Case Number: BS144464    Hearing Date: July 29, 2014    Dept: 82

Jacqueline Staten
v.
Client Security Fund Commission, the State Bar of California

Tentative Decision on Petition for Writ of Mandate: Granted

Petitioner Jacqueline Staten seeks a writ of mandate overturning Respondent Client Security Fund Commission’s (“Commission”) May 29, 2013 final decision reimbursing two of her former clients $10,500. Having reviewed the pleadings, the lodged administrative record, and the parties’ briefs, the Court rules as follows:

Request for Judicial Notice

The Court grants the Commission’s request for judicial notice of the Client Security Fund’s Rules of Procedure.

Statement of the Case

On January 19, 2010, while she was a licensed attorney, Petitioner entered into a representation agreement with Vita Yolanda Locurto and Damon Hollis (the “former clients”), through which she agreed to represent the former clients in a predatory lending case. (AR 52, 55-59). The former clients initially agreed to pay Petitioner a $19,500 prepaid deposit, $500 of which the former clients paid at the time the agreement was executed. (AR 52, 55-59). On January 25, 2010, Petitioner and the former clients agreed to reduce Petitioner’s representation fee to $10,500. (AR 52). The former clients claimed they paid Petitioner the remaining $10,000 by credit card that same day. (AR 52).

Several days after renegotiating Petitioner’s fee, the former clients became concerned about Petitioner’s ability to adequately represent their interests because Petitioner had yet to provide them with a revised version of her representation agreement and she had yet to request certain documents from them despite a pending deadline in their predatory lending case. (AR 52). After checking Petitioner’s State Bar attorney profile, the clients discovered that Petitioner had recently been suspended by the State Bar. (AR 52). The suspension was to take effect on February 12, 2010. (AR 52).

When the former clients confronted Petitioner about her disciplinary status, Petitioner told them that she did not raise the issue when she agreed to take their case because she believed she would be able to successfully challenge the suspension before it went into effect. (AR 52). Nevertheless, Petitioner assured the former clients that she would transfer their case and fees to another attorney in the event her suspension was enforced. (AR 52).

On February 2, 2010, Petitioner held a meeting with the former clients and the attorney she intended to transfer the clients’ case to. (AR 52). During the meeting, Petitioner assured the former clients that she would provide them with the revised representation agreement and that she would transfer the clients’ $10,500 prepaid fee to the other attorney should her suspension be enforced. (AR 52).

On March 15, 2010, Petitioner sent the former clients a letter stating that she could no longer represent them because she had been suspended by the State Bar on February 12, 2010. (AR 53). According to the former clients, at the time Petitioner sent the March 15, 2010 letter, Petitioner had yet to forward the $10,500 prepaid fee to the other attorney. (AR 53).

On March 16, 2010, the former clients attempted to contact Petitioner several times to inquire about the status of their prepaid fee. (AR 53). After being unable to reach Petitioner, the former clients contacted their credit card company to dispute the $10,000 credit card payment made to Petitioner on January 25, 2010. (AR 53). The credit card company informed the former clients that their credit card had recently been used to purchase a $10,000 car from “All Make Auto.” (AR 53). When the former clients contacted All Make Auto, a representative told them that a “Mrs. Staten” had recently used their credit card to purchase a $10,000 car. (AR 53).

While the former clients attached a credit card statement to their reimbursement application which indicates that a $10,000 purchase was made at “All Make Auto,” that credit card statement was issued to Leon W. Freeman who was not a party to the clients’ reimbursement action before the Commission. (AR 62-63). Although a Clatis Freeman was named on the former clients’ July 1, 2010 reimbursement application, neither Clatis Freeman nor Leon W. Freeman filed a declaration or other statement in support of the former clients’ reimbursement application, and neither was named in the Commission’s tentative and final decisions. (See AR 9-11, 21-24).

On July 1, 2010, the former clients filed a complaint against Petitioner with the Commission seeking reimbursement of the $10,500 prepaid fee. (AR 30-34). At the time the former clients filed their claim, they had been unable to contact Petitioner since March 2010. (AR 52-53). According to the former clients, Petitioner failed to provide adequate legal services during the time she represented them. (AR 52). In support of their application, the former clients filed a two-page sworn statement they executed on July 3, 2010, a credit card statement issued to Leon W. Freeman, a copy of the January 19, 2010 representation agreement, and a notice of suspension Petitioner filed with the court in the former clients’ predatory lending case. (AR 40-41, 52-65).

On September 27, 2012, the Commission issued a tentative decision directing the Client Security Fund to forward the $10,500 fee to the former clients and charge Petitioner for the amount of the forwarded fee, along with interest and costs. (AR 21-24).

