Damon Capital, LLC, et al. v. Yongduk Chung, et al.

MOTION TO STRIKE PORTIONS OF THE SECOND AMENDED COMPLAINT

 

MOVING PARTY(S): Defendants Yongduk Chung; JC&Company Law Corporation; JC&Company, Inc.; JC&Company PC; and JC&Company, LLP

RESPONDING PARTY(S): Plaintiffs Damon Capital, LLC, and Jacob Koo

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff Damon Capital, LLC, and Jacob Koo allege that their former attorneys committed professional negligence by, among other things, representing them in matters despite the existence of an undisclosed conflict. 

Defendants Yongduk Chung; JC&Company Law Corporation; JC&Company, Inc.; JC&Company PC; and JC&Company, LLP now move to strike portions of the Second Amended Complaint. Plaintiffs opposed.

TENTATIVE RULING:

Defendants’ Motion to Strike is GRANTED without leave to amend.

Defendants are to file an Answer to the SAC (as modified by this ruling) within 21 days if they have not already done so.

Plaintiff to give notice.

DISCUSSION:

Motion to Strike

I. Meet and Confer

The Declaration of Attorney David Samani reflects that the meet and confer requirement was satisfied. (CCP § 430.41.) 

II. Legal Standard

A motion to strike lies either (1) to strike any irrelevant, false or improper matter inserted in any pleading; or (2) to strike any pleading or part thereof not drawn or filed in conformity with the laws of this state, a court rule or order of court.  (CCP § 436.)

III. Analysis

Defendants move to strike the following portions of Plaintiffs’ First Amended Complaint:

1. The words, “in or around” in Paragraph 2, line 13.

2. Paragraphs 3-6, 34-47, in their entirety.

3. Paragraph 56, subdivisions (A)-(C), (F)-(J) in their entirety.

4. Paragraph 46 (duplicated numbering—found on page 19, line 5), subdivisions (A)-

(C) and (G), in their entirety.

5. Paragraph 50 (duplicated numbering—found on page 20, line 17), subdivisions (A)-

(C) and (G), in their entirety.

6. Paragraph 66, subdivisions (A)-(D), and (H), in their entirety.

7. Paragraph 67, subdivisions (A)-(C), in their entirety.

This is the second motion to strike allegations pertaining to an alleged conflict of interest. On December 8, 2023, this court granted Defendants’ motion to strike with leave to amend. (See 12/8/23 Minute Order and Final Ruling.) Based on the face of the First Amended Complaint, this court found the statute of limitations as it pertained to allegations of a conflict of interest began running near 2015 at the latest, and therefore, the allegations were untimely. (Id.)

Now, Defendants again contend that the subject allegations pertaining to the alleged conflict of interest remain precluded under the applicable statute of limitations and should be stricken. Under Code of Civil Procedure section 340.6(a), “an 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 giving rise to the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” 

“[W]hen a substantive defect is clear from the face of a complaint, such as a violation of the applicable statute of limitations or a purported claim of right which is legally invalid, a defendant may attack that portion of the cause of action by filing a motion to strike.” (PH II, Inc. v. Superior Ct. (1995) 33 Cal. App. 4th 1680, 1682–83.) However, the use of a motion to strike in such a case “should be cautious and sparing,” so as to not create “a procedural ‘line item veto’ for the civil defendant.” (Id.) Like demurrers, the grounds for a motion to strike must appear on the face of the pleading under attack, or from matters which the court may judicially notice. (CCP § 437; CPF Agency Corp. v. R&S Towing Service (2005) 132 Cal. App. 4th 1014, 1032.) “A demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. [Citation.] In order for the bar ... to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred. [Citation.]’ [Citation.]” (Comm. for Green Foothills v. Santa Clara Cnty. Bd. of Supervisors (2010) 48 Cal. 4th 32, 42.)

Again, the underlying allegations involve conduct during legal representation “in or around 2012 to 2015.” (SAC ¶ 2.) Defendants represented Plaintiff Koo, who held a 50% interest in Damon Capital. (Id.) Dean Kim held the other 50% interest in Damon Capital. (Id.) Plaintiff alleges that Defendants “simultaneously represented Damon Capital, Mr. Koo and Mr. Kim in connection with a transaction in which Mr. Kim’s interests were adverse to that of Damon Capital and Mr. Koo, because Mr. Kim was selling his fifty percent (50%) membership interest in Damon Capital to Mr. Koo.” (Id.) “At no time, however, did Defendants ever explain to Damon Capital or to Mr. Koo the nature or extent of the conflicts of interest that arose as a result of such legal representation.” (Id. ¶ 3.) 

