Opinion
NOT TO BE PUBLISHED
Appeals from an order and a judgment of the Superior Court of Orange County, Ronald L. Bauer, Judge. Appeal from order dismissed. Super. Ct. No. 04CC09340
Kohut & Kohut, Laura L. Kohut, Megan L. Wagner and Sarah K. Kohut for Plaintiff and Appellant.
DLA Piper US, Randall E. Kay and Alice W. Detwiler for Defendant and Respondent.
OPINION
RYLAARSDAM, J.
Plaintiff ICU Medical, Inc., a medical device manufacturer, sued the law firm of Fulwider Patton Lee & Utecht, LLP (Fulwider) for professional negligence and related claims, alleging Fulwider had breached its duties of loyalty and confidentiality by representing plaintiff in enforcing product patents while simultaneously representing plaintiff’s competitors in product development and patent prosecution and enforcement without informed consent. In an amended complaint, plaintiff named defendant Cardinal Health 303, Inc., and alleged it either conspired with or aided and abetted Fulwider’s wrongdoing.
The trial court entered a judgment dismissing the action against defendant after sustaining its demurrer to the third amended complaint without leave to amend. Plaintiff appealed from both the order sustaining the demurrer and the judgment and we granted its motion to consolidate the appeals. The appeal from the order sustaining defendant’s demurrer must be dismissed because it is not an appealable ruling. (Beazell v. Schrader (1962) 205 Cal.App.2d 673, 674.) But plaintiff’s timely appeal from the subsequent judgment of dismissal satisfies the jurisdictional requirements. (Forsyth v. Jones (1997) 57 Cal.App.4th 776, 780.)
We agree with the trial court’s conclusion that plaintiff’s claims against defendant are barred by the statute of limitations and affirm the judgment. Thus, we need not consider the alternative ruling that the amended complaint failed to state facts sufficient to constitute a cause of action against defendant.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff develops medical equipment, and “owns a number of patents covering” “intravenous medical connector technology.” In the early 1990’s, it filed confidential patent applications for and marketed “a second-generation intravenous medical connector” known as the CLAVE, along with “ancillary products” that “extended the application of CLAVE technology to other products and uses.”
In September 1994, plaintiff retained Fulwider, which specialized in intellectual property and patent law, “to represent [it] on various matters, including . . . the enforcement of its patents . . . .” At the time Fulwider also represented IVAC Medical Systems (IVAC) and Medex, Inc (Medex). IVAC later merged with another company and changed its name to Alaris. Through a subsequent merger, Alaris became a subsidiary of defendant. Fulwider’s retainer agreement disclosed the existence of its relationship with IVAC, but advised plaintiff it had “concluded that no current conflict is presented or is likely to arise in light of our long-term relationship with [Alaris].” The third amended complaint alleged “Fulwider represented [plaintiff] . . . until September 1999.”
Plaintiff further alleged that, as its attorney, Fulwider learned about plaintiff’s “confidential patent applications and patents,” including those relating to CLAVE, its “business strategies, . . . marketing directions and strategies, . . . numerous other confidential and proprietary matters,” and its “confidential analysis of competitive products and their possible infringement of [plaintiff’s] patents.” “Fulwider was familiar with [plaintiff’s] existing product line, including . . . CLAVE and ancillary products (such as the vial adaptor[ and] bag spike . . .) and products in development, including a positive pressure medical connector and closeable male luer . . . .”
Alaris allegedly undertook to “develop and market . . . intravenous medical connector” products and patent them so as “to block [plaintiff] from developing additional, or improving [its] existing . . . products . . . .” In addition, plaintiff alleged “Alaris formed a team to develop an intravenous medical connector to compete with . . . CLAVE,” which resulted in “the release of [the] ‘SmartSite’ intravenous medical connector in . . . 1996.”
