Judge Thomas D. Long, Case 22STCV24542 2023-03-30 Tentative Ruling

On July 28, 2022, Plaintiffs People of the State of California ex rel USAA Casualty Insurance Company, Garrison Property and Casualty Insurance Company, and USAA General Indemnity Company (collectively, “Plaintiffs”) filed this qui tam action against Defendants Pedram Sharokhi aka Peter Shah, JR Law Group LLC aka J&R Law Group, Everything Legal LLC, and Socal Legal Alliance LLC (collectively, “Defendants”). The complaint alleges that Sharokhi has never been authorized to practice law, but he operated the entity defendants as sham law offices. (Complaint ¶ 19.) Defendants submitted at least sixteen insurance claims while “concealing the fact that they were masquerading as attorneys and using, at times, the identity of attorneys or law firms without their consent.” (Complaint ¶ 20.) Plaintiffs seek civil penalties and assessments arising from Defendants’ violations of Penal Code section 550 and Insurance Code section 1871.7. (Complaint ¶ 1.)

On March 2, 2023, Plaintiffs filed a Motion for Order Directing Defendants to Post Bond, Undertaking, or Other Security or, in the alternative, for Other Equitable Relief.

A. Plaintiffs’ Request For Judicial Notice Is Granted In Part and Denied In Part.

Plaintiffs’ request for judicial notice of records of the State Bar of California and records filed with the Secretary of State (Exs. 1-7, 10) is granted. Plaintiffs’ request for judicial notice of documents filed in The State Bar of California v. Gil Lee Arbel in Los Angeles Superior Court, Case No. 17-O-05586 et al. (Ex. 16) and in Case Nos. 20STCV00424, 20STCP01769, 21STCV24687, and 22CHCP00360 (Exs. 20, 21, 33-35, 39, 52) is also granted. However, the Court does not take judicial notice of the truth of the contents of the documents.

Plaintiffs’ request for judicial notice of the State Bar’s Press Release dated October 27, 2022 (Ex. 51) is denied. A press release is not an official act, regulation, or enactment of the state, and Plaintiff relies on this exhibit to prove the truth of its contents, which is hearsay and not subject to judicial notice. (See Motion at p. 15.)

In an action under Insurance Code section 1871.7, “[t]he court shall have the power to grant other equitable relief, including temporary injunctive relief, as is necessary to prevent the transfer, concealment, or dissipation of illegal proceeds, or to protect the public.” (Ins. Code, § 1871.7.)

Plaintiffs contend that the posting of a bond, undertaking, or other security is necessary “to prevent Defendants from furthering their fraudulent scheme and abscond with their ill obtained proceeds.” (Motion at p. 7.) Plaintiffs seek an order requiring Defendants to post bond of at least $3.8 million, based on $160,000.00 in civil penalties ($10,000 for each of sixteen false claims), $3,395,731.29 in assessments (three times the amount that Defendants actually billed for the sixteen false claims), and $130,000.00 in attorney fees. (Motion at p. 20; see Ins. Code, § 1871.7, subd. (b).)

Regardless of Plaintiffs’ purported ability to prove the merits of their action (Motion at pp. 8-15), Plaintiffs have not shown that their requested relief “is necessary to prevent the transfer, concealment, or dissipation of illegal proceeds, or to protect the public.” (See Ins. Code, § 1871.7, subd. (b).) Plaintiffs assert that Sharokhi “is adept at using corporate entities and other individuals to pursue his fraudulent endeavors. Shah has opened and closed entities to his convenience and has failed to account at all for the settlement amounts he obtained from multiple insurers including USAA. In fact, Shah has little to no assets on his name despite the amount of money he has defrauded to multiple insurers. Shah is adept at concealing his fraudulent actions and the proceeds he obtained through them. It is therefore reasonable for USAA to suspect that Defendants will attempt to abscond with their ill-gained profits resulting from their fraudulent scheme and dissipate their assets.” (Motion at p. 16.) Plaintiffs provide no admissible evidence in support. Plaintiffs rely on the State Bar’s press release, of which the Court declined to take judicial notice, describing Sharokhi’s failure to pay client funds. (Motion at p. 15.) Plaintiffs also cite the charging documents in the State Bar investigation as containing allegations that Sharokhi’s former attorney continued to collaborate with him even after disbarment. (Motion at p. 15; see Motion, Ex. 52.) The cited exhibit is hearsay; the Court cannot take judicial notice of the truth of the contents of this document.

The only other justification for posting bond is so that Plaintiffs “are not left with an empty judgment at the end of this case.” (Motion at p. 6; see id. at p. 16 [“USAA is asking that a bond or undertaking be obtained to protect the eventual judgment in this matter.”], p. 18 [“The Court should exercise its authority and ensure that USAA and the People of the State of California can obtain a collectible judgment against Defendants.”].) But without evidence that equitable relief “is necessary to prevent the transfer, concealment, or dissipation of illegal proceeds, or to protect the public,” the Court finds that equitable relief is not warranted, whether under Insurance Code section 1871.7 or the Court’s inherent powers. (See Motion at pp. 17-18.)

In the alternative, Plaintiffs suggest that the Court “may issue a writ of attachment, enjoin Defendants from dissipation of their assets, and/or appoint a receiver to take control of their properties and business operations . . . [or] order Defendants to post an undertaking secured by real estate as collateral or by any other means that would ensure that the public is protected and that USAA maintains its ability to collect on the judgment that it is substantially likely to obtain in this action.” (Motion at p. 20.) These alternatives are not briefed, aside from this statement, and for the reasons previously stated, Plaintiffs have not shown why they are necessary.

The Motion for Order Directing Defendants to Post Bond, Undertaking, or Other Security or, in the alternative, for Other Equitable Relief is DENIED.

Parties who intend to submit on this tentative must send an email to the Court at SMCDEPT48@lacourt.org indicating intention to submit. Parties intending to appear are encouraged to appear remotely and should be prepared to comply with Dept. 48’s new requirement that those attending court in person wear a surgical or N95 or KN95 mask.

Hon. Thomas D. Long

Judge of the Superior Court