Judge: Nathan Vu, Case: 21-01233700, Date: 2022-08-29 Tentative Ruling
Demurrer
The demurrer is OVERRULED as to the 7th and 11th causes of action against Defendants Paoli and Paoli & Purdy, PC.
The demurrer is SUSTAINED as to the 9th, 13th, 14th, 15th, and 16th causes of action as to Defendants Paoli and Paoli & Purdy, PC, with leave to amend, and is SUSTAINED as to the 17th cause of action as to Defendants Paoli and Paoli & Purdy, PC, without leave to amend.
Plaintiff shall have 33 days to file an amended pleading.
Defendants Paoli & Purdy, PC, Court Purdy, and William Paoli demur to the First Amended Complaint (FAC) of Plaintiff Alicja Matak. Although Plaintiff has since filed a Second Amended Complaint (SAC), the amendments primarily addressed the claims against non-moving Defendant Jaroslaw Geier. Further, Plaintiff’s counsel indicated that Plaintiff intends to prepare and file a Third-Amended Complaint. Therefore, the Court will rule on the demurrer since the issues in the demurrer are likely to arise in the future.
In ruling on a demurrer, a court must accept as true all allegations of fact contained in the complaint. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) A demurrer challenges only the legal sufficiency of the affected pleading, not the truth of the factual allegations in the pleading or the pleader’s ability to prove those allegations. (Cundiff v. GTE Cal., Inc. (2002) 101 Cal.App.4th 1395, 1404-05.)
Questions of fact cannot be decided on demurrer. (Berryman v. Merit Prop. Mgmt., Inc. (2007) 152 Cal.App.4th 1544, 1556.) Because a demurrer tests only the sufficiency of the complaint, a court will not consider facts that have not been alleged in the complaint unless they may be reasonably inferred from the matters alleged or are proper subjects of judicial notice. (Hall v. Great W. Bank (1991) 231 Cal.App.3d 713, 718 n.7.)
Defendants Court Purdy and Paoli & Purdy, PC
The FAC alleges that Defendants Court Purdy and Paoli & Purdy, PC are vicariously liable for Defendant William Paoli’s tortious actions. (See, e.g., FAC ¶ 161.)
A principal may be held liable for the torts of its agent or ostensible agent that fall within the scope of the agency, even though the principal has not authorized the agent to commit intentional torts. (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 296-297; see Ermoian v. Deset Hospital (2007) 152 Cal.App.4th 475, 502.)
Here, the FAC alleges sufficient facts to show that Defendant Paoli & Purdy, PC, could be held vicariously liable for the misconduct of its agent Defendant Paoli.
The FAC, however, fails to allege facts showing Defendant Purdy could be held vicariously liable for the alleged misconduct of either Defendant Paoli or Defendant Paoli & Purdy, PC.
Seventh Cause of Action (Fraud)
The Seventh Cause of Action alleges, among other things, that Defendant Paoli represented without investigation that (i) the tortfeasor pilot had no assets available to pay the claim and (ii) there were no other sources of recovery available to pursue. (FAC ¶ 110(j) & (k).)
Moving Defendants contend that the allegations in the FAC do not constitute actionable misrepresentations.
The elements of a cause of action for negligent misrepresentation are: (i) A false statement of material fact that the defendant honestly believes to be true, but made without reasonable grounds for such belief; (ii) made with the intent to induce reliance; (iii) plaintiff’s reasonable reliance on the statement; and (iv) damages. (Century Surety Co. v. Crosby Ins. (2004) 124 Cal.App.4th 116, 129.) Negligent misrepresentation must be alleged with the same particularity required to plead fraud. (Small v. Fritz Cos Inc. (2003) 30 Cal.4th 167, 184.) The pleading must allege how, when, where, to whom and by what means the representations were tendered. (Id.)
