Opinion
G037378 Consol. with G037412
12-7-2006
In re Matter of FAIRWAGELAW, In Voluntary Dissolution, DAVID J. FULLER, et al., Petitioners and Respondents, v. JOHN M. HEURLIN, Objector and Appellant.
John M. Heurlin, in pro. per., for Objector and Appellant. Law Offices of Garrett S. Gregor and Garrett S. Gregor for Petitioners and Respondents.
Appellant John M. Heurlin is a suspended lawyer who has filed a claim in connection with the voluntary dissolution of a professional corporation of which he was a shareholder. We dismiss his interlocutory appeals from various interim orders in the ongoing dissolution action. Since the trial court has yet to resolve the dissolution action or order a final accounting, none of the challenged orders deprive Heurlin of his claim to attorney fees for services rendered before his suspension from practice.
We deny without prejudice respondents motion for appellate sanctions for prudential reasons. There is much, however, in Heurlins conduct that may be sanctionable, and we refer the matter to the State Bar of California for further consideration.
FACTS
In May 2004, Heurlin formed a professional corporation ("FairWageLaw") with respondents David J. Fuller and Henry P. Schrenker. The attorneys intended to prosecute wage and hour class action lawsuits. Each of the attorneys received one-third of the shares in the professional corporation.
Beginning in February 2004, the three attorneys, acting first as partners and then through FairWageLaw, prosecuted three separate class action lawsuits against major employers, National Stores, Inc., Staples, Inc. and Ross Stores, Inc.
The class action lawsuits are: (1) Luciano v. National Stores, Inc. (Super. Ct. Orange County, No. 04CC00601), (2) Franco v. Ross Stores, Inc. (Super. Ct. San Bernardino County, No. JCCP4331), and (3) Staples Overtime Cases (Super. Ct. Orange County, No. JCCP4235).
In January 2005, the California Supreme Court ordered that Heurlin be suspended from practicing law for two years, and placed on probation for an additional three years "and until he has shown proof satisfactory to the State Bar Court of his rehabilitation, fitness to practice and learning and ability in the general law . . . ." (In re John Heurlin on Discipline, S128831, http://appellatecases.courtinfo.ca.gov.) Heurlins suspension was effective in mid-February 2005.
Respondents, acting as a majority of the shareholders, thereupon voted to dissolve the professional corporation and remove Heurlin as a director "due to the recent discovery of disciplinary action taken by the State Bar of California . . . ."
In August 2005, Heurlin filed notices of liens in the three class action lawsuits. He identified himself as "John M. Heurlin, Esq." acting on behalf of himself and for lien claimant FairWageLaw. He informed defense counsel that "[t]he failure to include the name[] of attorney John M. Heurlin on any payment, including without limitation a draft, check or other negotiable instrument, may result in the imposition of duplicate liability for such fees, costs and/or expenses."
Also that month, respondents filed a petition for judicial supervision of the voluntary winding up of FairWageLaw. Respondents claimed that Heurlin had no authority to act on FairWageLaws behalf, and that his actions "will substantially devalue the assets of FAIRWAGELAW." The trial court (Judge Brenner) granted the petition and assumed jurisdiction of the winding up of FairWageLaw under Corporations Code section 1904.
In March 2006, Heurlin, acting individually and as a shareholder in FairWageLaw, filed a claim in the dissolution action for $ 1,091,200 in attorney fees. Heurlin also requested an accounting.
In July 2006, respondents filed an ex parte application to strike the attorney liens asserted by Heurlin in any pending action in which FairWageLaw was the attorney of record. Respondents did so on an ex parte basis because of a pending motion to approve a class action settlement in the National Stores litigation, one of the cases where Heurlin asserted his individual lien rights.
Respondents did not dispute that Heurlin performed legal services, but claimed that he did so as one of four attorneys with FairWageLaw. Respondents asserted that the representative plaintiffs executed their retainer agreements with FairWageLaw, not with Heurlin. "Clients did not contract with the individual attorneys, they entered a contract with the corporation for legal services." Respondents stated they desired all issues involving FairWageLaw to be decided "in the instant corporate dissolution case, and under the jurisdiction of this Court."
