Judge: Richard S. Whitney, Case: 37-2020-00040896-CU-PN-CTL, Date: 2023-12-01 Tentative Ruling

SUPERIOR COURT OF CALIFORNIA,

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HALL OF JUSTICE

TENTATIVE RULINGS - November 30, 2023

12/01/2023  10:30:00 AM  C-68 COUNTY OF SAN DIEGO

JUDICIAL OFFICER:Richard S. Whitney

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Civil - Unlimited  Professional Negligence Demurrer / Motion to Strike 37-2020-00040896-CU-PN-CTL PREOVOLOS VS PREOVOLOS [IMAGED] CAUSAL DOCUMENT/DATE FILED:

TENTATIVE RULING: DEFENDANTS' DEMURRER TO THE SECOND AMENDED COMPLAINT ('SAC') is SUSTAINED without leave to amend.

Defendants ATHANASIOS K. PREOVOLOS ('ATHANASIOS') and PREOVOLOS LEWIN, ALC (collectively 'Defendants') challenge the fourth and fifth causes for Intentional and Negligent Interference with Prospective Economic Relations, respectively, in Plaintiff Peter Preovolos' ('Plaintiff' or 'Peter') SAC. 'In determining whether the complaint states facts sufficient to constitute a cause of action, the trial court may consider all material facts pleaded in the complaint and those arising by reasonable implication therefrom; it may not consider contentions, deductions or conclusions of fact or law.' (SLPR, L.L.C. v. San Diego Unified Port District (2020) 49 Cal.App.5th 284, 316.) Plaintiff's requests for judicial notice are granted, to the extent permissible.

The elements of a cause of action for intentional interference with prospective economic advantage are: '(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.' (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1153 [Citation omitted].) 'To establish a claim for interference with prospective economic advantage, therefore, a plaintiff must plead that the defendant engaged in an independently wrongful act. [Citation] An act is not independently wrongful merely because defendant acted with an improper motive.' (Id. at 1158.) '[A]n act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.' (Id. at 1159.) The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.

(North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786.) Calendar No.: Event ID:  TENTATIVE RULINGS

2985652  69 CASE NUMBER: CASE TITLE:  PREOVOLOS VS PREOVOLOS [IMAGED]  37-2020-00040896-CU-PN-CTL 'One contracting party owes no general tort duty to another not to interfere with performance of the contract; its duty is simply to perform the contract according to its terms. The tort duty not to interfere with the contract falls only on strangers-interlopers who have no legitimate interest in the scope or course of the contract's performance.' (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514.) Defendants assert they were not strangers to the economic relation because ATHANASIOS acted as corporate counsel for PenChecks. '[A]bsent extraordinary circumstances, an attorney may not be held liable for urging a client to breach a contract with some third party.' (Schick v. Lerner (1987) 193 Cal.App.3d 1321, 1329.) '[P]ublic policy dictates that attorneys must remain free to counsel their clients without fear of subjecting themselves to liability as a result of the proper discharge of their professional obligations.' (Id.) '[T]he determination whether in a specific case the [attorney] will be held liable to a third person not in privity is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the [attorney's] conduct and the injury, and the policy of preventing future harm. [Citation.]' (Id. at 1329–1330 [Citation omitted].) First, the causes of action at issue are not for interference with a contract. Therefore, the issue regarding whether Defendants were strangers to any contracts is not relevant. However, for purposes of deciding whether Defendants could be liable for their advice to a client, the Court believes an analysis of the relationships is important. Plaintiff and Defendants were not in a contractual relationship, but they were in an economic relationship indirectly through PenChecks. Not only did ATHANASIOS represent his father, Plaintiff, as Plaintiff's 'personal counsel...for over 15 years,' but ATHANASIOS (and his law firm) gained intimate knowledge of Plaintiff's economic situation before and during marital negotiations. (SAC, ¶¶ 7, 15-29, 32.) Defendants acted as corporate counsel for PenChecks. Plaintiff alleges Defendants 'recommended that Peter execute a series of documents drafted by Defendants to financially penalize Peter in a manner that benefited Litsa and their sons, including Defendant Thanasi, and which wrested control of Peter's various businesses from Peter in the event that Litsa decided to file for divorce.' (SAC, ¶ 7.) Plaintiff essentially alleges Defendants had an indirect interest in the economic relationship Plaintiff maintained with PenChecks (and Plaintiff's other businesses) because ATHANASIOS could benefit from how divorce would play out by advising Plaintiff as to marital issues and as corporate counsel for PenChecks. (SAC, ¶¶ 15-24.) Notably, ATHANASIOS is 'a beneficiary of Peter and Litsa's estate plan and the Irrevocable Trust.' (SAC, ¶ 21.) The Court believes that Defendants' advice to PenChecks, if viewed entirely through an economic lens, could be seen as entirely intended to help PenChecks and not to negatively affect Plaintiff. Plaintiff does not allege the advice was disadvantageous to PenChecks economically. However, Plaintiff alleges Defendants did intend to harm Plaintiff. Such alleged harm to Plaintiff would be foreseeable, especially since Defendants were aware of Plaintiff's economic situation. It appears there is a close connection between Defendants' actions and the harm Plaintiff allegedly suffered. However, the policy of preventing future harm is already addressed by existing law regarding conflicts of interest. As Plaintiff points out, the allegedly improper conduct by Defendants was as to representing Plaintiff, Plaintiff's wife, and the family businesses at the same time without properly obtaining informed consent as to the conflicts. The issues in this case would be more properly addressed by enforcement of the law as to conflicts of interest, not imposing a duty on an attorney who is representing a corporate client where nonclients, for purposes of the advice to the client, could be negatively affected. The Court need not adopt a rule in this situation that could hamper attorney-client communications when law already exists to prevent the type of harm at issue here.

In short, the Court does not believe this case presents an extraordinary circumstance such that the Calendar No.: Event ID:  TENTATIVE RULINGS

2985652  69 CASE NUMBER: CASE TITLE:  PREOVOLOS VS PREOVOLOS [IMAGED]  37-2020-00040896-CU-PN-CTL general rule that attorneys do not owe any duty to nonclients should not be followed. Further, there are due process issues with permitting Plaintiff to pursue claims for Intentional and Negligent Interference with Prospective Economic Relations because Defendants cannot reveal attorney-client privileged information to defend themselves. 'It is the corporation, and not the shareholder, who is the holder of the privilege.' (McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th 378, 383.) Plaintiff cannot waive the privilege PenChecks holds. Therefore, Defendants would be in the untenable situation of being unable to fully defend themselves given that the crux of the claims relate to Defendants' communications with PenChecks, which would presumably be privileged. In such case, the claims are properly dismissed. (See Solin v. O'Melveny & Myers, LLP (2001) 89 Cal.App.4th 451, 466.) The demurrer is sustained as to the fourth and fifth causes for Intentional and Negligent Interference with Prospective Economic Relations, respectively. Plaintiff has the burden of proving a reasonable possibility of amendment. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) Plaintiff has not met this burden.

The demurrer is sustained without leave to amend.

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