Opinion
B315162
12-19-2022
LAW OFFICES OF GARY KURTZ, Plaintiff and Respondent, v. PHILIP MARKOWITZ, Defendant and Appellant.
Law Offices of Jeffrey A. Cohen and Jeffrey A. Cohen; Marcus, Watanabe & Enowitz, David M. Marcus and Daniel J. Enowitz for Defendant and Appellant. Gabriel Law Group, Jonathan G. Gabriel and David S. Mayes for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. LC103719 Rupert A. Byrdsong, Judge. Reversed and remanded with directions.
Law Offices of Jeffrey A. Cohen and Jeffrey A. Cohen; Marcus, Watanabe & Enowitz, David M. Marcus and Daniel J. Enowitz for Defendant and Appellant.
Gabriel Law Group, Jonathan G. Gabriel and David S. Mayes for Plaintiff and Respondent.
FEUER, J.
Philip Markowitz appeals from an amended judgment entered following our remand in Law Offices of Kurtz v. Markowitz (Oct. 22, 2020, B291880) (nonpub. opn.) (Kurtz I), awarding the Law Offices of Gary Kurtz $325,233 in damages on Kurtz's action to recover unpaid attorneys' fees. In Kurtz I, we held substantial evidence supported the trial court's findings after a bench trial that Markowitz entered into and breached a written engagement agreement with Kurtz. However, we reversed the judgment and remanded with instructions for the trial court to reduce the damages award, to amend the court's statement of decision to address Markowitz's affirmative defense that he was entitled to an offset for Kurtz's alleged legal malpractice, and to apply any offsets in the revised amended judgment.
We refer to the Law Offices of Gary Kurtz and its sole practitioner Gary A. Kurtz as Kurtz.
In this appeal, Markowitz contends the trial court erred in finding on remand there was no legal malpractice. We agree Markowitz presented evidence that compels a finding Kurtz committed legal malpractice when he appeared at a hearing on behalf of adverse parties, thereby creating a disqualifying conflict, and Markowitz is entitled to an offset for his legal expenses incurred in responding to an appeal of the ensuing motion to disqualify Kurtz. In addition, the trial court erred in awarding Kurtz postjudgment interest accruing on the date of the original judgment. We reverse and remand for the trial court to reduce the award to Kurtz from $325,233 to $308,103, and to strike the award of interest from the original judgment date.
FACTUAL AND PROCEDURAL BACKGROUND
A. Kurtz's Representation of Markowitz
In Kurtz I we detailed the history of Kurtz's legal representation of Markowitz and their dispute over attorneys' fees. In the early 2000's Markowitz partnered with Blue Water Sunset, LLC to form three limited liability companies (the LLC's) to invest in parking facilities. In June 2004 Blue Water Sunset sued Markowitz and the LLC's to dissolve the companies and distribute their assets based on allegations Markowitz misappropriated income and conveyed the LLC's assets to his wholly owned company Four Star General Properties, LLC (Four Star). (Blue Water Sunset, LLC v. First View, LLC (Super. Ct. L.A. County, 2014, No. BC316696) (Blue Water action).) Markowitz and the LLC's filed a cross-complaint against Blue Water Sunset and its owners for fraud, alleging Blue Water Sunset did not make its required initial capital contributions into the LLC's and was using the LLC's to defraud Markowitz of his capital and asset contributions.
Four Star was later joined as a defendant in the Blue Water action, and in December 2005 Markowitz retained Kurtz to represent Four Star. At some point Kurtz also began representing Markowitz in his individual capacity. As the litigation moved forward, Markowitz began to fall behind in paying Kurtz's invoices, and by September 2008 the outstanding balance on the invoices had grown to nearly $100,000. Around September 19, 2008 Markowitz terminated Kurtz after disagreements over the unpaid invoices, but the two soon reconciled, and on December 11, 2008 Kurtz substituted back in as counsel for Markowitz and Four Star.
In late 2009 a 10-day bifurcated jury trial was held on the cross-complaint in the Blue Water action before Judge Rex Heeseman to determine whether Blue Water Sunset made the initial capital contributions required under the operating agreements for the LLC's. Kurtz represented Markowitz at trial. The jury delivered a verdict in favor of Blue Water Sunset; however, the verdict was subsequently vacated based on an affidavit of prejudice Blue Water Sunset had filed against Judge Heeseman at the beginning of the trial.
Kurtz continued to represent Markowitz in the Blue Water action and other smaller matters for the next two years, and by late October 2012, the outstanding balance on Kurtz's invoices had grown to $329,833, and Kurtz began to bill Markowitz for interest. On December 6, 2012 Markowitz substituted in Michael Buley as Markowitz's counsel in the Blue Water action. A new trial on Blue Water Sunset's initial capital contributions was held as a bench trial in September 2014. At the conclusion of Blue Water Sunset's presentation of evidence, the trial court (Judge Michael Linfield) granted Markowitz's motion for entry of judgment in favor of Markowitz pursuant to Code of Civil Procedure section 631.8, finding Blue Water Sunset failed to prove it made its initial capital contribution to any of the LLC's. Judgment was entered on December 12, 2014.