Heurlin filed an opposition to the ex parte application and appeared at the hearing. He did not challenge respondents representations that the retainer agreements were executed with FairWageLaw rather than Heurlin.
On July 14, 2006, the trial court (Judge Monroe) issued a written order as follows: (1) the court maintained jurisdiction over all matters relating to FairWageLaw; (2) Heurlins previous attorney liens filed in connection with FairWageLaw "are ordered stricken," and (3) each of the defendants in the three class action lawsuits "shall not include the name of John Heurlin as a payee, or otherwise, on any settlement drafts or checks it issues . . . ."
On July 19, Heurlin filed a notice of appeal (G037378) from the July 14 order. On the same day, he filed a notice of objection to a proposed final settlement of the National Stores lawsuit. Heurlin informed the parties that he ("attorney John M. Heurlin") had filed a notice of appeal with this court and that "[t]his appeal stays all proceedings affected by its decision, and all matters to be heard in this case are stayed pending the decision of the Court of Appeal in the related matter."
On July 25, 2006, following a hearing, the trial court (Judge Brenner) issued a second order relating to Heurlins lien claims. This order declared that all funds paid to respondents in connection with legal fees earned by FairWageLaw constituted assets of the professional corporation "and under jurisdiction of this court" and were to be deposited in an interest bearing trust account until further court order. The July 25 order further directed that, "[b]y reason of his claim filed in the instant action for voluntary dissolution," Heurlin must litigate any issues "related to his association with FAIRWAGELAW APC" in the dissolution action, and not "in any other court."
Heurlin filed a second notice of appeal (G037412) on July 31, 2006. He warned defense counsel in the National Stores lawsuit against paying attorney fees to anyone "without my name on the settlement draft . . . since you are actually aware of the pending appeal." Heurlin signed this letter "John M. Heurlin, Esq." on the letterhead of the "Law Offices of John M. Heurlin."
Respondents have moved to dismiss the first appeal, and Heurlin filed his opposition, with exhibits. At our request, the parties have filed letter briefs regarding a dismissal of the second appeal. On the courts own motion, we consolidated the two appeals.
Respondents seek $6,300 in sanctions against Heurlin for bringing a frivolous appeal. Respondents claim that Heurlin brought the appeals in subjective bad faith to intimidate the class action defendants to include his name as payee on the settlement checks. Respondents rely in part upon the decision in DeRose v. Heurlin (2002) 100 Cal.App.4th 158 (DeRose), where a different panel of this court imposed a sanction of $ 6,000 against Heurlin for prosecuting a frivolous appeal against a former client with whom he had an attorney fees dispute.
DISCUSSION
The Challenged Orders are Nonappealable Interim Orders
Unless expressly made appealable by statute, interim court orders are not appealable. (Code Civ. Proc., § 904.1; Papadakis v. Zelis (1992) 8 Cal.App.4th 1146, 1149 (Papadakis).) Instead, under the "one final judgment rule," litigants must wait until the end of their case before seeking appellate review. This allows for orderly review of all issues involving trial court rulings in a single appellate proceeding, thereby avoiding piecemeal dispositions and costly multiple appeals. "Having the benefit of a complete adjudication by the trial court will assist the reviewing court to remedy error (if any) by giving specific directions rather than remanding for another round of open-ended proceedings." (Kinoshita v. Horio (1987) 186 Cal.App.3d 959, 967 (Kinoshita).)
We have the right and obligation to examine the jurisidictional issue of appealability at the earliest possible opportunity, and to do so sua sponte, if necessary. (Kinoshita, supra, 186 Cal.App.3d at pp. 962-963.) The "one final judgment rule" is "strictly construed," with interlocutory appeals permitted only if clearly mandated. (Id. at pp. 967-968.)
The general test for finality is whether issues remain to be decided below; where issues remain for future consideration or adjudication by the trial court as to the parties rights, the order is not appealable. (Kinoshita, supra, 186 Cal.App.3d at p. 963; see also Yeboah v. Progeny Ventures, Inc. (2005) 128 Cal.App.4th 443, 448 [order directing accounting is interlocutory and not appealable where further judicial action is required].)
