Judge Teresa A. Beaudet, Case Number: 20STCV34671, Date: 2024-02-02 Tentative Ruling

On September 10, 2020, Creative Recovery Concepts, Inc. filed the instant action against Defendants 8424 Western Plaza, LLC and Kathleen Janet Haywood aka Kathleen Robinson. The Complaint alleges causes of action for (1) breach of contract and (2) to set aside fraudulent transfer.

On April 25, 2022, a Complaint was filed in the matter Janet Haywood, et al. v. Stephen Cho, et al., Case No. 22STCV13629 (herein, the “Haywood Action”). On February 9, 2023, Janet Haywood (“Haywood”) filed the operative First Amended Complaint (“FAC”) in the Haywood Action against Defendants Stephen Cho and Creative Recovery Concepts. The FAC alleges causes of action for (1) breach of contract, (2) breach of implied covenant of good faith and fair dealing, and (3) conspiracy to commit fraud.[1]

On October 9, 2023, the Court issued a Nunc Pro Tunc Order in the Haywood Action providing, inter alia, as follows:

“It appearing to the Court that through inadvertence and/or clerical error, the minute order of 10/09/2023 in the above-entitled action does not properly reflect the Court’s order. At the direction of the Judicial Officer, said minute order is corrected nunc pro tunc as of 10/09/2023, as follows: By adding: The Court orders the following cases, 22STCV13629 and 20STCV34671, consolidated and assigned to Department 50 in Stanley Mosk Courthouse for all purposes. The Court designates 20stcv34671 as the lead case. All future documents must be filed under 20stcv34671 (CREATIVE RECOVERY CONCEPTS, INC. vs 8424 WESTERN PLAZA, LLC., et al.). Case numbers on all subsequent filings should be reflected under the lead case.” (Emphasis added.)

M. Stephen Cho (erroneously sued as Stephen Cho), herein “Cho,” now moves for judgment on the pleadings.[2] Haywood opposes.

The Court grants Cho’s request for judicial notice as to Exhibits A-J and L-P, only as to the fact of the filing of these documents. The Court denies Cho’s request for judicial notice as to Exhibit K. The Court notes that “[i]t is well settled that a court cannot take judicial notice of the truth of matters stated in pleadings or affidavits in the court file of another case, although it can be noticed that the documents¿exist. Judicial notice can be taken only of the contents of orders, findings of fact, conclusions of law, and judgments.” (Bennett v. Regents of University of California¿(2005) 133 Cal.App.4th 347, 358, fn. 7 [emphasis in original].)

A motion for judgment on the pleadings has the same function as a general demurrer but is made after the time for demurrer has expired. Except as provided by ¿Code of Civil Procedure section 438¿, the rules governing demurrers apply. (¿Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999¿.) A motion by a defendant can be made on the ground that the complaint (or any cause of action therein) “¿does not state facts sufficient to constitute a cause of action against that defendant.¿” (¿Code Civ. Proc., § 438, subd. (c)(1)(B)(ii)¿.) Pursuant to Code of Civil Procedure section 438, subdivision (d), “[t]he grounds for motion provided for in this section shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice.”

¿“¿To survive a demurrer, the complaint need only allege facts sufficient to state a cause of action; each evidentiary fact that might eventually form part of the plaintiff’s proof need not be alleged.¿” (¿C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 872¿.) For the purpose of testing the sufficiency of the cause of action, the demurrer admits the truth of all material facts properly pleaded. (¿Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967¿.) A demurrer “¿does not admit contentions, deductions or conclusions of fact or law.¿” (¿Daar v. Yellow Cab Co. (1967) 67 Cal.2d 695, 713¿.)

In FAC, Haywood alleges that in 2017, she retained Cho to represent her in a lawsuit filed in the Los Angeles County Superior Court known as “Genus v. Haywood,” a dispute arising out of an improved parcel of residential property owned and/or controlled by Haywood and located at 10427 S. Denker Avenue, Los Angeles, California (the “Denker Property”). (FAC, ¶ 7.) Haywood alleges that Cho “aggressively litigated the case, in the process conducting elaborate unnecessary Discovery as well as engaging in unnecessary litigation activities that were not prudent given the ‘big picture’ economic constraints of the litigation, with the legal fees increasing exorbitantly with the passing of each month…” (FAC, ¶ 8.)