All further undesignated statutory references are to the Code of Civil Procedure.
B. Kurtz's Action for Attorneys' Fees
Kurtz filed this action on December 31, 2015, asserting in the operative first amended complaint four causes of action against Markowitz to recover his unpaid fees: (1) breach of written contract, (2) breach of oral contract, (3) quantum meruit, and (4) common count for account stated. Kurtz prayed for $437,043 in damages, including 10 percent interest. Markowitz answered the complaint with a general denial and asserted 20 affirmative defenses, including the fifth affirmative defense of "the doctrine of setoff and/or offset" and the sixth affirmative defense seeking an offset for Kurtz's legal malpractice. On June 28, 2017 the trial court granted Markowitz's motion for summary adjudication of Kurtz's second cause of action for breach of oral contract but denied summary adjudication of the remaining causes of action.
A four-day bench trial was held from November 29 to December 4, 2017. Kurtz, Markowitz, and Buley testified, as well as Andre Jardini, an attorney who testified as an expert for Markowitz on the reasonableness of Kurtz's invoices and legal malpractice issues. The trial court admitted Kurtz's invoices, Jardini's analysis of the invoices, and the parties' communications. As we explained in Kurtz I, the principal issues at trial concerned whether the parties had executed a written retainer agreement, whether Kurtz gave notice of rate increases during the representation, the reasonableness of the hours incurred, and the accuracy and sufficiency of Kurtz's invoices.
Markowitz also presented evidence concerning Kurtz's professional negligence. Markowitz alleged there were four instances of legal malpractice by Kurtz during the Blue Water action: (1) Kurtz appeared at a hearing on behalf of the LLC's, creating a conflict of interest and prompting litigation over his disqualification; (2) Kurtz delayed seeking leave to file a second amended cross-complaint to assert derivative claims on behalf of the LCC's until the claims were time-barred; (3) Kurtz failed to file a motion to compel responses to unanswered requests for admission (RFA's); and (4) Kurtz failed to obtain leave for Markowitz and Four Star to file a cross-complaint for civil conspiracy against opposing counsel.
After the close of testimony, the trial court directed the parties to prepare combined closing statements and proposed statements of decision. Kurtz argued he should be awarded damages of $461,155 in quantum meruit, or in the alternative, $329,458 on account stated. Markowitz acknowledged Kurtz was entitled to recover the reasonable value of his services in quantum meruit but argued any award was "subject to defendant's pleaded defenses, including offset for damages (including malpractice) and failure to mitigate." Specifically, Markowitz proposed the court offset Kurtz's recovery by $600,000 in malpractice damages. Thus, Markowitz argued, the offset exceeded Kurtz's claim, precluding any recovery.
On April 12, 2018 the trial court issued a proposed statement of decision. The court recognized Kurtz and Markowitz gave contradictory testimony whether the parties executed a written engagement agreement, but it found Markowitz's testimony was "unbelievable for several reasons," including that Markowitz was a "fairly sophisticated businessman with significant experience with legal proceedings," and Markowitz's written communications showed inconsistences with his trial testimony. The court concluded Kurtz had proven the elements of breach of contract and awarded Kurtz $360,943 based on Jardini's calculations of Kurtz's billed fees, less payments made by Markowitz, without an award (or discussion) of any offsets. Markowitz objected to the proposed statement of decision on the basis it failed to address his "defense arising out of [Kurtz's] professional negligence." The court adopted the proposed statement of decision without modification, and on July 11, 2018 the court entered judgment for Kurtz for $360,943 (the original judgment).
C. Kurtz I and the Amended Statement of Decision and Judgment
On appeal from the original judgment, Markowitz contended substantial evidence did not support the trial court's finding the parties entered a written engagement agreement, the damages were excessive, and the court erred in failing to address Markowitz's affirmative defense of offset based on Kurtz's legal malpractice. In Kurtz I we held substantial evidence supported the court's finding Markowitz breached a written contract but not its award of damages, concluding Kurtz's contract damages were limited to $325,233 based on the balance on Kurtz's last invoice and undisputed credits, as well as Kurtz's response to the demand for a bill of particulars. We agreed with Markowitz the trial court erred in failing to include in its statement of decision any findings on Markowitz's affirmative defense of legal malpractice. We explained, "Whether Kurtz committed malpractice, and if so, the amount of any offset, were the subject of extensive testimony, pretrial and posttrial briefing, and multiple motions in limine....In the absence of findings on the controverted issue of legal malpractice, section 634 bars our implying findings by the trial court because we have 'no means of ascertaining the trial court's reasoning or determining whether its findings on disputed factual issues support the judgment as a matter of law.' [Citation.] We do not know, for example, whether the trial court found Markowitz failed to prove Kurtz's conduct was negligent or failed to prove causation or damages." (Kurtz I, supra, B291880.) We reversed the judgment and remanded with instructions for the trial court to address in an amended statement of decision Markowitz's affirmative defense of legal malpractice, and for the court to reduce the amount of damages from $360,943 to $325,233, less any offset for legal malpractice.
