Judge Michael P. Linfield, Case 21STCV46412 2022-08-03 Tentative Ruling

Judge: Michael P. Linfield, Case: 21STCV46412, Date: 2022-08-03 Tentative Ruling

Moving Party: Plaintiffs/Cross-Defendants Noah Meiner, Lennifer Hilliard, and Sandra Wilson (collectively “Meiner”)

Resp. Party: Cross-Complainants/ Defendants Gregory Walston, and Walston and Associates dba The Walston Law Group (collectively “Walston”)

Plaintiffs/Cross-Defendants Noah Meiner, Lennifer Hilliard, and Sandra Wilson’s Demurrer to the Sixth Cause of Action for Express Breach of Contractual Duty to Defend and/or to Pay Defense Costs from the Outset in Cross-Complainants/ Defendants Gregory Walston, and Walston and Associates dba The Walston Law Group’s First Amended Cross-Complaint is SUSTAINED without leave to amend.

During oral argument, Walston’s attorney indicated that the demurrer was moot because Walston had just filed a dismissal as to the Meiner plaintiffs. Counsel argued that the Court therefore should not issue its ruling sustaining the demurrer without leave to amend.

There are two problems with Walston’s attorney’s argument. First, the request for dismissal was filed at 8:20 am this morning. Counsel admitted in oral argument that it was filed after they had read the Court’s tentative sustaining the demurrer. The dismissal has not yet been entered; the request for dismissal was received by the Court at 8:20 a.m. this morning, but as of the time of this ruling, the Meiner plaintiffs have not yet been dismissed.

Second, the Court is concerned that Walston and/or its counsel is playing games with the Court. Walston had no problem opposing the demurrer on its merits, and having the Court and its staff spend more than 10 hours analyzing this demurrer. Only after Walston learned that the Court was inclined to sustain the demurrer, did they move to dismiss the plaintiffs in order to moot the demurrer.

Clients (Meiner) file a legal malpractice claim against their attorneys. The defendant attorneys then file a cross-complaint against another attorney (Walston) with whom they were associated as partners or co-counsel at the time the malpractice allegations arose. Walston then turns around and sues the original client plaintiffs to require them (in the sixth cause of action) to pay the cost of the Walston’s defense. Walston’s cross-complaint is based on an indemnification agreement between Walston and the plaintiff clients.

This demurrer raises the question: can this cause of action requiring the client to pay the costs of the attorneys’ defense go forward? The answer is: No.

On December 21, 2021, Plaintiffs Noah Meiner, Lennifer Hilliard, and Sandra Wilson filed a complaint against Defendants Robin Amelia Sheehan, Brian Morgan Heit, Matthew Jacob Feaver, and Heit Law Group alleging the following causes of action:

On January 25, 2022, Defendants and Cross-Complainants Robin Amelia Sheehan, Matthew Jacob Feaver, Brian Morgan Heit, and Heit Law Group filed a cross-complaint against Cross Defendants Gregory Walston, and Walston & Associates dba The Walston Law Group alleging the following causes of action:

On April 21, 2022, Cross Defendants/ Cross-Complainants Gregory Walston and Walston and Associates dba the Walston Law Group filed a cross-complaint against Cross Defendants General Star Insurance Company, Robin Amelia Sheehan, Jay Fink, Noah Meiner, Lennifer Hilliard, and Sandra Wilson alleging the following causes of action:

2. Contractual and Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing

3. Unfair Business Practices under Business and Professions Code §§ 17200 et seq.

6. Express Breach of Contractual Duty to Defend and/or to Pay Defense Costs from the Outset

On April 29, 2022, the Walston Cross-Complainants filed a First Amended Cross-Complaint against Cross Defendants General Star Insurance Company, Robin Amelia Sheehan, Joel Steven Fink aka Jay Fink, Noah Meiner, Lennifer Hilliard, Sandra Wilson, and Moes 1 to 60 to allege the same causes of action.