Haywood alleges that Cho “pressured and coerced [Haywood] to participate…in a Settlement Conference,” and that during the Settlement Conference, Haywood “caved into the active efforts of [Cho] to induce if not compel [Haywood] to settle the dispute…” (FAC, ¶ 11.) Haywood further alleges that Cho falsely informed Haywood that she “faced the prospect of being incarcerated by the trial judge” if Haywood did not relinquish her interest in the Denker Property for the amount of $650,000.00. (FAC, ¶ 12.)

In addition, Haywood alleges that after the settlement was memorialized, Cho “passed off his large Bill for attorneys fees to [Creative Recovery Concepts], who aggressively sought payment of the attorneys fees from [Haywood]…” (FAC, ¶ 14.) Haywood alleges that “[t]he Draconian collection actions of [Creative Recovery Concepts] confirmed [Haywood’s] suspicions that the reason that [Cho] racked up such and [sic] exorbitant amount of unnecessary attorneys fees when he intended to induce settlement was because [Cho] was overtly engaging in actions to manifest the and act out a [conspiratorial scheme] to use [Creative Recovery Concepts] to collect aggressively his exorbitant and worthless attorneys fees…” (FAC, ¶ 15.)

In the first cause of action for breach of contract, Haywood alleges that “PLAINTIFF HAYWOOD and DEFENDANT CHO entered into a contract in which DEFENDANT CHO promised to provide useful and valuable legal services in exchange for PLAINTIFF HAYWOOD’s promise to pay him legal fees and costs for those useful and valuable legal services.” (FAC, ¶ 17.) Haywood alleges that “DEFENDANT CHO breached this contract by racking up exorbitant unnecessary attorneys fees while knowing full well that he intended to settle the litigation, and that such legal efforts were superfluous and unnecessary, but DEFENDANT CHO relentlessly pursued and charged these fees because he knew that most if not all of them would be collected by DEFENDANT CREATIVE RECOVERY, which acted as DEFENDANT CHO’s ‘in house’ COLLECTION STRONG ARM, with DEFENDANT CREATIVE RECOVERY’s sole purpose to collect most if not all of the exorbitant and unnecessary legal fees racked up by DEFENDANT CHO on cases that he intended to settle despite incurring unnecessarily the fees and expenses normally only expended for cases that actually must be taken to trial.” (FAC, ¶ 18.)

In the motion, Cho asserts that “[h]ere, the FAC clearly states a claim for legal malpractice, disguised as a Breach of Contract claim which is based on an agreement to provide legal representation…” (Mot. at p. 11:11-12.) Cho cites to Schultz v. Harney (1994) 27 Cal.App.4th 1611, 1621, where the Court of Appeal noted that “[a]n attorney’s breach of the ethical duties of good faith and fidelity, which are owed by an attorney to his or her client, amounts to legal malpractice and is actionable.” Cho also cites to Lynch v. Warwick (2002) 95 Cal.App.4th 267, 273, where the Court of Appeal found that “[h]ere, although he seeks a contractual-type damage (out-of-pocket expenses for attorney fees) and labels his cause of action as a breach of contract, Lynch is actually seeking recovery on a tort theory for Warwick’s negligence, i.e., Lynch is seeking recovery for legal malpractice. Our Supreme Court has made it clear that a legal malpractice action against a former criminal attorney requires a showing of actual innocence.”[3] In the opposition, Haywood does not appear to address or dispute Cho’s argument that Haywood’s “[b]reach of Contract claim is in reality a claim for legal malpractice.” (Mot. at p. 11:20-21.)

Cho then asserts that Haywood’s “legal malpractice” claim is time-barred. Cho cites to Code of Civil Procedure section 340.6, subdivision (a), which provides in part that “[a]n 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 constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.”

Cho argues that “it is undisputed that as of October 15, 2019, Mr. Cho ceased to be counsel for Plaintiff. (See Exhibits N and O to RJN.) as such, the time to bring any claim for legal malpractice lapsed on October 14, 2020, under § 340.6(a). The original complaint (which actually stated a cause of action for legal malpractice) was not filed April 25, 2022…The claim is therefore time barred.” (Mot. at p. 12:5-10.) As set forth above, in support of this argument, Cho cites to Exhibit “O” to his request for judicial notice, which is an October 15, 2019 Order granting the motion of M. Stephen Cho to be relieved as counsel for 8424 Western Plaza, LLC in the case Genus v. 8424 Western Plaza, LLC, Case No. BC706314. (Cho’s RJN, Ex. O.)

