Judge: Mel Red Recana, Case: 23STCV03810, Date: 2024-05-29 Tentative Ruling
Case Number: 23STCV03810 Hearing Date: May 29, 2024 Dept: 45
Hearing
date: May 29, 2024
Moving
Party: Defendants Ervin, Cohen &
Jessup, LLP and Reeve E. Chudd
Responding
Party: Plaintiff Jonathan Brodsky, as
Trustee of the Adco Trust
Demurrer
to First Amended Complaint
The Court
considered the moving papers, opposition, and reply.
The
demurrer is OVERRULED in its entirety.
Background
On
April 26, 2023, Plaintiff Jonathan Brodsky, as Trustee of the Adco Trust
(“Plaintiff”) filed the operative First Amended Complaint (“FAC”) against
Defendants Ervin, Cohen & Jessup, LLP; Reeve E. Chudd (“Defendants”); and
DOES 1 through 50, inclusive for: (1) Legal Malpractice; (2) Negligent
Misrepresentation; (3) Breach of Fiduciary Duty; and (4) Fraudulent
Concealment.
On
August 14, 2023, Defendants filed the instant Demurrer to FAC. On March 18,
2024, Plaintiff filed an opposition. On May 20, 2024, Defendants filed a reply.
Legal
Standard
“The primary function of a pleading is to give the other party notice so
that it may prepare its case [citation], and a defect in a pleading that
otherwise properly notifies a party cannot be said to affect substantial
rights.” (Harris v. City of Santa Monica (2013) 56 Cal.4th 203, 240.)¿
“A¿demurrer¿tests the legal sufficiency of the factual allegations in a
complaint.” (Ivanoff v. Bank of America, N.A.¿(2017) 9 Cal.App.5th 719,
725.) The Court looks to whether “the complaint alleges facts sufficient to
state a cause of action or discloses a complete defense.” (Id.) The
Court does not “read passages from a complaint in isolation; in reviewing a
ruling on a demurrer, we read the complaint ‘as a whole and its parts in their
context.’ [Citation.]” (West v. JPMorgan Chase Bank, N.A. (2013) 214
Cal.App.4th 780, 804.) The Court “assume[s] the truth of the properly pleaded
factual allegations, facts that reasonably can be inferred from those expressly
pleaded and matters of which judicial notice has been taken.” (Harris, supra,
56 Cal.4th p. 240.) “The court does not, however, assume the truth of
contentions, deductions or conclusions of law. [Citation.]” (Durell v. Sharp
Healthcare (2010) 183 Cal.App.4th 1350, 1358.)¿¿¿
¿ A general demurrer may be brought
under Code of Civil Procedure section 430.10, subdivision (e) if insufficient
facts are stated to support the cause of action asserted or under section
430.10, subdivision (a), where the court has no jurisdiction of the subject of
the cause of action alleged in the pleading. All other grounds listed in
Section 430.10, including uncertainty under subdivision (f), are special
demurrers. Special demurrers are not allowed in limited jurisdiction courts.
(Code Civ. Proc., § 92, subd. (c).)¿¿¿
¿ Leave to amend must be allowed where
there is a reasonable possibility of successful amendment. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 348.) The burden is on the complainant to
show the Court that a pleading can be amended successfully. (Id.)¿¿
Discussion
Meet and Confer
Prior to filing
a demurrer, the demurring or moving party is required to meet and confer with
the party who filed the pleading demurred to for the purposes of determining
whether an agreement can be reached through a filing of an amended pleading
that would resolve the objections to be raised in the demurrer. (Code Civ.
Proc., § 430.41.)¿¿¿
Here, Defendants
advance the declaration of Defendant Ervin Cohen & Jessup, LLP’s counsel of
record, Allan B. Cooper, attesting to the meet and confer efforts made in
regard to the issues raised in the demurrer. Cooper declares on August 9, 2023,
he met and conferred via Zoom teleconference with counsels for Plaintiff and
counsel for Defendant Chudd. (Cooper Decl., ¶2.) The parties discussed the
basis for the demurrer and Plaintiff’s counsel indicated that they would need
to speak with Plaintiff. (Id.) As of the date of the declaration, Cooper
has not received a response from Plaintiff’s counsels of record. (Id.)
Therefore, the
Court finds that Defendants sufficiently met and conferred prior to filing the
instant demurrer.
