Opinion
E065442
09-20-2017
WARREN J. MICHAELS, Plaintiff and Appellant, v. MATTHEW T. WARD et al., Defendants and Respondents.
Warren J. Michaels, in pro. per., for Plaintiff and Appellant. Klinedinst, Gregor A. Hensrude and Bradley R. Cochran, for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super.Ct.No. PSC1500511) OPINION APPEAL from the Superior Court of Riverside County. David M. Chapman, Judge. Affirmed. Warren J. Michaels, in pro. per., for Plaintiff and Appellant. Klinedinst, Gregor A. Hensrude and Bradley R. Cochran, for Defendants and Respondents.
Plaintiff and appellant Warren J. Michaels, representing himself in propria persona, seeks the return of more than a half million dollars in attorney fees and expenses paid to his former attorneys, plus punitive damages and interest. The bulk of the fees and expenses were paid pursuant to a fee agreement, after the attorneys substituted into the case and the representation resulted in a settlement before trial of $1.6 million in Michaels's favor.
Michaels's third amended complaint asserts purported causes of action for promissory fraud, conversion, and fraudulent misrepresentation. He appeals from the trial court's judgment of dismissal, entered after it sustained without leave to amend the demurrer of defendants and respondents Matthew T. Ward, Law Offices of Matthew T. Ward, and Don C. Burns to the third amended complaint. We affirm the judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
According to the allegations of the operative third amended complaint, in 2008, Michaels filed a civil lawsuit (the underlying action) in propria persona, alleging that the defendants had breached an oral promise to compensate Michaels for "accounting and tax services" by paying him the accumulated interest portion of a tax refund he obtained for them, a sum of $4,673,910.76. He obtained a favorable ruling on a motion to strike his claims (anti-SLAPP motion) pursuant to Code of Civil Procedure section 425.16, and prevailed in the appeal of that ruling to this court. In July 2011, Michaels hired Ward and his firm to assist him with "preparation and trial," but without substituting in as counsel.
On our own motion, we take judicial notice of our unpublished opinion (Michaels v. Marconi (Aug. 17, 2010, E048114) [nonpub. opn.]) affirming the trial court's ruling in Michaels's favor on the anti-SLAPP motion in the underlying action. (See Fink v. Shemtov (2010) 180 Cal.App.4th 1160, 1171, 1173 [court may take judicial notice of prior unpublished opinions in related appeals on its own motion].) --------
In September 2011, one month before trial of the underlying action, at the suggestion of Ward, Michaels entered into a new fee agreement, whereby Ward and Burns (who is not a member of Ward's law firm, but with whom Ward would "team up" as "co council" for the trial) would substitute into the case and handle trial preparation and trial of the matter for Michaels. The new fee agreement provided for a "minimum retainer" paid in advance, plus a flat fee if the case settled prior to trial or a contingency fee calculated as a percentage of any gross recovery at trial. In the portion of the agreement regarding the minimum retainer, the agreement stated in relevant part as follows: "Client understands and agrees that attorney Ward's office will be essentially unable to accept or complete work on existing matters or new matters while concentrated on preparation of Client's case for trial and conducting of the trial. As such Client agrees that this 'minimum retainer' is 'NON-REFUNDABLE'; that said sum will be deemed 'earned on deposit.'"
After substituting in as counsel for Michaels, Ward and Burns litigated the matter, including dismissing several parties from the case "to simplify the litigation for presentation to the jury." Trial was continued from October 2011 to January 2012. In January 2012, shortly before trial, at the urging of his counsel, Michaels accepted a settlement of $1.6 million. The settlement funds were received and distributed in February 2012 as follows: $1,134,898.10 to Michaels; $213,101.90 to Ward; and $252,000 to Burns.
In February 2012, after the settlement funds were distributed, Ward informed Michaels that he would be going to work for a different law firm, and provided Michaels with a brochure for that law firm. Ward also "requested that Michaels immediately remove his records from his Law Office because he needed the space for Ward and Burns to prepare for a trial." According to the third amended complaint, "[t]hese statements raised serious concerns in Michaels' mind." Michaels had believed, based on the terms of the fee agreement, that Ward and Burns had been working exclusively on his lawsuit. He began investigating what other matters Ward and Burns might have been working on, and the third amended complaint lists the fruits of that investigation, namely, various litigation activities by the attorneys on behalf of other clients, which took place during their representation of Michaels.
