Case Number: 17STLC06076 Hearing Date: June 25, 2018 Dept: 94

Plaintiff/Cross-Defendant Andrew E. Smyth’s motion for judgment on the pleadings of the Cross-Complaint of Frank Mayor and Cindy Gunadi is GRANTED with respect to the second cause of action for legal malpractice with 30 days’ leave to amend, and DENIED with respect to the first cause of action for breach of contract.

Background:

On December 13, 2017, Plaintiff Andrew Smyth (“Smyth”) filed the instant action for breach of written retainer agreement, account stated, and for services rendered against Defendants Frank Mayor (“Mayor”) and Cindy Gunadi (“Gunadi”) in a bankruptcy proceeding. On January 30, 2018, Mayor and Gunadi (collectively, “Cross-Complainants”) filed a Cross-Complaint against Smyth for breach of contract and legal malpractice against Smyth. On May 23, 2018, Smyth filed the instant motion for judgment on the pleadings with respect to the Cross-Complaint. Cross-Complainants filed their opposition on June 11, 2018. Smyth replied on June 19, 2018.

Legal Standard:

The standard for ruling on a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer, that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law. (Bezirdjian v. O’Reilly (2010) 183 Cal.App.4th 316, 321-322, citing Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216.) Matters which are subject to mandatory judicial notice may be treated as part of the complaint and may be considered without notice to the parties. Matters which are subject to permissive judicial notice must be specified in the notice of motion, the supporting points and authorities, or as the court otherwise permits. (Id.) The motion may not be supported by extrinsic evidence. (Barker v. Hull (1987) 191 Cal.App.3d 221, 236.)

Requests for Judicial Notice

Smyth requests that the court take judicial notice of:

“Memorandum” in Case No. 16-60015, United States Court 6 of Appeals for the Ninth Circuit; and

“Memorandum’ in Case No. CC:15-1227, United States Bankruptcy Appellate Panel of the Ninth Circuit.

Cross-Complainants request that the court take judicial notice of:

Transcript of Proceedings before the Honorable Thomas B. Donovan in Case No. 2:11-bk-40813-TD, United States Bankruptcy Court, Central District of California, Los Angeles, on July 1, 2015 at 10:00 am, pp. 1 and 10.

The requests are granted pursuant to Cal. Evidence Code section 452(d).

Discussion

Allegations in Cross-Complaint

The Cross-Complaint alleges the following facts regarding the claims brought against Smyth: Cross-Complainants were involved in a complex bankruptcy case involving their business, Cinevision International. (X-Comp, ¶6.) On May 20, 2014, they signed a retainer agreement with Smyth that stated he would aid them in defending the Chapter 7 Trustee’s adversary suit. (Id. at ¶9.) In May 2015, the Trustee’s attorney filed an Application to Issue an OSC to recover attorneys’ fees. (Id. at ¶10.) Mayor immediately contact Symth about the need to timely respond as a response to the OSC was due by June 1, 2015. (Id. at ¶11.) Mayor communicated with Smyth numerous times to assist with the preparation of the response, and reminded Smyth of the June 1 deadline. (Id. at ¶13.) Smyth assured Mayor that the response would be timely filed. (Ibid.) The response was not timely filed and the OSC was entered on June 1, 2015, setting a hearing for July 1, 2015 as to why Cross-Complainants should not be held in contempt and found responsible for the Trustee’s attorneys’ fees. (Id. at ¶¶14-15.)

After the June 1, 2015 hearing, Smyth refused to further represent Cross-Complainants unless they agreed to sign another retainer agreement and pay additional fees. (Id. at ¶16.) Smyth continued to make major mistakes in representing Cross-Complainants and they refused to pay him further fees. (Id. at ¶17 and Exh. 4.) Symth’s alleged breaches of contract include failing to (1) “perform legal services called for under this agreement;” (2) “keep Client reasonably informed of progress and developments;” and

(3) “respond promptly to Client’s inquiries and communications.” (Id. at ¶19.) Smyth’s allege malpractice includes (1) failing to perform legal services that they were engaged to provide; (2) missing important ling deadlines despite being repeatedly reminded not to; and (3) refusing to continue their clients’ representation until being paid more money. (Id. at ¶22.) The breaches of contract and malpractice are alleged to be the direct and proximate cause of damages to Cross-Complainants in the amount of at least $25,000.00. (Id. at ¶¶20, 23.)