Here, the FAC alleges on 07/17/2020, Defendant Paoli falsely represented by email that there were no further sources of recovery to pursue, without reasonable grounds for making this representation. (FAC ¶¶ 42, 50, 110(j)-(k).) The FAC also alleges that Paoli made the representations with an intent to induce Plaintiff to forego pursuing proceeds from other liable defendants, and Plaintiff did in fact so rely to her detriment, (FAC ¶ 115), and that given Defendant Paoli’s fiduciary relationship, Plaintiff’s reliance was reasonable, (FAC ¶ 112(a)).
As discussed above, Paoli & Purdy can be held vicariously liable for its agent’s alleged misconduct. Thus, Plaintiff has plead a sufficient claim for fraud in the Seventh cause of action against Defendants Paoli and Paoli & Purdy (Paoli Defendants).
Ninth Cause of Action (Concealment)
The Ninth Cause of Action alleges that Defendant Paoli concealed, among other things, that Plaintiff was the exclusive heir to the estate. (FAC ¶ 132(b).)
Concealment is a species of fraud, and “[f]raud must be pleaded with specificity.” (Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 878.) General and conclusory allegations do not suffice. (Lazar v. Super. Ct. (1996) 12 Cal.4th 631, 645).
The heightened pleading standard requires “pleading facts [that] ‘show how, when, where, to whom, and by what means the representations were tendered.’ [Citation.]” (Ibid.) Further, “‘[a] plaintiff's burden in asserting a fraud claim against a corporate employer is even greater. In such a case, the plaintiff must allege the names of the persons who made the allegedly fraudulent representations, their authority to speak, to whom they spoke, what they said or wrote, and when it was said or written.’” (Hamilton v. Greenwich Investors XXVI, LLC (2011) 195 Cal.App.4th 1602, 1614.)
“A duty to speak may arise in four ways: it may be directly imposed by statute or other prescriptive law; it may be voluntarily assumed by contractual undertaking; it may arise as an incident of a relationship between the defendant and the plaintiff; and it may arise as a result of other conduct by the defendant that makes it wrongful for him to remain silent.” (SCC Acquisitions, Inc. v. Central Pac. Bank (2012) 207 Cal.App.4th 859, 860.) Attorneys owe their clients a fiduciary duty. (See Neel v. Magana, Olney, Levy, Cathcart & Gelfand (1971) 6 Cal.3d 176, 189; FAC ¶ 112(a).)
Here, the FAC does not allege sufficient facts to support a claim for concealment against either of the Paoli Defendants. The FAC alleges that the Paoli Defendants concealed that Plaintiff had an exclusive right to inherit, and (FAC ¶¶ 110(c), 132(b), and as Plaintiff’s attorneys, Defendants owed Plaintiff the duty to disclose this material fact. (FAC ¶ 112(a).) The FAC also alleges that Plaintiff was unaware of the true facts, that Plaintiff would not have acted as she did, and she suffered damages as a result. (See FAC ¶ 137.)
The FAC, however, does not allege facts to support that Defendants intended to defraud Plaintiff. Thus, the FAC does not sufficiently plead Ninth cause of action for concealment against Defendants Paoli and Paoli & Purdy.
Eleventh Cause of Action (Civil Conspiracy)
The 11th Cause of Action alleges that Defendant Paoli and Defendant Mariusz Matak conspired to secure a settlement payment for Defendant Matak, to which he would not otherwise have been entitled. (FAC ¶¶ 151-154.)
The Paoli Defendants argue that Plaintiff cannot plead a civil conspiracy against counsel who represented Plaintiff without leave of court, pursuant to Code of Civil Procedure section 1714.10(a).
Plaintiff addresses this argument in opposition to the motion to strike, arguing that Section 1714.10(a) does not bar this action because defendant attorneys owe an independent duty to plaintiff. (Civ. Code § 1714.10(c).)
Civil Code Section 1714.10(a) provides that:
No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest or compromise any 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.
Subdivision (c) of the statute, however, explains that:
This section shall not apply to a cause of action against an attorney for a civil conspiracy with his or her client, where . . . the attorney has an independent legal duty to the plaintiff.
The Paoli Defendants, as Plaintiff’s attorneys, owe a fiduciary duty to Plaintiff.
