Judge Mitchell L. Beckloff, Case 20STCV32017 2023-03-01 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 20STCV32017, Date: 2023-03-01 Tentative Ruling

Defendant/Plaintiff/Cross-Complainant, Steinberg Law (Law Firm), seeks five writs of attachment against (1) Plaintiff/Defendant/Cross-Defendant, Daniel Ellis Wolfe individually (Wolfe), in the amount of $391,096; (2) Defendant, Daniel Wolfe, as Trustee of the Wolfe Family Trust of 1992 (Trustee) in the amount of $326,876; (3) Defendant, Hawthorne Hanger Operations, LP (HHO) in the amount of $326,876; (4) Defendant, Wolfe Air Aviation, LTD (Wolfe Air) in the amount of $64,220; and (5) Defendant, Fleet Unlimited, Inc. (Fleet) in the amount of $64,220.[1]

Law Firm’s request for judicial notice (RJN) of Exhibits 1 through 3 is granted. (Evid. Code § 452, subd. (d).) Law Firm’s RJN also contains Exhibits 4 through 14. Law Firm has not sought judicial notice of the exhibits. Accordingly, the court disregards Exhibits 4 to 14 attached to the RJN.

Law Firm’s evidentiary objections: All objections are sustained except objection five which is overruled.[2]

The Court shall issue a right to attach order if the Court finds all of the following:

(1) The claim upon which the attachment is based is one upon which an attachment may be issued.

(2) The plaintiff has established the probable validity of the claim upon which the attachment is based.

(3) The attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based.

“The application [for a writ of attachment] shall be supported by an affidavit showing that the plaintiff on the facts presented would be entitled to a judgment on the claim upon which the attachment is based.” (Code Civ. Proc., § 484.030.) Statutory attachment procedures are purely creations of the legislature and as such “are subject to ‘strict construction.’ ” (Hobbs v. Weiss (1999) 73 Cal.App.4th 76, 79; see also Nakasone v. Randall (1982) 129 Cal.App.3d 757, 761.) A judge does not have authority to order any attachment that is not provided for by the attachment statutes. (Jordan-Lyon Productions, Ltd. v. Cineplex Odeon Corp. (1994) 29 Cal.App.4th 1459, 1466.) “The declarations in the moving papers must contain evidentiary facts, stated ‘with particularity,’ and based on actual personal knowledge with all documentary evidence properly identified and authenticated.” (Hobbs v. Weiss, supra, 73 Cal.App.4th at 79-80.) “In contested applications, the court must consider the relative merits of the positions of the respective parties and make a determination of the probable outcome of the litigation.” (Id. at 80 [cleaned up].)

“A claim has ‘probable validity’ where it is more likely than not that the plaintiff will obtain a judgment against the defendant on that claim.” (Code Civ. Proc., § 481.190.)

Law Firm seeks an attachment based on a written retainer agreement for legal services. As evidence in support of Law Firm’s claims, it submits the declaration of Law Firm’s attorney who attaches a copy of the verified complaint in the matter of LASC 21GDCV00232.[3] (Brooks Decl., ¶ 2, Ex. A.)

The Law Firm contends Defendants Wolfe, HHO and Trustee retained it in March 2017 for legal representation in civil matters including litigation. (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶ 28].) In May 2018, Defendants Wolfe, Wolfe Air and Fleet retained Law Firm to represent them in different civil litigation. (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶ 66].) For each legal matter, the parties executed a written retainer agreement outlining their respective obligations. (Brooks Decl., Ex. A [Verified Compl., ¶¶ 30, 68.)