On May 10, 2022, “Plaintiffs and Cross-Defendants Noah Meiner, Lennifer Hilliard, and Sandra Wilson (collectively “Meiner”) will and hereby do move the Court for an Order granting their Special Motion to Strike, pursuant to California’s Anti-SLAPP statute, all of the causes of action alleged against them in the First Amended Cross-Complaint (“FACC”) filed by Gregory Walston, and Walston and Associates Inc. dba the Walston Law Group (collectively “Walston”).” (Motion, p. 2:4-9.)

On June 9, 2022, the Court denied Meiner’s Special Motion to Strike Walston’s First Amended Cross-Complaint.

On June 30, 2022, Meiner demurred to the Sixth Cause of Action for Express Breach of Contractual Duty to Defend and/or to Pay Defense Costs from the Outset alleged in Walston’s First Amended Cross-Complaint.

On July 21, 2022, Walston opposed Meiner’s demurrer to Walston’s First Amended Cross-Complaint.

On July 27, 2022, Meiner replied to Walston’s opposition to Meiner’s demurrer.

Cross-Complainants/ Defendants Gregory Walston, and Walston and Associates dba The Walston Law Group request that the Court rule on their objections to Plaintiffs/Cross-Defendants Noah Meiner, Lennifer Hilliard, and Sandra Wilson’s Memorandum of Points and Authorities in Support of their Demurrer to Walston’s First Amended Cross-Complaint. The following consists of the Court’s rulings on these objections.

Objection
1		OVERRULED
2		OVERRULED
3		OVERRULED
4		OVERRULED
5		OVERRULED
6		OVERRULED
7		OVERRULED
8		OVERRULED
9		OVERRULED
10		OVERRULED
11		OVERRULED

Plaintiffs/Cross-Defendants Noah Meiner, Lennifer Hilliard, and Sandra Wilson request that the Court take judicial notice of the following documents:

· “Exhibit A is a true and correct copy of Gregory Walston’s information on the State Bar of California’s website as of May 5, 2022.

· Exhibit B is a true and correct copy of Walston and Associates Inc. dba The Walston Law Group’s information from the California Secretary of State’s website as of April 29, 2022.

· Exhibit C is a true and correct copy of Heit Law Group PC’s information from the California Secretary of State’s website as of February 25, 2021.

· Exhibit D is a true and correct of the Complaint in the Walston v. Sheehan Action, No. CGC-20-582206 (Super. Ct. Cal. Cty. of San Francisco filed Jan. 15, 2020).

· Exhibit E is a true and correct copy of the Complaint, filed by Walston & Sheehan and Heit Law Group PC, in the underlying action: Meiner v. Plateau Data Systems Inc., Case No. 3:19-cv-08138-LB (N.D. Cal.), filed on Nov. 19, 2019 as Case No. 19-CIV-06839 (Super. Ct. Cal. Cty. of San Mateo).

· Exhibit F is a true and correct copy of the “Notice of Substitution of Counsel for Noah Meiner, Lennifer Hilliard, and Sandra Wilson” that Meiner’s former counsel Brian Morgan Heit filed in the underlying Meiner v. Plateau action (Dkt. No. 12) on February 13, 2020.

· Exhibit G is a true and correct copy of the “Notice of Charging Lien for Attorneys’ Fees” that Meiner’s former counsel Gregory Walston filed on behalf of Walston and Associates Inc. dba The Walston Law Group in the underlying Meiner v. Plateau action (Dkt. No. 27) on April 9, 2020.

· Exhibit H1 is a true and correct copy of the Meiner v. Plateau Register of Actions from the Superior Court of California, County of San Mateo. Exhibit H2 is a true and correct copy of the subsequent Meiner v. Plateau Register of Actions from the U.S. District Court for the Northern District of California.” (Request for Judicial Notice in Support of Meiner’s Demurrer to Walston’s First Amended Cross-Complaint, p. 2:12—3:4.)

The Court GRANTS Meiner’s requests for judicial notice. (Evid. Code, § 452, subd. (c) for Exs. A-C; Evid. Code, § 452, subd. (d) for Exs. D-H2.)

Cross-Complainants/ Defendants Gregory Walston, and Walston and Associates dba The Walston Law Group request that the Court take judicial notice of the following documents:

1. “Cross-defendants’ complaint, a true and correct copy of which is attached to the exhibit index as exhibit B. (Evid. Code § 452(d) [“Records of (1) any court of this state”].)

