Case Number: SC121568 Hearing Date: April 09, 2014 Dept: O

SC121568
BEN-SIMON v. KHALIPOUR ET AL

Defendant Khalilpour’s Demurrer is OVERRULED as to the 2nd cause of action, SUSTAINED W/O LEAVE as to the 1st c/a and SUSTAINED W/10 DAYS LEAVE TO AMEND as to the 3rd cause of action. Defendant fails to establish that under the facts pleaded, he owed no duty of care to Plaintiff. However, Plaintiff fails to allege that he contracted with Defendant or facts indicating that he was a third party beneficiary of the contract. Plaintiff’s fraud claim, however, suffers from a lack of specificity.

ANALYSIS: Defendant demurs on three grounds: (1) Plaintiff was not the client and not a party to the retainer agreement and as such, cannot sue Defendant for malpractice or any other claim that essentially alleges malpractice; (2) any malpractice claim is time barred because the attorney-client relationship between Defendant and client Mozzafari terminated in June 2012 and the lack of a cross-complaint was discovered by Plaintiff in June 2012; and (3) the fraud claim lacks specificity.

In response, Plaintiff opposes on grounds that (1) Plaintiff was paying the legal bills and was to receive 50% of any proceeds awarded to Mozzafari in the prior action, giving him standing and making him a third party beneficiary of the contract; (2) the complaint alleges that the failure to file the x-complaint was only discovered on 7/30/13, only approximately 3 months before this action was filed; and (3) the fraud claim is sufficiently pleaded.

Standing: “[A]n attorney will normally be held liable for malpractice only to the client with whom the attorney stands in privity of contract, and not to third parties.” Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523, 529. There are, however, limited exceptions under which a third party may sue. Determination of whether in a specific case an attorney will be held liable to a third person not in privity “is a matter of policy and involves the balancing of various factors, among which are the extent to which the transaction was intended to affect the plaintiff, the foreseeability of harm to him, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the [attorney’s] conduct and the injury, and the policy of preventing future harm.” Lucas v. Hamm (1961) 56 Cal.2d 583, 588. “The question of whether an attorney may, under certain circumstances, owe a duty to some third party is essentially one of law and, as such, involves a judicial weighing of the policy considerations for and against the imposition of liability under the circumstances.” Skarbrevik v. Cohen, England & Whitfield (1991) 231 Cal.App.3d 692, 701.

Defendant argues that Plaintiff cannot sue because he was not the client on the retainer agreement and legal malpractice claims are not assignable. Defendant fails to provide any authority holding that the only person who may ever sue for malpractice is the client expressly identified in the retainer agreement. Defendant’s authority regarding the non-assignability of legal malpractice claims is inapposite, as Plaintiff is not suing as assignee. In fact, Plaintiff’s standing is based on third-party beneficiary status by virtue of his payment of the fees and his entitlement to 50% of the proceeds obtained by Mozzafari in the prior action. Defendant does not address the legal viability of these grounds for standing.

Plaintiff also alleges facts entitling him to sue Defendant under Lucas. Plaintiff alleges that he specifically discussed with Defendant his involvement in the case. Specifically, Plaintiff consulted with Defendant regarding the case and based on the consultation decided he would pay for the attorney fees incurred on Mozzafari’s behalf. In addition, Defendant knew that Plaintiff would be entitled to 50% of any recovery obtained and that Plaintiff was only agreeing to pay because Defendant promised Plaintiff directly that he would file a x-complaint on Mozzafari’s behalf. Defendant was fully aware that Plaintiff had a vested financial interest in the outcome of the lawsuit and that Plaintiff was involved in Mozzafari’s decisions regarding legal strategy. Based on these facts, Defendant owed Plaintiff a duty.

However, Plaintiff fails to allege any standing to sue for breach of contract. Exhibit A is a confidentiality agreement between Plaintiff and Mozzafari. Exhibit B is the retainer agreement. It makes no reference to Plaintiff, nor does it contain any language that could possible be interpreted to be an intent to benefit anyone other than Mozzafari. “A contract, made expressly for the benefit of a third person, may be enforced by him at any time before the parties thereto rescind it. The intent to benefit a third party must appear on the terms of the contract. As explained by well-reasoned case law: A third party should not be permitted to enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his right to performance is predicated on the contracting parties’ intent to benefit him. The fact that the contract, if carried out to its terms, would inure to the third party’s benefit is insufficient to entitle him or her to demand enforcement.” For this reason, demurrer to the breach of contract claim is properly sustained w/o leave.

Statute of Limitations: CCP § 340.6(a) states in pertinent part: “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…Except for a claim for which the plaintiff is required to establish his or her factual innocence, in no event shall the time for commencement of legal action exceed four years except that the period shall be tolled during the time that any of the following exist: (1) The plaintiff has not sustained actual injury….” For a claim based on a breach of fiduciary duty, the one year statute of limitations applies. See, e.g., Stoll v. Superior Court (1992) 9 Cal.App.4th 1362, 1368-69.

Defendant’s statute of limitations argument ignores Plaintiff’s allegation that he only discovered Defendant’s failure to file the x-complaint on 7/30/13, approximately 3 months before this action was filed. As stated under CCP §340.6, the 1-year limitations period begins to run after discovery of the omission. The complaint is therefore not clearly and affirmatively time-barred on its face and demurrer on grounds of SOL must be overruled.

Fraud: The elements of fraud are: (1) misrepresentation (false representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3) intent to defraud or induce reliance; (4) justifiable reliance; and (5) damages. See Civil Code §1709. Fraud actions are subject to strict requirements of particularity in pleading. See Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal. 3d 197, 216. Representations as to future acts may be actionable as promissory fraud, but this requires that the promise be made with the specific and knowing intent not to perform. See Tarmann v. State Farm Mut. Auto. Ins. Co. (1991) 2 Cal.App.4th 153, 158-159.

“Consistent with the rule requiring specificity in pleading fraud, a complaint must state ultimate facts showing that the defendant intended or had reason to expect reliance by the plaintiff or the class of persons of which he is a member.” Geernaert v. Mitchell (1995) 31 Cal. App. 4th 601, 608. A plaintiff must allege what was said, by whom, in what manner (i.e. oral or in writing), when, and, in the case of a corporate defendant, under what authority to bind the corporation. See Goldrich v. Natural Y Surgical Specialties, Inc. (1994) 25 Cal.App.4th 772, 782.

Plaintiff’s fraud claim is insufficiently pleaded. Plaintiff alleges in ¶¶18 and 38 that he relied on Defendant and Mozaffari’s representations that he would be paying for the prosecution of the x-complaint and that one would be filed. However, Plaintiff does not allege when or how these misrepresentations were made. Plaintiff could also provide more clarity and specificity regarding Defendant’s precise misrepresentation. Demurrer is properly sustained with 10 days leave to amend.