Michaels filed the present lawsuit on January 30, 2015. The operative third amended complaint asserts three purported causes of action, for promissory fraud, conversion, and fraudulent misrepresentation. These claims rest on the notion that the attorneys falsely promised Michaels they would spend their time working exclusively on his case, and that they misrepresented the extent of their trial experience. Each of the purported causes of action sounds in fraud; even in the conversion cause of action, there is no allegation that Ward and Burns took funds they were not entitled to under the fee agreement, only a claim that the fee agreement is "void for lack of mutual assent due to promissory fraud and misrepresentations." As damages, Michaels seeks return of the funds paid to Ward and Burns out of the settlement funds, an unspecified amount for the cost of investigating of his claims, plus $3,073,910.76, representing the difference between the settlement amount and the amount he contends "a reasonable jury would have awarded [him] in the Underlying Action" at trial, plus interest and punitive damages.
The trial court sustained demurrers to each of the first three complaints filed by Michaels in this matter, but granted leave to amend. It sustained the demurrer to the third amended complaint without leave to amend, and entered judgment in favor of Ward and Burns.
II. DISCUSSION
On appeal, Michaels argues that the third amended complaint adequately pleaded causes of action for promissory fraud, conversion, and fraudulent misrepresentation, and the trial court's ruling to the contrary was erroneous. He asks that we reverse that ruling, and "order the assignment of a different trial judge to preside over further proceedings in this action." We decline to do so.
A. Standard of Review.
In reviewing a ruling on a demurrer, this court "independently evaluate[s] the complaint, construing it liberally, giving it a reasonable interpretation, reading it as a whole, and viewing its parts in context." (Burns v. Neiman Marcus Group, Inc. (2009) 173 Cal.App.4th 479, 486.) We treat "'the demurrer as admitting all material facts properly pleaded . . . .'" (Blank v. Kirwan (1985) 39 Cal.3d 311, 318, quoting Serrano v. Priest (1971) 5 Cal.3d 584, 591.) But we "may not consider conclusions of fact or law, opinions, speculation or allegations which are contrary either to law or to judicially noticed facts." (Long Beach Equities, Inc. v. County of Ventura (1991) 231 Cal.App.3d 1016, 1024 (Long Beach Equities).)
The denial of leave to amend is reviewed for abuse of discretion. (Vaca v. Wachovia Mortgage Corp. (2011) 198 Cal.App.4th 737, 744.) "To show abuse of discretion, plaintiff must show in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action." (Buller v. Sutter Health (2008) 160 Cal.App.4th 981, 992 (Buller).)
B. Analysis.
Michaels has attempted to avoid framing this action in terms of legal malpractice, because any such claim would be time barred. There is a one-year limitations period for any "action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services . . . ." (Code Civ. Proc., § 340.6, subd. (a).) This limitations period begins to run when the plaintiff suspects or should suspect that his or her injury was caused by wrongdoing. (Apple Valley Unified School Dist. v. Vavrinek, Trine, Day & Co. (2002) 98 Cal.App.4th 934, 943.) Michaels has pleaded that he had such a suspicion in February 2012. He did not file the present lawsuit until January 2015, nearly two years after the limitations period for a legal malpractice action had expired.
It is questionable whether Michaels in fact succeeded in pleading around the limitations period for legal malpractice actions. He asserts no cause of action labelled "legal malpractice." But Code of Civil Procedure section 340.6 applies based on the conduct alleged, not on how the plaintiff has styled a cause of action. (Lee v. Hanley (2015) 61 Cal.4th 1225, 1236 (Hanley).) And the third amended complaint contains allegations of wrongful acts or omissions arising out of Ward's and Burns's performance of professional services; for example, that they "exercise[d] extreme pressure on Michaels to execute a settlement"; that they "were not prepared to proceed to trial on January 27, 2012 because they were too busy with other cases they were working"; and that they "effectively abandoned Michaels in order to collect easy money from Michaels and proceed to trial" on behalf of another client. At least arguably, therefore, regardless of how the causes of action are framed, they are in substance claims arising out of Ward's and Burns's performance of professional services.
