out all or any part of any
pleading not drawn or filed in conformity with the laws of California, a court
rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a
pleading which is not essential to the claim is surplusage; probative facts are
surplusage and may be stricken out or disregarded”].)
“Liberality in permitting amendment
is the rule, if a fair opportunity to correct any defect has not been given.” (Angie
M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
Analysis
Defendant Robert Rosenbaum demurs to the First Amended Complaint (FAC)’s
causes of action for breach of fiduciary duty, fraud, interference with
contract, and financial elder abuse. Defendant also moves to strike certain
remedies, including emotional distress, prejudgment interest, treble damages and
punitive damages.
Fiduciary Duty
The elements for a breach of fiduciary duty cause of action are “the
existence of a fiduciary relationship, its breach, and damage proximately
caused by that breach.” (Thomson v. Canyon (2011) 198 Cal.App.4th 594,
604.) “‘The attorney-client relationship is a fiduciary relation of the very
highest character imposing on the attorney a duty to communicate to the client
whatever information the attorney has or may acquire in relation to the subject
matter of the transaction.’” (Slovensky v. Friedman (2006) 142
Cal.App.4th 1518, 1534.) “‘The scope of an attorney’s duty may be determined as
a matter of law based on the Rules of Professional Conduct which, ‘together
with statutes and general principles relating to other fiduciary relationships,
all help define the duty component of the fiduciary duty which an attorney owes
to his [or her] client.’’” (Id. at 1534-35.)
Generally, Defendant argues that Plaintiff failed to amend the
deficiencies with the initial complaint. Defendant asserts that there is no
alleged breach of fiduciary duty, and there are still insufficient facts
regarding proximate causation and damages. For instance, Defendant contends
that the allegations show that he refused to turn over the disputed
amount to Plaintiff, but not that he ever had custody, possession, or control
over any of those funds. Defendant notes that the rules of professional conduct
do not allow for the distribution of the funds in these circumstances.
The FAC alleges that Defendant has control over the disbursement
of the funds. The FAC alleges that Defendant has manufactured a dispute over a
certain portion of the funds by claiming a fee greater than the amount he is
entitled to under the retainer agreement. (FAC ¶¶ 7-11.) The funds cannot be
disbursed without written authorization from Lebowsky. (¶ 13.) Thus, causation
is alleged.
Defendant, in part, claims immunity from liability based upon Rule of
Professional Conduct 1.15, which provides a professional duty to “promptly
distribute any undisputed funds or property in the possession of the lawyer or
law firm* that the client or other person* is entitled to receive.” (CRPC Rule
1.15(d)(7).) Defendant reasons that because the funds are disputed, he does not
have to approve the disbursement of the funds. Notably, the rule further
provides:
(f) For purposes of
determining a lawyer’s compliance with paragraph (d)(7), unless
the lawyer, and the
client or other person* agree in writing that the funds or
property will
continue to be held by the lawyer, there shall be a rebuttable
presumption affecting the burden of proof as defined in
Evidence Code sections
605 and 606 that a
violation of paragraph (d)(7) has occurred if the lawyer, absent
good cause, fails to
distribute undisputed funds or property within 45-days of the
date when the funds
become undisputed as defined by paragraph (g). This
presumption may be
rebutted by proof by a preponderance of evidence that there
was good cause for
not distributing funds within 45 days of the date when the
funds or property
became undisputed as defined in paragraph (g).
(g) As used in this
rule, “undisputed funds or property” refers to funds or property, or a
portion of any such
funds or property, in the possession of a lawyer or law firm*
where the lawyer
knows* or reasonably should know* that the ownership interest
of the client or
other person* in the funds or property, or any portion thereof, has
become fixed and
there are no unresolved disputes as to the client’s or other
person’s*
entitlement to receive the funds or property.
(Emphasis added.)
Defendant asserts that because the funds are disputed, there would be no
duty to disburse the funds under his control. However, these rules only affect
the evidentiary burden in determining whether a lawyer violated the
professional duty found in rule 1.15(d)(7). The rules do not defeat the
allegations at the pleading stage, which are presumed true. The rule also
recognizes that a lawyer still has the independent duty to promptly resolve
the dispute, whether or not the presumption discussed in rule 1.15 applies. The
commentary explains that “[6] Whether or not the rebuttable presumption in
paragraph (f) applies, a lawyer must still comply will all other applicable
provisions of this rule. This includes a lawyer’s duty to take diligent
steps to initiate and complete the resolution of disputes concerning a client’s
or other person’s* entitlement to funds or property received by a lawyer.”