The statutory authority for requesting the court to take jurisdiction over the process of winding up a corporations affairs is set out in Corporations Code section 1904. Under the statute, the trial court may take jurisdiction over a voluntary winding up proceeding "if that appears necessary for the protection of any parties in interest," including shareholders and creditors, and, if it assumes jurisdiction, to "make such orders as to any and all matters concerning the winding up of the affairs of the corporation, and for the protection of its shareholders and creditors as justice and equity may require." (Ibid.)
Both orders from which Heurlin purports to appeal were entered in the voluntary dissolution proceedings, and were made pursuant to the trial courts broad jurisdiction. Neither order deprives Heurlin of his claim to attorney fees for services rendered while he was working as a lawyer at FairWageLaw before Heurlins bar license was suspended. That matter remains to be determined in the dissolution action, which will be terminated by an order declaring FairWageLaw to be duly wound up and dissolved upon a final settlement of the accounts. (Corp. Code, §§ 1808, subd. (a) & 1907, subd. (d).)
Heurlin says that the July 25 order is in the nature of a judgment directing payment of money, thereby giving him a right to appeal as a final collateral order directing the payment of money or the performance of an act by or against the appellant. We disagree. The July 25 order does not deprive Heurlin of his claimed entitlement to recover the reasonable value of his legal services prior to his suspension. To the contrary, the order expressly directs that such funds be placed in an interest-bearing trust account, thereby preserving the corpus. Far from being collateral to the general subject matter of the dissolution action, the July 25 order is "`important and essential to the correct determination of the main issue. If the order is `a necessary step to that end, it is not collateral." (Steen v. Fremont Cemetery Corp. (1992) 9 Cal.App.4th 1221, 1227.) Heurlins claim that respondents could flee the country with the money flies in the face of the notion of a trust account.
How the fees are to be divvied up is a matter yet to be determined. Heurlin himself has asked for an accounting. Thus, Heurlins substantive rights to attorney fees for his pre-suspension legal work in the underlying actions will not be affected by an order dismissing the instant appeals. As far as the voluntary dissolution proceedings are concerned, further judicial action is required on the part of the trial court to determine the rights of the parties to those proceedings. The statutory scheme governing the dissolution of corporations (e.g., Corp. Code, § 1807, subd. (e)) provides Heurlin with a forum to protect his interests in FairWageLaw.
Under similar circumstances, the court in Kinoshita, supra, 186 Cal.App.3d 959, dismissed an appeal from a judgment decreeing the dissolution of a partnership and directing the sale of assets by a receiver. The court held the order was not "final" for purposes of appeal because the trial court still retained jurisdiction and had yet to determine the percentage interests held by each partner. "The judgment before us does not provide a complete formula for distribution of the proceeds of sale, but at most identifies some of the factors and principles which will go into that distribution. Nor does it determine the interests of the individual defendants." (Id. at p. 965.) For policy reasons, Kinoshita stressed that "exceptions to the one final judgment rule should not be allowed unless clearly mandated." (Id. at p. 967.)
And, in Papadakis, supra, 8 Cal.App.4th 1146, the court dismissed an appeal brought by individual partners against an interlocutory order ordering the preparation of an accounting in a dispute over a pistachio ranch partnership. Like Heurlin here, the Papadakis partners argued that they were irrevocably damaged by the interim order because it directed the sale of the land upon which the pistachio trees grew. But the court noted the pistachio grove in question was owned by the partnership, leaving appellants rights as individual partners left to be litigated in the underlying action. "[Appellants] do not own the particular pistachio grove in question, which is owned by a partnership. [Appellants] and the other partners simply own portions of the partnership; they do not directly own the land in question and are entitled only to a share of the proceeds of a sale of partnership assets." (Id. at p. 1149.)
