Case Number: BC525967    Hearing Date: April 26, 2016    Dept: 46

Case Number: BC525967
BAKER & HOSTETLER LLP VS ALAN D LIKER
Filing Date: 10/29/2013
Case Type: Collections Case-Seller Plaintiff (General Jurisdiction)

04/26/2016
Hearing on Demurrer To Second Amended Cross-Complaint (SACC)
Motion to Strike Portions of SACC

NOTICE OF TENTATIVE RULING AND PROCEDURE FOR SUBMISSION WITHOUT HEARING

This tentative ruling is posted at 8:15 a.m. p.m. on 4/21/2016.

If there are no parties who have appeared in the action other than Plaintiff/Petitioner, then Plaintiff/Petitioner may submit to the tentative without appearance by telephonic notification to the clerk of Dept. 46 between 8:00 a.m. and 4:00 p.m. on a date prior to the hearing or morning prior to the hearing by calling (213) 633-0646 or by sending an e-mail to SMCDEPT46@lacourt.org copied to all parties indicating all parties submit to the tentative and the identity of the person or firm giving notice, and the court will issue the tentative ruling as the final ruling. If the other parties have appeared in the action, then the parties must first confer and all agree that the tentative ruling will be the final ruling on the matter. If the parties to the matter before the court all agree, the moving parties, or if none a representative of the parties, may call the clerk or send an e-mail (as referenced above) and submit without an appearance, and the court will issue the tentative ruling as the final ruling. If an order is required, it should be lodged directly in Dept. 46 with a copy to adverse/other parties, if any.

TENTATIVE RULING

The court has not been updated as to the status of the substitution of a personal representative/special administrator of decedent/Estate of Mr. Liker into this action, so the party-standing and jurisdictional issues for the demurrer and MTS are unresolved. It appears that some action in BP171221 has taken place based upon the docket, but it is unclear who the administrator of the estate is or the results of the orders. The parties are directed to confer and find a continuance date for the hearing on the demurrer and MTS to a date after the appointment of a personal representative/special administrator OR if one is appointed, then prepare a stipulation and order substituting the personal representative/special administrator as party defendant/cross-complainant.

Otherwise, if the party-standing and jurisdictional issues are resolved, then the court maintains the tentative ruling initially issued on 4/7/2016, which follows in updated form, sustaining the demurrers without leave to amend pursuant to CCP §430.10(e). See attached tentative ruling from 4/7/2016 which is incorporated herein as if fully set forth at length herein and discussion therein.

Plaintiff and Cross-Defendant’s Request for Judicial Notice is GRANTED; the demurrer to the 1st through 3rd Causes of Action [“COA”] of the Second Amended Cross Complaint [“SACC”] is SUSTAINED WITHOUT LEAVE TO AMEND pursuant to CCP §430.10(e) in that, after several opportunities to amend to state a cause of action, none of the purported causes of action state facts sufficient to state a cause of action. The Cross-Complaint is therefore dismissed. Baker Hostetler is ordered to lodge and serve a proposed order of dismissal. As this disposes of the Cross-Complaint, judgment on the cross-complaint is appropriate which should also be served and lodged to give opportunity for objection.

DISCUSSION

Fraud

The first cause of action fails to state a cause of action for fraud. The cause of action states in pertinent part:

“20. On or around late June 2011, B&H represented to Liker in writing that ‘it [was] necessary to amend [their] previous March 6, 2009 and July 15, 2009 engagement letters” and enter into the June 2011 Agreement. (Emphasis added). That representation was made by James on B&H’s behalf.
21. B&H’s representation was false, and B&H and James knew it was false. In fact, it was not necessary for Liker to sign a new agreement with B&H, nor was it in Liker’s best interest to sign a new agreement with B&H; Rather, the representation was intended solely to induce Liker to sign the June 2011 Agreement and further a bad faith and unethical scheme to provide B&H with a pecuniary interest adverse to Liker’s interests. Moreover, James admitted it was not “necessary” for Liker to sign the June 2011 Agreement to maintain B&H’s legal representation in Liker’s lawsuit against Liker’s Clients, which was on the eve of trial at the time the false representation was made.
22. In addition to the affirmative misrepresentation set forth above, B&H failed to disclose and concealed material facts from Liker. These facts included the inherent and actual conflict of interest between B&H and Liker, the impact on Liker’s rights that signing the June 2011 Agreement would have, and the adverse financial interest B&H would receive from the June 2011 Agreements. Notwithstanding its fiduciary relationship with Liker and the applicable rules of professional conduct and other statutory and legal obligations, B&H intentionally failed to disclose and concealed these facts from Liker in furtherance of its bad faith and unethical scheme to induce Liker to sign the June 2011 Agreement.
23. At the time B&H made its affirmative misrepresentation, Liker was ignorant of the falsity of B&H’s misrepresentation and unaware that B&H had concealed material facts from him. Indeed, B&H waited until Liker was at a critical juncture in the case against Liker’s Clients shortly before representing that “it [was] necessary to amend [their] previous March 6, 2009 and July 15, 2009 engagement letters.” Liker was under duress and did not have adequate time to consider B&H’s proposed modification, the June 2011 Agreement, because he needed B&H to help prepare for the impending trial. Liker therefore actually, reasonably, and justifiably relied on the misrepresentation made by his attorneys and fiduciary, B&H, and signed the June 2011 Agreement. If Liker had known that B&H’s representations were false, he would not have signed the June 2011 Agreement.
24. As a direct and foreseeable result of B&H’s fraudulent conduct, Liker has been damaged in the sum of all fees and costs paid by Liker to B&H since the signing of the June 2011 Agreement, which is in excess of $165,000. Liker is also entitled to disgorgement of all fees and costs paid to B&H in light of B&H’s misrepresentations and corresponding breaches of ethical obligations. Also, prior to the initiation of this lawsuit, Liker expended significant sums of money to fight B&H’s claims for hundreds of thousands of dollars in fees stemming from the June 2011 Agreement, including fees and costs associated with the fee arbitration conducted by the Beverly Hills Bar Association.” (SACC, ¶¶20-24).

Again, “’”[t]he elements of fraud, which give rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or ‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.”’ (Lazar v. Superior Court (1996) 12 C.4th 631, 638). ‘”Every element of the cause of action for fraud must be alleged in the proper manner (i.e., factually and specifically), and the policy of liberal construction of the pleadings … will not ordinarily be invoked to sustain a pleading defective in any material respect.”’ (Committee On Children’s Television, Inc. v. General Foods Corp. (1983) 35 C.3d 197, 216).” Rutherford Holdings, LLC v. Plaza Del Rey (2014) 223 C.A.4th 221, 234.

Defendant/Cross-Complainant (“Liker”) has not sufficiently alleged the falsity of the alleged misrepresentation, his reasonable reliance thereon, or the element of damages.

As this court previously determined the 10/30/15 ruling, “the replacement fee agreement was necessary in light of the Arnall decision, precisely as Baker & Hostetler told Liker.”

Liker admits that he was the real party in interest in the Arnall decision and understood that said decision held that a client can avoid an attorney-client fee agreement for failure to comply with §6147, leaving the attorney with the right to make a claim for a quantum meruit recovery. (Id., ¶ 9).

Liker has admitted his understanding that the 7/09 Fee Agreement required amendment in the 6/11 Agreement, as evidenced by his signature under the language in the 6/11 agreement stating, “[i]f you understand and agree to the terms and conditions of this letter agreement, please sign both copies of the agreement, signifying your understanding and acceptance.” (See SACC, Exhibit “B”).

Liker also cannot show justifiable reliance; as Baker & Hostetler points out, “Liker does not (and cannot) allege that he did not know in June 2011, after receiving the Court of Appeal’s ruling in Arnall, that the July 2009 Fee Agreement’s possible violation of section 6147 rendered it voidable at his election…when Baker told Liker that as a result of the Arnall decision there was a likelihood of the July 2009 Fee Agreement being rendered voidable, Liker was simply being told what he already knew from his own review and understanding of the Arnall decision and what was in fact—as later confirmed—an absolutely true statement.” (Demurrer, 6:25-7:3).