Setting the issue of the limitations period aside, however, a fundamental premise of Michaels's fraud claims—that Ward and Burns promised Michaels they would work exclusively on Michaels's case until it was resolved—is false. The fee agreement recites that "Ward's office will be essentially unable to accept or complete work on existing matters or new matters while concentrated on preparation of Client's case for trial and conducting of the trial," as justification for requiring payment of a nonrefundable "minimum retainer." It makes no recitation, however, as to what Ward's office would or would not do while not "concentrated" on preparation of Michaels's case—it is notable that shortly after the signing of the fee agreement, trial was continued, relieving any time pressure that might otherwise have required exclusive focus for some period of time. Neither does the fee agreement specify any particular period of time when Ward and his firm would be "concentrated" on Michaels's case. And the agreement makes no recitation at all about what work Burns's office would be able or unable to do.
Michaels's reliance on Banning Ranch Conservancy v. Superior Court (2011) 193 Cal.App.4th 903 is misplaced. In that case, the Court of Appeal points out that attorneys committing to a "'classic'" or "'general'" retainer agreement commit to reallocating their time "'so that they can stand ready to serve'" the client for a specified period of time (or, as in the present case, with respect to a particular legal matter): they must be prepared to "take on future legal work, regardless of inconvenience, client relations or workload constraints." (Id. at p. 916-917.) They also "give up their right to be hired by persons with interests that conflict with the general retainer client . . . ." (Id. at p. 917.) Such a representation is "'exclusive,'" however, only in that broad, but nevertheless quite limited sense. Nothing in Banning Ranch is properly read to support the notion that an attorney who has committed to a "classic" or "general" retainer agreement may not take on other clients, so long as no conflict, either in terms of time allocation or legal interests, arises from representing the other client.
Moreover, there are no facts alleged showing Michaels suffered any damages from any purported misrepresentations. (See Robinson Helicopter Co. v. Dana Corp. (2004) 34 Cal.4th 979, 990 [damages is an element of a fraud claim]; Hanley, supra, 61 Cal.4th at p. 1240 [damages is an element of a conversion claim].) In a legal malpractice action, Michaels could conceivably point to, say, some manner in which the attorneys' allocation of time to other clients affected their performance on his behalf, or things more experienced attorneys would have done differently, to his detriment. But Michaels has eschewed any such arguments, in an attempt to avoid the statute of limitations.
Michaels points to the circumstance that Ward and Burns received payments pursuant to the fee agreement out of the settlement funds. But this is not enough to carry his burden of pleading damages. Whether framed as a legal malpractice action or fraud action, a plaintiff seeking disgorgement of attorney fees must show injury from the representation beyond simply the payment of the fees. (See Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1536 [involving malpractice claim]; Frye v. Tenderloin Housing Clinic, Inc. (2006) 38 Cal.4th 23, 48 [involving fraud and misrepresentation claim].)
Michaels also attempts to claim as damages the amount he believes he would have been awarded if the case had proceeded to trial. The third amended complaint asserts that, but for the alleged misrepresentations, Michaels not only would not have hired Ward and Burns, but also would not have entered into any settlement of the underlying action, and would likely have prevailed at trial, either representing himself or represented by other attorneys, obtaining "a reasonable jury verdict in the amount of $4,673,910.76." This string of hypotheticals, however, is made up of speculations and conclusions. There are no facts of the sort that are cognizable on review of a ruling on a demurrer. (Long Beach Equities, supra, 231 Cal.App.3d at p. 1024.)
In short, with respect to damages, Michaels is caught between a rock and a hard place. He cannot allege that his attorneys' representation of him fell below the applicable standard of care, or else his claims would be time barred. But with the exception of such allegations, nothing in the third amended complaint establishes that he was damaged by the alleged misrepresentations. For that reason—among others, which we need not discuss—each of Michaels's asserted causes of action cannot survive demurrer, and the third amended complaint was properly dismissed.
Michaels has not attempted "to show in what manner the complaint could be amended and how the amendment would change the legal effect of the complaint, i.e., state a cause of action." (Buller, supra, 160 Cal.App.4th at p. 992.) We therefore find no abuse of discretion in the trial court's decision not to grant him further leave to amend.
III. DISPOSITION
The judgment is affirmed. Defendants are awarded costs on appeal.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
CODRINGTON
J. We concur: RAMIREZ
P. J. MCKINSTER
J.