As an initial matter, the Court does not find that this October 15, 2019 Order shows that “Cho ceased to be counsel for [Haywood],” as the Order concerns the client “8424 Western Plaza, LLC.” Moreover, Cho does not appear to cite to legal authority demonstrating that the statute of limitations set forth in Code of Civil Procedure section 340.6, subdivision (a) begins to run when an attorney stops representing a client. Rather, as Cho points out, this provision provides that “[a]n 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 constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc., § 340.6, subd. (a).)

Cho also argues that “[a]s is evident from Exhibit P to RJN (Register of Action in the consolidated actions), Plaintiff and 8424 Western Plaza LLC were served with the collections complaint on or about October 13, 2020, and October 26, 2020. As such, Plaintiff was on actual notice of the collections complaint wherein CRC, as the assignee of Mr. Cho, was seeking to recover unpaid legal bills, to set aside the fraudulent transfer. Under Jolly[4], Plaintiff was aware of the specific ‘facts’ necessary to establish her legal malpractice claim. Yet, she waited to file the original complaint (which asserted a claim for legal malpractice) until April 25, 2022[5]. Given the clear language in § 340.6, this claim is time barred.” (Mot. at pp. 12:26-13:6.)

As set forth above, Cho relies on Exhibit “P” to his request for judicial notice, which is a case summary for the instant action, Case No. 20STCV34671. (Cho’s RJN, Ex. P.) The item listed for October 13, 2020 provides, “Proof of Service by Substituted Service; Filed by: CREATIVE RECOVERY CONCEPTS, INC. (Plaintiff); As to: 8424 WESTERN PLAZA, LLC. (Defendant); Proof of Mailing Date: 10/02/2020…” (Ibid.) The item listed for October 26, 2020 provides, “Proof of Service by Substituted Service; Filed by: CREATIVE RECOVERY CONCEPTS, INC. (Plaintiff); As to: KATHLEEN JANET HAYWOOD (Defendant); Proof of Mailing Date: 10/08/2020…” (Ibid.) However, the Court does not see how this shows that “Plaintiff was aware of the specific ‘facts’ necessary to establish her legal malpractice claim,” as Cho asserts. (Mot. at p. 13:3-4.) Moreover, the Court finds that this is a factual argument not appropriate for a motion for judgment on the pleadings.

Based on the foregoing, the Court does not find that Cho has demonstrated that the first cause of action of the FAC is time-barred. Thus, the Court denies Cho’s motion as to the first cause of action.

D. Second Cause of Action of the FAC for Breach of Implied Covenant of Good Faith and Fair Dealing

As to the second cause of action, Cho first asserts that “the contract at issue is for Mr. Cho to provide legal services and the allegations in the original complaint and the FAC are for legal malpractice. However, as discussed above, the claim for legal malpractice is time barred. Therefore, the claim for breach of implied covenant of good faith and fair dealing cannot survive.” (Mot. at p. 14:5-8.) As set forth above, the Court does not find that Cho has demonstrated that the first cause of action for breach of contract is time-barred.

Cho also argues that the second cause of action “fails because it is duplicative and relies on the same facts as those in the Breach of Contract Claim.” (Mot. at p. 14:9-10.) Cho cites to Award Metals, Inc. v. Superior Court (1991) 228 Cal.App.3d 1128, 1134-1135, where the Court of Appeal noted that “[d]espite the label of negligence, however, real party alleges in the first cause of action, in the language of section 4558, that petitioner ‘negligently, knowingly removed and/or failed to install a point of operation guard on said power press, and that this removal or failure to install was specifically authorized by said Defendant under conditions known by said Defendant to create a probability of serious death or injury.’ Except for the conclusory allegation that petitioner acted negligently, these allegations are virtually identical to the allegations contained in the fifth cause of action for violation of section 4558. Petitioner concedes that the demurrer was properly overruled as to the fifth cause of action under the exception of section 4558, and it would follow that the similar allegations in the first cause of action should also survive the demurrer. But stating them in two causes of action, as real party has done, is merely duplicative pleading which adds nothing to the complaint by way of fact or theory. For that reason, the demurrer should have been sustained as to this cause of action insofar as it affects petitioner.”