On July 20, 2016 Kurtz filed a response to Markowitz's demand for a bill of particulars under section 454, stating the principal balance owed to him was $335,330. We limited Kurt's recovery to the lower balance on his last invoice.
After the remittitur was issued, in February 2021 the parties submitted in the trial court proposed amended statements of decision. On April 20, 2021 the trial court adopted Kurtz's submission as the court's proposed statement of decision.Markowitz filed objections, and on August 5 the court issued a proposed second amended statement of decision. The seven-page decision included one and a half pages addressing Markowitz's legal malpractice theories. After summarizing the law of legal malpractice, the court devoted one paragraph to each of the four theories, finding as to each one that Markowitz failed to carry his burden of proving the elements of legal malpractice because he failed to present evidence of negligence, causation, or damages. The court concluded Markowitz failed to prove malpractice was committed to justify any offsets to the damages award, and it ordered Kurtz to prepare an amended judgment.
The trial court initially adopted Kurtz's submission as the final amended statement of decision, but it later reissued the document as a proposed amended statement of decision.
On September 1, 2021 the trial court overruled Markowitz's objections to the proposed second amended statement of decision and the proposed judgment submitted by Kurtz, and it adopted the proposed second amended statement of decision as its final decision without any changes. The same day the court entered an amended judgment awarding Kurtz $325,233 "plus interest of $89.10 per day commencing on July 11, 2008," which was the date of the original judgment.
Markowitz again appealed.
DISCUSSION
A. Governing Law and Standard of Review
The elements of a cause of action for legal malpractice are "(1) the duty of the attorney to use such skill, prudence, and diligence as members of his or her profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the breach and the resulting injury; and (4) actual loss or damage resulting from the attorney's negligence." (Coscia v. McKenna &Cuneo (2001) 25 Cal.4th 1194, 1199; accord, O'Shea v. Lindenberg (2021) 64 Cal.App.5th 228, 235.)
"In a litigation malpractice action, the plaintiff must establish that but for the alleged negligence of the defendant attorney, the plaintiff would have obtained a more favorable judgment or settlement in the action in which the malpractice allegedly occurred." (Viner v. Sweet (2003) 30 Cal.4th 1232, 1241; accord, O'Shea v. Lindenberg, supra, 64 Cal.App.5th at pp. 235236.) "[T]he method for proving the element of causation has been likened to a 'trial within a trial' or a 'case within a case.'" (Ambriz v. Kelegian (2007) 146 Cal.App.4th 1519, 1531; accord, Namikas v. Miller (2014) 225 Cal.App.4th 1574, 1582 ["This standard requires a 'trial-within-a-trial' of the underlying case, in which the malpractice jury must decide what a reasonable jury or court would have done if the underlying matter had been tried ...."].) Legal malpractice may be asserted as an offset against an attorney's claim to recover fees, regardless of whether a cause of action for legal malpractice would be time-barred. (Safine v. Sinnott (1993) 15 Cal.App.4th 614, 618-619.)
Markowitz contends the trial court's findings were not supported by substantial evidence. However, a different standard of review applies where, as here, the appellant had the burden of proof at trial. "'In the case where the trier of fact has expressly or implicitly concluded that the party with the burden of proof did not carry the burden and that party appeals, it is misleading to characterize the failure-of-proof issue as whether substantial evidence supports the judgment.' [Citation.] 'Thus, where the issue on appeal turns on a failure of proof at trial, the question for a reviewing court becomes whether the evidence compels a finding in favor of the appellant as a matter of law.'" (Juen v. Alain Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 978-979; accord, Atkins v. City of Los Angeles (2017) 8 Cal.App.5th 696, 734.)
Markowitz also argues we should reject the trial court's findings because the judge "failed to take the steps necessary to refresh his recollection to perform his duty on remand" and in the second amended statement of decision "could only muster a single paragraph of analysis" for each of Markowitz's malpractice theories. Although the second amended statement of decision did not contain detailed findings, it is sufficient for our review because the trial court identified for each of the malpractice issues the elements on which Markowitz failed to carry his burden of proof.
