Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, Robert A. Dukes, Judge. Reversed. Los Angeles County Super. Ct. No. KC036310
Law Offices of Herbert Hafif, Herbert Hafif, Greg K. Hafif and Michael G. Dawson for Cross-Complainant and Appellant.
Law Office of Ronald C. Stock and Ronald C. Stock for Cross-Defendant and Respondent.
TURNER, P. J.
I. INTRODUCTION
Cross-complainant, the Law Offices of Herbert Hafif (the Hafif firm), appeals from a May 29, 2008 judgment of dismissal. The judgment was entered after the trial court granted the judgment on the pleadings motion of cross-defendant, Ronald C. Stock. The trial court ruled the Hafif firm’s cross-complaint should have been filed as a compulsory counterclaim in a separate lawsuit. We reverse the judgment and the underlying judgment on the pleadings order.
II. BACKGROUND
The present dispute involves several lawsuits. But the two principal lawsuits relevant to this appeal are the present case, Britt v. Metropolitan Life Insurance Company (Super. Ct. L.A. County, No. KC036310), and Stock v. Hafif (Super. Ct. L.A. County, No. KC034700). Both the present action and Mr. Stock’s lawsuit involve disputes over attorney fees following the termination of a long-term oral co-counsel agreement between Mr. Stock and the Hafif firm.
A. The Present Lawsuit
In an underlying action commenced in 1998, Dr. Roberta Noel Britt sued her disability insurer, the Metropolitan Life Insurance Company. Mr. Stock represented Dr. Britt. Mr. Stock acted initially under the co-counsel agreement with the Hafif firm, but later represented Dr. Britt independently. The underlying action settled for $1.5 million. Metropolitan Life Insurance Company paid a portion of the settlement. But the Hafif firm placed a lien on the remaining settlement funds claiming it was entitled to attorney fees. Mr. Stock has already recovered his attorney fees for representing Dr. Britt in the underlying action.
On February 7, 2001, Dr. Britt, represented by Mr. Stock, sued the Metropolitan Life Insurance Company, Herbert Hafif (Mr. Hafif) and Greg Hafif, who are not parties to this appeal, and the Hafif firm. Dr. Britt alleged, generally, that the Hafifs and their firm were wrongfully and intentionally interfering with her right to receive the proceeds of the settlement in the underlying action. On October 4, 2001, the Metropolitan Life Insurance Company filed a cross-complaint against Dr. Britt, the Hafif firm, and Mr. Stock. In its cross-complaint, the Metropolitan Life Insurance Company sought to interplead the remaining settlement funds. On November 20, 2001, the Hafifs and their firm filed answers to Dr. Britt’s complaint and Metropolitan Life Insurance Company’s interpleader cross-complaint. At the same time, the Hafif firm filed a cross-complaint against Mr. Stock. This is the cross-complaint that is the subject of this appeal. The Hafif firm alleged: Mr. Stock was assigned as the attorney in charge of Dr. Britt’s underlying action against Metropolitan Life Insurance Company; Dr. Britt and Mr. Stock, as an agent of the Hafif firm, executed a retainer agreement; in August 1998, Dr. Britt retained a new attorney, James Vogt; Mr. Hafif was unaware of the substitution; in September 1998, Mr. Stock resumed representation of Dr. Britt; Mr. Stock and Dr. Britt contend that when representation resumed, the prior retainer agreement was no longer in effect; Mr. Stock and Dr. Britt entered into an oral agreement that Dr. Britt would pay the reasonable value of Mr. Stock’s services; Mr. Hafif was unaware of this arrangement; on November 12, 1998, the Hafif firm filed a complaint for Dr. Britt against Metropolitan Life Insurance Company; the Hafif firm paid all costs of the litigation ($12,048) until approximately February 2000, when the Hafif firm substituted out of the case and Mr. Stock substituted in; the case settled in June 2000 for $1.5 million; and the Hafif firm was entitled to but had not received its share of attorney fees.