(Emphasis added.) As such, the FAC alleges Defendant violated his fiduciary
duties to Plaintiff by, at a minimum, falsely disputing the funds by demanding more
than the contingency fee and by delaying the payment process. It would be a
violation of counsel’s duties to his client to fabricate an illegitimate claim
to fees greater than the amount agreed-to in the parties’ retainer agreement. Additionally,
Defendants held the “non-disputed” portions of the settlement sum for five
months without justification. (FAC ¶ 18.) This delayed disbursement of undisputed funds was not prompt and could be
considered a violation of this rule.
Plaintiff alleges damages stemming from this illegitimate dispute,
including deprivation of the undisputed portion of the sum for a period of time
and deprivation of the disputed sum without a legitimate basis. (FAC ¶20.)
Thus, the claim is well-pled.
Accordingly, the demurrer is
OVERRULED as to this cause.
Fraud
The elements of fraud 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.” (Charnay v.
Cobert (2006) 145 Cal.App.4th 170, 184.) In California, fraud, including
negligent misrepresentation, must be pled with specificity. (Small v. Fritz
Companies, Inc. (2003) 30 Cal.4th 167, 184.) “The particularity demands
that a plaintiff plead facts which show how, when, where, to whom, and by what
means the representations were tendered.” (Cansino v. Bank of America
(2014) 224 Cal.App.4th 1462, 1469.)
Defendant argues that there are no
allegations that he made any false representations. However, the FAC alleges
the false representations with specificity, including intent and justifiable
reliance. On December 14, 2016, Defendant notified Plaintiff via email that he
intended to appear in the underlying matter and that Nagler and himself “plan
to share the fee you agree upon with him, and my involvement will not increase
the attorney’s fees you pay under the agreement with [Nagler]”. (FAC ¶ 9.) Under
that agreement, the fee would be, at most, 40% of Plaintiff’s gross recovery. (FAC
¶ 8.) However, Defendant refused to honor this representation, and now insists
that he be paid a 65% contingency fee. (¶ 11.) At the time Defendant made this
representation, he intended to demand attorneys’ fees greater than the
contingency fee, as part of a scheme to unduly influence and exploit Plaintiff to
take most of any settlement sum for himself. (¶ 25.) Defendant intended that
Plaintiff rely on the representation so that Plaintiff would not object to
Defendant rendering his services to Nagler. (¶ 27.) In justifiable reliance on
the representation, Plaintiff agreed to Defendant working as co-counsel with
Nagler in the underlying matter and not insist that the parties enter into a
separate written retainer agreement. (¶ 24.) Plaintiff suffered damages because
of the alleged reliance. (¶¶ 28-29.) Therefore, the fraud claim is well-pled.
Accordingly, the demurrer is
OVERRULED as to this cause of action.
Intentional Interference with a Contract
Defendant contends that the FAC
fails to plead the elements of intentional interference with a contract. To
allege a claim of intentional interference with contract, a plaintiff must
plead (a) a valid and existing contract, (b) knowledge of the contract and
intent to induce breach, (c) breach of contract, (d) breach caused by
defendant’s unjustified or wrongful conduct, and (e) damages. (Dryden v.
Tri-Valley Growers (1977) 65 Cal.App.3d 990, 995.)
The FAC alleges that Defendant knew
of the retainer agreement between Nagler and Plaintiff, which set the parties’
understanding of the contingency fee and the amount due thereunder. (FAC ¶ 32.)
Defendant intended to induce a breach of the Nagler retainer agreement by
compelling Plaintiff to pay an unconscionable fee to Defendant in excess of the
Nagler retainer. (FAC ¶ 34.) Defendant unjustifiably and wrongfully caused a
breach of the retainer agreement by inserting himself into the retainer
agreement with intent to demand outrageous payments from Plaintiff, and
cajoling Plaintiff into “agreeing” to confusing emails which he failed to
explain clearly to Plaintiff. (FAC ¶ 33.) Defendant deceived Plaintiff about
the meaning of certain emails to create the false impression that Plaintiff had
“agreed to” an unconscionable fee and to Defendant’s bad-faith attorneys’ lien.
(FAC ¶¶ 12, 33, 42.) Further, Defendant caused delays in payment under the
retainer agreement, which could be considered a breach of the retainer
agreement. Plaintiff pleads damages as discussed above. (FAC ¶ 37.)
Accordingly, the demurrer is
OVERRULED as to this cause of action.