Indeed, in both the first and second causes of action of the FAC, Haywood alleges that “PLAINTIFF HAYWOOD and DEFENDANT CHO entered into a contract in which DEFENDANT CHO promised to provide useful and valuable legal services in exchange for PLAINTIFF HAYWOOD’s promise to pay him legal fees and costs for those useful and valuable legal services.” (FAC, ¶¶ 17, 20.) In addition, in both the first and second causes of action, Haywood alleges that “DEFENDANT CHO breached this contract” and that “DEFENDANT CHO breached this Implied Covenant of Good Faith and Fair Dealing” by “racking up exorbitant unnecessary attorneys fees while knowing full well that he intended to settle the litigation, and that such legal efforts were superfluous and unnecessary, but DEFENDANT CHO relentlessly pursued and charged these fees because he knew that most if not all of them would be collected by DEFENDANT CREATIVE RECOVERY, which acted as DEFENDANT CHO’s ‘in house’ COLLECTION STRONG ARM, with DEFENDANT CREATIVE RECOVERY’s sole purpose to collect [aggressively] most if not all of the exorbitant and unnecessary legal fees racked up by DEFENDANT CHO on cases that he intended to settle despite incurring unnecessarily the fees and expenses normally only expended for cases that actually must be taken to trial.” (FAC, ¶¶ 18, 22.)

In the opposition, Haywood does not appear to dispute that the second cause of action is duplicative of the first. Thus, based on the foregoing, the Court grants Cho’s motion as to the second cause of action, with leave to amend.

Lastly, the Court notes that in the opposition, Haywood “requests that this Court provide the Plaintiff leave to amend the First Amended Complaint to include a Cause of Action for Fraud.” (Opp’n at p. 3:14-16.) The Court does not find that such request is appropriately made in Haywood’s opposition to the instant motion, and thus denies the request. Haywood may file a properly noticed motion should she seek leave to amend the FAC to add a cause of action for fraud.

Based on the foregoing, the Court grants Cho’s motion for judgment on the pleadings as to the second cause of action of the FAC, with leave to amend. Cho’s motion is denied as to the first cause of action of the FAC.

The Court orders Haywood to file and serve an amended complaint, if any, within 20 days of the date of this order.

[1]On October 31, 2023, the Court issued a minute order in the Haywood Action providing, inter alia, that “the Court grants Cho’s special motion to strike as to the third cause of action of the FAC. Cho’s motion is otherwise denied.”

[2]Cho’s notice of motion states that “the motion of Defendant Mr. M. Stephen Cho (erroneously sued as Stephen Cho, ‘Mr. Cho’) for Judgment on the Pleadings is set for a hearing on February 14, 2024…” (Notice of Motion at p. 1:22-23.) The memorandum of points and authorities in support of the motion addresses Haywood’s causes of action in the FAC for breach of contract and breach of implied covenant of good faith and fair dealing. Thus, the Court construes the instant motion for judgment on the pleadings as directed to the first and second causes of action of Haywood’s FAC in the Haywood Action.

[3]The Lynch Court noted that “Lynch filed a complaint against Warwick containing causes of action for legal malpractice, breach of contract and breach of fiduciary duty. As amended, the causes of action were based on Warwick’s alleged failure to perform the professional services for which he was retained. Lynch alleged that Warwick failed to interview key witnesses, unnecessarily sought continuances, failed to prevent the loss or destruction of evidence, failed to develop a working relationship of trust and confidence with him, and failed to adequately communicate with him about the case.” (Id. at pp. 269-270.)

[4]Cho notes that in Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110-1111, the California Supreme Court found that “[u]nder the discovery rule, the statute of limitations begins to run when the plaintiff suspects or should suspect that her injury was caused by wrongdoing, that someone has done something wrong to her…A plaintiff need not be aware of the specific ‘facts’ necessary to establish the claim; that is a process contemplated by pretrial discovery. Once the plaintiff has a suspicion of wrongdoing, and therefore an incentive to sue, she must decide whether to file suit or sit on her rights. So long as a suspicion exists, it is clear that the plaintiff must go find the facts; she cannot wait for the facts to find her.”

[5]As set forth above, on April 25, 2022, the original Complaint was filed in the Haywood Action.

CREATIVE RECOVERY CONCEPTS, Plaintiff, vs. 8242 WESTERN PLAZA, LLC, et al., Defendants.	Case No.:	20STCV34671 [c/w 22STCV13629]
	Hearing Date:	February 14, 2024
	Hearing Time:	2:00 p.m.
	[TENTATIVE] ORDER RE: MOTION FOR JUDGMENT ON THE PLEADINGS

Superior Court of California

County of Los Angeles

Department 50