Plaintiffs further allege that Defendants “actively concealed from Plaintiffs the existence of such conflicts of interest” and “affirmatively led Plaintiffs to believe that Defendants’ concurrent representation of Damon Capital, Mr. Koo, and Mr. Kim raised no legal issues.” (Id. ¶ 38.) Moreover, Plaintiffs allege that Defendants “refused, and continue to fail and refuse, to turn over to Damon Capital and Mr. Koo all “client materials and property” in Defendants’ possession, custody, or control belonging to Damon Capital or Mr. Koo, as required by Current Rule 1.16(e)(1).” (Id.) Based on these additional allegations, Plaintiffs contend that “the delayed discovery rule applies to the causes of action alleged by Plaintiffs against Defendants herein.” (Id.) Moreover, Plaintiffs allege they did not sustain an “actual injury” from the alleged conflict until the Orange County litigation in 2023 between Mr. Kim and Mr. Koo that arose from the dispute between them. (Id. ¶ 41-47.) 

Upon review of the additional allegations and arguments, the court again concludes that Plaintiffs’ allegations pertaining to a conflict of interest are time barred under the one-year statute of limitations. As noted in the previous ruling, the nature and extent of the conflict was readily apparent at the time it happened. Plaintiffs’ arguments against this conclusion are unavailing. 

First, Plaintiffs argue the statute of limitations was tolled until 2023, when they suffered “actual injury” through an unfavorable verdict in the Orange County litigation. (See Truong v. Glasser (2009) 181 Cal. App. 4th 102, 111 [“if the plaintiff has not sustained actual injury, the one-year statute is tolled”].)

However, the actual injury in this matter—at least as it pertains to the conflict of interest—is the conflict of interest itself that occurred in 2015. Though the alleged attorney negligence may have ultimately caused an unfavorable verdict later in 2023 does not change the initial harm.

Second, Plaintiffs argue there are no allegations on the face of the SAC demonstrating that they were aware of the existence of the conflict in 2015.

However, it is unavoidable that Plaintiffs knew Defendants were representing all parties to the transaction in 2015. Thus, the conflict was apparent and known to Plaintiffs at that time. It is irrelevant that Plaintiffs may not have realized the arrangement constituted a conflict from a legal or ethical standpoint. (See Worton v. Worton (1991) 234 Cal.App.3d 1638, 1650 [“It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action.”].) It only matters that they were aware of the facts underlying that conflict, i.e., that the attorneys were representing all parties in the transaction. (See Truong v. Glasser (2009) 181 Cal. App. 4th 102, 110 [“The one-year period is triggered when the client discovers, or should have discovered, the facts constituting the wrongful act or omission and “not by his discovery that such facts constitute professional negligence, i.e., by discovery that a particular legal theory is applicable based on the known facts.”].)

Third, Plaintiffs argue the continuous representation doctrine applies. The one-year statute of limitations is tolled “during the time…[t]he attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred.”  (340.6(a)(2).)

However, there are no facts alleged in the SAC to support continuous representation. Plaintiffs allege only that Defendants have failed and refused to turn over their “client materials and property.” (SAC ¶ 9.) But “[c]ontinuity of representation ultimately depends, not on the client's subjective beliefs, but rather on evidence of an ongoing mutual relationship and of activities in furtherance of the relationship.” (GoTek Energy, Inc. v. SoCal IP L. Grp., LLP (2016) 3 Cal. App. 5th 1240, 1248.) The mere failure to transfer client files, standing alone, is not objective evidence of an ongoing mutual relationship. (See id. [transfer of client files was not “evidence of an ongoing mutual relationship”].)

Thus, this court concludes again that the statute of limitations began running at or near the time of the underlying transaction in 2015 at the latest. (See Saliter v. Pierce Brothers Mortuaries (1978) 81 Cal.App.3d 292, 299–300 [where allegations bearing on issue of whether plaintiff was on inquiry notice would support only one legitimate inference, question is one of law that may be resolved on demurrer]. Under the one-year statute of limitations, the claims pertaining to the conflict of interest are untimely on their face. (See CCP § 340.6(a).)

Accordingly, Defendants’ Motion to Strike is GRANTED without leave to amend.

Moving parties to give notice.

IT IS SO ORDERED.

Dated:   April 17, 2024 ___________________________________