Judge: Mark H. Epstein, Case: 20SMCV00509, Date: 2023-01-18 Tentative Ruling

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Case Number: 20SMCV00509    Hearing Date: January 18, 2023    Dept: R

The motion to strike is GRANTED.

Plaintiff Mark D. Sachar, individually and as Trustee of the Mark Sachar Trust, dated October 27, 2011, as well as derivatively on behalf of various LLC and Partnership entities (“Mark”) sued defendants Barbara Bentley, the LLC and Partnership Entities, and others for disputes over a family trust and how it has been operated. Included as defendants are Victor Crisostomo, Dor, Crisostomo, Dor & Dow, and VM Crisostomo Accountancy Corp. (collectively “the Accountant defendants”).  The Accountant defendants have filed a motion to strike portions of the Third Amended Complaint (“TAC”) that seek attorneys’ fees under the tort of another doctrine.  Mark opposes.  (The court uses first names because of the duplicative surnames; no disrespect is intended.)

Preliminarily, a motion to strike a request for damages is not procedurally improper.  This sort of remedy is one of the few available means to excise a portion of a cause of action early on in the case that requests improper damages.  The court now turns to the merits.

“Ordinarily, pursuant to the American rule, a party must pay for its own attorney fees unless a contract or statute provides authority for recovery of attorney fees from a litigation opponent. The tort of another doctrine holds that ‘[a] person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney's fees, and other expenditures thereby suffered or incurred.’  (Prentice v. North American Title Guaranty Corp. (1963) 59 Cal.2d 618, 620.)  The tort of another doctrine is not really an exception to the American rule, but simply ‘an application of the usual measure of tort damages.’  (Sooy v. Peter (1990) 220 Cal.App.3d 1305, 1310 [equating recovery of attorney fees as damages to medical fees recovered in personal injury action]; see § 3333 [‘the measure of damages . . . is the amount which will compensate for all the detriment proximately caused thereby, whether it could have been anticipated or not’].)”  (Mega RV Corp. v. HWH Corp. (2014) 225 Cal.App.4th 1318, 1337–1338, parallel citations omitted.)

Mark requests damages pursuant to this doctrine, claiming that the Accountant defendants’ breach of their fiduciary duties to him caused him to enter into onerous, one-sided agreements with his sister Barbara.  Those agreements allegedly deprived Mark of his rights and he claims that he had to sue his sister to protect said rights and mitigate his damages.  However, as the Accountant defendants point out, Mark alleges a relationship between the Bentley defendants (the Bentley defendants are essentially those related to Mark) and the Accountant defendants.  As the Court of Appeal held in a case in which the parties were somewhat similarly situated, “The biggest problem with this claim, however, as contractor asserts in its supplemental letter brief, is that the tort of another doctrine does not apply to the situation where a plaintiff has been damaged by the joint negligence of codefendants.  Vacco Industries, Inc. v. Van Den Berg, supra, 5 Cal.App.4th 34:  ‘The rule of Prentice was not intended to apply to one of several joint tortfeasors in order to justify additional attorney fee damages.  If that were the rule there is no reason why it could not be applied in every multiple tortfeasor case with the plaintiff simply choosing the one with the deepest pocket as the “Prentice target.”  Such a result would be a total emasculation of Code of Civil Procedure section 1021 in tort cases.’”  (Gorman v. Tassajara Development Corp. (2009) 178 Cal.App.4th 44, 80, parallel citations omitted.)  For that reason, the doctrine is of limited application.  It is often used in the context of an interference tort, which illustrates the theory.  Assume that two parties have a contract for plaintiff to buy land from another.  Assume further that the defendant tortfeasor interferes with that contract such that the seller refuses to perform, thereby threatening or breaching the contract with plaintiff.  As a result, the buyer is forced to sue the seller to enforce the contract.  The buyer then sues the interfering tortfeasor.  The damages will include the attorneys’ fees that were expended in suing the seller to enforce the contract because but for the tortious interference, the seller would have honored the contract without suit; the interference caused—as an element of damages—the plaintiff to hire an attorney and pay the attorney in the suit against the seller.  The defendant—being sued for interference—is not a co-tortfeasor with the seller.  Indeed, the seller is not a tortfeasor at all but rather a party to a contract.  The damages caused by the interference are precisely the fees expended to enforce the contract.  (Note that the plaintiff’s fees for prosecuting the interference tort are not recoverable.)  Thus, the interfering defendant is the “another” who committed the “tort of” interference and thus will have to pay as damages the fees incurred in the other suit to enforce the contract.

Here, there is a relationship between the Accountant defendants and the Bentley defendants.  The Bentley defendants (and in fact, Mark as well) had retained the Accountant defendants.  “The Accountancy Defendants represented all of the members the various entities and trusts that were created by members of the Sachar family, as well as all the members of the Sachar family individually, which included Dad, Mom, Barbara, and Mark, as well as Mark’s wife, Pat. The tax and accounting services and advice they provided to the Sachar family members and the entities and trusts created by them, included assistance in the formation of the Trusts and other estate planning vehicles, including the Family Partnership and LLCs, as well as ongoing accounting, business and tax advice and representation.  In addition, as alleged more fully below, Victor voluntarily assumed the role of intermediary and moderator between Mark, Barbara and Victor.”  (TAC, ¶59.)  This is, in essence, a principal/agent relationship between the two sets of defendants (and Mark).

For purposes of “tort of another” doctrine, an employee/employer or principal/agent are not bona fide third parties to one another.  (See Golden West Baseball Co. v. Talley (1991) 232 Cal.App.3d 1294, 1302, disapproved on other grounds, Reid v. Google, Inc. (2010) 50 Cal.4th 512).  “Where a party brings suit against an employer based upon the fraud of an employee, the injured party cannot recover the attorney's fees incurred in that action in a subsequent action against the employee where the employee acted within the course and scope of his or her employment and not for personal benefit.”  (Miller & Starr (4th ed.) 12 Cal. Real Est. § 40:66, Recovery of fees as damages for tort of another.)

