Judge: Mark H. Epstein, Case: 23SMCV04284, Date: 2024-03-20 Tentative Ruling

Case Number: 23SMCV04284    Hearing Date: April 3, 2024    Dept: I

The demurrer is SUSTAINED WITH LEAVE TO AMEND.  This is one of three related cases involving legal work done by the Mashion firm and the underlying transaction.  Miles signed a retainer agreement, but there was allegedly an understanding that Viridity would either pay the law firm directly or reimburse Miles for the fees he paid.  Miles sues the firm for fraud.  All seem to agree that the suit is barred to the extent it is for malpractice by virtue of the one year statute of limitations.  However, fraud has a three year statute and can, in some cases, be an exception to a malpractice action.

The fraud alleged is that the firm never explained the effect of having Viridity pay Miles’s bills.  (Of course, that assumes that the agreement was for Viridity to pay directly rather than for it to reimburse Miles, but the court will so assume for these purposes.)  The Rules of Professional Conduct do not prohibit a third party from paying or being responsible for paying the client’s legal bill, but it does require informed written consent.  According to Miles, the firm never got informed written consent because the firm never explained the import of that agreement, although all parties seem to agree that Viridity paid the initial retainer and that everyone was aware of that fact.  But even if Viridity paid the initial retainer, that is not the equivalent of informed written consent—at least for pleading purposes.

But even with that assumption, there are a number of problems with that theory.  Specifically, Miles fails to allege with particularity at least three elements of the tort.  One is materiality: specifically, Miles never alleges why the explanation would be material under the facts of this case.  In other words, what is it that is material that the firm should have said but did not say?  Related to that is the question of reliance.  This is not reliance on Viridity’s agreement to pay, but rather reliance in that there was a consequence to that agreement about which Miles did not know but that if he had known, would have caused him to act differently.  And, finally, the court does not see the damages alleged.  How was Miles harmed by the firm’s failure to explain the import of Viridity’s purported promise given that the retainer agreement expressly obligates him to pay the firm?  All of those elements—materiality, reliance, and damage—are elements of a cause of action for fraud.  They are not alleged with anything remotely approaching specificity.  Because they are not alleged adequately, the cause of action must fail.

The operative complaint is the First Amended Complaint.  The court will give Miles leave to amend one more time within 30 days.  However, Miles is warned that leave to amend will likely not be given again, at least if the same problem persists.  The motion to strike is denied as MOOT.

The court is aware of the claim that the meet and confer was inadequate.  However, even assuming that to be the case, the failure to meet and confer is not a ground to deny the demurrer; all the court could do was to continue the matter to allow a meet and confer.  Doing so would serve no purpose here.  The court notes that the rule is not the same with regard to discovery motions.  The firm is also warned that it will need to conduct a real meet and confer.  The issue is specificity; if the firm requires more specificity, it should meet and confer with Miles to make that known and give Miles an opportunity to add detail.  The court makes that ruling because specificity is the type of deficiency that is often curable.  Because the court might well not give Miles another chance to cure if it must rule on a demurrer, it is vital that Miles give it the best shot now, and if there is a problem of which the firm is aware that can be cured, the firm needs to make it known before a demurrer is filed so that Miles can attempt to meet the problem.