2. Defendants Jacob Feaver, Brian Heit, and Heit Law Group’s cross-complaint, a true and correct copy of which is attached to the exhibit index as exhibit C. (Evid. Code § 452(d).)

3. Cross-complainants’ first amended cross-complaint, a true and correct copy of which is attached to the exhibit index as exhibit D. (Evid. Code § 452(d).)” (Cross-Complainants Request for Judicial Notice in Opposition to Meiner’s Demurrer, p. 2:1-6.)

Walston’s request for judicial notice is DENIED as superfluous. Any party that wishes to draw the Court’s attention to a matter filed in this action may simply cite directly to the document by execution and filing date. (See Cal. Rules of Court, rule 3.1110(d).)

A demurrer is a pleading used to test the legal sufficiency of other pleadings. (Cty. of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1008–09; Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) It raises issues of law, not fact, regarding the form or content of the opposing party’s pleading. It is not the function of the demurrer to challenge the truthfulness of the complaint. (Unruh-Haxton v. Regents of Univ. of California (2008) 162 Cal.App.4th 343, 365, as modified (May 15, 2008).) For purpose of the ruling on the demurrer, all facts pleaded in the complaint are assumed to be true, however improbable they may be. (CCP §§ 422.10, 589.)

A demurrer can be used only to challenge defects that appear on the face of the pleading under attack; or from matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311.) No other extrinsic evidence can be considered (i.e., no “speaking demurrers”). A demurrer is brought under Code of Civil Procedure § 430.10 (grounds), § 430.30 (as to any matter on its face or from which judicial notice may be taken), and § 430.50(a) (can be taken to the entire complaint or any cause of action within).

A 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. A demurrer for uncertainty may be brought pursuant to Code of Civil Procedure section 430.10, subdivision (f). “A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of California, Inc. (1993) 14 Cal.App.4th 612, 616.) “In general, ‘demurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.’” (Lickiss v. Financial Industry Regulatory Authority (2012) 208 Cal.App.4th 1125, 1135.)

The demurring party must file with the court, and serve on the other party, the: (1) demurrer; (2) notice of hearing; (3) memorandum of points and authorities; and (4) proof of service. (See Cal. Rules of Court, rule 3.1112(a), rule 3.1300(c), rule 3.1320; Code Civ. Proc., § 1005(b).) “A demurrer shall distinctly specify the grounds upon which any of the objections to the complaint . . . are taken. Unless it does so, it may be disregarded.” (CCP § 430.60.)

“A contractual promise to “defend” another against specified claims clearly connotes an obligation of active responsibility, from the outset, for the promisee's defense against such claims. The duty promised is to render, or fund, the service of providing a defense on the promisee's behalf—a duty that necessarily arises as soon as such claims are made against the promisee and may continue until they have been resolved. This is the common understanding of the word “defend” as it is used in legal parlance.” (Crawford v. Weather Shield Mfg., Inc. (2008) 44 Cal.4th 541, 553–554.) Unless the parties' agreement "expressly provides otherwise, a contractual indemnitor has the obligation, upon proper tender by the indemnitee, to accept and assume the indemnitee's active defense against claims encompassed by the indemnity provision. Where the indemnitor has breached this obligation, an indemnitee who was thereby forced, against its wishes, to defend itself is entitled to reimbursement of the costs of doing so." (Crawford, 44 Cal.4th at 555.)

The Sixth Cause of Action for Express Breach of Contractual Duty to Defend, and/or to Pay Defense Costs from the Outset identifies a written contract including a provision that “requires cross defendants to immediately defend cross-complainants, or to pay for cross-complainants’ defense costs from the outset.” (FACC, ¶¶ 109, 112.) The Sixth Cause of Action further identifies a breach of this expressly contracted duty to defend, and resultant damages from the alleged breach. (FACC, ¶¶ 109, 118-121.) The Court finds that the Sixth Cause of Action for Sixth Cause of Action for Express Breach of Contractual Duty to Defend, and/or to Pay Defense Costs adequately pleads a cause of action for Express Breach of Contractual Duty to Defend, and/or to Pay Defense Costs from the Outset.