"'Specifically, the question becomes whether the appellant's evidence was (1) "uncontradicted and unimpeached" and (2) "of such a character and weight as to leave no room for a judicial determination that it was insufficient to support a finding.'"" (Juen, supra, 32 Cal.App.5th at p. 979; accord, Glovis America, Inc. v. County of Ventura (2018) 28 Cal.App.5th 62, 71.) "[U]nless the trial court makes specific findings of fact in favor of the losing [party], we presume the trial court found the [losing party's] evidence lacks sufficient weight and credibility to carry the burden of proof. [Citations.] We have no power on appeal to judge the credibility of witnesses or to reweigh the evidence." (Bookout v. State of California ex rel. Dept. of Transportation (2010) 186 Cal.App.4th 1478, 1486; accord, Jennifer K. v. Shane K. (2020) 47 Cal.App.5th 558, 579.)
"'In reviewing a judgment based upon a statement of decision following a bench trial, we review questions of law de novo.'" (Veiseh v. Stapp (2019) 35 Cal.App.5th 1099, 1104; accord, Thompson v. Asimos (2016) 6 Cal.App.5th 970, 981; see Atkins v. City of Los Angeles, supra, 8 Cal.App.5th at p. 738 [entitlement to a particular measure of damages is a question of law subject to de novo review].)
B. The Evidence Compels a Finding Kurtz Committed Legal Malpractice by Appearing for an Adverse Party
1. The evidence at trial
Kurtz admitted he made a courtesy appearance as counsel for the LLC's at an October 1, 2007 hearing in the Blue Water action in connection with an unopposed demurrer filed jointly by Markowitz and the LLC's, because the attorney for the LLC's was unavailable. (Blue Water Sunset, LLC v. Markowitz (2011) 192 Cal.App.4th 477, 481, 483 (Blue Water Sunset, LLC.) The Court of Appeal in Blue Water Sunset, LLC also concluded Kurtz had prepared and filed the demurrers on behalf of Markowitz, Four Star, the LLC's, and another defendant. (Id. at p. 483.) Following Kurtz's appearance at the demurrer hearing, Blue Water Sunset brought a motion to disqualify Kurtz from representing Markowitz and Four Star, as well as the LLC's, because the LLC's, although nominal defendants, were adverse to Markowitz and Four Star. The trial court denied the disqualification motion, but the Court of Appeal reversed, concluding Kurtz was disqualified from representing the LLC's, although he could continue to represent Markowitz and Four Star. (Id. at p. 492.)
The trial court judicially noticed and admitted at trial the decision in Blue Water Sunset, LLC. As described in the decision, Markowitz and the LLC's jointly demurred to fraud claims asserted by Blue Water Sunset against Markowitz and, on a derivative basis, the LLC's. (Blue Water Sunset, LLC, supra, 192 Cal.App.4th at p. 483.) The Court of Appeal observed that Kurtz admitted in his declaration, "'[O]n certain matters where the interests of all defendants were aligned, and particularly with certain motions or oppositions in which I was the main lawyer preparing the paperwork, I have specially appeared for [the LLC's attorney].'" (Id. at p. 483, fn. 8.).
In Blue Water Sunset, LLC, supra, 192 Cal.App.4th 477, the Court of Appeal held that Kurtz's preparation of the demurrer and appearance on behalf of the LLC's at the October 2007 demurrer hearing created an attorney-client relationship, and therefore Kurtz had a conflict of interest because Markowitz and Four Star on the one hand, and the LLC's on the other, claimed the right to ownership of certain real estate and rental income to the exclusion of the other. (Id. at pp. 487-490.) The court explained that "[o]nce Blue Water sued Four Star and Markowitz derivatively on behalf of the [LLC's] for fraud and fraudulent conveyance, the [LLC's] stood to benefit if Blue Water prevailed. Though nominally named as defendants, the limited liability companies were actually plaintiffs in the eyes of the law." (Id. at p. 489.) Further, "[t]he [LLC's] had an expectation that their attorney would do nothing to help Four Star and Markowitz, including assert demurrers and argue that the fraud and fraudulent conveyance causes of action were defective ....It is undeniable that Four Star and Markowitz had the exact opposite expectation. Thus, when Kurtz jointly represented Four Star, Markowitz and the limited liability companies, Kurtz's representation of one side was per se rendered less effective because he was forced to pick one side over the other and could not meet his fiduciary obligations." (Ibid., footnotes omitted.)
Jardini testified Kurtz's appearance for the LLC's while representing Markowitz (and Four Star) was "a mistake" and fell below the standard of care based on settled law on conflicts of interest at the time of Kurtz's appearance. Further, but for Kurtz's conduct in preparing the demurrer and appearing on behalf of the LLC's, Blue Water Sunset would not have had a basis for moving to disqualify Kurtz. Thus, if Markowitz wanted to preserve his ability to have Kurtz represent him in the litigation, Markowitz had to pay $52,130 to the appellate lawyers at Benedon &Serlin to represent him and Four Star in the appeal of the order on the disqualification motion.
Jardini also calculated that Kurtz billed Markowitz $13,475 for his own work in connection with the disqualification motion and appeal, but on cross-examination Jardini conceded he may have erroneously included in this calculation fees billed on an unrelated disqualification matter. On appeal, Markowitz asserts only that he was entitled to an offset for Benedon & Serlin's fees.
