Case Number: 19LBCV00161 Hearing Date: September 19, 2019 Dept: S27

TR: Defendants Juan Lopez, Direct Automotive Corporation, and Car Credit Auto Sales Corporation’s petition to allow the filing of a cross-complaint is DENIED without prejudice. Defendants do not show they would reasonably prevail on their attorney-client conspiracy claim against the proposed cross-defendants. Nevertheless, because Nasri did not address the other alleged causes of action in the proposed cross-complaint, the court is inclined to permit its filing, with the exception that the first cause of action for attorney-client conspiracy be struck.

INTRODUCTION

This action arises out an agreement to purchase NK Financing Corporation. Plaintiff Mohammad Nasri sold NK to Defendants Juan Lopez, Direct Automotive Corporation, and Car Credit Auto Sales Coporation.

The complaint, filed on March 11, 2019, asserts causes of action for:

(1) BREACH OF WRITTEN CONTRACT

(2) BREACH OF IMPLIED COVENANT

OF GOOD FAITH AND FAIR DEALING

(3) BREACH OF WRITTEN CONTRACT

(4) BREACH OF IMPLIED COVENANT

OF GOOD FAITH AND FAIR DEALING

(5) BREACH OF CONTRACTANTICIPATORY

BREACH

(6) DECLARATORY RELIEF

(7) INJUNCTIVE RELIEF

On June 18, 2019, Defendants filed a petition to allow the filing of a cross-complaint. Defendants allege Nasri and proposed Cross-defendants Elliott Benjamin, who was Nasri’s counsel during the sale transaction, and Parker Mills, LLP, which is Benjamin’s law firm, conspired to fraudulently induce Defendants purchase of NK.

The proposed cross-complaint asserts causes of action for:

1. CIVIL CONSPIRACY UNDER CAL. CIV. CODE§ 1714.10

2. BREACH OF WRITTEN CONTRACT

3. INTENTIONAL MISREPRESENTATION

4. NEGLIGENT MISREPRESENTATION

5. CONCEALMENT

6. BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING

7. PROFESSIONAL NEGLIGENCE OF BREACH OF CONTINUING DUTY OF CARE TO A CLIENT FOR FAILURE TO COMMUNICATE

8. PROFESSIONAL NEGLIGENCE OF BREACH OF DUTY TO CLIENT AS A RESULT OF A CONFLICT OF INTEREST

9. DECLARATORY RELIEF

PETITION TO FILE CROSS-COMPLAINT

Defendants seek leave to file a cross-complaint that asserts a cause of action, among others, for civil conspiracy against an attorney, Elliott Benjamin, and his firm, Parker Mills, LLP (“PM”). Defendant Nasri opposes the petition. Nasri is represented by PM. Nasri only addresses the attorney client conspiracy cause of action.

Legal Standard

“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 court may allow the filing of a pleading claiming liability based upon such a civil conspiracy following the filing of a verified petition therefor accompanied by the proposed pleading and supporting affidavits stating the facts upon which the liability is based. The court shall order service of the petition upon the party against whom the action is proposed to be filed and permit that party to submit opposing affidavits prior to making its determination. The filing of the petition, proposed pleading, and accompanying affidavits shall toll the running of any applicable statute of limitations until the final determination of the matter, which ruling, if favorable to the petitioning party, shall permit the proposed pleading to be filed.” (Civ. Code, § 1714.10(a).)

Discussion

Procedure

Nasri contends the petition should be denied because the petition is not verified. Under section 1714.10(a), the “court may allow the filing of a pleading claiming liability based upon such a civil conspiracy following the filing of a verified petition therefor accompanied by the proposed pleading and supporting affidavits stating the facts upon which the liability is based.” Here, the petition is not verified. In opposition, Defendants contend the declaration of Cross-complainant Juan Lopez essentially asserts the same facts stated in the petition. However, section 1714.10(a) already requires “supporting affidavits”, so Lopez’s declaration does not sufficiently substitute for the requirement that the petition be verified.

Nevertheless, Lopez’s declaration substantially asserts the same facts as the petition, and thus, the court finds the declaration is the evidentiary equivalent of a verified petition. (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 820 [“Despite the plaintiff’s not having filed a verified petition …, the Court of Appeal still treated the order allowing the claim as appealable under section 1714.10, … because the motion to amend had been supported by declarations, the evidentiary equivalent of the verified petition required under the statute.”].)

Therefore, the court is inclined to consider the petition despite the procedural defect.

Evidentiary Objections

The opposition’s evidentiary objections nos. 1-16 are made against the petition, but because the petition is not verified, it is not evidence, and therefore, the objections are moot.

The opposition’s evidentiary objections as to the declaration of Juan Lopez nos. 17-28 are OVERRULED. These portions of Lopez’s declaration are made from his personal knowledge.

Exceptions to section 1714.10

The pleading requirements under section 1714.10(a) “shall not apply to a cause of action against an attorney for a civil conspiracy with his or her client, where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney’s acts go beyond the performance of a professional duty to serve the client and involve a conspiracy to violate a legal duty in furtherance of the attorney’s financial gain.” (Civ. Code, § 1714.10(c).)

In reply, Defendants essentially contend that they were Benjamin’s client and therefore were owed an independent duty from him.

A “‘“client’ means a person who, directly or through an authorized representative, consults a lawyer for the purpose of retaining the lawyer or securing legal service or advice from him in his professional capacity….” (Evid. Code, § 951.)

It is undisputed that Defendants did not retain Benjamin. But, a “client” may be someone who consults a lawyer for the purpose of securing legal service or advice from him in his professional capacity.