B. Mr. Stock’s Prior Lawsuit
On July 7, 2000, Mr. Stock filed a lawsuit against Mr. Hafif and the Hafif firm. Mr. Stock alleged he was entitled to attorney fees under the co-counsel arrangement in connection with a class action, Barnicle v. American General Life Insurance Company (Super. Ct. San Diego County, No. EC011865). On March 9, 2001, Mr. Stock filed a second amended complaint. In his second amended complaint, Mr. Stock alleged he was entitled to attorney fees in numerous civil cases—including malpractice and fee dispute cases he defended—that were litigated between 1993 and 1999 pursuant to the co-counsel arrangement. Mr. Stock alleged Mr. Hafif and the Hafif firm had collected but failed to distribute attorney fees due under the oral co-counsel agreement. At the request of Mr. Hafif and the Hafif firm, Mr. Stock served a March 27, 2001 bill of particulars. The bill of particulars listed the lawsuits for which Mr. Stock claimed he was owed money. Mr. Stock included Dr. Britt’s underlying action against Metropolitan Life Insurance Company in his list. He indicated that matter was “in litigation.” In his third and fourth amended complaints, filed on June 20, 2001 and July 8, 2001, respectively, Mr. Stock alleged he was entitled to attorney fees in specified cases “and others” litigated under the co-counsel agreement. Mr. Stock did not list Dr. Britt’s underlying action against the Metropolitan Life Insurance Company as one of the specified cases. Mr. Hafif and his firm filed their answer to the fourth amended complaint on November 28, 2001. The answer to the fourth amended complaint was filed eight days after the Hafif firm filed its cross-complaint against Mr. Stock in the present lawsuit.
On July 9, 2002, following a jury trial, a judgment was entered in Mr. Stock’s favor. The jury found the Hafif firm owed Mr. Stock attorney fees in connection with five underlying actions—identified as Barnicle, Rodriguez, Los Robles, Ahmedyar and Kazmi. The jury found Mr. Stock’s claim as to a sixth matter, identified as Mandilawi, was barred by the statute of limitations. We reversed the judgment in Mr. Stock’s favor based upon the controlling authority in Chambers v. Kay (2002) 29 Cal.4th 142, 147-163, as all of his contract breach claims were barred by the provisions of rule 2-200(A)(1) of the California Rules of Professional Conduct. (Stock v. Hafif (June 4, 2004, B161501) [nonpub. opn.].) We concluded the jury had found Mr. Hafif and his firm breached the oral co-counsel agreement and there was “overwhelming” evidence to that effect. (Id., typed opn. at pp. 14-15.) But we held that under Chambers v. Kay, supra, 29 Cal.4th at pages 147-163, the judgment based on a contract breach theory must be reversed. (Stock v. Hafif, supra, typed opn. at pp. 2, 4-5.) We further concluded that under Huskinson & Brown v. Wolf (2004) 32 Cal.4th 453, 456, 464, Mr. Stock had a right to quantum meruit damages. (Stock v. Hafif, supra, typed opn. at p. 8.) We remanded this case for a limited retrial as to damages. (Id., typed opn. at p. 16.) A retrial was held and a verdict was returned again against Mr. Hafif and the Hafif firm. Mr. Stock was dissatisfied with the verdict and filed a new trial motion which was granted. Mr. Hafif and his firm appealed the order granting Mr. Stock’s new trial motion. We affirmed the order granting the new trial motion. (Stock v. Hafif (Jan. 31, 2007, B185685) [nonpub. opn.].)
C. Mr. Stock’s Judgment On The Pleadings Motion
In the present case, with respect to the Hafif firm’s cross-complaint, Mr. Stock filed a judgment on the pleadings motion. Mr. Stock’s judgment on the pleadings motion was based on the compulsory counterclaim rule. (Code Civ. Proc., § 426.30, subd. (a).) Mr. Stock argued the cross-complaint should have been filed as a compulsory counterclaim in his own action. The trial court agreed concluding the Hafif firm should have filed a compulsory cross-complaint in Mr. Stock’s lawsuit with respect to any fee dispute arising out of their co-counsel arrangement. The trial court entered a judgment of dismissal against the Hafif firm. (The judgment does not mention Herbert or Greg Hafif.) The Hafif firm appeals from that judgment.
All further statutory references are to the Code of Civil Procedure unless otherwise noted.
