Case Name: Grellas Shah LLP v. Linda Pokarney, et al.

Case No.: 16CV292971

Grellas Shah LLP’s Motion for Summary Adjudication

Factual and Procedural Background

This is an action for breach of contract. According to the allegations of the underlying complaint, plaintiff Grellas Shah LLP (“Grellas”) and defendant Linda Pokarney (“Pokarney”) entered into a written attorney-client agreement, providing that plaintiff Grellas would provide defendant Pokarney with legal representation in connection with “an action against Dan Carpenter, Northwestern Life, and certain officers and directors of Clear View Technologies.” (Complaint, ¶¶BC-1–BC-5, Ex. A.) Plaintiff Grellas filed a complaint on March 21, 2016, alleging defendant Pokarney failed to pay outstanding invoices in the amount of $124,477.23 and asserting claims for breach of contract and common counts. (Ibid.)

On May 16, 2016, defendant Pokarney filed an answer to plaintiff Grellas’ complaint and also filed a cross-complaint against Grellas and attorney Dhaivat H. Shah (“Shah”). The cross-complaint alleges on or about May 2, 2013, Pokarney and others entered into an agreement with Grellas and Shah whereby Grellas would provide Pokarney legal services in connection with an action against Dan Carpenter, Northwestern Life, and certain officers and directors of Clear View Technologies. (Cross-Complaint, ¶BC-1.) According to Pokarney, Grellas and Shah breached the agreement by overcharging Pokarney for legal services in an amount exceeding the estimate given by Grellas and Shah for legal services by a substantial factor, and by continuing expensive out-of-state discovery without Pokarney’s authorization, and after Pokarney had instructed Grellas and Shah to just settle the underlying action on her behalf. (Cross-Complaint, ¶BC-2.) Pokarney’s cross-complaint asserts causes of action for (1) breach of contract; and (2) common counts.

On June 10, 2016, Grellas filed a demurrer to Pokarney’s answer.

On June 20, 2016, Grellas filed an answer to Pokarney’s cross-complaint.

On July 21, 2016, the court sustained Grellas’ demurrer to Pokarney’s answer with leave to amend. On July 28, 2016, Pokarney filed a first amended answer to Grellas’ complaint.

On October 19, 2017, Grellas filed a first amended complaint (“FAC”).

On November 21, 2017, Pokarney filed an answer to Grellas’ FAC.

On November 22, 2017, Grellas filed the motion now before the court, a motion for summary adjudication of the first cause of action in Pokarney’s cross-complaint for breach of contract and for summary adjudication of the first through fourth and sixth through seventh affirmative defenses of Pokarney’s answer to Grellas’ FAC.

Discussion

I. Grellas’ motion for summary adjudication of the first cause of action [breach of contract] of cross-complainant Pokarney’s cross-complaint is DENIED.

In moving for summary adjudication, Grellas argues it did not breach the agreement in the manner alleged by Pokarney. As noted above, Pokarney alleges Grellas and Shah “breached the agreement by overcharging Pokarney for legal services in an amount exceeding the estimate given by Grellas and Shah for legal services by a substantial factor, and by continuing expensive out-of-state discovery without Pokarney’s authorization, and after Pokarney had instructed Grellas and Shah to just settle the underlying action on her behalf. (Cross-Complaint, ¶BC-2.)

Grellas proffers evidence that the fee agreement did not include an estimate. The fee agreement contains an express disclaimer of any guarantees about the litigation. Pokarney admits Grellas did not guarantee any fee estimate. Pokarney admits Grellas did not conduct any out-of-state discovery.

Grellas argues that since the fee agreement did not include an estimate of fees, Grellas cannot be in breach for exceeding an estimate. In opposition, Pokarney contends Grellas reads the allegations of her cross-complaint too narrowly. Pokarney contends the gravamen of her cross-claim is that Grellas overcharged her. Pokarney points to the provision of the fee agreement which states, “The Firm [Grellas] shall provide those legal services reasonably required to represent Clients [including Pokarney.]” Pokarney argues the oral estimate of $100,000 given by Grellas was not intended to be binding, but is evidence of the parties’ understanding of the amount of legal services “reasonably required.”

The court agrees with Pokarney that the allegations of the cross-complaint encompass a breach of contract based on overcharging. Thus, the lack of a written estimate in the fee agreement is not dispositive of this first cause of action. Accordingly, Grellas’ motion for summary adjudication of the first cause of action of cross-complainant Pokarney’s cross-complaint is DENIED.

II. Grellas’ motion for summary adjudication of certain affirmative defense in Pokarney’s answer to FAC is GRANTED, in part, and DENIED, in part.

