Judge: Upinder S. Kalra, Case: 22STCV07308, Date: 2023-08-29 Tentative Ruling

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Case Number: 22STCV07308    Hearing Date: August 29, 2023    Dept: 51

Tentative Ruling

Judge Upinder S. Kalra, Department 51

HEARING DATE:   August 29, 2023                                             

CASE NAME:           Ali Ebneshahidi DC v. Law Office of Willoughby and Associates Inc.

CASE NO.:                22STCV07308           

DEMURRER WITHOUT MOTION TO STRIKE

MOVING PARTY: Defendant Law Office of Willoughby and Associates Inc.

RESPONDING PARTY(S): Plaintiff Ali Ebneshahidi DC

REQUESTED RELIEF:

1.      An order sustaining the demurrer as to the 1^st and 2^nd causes of action in the Third Amended Complaint.

TENTATIVE RULING:

1.      Demurrer as to 1^st and 2nd causes of action in the Third Amended Complaint is OVERRULED.

2.      Demurrer as to the Third Cause of Action is SUSTAINED without leave to amend.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

On February 28, 2022, Plaintiff Ali Ebneshahidi DC filed a complaint against Law Offices of Willoughby and Associates Inc.

The First Amended Complaint was filed on June 13, 2022. The complaint raised three causes of action: (1) Breach of Contract, (2) Breach of Implied Contract, and (3) Breach of Fiduciary Duty. This action is to recover $93,970 in payment for services rendered under various medical liens signed by various patients promising to pay Plaintiff. These various patients retained Defendant in suits against unknown third parties. Plaintiff alleges that Defendant did not use an interpleader and has failed to disburse funds.

On July 15, 2022, Defendant field a Demurrer with a Motion to Strike, which was SUSTAINED, in part as to the 1^st and 2^nd causes of action, and OVERRULED, as to the 3^rd cause of action.

On November 21, 2022, Plaintiff filed a Second Amended Complaint.

On December 20, 2022, Defendant filed a Demurrer, which was SUSTAINED, with leave to amend.

On February 23, 2023, Plaintiff filed a Third Amended Complaint.

On March 23, 2023, Defendant filed a Demurrer. Plaintiff’s Opposition was filed on May 9, 2023. Defendant’s Reply was filed on May 12, 2023.

LEGAL STANDARD

Demurrer

A demurrer for sufficiency tests whether the complaint states a cause of action. (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) When considering demurrers, courts read the allegations liberally and in context. In a demurrer proceeding, the defects must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. …. The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn 147 Cal.App.4th at 747.)

Motion to Strike

The court may, upon a motion, or at any time in its discretion, and upon terms it deems proper, strike any irrelevant, false, or improper matter inserted in any pleading. (Code Civ. Proc., § 436(a).) The court may also strike all or any part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (Id., § 436(b).) The grounds for moving to strike must appear on the face of the pleading or by way of judicial notice. (Id. § 437.) “When the defect which justifies striking a complaint is capable of cure, the court should allow leave to amend.” (Vaccaro v. Kaiman (1998) 63 Cal.App.4th 761, 768.)

Meet and Confer:

Prior to filing a demurrer, the demurring party is required to satisfy their meet and confer obligations pursuant to Code of Civ. Proc. §430.41, and demonstrate that they so satisfied their meet and confer obligation by submitting a declaration pursuant to Code of Civ. Proc. §430.41(a)(2) & (3). 

ANALYSIS:

First Cause of Action: Breach of Contract

Defendant argues that these causes of action fail for two main reasons. First, Defendant argues that Plaintiff cannot establish breach or damages. The contract term states that Defendant is not directly responsible to Plaintiff, but rather the patient. (Demurrer 4: 14-22.) Second, these causes of action are defective because Plaintiff failed to join necessary and indispensable parties. Because there are various patients to have alleged contracts with Plaintiff, they are necessary parties and Plaintiff must “join the various patients, each of which has a separate and distinct interest.” (Demurrer 6: 5-8.)

Defendant argues that not only are the patients separate and distinct, the alleged debt is the responsibility of the patients. Further, Defendant argues that Plaintiff has entered into various agreements with the patients, each of which would “maintain a separate and distinct interest in the funds.” Lastly, Plaintiff states in the TAC that Defendant should have interplead the funds and therefore should bring the patients into the lawsuit to protect their interest and the reason for not joining the patients – a fear of negative reviews and the time and cost – is nonsensical.

            Plaintiff first argues that the issues do not concern the patients, but rather the issues concern Plaintiff, the lienholder, and Defendant, who requested Plaintiff’s services. Moreover, Plaintiff argues that it is not the intent of the parties to pursue the individual patients; the issues here relate to “Defendants’ failures to pay the amounts that they previously agreed to pay.” (Opp. 5: 22-23.)

“To establish a cause of action for breach of contract, the plaintiff must plead and prove (1) the existence of the contract, (2) the plaintiff’s performance or excuse for nonperformance, (3) the defendant’s breach, and (4) resulting damages to the plaintiff.  [Citation.]”  (Maxwell v. Dolezal (2014) 231 Cal.App.4th 93, 97-98.)