Heurlin, citing Carroll v. Interstate Brands Corp. (2002) 99 Cal.App.4th 1168, 1171, fn. 2 (Carroll), McClearen v. Superior Court (1955) 45 Cal.2d 852, 855, and similar cases, says there is "no question" that "any order expunging a lien is appealable." Heurlin says that the trial courts orders have "the effect of permitting Appellants money to pass into the hands of the adverse party, and therefore [are] appealable. All this Court need do is consider the inevitable sequence of events if the Order is not reversed. Respondents will receive the money and will spend it, without accountability to Appellant. This law does not permit this situation." He calls the orders "a license to steal" and suggests that respondents, once they have the money, "could move to another country."
Carroll, supra, 99 Cal.App.4th 1168, is not on point. In Carroll, the trial court in an employment discrimination case issued an order expunging the lien of an attorney who formerly worked for plaintiffs counsel. On appeal, the court held that "because the attorney is not a party to the underlying action and has no right to intervene, the trial court acts in excess of its jurisdiction when it purports to determine whether the attorney is entitled to foreclose a lien on the judgment." (Id. at p. 1173.) "After the client obtains a judgment, the attorney must bring a separate, independent action against the client to establish the existence of the lien, to determine the amount of the lien, and to enforce it." (Ibid.) "An order within the underlying action purporting to affect an attorneys lien is void." (Ibid., italics added.)
The Carroll court properly entertained a review of the order expunging the lien because it was a final order on a collateral matter in the underlying action. (See generally 9 Witkin, Cal. Procedure (4th ed. 1997) Appeal, § 60, p. 116.) Here, Heurlin appeals from two orders, each made by the court in the exercise of its broad supervisory power over the winding up of the corporation. Considered collectively, the orders merely declare the fee claims in the underlying litigation to be assets of the corporation, to be held pending further determination of the court in the dissolution action. (Corp. Code, § 1804 ["the court . . . may make such orders and decrees . . . in the case as justice and equity require"]; Corp. Code § 1904 ["[t]he court . . . may make such orders as to any and all matters concerning the winding up of the affairs of the corporation and for the protection of its shareholders and creditors as justice and equity may require"].) Future adjudication is contemplated. The orders are not final; they are interlocutory. Accordingly, they are not appealable. As explained above, Heurlin has filed a claim in the dissolution action, and the July 14 and July 25 orders do not deprive him of his right to fees.
We do not decide any substantive issues on the merits. To do so would be premature in the absence of any such ruling by the trial court. Because we do not pass on the merits of Heurlins claim to attorney fees, we need not wait, as he proposes, for a "complete briefing of the issues and revue [sic] of the record." The decisions in Chino Land Etc. Co. v. Hamaker (1916) 171 Cal. 689 and Johnson v. Sun Realty Co. (1932) 215 Cal. 382, 383 are not on point. One can only speculate what the trial court will do. In dismissing these appeals, we do not decide to whom the attorney fees should be paid. That determination remains to be made in the dissolution proceedings.
The Appeal from the Order Barring Litigation in Another Forum is Frivolous
Heurlin complains that the July 25 order bars him from litigating issues related to the voluntary dissolution in any other forum. Heurlin states he has a separate lawsuit before Judge Gregory Lewis (Heurlin v. Schrenker (Super. Ct. Orange County No. 06CC04192)) "to ascertain the nature, extent and amount of his liens in various actions in which he acted as counsel." He says he should be entitled to appeal an order which enjoins him "from continuing to litigate a case already at issue, before another Superior Court Department, and against parties who are not bound by the Order." In his opinion, this is akin to an order granting an injunction, which is appealable under Code of Civil Procedure section 904.1, subdivision (a)(6).
Heurlin overlooks the fact that respondents motion to dismiss includes an order issued by Judge Lewis on June 5, 2006, staying all proceedings before him because "the two cases are related such that the Motion to Stay should be granted . . . ." Thus, Heurlin was prohibited from proceeding with his separate lawsuit well before the July 14 and July 25 orders he now challenges.