To further these efforts, Alaris allegedly “directed, incited, encouraged and aided and abetted Fulwider to breach its fiduciary duties to [plaintiff] as an existing client (September 1994 – September 1999) and former client (September 1999 – present) and to defraud [plaintiff] . . . .” Plaintiff specifically alleged Alaris made Fulwider a member of its SmartSite development team and “retained Fulwider to prepare and prosecute . . . patent application[s]” covering “CLAVE technology,” “the SmartSite technology,” “a positive pressure needleless connector,” “vial adaptor technology,” and “a closeable male luer designed to work with” plaintiff’s CLAVE. “At Alaris’s direction and with [its] technical and financial assistance,” Fulwider also “filed and prosecuted patents designed to . . . block [plaintiff’s] improvement or modification of its products . . . .”
Plaintiff also alleged that, in November 1998, “Fulwider drafted a contract between Alaris and Medex that gave Alaris a license to a needleless valve device similar to a product developed and patented by plaintiff, which included “a ‘right to proceed against any third party for alleged infringement . . . .’” Alaris subsequently authorized Medex to sue plaintiff and, in March 1999, Medex filed suit “alleging that [plaintiff’s] CLAVE infringed on [a] Medex [p]atent.” Plaintiff alleged that it “incurred damages through being required to litigate and settle the Medex” patent infringement action.
Plaintiff “asked . . . Fulwider[] for a[n] opinion as to whether [its needleless valve] technology infringed Medex[’s] [p]atent . . . .” “Fulwider orally provided . . . a[n] . . . opinion that [plaintiff’s] technology did not infringe upon Medex[’s] [p]atent.” But on September 13, after plaintiff asked Fulwider to give it a written opinion, Fulwider “informed [plaintiff] of the conflict [of interest it had with concurrently representing Medex] and . . . terminate[d] its representation of [plaintiff].”
The same day, plaintiff alleged that it sent Fulwider a letter, stating in part, as follows: “it appears your firm may have a conflict of interest over its representation of [plaintiff] and Medex . . . . Medex and [plaintiff] have sued each other over patent matters. [¶] Until the question of conflict is resolved, you [Fulwider] should not advise or represent any of the above named companies, nor disclose any information concerning one party to any other party. ‘Other party’ would also include Alaris . . . .” Plaintiff alleged the reference to “Alaris[] was based upon a rumor that Alaris might be providing some financial support for Medex’s threatened patent infringement action against [plaintiff],” but denied it had “actual knowledge that Alaris was providing Medex with financial support” or “knowledge of the existence of any conflict associated with Fulwider’s representation of [plaintiff] and Alaris . . . .”
The third amended complaint further alleged, “notwithstanding [plaintiff’s] insistence that Fulwider cease its representation of Medex, Fulwider continued to represent both Medex and Alaris . . . .”
In September 2000, plaintiff and Fulwider executed an agreement to toll the statute of limitations on plaintiff’s “claims against Fulwider arising out of [its] legal representation of [plaintiff].” A copy of a tolling agreement attached as an exhibit to the third amended complaint states, “Questions have arisen as to whether . . . there was any wrongful act or omission by Fulwider in its performance of professional services for [plaintiff]” and while Fulwider “denie[d] that it engaged in any such wrongful conduct,” absent the tolling agreement plaintiff “is nonetheless prepared to commence a lawsuit against Fulwider, based on the legal representation . . . .” Plaintiff and Fulwider annually renewed the tolling agreement until September 2004.
In June 2004, plaintiff sued Alaris for patent infringement concerning the latter’s SmartSite products. The third amended complaint alleged that, “on or after” filing this lawsuit, plaintiff “first became aware of Fulwider’s involvement” in prosecuting patent applications for the CLAVE technology, the SmartSite technology, the positive pressure technology, the vial adaptor, the closeable male luer, plus attempts to block plaintiff’s improvement or modification of its products. Plaintiff also averred it learned “of Fulwider’s involvement in the development of the SmartSite” products in August 2005 “through discovery taken in this action.”