Financial Elder Abuse
Defendant reiterates the same
arguments discussed above as to the financial elder abuse cause of action,
namely that the FAC fails to allege facts that Defendant took or has anything
belonging to Plaintiff. Financial elder
abuse occurs when a person takes the property of an elder for a wrongful use or
with intent to defraud or by undue influence. (Welf. & Inst. Code §
15610.30(a).) A person is deemed to have taken the property when he or she has
deprived an elder of any property right. (§ 15610.30(c).) Although bad faith or
intent to defraud is not required, wrongful use of property must still be
alleged. (Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th
522, 527-28.) “A person . . . shall be deemed to have taken . . . property for
a wrongful use if . . . the person . . .
takes . . . the property and the person
. . . knew or should have known that this conduct is likely to be harmful to
the elder . . ..” (§ 15610.30(b).)
The FAC alleges that Defendant attempted to charge an unconscionable fee
without a written fee agreement, attempted to deceive Plaintiff about the
meaning of certain emails to create the false impression that Plaintiff agreed
to an unconscionable fee, and made bad-faith claims about having a valid
attorneys’ lien. (FAC ¶ 24.) As discussed, Defendant has control over the
disbursement of the settlement funds and refused to disburse the funds. (FAC ¶
44.) As such, Defendant “deprived” Plaintiff of both the disputed and
undisputed settlement funds under the broad definition provided for in the
Elder Abuse Act, which constitutes financial elder abuse.
Accordingly, the demurrer is OVERRULED.
Motion to Strike
– Punitive damages
Defendant argues that Plaintiff has not pled any valid basis to maintain
a claim for punitive damages, including under Welfare and Institutions Code
section 15657.5 and Civil Code section 3294.
“In order to survive a motion to strike an allegation of punitive
damages, the ultimate facts showing an entitlement to such relief must be pled
by a plaintiff. [Citations.] In passing on the correctness of a ruling on a
motion to strike, judges read allegations of a pleading subject to a motion to
strike as a whole, all parts in their context, and assume their truth.
[Citations.] In ruling on a motion to strike, courts do not read allegations in
isolation. [Citation.]” (Clauson v. Superior Court (1998) 67 Cal.App.4th 1253,
1255.) “The mere allegation an intentional tort was committed is not sufficient
to warrant an award of punitive damages. [Citation.] Not only must there be
circumstances of oppression, fraud or malice, but facts must be alleged in the
pleading to support such a claim. [Citation.]” (Grieves v. Superior Ct.
(1984) 157 Cal.App.3d 159, 166, fn. omitted.)
The FAC alleges that Defendant engaged in acts of fraud. Civil
Code section 3294(c)(3) defines “Fraud” as “an
intentional misrepresentation, deceit, or concealment of a material fact known
to the defendant with the intention on the part of the defendant of thereby
depriving a person of property or legal rights or otherwise causing injury.” As
discussed above, Defendant intentionally misrepresented that his engagement
would not increase the fee beyond that set in the Nagler retainer, with the
intent to deprive Plaintiff’s full share of the settlement funds by exceeding the
Nagler retainer. (FAC ¶¶ 9-11, 24-27.) Similarly, the elder abuse claim is well
stated. Therefore, the claims for punitive damages and other enhanced remedies
under the Elder Abuse Act are supported.
Accordingly, the motion to strike is DENIED as to punitive damages.
Motion to Strike
– Treble Damages
Defendant moves to strike the request for treble damages under Civil Code
section 3345. This section relevantly states:
(a) This section shall apply only in actions
brought by, on behalf of, or for the benefit of those individuals specified in
paragraphs (1) to (3), inclusive, to redress unfair or deceptive acts or
practices or unfair methods of competition.
(1) Senior citizens [a person who is 65 years
of age or older]…
(b) Whenever a
trier of fact is authorized by a statute to impose either a fine, or a civil
penalty or other penalty, or any other remedy the purpose or effect of which is
to punish or deter, and the amount of the fine, penalty, or other remedy is
subject to the trier of fact's discretion, the trier of fact shall consider the
factors set forth in paragraphs (1) to (3),
inclusive, in addition to other appropriate factors, in determining the
amount of fine, civil penalty or other penalty, or other remedy to impose.
Whenever the trier of fact makes an affirmative finding in regard to one or
more of the factors set forth in paragraphs (1) to
(3), inclusive, it may impose a fine, civil penalty or other penalty, or
other remedy in an amount up to three times greater than authorized by the
statute, or, where the statute does not authorize a specific amount, up to
three times greater than the amount the trier of fact would impose in the
absence of that affirmative finding.
(1) Whether the defendant knew or should have
known that their conduct was directed to one or more senior citizens, disabled
persons, or veterans.
(2) Whether the defendant's conduct caused
one or more senior citizens, disabled persons, or veterans to suffer: loss or
encumbrance of a primary residence, principal employment, or source of income;
substantial loss of property set aside for retirement, or for personal or
family care and maintenance; or substantial loss of payments received under a
pension or retirement plan or a government benefits program, or assets
essential to the health or welfare of the senior citizen, disabled person, or
veteran.