III. DISCUSSION
Section 426.30, subdivision (a) states: “Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” The term “related cause of action” in section 425.30, subdivision (a) is defined as follows, “‘Related cause of action’ means a cause of action which arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause of action which the plaintiff alleges in his complaint.” (§ 426.10, subd. (c).) The presence of a common transaction renders the counterclaim compulsory. (Currie Medical Specialties, Inc. v. Bowen (1982) 136 Cal.App.3d 774, 777.) Section 426.30 is mandatory. (Keating v. Superior Court (1982) 31 Cal.3d 584, 607, overruled on another point in Southland Corp. v. Keating (1984) 465 U.S. 1, 17; Currie Medical Specialties, Inc. v. Bowen, supra, 136 Cal.App.4th at p. 777.) The compulsory counterclaim rule is liberally construed for the purpose of avoiding a multiplicity of actions. (Clark v. Lesher (1956) 46 Cal.2d 874, 881-882; Flickinger v. Swedlow Engineering Co. (1955) 45 Cal.2d 388, 393.) The Court of Appeal has held: “The purpose of section [426.30, subd. (a)] is to provide for the settlement in a single action of all conflicting claims between the parties arising out of the same transaction and thus avoid multiplicity of actions and judgment. To achieve this purpose, the statute has been liberally construed.” (Carey v. Cusack (1966) 245 Cal.App.2d 57, 66; see Bewley v. Riggs (1968) 262 Cal.App.2d 188, 190.) Whether the Hafif firm was required to assert its cross-complaint in Mr. Stock’s lawsuit is a question we review de novo. (See Carroll v. Import Motors, Inc. (1995) 33 Cal.App.4th 1429, 1435; Currie Medical Specialties, Inc. v. Bowen, supra, 136 Cal.App.3d at pp. 776-777.)
The Hafif firm argues in effect and we agree that its cross-complaint was compulsory in the present action but not in Mr. Stock’s lawsuit. Dr. Britt’s present action against the Metropolitan Life Insurance Company and the Hafif firm concerning disbursement of the remaining settlement proceeds was commenced on February 7, 2001. But Mr. Stock’s lawsuit, which had been filed on July 7, 2000, as then pleaded, sought to recover attorney fees only with respect to the Barnicle class action. It was not until March 9, 2001, after Dr. Britt’s present action was filed on February 7, 2001, that Mr. Stock filed his second amended complaint in his lawsuit which sought attorney fees in numerous civil cases including malpractice and fee dispute cases he defended between 1993 and 1999 pursuant to the co-counsel arrangement. On October 4, 2001, when the Metropolitan Life Insurance Company filed the interpleader cross-complaint, the pleadings in Mr. Stock’s lawsuit had been amended to seek attorney fees owed to him in connection with numerous civil actions litigated under the co-counsel arrangement. On October 4, 2001, the Hafif firm had not yet filed an answer in Mr. Stock’s lawsuit. Thus, when Dr. Britt’s suit, the present action, was filed on February 7, 2001, the Hafif firm was faced with two lawsuits. The first, filed on February 7, 2001, was the present action involving the settlement in Dr. Britt’s underlying action and the Hafif firm’s attorney fees claim against its proceeds. The second lawsuit involved Mr. Stock’s assertion the Hafif firm had collected but had not paid to him attorney fees in the Barnacle action. The Hafif firm’s decision to file its cross-complaint in the present actionwas consistent with and mandated by the compulsory counterclaim rule. The Hafif firm’s cross-complaint, which the trial court dismissed, sought to resolve the dispute over attorney fees due the Hafif firm for its work on Dr. Britt’s underlying action against the Metropolitan Life Insurance Company. It related specifically to the dispute in the present case, and not generally to attorney fees collected by the Hafif firm in other cases litigated under the co-counsel agreement with Mr. Stock. Dr. Britt’s action to recover settlement proceeds from her disability insurer and to resolve the Hafif firm’s claim to a portion of those proceeds, Metropolitan Life Insurance Company’s action to interplead the remaining settlement funds, and the Hafif firm’s claim to a portion of those funds as attorney fees all arose out of “the same transaction, occurrence, or series of transactions or occurrences....” (§ 426.10, subd. (c); Currie Medical Specialties, Inc. v. Bowen, supra, 136 Cal.App.3d at p. 777.) The Hafif firm’s cross-complaint in the present case was a compulsory counterclaim. (Ibid.) As a result, the trial court erred in dismissing it.