On September 10, 2004, plaintiff filed this action against Fulwider. Plaintiff obtained leave to file a second amended complaint adding defendant as a party in November 2005. Defendant demurred to it and the trial court sustained the demurrer with leave to amend stating, “the current pleading establishes that plaintiff was on inquiry notice as of 9/13/99.” Thus, plaintiff needed “to specifically plead facts in support of delayed discovery of the conflict and damages.”
Plaintiff’s third amended complaint contains 8 causes of action. Against Fulwider alone, it asserted claims for professional negligence, breach of contract, negligent misrepresentation, and conversion. Against both Fulwider and defendant, it sought recovery for breach of fiduciary duty, fraudulent inducement, intentional and negligent concealment, and constructive fraud.
The breach of fiduciary duty count alleged Fulwider breached the duties of maintaining client confidentiality and undivided loyalty by accepting plaintiff’s employment while representing other clients with actual or potential adverse interests without obtaining plaintiff’s informed consent; in failing to take steps to cure the conflicts of interest; and in taking action on behalf of plaintiff’s competitors. As to defendant, the count alleged “Alaris knew of Fulwider’s breach . . . and aided and abetted Fulwider . . . by its actions enumerated above.” The remaining three counts naming defendant sought recovery for fraudulently inducing plaintiff to enter into the attorney-client relationship with Fulwider by falsely representing the law firm’s simultaneous representation of Alaris “posed no conflict of interest”; fraudulently concealing the potential and actual conflicts of interest in Fulwider’s simultaneous representation of plaintiff, Medex, and Alaris; and constructive fraud for Fulwider’s “failure to disclose to [plaintiff] material facts regarding its representation of [plaintiff], Alaris and Medex, and misrepresenting the nature of [these] representations.”
Defendant again demurred. The trial court sustained this demurrer without leave to amend, finding plaintiff’s claims against defendant were barred by the statute of limitations and failed to allege facts sufficient to state any cause of action against it.
DISCUSSION
1. Introduction
“In reviewing the sufficiency of a complaint against a general demurrer, we are guided by long-settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. [Citation.]’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; see also Howard Jarvis Taxpayers Assn. v. City of La Habra (2001) 25 Cal.4th 809, 814.) In addition, “we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context. [Citation.] When a demurrer is sustained, we determine whether the complaint states facts sufficient to constitute a cause of action. [Citation.]” (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.) To sustain a demurrer on the basis of the statute of limitations, “the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred. [Citation.]” (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403; see also Geneva Towers Ltd. Partnership v. City and County of San Francisco (2003) 29 Cal.4th 769, 781.)
2. Accrual of Plaintiff’s Causes of Action Against Defendant
“Under the statute of limitations, a plaintiff must bring a cause of action within the limitations period applicable thereto after accrual of the cause of action. [Citations.]” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) “Generally speaking, a cause of action accrues at ‘the time when the cause of action is complete with all of its elements.’ [Citations.]” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 806-807; Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1528.) “The general rule for defining the accrual of a cause of action sets the date as the time ‘when, under the substantive law, the wrongful act is done,’ or the wrongful result occurs, and the consequent ‘liability arises . . . .’ [Citation.]” (Norgart v. Upjohn Co., supra, 21 Cal.4th at p. 397.) “[A]lthough a right to recover nominal damages will not trigger the running of the period of limitation, the infliction of appreciable and actual harm, however uncertain in amount, will commence the statutory period. . . . [N]either uncertainty as to the amount of damages nor difficulty in proving damages tolls the period of limitations.” (Davies v. Krasna (1975) 14 Cal.3d 502, 514, fn. omitted.)
Plaintiff’s causes of action accrued on September 13, 1999, the date Fulwider unilaterally terminated its attorney-client relationship with plaintiff citing the conflict arising from its simultaneous representation of Medex. On that date, plaintiff’s attorney-client relationship with Fulwider ended. “[I]n the event of an attorney’s unilateral withdrawal or abandonment of the client, the representation ends when the client actually has or reasonably should have no expectation that the attorney will provide further legal services. [Citations.]” (Gonzalez v. Kalu (2006) 140 Cal.App.4th 21, 30-31.) In fact, the third amended complaint expressly alleges Fulwider represented plaintiff “until September 1999,” and incorporates one of the tolling agreements plaintiff executed with Fulwider which acknowledged its immediate right to sue Fulwider for injuries allegedly caused by the latter’s legal representation of it. In addition, the complaint alleges that, by September 1999, plaintiff had suffered injury in the form of legal expenses incurred to defend against Medex’s patent infringement action.