Thirteenth Cause of Action (Financial Elder Abuse)
The Thirteenth Cause of Action alleges that Defendants unlawfully took Plaintiff’s money by assisting Defendant Matak in appropriating settlement funds and inheritance assets to which Plaintiff was solely entitled, despite Defendant’s knowledge that Defendant Matak was not entitled to those funds. (FAC ¶¶ 175, 177.)
The Elder Abuse and Dependent Adult Civil Protection Act protects “elders,” which is defined to mean “any person residing in this state, 65 years of age or older.” (Welf. & Inst. Code, § 15610.27.)
The elements of a cause of action for financial elder abuse are: (i) Defendant took/retained plaintiff’s property; (ii) Plaintiff was 65 years or older at the time of the conduct; (iii) Defendant took/retained Plaintiff’s property for a wrongful use/with the intent to defraud/by undue influence; (iv) Plaintiff was harmed; (v) Defendant’s conduct was a substantial factor in causing the harm. (See Welf. & Inst. Code, § 15610.30(a); CACI 3100.) Financial Elder Abuse is a statutory cause of action. “[W]here, as here, statutory remedies are invoked, the facts ‘must be pleaded with particularity.’” (Carter v. Prime Healthcare Paradise Valley LLC (2011) 198 Cal.App.4th 396, 410.)
Here, the FAC fails to allege that Plaintiff is an elder protected by the Act. Plaintiff is alleged to principally reside in Poland. (FAC ¶ 1.)
Fourteenth Cause of Action (IIED)
The Fourteenth Cause of Action alleges that Defendants defrauded and conspired to defraud Plaintiff by exploiting Plaintiff’s vulnerabilities, her residence in Poland, and lack of knowledge of the English language and the American legal system. (FAC ¶¶ 190-194.)
“A defendant’s conduct is ‘outrageous’ when it is so ‘extreme as to exceed all bounds of that usually tolerated in a civilized community.’ And the defendant’s conduct must be ‘intended to inflict injury or engaged in with the realization that injury will result.’” (Id.) Further, that conduct must be directed at the plaintiff, or occur in the presence of a plaintiff of whom the defendant is aware. (Potter v. Firestone Tire & Rubber Co. (1993) 6 Cal.4th 965, 1002 [re groundwater contamination].)
The complaint must plead specific facts that establish severe emotional distress resulting from defendant's conduct.” (Michaelian v. State Comp. Ins. Fund (1996) 50 Cal. App. 4th 1093, 1114.)
While the FAC made general and conclusory allegations regarding this claim, it failed to allege sufficient facts to show that the Paoli Defendants’ conduct was extreme or outrageous, that Plaintiff suffered severe emotional distress, or that the Paoli Defendant’s conduct caused Plaintiff’s emotional distress.
Fifteenth Cause of Action (NIED)
The Fifteenth Cause of Action alleges that Defendants caused Plaintiff emotional distress in their initiation, handling, and settlement of the wrongful death action. (FAC ¶ 200.)
As the court’s 06/27/2022 ruling on Defendant Geier’s demurrer notes, a legal malpractice action does not support recovery of emotional distress damages. “Where the interest of the client is economic, serious emotional distress is not an inevitable consequence of the loss of money and, as noted, the precedents run strongly against recovery. For these reasons the issue is not resolved in plaintiff’s favor simply because she has pleaded an otherwise actionable claim of legal malpractice.” (Merenda v. Super. Ct. (1992) 3 Cal.App.4th 1, 10 disapproved on other grounds of by Ferguson v. Lieff, Cabraser, Heimann & Bernstein (2003) 30 Cal.4th 1037.)
Camenisch v. Superior Court (1996) 44 Cal.App.4th 1689, 1697 followed Merenda. “[E]motional distress damages are not generally recoverable in cases of attorney malpractice related to litigation. . . . Public policy reasons do not support a different result when the alleged malpractice is committed in a tax advice context, even if the tax advice is part of an estate plan.”
Therefore, the NIED claim, as plead, fails as a matter of law.
Sixteenth Cause of Action (UCL)
The Sixteenth Cause of Action alleges that Defendants’ conduct was unfair, unlawful, and deleterious to Plaintiff.