(3) Whether one or more senior citizens,
disabled persons, or veterans are substantially more vulnerable than other
members of the public to the defendant's conduct because of age, poor health or
infirmity, impaired understanding, restricted mobility, or disability, and
actually suffered substantial physical, emotional, or economic damage resulting
from the defendant's conduct.
(Emphasis added.)
The FAC alleges sufficient facts to support a claim of treble damages
under this section. First, this action may be fairly described as an action
seeking to redress Defendant’s alleged unfair or deceptive acts or practices
against an elder. It is undisputed that Plaintiff is over the age of 65. (FAC ¶41.)
As noted, Defendant misrepresented to
Plaintiff the amount of fees he would charge as a part of his representation.
(FAC ¶¶9-11.) In addition, one or more of the above factors are pled.
Defendant was aware that Plaintiff was an elder. (FAC ¶41.) Plaintiff pleads
that his damages included assets essential to his welfare. (FAC ¶ 43.) Thus,
the court is not inclined to strike the requested relief.
Accordingly, the motion is DENIED.
Motion to Strike
– Emotional Distress
Defendant moves to strike the claim of emotional distress damages.
Defendant argues that Plaintiff essentially asks to insert a claim of
intentional infliction of emotional distress, which is unsupported.
However, emotional distress may be recovered in actions for fraud and
breach of fiduciary duty. Generally, one who willfully deceives another
with intent to induce him to alter his position to his injury or risk, is
liable for any damage which he thereby suffers. (Civ. Code §1709; see
also §3333 [torts, generally]; cf. Civ. Code §3343 [fraud in purchase, sale or
exchange of property].) Further, a plaintiff
is entitled to damages for all harm proximately caused by defendant's
breach of fiduciary duty under section 3333. (Michelson v. Hamada (1994)
29 Cal.App.4th 1566, 1582.)
That said, Defendant’s argument applies to the claim for contractual
interference. Damages for emotional distress are generally not available
for interference with contractual relations. (DiLoreto v. Shumake (1995)
38 Cal.App.4th 35, 38-39.) Emotional distress damages may only be awarded where
defendant's conduct is “extreme and outrageous” and the circumstances make it
objectively reasonable that plaintiff will suffer serious emotional
distress. (Id.) A defendant’s
conduct “‘must be so extreme as to exceed all bounds of that usually tolerated
in a civilized society.’” (Moncada v. West Coast Quartz Corp. (2013) 221
Cal.App.4th 768, 780.) “Behavior may be considered outrageous if a defendant (1)
abuses a relation or position which gives him power to damage the plaintiff’s
interest; (2) knows the plaintiff is susceptible to injuries through mental
distress; or (3) acts intentionally or unreasonably with the recognition that
the acts are likely to result in illness through mental distress.” (McDaniel
v. Gile (1991) 230 Cal.App.3d 363, 372.) The question of whether the
conduct is in fact outrageous is a question of fact to be determined beyond the
pleading stage. (So v. Shin¿(2013) 212 Cal.App.4th 652.) When reasonable
persons may differ, it is for the jury to determine whether particular conduct
has been sufficiently extreme and outrageous to result in liability.¿(Alcorn
v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 499.)
While Plaintiff does not make an
express claim of intentional emotional distress, Plaintiff does plead facts
which may support the emotional distress claim under the contractual
interference cause of action. Plaintiff alleges that Defendant disregarded the
agreed-upon contingency fee and demanded an “outrageous and unconscionable” sum
of money, and sent confusing correspondence to trick Plaintiff into agreeing to
his outrageous demands. (FAC ¶ 18.) Defendant exploited Plaintiff’s age and
exerted undue influence on Plaintiff in order to take the majority of the
Settlement Sum, in disregard for the wellbeing of his elderly client. (FAC ¶¶
26-27.) The above facts establish that Defendant abused a fiduciary position of
power over Plaintiff, against Plaintiff’s interest, while knowing of
Plaintiff’s elder status. Furthermore, Defendant took Plaintiff’s funds even
though they were “assets essential to his welfare.” (FAC ¶ 43.) Under such
facts, it could be objectively reasonable that plaintiff would suffer serious
emotional distress. Further, it would be a question of fact as to whether
Defendants’ conduct was sufficiently outrageous to justify recovery of
emotional distress damages.
Accordingly, the motion to strike is
DENIED.
Motion to Strike - Prejudgment interest
Plaintiff’s claim of prejudgment
interest is based on the breach of contract cause of action, which alleges a
sum certain. (FAC ¶¶50-51.) Thus, prejudgment interest is available. (Civ. Code
§ 3287(a).) Accordingly, the motion is DENIED.