Kurtz testified that his appearance on behalf of the LLC's did not force Markowitz to pay legal fees in connection with the appeal of the disqualification motion because Kurtz advised Markowitz instead to replace him as counsel in the Blue Water action: "When [Markowitz] received the [disqualification] motion I told him you had just replaced me, just replace me again. I'm fungible. He had fired me two months earlier, asked me to come back in the case. I was in the case for five days when they filed this motion....I told him-that's what I told him, don't spend the money." Kurtz continued to represent Markowitz at Markowitz's request, but he agreed to give Markowitz a credit of $35,000, which was the amount Markowitz told Kurtz at the time he had spent on the appeal. Kurtz testified he marked down the balance owed by "a little more than $25,000" in his September 2011 invoice to reflect this credit, and he also allowed Markowitz to keep $10,000 Markowitz received from his sale of Kurtz's car.
Markowitz testified he made the decision to mount a defense in the appeal because "they were trying to disqualify all my attorneys for the case . . . they were trying to disqualify Mr. Kurtz as well as [the LLC's attorney]....And if I didn't take it up on appeal I would be forced to . . . hire new lawyers at that time, and have to maybe start over." Jardini similarly opined that Markowitz "really didn't" have a choice not to defend himself on appeal. Rather, "[a]s a practical matter, given the scope and arch of the litigation and how much it had cost to start over would have been prohibitively expensive, and so you're put in a go, no-go situation, and he decided to go."
Jardini admitted during cross-examination that Kurtz substituted in as counsel for Markowitz only six days earlier (after being terminated three months before over billing disputes), but Jardini opined the situation was different from the usual case where a lawyer is on the case a short time because Kurtz had represented Markowitz for three years.
2. The evidence compels a finding Kurtz committed legal malpractice, entitling Markowitz to an offset of $17,130
In the second amended statement of decision, the trial court rejected Markowitz's request for an offset based on the disqualification issue, finding the court "was not convinced by Jardini that [Kurtz's] representation in the Blue Matter case was malpractice or that defendant was damaged. The decision to challenge the disqualification was not based on any conduct committed by [Kurtz]. Notably, attorneys specially appear for both sides during generic case management conference all the time without creating conflicts." The evidence compels a contrary finding.
Although not all attorney conduct that creates a conflict of interest necessarily constitutes professional negligence, Jardini's testimony that Kurtz's appearance on behalf of the LLC's was "a mistake" that fell "below the standard of care" is uncontroverted. And as the Court of Appeal explained, even a single appearance for adverse parties creates a conflict of interest because the attorney owes all clients a "duty of utmost loyalty." (Blue Water Sunset, LLC v. Markowitz, supra, 192 Cal.App.4th at p. 488, citing Streit v. Covington &Crowe (2000) 82 Cal.App.4th 441, 445 ["That the association is limited to a single appearance is a distinction only of degree, not of kind."].) Further, the LLC's were adverse to Markowitz and Four Star with respect to the derivative claims that were subject to the demurrer because the LLC's "were actually plaintiffs in the eyes of the law." (Blue Water Sunset, LLC, at p. 489.) Thus, the trial court erred in finding no conflict of interest because Kurtz drafted the demurrer and appeared at the demurrer hearing (not a "generic case management conference"), and even a single appearance creates a conflict of interest.
Moreover, the evidence compels a finding Markowitz was entitled to an offset for the money he spent on the appeal of the disqualification motion. Markowitz could have decided-as Kurtz recommended-not to defend his interests on appeal and instead hire a new lawyer to represent him in the Blue Water action. But as both Markowitz and Jardini testified, had Markowitz terminated Kurtz, substituting in a new lawyer in the middle of the multiyear litigation would have forced Markowitz to "start over" and incur even greater costs. There was no evidence to the contrary (only that Kurtz recommended Markowitz hire another attorney). Further, Jardini presented undisputed evidence (his summary of the appellate firm's invoices) that the appellate lawyers charged Markowitz $52,130 in attorneys' fees and costs. However, Markowitz did not meet his burden to show he was entitled to an offset for the entire $52,130 in appellate costs because Kurtz testified he reduced Markowitz's balance by $35,000 ($25,000 off the invoices and $10,000 for the car).Accordingly, Markowitz was entitled to an offset for the difference: $17,130.
Markowitz argues Kurtz failed to show on his invoices where he reduced Markowitz's bill by $35,000, but Markowitz failed to present evidence in the trial court showing the invoices were inconsistent with Kurtz's testimony.