Business & Professions Code Section 17200 prohibits “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” Under the unlawful prong, a violation of law may be actionable as unfair competition under Cal. Business & Professions Code section 17200. (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81.)
“An unfair business practice occurs when that practice offends an established public policy or when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. . . . An unfair business practice also means the public policy which is a predicate to the action must be tethered to specific constitutional, statutory or regulatory provisions.” (Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81 [internal citations omitted].)
Courts have described the test for unfairness in consumer actions in different ways. (See Bardin v. DaimlerChrysler Corp. (2006) 136 Cal.App.4th 1255, 1267.) Some cases hold that a business practice is “unfair” under the UCL if: (1) the consumer’s injury is substantial; (2) the injury is not outweighed by any countervailing benefits to consumers or competition; and (3) the injury could not reasonably have been avoided by consumers themselves. (Camacho v. Automobile Club of S. Cal. (2006) 142 Cal.App.4th 1394, 1403–05.)
Other cases require “that the public policy which is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL ... be tethered to specific constitutional, statutory, or regulatory provisions.” (Bardin v. DaimlerChrysler Corp., supra, 136 Cal.App.4th at pp. 1260-61.) Other cases assess whether the practice “is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers ... [weighing] the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” (Id. at p. 1260.)
Two remedies are available to private litigants under Section 17200: restitution and injunction. (Code Civ. Proc., § 17203.) The remedies are cumulative to other remedies within the chapter, including civil penalties and those remedies imposed by other laws. (People v. Bestline Products, Inc. (1976) 61 Cal.App.3d 879, 923-924.) Civil penalties are available in actions brought by public law enforcement officials, but not private litigants. (Bus. & Prof. Code, § 17206.)
Nonrestitutionary disgorgement, which focuses on the defendant’s gain from the unfair practice despite whether the plaintiff suffered a loss, is not an available remedy for an individual private plaintiff or class action plaintiff under the UCL. (Feitelberg v. Credit Suisse First Boston, LLC (2005) 134 Cal.App.4th 997, 1013 [citing Korea Supply, supra, 29 Cal.4th at p. 1152].) In Feitelberg v. Credit Suisse First Boston, the court affirmed the trial court’s judgment of dismissal after sustaining defendants’ demurrer based on the dispositive issue of whether nonrestitutionary disgorgement is available in a class action UCL claim. (Id.)
The court may sustain a demurrer for lack of available remedy under the UCL. (See Feitelberg v. Credit Suisse First Boston, LLC, supra, 134 Cal.App.4th at p. 1013.)
Here, the FAC does not allege facts to support any available remedy under section 17200. The FAC seeks “restitution of these funds” (FAC ¶ 216), but the FAC does not allege that the Paoli Defendants acquired any money or property by means of UCL violations. (See Business & Prof. Code, § 17203 [remedy of restitution allows court “to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition”].) In fact, the only legal fees paid by Plaintiff appear to have gone to other Defendants. (See FAC ¶ 122 [alleging Plaintiff paid Defendant Ilasz & Associates, PC].)
Seventeenth Cause of Action (Unauthorized Practice of Law)
The Seventeenth Cause of Action alleges that Defendants are out-of-state attorneys who engaged in the unauthorized practice of law within California. (FAC ¶¶ 222-226.)
Business and Professions Code Section 6125 provides that: “[n]o person shall practice law in California unless the person is an active licensee of the State Bar.” Section 6126.5(a) provides for an enforcement action brought in the name of the people of the State of California by the Attorney General, a district attorney, or a city attorney, acting as a public prosecutor. (Bus. & Prof. Code, § 6126.5(a).) The Code, however, does not provide for any private right of action. (See Bus. & Prof. Code, § 6125 et seq.)
Plaintiff requests leave to amend to include an alternative cause of action under Civil Procedure Code section 1029.8. (See McKay v. Longsworth (1989) 211 Cal.App.3d 1592 [holding that “by statute, [the defendant], in causing injury or damage to [the plaintiff] by his unlicensed practice of law, was also liable to her ‘for treble the amount of damages assessed’ plus, in the court’s discretion, costs and attorneys’ fees.”].)