Legal Malpractice

The elements of a claim for legal malpractice are: (1) the duty of the professional to use such skill, prudence, and diligence that other members of the profession commonly possess and exercise; (2) breach of that duty; (3) proximate causal connection between the negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the professional’s negligence. (Landmark Screens, LLC v. Morgan, Lewis & Bockius, LLP (2010) 183 Cal.App.4th 238, 247-48.)

Smyth brings the instant motion for judgment on the pleadings with respect to the claim for legal malpractice on the grounds that Cross-Complainants have not, and cannot, allege causation. In order to allege causation, Cross-Complainants must allege facts establishing that, but for alleged malpractice, it is more likely than not they would have obtained a more favorable result. (See Charnay v. Cobert (2006) 145 Cal.App.4th 170, 179-180.)

It is unclear from the allegations in the Cross-Complaint what damages Cross-Complainants incurred as a result of Smyth’s failure to file a timely response to the June 1, 2015 OSC. Although not alleged in the Cross-Complaint, the matters of which the court takes judicial notice indicate the following sequence of events following the June 1, 2015 OSC. On July 1, 2015, the bankruptcy court sanctioned Cross-Complainants $99,745.24 for violating the automatic bankruptcy stay and failing to turn over property that belongs to the bankruptcy estate. (Motion, RNJ, Exh. B., p. 2:3-7.) Smyth filed an appeal with the Bankruptcy Appellate Court, which affirmed the decision of the bankruptcy court. (Id. at p. 19:14-17.) Smyth then filed an appeal with the Ninth Circuit Court of Appeals, which overturned the lower courts’ rulings on the grounds that the bankruptcy court applied the wrong standard of proof. (Motion, RJN, Exh. A., p. 4.) The matter was remanded to the bankruptcy court with orders to apply a heightened clear and convincing standard of proof. (Ibid.)

It is not possible to tell from the allegations, or the matters of which the court takes judicial notice, how Cross-Complainants were damaged by Smyth’s failure to timely file a response to the June 1, 2015 OSC. In reading the opposition, it appears that they are alleging that but for Smyth’s untimely response, they would not have incurred additional legal fees for the appeal of the bankruptcy court ruling. (See Opp., p. 3:1-7.) They also seem to argue that they would not have had to take out a “hard money loan” to pay off the attorneys’ fees award. (Ibid.) To the extent these are the damages of “at least $25,000.00” to which Cross-Complainants allege in the Cross-Complaint, there are insufficient facts alleged in the pleading to connect those damages to Smyth’s failure to timely oppose the June 1, 2015 OSC.

The court is further persuaded by Smyth’s contention that Cross-Complainants can never allege his late filing of the OSC opposition caused their damages because the bankruptcy court did consider the late-filed opposition. As explained by the Bankruptcy Appellate Court, although the bankruptcy court called the opposition a “meaningless document,” it did not disregard [Cross-Complainants’] opposition to the OSC. (Motion, RJN, Exh. B, p. 13:10-18.) Smyth was also allowed to argue at length during the hearing on the OSC. (Id. at p. 13:19-21.) This demonstrates that the untimely filing of the opposition to the June 1, 2015 OSC was not the reason the bankruptcy court ruled against Cross-Complainants on the issue of attorneys’ fees.

However, the Cross-Complaint does made the additional allegation that Smyth “continued to make major mistakes in representing MAYOR and GUNADI that amount to legal malpractice.” (X-Comp, ¶17.) Although specifics regarding these “major mistakes” are not alleged, they provide a basis for Cross-Complainants to amend their pleading to demonstrate how Smyth’s alleged major mistakes caused the damages they allegedly incurred.

Accordingly, the motion for judgment on the pleadings is granted as to Cross-Complainants’ cause of action for legal malpractice with leave to amend.

Breach of Contract

The court notes that Smyth’s moving papers do not make any specific arguments regarding the cause of action for breach of contract. It is only in Smyth’s reply papers that he addresses the breach of contract cause of action. Unless Cross-Complainants are provided adequate notice and opportunity to address the new arguments made in the reply, the motion for judgment on the pleadings should be denied as to the cause of action for breach of contract.

Finally, regarding Smyth’s contention that Cross-Complainants cannot allege or prove damages because the trial court’s judgment has been reversed, there is no allegation regarding the reversal of the judgment, nor has Smyth shown that this is a matter of which the court can take judicial notice. (See Motion, pp. 6:22-7:1.) Accordingly, this does not support his request for judgment on the pleadings of the breach of contract claim.

Cross-Complainants to give notice.