Law Firm provided the Wolfe Parties with invoices for legal services provided and the amounts due from the Wolf Parties for legal services rendered. (Brooks Decl., ¶ 2, Ex. A [Verified Compl., Exs. 4-30, 36-56].) Based on the invoices evidencing legal services rendered and the Wolfe Parties’ failure to pay as required, the Law Firm contends the following amounts are now owed by each party pursuant to the terms of their written agreements:

· Defendant Wolfe in the amount of $391,096 (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶¶ 44, 63, 80, and 97]);

· Defendant HHO in the amount of $326,876 (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶¶ 174 and 63]);

· Defendant Trustee in the amount of $326,874 (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶¶ 44 and 63]);

· Defendant Wolfe Air in the amount of $64,220 (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶¶ 80 and 97]); and

· Defendant Fleet in the amount of $64,220 (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶ 180 and 97]).

The court notes Defendant Wolfe, on behalf of HHO, verified HHO owed Law Firm $271,465.21 as of July 12, 2019. (Brooks Decl., ¶ 2, Ex. A [Verified Compl., Exs. 61].) Defendant Wolfe also, on behalf of Fleet and Wolfe Aire, verified Fleet and Wolfe Air owed Law Firm $49,843.83 as of July 3, 2019. (Brooks Decl., ¶ 2, Ex. A [Verified Compl., Exs. 62].)

The verified complaint alleges the Wolfe Parties owe “at least” $326,876.61 to Law Firm. (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶ 63].) The verified complaint also alleges Defendants Wolfe, Trustee and HHO “jointly and severally agreed to pay [Law Firm] all outstanding, current and future legal fees and costs . . . .” (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶¶ 31, 50].) Finally, Defendant Wolfe “personally guarantied all payments, fees and costs due to [Law Firm] on behalf of all clients.” (Brooks Decl., ¶ 2, Ex. A [Verified Compl., ¶ 52, Ex. 1].)

The Wolfe Parties argue Law Firm is not entitled to orders for attachment. They assert their claims for tort damages (breach of fiduciary duty and legal malpractice) exceed Law Firm’s claim for unpaid fees. Thus, the Wolfe Parties assert a defense to Law Firm’s request for an order for attachment based on offset.

The Wolfe Parties describe the underlying litigation to explain their entitlement to offset.

One (or more) of the Wolfe Parties (it is not entirely clear which one or ones) is one of two fixed based operators at the Hawthorne Municipal Airport. Over the last 10 years, the Wolfe Parties have been in litigation with its only other airport competitor—Jet Center. Jet Center contends the Wolfe Parties are precluded from selling fuel—a service provided by fixed base operators—based on a restrictive covenant in a partnership buyout agreement. The Wolfe Parties retained Law Firm to challenge the validity of that restrictive covenant in a declaratory relief action.

The Wolfe Parties contend Law Firm committed malpractice when it failed to name all relevant parties for the declaratory relief action. The Wolfe Parties argue Law Firm breached the standard of care when it named only two of four owners of Jet Center. According to the Wolfe Parties, Law Firm’s negligence led to “judgment against the wrong parties, but gave [David] Wehrly [another Jet Center owner] the opportunity to bring a separate subsequent arbitration action against Wolfe that resulted in an award in excess of one million dollars against Wolfe for alleged loss of profits from fuel sales in purported violation of the restrictive covenant.” (Opposition 4:11-14.)

The Wolfe Parties contend Law Firm breached the standard of care when it failed to object to and oppose Wehrly's demand for arbitration. The Wolfe Parties assert grounds were available to avoid arbitration. (Franceschi Decl., ¶ 7.)

Finally, the Wolfe Parties argue Law Firm should have brought an action in federal court. The Wolfe Parties argue Law Firm could have initiated such federal litigation based on the Sherman Act. While the Wolfe Parties acknowledge Law Firm asserted a state law equivalent claim under the Cartwright Act, they contend Law Firm did not have the necessary experience to prosecute the Wolfe Parties’ Cartwright Act claim. Law Firm withdrew the Cartwright Act claim under a threat of sanctions under Code of Civil Procedure section 128.5 despite the “per se anti-competitive” nature of relevant contractual provisions between the Wolfe Parties and the City of Hawthorne.