A. First affirmative defense – failure to state a cause of action.

As indicated in her opposition, Pokarney withdrew this affirmative defense in filing her answer to Grellas’ FAC. Grellas cannot obtain summary adjudication of an affirmative defense which does not exist.

B. First affirmative defense – statute of limitations.

Pokarney does not oppose summary adjudication of her first affirmative defense based on statute of limitations. Accordingly, Grellas’ motion for summary adjudication of the first affirmative defense of Pokarney’s answer to FAC is GRANTED.

C. Second affirmative defense – laches.

Pokarney does not oppose summary adjudication of her second affirmative defense based on laches. Accordingly, Grellas’ motion for summary adjudication of the second affirmative defense of Pokarney’s answer to FAC is GRANTED.

D. Third affirmative defense – estoppel.

It is now well settled “that the party relying upon the doctrine of equitable estoppel must prove the existence of the four required elements essential to its application: (1) that the party to be estopped must be apprised of the facts; (2) he must intend that his conduct will be acted upon, or act in such a manner that the party asserting the estoppel could reasonably believe that he intended his conduct to be acted upon; (3) the party asserting the estoppel must be ignorant of the true state of the facts; and (4) he must rely upon the conduct to his injury.” (Ware Supply Co. v. Sacramento Savings & Loan Association (1966) 246 Cal.App.2d 398, 407 (Ware).)

The key point to note for summary judgment is that, “The existence of an estoppel in pais is a question of fact unless the facts are undisputed and susceptible of only one inference in which event it is a question of law.” (Ware, supra, 246 Cal.App.2d at pp. 407 – 408; see also Driscoll v. City of Los Angeles (1967) 67 Cal.2d 297, 305; see also Martinez v. Scott Specialty Gases, Inc. (2000) 83 Cal.App.4th 1236, 1248 – 1249 [“Estoppel is resolvable by summary judgment when … no estoppel could exist as a matter of law.”]; Mills v. Forestex Co. (2003) 108 Cal.App.4th 625, 652 [“In the usual case, estoppel is a question of fact to be resolved by the trier of facts. However, when ‘the facts are undisputed, the existence of an estoppel is a question of law.’”])

Pokarney asserts Grellas’ words and conduct indicated the bills in the underlying matter would not exceed $100,000, and that she relied on this to her detriment. In moving for summary adjudication of this defense, Grellas contends it did not have any intent for Pokarney to rely on any estimate which is evidenced by Pokarney’s admission that Grellas did not guarantee any estimate and the fee agreement itself disclaimed any guarantees relating to the litigation. These facts do not negate the element of intent. Rather, they go to whether Pokarney was ignorant of the true state of facts, i.e., whether Pokarney knew that the bills would likely exceed $100,000. In opposition, Pokarney declares she did not realize the scope of her bills until April 2015. Pokarney’s knowledge is measured at the time she relied, not when she subsequently became cognizant of the true state of the facts. Here, Pokarney relied on Grellas’ estimate in entering into the fee agreement in early May 2013. Pokarney’s admission that the estimate was not a guarantee or that the fee agreement included a disclaimer does not negate Grellas’ intent to induce Pokarney into initially retaining their services with a representation that the bills would not exceed $100,000.

Grellas offers further evidence to argue, additionally, that even if Pokarney was truly ignorant, she could not reasonably rely on Grellas’ representation that the bills would not exceed $100,000 because Pokarney was billed monthly, the billing reached $100,000 by October 2014, Pokarney paid an outstanding balance in excess of $100,000 in April 2014 and an additional $48,000 in July 2015 without complaint. According to Grellas, Pokarney paid $227,000 and received several months of invoices reflecting tens of thousands of dollars in additional legal work before first complaining in September 2015 that she had been told the case would cost no more than $100,000. Again, the flaw in Grellas’ argument is that Grellas is viewing the reasonableness of Pokarney’s reliance in hindsight. The reasonableness of Pokarney’s reliance is measured at the time she agreed to retain Grellas, not years into the litigation. Moreover, as Pokarney points out in her opposition, whether her continued reliance is reasonable is a question of fact because, by the time she realized the scope of her bills, she believed she was stuck in the lawsuit and could not pull out without losing her investment or replace her attorneys without having to start from scratch. “Except in the rare case where the undisputed facts leave no room for a reasonable difference of opinion, the question of whether a plaintiff’s reliance is reasonable is a question of fact.” (Alliance Mortgage Co. v. Rothwell (1995) 10 Cal.4th 1226, 1239.)