Defendant contends that, at best, plaintiff’s causes of action against it were governed by a four-year statute of limitation. Plaintiff does not dispute this assertion. Furthermore, plaintiff’s tolling agreements with Fulwider do not apply to defendant since it was not “the person obligated” by those contracts. (Code Civ. Proc., § 360.5.) Consequently, absent some principle authorizing an extension of the limitations period, plaintiff’s right to sue it expired no later than September 13, 2003.
Plaintiff relies on three grounds to overcome the bar of the statute of limitations in this case. Each of them lacks merit.
a. The Continuous Accrual Doctrine
“Under th[e continuous accrual] doctrine, ‘[w]hen an obligation or liability arises on a recurring basis, a cause of action accrues each time a wrongful act occurs, triggering a new limitations period. [Citation.]’” (State ex rel. Metz v. CCC Information Services, Inc. (2007) 149 Cal.App.4th 402, 418.) Citing Fulwider’s alleged filing of patent applications in 2002 and 2003, its rendition of patent opinions, and its assistance to defendant in the 2004 patent infringement action, plaintiff seeks to overcome the statute of limitations by arguing “many of the claims [it] alleges against [defendant] arose within the applicable limitations period and are ongoing . . . .” (Italics and bold omitted.) This contention lacks merit.
The causes of action plaintiff alleges against defendant are not subject to a continuing accrual exception. Generally, application of the continuous accrual doctrine has been limited to “the obligation to make periodic payments under . . . statutes or regulations,” such as taxes or pension and welfare benefits (Hogar Dulce Hogar v. Community Development Commission (2003) 110 Cal.App.4th 1288, 1295-1296), or continuing nuisances (Baker v. Burbank-Glendale-Pasadena Airport Authority (1985) 39 Cal.3d 862, 869). Three of the counts plaintiff alleged against defendant, fraudulent inducement and concealment, and constructive fraud were premised upon Fulwider’s alleged misrepresentations or nondisclosures that occurred before it terminated the attorney-client relationship with plaintiff.
The second cause of action for breach of fiduciary duty is also primarily based on Fulwider’s alleged violation of its ethical duties extant during the attorney-client relationship with plaintiff. The only post-termination conduct clearly alleged is Fulwider’s patent application filing for Alaris and assisting it “in defending . . . against [plaintiff’s] allegations in the . . . [p]atent [i]nfringement [a]ction[].” Standing alone, these efforts do not constitute independently wrongful acts.
Plaintiff cites rule 3-310(E) of the Rules of Professional Conduct, which precludes an attorney from accepting employment “adverse to the client or former client . . . .” But since “[t]here is no independent cause of action for the breach of a disciplinary rule,” a violation of the Rules of Professional Conduct “do[es] not alone support a claim for damages. [Citation.]” (Ross v. Creel Printing & Publishing Co. (2002) 100 Cal.App.4th 736, 746; see also Rules Prof. Conduct, rule 1-100(A) [“The[] rules are not intended to create new civil causes of action”].) Thus, even assuming Fulwider’s alleged post-September 1999 assistance to defendant constitutes a violation of its ethical obligations, it would not constitute a new wrongful act extending the time for plaintiff to file suit.