The Wolfe Parties contend Law Firm’s “application proffers no evidence, let alone the requisite expert testimony on the subject matter.” (Opposition 11:11-13.) Law Firm, however, has presented a straightforward breach of contract claim. Law Firm has demonstrated the existence of a contract (retainer agreement), Law Firm’s performance (legal services), the Wolfe Parties’ breach (failure to pay) and damages (outstanding balance due). Law Firm’s claim is based on percipient witness testimony as well as corroborating documentation to support its claims.

In defense of Law Firm’s application, the Wolfe Parties rely on complicated negligence and breach of fiduciary duty claims for offset with little evidence in support. In fact, the Wolfe Parties recite extensive evidence not before the court; it is not “a factually-supported defense . . . .” (Opposition 10:25.) The evidence they present to support their offset claims is their own attorney’s declaration. Much of that declaration, however, has been stricken based on evidentiary objections. Thus, the Wolfe Parties have little relevant evidence to support their offset claims.

While the Wolfe Parties do not have the burden of proof on the application for an order of attachment, they do have the burden of demonstrating some validity to their offset claims. The lack of admissible and persuasive evidence is fatal to their offset claims. (Lydig Construction, Inc. v. Martinez Steel Corp. (2015) 234 Cal.App.4th 937, 945. [“[T]o sustain reduction in a writ amount, most courts require that defendant [or cross-defendant] provide enough evidence about its counterclaims [or claims] and/or defenses to prove a prima facie case.”])

Most importantly, these particular offset claims are inapplicable as a defense in this context. While tort claims arising from a contract may support an order for attachment, the Wolfe Parties’ tort claims (the purported offset claims) are not based on amounts readily ascertainable from the face of the contract. The Wolfe Parties’ claims require a factual analysis to determine damages sustained by them; their damages are not fixed and readily ascertainable as required by The Attachment Law.[4] As such, the Wolfe Parties’ purported offset claims do not meet the requirements of Code of Civil Procedure section 483.015, subdivision (b)(2). In fixing the amount of the attachment, the court may make a reduction based on “[t]he amount of any indebtedness of the plaintiff that the defendant has claimed in a cross-complaint filed in the action if the defendant's claim is one upon which an attachment could be issued.” (Code Civ. Proc., § 483.015, subd. (b)(2) [emphasis added].)

Further, a claim for offset here may be asserted only by Defendant Wolfe. He is the only Defendant with any pending cross complaint.[5]

The Wolfe Parties generally argue Law Firm’s claim for fees is “subject to forfeiture.” (Opposition 8:12-9:28.) That is—as a remedy to a client harmed by its attorney’s breach of fiduciary duty—the client may obtain a forfeiture (“are subject to forfeiture”) of the attorney fees. (Opposition 9:12-18 [citing Jeffry v. Pounds (1977) 67 Cal App 3d 6, 12], 10:17.)[6] The Wolfe Parties’ claim is insufficiently developed, and, in any event, the breach of fiduciary duty claim is insufficiently supported.

Based on the admissible evidence before the court, this court finds Law Firm has demonstrated the probable validity of its breach of contract claim. The court further finds the Wolfe Parties have not met their burden of demonstrating facts supporting Defendant Wolfe’s offset claim or entitlement thereto.

The court shall issue a right to attach order if the claim upon which the attachment is based is one upon which an attachment may be issued. (Code Civ. Proc., § 484.090.) “[A]n attachment may be issued only in an action on a claim or claims for money, each of which is based upon a contract, express or implied, where the total amount of the claim or claims is a fixed or readily ascertainable amount not less than five hundred dollars ($500) exclusive of costs, interest, and attorney’s fees.” (Id., § 483.010, subd. (a).) “If the action is against a defendant who is a natural person, an attachment may be issued only on a claim which arises out of the conduct by the defendant of a trade, business, or profession.” (Id., § 483.010, subd. (c).)