C. Markowitz Was Not Entitled to an Offset Based on Other Instances of Kurtz's Alleged Legal Malpractice
1. Failure to amend the cross-complaint in the Blue Water action
In May 2009 Markowitz filed a fourth amended crosscomplaint in the Blue Water action in which he asserted four derivative causes of action on behalf of the LLC's, including for rescission, fraudulent conveyance, restitution, capital contribution, and quiet title. The trial court (Judge Ramona G. See) granted Blue Water's motion for summary adjudication of the claims, finding they were barred by the statute of limitations, which expired in 2006 or 2007 (depending on the claim).
At trial in this action, Markowitz argued Kurtz's failure to amend the cross-complaint earlier to include the claims caused the statutes of limitations to run and Markowitz to forfeit claims worth $600,000. However, Kurtz testified he could not have asserted the derivative cross-claims any sooner because the LLC's had been pursuing the claims directly. He moved to amend the cross-complaint after the LLC's stopped prosecuting their direct claims as a result of Judge Heeseman's ruling that Markowitz could no longer provide lawyers for the LLC's, and instead he had to pay half of the costs of hiring independent counsel for the LLC's (with Blue Water Sunset paying the other half). Markowitz refused to share the costs, so the direct actions could not proceed. Jardini initially testified Kurtz's failure to timely assert the cross-claims fell below the standard of care, but on cross-examination Jardini admitted he had not analyzed whether the statutes of limitation had expired before Kurtz could have filed the claims.
In the amended statement of decision, the trial court found "the evidence demonstrated that [Markowitz] could not have asserted derivative cross-claims because the entities were pursuing the claims directly. Moreover, Jardini failed to establish that any statute of limitations had actually expired, and presented no evidence that defendant would have prevailed on any cross-claim." On appeal, Markowitz argues that even if the statutes of limitation already expired before Markowitz could have asserted the derivative claims, it was Kurtz's recommendation to plead the claims of the LLC's as derivative claims, and Kurtz "had a duty to advise [Markowitz] that converting the LLC's claims to derivative claims would result in them being time barred, and that if Markowitz wanted to preserve them, he needed to agree to Judge Heeseman's suggestion to split the cost of a lawyer to represent the LLC's with Blue Water Sunset." According to Markowitz, Kurtz's failure to properly advise Markowitz therefore constituted legal malpractice. Markowitz also contends he testified extensively regarding the viability of his claims against Blue Water Sunset, which were valued at $600,000.
Markowitz's arguments are unavailing. Even if Kurtz's failure to advise Markowitz on the statutes of limitation was negligent, Markowitz failed to present evidence that compels a finding he would have been awarded $600,000-or any amount- against Blue Water Sunset but for Kurtz's negligence. Although Markowitz testified as to each of Blue Water Sunset's various schemes to cheat and defraud him and the amount of money stolen as part of those schemes, Markowitz did not show by a preponderance of the evidence that he would have prevailed on those claims had they been tried in the Blue Water action. (See Namikas v. Miller, supra, 225 Cal.App.4th at p. 1582 ["'The plaintiff must prove, by a preponderance of the evidence, that but for the attorney's negligent acts or omissions, he would have obtained a more favorable judgment or settlement in the action in which the malpractice allegedly occurred.'"].)
For example, Markowitz testified as to a "Ryback note" that he purchased the note to secure a loan for $390,000, but "Blue Water Sunset had stolen that Ryback note from my company, which was First View, and so we were suing for return of the note or the money that it was worth." However, Markowitz did not present any documentary evidence to support his testimony that there was a "Ryback note," what amount was owed on the loan, or how the note was stolen. Markowitz's testimony about theft of "Vidnet" shares was likewise cursory, with Markowitz testifying, "I don't recall the note," other than that he paid $50,000 for it and "Blue Water took [it] from me, and we were suing to get it back, or the value of it back...." Markowitz's testimony about a "second swindle" and $100,000 that Blue Water Sunset's principal, Victor Noval, took from one of Markowitz's LLC's to give to Noval's girlfriend Christy Frank was likewise not supported by any evidence or details.
2. Failure to file a motion to have Markowitz's RFA's deemed admitted
In April 2006 Kurtz served requests for admissions on Blue Water Sunset asking it to admit it never made an initial capital contribution to the LLC's. As discussed, in 2014 the trial court in the Blue Water action (Judge Michael Linfield) entered judgment for Markowitz after finding Blue Water Sunset failed to prove it made its initial capital contributions to any of the LLC's. After the trial, Markowitz, then represented by Buley, filed a motion to recover his attorneys' fees as a cost under section 2033.420 based on Blue Water Sunset's failure to admit it never made the contributions. Buley testified in this action that the Blue Water court denied the motion because Markowitz could not establish the RFA's were properly served (the copy of the RFA's submitted with the motion did not include a signed proof of service), and even if the RFA's had been served and were unanswered, Kurtz should have filed a motion to compel further responses or to have the requests deemed admitted. Buley testified, "Had that step been taken, it would have short-circuited the litigation and ended the litigation back at that time, and it wouldn't have required the additional incurrence of expenses, fees. And so . . . some further work should have been done if the RFA's had, in fact, not been answered." Kurtz testified that filing a motion to have the RFA's deemed admitted would have been pointless because Blue Water Sunset would simply have denied the RFA's prior to the hearing on the motion. Jardini did not provide an opinion on whether Kurtz's conduct was below the standard of care because the trial court sustained Kurtz's objection that Jardini had not been designated to testify on the subject and did not provide an opinion at his deposition.
