Case Name: MacDonald Fernandez LLP v. Iris Biotechnologies, Inc.

Case No.: 1-14-CV-261635

Plaintiff/cross-defendant MacDonald Fernandez LLP (“Cross-Defendant”) demurs to the cross-complaint (“Cross-Complaint”) filed by defendant/cross-complainant Iris Biotechnologies, Inc. (“Iris”).

This is an action for legal malpractice and fraud.  In July 2012, Iris hired Cross-Defendant to file a legal claim against its previous legal counsel, Heller Ehrman, LLP (“Heller”).  (Cross-Complaint at ¶ 2.)  At the time, Heller was in the midst of bankruptcy proceedings.  (Id.)  In handling Iris’s matter, Cross-Defendant committed several acts of malpractice and made several misrepresentations to Iris.  (Id. at ¶ 4.)  These included filing its claims against Heller in the bankruptcy proceeding rather than the individual attorneys that represented it, disclosing confidential information to opposing counsel, fraudulently billing Iris for sums it did not authorize and failing to take the steps necessary to permit Iris to postpone and/or collect monies paid to Heller’s creditors.  (Id. at ¶¶ 5, 6.)

On May 12, 2014, Iris filed the Cross-Complaint asserting claims for (1) legal malpractice, (2) breach of fiduciary duty, (3) negligent misrepresentation and (4) fraudulent concealment.

On June 17, 2014, Cross-Defendant filed the instant demurrer to the Cross-Complaint and each of the four causes of action asserted therein on the ground of failure to state facts sufficient to constitute a cause of action.  (Code Civ. Proc., § 430.10, subd. (e).)

Cross-Defendant’s request for judicial notice is GRANTED.  (Evid. Code, § 452, subd. (d).)

Iris’s request for judicial notice is GRANTED.  (Id.)

In demurring to each of the causes of action asserted in Iris’s Cross-Complaint, Cross-Defendant asserts that no claims have been stated because each is barred by the applicable statute of limitations.  Cross-Defendant contends that the same one year statute of limitations provided by Code of Civil Procedure section 340.6 (“Section 340.6”) applies to all of the claims asserted against it.  This code section states, in pertinent part, that:

An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission, or four years from the date of the wrongful act or omission, whichever occurs first.

(Code Civ. Proc., § 340.6, subd. (a).)

Iris agrees that Section 340.6 is implicated by its claims, but only with respect to the first, second and third causes of action.  Iris contends that this statute of limitations does not apply to its fourth cause of action for fraudulent concealment, a contention that is well-taken.  As expressly articulated in the statutory language set forth above, Section 340.6 does not apply to claims for actual fraud.  Consequently, Cross-Defendant’s demurrer to the fourth cause of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED, as is Cross-Defendant’s demurrer to the entire Cross-Complaint.

Cross-Defendant insists that Iris discovered, or should have discovered, the facts constituting the alleged wrongful acts or omissions upon which its claims are based no later than December 5, 2012, when it employed the Cotchett law firm and its current counsel, Mr. Sterrett, to pursuant an appeal of the bankruptcy court’s denial of the only motion filed by Cross-Defendant on Iris’s behalf, the Motion to Allow Late Filing of Malpractice Claim.  Cross-Defendant acknowledges that the statute of limitations was tolled while it continued to represent Iris until January 31, 2013, when the bankruptcy court granted Cross-Defendant’s motion to withdraw as counsel.  Thus, according to Cross-Defendant, the one-year statute of limitations began to run at the latest on that date and therefore ran out on January 31, 2014, more than four months before the Cross-Complaint was filed.

However, it is not apparent, merely from the fact that Iris employed different counsel to pursue an appeal, that that is when it discovered, or should have discovered, Cross-Defendant’s alleged wrongful acts or omissions.  Importantly, Iris’s claims are based on several different acts; where a plaintiff sues a defendant for legal malpractice alleging several distinct acts of malpractice with respect to a single representation, a demurrer is properly granted on the basis of the statute of limitations only if each alleged act of malpractice is time-barred.  (See PH II, Inc. v. Superior Court (1995) 33 Cal.App.4^th 1680, 1682.)  The allegations of the Cross-Complaint do not establish when Iris discovered or should have discovered that Cross-Defendant committed each of acts alleged.  In order for a demurrer to be sustained on statute of limitations grounds, it must appear “clearly and affirmatively” from the face of the pleadings that the action is time-barred.  (See Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4^th 1397, 1403.)  This is not the case here.  Consequently, there is no basis to sustain Cross-Defendant’s demurrer and thus no need to evaluate Iris’s arguments regarding actual injury and tolling.

In accordance with the foregoing, Cross-Defendant’s demurrer to the first, second and third causes of action on the ground of failure to state facts sufficient to constitute a cause of action is OVERRULED.