In Golden West, the plaintiff baseball club initially sued a city in a contract dispute over what use could be made of the parking lot at Anaheim Stadium. (Golden West, supra, 232 Cal.App.3d at pp. 1298-1299.)  Golden West later sued the city manager in a separate action, alleging he had misrepresented certain facts to it while negotiating with a football team about possible alternative uses of the parking lot. (Id. at p. 1297.)  Golden West claimed the city manager's misrepresentations necessitated its lawsuit against the city, and therefore the third party tortfeasor doctrine applied.  (Id. at p. 1302.)  But, on an issue of first impression at the time, the court held that attorneys' fees were not recoverable because the city manager was acting as a representative of the city, and therefore the suit against the city could not be considered one against a “third party” for purposes of recovering attorneys' fees.  (Ibid.)

This [tort of another] doctrine “allows a plaintiff attorney fees if he is required to employ counsel to prosecute or defend an action against a third party because of the tort of the defendant.”  (Grey v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505, italics added; see Rest.2d Torts, § 914, subd. (2).) Golden West claims it was forced to employ counsel to prosecute the Parking Lot Action because of Talley's misrepresentations. The italicized portion of the quotation from Gray, however, frames the question we must answer here: Is the relationship between Talley and the City such that the City can be considered a third party?

The trial court found this question to be one of first impression in California, and our research has confirmed that fact.  Issues of first impression often present close questions, but we believe the facts of this case lead to an obvious conclusion.  Golden West has conceded, as it must, that Talley acted as a representative of the City during all the negotiations concerning the lease.  Further, Golden West offered no evidence that Talley acted outside the scope of his employment with the City at any relevant time.  (See part II of this opinion, post.)  Golden West never even presented a theory as to how Talley's interests could possibly be divergent from those of the City.  Under these circumstances we hold that an employee cannot be sued under the ‘tort of another’ doctrine to recover attorneys' fees incurred in an action against the employer unless it is shown the employee was not acting on behalf of the employer.

(Id. at p. 1302.)

Based on this and similar authority, the court believes the relationship alleged between the Accountant defendants and Bentley defendants is too close because they allegedly acted together to cause the same harm in tort.  “Barbara, with the aid of the Lawyer Defendants and Accountancy Defendants, also defrauded Mark out of his real estate assets.”  (TAC, ¶ 26.)  There are no allegations that the Accountant defendants acted in their own self-interest.  Similarly, in Golden West the court held that “Golden West also attempts to rely on cases where the employee or agent was clearly not acting on behalf of the employer or principal.  For example, in Howard v. Schaniel (1980) 113 Cal.App.3d 256, plaintiff prevailed against a seller in a quiet title action and then successfully sued the seller's broker for the attorneys' fees incurred in the quiet title action.  However, the broker in Howard was found to have ‘acted on his own behalf, without the knowledge of [the seller] and not in [the seller's] best interests; . . .’  (Id. at p. 261.)  Similarly, in Phil Crowley Steel Corp. v. Sharon Steel Corp. (8th Cir. 1986) 782 F.2d 781, the court specifically found that a parent corporation's conduct was contrary to the interests of a subsidiary; thus, attorneys' fees were recoverable against the parent where it had interfered with a plaintiff's contract against the subsidiary.  (Id. at p. 784.)  In the present appeal, however, Talley's conduct was clearly in harmony with the interests of the City. Under these circumstances, the ‘tort of another’ doctrine cannot apply.”  (Golden West, supra, 232 Cal.App.3d at p. 1303, parallel citations omitted.)

Mark explicitly alleges that the Accountant defendants acted on Barbara’s behalf and in their own self-interest because she paid their bills: “Barbara set out to acquire 100% of the Family’s cumulated wealth for herself, by whatever means necessary.  She was successful only because she had the knowing and willful assistance of the Lawyer Defendants and the Accountancy Defendants, in whom Mark had complete trust and confidence based upon their longstanding relationships.  Their web of interrelated breaches of fiduciary duty and pattern of disloyalty and dishonesty to all but Barbara, who was the one paying their bills is a horrific example of the product of greed - Barbara’s, the Lawyer Defendants, and the Accountancy Defendants.  Defendants, and each of them, should be forced to fully compensate the Plaintiffs for all their damage, to disgorge any profits they made, and to be punished to the fullest extent the law allows.”  (TAC, ¶72.)  That is not enough to invoke the doctrine.  To the contrary, it shows why the doctrine does not apply: Barbara and the Accountant defendants were acting as co-tortfeasors.

Thus, the defendants were all alleged co-joint tortfeasors.  They are alleged to have worked together during which they all breached their independent fiduciary duties to Mark in order to assist Barbara in depriving Mark of his assets.  As the Court of Appeal put it in Vacco, “The pleadings and the evidence demonstrated that Van Den Berg and Eastlack, working together with their newly acquired corporate vehicle, Kamer, jointly committed the tortious acts of which Vacco complained.  There is nothing about their relationship or their conduct that justifies singling out Van Den Berg as the one whose conduct caused Vacco to have to prosecute a legal action against the other two.  Yet, this is the justification which Vacco offers for the imposition of Prentice fees against Van Den Berg.  The rule of Prentice was not intended to apply to one of several joint tortfeasors in order to justify additional attorney's fee damages.”  (Vacco Industries, Inc. v. Van Den Berg (1992) 5 Cal.App.4th 34, 57.)  As was the case in Vacco, the tort of another doctrine does not apply in this situation.

The motion is GRANTED.