In its second amended statement of decision, the trial court found Markowitz's position "that he should have recovered fees after moving to have requests for admissions deemed admitted is speculation as there is no way one could guess whether another judicial officer would have granted said motion had it been filed. Furthermore, Jardini did not provide an opinion on whether the failure to move to have the request for admissions deemed admitted fell below the standard of care." Markowitz contends on appeal that the court erred because Kurtz submitted a declaration in support of his motion for costs in the Blue Water action, in which he admitted the purpose of propounding the RFA's was to establish a basis to collect fees if Markowitz prevailed in proving Blue Water Sunset did not make an initial capital contributions. Therefore, it was malpractice for Kurtz not to follow up on the RFA's.
We do not reach whether Kurtz's failure to follow up on the unanswered RFA's was negligent because we agree with the trial court it is speculative to assume Markowitz would have recovered his attorneys' fees if Kurtz had done so. As Kurtz testified, had he filed a motion to compel responses or sought to have the requests deemed admitted, Blue Water Sunset would likely have responded that it did not receive the requests (and the record does not show otherwise), and then served responses. Given the central disputed issue in the Blue Water action was whether Blue Water Sunset made capital contributions to the LLC's, it is unlikely Blue Water would have admitted it had not done so. It is true, as Markowitz argues, that section 2033.420 provides that a court "shall" order cost-of-proof sanctions if a party fails to admit the truth of a matter in response to a request that is later proven. But the statute includes several exceptions, including if "[a]n objection to the request was sustained" (§ 2033.420, subd. (b)(1)) or "[t]he party failing to make the admission had reasonable ground to believe that that party would prevail on the matter." (Id., subd. (b)(3).) On this record, Markowitz cannot show that but for Kurtz's negligent conduct in failing to move to compel responses to the requests for admission or deem them admitted, he would have prevailed on a motion under section 2033.420. (Viner v. Sweet, supra, 30 Cal.4th at p. 1241.)
3. Unsuccessful motion for leave to bring claims against opposing counsel
Finally, Markowitz contends Kurtz was negligent in preparing a motion under Civil Code section 1714.10 for leave of court to file a cross-complaint in the Blue Water action against opposing counsel alleging a civil conspiracy based on bribery of a witness, which the trial court denied based on insufficient evidence of the alleged conspiracy. Markowitz paid Benedon &Serlin $42,696 to prosecute an unsuccessful appeal of the denial. Jardini opined that Kurtz's failure to obtain leave from the court to "file a claim for civil conspiracy against a lawyer fell below standard of care." But when asked on cross-examination what facts Jardini had to support his opinion, he responded, "[I]t wasn't granted at the trial level, and you can't pursue it if it wasn't granted," and "the error was doing it imperfectly without sufficient evidence."
Civil Code section 1714.10, subdivision (a), provides in relevant part, "No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest or compromise a claim or dispute, and which is based upon the attorney's representation of the client, shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes the claim for civil conspiracy to be filed after the court determines that the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action."
The trial court rejected this claim on the ground it was "not supported by any expert testimony." Although Jardini did testify on the issue, we agree Jardini's testimony did not demonstrate legal malpractice. Although he testified the Civil Code section 1714.10 motion was done "imperfectly" and "without sufficient evidence," the record does not reflect whether the insufficiency of the evidence resulted from Kurtz's deficient performance. Nor does the record show that there was sufficient evidence of the conspiracy to support a successful motion.
D. Kurtz Is Not Entitled to Postjudgment Interest from the Date of the Original Judgment
Markowitz contends the trial court erred in awarding daily interest on the amended judgment of $325,233 commencing on July 11, 2018, the date of the original judgment, because we reversed the original judgment in Kurtz I. Kurtz contends that although we nominally reversed the judgment, our disposition in Kurtz I was "in practical effect" a modification of the original judgment, because other than reducing the damages award from $360,943 to $325,233, we remanded simply for the trial court to amend its statement of decision to make specific findings addressing legal malpractice. Markowitz has the better argument.