After reviewing the Third Amended Complaint, the Court finds that Plaintiff has sufficiently alleged a cause of action for breach of contract. Previously this Court stated that Plaintiff did not provide the separate contracts. Here, each of the patients’ liens have been provided. “A written contract may be pleaded either by its terms—set out verbatim in the complaint or a copy of the contract attached to the complaint and incorporated therein by reference—or by its legal effect. [Citation.] In order to plead a contract by its legal effect, plaintiff must ‘allege the substance of its relevant terms.” (Heritage Pacific Financial, LLC v. Monroy (2013) 215 Cal.App.4th 972, 993.) Moreover, the Plaintiff has sufficiently pleaded the necessary facts to satisfy a breach of contract claim: (1) the contracts exist, as are seen in Exhibit A (TAC ¶ 25, Ex. A); (2) Plaintiff performed, i.e., providing medical treatments to the patients and information to the attorneys to recover billed charges (TAC ¶ 26); (3) Defendant breached the lien agreements by failing to pay the funds on settlement on the claim (TAC ¶ 27); Plaintiff has been harmed because of Defendant’s failure to pay (TAC ¶ 28.)

Second Cause of Action: Breach of Implied Contract

Defendant combined the arguments for the first and second causes of action.

“A cause of action for breach of implied contract has the same elements as does a cause of action for breach of contract, except that the promise is not expressed in words but is implied from the promisor's conduct.” (Yari v. Producers Guild of America, Inc. (2008) 161 Cal.App.4th 172, 182.)

As stated above, Plaintiff has sufficiently alleged the existence of the contract, by attaching each of the liens. Moreover, the implied contract cause of action, the Court finds that as to Patients AC, KC, JV, and MO, the TAC is sufficiently pleaded. The TAC states that (1) implied contract exists because despite Defendant not signing the agreement, there was implied conduct via conversations and letters (TAC ¶ 33); (2) Plaintiff performed on the contract, by providing care to the patients (TAC ¶¶ 34-35); (3) Defendant “refused to Interplead or increase an offer to an acceptable sum” (TAC ¶ 36); and (4) Plaintiffs were damaged by a total of $8,790.

Third Cause of Action for Breach o Fiduciary Duty

Previously, this Court determined that there was a fiduciary duty. However, the Court stated at the June hearing that it was considering reversing its previous decision on the breach of fiduciary duty and asked the parties to provide additional briefing on Gilman v. Dalby (2009) 176 Cal.App.4th 606, and Farmers Ins. Exchange v. Smith (1999) 71 Cal.App.4th 660.

The elements of a claim for breach of fiduciary duty are (1) the existence of a fiduciary relationship, (2) its breach, and (3) damage proximately caused by that breach.” (O'Neal v. Stanislaus County Employees' Retirement Assn. (2017) 8 Cal.App.5th 1184, 1215.)

            Plaintiff argues that Gilman is distinguishable from this matter. First, in Gilman, the successor attorney did not sign the lien, whereas here, Mr. Willoughby signed all but four of the liens. (Supp. Opp. 3: 23-26.) Moreover, the language of the lien creates a fiduciary relationship. (Id. at 26-28.) Plaintiff further argues that once an attorney collects the money, he becomes a fiduciary of the lienholder because “such payment is explicitly directed by the client, and the attorney is therefore vested with the duty to protect that money.” (Id. at 4: 15-18.) Plaintiff also argues that Smith concern whether an insurer can ““press-gang” a policyholder’s personal injury attorney into service as a collection agent.” (Supp. Opp. 6: 19-21.) Plaintiff further argues that the point of the lien to

            Defendant argues that Plaintiff’s reliance on the signature part is misplaced, as the main holding in Gilman was whether a fiduciary arose out of the lien. (Reply 2: 21-25.) As the Gilman Court stated, a personal injury attorney “does not owe a fiduciary duty to a holder of a medical lien on the proceeds.”

Considering the reading of Gilman and Farmers, the Court finds that the lien did not create a fiduciary duty between Plaintiff and Defendant. As the Court in Gilman stated, “the lien created nothing more than a contractual duty to withhold money for Gilman in the event the litigation was successful. “[T]he contractual right to contingent compensation in the control of another has never, by itself, been sufficient to create a fiduciary relationship where one would not otherwise exist.” (Gilman v. Dalby (2009) 176 Cal.App.4th 606, 614.) Further, the Court in Farmers, which is factually similar to the current case, stated that an attorney’s duty is to their client, first and foremost.

Courts must not forget that the attorney's duty is to his or her client—that, after all, is the nature of their relationship. When an attorney is paid proceeds which are the result of the litigation instituted on behalf of the client, the attorney's duty is to turn over those proceeds to the client. Now, the attorney may have already made an arrangement with the client to first withhold fees and costs associated with the litigation before turning over the balance, and the client may, at least in theory, direct the attorney to discharge the insurer's reimbursement claim. Still, the fact remains that, just like the insurer who has no choice but to pay the first party claim, the attorney has no choice but to turn over the balance of the proceeds to the client. Indeed, attorneys usually get into trouble if they don't pay over the balance to their clients.

(Farmers Ins. Exchange v. Smith (1999) 71 Cal.App.4th 660, 670–671.)

The language of the lien states that the patient is directly responsible and the agreement “is made solely for said doctor’s additional protection and in consideration of his/her awaiting payment.” (Reply 6: 22-25.) Thus, as the attorney, Defendant was required to pay out the settlement funds. As Defendant argued previously, and Plaintiff has acknowledged, Plaintiff can pursue claims against the patients for the owed money.

CONCLUSION:

For the foregoing reasons, the Court decides the pending motion as follows:

            Demurrer as to the 1^st and 2^nd causes of action is OVERRULED.

            Demurrer as the 3^rd cause of action is SUSTAINED without leave to amend.

Moving party is to give notice.

IT IS SO ORDERED.

Dated:             August 29, 2023                      __________________________________                                                                                                                Upinder S. Kalra

                                                                                    Judge of the Superior Court