Our resolution of this appeal is consistent with the position Mr. Stock took in the trial court in response to a notice of related cases filed by Mr. Hafif and the Hafif firm. At that time, in August 2001, Mr. Stock argued his lawsuit and Dr. Britt’s present action were not related within the meaning of Los Angeles Superior Court Local Rule 7.3(f). He averred: “In the Stock Case, Stock alleges damages arising from Defendants’ repudiation of an agreement between Stock and Defendants for the apportionment of legal fees to Stock commensurate with the legal services performed by Stock in [a] number of cases between 1993 and 1999. Defendants’ [sic] dispute the agreement and allege that Stock is entitled to payment for his legal services only in amounts payable at the sole and arbitrary discretion of Hafif. The funds sought by Stock in the Stock Case have been paid to Defendants and are wrongfully withheld by Defendants. Stock is entitled to his portion of those fees under the agreement and under the parties’ joint venture agreement. Stock’s claims in the Stock Case include breach of contract, accounting, joint venture, fraud, open book account, money had and received, conversion, breach of fiduciary duty (joint venture), unfair competition (Business and Professions Code Section 17200 et seq.[)], quantum meruit, and constructive trust against both Defendants. The Stock Case involves issues arising only from the co-counsel relationship between Stock and Defendants and Stock’s attorney-client relationship with Defendants to the extent Stock performed legal services for Defendants. The Stock Case arises from Stock’s performance of legal services over a period of years in a diverse number of cases which have nothing to do with the Britt Case. The questions of law and fact to be determined in the Stock Case are numerous, involve a diverse number of cases where Defendants hold fees earned by Stock, and encompass theories of breach of contract, joint venture and quantum meruit which are distinct from the issues in the Britt Case. Further, the inclusion of the separate and smaller Britt Case in the Stock Case would be both inefficient and greatly distracting. [¶] By contrast, in the Britt Case, Hafif has never received fees from plaintiff Roberta Noel Britt (‘Britt’) and Stock is not suing Hafif for the disgorgement of Stock’s fees earned in the Britt case. Instead, the Britt Case involves Hafif’s filing and misuse of an allegedly false and excessive equitable lien to obstruct and prevent disbursement of client funds required to be promptly paid to Britt under Britt’s settlement agreement with defendant Metropolitan Life Insurance Company. The allegedly false and inequitable lien claims at issue in the Britt Case involve only Hafif individually and are not part of a joint venture such as alleged in the Stock Case. Further, there is no written retainer agreement between [the Hafif firm] and Britt and no contractual lien rights exist. Despite this fact, Hafif has attempted to lay claim to all legal fees owed by Britt and not just fees which might be supported by a quantum meruit theory of recovery for legal services performed by employees of [the Hafif firm]. Accordingly, Britt seeks damages from Hafif for intentional interference with economic advantage, breach of fiduciary duty, abuse of process, breach of oral agreement and unfair business practices under Business and Professions Code Section 17200 et seq. The issues of fact and law presented in the Britt Case, therefore, arise from different events, require the determination of significantly different questions of law and fact and will not require duplicative labor.” (Italics added.)
Los Angeles Superior Court Local Rule 7.3(f) states: “(1) The procedure for relating cases is set forth in California Rules of Court, rule 3.300;....” California Rules of Court, rule 3.300 (a) defines a “related case” as follows: “A pending civil case is related to another pending civil case... if the cases: [¶] (1) Involve the same parties and are based on the same or similar claims; [¶] (2) Arise from the same or substantially identical transactions, incidents, or events requiring the determination of the same or substantially identical questions of law or fact; [¶] (3) Involve claims against, title to, possession of, or damages to the same property; or [¶] (4) Are likely for other reasons to require substantial duplication of judicial resources if heard by different judges.”
IV. DISPOSITION
The May 29, 2008 judgment of dismissal is reversed. The underlying order granting judgment on the pleadings is reversed. Cross-complainant, the Law Offices of Herbert Hafif, is to recover its costs on appeal from cross-defendant, Ronald C. Stock.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
We concur:, ARMSTRONG, J., KRIEGLER, J.