Liker’s claim that Baker & Hostetler somehow “concealed” that it was not, in fact, “necessary” to enter into the 6/11 Agreement is contradicted by the findings already made in this court’s 10/30/15 ruling.

It could not have been, as Liker states, “a conflict of interest to correctly describe the requirement of Business and Professions Code §6147 in light of Arnall.” (Demurrer, 8:7-9).

Liker’s allegations that Baker & Hostetler failed to disclose the impact on him are belied by Exhibit “B” itself, which specifically states that “Client is informed that this attorney fee is not set by law but rather is negotiable between the Firm and Client” and further informing him that “[t]his supplemental agreement is intended to amend the [prior] Agreements only with respect to the information contained herein.” Liker testified:

“Q. All right. So isn’t it true that as of Thursday, June 23rd, 2011,
you knew the purpose of the revised engagement letter was to
protect the Baker firm because Peter told that to you, right?

A. That was a purpose, not the purpose.

Q. Okay. It was a purpose.
But you knew it was a purpose because he told you that,
right?

A. Right.” (Reply RJN, Exhibit “6,” 58:6-14).

Breach of Fiduciary Duty

Liker has alleged, in relevant part, as follows:

“27. Liker hired B&H to act as his attorneys and provide him with legal advice and services. That attorney-client relationship gives rise to a general fiduciary duty owed by B&H to Liker. The scope of B&H’s duties to Liker are defined by, among other things, the California Rules of Professional Conduct and relevant portions of the California Business & Professions Code.
28. In breach of its fiduciary duties to Liker, B&H affirmatively misrepresented to Liker that it was “necessary” for Liker to sign the June 201 1 Agreement in an effort to gain leverage against Liker and obtain for itself a pecuniary interest adverse to Liker’s interests. B&H also breached its fiduciary duties to Liker by failing to disclose and concealing material facts from Liker, including the inherent and actual conflict of interest between B&H and Liker, the impact on Liker’s rights that signing the June 2011 Agreement would have, and the adverse financial interest B&H would receive from the June 2011 Agreement.
29. As a direct and foreseeable result of the foregoing breaches of fiduciary duty, Liker has been damaged…
30. In addition, when Liker selected new trial counsel to actually try his lawsuit against Liker’s Clients and requested that B&H turn over Liker’s client files, papers and property to new counsel, B&H refused to comply with this request in breach of its ethical duty to Liker pursuant to California Rule of Professional Conduct 3-700(D). As a direct result of this breach of ethical duty by B&H, Liker’s trial preparation was inhibited and Liker expended fees and costs seeking to compel B&H to turn over his client file, papers and property…” (SACC, ¶¶ 27-30).

“The elements of a cause of action for breach of fiduciary duty are: 1) the existence of a fiduciary duty; 2) a breach of the fiduciary duty; and 3) resulting damage. (City of Atascadero v. Merill, Lynch, Pierce, Fenner & Smith, Inc. (1999) 68 C.A.4th 445, 483).” Pellegrini v. Weiss (2008) 165 C.A.4th 515, 524.

This cause of action fails, for the reasons set forth in the discussion regarding the fraud cause of action. Also Liker’s contention that Baker & Hostetler entered into the 6/11 Agreement to gain an interest adverse to him in contravention of California Rules of Professional Conduct Rule 3-310 fails, inasmuch as it “is not intended to apply to the agreement by which the member is retained by the client, unless the agreement confers on the member an…interest adverse to the client.” Fletcher v. Davis (2004) 33 C. 4th 61, 72, quoting Discussion, 23 pt. 3 West’s Annotated Codes, Court Rules (1996 ed.) Rules Prof. Conduct, foll. Rule 3–300, p. 366. This rule does not apply to fee agreements that merely give the attorney an unsecured right to proceed against a client. Id. (distinguishing between ordinary fee agreement and one conferring a charging lien).
Liker’s contention that Baker & Hostetler violated California Rules of Professional Conduct Rule 3-700, moreover, is a sham pleading in that it contradicts statements made in the FACC, i.e., that Baker & Hostetler, at most, “delayed in turning over the files…” (See Request for Judicial Notice, Exhibit “2,” ¶23). ‘Where an allegation is contrary to law or to a fact of which a court may take judicial notice, it is to be treated as a nullity.’ The court may take judicial notice of such records as appellant’s affidavits (Del E. Webb Corp. v. Structural Materials Co. (1981) 123 C.A.3d 593, 604 and prior complaints in the same action (Perdue v. Crocker National Bank [(1985)] 38 C.3d 913, 923, fn. 5). Although ‘[g]enerally, after an amended pleading has been filed, courts will disregard the original pleading’ (Kenworthy v. Brown (1967) 248 C.A.2d 298, 302), they will not do so ‘where an amended complaint attempts to avoid defects set forth in a prior complaint by ignoring them. The court may examine the prior complaint to ascertain whether the amended complaint is merely a sham.’ (Ibid.).” Amid v. Hawthorne Community Medical Group, Inc. (1989) 212 C.A.3d 1383, 1387.