In awarding interest from the date of the original judgment, the trial court cited Snapp v. State Farm Fire &Casualty Co. (1964) 60 Cal.2d 816 (Snapp). In Snapp, the Supreme Court held, "'A judgment bears legal interest from the date of its entry in the trial court even though it is still subject to direct attack. [Citation.] When a judgment is modified upon appeal, whether upward or downward, the new sum draws interest from the date of entry of the original order, not from the date of the new judgment. [Citations.] On the other hand, when a judgment is reversed on appeal the new award subsequently entered by the trial court can bear interest only from the date of entry of such new judgment.'" (Id. at pp. 818-819.) The Supreme Court concluded that because the Court of Appeal reversed the trial court's damages award against an insurer for less than the policy limits ($8,168.25) and directed the trial court to enter judgment for the full policy limits ($25,000), interest properly accrued as of the date of the original judgment. (Id. at p. 817.) The court explained, "The obligation to pay at least $8,168.25 has existed ever since the entry of the original judgment. This obligation was not set aside and vacated by the 'reversal.' The legal effect of that reversal was to determine that as of the date of the original judgment plaintiffs were entitled to $25,000. Thus, the original judgment was increased from $8,168.25 to $25,000, based solely on the record then before the appellate court. No issues remained to be determined. No further evidence was necessary. Thus. the so-called 'reversal' with directions, was, in fact and in law, a 'modification.'" (Id. at p. 820.)
In each of the cases relied on by Markowitz, as in Snapp, the courts concluded the earlier reversals in practice constituted modifications of the prior judgments because the appellate courts directed entry of a revised judgment without remanding for further factfinding by the trial court. In Stockton Theatres, Inc. v. Palermo (1961) 55 Cal.2d 439, 444 the Supreme Court held the earlier reversal of a trial court order disallowing a bond premium as a cost item had the "legal and practical effect of modifying the original award" because the appellate court's ruling determined "not only that such item was recoverable, but that it should have been recoverable as of the date" of the judgment from which the interest accrued. In Munoz v. City of Union City (2009) 173 Cal.App.4th 199, 207 the court held that two previous appeals, the first dismissing one of three tort defendants, and the second correcting the allocation of the judgment between the two remaining defendants, constituted modifications because no further factfinding was required on remand, but rather, the appellate court determined the proper allocation of the award based on the jury's verdict and allocation as to the remaining defendants. Similarly, in Ehret v. Congoleum Corp. (2001) 87 Cal.App.4th 202, 210 the court held a prior appeal was a modification, not a full reversal, because the appeal had the effect of reinstating a jury verdict and fault allocation after reversing the erroneous grant of a judgment notwithstanding the verdict.
Had we in Kurtz I simply instructed the trial court to reduce the damages to match Kurtz's invoices, Snapp would be on all fours, and interest on the reduced award would run from the date of the original judgment. Likewise, had we only instructed the trial court to prepare a more detailed statement of decision (as Kurtz has characterized our instruction in Kurtz I), interest on the original judgment would properly have accrued. But instead, we instructed the trial court to address Markowitz's four legal malpractice theories and to "reduce the amount of damages from $360,943 to $325,233, less any offset." (Kurtz I, supra, B291880, italics added.) In remanding for further factfinding by the trial court, we underscored that "we have 'no means of ascertaining the trial court's reasoning or determining whether its findings on disputed factual issues support the judgment as a matter of law.'" (Ibid.) Therefore, unlike in Snapp, there remained issues to be determined by the trial court. (See Snapp, supra, 60 Cal.2d at p. 820.) Moreover, because Markowitz alleged his malpractice damages far exceeded Kurtz's contract damages, our remand in Kurtz I could have resulted in the practical elimination of the damages award in the original judgment.
Accordingly, our disposition in Kurtz I was a reversal, not a modification, and the trial court erred in granting postjudgment interest from the date of the original judgment. However, because our holding in this appeal-that Markowitz was entitled to a malpractice offset of $17,130-serves as a modification of the amended judgment, not a reversal, Kurtz is entitled to interest on the revised amount of damages running from September 1, 2021, the date of the amended judgment.
Because we reverse the interest award in the amended judgment, we do not reach Markowitz's contention the trial court should not have specified the daily interest that would accrue ($89.10 per day) because the interest amount would vary based on the amount owed on the judgment. Markowitz also contends the trial court in its second amended statement of decision miscalculated Kurtz's total damages, stating Kurtz was entitled to receive $352,451 although we held in Kurtz I that Kurtz should receive only $325,233. Markowitz is correct as to the miscalculation, but as Kurtz points out in his respondent's brief, the amended judgment did not include this error. Rather, Kurtz decided to forgo recovery of the additional amount awarded in the second amended statement of decision. Because the judgment accurately reflects our direction in Kurtz I, we reject Markowitz's contention that the second amended statement of decision must be revised to correct the miscalculation. Instead, the revised amended judgment will control.
DISPOSITION
The amended judgment is reversed. The matter is remanded to the trial court to revise the amended judgment to award damages in the amount of $308,103. The court is also instructed to strike the award of postjudgment interest accruing from the date of the original judgment and to award postjudgment interest running from the date of the amended judgment (September 1, 2021). Markowitz is entitled to recover his costs on appeal.
We concur: PERLUSS, P. J., HOWARD, J. [*]
[*] Judge of the Marin County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.