Plaintiff has failed to show the continuous accrual doctrine applies in circumstances similar to the present case.
b. The Conspiracy Allegations
The fifth count for fraudulent inducement, sixth count for intentional and negligent concealment, and the eighth count for constructive fraud allege, on information and belief, “that Alaris conspired with Fulwider and/or aided and abetted Fulwider in” committing its purportedly wrongful acts. Plaintiff argues the conspiracy allegations shield these counts from the bar of the statute of limitations because “Fulwider and Alaris are committing wrongful acts in furtherance of the conspiracy even today,” and consequently, “the ‘last overt act’ in furtherance of such conspiracy has not yet occurred.” We disagree.
“[W]hen a civil conspiracy is properly alleged and proved, the statute of limitations does not begin to run on any part of a plaintiff’s claims until the ‘last overt act’ pursuant to the conspiracy has been completed. [Citation.]” (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 786.) But “‘[i]n order to state a cause of action based upon a conspiracy theory the plaintiff must allege the formation and operation of the conspiracy, the wrongful act or acts done pursuant to it, and the damage resulting from such acts. [Citation.] In making such allegations bare legal conclusions, inferences, generalities, presumptions, and conclusions are insufficient. [Citation.]’ [Citation.]” (State ex rel. Metz v. CCC Information Services, Inc., supra, 149 Cal.App.4th at p. 419.) Other than the conclusory allegation that “Alaris conspired with Fulwider,” plaintiff failed to further describe the nature of the Alaris-Fulwider conspiracy.
Furthermore, as discussed above, the counts containing the conspiracy allegation are premised on the accomplishment of objectives that necessarily ceased upon Fulwider’s September 1999 disclosure of an actual conflict and its termination of the attorney-client relationship with plaintiff. “‘[A]cts committed by conspirators subsequent to the completion of the crime which is the primary object of a conspiracy cannot be deemed to be overt acts in furtherance of that conspiracy. Consequently, upon successful attainment of the substantive offense which is the primary object of the conspiracy, the period of the statute of limitations for the conspiracy begins to run at the same time as for the substantive offense itself.’ [Citations.]” (State ex rel. Metz v. CCC Information Services, Inc., supra, 149 Cal.App.4th at p. 419; see also Livett v. F. C. Financial Associates (1981) 124 Cal.App.3d 413, 419 [case law distinguishes “between activities of conspirators after perpetration of the principal object of the conspiracy which may evidence the prior conspiracy and hence be admissible at time of trial, from acts which are properly classifiable as ‘overt acts’ in furtherance of the conspiracy”].) Because of the nature of these causes of action, post-termination acts could not constitute overt acts in furtherance of a conspiracy.
Therefore, we find plaintiff’s reliance on the conspiracy allegations without merit.
c. The Discovery Rule
Plaintiff further contends the discovery rule delayed the accrual of its claims against defendant. First, plaintiff argues the trial court erred in finding it was on inquiry notice as of September 13, 1999, because its fiduciary relationship with Fulwider required the law firm to give actual notice of the facts giving rise to its claims against defendant. Second, even if the inquiry notice standard applies, the trial court erred in finding it existed as a matter of law in this case.
Under the discovery rule, “accrual [of a cause of action] is postponed until the plaintiff either discovers or has reason to discover the existence of a claim, i.e., at least has reason to suspect a factual basis for its elements. [Citation.]” (Slovensky v. Friedman, supra, 142 Cal.App.4th at pp. 1528-1529.) It applies where “the plaintiff ‘“‘has notice or information of circumstances to put a reasonable person on inquiry . . . .’”’ [Citations.]” (Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1110-1111.) But it “only delays accrual until the plaintiff has, or should have, inquiry notice of the cause of action.” (Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 807.) Thus, “[t]he discovery rule does not encourage dilatory tactics because plaintiffs are charged with presumptive knowledge of an injury if they have ‘“‘information of circumstances to put [them] on inquiry’”’ or if they have ‘“‘the opportunity to obtain knowledge from sources open to [their] investigation.’”’ [Citations.] In other words, plaintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.” (Id. at p 807-808, fn. omitted.)