Meiner identifies the following eight grounds for their demurrer to Walston’s FACC.

1. Walston & Associates Inc. lacks capacity to sue, and therefore there is a misjoinder of Parties in the FACC.

2. The FACC fails to state a cause of action against Meiner because indemnity provisions ordinarily relate to third parties’ claims, not claims between co-counsel and co-indemnitees. The Sheehan et al Cross-Complainants who sued Walston are not third parties.

3. The FACC fails to state a cause of action against Meiner because Walston’s active negligence precludes recovery on a general indemnity agreement. Moreover, Walston is liable for their partners and co-counsels’ acts in the underlying Meiner v. Plateau action.

4. The FACC fails to state a cause of action against Meiner because Walston cannot prospectively limit their liability for malpractice, pursuant to Rule of Professional Conduct 1.8.8.

5. The FACC fails to state a cause of action against Meiner because a contract which exempts any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, is against the policy of the law. Civ. Code § 1668. A law established for the public good cannot be contravened by a private agreement. Civ. Code § 3513.

6. The FACC fails to state a cause of action against Meiner because an indemnity provision, hidden in a contract of adhesion, that would force Meiner to fund Walston’s defense against Meiner’s own litigation, is unconscionable.

7. The FACC fails to state a cause of action against Meiner because Meiner voided the Legal Services Agreements pursuant to Business & Professions Code § 6147, rendering the indemnity provision unenforceable.

“Civil Code section 2772 defines “indemnity” as a contract by which one engages to save another from a legal consequence of the conduct of one of the parties, or of some other person. The indemnitor is the party obligated to pay another, and the indemnitee is the party entitled to receive the payment from the indemnitor. Indemnity generally refers to third party claims. A clause which contains the words ‘indemnify’ and ‘hold harmless' is an indemnity clause which generally obligates the indemnitor to reimburse the indemnitee for any damages the indemnitee becomes obligated to pay third persons. Indemnification agreements ordinarily relate to third party claims.” (Zalkind v. Ceradyne, Inc. (2011) 194 Cal.App.4th 1010, 1023–1024 (cleaned up).)

As Walston states, the indemnification clause “states that ‘Client’ would indemnify ‘Attorneys’ if they were ‘subject to any claims stemming from services performed pursuant to this agreement.’” (Opposition, p. 13:26-27.) Meiner and Walston agree that indemnification agreements ordinarily relate to third party claims. (Motion, MPA, p. 7:17-19; FACC, ¶ 117, Myers Building Industries, Ltd. v. Interface Technology, Inc. (1993) 13 Cal.App.4th 949, 969.) Meiner asserts that “the Sheehan Cross-Complainants suing Walston are not third parties. Rather, Sheehan, Heit, and Feaver were owners of or employed by Heit LG (a party to the Legal Services Agreements), and Sheehan was previously a partner in W&S (another party to the Legal Services Agreements).” (Motion, MPA, p. 7:19-22.) Meiner reasons that since indemnity provisions ordinarily relate to third-party claims and Sheehan, Heit, Feaver, and the Heit Law Group PC are not third parties to the Legal Services Agreements, the indemnity provision of the Legal Services Agreements “is unenforceable against any claims Sheehan et al have brought or might bring against Walston.” (Motion, MPA, p. 7:29-30.) Meiner notes further that in the Declaration of Gregory Walston, filed May 25, 2022 in this case, Walston offers his rationale for including an indemnity provision (the crazy ex-girlfriend scenario). (Walston Decl., filed May 25, 2022, ¶ 11.)

The Court finds Meiner’s assessment accurate. The indemnity provision does not reference claims between parties to the Legal Services Agreement; certainly, parties could so contract if they chose. (Zalkind, 194 Cal.App.4th at 1024.) Rather, the provision references third party claims, and the Sheehan, Heit, Feaver, and Heit Law Group PC Cross-Complaint is not a third-party claim.

Because the Court sustains the demurrer on the grounds stated above, it need not reach the issue of unconscionability. However, the Court also finds that this indemnification provision – which would require the client to pay the costs that his former attorney incurred in defending a malpractice action – to be unconscionable.