California Civil
Code section 1714.10
“No cause of
action against an attorney for a civil conspiracy with his or her client
arising from any attempt to contest or compromise a claim or dispute, and which
is based upon the attorney’s representation of the client, shall be included in
a complaint or other pleading unless the court enters an order allowing the
pleading that includes the claim for civil conspiracy to be filed after the
court determines that the party seeking to file the pleading has established
that there is a reasonable probability that the party will prevail in the
action.” (Civ. Code, § 1714.10, subd. (a).)
“Failure to
obtain a court order where required by subdivision (a) shall be a defense to
any action for civil conspiracy filed in violation thereof. The defense shall
be raised by the attorney charged with civil conspiracy upon that attorney’s
first appearance by demurrer, motion to strike, or such other motion or
application as may be appropriate. Failure to timely raise the defense shall
constitute a waiver thereof.” (Civ. Code, § 1714.10, subd. (b).) However, “[t]his
section shall not apply to a cause of action against an attorney for a civil
conspiracy with his or her client, where (1) the attorney has an independent
legal duty to the plaintiff, or (2) the attorney’s acts go beyond the
performance of a professional duty to serve the client and involve a conspiracy
to violate a legal duty in furtherance of the attorney’s financial gain.” (Civ.
Code, § 1714.10, subd. (c).)
In Klotz v.
Milbank, Tweed, Hadley & McCloy (2015) 238 Cal.App.4th 1339, Plaintiffs’
filed a complaint alleging breach of fiduciary duty, conspiracy in breach of
fiduciary duty, and legal malpractice. (Klotz v. Milbank, Tweed, Hadley
& McCloy (2015) 238 Cal.App.4th 1339, 1342-43 (Klotz).) The Klotz
court held “failure to obtain prefiling approval of conspiracy claims does not
warrant dismissal of other claims not requiring prefiling approval.” (Klotz,
supra, 238 Cal.App.4th at p.1349.) The court in Klotz reasoned that
there is no evidence the drafters of section 1714.10 intended such a
“gratuitously destructive” result. (Id.)
Defendants demur
to the entire FAC on the grounds that Plaintiff did not obtain the pre-filing
court approval before filing the original complaint pursuant to Civil Code
section 1714.10, subdivision (a).
Here, Civil Code
section 1714.10 applies to civil conspiracy claims only. Although the FAC makes
allegations that Defendants conspired with former Trustee, Robert Kory, neither
the original complaint nor the FAC actually assert a civil conspiracy cause of
action. Like in Klotz, Plaintiff asserts causes of action for breach of
fiduciary duty and legal malpractice. Furthermore, Plaintiff asserts causes of
action for negligent misrepresentation, aiding and abetting breach of fiduciary
duty, and fraudulent concealment. As such, Plaintiff was not required to obtain
pre-filing court approval before filing the original complaint nor the FAC.
Even if Plaintiff’s claims were to be considered civil conspiracy claims
against Defendants, Plaintiff still would not have needed to obtain a
pre-filing order because Defendants owed an independent legal duty to Plaintiff
not to defraud them as nonclients per Civil Code section 1714.10, subdivision
(c). (See Klotz v. Milbank, Tweed, Hadley & McCloy (2015) 238
Cal.App.4th 1339, 1351 [“an attorney has an independent legal duty to refrain
from defrauding nonclients.”]) The entire FAC alleges that Defendants defrauded
Plaintiff.
Therefore, the
demurrer to the entire FAC on the basis of Civil Code section 1714.10 is
OVERRULED.
First
Cause of Action for Legal Malpractice
Defendants demur to the first cause of action on
the grounds that (1) it is barred by statute of limitations under Code of Civil
Procedure section 340.6; and (2) it fails to state facts sufficient to
constitute a cause of action.
Code of Civil Procedure section
340.6, subdivision (a) states in relevant part, “[a]n action against an
attorney for a wrongful act or omission, other than for actual fraud, arising
in the performance of professional services shall be commenced within one year
after the plaintiff discovers, or through the use of reasonable diligence should
have discovered, the facts constituting the wrongful act or omission, or four
years from the date of the wrongful act or omission, whichever occurs first.”
(Code Civ. Proc., § 340.6, subd. (a).) However,
“[e]xcept for a claim for which the plaintiff is required to establish
the plaintiff’s factual innocence, the time for commencement of legal action
shall not exceed four years except that the period shall be tolled during the
time [if]…[t]he attorney continues to represent the plaintiff regarding the
specific subject matter in which the alleged wrongful act or omission
occurred.” (Code Civ. Proc., § 340.6, subd. (a)(2).) Furthermore, “Successor
trustees may only avail themselves of tolling under section 340.6, subdivision
(a)(2), for as long as the attorney continuously represents a predecessor
trustee on matters of trust administration. This tolling is premised on the
ability of successor trustees to stand in their predecessor's shoes in matters
of trust administration.” (Kelly
v. Orr (2016) 243
Cal.App.4th 940, 947-48.)