Heurlin never sought appellate review of Judge Lewiss order. Were we to grant relief to Heurlin by reversing that portion of the July 25 order that prohibits him from litigating his claims in another court, he would still be bound by Judge Lewiss undisturbed order, and our purported "relief" would be wholly ineffectual. We do not assume appellate jurisdiction to render opinions on abstract or academic propositions of law. (Giles v. Horn (2002) 100 Cal.App.4th 206, 226-227.)
Under these circumstances, Heurlins appeal from the July 25 order is frivolous to the extent that it raises issues concerning Judge Brenners "injunction" against prosecuting the separate action in Judge Lewiss court. We have inherent authority to "summarily dismiss any action or appeal which has as its object to delay, vex or harass the opposing party or the court, or is based upon wholly sham or frivolous grounds." (Ferguson v. Keays (1971) 4 Cal.3d 649, 658.) We will do so in the "absolutely clearest cases" of frivolous appeals prosecuted for purposes of delay. (People ex rel. Lockyer v. Brar (2004) 115 Cal.App.4th 1315, 1318 (Brar)), or in those rare instances where "a mere inspection of the record discloses that no relief can be granted appellant." (Toohey v. Toohey (1950) 97 Cal.App.2d 84, 85; see also In re Jessica K. (2000) 79 Cal.App.4th 1313, 1315 [dismissing appeal where "no effective relief can be granted"].)
In Brar, supra, 115 Cal.App.4th 1315, an attorney, who was being civilly prosecuted by the Attorney General under Californias unfair competition law, sought to misuse the anti-SLAPP statutes to "get a free time-out in the trial court" pending his interlocutory appeal. (Id. at p. 1318.) But the anti-SLAPP statute specifically exempted actions brought by public prosecutors. Despite this, the attorney argued that he was entitled to his appeal (and the automatic stay) until the matter was briefed and argued. The Brar court saw through the sham, and granted the Attorney Generals motion to dismiss: "This is about as patently frivolous an appeal taken for purposes of delay as is imaginable." (Id. at p. 1318.)
We reiterate, as we did in Brar, supra, 115 Cal.App.4th 1315 that the power to dismiss appeals before briefing "must be used with extreme rarity . . . ." (Id. at p. 1319.) Here, as in Brar, it appears necessary to prevent the abusive tactic of "buy[ing] time from the day of reckoning in the trial court." (Ibid.) It is patently frivolous to take an appeal from an "injunction" against prosecuting an action that already has been abated. The July 25 order had no practical impact upon Heurlins ability to litigate in Judge Lewiss court because Judge Lewis already had passed the ball to Judge Brenners court more than a month earlier. What is at issue for us to decide?
Moreover, Heurlin has used his filing of these specious appeals to make the argument to defense counsel in the National Stores lawsuit that the notices of appeal automatically stay the challenged orders. As demonstrated by Heurlins threatening letters to defense counsel in the class action lawsuit, the appeal "practically has the words `brought for reasons of delay virtually tattooed on its forehead." (Brar, supra, 115 Cal.App.4th at p. 1319.) "Review on the merits, after briefing (as distinct from review, as here, of the papers on a motion to dismiss) only rewards a frivolous appeal." (Ibid.)
Respondents Request for Sanctions May be Heard in the Trial Court
Heurlin challenges respondents sanctions request as a "smear campaign" based on "lurid mischaracterizations" of "events four years gone." He minimizes his "misdeeds," explaining that they do not bear even a "passing resemblance" to the instant appeals.
In DeRose, supra, 100 Cal.App.4th 158, this court imposed sanctions of $6,000 against Heurlin for bringing a frivolous appeal. Heurlin, the opinion stated, "followed a path of artifice and deceit with single-minded determination." (Id. at. p. 161) "Heurlins conduct has been disgraceful." (Ibid.) Notably, that case also involved Heurlins attempts to impose a lien on settlement proceeds to prevent them from being distributed to a client. Heurlins litigation abuse is detailed in DeRose, and makes for strong reading.