As for plaintiff’s actual notice argument, it is true that “‘[t]he attorney-client relationship is a fiduciary relation of the very highest character imposing on the attorney a duty to communicate to the client whatever information the attorney has or may acquire in relation to the subject matter of the transaction. [Citation.]’ [Citation.]” (Slovensky v. Friedman, supra, 142 Cal.App.4th at p. 1534.) But even so, plaintiff’s reliance on its fiduciary relationship with Fulwider to relax its obligation to make an inquiry into the existence of wrongdoing dissipated upon Fulwider’s repudiation of their attorney-client relationship. (Lee v. Escrow Consultants, Inc. (1989) 210 Cal.App.3d 915, 921; 3 Witkin, Cal. Procedure (4th ed. 1996) Actions, § 606, p. 779.) Thereafter, Fulwider’s refusal to issue a written opinion on whether plaintiff’s technology infringed Medex’s patent, Fulwider’s announcement that an actual conflict existed in its representation of both plaintiff and Medex, plus plaintiff’s admitted second-hand information that Alaris was possibly supporting Medex’s patent infringement action, provided the actual notice necessary to trigger plaintiff’s duty to investigate the possibility of legal action.
Generally, “[t]he discovery rule . . . allows accrual of the cause of action even it the plaintiff does not have reason to suspect the defendant’s identity. [Citation.]” (Fox v. Ethicon Endo-Surgery, Inc., supra, 35 Cal.4th at p. 807.) But as noted, the third amended complaint also admits plaintiff knew of Alaris’s possible participation in its patent infringement dispute with Medex. These additional facts support the trial court’s conclusion that plaintiff was on inquiry notice to investigate defendant’s possible involvement. The amended complaint’s allegations concerning plaintiff’s discovery during this litigation reflect that, had it timely sued, plaintiff would have discovered the evidence supporting its alleged claims against defendant. By waiting for these facts to find it rather than seeking them out, plaintiff must be charged with having knowledge of the facts essential to support its claim in 1999. (Jolly v. Eli Lilly & Co., supra, 44 Cal.3d at pp. 1110-1111.)
3. The Denial of Leave to Amend the Complaint
Finally, plaintiff contends the trial court erred by sustaining defendant’s demurrer to the third amended complaint without leave to amend. This contention lacks merit.
“[W]hen [a demurrer] is sustained without leave to amend, we decide whether there is a reasonable possibility that the defect can be cured by amendment: if it can be, the trial court has abused its discretion and we reverse; if not, there has been no abuse of discretion and we affirm. [Citations.] The burden of proving such reasonable possibility is squarely on the plaintiff. [Citation.]” (Blank v. Kirwan, supra, 39 Cal.3d at p. 318.)
“A general demurrer may be sustained without leave to amend where it is probable from the nature of the defects and previous unsuccessful attempts to plead that the plaintiff cannot state a cause of action. [Citations.]” (5 Witkin, Cal. Procedure, supra, Pleading, § 947, p. 405, italics omitted.) In sustaining defendant’s demurrer to the second amended complaint with leave to amend, the trial court clearly advised plaintiff that it needed to “specifically plead facts in support of delayed discovery of the conflict and damages. . . .” The third amended complaint failed to overcome this defect.
Furthermore, given the allegations of the third amended complaint, there is no possibility plaintiff could plead around these defects. “‘“A plaintiff may not avoid a demurrer by pleading facts or positions in an amended complaint that contradict the facts pleaded in the original complaint or by suppressing facts which prove the pleaded facts false. [Citation.]” [Citations.]’ [Citation.] Similarly, ‘[u]nder the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment. . . .’ [Citation.]” (State ex rel. Metz v. CCC Information Services, Inc., supra, 149 Cal.App.4th at p. 412.)
Consequently, we conclude plaintiff has failed to carry its burden of establishing a reasonable possibility of filing an amended complaint overcoming the bar of the statute of limitations as to the claims against defendant.
DISPOSITION
The appeal in case number G037141 is dismissed. The judgment dismissing respondent from this action is affirmed. Respondent shall recover its costs on appeal.
WE CONCUR: SILLS, P. J., IKOLA, J.