“To prove a legal malpractice cause of action, the plaintiff must show:
(1) a duty by the attorney to use such skill, prudence and diligence as members
of his or her profession commonly possess and exercise; (2) breach of that
duty; (3) a proximate causal connection between the breach and the resulting
injury; and (4) actual loss or damage resulting from the attorney's negligence.”
(Redante v.
Yockelson (2003) 112
Cal.App.4th 1351, 1356.)
Here, the FAC alleges that Plaintiff discovered Defendants fraud and
deceptions on July 11, 2022. (FAC ¶9.) The FAC further alleges Defendants
represented Kory, as Trustee of the Adco Trust from February 27, 2013 through
July 11, 2022. (FAC ¶5.) Moreover, the original complaint was filed on February
21, 2023, which is before the one year statute of limitations would have
expired. Even if Plaintiff did not file the original complaint within the one
year statute of limitations, Plaintiff availed himself to the tolling of the
statute of limitations on this cause of action because the FAC alleges
Defendants continuous representation of Kory in regard to the alleged wrongful
act or omission that is the subject of the present lawsuit and Plaintiff
succeeded Kory as Trustee of the Adco trust. Additionally, the FAC states
sufficient facts to support a cause of action for legal malpractice.
Specifically, the FAC alleges Defendants legally represented Plaintiff. (FAC
¶36.) The FAC also alleges Defendants owed Plaintiff a duty to perform legal
services within the applicable standard of care for estate and probate lawyers
practicing in California, Defendants breached that duty in connection with
administration of the LCFT and Adco Trust, and Defendants breach was the direct
and proximate cause of damages to Plaintiff in the amount not exceeding
$9,000,000.00. (FAC ¶¶62-67.)
Therefore, the demurrer as to the first cause of action is OVERRULED.
Second
Cause of Action for Negligent Misrepresentation
Defendants demur to the second cause of action on the grounds that (1)
it is barred by statute of limitations under Code of Civil Procedure section
338, subdivision (d); and (2) it fails to state facts sufficient to constitute
a cause of action.
Code of Civil Procedure section 338,
subdivision (d) states in relevant part, “[a]n action for relief on the ground
of fraud or mistake” must be filed within three years. (Code Civ. Proc., § 338,
subd. (d).) However, [t]he cause of action in that case is not deemed to have
accrued until the discovery, by the aggrieved party, of the facts constituting
the fraud or mistake.” (Id.)
“The elements of negligent misrepresentation are ‘(1) the
misrepresentation of a past or existing material fact, (2) without reasonable
ground for believing it to be true, (3) with intent to induce another's
reliance on the fact misrepresented, (4) justifiable reliance on the
misrepresentation, and (5) resulting damage.’” (National Union Fire Ins. Co. of Pittsburgh, PA v.
Cambridge Integrated Services Group, Inc.(2009) 171 Cal.App.4th 35, 50.)
As discussed above, the FAC alleges that Plaintiff discovered
Defendants purported fraud on July 11, 2022, which is a one year before the
original complaint was filed. Thus, the negligent misrepresentation claim is
not barred by the applicable statute of limitations. Furthermore, the FAC
states facts sufficient to support a cause of action for negligent misrepresentation.
The FAC realleges and incorporates by reference the allegations of Paragraphs
1-58. (FAC ¶68.) The FAC further alleges Defendants represented to Adam Cohen that
they were acting in the best interests of Plaintiff and the other beneficiaries
of LCFT, Leonard executed a Restatement document, Kory was validly the Trustee of LCFT, the
Restatement and Acceptance of Trustee document had force and effect, and a
scrivener’s error had been made to the Third Amendment. (FAC¶70.) The FAC
further alleges Defendants had no reasonable grounds for believing the
representations to be true, made the representations with the intent to induce
Plaintiff’s reliance, Plaintiff justifiably relied on these representations,
and Defendants’ conduct resulted on damages to Plaintiff. (FAC ¶¶71-75.)
Therefore, the demurrer as to the second cause of action is OVERRULED.
Third
Cause of Action for Breach of Fiduciary Duty
Defendants demur to the third cause of action on the grounds that (1)
it is barred by statute of limitations under Code of Civil Procedure section
343; and (2) it fails to state facts sufficient to constitute a cause of
action.
