Judge: Stephen I. Goorvitch, Case: 22STCV32849, Date: 2023-09-18 Tentative Ruling

Case Number: 22STCV32849    Hearing Date: April 2, 2024    Dept: 39

Marvin Kay v. Gregory A. Yates, et al.

Case No. 22STCV32849

Motion for Reconsideration of Court’s Decision to Grant

Motion for Judgment on the Pleadings

            Plaintiff Marvin Kay (“Plaintiff”) filed this action against Gregory A. Yates and his practice, asserting causes of action for breach of contract and conversion.  Plaintiff alleges that there was a referral agreement which entitled Plaintiff to fees relating to Mr. Yates’ work on behalf of the plaintiff in Case Number BC661807, who is Mr. Anthony Miramontes.  Plaintiff alleges that Mr. Yates did not pay him a share of the fees for one of the settlements, the “Lime Grove settlement.”  Yates argues that this settlement was not covered by the parties’ referral agreement. 

Plaintiff alleges as follows in the operative complaint: 

Edward Steinbrecher (“Steinbrecher”) was an attorney who maintained a practice, Edward Steinbrecher, P.C. (the “practice”). (Complaint, ¶ 1.)  Steinbrecher passed away, and in May 2019, the probate court appointed Plaintiff to be the practice administrator for the practice. (Ibid.) At the time of his death, Steinbrecher was handling a personal injury case on behalf of the plaintiff: Anthony Miramontes v. United Parcel Services, Inc., et al., Case No. BC661807 (the “Miramontes case”). (Complaint, ¶ 10.) Prior to his death, Steinbrecher had spent approximately 4,000 hours on the case. (Complaint, ¶ 13.)

Plaintiff and Gregory A. Yates, Esq. negotiated an agreement under which Yates would handle the Miramontes case, and Plaintiff would be paid a portion of the attorney’s fees earned by Yates. (Complaint, ¶ 14 & Exh. B.) Specifically, the agreement included “a sliding scale” up to the agreed upon value of Steinbrecher’s work, which was $4 million (based upon the 4,000 hours at a rate of $1,000 per hour). (Complaint, ¶¶ 14-15.) The agreement was signed by Plaintiff and Yates on June 12 and June 13, 2019, respectively. (Complaint, Exh. B.) Yates executed an addendum to this agreement on June 14, 2019, with his client, as required by California Rules of Professional Conduct, rule 1.5.1. (Complaint, Exh. D.) Plaintiff did not sign this agreement. (See ibid.)

Yates then recruited Steve Vartazarian, Esq. to work on the case. The client—Anthony Miramontes—signed the fee splitting agreement on August 26, 2019. (Complaint, Exh. E.) Both Yates and Vartazarian signed the fee splitting agreement under rule 1.5.1, on September 4, 2019. (Ibid.) The client signed this agreement, but Plaintiff did not sign this agreement. (Ibid.)  Plaintiff alleges that the Miramontes case settled, and that both Yates and Vartazarian received portions of the settlement proceeds, but they did not pay Plaintiff the required attorney’s fees. (Complaint, ¶¶ 19-25.)

            On September 26, 2023, the Court granted Defendants Steve Vartazarian and his practice’s motion for judgment on the pleadings because Yates, not Vartazarian, signed the contract with Plaintiff.  (See Court’s Minute Order, dated September 26, 2023.)  The Court denied leave to amend, finding that “no amendment would be successful,” dismissing the Vartazarian defendants with prejudice.  The Court denied the motion with respect to Gregory A. Yates and his practice (collectively, “Defendants”).  (Ibid.)

            The petition to approve the Lime Grove settlement was sealed, so Plaintiff sought access to this sealed document.  At a hearing on November 6, 2023, the Court considered Plaintiff’s need for the information versus the settling parties’ privacy interests and bifurcated discovery/dispositive motions to address this issue.  Specifically, the Court ruled as follows:

“The parties will first take discovery on the issue of whether the Lime Grove settlement falls within the scope of the parties’ agreement, e.g., whether Mr. Yates worked on the case, whether the Lime Grove portion of the case falls within the parties’ agreement, etc.  In other words, the first phase of discovery—‘Phase One’—will address every issue not dependent upon the amount of the Lime Grove settlement and Mr. Yates’s fee for the Lime Grove settlement.  The Court will then hear the motion for summary judgment/adjudication.  If the motion is denied, the parties will then take discovery on the remaining issue—‘Phase Two’—which is whether Mr. Yates’ fee for his work on the Lime Grove settlement reaches the necessary threshold of the parties’ agreement and how much of this fee should be paid to Plaintiff.  If the case reaches Phase Two, the Court will determine at that point whether, and to what extent, Plaintiff’s counsel is entitled to information about the Lime Grove settlement amount and the attorneys’ fees.  The Court believes that bifurcation is the most equitable way to balance Plaintiff’s need for the information with the settling parties’ interest in confidentiality, as Plaintiff would not be able to access the confidential information unless and until it is clear it is necessary.”

(See Court’s Minute Order, dated November 6, 2023.)  Plaintiff’s counsel sought access to the petition to approve the Lime Grove settlement, which was sealed, and the Court ordered disclosure of sufficient information to resolve the issues in Phase One.  (See Court’s Minute Order, dated November 14, 2023.)

