GREENLEAF MUTUAL BENEFITS ASSOC. v. OH, ET AL.
Case No.: 1-14-CV-261230
DATE: June 17, 2014
TIME: 9:00 a.m.
DEPT.: 3

As an initial matter there is no statutory authority allowing for the assertion of evidentiary objections when the Court is evaluating a Petition for leave to file a complaint alleging that an attorney conspired with his client in an attempt to contest or compromise a claim or dispute under Civ Code §1714.10. Rule of Court 3.1354 has no application outside of a motion for summary judgment/adjudication and the Court’s review of a petition brought under Civ. Code §1714.10 is not analogous to its review of a special motion to strike, where evidence may be considered and evidentiary objections may be made. See Burtscher v. Burtscher (1994) 26 Cal App 4th 720, 726 (“In making such prepleading determinations, the trial court is not weighing conflicting evidence, determining credibility or drawing inferences. It is performing a ‘gatekeeping’ function, filtering out frivolous allegations of conspiracy but without subjecting them to the ‘fact adjudicative screen’ that would violate the right to a jury trial.”) See also Berg & Berg Enterprises v. Sherwood Partners (2005) 131 Cal App 4th 802, 818 (“Applying section 1714.10 thus requires the court to initially determine whether the pleading falls either within the coverage of the statute or, instead, within one of its stated exceptions. This determination pivots, in turn, on whether the proposed pleading states a viable claim for conspiracy against the attorney. For all intents and purpose, this is the determinative question. If such a claim is stated, the analysis ends before reaching evidentiary considerations; the statute does not apply because the claim necessarily falls under one of its exceptions. If it is not stated, the analysis likewise ends, but with the opposite result; the pleading is disallowed for its failure to meet the initial gatekeeping hurdle of the statute.”) Court’s emphasis. Accordingly the Court will not rule on the objections submitted by Defendants.

For similar reasons, Defendants’ request for judicial notice is DENIED. A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the Court. Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal App 4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal 4th 415, 422 fn. 2.

Civ. Code §1714.10(a) states in pertinent part that: “No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest to 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.”

“In order to maintain an action for conspiracy, a plaintiff must allege that the defendant had knowledge of and agreed to both the objective and the course of action that resulted in the injury, that there was a wrongful act committed pursuant to that agreement, and that there was resulting damage.” Berg & Berg Enterprises, supra, at 823 (citing Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal 4th 26).

Because the proposed Complaint alleges that the attorney Defendants, on behalf a certain faction of the Greenleaf membership comprised of 13 individuals, filed an action in case no. 1-12-CV-234143 styled as an interpleader action brought on behalf of Greenleaf, for the purpose of seizing control of accounts belonging to Greenleaf and used to fund its ongoing legal actions, and improperly distributed those funds solely to those 13 individuals it initially appears subject to §1714.10(a). Such alleged acts can be reasonably construed as a conspiracy to contest or compromise a claim or dispute and conspiracy to commit fraud is the 2nd cause of action in the proposed complaint.

However, Civ. Code §1714.10(c) states in pertinent part that: “This section 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 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.”

As several courts of appeal have noted, the amendment to the statute to include subdivision (c) has drastically limited its application. “As the phrase is used in section 1714.10, subdivision (c), an attorney’s ‘independent legal duty to the plaintiff’ includes the ‘duty to abstain from injuring the plaintiff through express misrepresentation.’ . . . If the plaintiff seeks to plead a conspiracy claim against an attorney based on fraud or virtually any other common law tort theory, the claim falls within section 1714.10, subdivision (c)(1); the procedural requirements of section 1714.10, subdivision (a) do not apply (that is, the plaintiff need not demonstrate a probability of prevailing on the merits); and the statute serves no screening function whatsoever. Similarly, even if the duty allegedly breached is one owed by the client but not the attorney (for example, the client has a fiduciary duty to the plaintiff), if the plaintiff alleges facts (or provides a factual description in the petition for leave to file the complaint) sufficient to negate the agent immunity rule at the pleading stage (by averring the attorney was acting outside his professional capacity and for his own personal gain), section 1714.10, subdivision (c)(2), excepts the pleading from subdivision (a)’s evidentiary requirements; and the statute again does not allow any preliminary evaluation of the merits of the case.” Favila v. Katten Muchin Rosenmann LLP (2010) 188 Cal App 4th 189, 209-210, internal citations omitted but citing among others Pavicich v. Santucci (2000) 85 Cal App 4th 382, 397 (plaintiff permitted to sue attorney for conspiring with client because attorney had duty to plaintiff not to commit fraud).

The Court finds that §1714.10(c) applies to the Petition and proposed complaint and Plaintiff is exempted from §1714.10(a)’s requirements and need not show a probability of prevailing. This is a situation where the proposed complaint does allege a breach of duty owed by the clients (a faction of Greenleaf) to the Plaintiff (Greenleaf) not to injure it by fraudulently seizing control of and disposing of its funds. It also adequately alleges that the attorney defendants knew, by no later than Jan. 5, 2012, that there was a dispute between factions of Greenleaf and that Greenleaf was already represented by counsel. Therefore the attorney defendants, allegedly, knew well before the filing in case no. 1-12-CV-234143 on Oct. 15, 2012, that they could not claim to represent Greenleaf and were not authorized to take actions on its behalf. This renders their filing of the Complaint in case no. 1-12-CV-234143 not only an attempt to defraud Greenleaf in violation of their duty not to defraud nonclients, but also an intentional fraud upon the Court for financial gain. This is sufficient to negate the agent immunity rule at the pleading stage and renders §1714.10(a) inapplicable to the proposed complaint. Accepting the allegations as true for purposes of evaluating the Petition, the attorney defendants could not have reasonably believed that in filing the purported interpleader and making representations to the Court as the supposed legal representative of Greenleaf they were simply performing their professional duty on behalf of a client.

The Court therefore finds that Plaintiff may proceed to file the proposed Complaint as no Court order is required. Leave to file the proposed complaint is GRANTED.

Unless and until the Court adopts its tentative ruling allowing the filing of the proposed complaint, enters an order to that effect, and the proposed complaint is actually filed as a complaint rather than as an exhibit to the Petition, there is no operative pleading in this action. Accordingly both Defendants’ demurrer to the proposed complaint and their special motion to strike the proposed complaint are invalid as they were filed in the absence of any operative pleading. Both motions are off calendar as facially invalid, without prejudice to Defendants’ ability to file a properly noticed demurrer and/or special motion to strike once the proposed complaint is actually filed and served. No stay in discovery is currently in place as the special motion to strike filed May 20, 2014 is facially invalid.

The Court also notes that this order falls under §1714.10(d), stating in pertinent part that “[a]ny order made under subdivision (a), (b), or (c) which determines the rights of a petitioner or an attorney against whom a pleading has been or is proposed to be filed, shall be appealable as a final judgment in a civil action.”