Finally, Grellas contends Pokarney cannot demonstrate any detriment or injury by arguing that Pokarney still would have had to hire another law firm to represent her and would have paid in excess of $100,000 to the other firm. However, Grellas does not proffer any admissible evidence to substantiate this factual assertion that Pokarney would have incurred more than $100,000 in legal fees. Grellas merely offers Pokarney’s own discovery response asserting Grellas should have known the $100,000 estimate was unreasonable. This evidence does not affirmatively demonstrate that Pokarney would have paid more to some other firm.

Accordingly, Grellas’ motion for summary adjudication of the third affirmative defense of Pokarney’s answer to FAC is DENIED.

E. Fourth affirmative defense – waiver.

Pokarney does not oppose summary adjudication of her fourth affirmative defense based on waiver. Accordingly, Grellas’ motion for summary adjudication of the fourth affirmative defense of Pokarney’s answer to FAC is GRANTED.

F. Sixth affirmative defense – failure to mitigate damages.

“ ‘ “The doctrine of mitigation of damages holds that ‘[a] plaintiff who suffers damage as a result of … a breach of contract … has a duty to take reasonable steps to mitigate those damages and will not be able to recover for any losses which could have been thus avoided.” ’ Under the doctrine, ‘[a] plaintiff may not recover for damages avoidable through ordinary care and reasonable exertion.’ However, ‘[t]he duty to mitigate damages does not require an injured party to do what is unreasonable or impracticable.’ ” (Agam v. Gavra (2015) 236 Cal.App.4th 91, 111 (Agam); internal citations omitted; see also CACI No. 358.) “Whether a plaintiff acted reasonably to mitigate damages … is a factual matter to be determined by the trier of fact … .” (Agam, supra, 236 Cal.App.4th at p. 111; see also Sackett v. Spindler (1967) 248 Cal.App.2d 220, 239—“The question of whether the injured party has acted reasonably in mitigating damages is one of fact.”)

In moving for summary adjudication of this defense, Grellas proffers evidence that it did not actually suffer any damages because until September 2015, Pokarney had paid all her legal fees. In September 2015, Pokarney responded to Shah’s email requesting payment by asserting that Grellas estimated her total legal bill would not exceed $100,000 and during an August 13 meeting, she issued a stop-work order. Grellas asked to substitute out or it would make a motion to withdraw. Pokarney asked Grellas not to withdraw and agreed to make a $100,000 payment with the balance to be paid from any proceeds from settlement. It was not until November that Pokarney notified Grellas that she disputed certain charges so Grellas should not retain any portion of the settlement. Grellas again asked to withdraw but Pokarney refused. By November 2015, it was too late for Grellas to ethically withdraw because Pokarney was facing several motions for summary judgment and Pokarney would lose her case if she did not oppose the motions.

In opposition, Pokarney proffers evidence that around April 2015, she “directed [Grellas] to just work on settlement and to contain the cost of litigation.” “Notwithstanding my instructions to Grellas Shah to just work on settlement, Grellas Shah billed me over $15,474 in fees and $5,686.96 in or about August 11th and 12th 2015 to take a deposition in San Clemente. I never authorized this deposition, and I did not learn about it until it was already done. After learning about the San Clemente deposition in August 2015, I again instructed Grellas Shah to stop running up an excessive bill in my case, to stop taking expensive discovery, and to just focus on settling.”

Based on the evidence proffered by both parties, whether Grellas acted reasonably to mitigate damages is a factual issue to be decided by the trier of fact. Accordingly, Grellas’ motion for summary adjudication of the sixth affirmative defense of Pokarney’s answer to FAC is DENIED.

G. Seventh affirmative defense – breach of fiduciary duty.

Grellas argues summary adjudication of Pokarney’s seventh affirmative defense, breach of fiduciary duty, is appropriate because breach of fiduciary duty does not exist as an affirmative defense. Grellas directs the court to the absence of such a defense from the Judicial Council of California Civil Jury Instructions and from the Attachment to Answer-Contracts prepared by the Santa Clara County Superior Court Self-Service Center as proof that the affirmative defense does not exist.

“When a plaintiff moves for summary adjudication on an affirmative defense, the court shall grant the motion ‘only if it completely disposes’ of the defense. [Citation.] The plaintiff bears the initial burden to show there is no triable issue of material fact as to the defense and that he or she is entitled to judgment on the defense as a matter of law. In so doing, the plaintiff must negate an essential element of the defense, or establish the defendant does not possess and cannot reasonably obtain evidence needed to support the defense. [Citations.]” (See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889, 899–900; italics original.)

The argument and legal authority presented by Grellas is not sufficient to meet its initial burden with regard to the seventh affirmative defense. Accordingly, Grellas’ motion for summary adjudication of the seventh affirmative defense of Pokarney’s answer to FAC is DENIED.