In Papadakis, supra, 8 Cal.App.4th 1146 the appellate court not only dismissed the appealing lawyers appeal from nonfinal, interlocutory orders in a partnership dispute, but also imposed $20,000 in sanctions because of the "continued contumacy of appellants despite a prior sanction award in this litigation . . . ." (Id. at p. 1148.) Papadakis recounted "the very long and sordid story of this litigation, and the manner in which determined lawyers with dubious ethics have unconscionably delayed the imposition of effective remedies for their misdeeds." (Ibid.)
As in DeRose, supra, 100 Cal.App.4th 158 and Papadakis, supra, 8 Cal.App.4th 1146, there is a strong case for imposing appellate sanctions against Heurlin for taking appeals in bad faith and for the purpose of delay. Heurlin repeatedly has made wild, unsubstantiated accusations that respondents will abscond with the disputed attorney fees, ignoring his own filing of a claim for such fees in the dissolution action, as well as the trial courts orders that such funds be held in an interest-bearing trust account.
An order for payment of sanctions requires not only fair warning and an opportunity to respond, but also a hearing. (DeRose, supra, 100 Cal.App.4th at p. 181.) Given the need for expedition, we are loathe to allow the specter of appellate sanctions (however meritorious) to prolong the very delay that the sanctions would be designed to punish. It is the interests of the judicial process and the public to dismiss these improper appeals as soon as practicable. As in Brar, our opinion is without prejudice to any efforts by respondents to seek sanctions in the trial court against Heurlin for taking a frivolous appeal. (See Brar, supra, 115 Cal.App.4th at p. 1320.) Moreover, there are other remedies to protect the public interest against knavish lawyering. While Heurlins suspension from the practice of law is due to end in early 2007, he remains on probation pending proof to the State Bar of California of his fitness to practice law.
We are troubled by Heurlins breezy and lackadaisical dismissal of his serious misconduct in DeRose, supra, 100 Cal.App.4th 158. He has been cavalier in dealing with what he artfully terms his "disability." Heurlin has declared below that he considers himself an "active licensed attorney in the State of California" who is "simply `Unentitled to practice on behalf of anyone else for another thirteen months."
As a suspended attorney, Heurlin is barred from holding himself out as practicing or otherwise entitled to practice law. (Bus. & Prof. Code, § 6126, subd. (b).) A suspension order "disqualifies the attorney not only from practicing law but also from holding himself or herself out as entitled to practice during the suspension period. [Citation.] Petitioners duty toward his client did not entitle him to knowingly create, or leave undisturbed, a false impression . . . ." (Arm v. State Bar (1990) 50 Cal.3d 763, 775 [attorney deliberately withheld information of his impending suspension from opposing counsel]; see also In re Cadwell (1975) 15 Cal.3d 762, 771, fn. 3 [by his conduct, suspended attorney "impliedly made such a representation" that he was licensed to practice law].)
Particularly disquieting are Heurlins aggressive letters to settling counsel in the National Stores lawsuit. Notwithstanding his suspension, he made repeated (and wholly gratuitous) use of the letterhead of the "Law Offices of John Heurlin," and "John M. Heurlin, Attorney at Law," and signs his written communications, "John M. Heurlin, Esq." This may give the misleading impression that Heurlin is an actively practicing attorney who maintains a functioning law office, not only representing his own lien rights, but those of FairWageLaw (a distinct legal entity) as well. One can posit that these references are designed to magnify the force of his threats to defense counsel in the class action lawsuits.
Heurlin simply should have styled himself, "John M. Heurlin, in pro. per.," as we have done.
The record of Heurlins disciplinary proceedings is not before us, nor do we have the full context of the settings in which his communications to other counsel were made. Under these circumstances, we believe that the California State Bar is in the best position to determine the impact of Heurlins most recent conduct in order "to protect the public and the courts, and to preserve public confidence in the legal profession." (Arm v State Bar, supra, 50 Cal.3d at p. 768.)
DISPOSITION
The appeals are dismissed. Costs on appeal are awarded to respondents. The clerk of this court is directed to forward a copy of this opinion to the California State Bar upon issuance of the remittitur, with reference to the disciplinary proceeding in In re John Heurlin on Discipline, 00-0-12632.
We Concur:
RYLAARSDAM, ACTING P. J.
OLEARY, J.