            The Court anticipated that the parties would litigate the dispositive issues: Whether Mr. Yates worked Mr. Miramontes’s cases and, if so, whether “the Lime Grove portion of the case falls within the parties’ agreement.”  If not, Plaintiff has no causes of action for breach of contract and conversion.  Inexplicably, the parties were back before the Court litigating issues relating to Phase Two.  Defendants filed a motion for summary adjudication, arguing that the payment Yates received from Vartazarian is not a “specific sum capable of identification,” entitling Defendants to summary adjudication of the conversion claim.  Understandably, Plaintiff’s counsel sought to continue the hearing on Defendants’ motion to conduct discovery on this issue.

            The Court ordered that it only intends to consider Defendants’ motion for summary judgment/adjudication with respect to the issues in Phase One: Whether Mr. Yates worked on the Lime Grove settlement; whether the Lime Grove settlement was part of his referral agreement with Plaintiff; whether the referral agreement is valid, etc.  However, in the process of reviewing that issue, the Court concluded that it may have erred in granting Steve Vartazarian and his practice’s motion for judgment on the pleadings with respect to the cause of action for conversion.  Vartazarian did not sign the referral agreement, which was the basis of the Court’s decision to grant the motion.  However, in Defendants’ motion for summary judgment, they represent that Vartazarian handled the Lime Grove settlement and received the settlement proceeds, and Vartazarian then paid Yates pursuant to their fee splitting agreement.  (See Defendants’ Memorandum of Points and Authorities, p. 31:15-32:1.)  If Vartazarian did so knowing that Plaintiff was entitled to a portion of those funds, Vartazarian may be liable for conversion. 

            Based upon the foregoing, the Court noticed its own motion for reconsideration whether it should vacate its order of September 26, 2023, and issue a new and different order denying Vartazarian and his practice’s motion for judgment on the pleadings on the conversion claim.  (See Court’s Minute Order, dated January 23, 2024.)  The Court has inherent authority to reconsider any of its rulings.  (Le Francois v. Goel (2005) 35 Cal.4th 1094, 1103.)  The Court provided written notice and set a new briefing schedule. 

            The elements of conversion are as follows: (1) The plaintiff’s ownership or right to possession of the property; (2) The defendant’s conversion by a wrongful act or disposition of property rights; and (3) Damages.  (See Welco Electronics, Inc. v. Mora (2013) 223 Cal.App.4th 202, 208.)  “[T]he simple failure to pay money owed does not constitute conversion.” (Kim v. Westmoore Partners, Inc. (2011) 201 Cal.App.4th 267, 284.) However, there are exceptions to this principle. “A cause of action for conversion of money can be stated only where a defendant interferes with the plaintiff’s possessory interest in a specific, identifiable sum, such as when a trustee or agent misappropriates the money entrusted to him.” (Ibid.) “California cases permitting an action for conversion of money typically involve those who have misappropriate, commingled, or misapplied specific funds held for the benefit of others.” (Ibid., citations omitted.)  Specifically, an attorney may assert a cause of action for conversion for unpaid legal fees if there is “a specific sum capable of identification” and there was a lien created by a written agreement.  (See Weiss v. Marcus (1975) 51 Cal.App.3d 590, 598-599.) 

            If the Vartazarian defendants received the Lime Grove settlement proceeds, and kept some of the funds and paid Yates the rest of the funds, while having actual or constructive knowledge that Plaintiff was entitled to those funds, Plaintiff may have a claim for conversion against the Vartazarian defendants.  But the dispositive issue is whether the Vartazarian defendants had actual or constructive knowledge that Plaintiff was entitled to those funds, i.e., Whether the Vartazarian defendants knew the details of Yates’ referral agreement with Plaintiff; whether the Lime Grove settlement was part of Yates’ referral agreement with Plaintiff and the Vartazarian defendants knew; whether the referral agreement is valid and the Vartazarian defendants knew; etc.  The complaint does not allege sufficient facts to demonstrate that the Vartazarian defendants had actual or constructive knowledge of the relevant details, so the Court was correct in granting the Vartazarian defendants’ motion for judgment on the pleadings. 

            Based upon the foregoing, the Court rules as follows:

            1.         The Court’s motion for reconsideration is granted in part and denied in part. 

            2.         The Court did not err in granting the Vartazarian defendants’ motion for judgment on the pleadings, so the motion for reconsideration is denied in this respect.

            3.         However, the Court erred in denying leave to amend and dismissing the Vartazarian defendants with prejudice.  In theory, Plaintiff might be able to allege additional facts that would cure the defects.  Therefore, the motion for reconsideration is granted only insofar as the Court grants leave to amend with respect to the conversion claim (not the breach of contract claim) and converts the dismissal with prejudice to a dismissal without prejudice. 

            4.         The Court authorizes Plaintiff’s counsel to file an amended complaint with a cause of action for conversion against the Vartazarian defendants, supported by additional facts, within thirty (30) days.

            5.         The Yates defendants need not re-file their motion for summary judgment.  The Court will construe that motion as addressing any first amended complaint.  However, the Vartazarian defendants may file their own joinder to the Yates defendants’ motion for summary judgment and their own motion for summary judgment to address any independent issues. 

            6.         Plaintiff’s counsel shall provide notice and file proof of such with the Court.