Law Firm’s claim is based on a written contract—a retainer agreement—and is in excess of 500 dollars.

Accordingly, the court finds Law Firm’s claim is a proper basis for attachment.

Code of Civil Procedure section 484.090 states the court shall issue a right to attach order if “the attachment is not sought for a purpose other than the recovery on the claim upon which the attachment is based . . . [and] the amount to be secured by the attachment is greater than zero.”

Here, Law Firm, through declarant Keven Steinberg, attests the application for attachment is not sought for a purpose other than the recovery on a claim upon which the attachments are based. (Form AT-105, ¶ 4.) Accordingly, the court finds Law Firm has complied with Code of Civil Procedure sections 484.020 and 484.090.

Code Civil Procedure section 487.010, subdivision (a) provides that “[w]here the defendant is a corporation, all corporate property for which a method of levy is provided” is subject to attachment. Where the defendant is a natural person, the description of the property shall be reasonably adequate to permit the defendant to identify the specific property sought to be attached.” (Code Civ. Proc., § 484.020, subd. (e).)

Law Firm properly identifies the property subject to attachment as the property identified in 9(a) and (c) of the Judicial Council forms for attachment.

The Wolfe Parties argue if the attachment is granted, the court should order a $33,177,000 undertaking. This amount represents 1.5 times the value of the assets sought to be attached ($22,118,000). (Wolfe Decl., ¶ 2.) The Wolfe Parties’ argument is puzzling. The total amount of attachment sought as to all Wolfe Parties is $1,173,284. To the extent the levying officer would attach in excess of $1,173,284, the Wolfe Parties have their remedies. While Law Firm set forth assets worth over $22 million as subject to attachment, the amount of attachment authorized by the court does not exceed $1,173,284.

The Wolfe Parties provide no evidence of damages they would suffer if the attachment is later found to have been wrongfully issued. Therefore, Law Firm shall post a $10,000 undertaking for each writ before each writ issues.

[1] The court refers to the defendants collectively herein as the Wolfe Parties.

[2] The court notes none of the evidence (the underlying facts) purportedly relied upon by the Wolfe Parties’ attorney to render his opinion has been received into evidence. (See Franchesci Decl., ¶¶ 5 [“material misrepresentations that were calculated”, “to avoid what he believed”], 7 [“failing to inform”, “there was a defense”], 8.)

[3] That action has been consolidated into this action.

[4] How, if at all, the damages could be different for each of the Wolfe Parties is left unexplained. The extent of damages suffered by each of the Wolfe Parties is relevant for purposes of offset. See footnote 5 infra.

[5] Law Firm notes none of the Wolfe Parties filed a cross-complaint against Law Firm’s complaint for breach of contract. Law Firm is technically correct. The Wolfe Parties’ claims, however, are contained in a complaint in this consolidated action. Law Firm’s reliance on Code of Civil Procedure section 483.015, subdivision (a)’s reference to a “cross-complaint” elevates form over substance. The court acknowledges Defendant Wolfe, in his individual capacity, brought the complaint (which the court is treating as a cross-complaint) in the action consolidated herein. Accordingly, Wolfe Parties, other than Dan Wolfe individually, have no offset claim that satisfies Code of Civil Procedure section 483.015, subdivision (b).

[6] The court notes the attorneys were “entitled to compensation for services supplied preceding the breach of professional conduct” in Jeffry v. Pounds, supra, 67 Cal.App.3d at 12. The rule in Jeffry v. Pounds and Goldstein v. Lees (1975) 46 Cal.App.3d 614 is not categorical. (See Sheppard, Mullin, Richter & Hampton, LLP v. J-M Manufacturing Co., Inc. (2018) 6 Cal.5th 59, 91. [“But the court did not purport to craft a rule to govern all other breaches, nor did it offer any reasoning to support such a categorical rule.”]) The Wolfe Parties provide no analysis of what fees might be subject to forfeiture, and why the facts here support forfeiture.