Breach of Fiduciary Duty

Liker has alleged, in pertinent part, as follows:

“35. While B&H was counsel of record for Liker in the lawsuit against Liker’s Clients, B&H requested and was provided with a copy of Liker’s post-judgment settlement agreement with Liker’s Clients. The settlement agreement contains an express confidentiality provision, and B&H was advised of that provision in writing at the time B&H received the settlement agreement. The confidentiality provision covered the amount paid in settlement…
37. …B&H, for its own financial interest and in violation of its ethical, statutory and contractual obligations, publically disclosed the exact settlement amount when it initiated this matter and filed its complaint against Liker. Liker did not consent to this disclosure of confidential information, and there was no malpractice action pending against B&H when it made this disclosure. As James later admitted under oath in deposition, it was not necessary for B&H to make that public disclosure in order to allege a cause of action against Liker. This unwarranted disclosure was a breach of B&H’s ethical duties and the settlement agreement, to which it was bound, independent of the setting in which it occurred (i.e., in the course of litigation).
38. B&H also publically disseminated the legal bills it had sent to Liker during the course of representation when it initiated this matter and filed its complaint against Liker…
40. B&H also breached its ethical, statutory and contractual duties to “preserve [Liker’ s] confidences and secrets” by disclosing the confidential amount of Liker’ s settlement with Liker’s Clients to a third party, Karim Damji of Lorax Environmental, Inc. (“Lorax”). Lorax had previously rendered computer graphic services to Liker. As a direct result of B&H’s disclosure and breach of duty, Lorax filed a civil lawsuit, Lorax Environmental, Inc. v. Alan D. Liker, Los Angeles Superior Court Case No. BC518140, that disclosed the exact settlement amount and used that confidential information against Liker, and caused Liker to expend fees and costs to defend against Lorax’s claims…” (SAC, ¶¶ 35, 37, 38 & 40).

Liker’s settlement amount and Baker & Hostetler’s legal bills were not protected from disclosure in this action. This court previously determined that this information was not confidential. An attorney can reveal confidences to defend against a malpractice claim or in a fee dispute….’ (Styles v. Mumbert (2008) 164 C.A.4th 1163, 1168; see also Evidence Code, §958 [‘There is no privilege under this article as to a communication relevant to an issue of breach, by the lawyer or by the client, of a duty arising out of the lawyer-client relationship’].).” Dietz v. Meisenheimer & Herron (2009) 177 C.A.4th 771, 786.

Additionally, the Lorax v. Liker pleadings reflect that Lorax’s damages had nothing to do with the Arnall settlement; rather, the damages sought were for unpaid work Lorax performed for Liker. Liker has conceded, moreover, that he does not have any information supporting his allegation that Baker & Hostetler disclosed the confidential amount of his settlement with the Arnall Group to Karim Damji. (Reply RJN, Exhibit “12,” 229:13-230:7).

Motion to Strike

Based upon the recommendation made above, the motion to strike is taken off calendar.

Conclusion

As such, the demurrer is sustained and the motion to strike is taken off calendar. Leave to amend is denied. Therefore the SACC is ordered dismissed.

IT IS SO ORDERED:

______________________________
Frederick C. Shaller, Judge