Code of Civil Procedure section 343
states in relevant part, “[a]n action for relief not hereinbefore provided for
must be commenced within four years after the cause of action shall have
accrued.” (Code Civ. Proc., § 343.)
“The elements of a claim for breach of fiduciary duty are (1) the
existence of a fiduciary relationship, (2) its breach, and (3) damage
proximately caused by that breach.” (O’Neal
v. Stanislaus County Employees’ Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215 [internal
quotations omitted].)
As discussed above, the original complaint was filed on February 21,
2023, thus this action is not time barred. Furthermore, the FAC states
sufficient facts to support a cause of action for breach of fiduciary duty. The
FAC alleges Defendants represented Plaintiff as its trust and estate attorneys.
(FAC ¶36.) The FAC also alleges Defendants represented Kory in his capacity as
Trustee of Adco. (FAC ¶78.) The FAC also alleges as a result of Defendants
legal representative role they owed a fiduciary duty to Plaintiff, Defendants
breached their fiduciary duties, and as a result of their breach proximately
caused damage to Plaintiff. (FAC ¶¶79-83.)
Therefore, the demurrer to the third cause of action is OVERRULED.
Fourth
Cause of Action for Aiding and Abetting Breach of Fiduciary Duty
Defendants demur to the fourth cause of action on the grounds that (1)
it is barred by statute of limitations under Code of Civil Procedure section
343; and (2) it fails to state facts sufficient to constitute a cause of
action.
“The elements of a claim for aiding and abetting a breach of fiduciary
duty are: (1) a third party's breach of fiduciary duties owed to plaintiff; (2)
defendant's actual knowledge of that breach of fiduciary duties; (3)
substantial assistance or encouragement by defendant to the third party's
breach; and (4) defendant's conduct was a substantial factor in causing harm to
plaintiff. ” (Nasrawi
v. Buck Consultants LLC (2014)
231 Cal.App.4th 328, 343.)
As explained above, the original complaint was timely filed. Here, the
FAC states sufficient facts to support the second cause of action. The FAC
alleges Kory’s claim to be a valid Trustee for LCFT was false. (FAC ¶97.) The
FAC further alleges Kory was able to remain as Trustee of LCFT due to the aid
of Defendants in forging the Third Amendment to the LCFT and creation of
fraudulent Acceptance. (Id.) The FAC also alleges Defendants acted with the
knowledge that Kory was breaching his fiduciary duties. (FAC ¶¶1-58, 77-91.)
The FAC also alleges Defendants’ conduct was a substantial factor in causing
damage and harm to Plaintiff. (FAC ¶98.)
Therefore, the demurrer as to the fourth cause of action is OVERRULED.
Fifth
Cause of Action for Fraudulent Concealment
Defendants demur to the fifth cause of action on the grounds that (1)
it is barred by statute of limitations under Code of Civil Procedure section
338, subdivision (d); and (2) it fails to state facts sufficient to constitute
a cause of action.
“The required elements for fraudulent concealment are (1) concealment
or suppression of a material fact; (2) by a defendant with a duty to disclose
the fact to the plaintiff; (3) the defendant intended to defraud the plaintiff
by intentionally concealing or suppressing the fact; (4) the plaintiff was
unaware of the fact and would not have acted as he or she did if he or she had
known of the concealed or suppressed fact; and (5) plaintiff sustained damage
as a result of the concealment or suppression of the fact. [Citation.]” (Hambrick v. healthcare Partners
Medical Group, Inc. (2015)
238 Cal.App.4th 124, 162.)
As previously discussed, the FAC is not time barred by the statute of
limitations set forth in Code of Civil Procedure section 338, subdivision (d). Here,
the FAC state sufficient facts to support a claim for fraudulent concealment.
The FAC alleges Defendants had a duty to disclose material facts to Plaintiff
and to act in Plaintiff’s best interest. (Fac ¶¶1-58, 77-91, 96-98.) The FAC
further alleges Defendants concealed their conduct, misstatements, fabrication
of records, billing abuses and excuses, from Plaintiff knowing they were false.
(FAC ¶100.) The FAC also alleges Defendants concealed these facts from
Plaintiff with the intent to defraud Plaintiff. (FAC ¶101.) The FAC also
alleges Plaintiff was unaware of concealment until July 11, 2022. (FAC ¶9.) The
FAC further alleges Defendants’ concealment of material facts caused Plaintiff
damages not limited to $9,000,000.00. (FAC ¶103.)
Therefore, the demurrer as to the fifth cause of action is OVERRULED.
It
is so ordered.
Dated: May 29, 2024
_______________________
MEL RED RECANA
Judge of the
Superior Court