However, a claim pursuant to Civil Procedure Code section 1029.8 is different from a claim of unauthorized practice of law under Business and Professions Code section 6125. Therefore, adding a cause of action under Section 1029.8 does not constitute an amendment to the 17th cause of action.
The Court will sustain the demurrer to the Seventeenth cause of action without leave to amend, which shall not have an effect on Plaintiff’s ability to include a claim under Section 1029.8.
Motion to Strike
The motion to strike of Defendants Paoli & Purdy, PC, Court Purdy, and William Paoli is GRANTED as to the Prayer for Relief ¶ 5, with leave to amend, and is DENIED as to allegations and prayer for relief for Punitive Damages, and is DENIED as moot as to 11th and 15th causes of action.
Plaintiff shall have 33 days to file an amended pleading.
Defendants Paoli & Purdy, PC, Court Purdy, and William Paoli filed a motion to strike allegations of the FAC that relate to punitive damages, attorney’s fees, and the 11th and 15th causes of action.
Pursuant to Code of Civil Procedure Section 436 the court may, upon a motion made or at any time in its discretion, strike out “any irrelevant, false, or improper matter inserted in any pleading.” “Irrelevant” matters include allegations not essential to the claim, allegations neither pertinent to nor supported by an otherwise sufficient claim, or a demand for judgment requesting relief not support by the allegations of the complaint. (Code Civ. Proc., § 431.10(b).)
Punitive Damages
Punitive damages are available in actions “for breach of an obligation not arising from contract.” (See Civ. Code, § 3294(a).) In the absence of an independent tort, punitive damages may not be awarded for breach of contract, even where the defendant’s conduct in breaching the contract was willful, fraudulent or malicious. (Cates Constr., Inc. v. Talbot Partners (1999) 21 Cal.4th 28, 61.)
To plead a claim to recover punitive damages, a plaintiff must plead and show one of the following bases for imposition of exemplary damages: malice, oppression, or fraud. (Civ. Code, § 3294(a).) A fraud cause of action adequately pled will generally support a prayer for punitive damages. (Stevens v. Super. Ct. (1986) 180 Cal.App.3d 605, 610.) A claim of fraud, such as false promises or inducing a person to enter into a contract through false statements, can lead a trier of fact to assess punitive damages in some cases. (See Bardis v. Oates (2004) 119 Cal.App.4th 1, 23, 9; Las Palmas Associates v. Las Palmas Center Associates (1991) 235 Cal.App.3d 1220, 1255 [false promise to guarantee a lease].)
“Although punitive damages by definition are recoverable for the tort of ‘deceit’ (§ 3294, subd. (c)(3)), it has been uniformly held that punitive damages are not recoverable in that branch of ‘deceit’ which is mere negligence.” (Branch v. Homefed Bank (1992) 6 Cal.App.4th 793, 799 [citing Delos v. Farmers Group, Inc. (1979) 93 Cal.App.3d 642, 656; Reid v. Moskovitz (1989) 208 Cal.App.3d 29, 32].)
Here, the FAC alleges a valid claim for fraud and therefore supports the recovery of punitive damages. Thus, the punitive damages allegations contained in the FAC do not need to be stricken.
Attorney’s Fees
The general rule regarding attorney’s fees is that each party is responsible for its fees regardless of which party ultimately prevails. (Code Civ. Proc., § 1021.) Recoverable costs include attorney’s fees only if provided for by contract or statute. (Code Civ. Proc., § 1033.5.)
Plaintiff contends the Elder Abuse Act provides for the recovery of attorney’s fees. The FAC, however, fails to plead a valid cause of action under the Act. Therefore, attorney’s fees are not recoverable as plead by the FAC.
Eleventh and Fifteenth Causes of Action
The Court has sustained the demurrer to the 11th and 15th causes of action. Therefore, the motion to strike is moot as to allegations contained in those claims.
Moving Defendants shall give notice of this ruling.