Judge: Mark V. Mooney, Case: 20STCV47167, Date: 2022-10-13 Tentative Ruling
Case Number: 20STCV47167 Hearing Date: October 13, 2022 Dept: 68
20STCV47167 Pellitteri v. Krane & Smith APC
TENTATIVE RULING:
MOTION OF DEFENDANTS TO REQUIRE PLAINTIFF
PROGRESSIVE CONSULTING SERVICES, INC. TO POST AN UNDERTAKING:
Defendants ask this Court to require Plaintiff Progressive Consulting Services, Inc. a Nevada Corporation, (“PCS”) to post a bond for costs pursuant to Code Civ. Proc., § 1030.
The Court GRANTS Defendants motion requiring
Progressive Consulting Services, Inc. to post an undertaking in the reduced
amount of $33,350 (rather that $43,350 as requested by moving party).
Legal Standard
“When the plaintiff in an action or special proceeding
resides out of the state, or is a foreign corporation, the defendant may at any
time apply to the court by noticed motion for an order requiring the plaintiff
to file an undertaking.” (Code Civ. Proc., § 1030(a).) The plaintiff,
however, will not be required to file an undertaking unless “there is a
reasonable possibility that the moving defendant will obtain judgment in the
action or special proceeding.” (Id., § 1030(b).) The motion
must be accompanied by an affidavit stating the nature and amount of costs and
attorney’s fees the defendant has incurred and expects to incur. (Ibid.)
“If the court,
after hearing, determines that the grounds for the motion have been
established, the court shall order that the plaintiff file the undertaking in
an amount specified in the court’s order as security for costs and attorney’s
fees.” (Code Civ. Proc., § 1030(c).)
If the motion is granted and the plaintiff fails to file
the undertaking within the time allowed, the plaintiff’s action or special
proceeding shall be dismissed as to the defendant in whose favor the order
requiring the undertaking was made. (Code Civ. Proc., §1030(d).) “The determinations of the court under this section have
no effect on the determination of any issues on the merits of the action or
special proceeding and may not be given in evidence nor referred to in the
trial of the action or proceeding.” (Id., §1030(f).)
Discussion
Defendants must
show Plaintiff is an out-of-state corporation, that Defendants have a “reasonable
possibility” of obtaining judgment against Plaintiff, and that the amount of
their request is justified.
Plaintiff’s
Residency
The parties do
not dispute that PCS is a Nevada corporation. Thus, the residency requirement
is satisfied.
Reasonable
Possibility of Judgment
Plaintiffs’ action
is for (1) Legal Malpractice, (2) Breach of Fiduciary Duty, and (3) Breach of
Contract. All claims arise out of the
representation of Pelletteri by Defendants in a case known as Pellitteri v.
Wellquest, LASC BC490541. Plaintiff PCS
was not a party to that action. Nor was
it a party to the initial written retainer agreement between Defendants and
Marcia, Jospeh and Robert Pellitteri. The action was litigated for a number of
years based on the factual assertion by Plaintiff Marsha Pelletteri that she
was an assignee of the rights under the contract between Wellquest and PCS. That position is inconsistent with the
assertion that PCS had rights which were harmed by Defendants’ failings.
Defendants have
shown that they have a meaningful probability of obtaining judgment against
PCS.
Defendants
argue that PCS had nothing to gain in the underlying lawsuit and was not
damaged by the underlying lawsuit, as its rights belonged to Pelletteri.
Plaintiff responds that PCS lost a potential reward of royalties it was due,
and Defendants failed to inform Pelliterri that she could be liable for
attorneys fees if she lost the underlying lawsuit.
As a threshold
matter, Plaintiff argues that Defendants’ motion fails because it fails to
address Plaintiff’s causes of action for breach of fiduciary duty and breach of
contract. However, in their moving papers Defendants acknowledge each cause of
action brought against them and proceed to make arguments that—while presented
in the context of legal malpractice—sufficiently explain why they have a reasonable
possibility of succeeding on all the causes of action brought by PCS.
It is
noteworthy that PCS was not a party to the initial retainer agreement, and was
not named in the lawsuit. Instead,
Pelletteri, claiming to be the sole shareholder of PCS, litigated the case
claiming that she, not PCS, was the holder of the rights under the Wellquest
contract. PCS was not a represented
party until years into the litigation.
PCS is unable
to show how it was damaged in the underlying lawsuit. The award of attorneys
fees was made against Pellitteri—not PCS. Therefore, PCS suffered no monetary
damages.
Furthermore, PCS
is unable to show how it lost out on a potential judgment for royalties owed
from Wellquest. Plaintiff argues that Defendants failed to ascertain whether
there was a written or oral contract assigning PCS’s rights under the royalty
agreement with Wellquest to Pellitteri. However, this only affected
Pellitteri’s standing to sue in the underlying lawsuit—not PCS’s. Plaintiff
also argues that Defendants failed to add PCS as a plaintiff to the underlying
lawsuit. But Defendants were informed by Pelletteri that it was she, not PCS,
that held the rights under the contract.
In that same lawsuit Pellitteri was alleging that PCS assigned all of
its rights to her. Pelletteria controlled
the litigation. Therefore, it would have
been impossible for PCS to recover an award of royalties from Wellquest, as the
rights to those royalties allegedly belonged to Pellitteri.
Because
Plaintiffs cannot show how Defendants caused PCS to either suffer damages or
lose a potential judgment in its favor in the underlying action, Defendants
have shown a reasonable possibility of obtaining a judgment against PCS in this
action.
Given the sworn
evidence from Pellitteri, sole shareholder of PCS, that she, not PCS, owned the
rights upon which she predicated her own suit against Wellquest, Defendants
have a reasonable probability of prevailing in this case against PCS.
For the
purposes of this motion, the Court does not concern itself with whether
Defendants have shown a possibility of prevailing against Pellitteri because Defendants’
motion does not seek to require Pellitteri to post an undertaking.
Plaintiff’s
first sentence in their Opposition states that the motion seeks to have both
Pellitteri and PSCS post an undertaking for costs. Not true.
The Motion seeks to have an undertaking for PCS only. This decision has no effect on the determination of any issues on the
merits of the action and may not be given in evidence nor referred to at trial.
Amount of
Undertaking
Defendants must
justify the amount of the undertaking with affidavits stating the nature and
amount of costs it expects to incur.
Here,
Defendants only seek an undertaking for costs and not attorneys fees. They
present the declaration of Kenny Brooks who states over the course of a single
paragraph why Defendants expect to incur $43,350 in costs. According to Mr. Brooks,
Defendants expect to incur $2,500 in expert witness fees, $7,200 in court
reporter fees for trial, $2,000 in motion and filing fees, $1,500 in exhibit
fees, and $30,000 in deposition fees. (Brooks Decl. ¶ 2.) The only justification
Mr. Brooks provides for the $30,000 in deposition fees is a short sentence
indicating that Defendants expect 5 depositions at $6,000 per deposition.
The Court finds
this figure to be inflated. Defendants present no documentation, receipts, estimates,
or invoices detailing their calculations. As a result, the Court is left to
make its own determination pursuant to its authority under Code of Civil
Procedure section 1030(c).
Accordingly, the Court requires Plaintiff PCS to post an undertaking of $33,350.