Defendants present the following evidence that Defendants consulted Benjamin to secure professional legal services and advice in connection with the purchase. Nasri and Defendants engaged Benjamin and PM to assist in various issues related to the NK purchase, such as finalizing terms of the transaction, resolving issuance of a policy insuring the deed of trust executed in connection with the transaction, resolving a pending judgment against Cross-complainant Lopez, resolving IRS issues with Cross-complaint Direct, and communicating on Lopez’s behalf with North American Title Company to clear the judgment against him. (Lopez Decl. ¶ 6.) It is undisputed that Defendants did not sign a retainer agreement with Benjamin and PM. But, Lopez was paying for half of the legal fees incurred as a result of Benjamin’s assistance in the matter. (Lopez Decl. ¶ 4 [p. 6:21].)

In opposition, Benjamin states he represented Nasri in connection with the NK purchase and denies assisting Lopez. (Benjamin Decl. ¶ 7.) To corroborate Benjamin’s declaration, Nasri states that Benjamin and PM “represented me exclusively for the purchase transaction.” (Nasri Decl. ¶ 8.) Further, Nasri states he believes Lopez was represented by separate counsel during the purchase transaction (Nasri Decl. ¶ 10), and this belief is corroborated by Lopez’s testimony that he asked Benjamin, through separate counsel, for a copy of the purchase agreement (Lopez Decl. ¶ 8). As to payments to Benjamin and PM, Nasri states NK paid half the fees and Nasri, personally, paid the other half. (Nasri Decl. ¶ 9.)

Under these circumstances, the preponderance of the evidence weighs in favor of Nasri, Benjamin, and PM, and thus, Benjamin did not legal service or advice in his professional capacity to Defendants. Therefore, Defendants do not show sufficient evidence that Benjamin owed Defendants an independent legal duty.

Therefore, section 1714.10(c)(1) does not apply.

The court agrees with Nasri that Defendants have presented insufficient evidence that Benjamin acted in further of his financial gain. Therefore, section 1710.10(c)(2) would not apply.

Next, the court considers the merits of Defendants alleged attorney-client conspiracy claim.

Merits – Conspiracy Claim

“The elements of an action for civil conspiracy are the formation and operation of the conspiracy and damage resulting to plaintiff from an act or acts done in furtherance of the common design. … In such an action the major significance of the conspiracy lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong, irrespective of whether or not he was a direct actor and regardless of the degree of his activity. [Citations.]” (Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39, 44, citation and quotations omitted.)

Section 1714.10 “prohibit[s] a complaint from including a cause of action against an attorney based on a civil conspiracy with his or her client, except upon a court finding that the plaintiff had demonstrated a reasonable probability of prevailing.” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 816.)

“To be a conspirator one must share a common purpose with another, not merely suspect or have knowledge of the other’s own private purpose.” (Harris v. Capitol Records Distributing Corp. (1966) 64 Cal.2d 454, 462.) “[T]he requisite concurrence and knowledge ‘may be inferred from the nature of the acts done, the relation of the parties, the interests of the alleged conspirators, and other circumstances.’” (Wyatt v. Union Mortgage Co. (1979) 24 Cal.3d 773, 785.)

In the proposed cross-complaint, Defendants allege Nasri, Benjamin, and PM jointly conspired to misrepresent to Defendants that the terms of the Agreement included a provision wherein Nasri agreed to commit to fund NK’s operations during the term of the Agreement in the same manner as which he previously funded it operations. (Proposed Cross-complaint, ¶ 41.)

Here, the evidence submitted in support of the formation and operation of the conspiracy to misrepresent the terms of the agreement with respect to Nasri’s agreement to continue to fund NK operations is that Nasri was represented by Benjamin in the subject matter. (Lopez Decl. ¶ 6.) Defendants have not directed the court to any other evidence that supports the existence of the formation and operation of the conspiracy. While the requisite knowledge of a conspiracy may be inferred from the circumstances, Defendants have not met their burden to show they would reasonably prevail under the circumstances. In short, Defendants do not sufficiently show with evidence that Nasri “had knowledge of and agreed to both the objective and the course of action that resulted in the injury….” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., supra, 131 Cal.App.4th at 823.) Further, Nasri denies ever representing that he would fund NK’s operations after the purchase transaction closed. (Nasri Decl. ¶ 13.)

As to the alleged misrepresentation about the purchase price of NK, Defendants have also not shown sufficient Nasri, Benjamin, and PM had knowledge of or agreed to both the objective and the course of action that resulted in the injury.

The court notes there is sufficient evidence to show Benjamin’s conduct harmed Defendants. Benjamin represented that the terms of the purchase agreement contained that Nasri would continuing to fund NK’s operations, even though the actual agreement did not include such terms. (Lopez Decl. ¶¶ 4 [p .6:10], 10, 13.)

In opposition, Nasri contends Benjamin’s verbal representation about the terms of the agreement would be excluded by the parol evidence rule. The court agrees with Defendants that the evidence would be permissible under the fraud exception to the parol evidence rule. (Continental Airlines, Inc. v. McDonnell Douglas Corp. (1989) 216 Cal.App.3d 388, 424 [“the fraud exception to the parol evidence rule, which specifically allows evidence of representations which contradict or vary the terms of a contract in order to establish fraud.”].)

Based on the foregoing, the court finds there is insufficient evidence of a conspiracy between Benjamin and Nasri to establish that Defendants would reasonably prevail on the attorney-client conspiracy claim.

Accordingly, the petition to allege the attorney-client conspiracy claim is DENIED without prejudice.

Because Nasri does not challenge the petition as to any other cause of action alleged, the court is inclined to permit the cross-complaint be filed, with the exception that the first cause of action for attorney-client conspiracy be struck.