On October 30, 2012, Petitioner submitted an objection to the Commission’s September 27, 2012 tentative decision and requested additional time to submit materials in support of her objection. (AR 18-19). In her extension request, Petitioner informed the Commission that she needed additional time to prepare her objection because all of her client files had been placed in storage while she was in custody serving a one-year criminal sentence, which she completed on December 19, 2011. (AR 18). The Commission granted Petitioner’s extension request and scheduled a review of Petitioner’s objection for February 14, 2013. (AR 15).

On February 5, 2013, Petitioner submitted a second extension request to the Commission, stating that she needed an additional two months to prepare materials for the review of her objection to the September 27, 2012 tentative decision. (AR 14). In her request, Petitioner explained that she needed additional time to gather documents because she had accepted full-time employment on a probationary basis on January 7, 2013 and, as a result, was unable to prepare for the February 14, 2013 review. (AR 14).

On February 12, 2013, the Commission granted Petitioner’s second extension request and continued the review to April 18, 2013. (AR 13). The Commission informed Petitioner that she had until April 3, 2013 to submit arguments and materials in support of her objection. (AR 13). Petitioner never submitted materials in support of her objection prior to the April 3, 2013 deadline. (AR 9).

On April 18, 2013, the Commission considered Petitioner’s objection to the September 27, 2012 tentative decision. (AR 9). On April 23, 2013, Petitioner submitted materials in support of her objection to the Commission. (AR 10). Citing Petitioner’s failure to timely submit her supporting materials, the Commission refused to consider the materials prior to issuing its final decision. (AR 10). On May 29, 2013, the Commission issued a final decision upholding the September 27, 2012 tentative decision. (AR 9-11).

On June 7, 2013, the Commission issued a check for $10,500 to the former clients. (AR 8). On June 10, 2013, the Commission sent Petitioner a Notice of Payment notifying her that she was liable for reimbursing the Commission for the $10,500, plus interests and costs, paid to the former clients. (AR 4).

Petitioner now seeks a writ of mandate remanding the Commission’s May 29, 2013 final decision with directions to allow Petitioner to submit the materials contained in her “book of exhibits” and to reconsider Petitioner’s objection in light of those materials. Alternatively, Petitioner seeks a writ of mandate setting aside the Commission’s final decision on the ground that the Commission’s findings are not supported by substantial evidence.

Standard of Review

Petitioner seeks a writ of mandate pursuant to California Code of Civil Procedure section 1094.5. Code of Civil Procedure section 1094.5 is the administrative mandamus provision establishing the procedure for judicial review of adjudicatory decisions rendered by administrative agencies. Topanga Ass’n for a Scenic Community v. County of Los Angeles, (1974) 11 Cal. 3d 506, 514-15. Under Code of Civil Procedure section 1094.5(b), the pertinent issues to be determined in an administrative mandamus proceeding are: (1) whether the respondent has proceeded without jurisdiction; (2) whether there was a fair trial; and (3) whether there was a prejudicial abuse of discretion. An abuse of discretion is established if the respondent has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence. Code Civ. Proc., § 1094.5(b).

In determining whether the Commission properly ordered attorney’s fees paid by an applicant to be reimbursed from the Client Security Fund’s discretionary fund, a trial court reviews the Commission’s decision for substantial evidence. Johnson v. State Bar, (1993) 12 Cal.App.4th 1561, 1566-67. Under the substantial evidence test, the petitioner has the burden of demonstrating the agency’s findings are not supported by substantial evidence in light of the whole record. Young v. Gannon, (2002) 97 Cal.App.4th 209, 225. Substantial evidence is relevant evidence that a reasonable mind might accept as adequate to support a conclusion (California Youth Authority v. State Personnel Board, (2002) 104 Cal. App. 4th 575, 584-85), or evidence of ponderable legal significance which is reasonable in nature, credible and of solid value. Mohilef v. Janovici, (1996) 51 Cal. App. 4th 267, 305 n. 28.

An agency is presumed to have regularly performed its official duties. Evid. Code § 664. Therefore, the Petitioner seeking administrative mandamus bears the burden of proof to demonstrate “wherein the proceedings were unfair, in excess of jurisdiction or showed prejudicial abuse of discretion.” Afford v. Pierno, (1972) 27 Cal.App.3d 682, 691; Steele v. Los Angeles County Civil Service Commission, (1958) 166 Cal.App.2d 129, 137. Despite the presumption of regularity in the agency’s action, the challenged agency’s decision must be supported by the evidence. Board of Medical Quality Assurance v. Superior Court, (1977) 73 Cal.App.3d 860, 862.

Analysis

1. Petitioner has not demonstrated that evidence relevant to her objection exists

Petitioner contends that she was denied a fair opportunity to object to the Commission’s tentative decision because the Commission refused to consider Petitioner’s untimely submitted supporting materials. As such, Petitioner seeks an order pursuant to California Code of Civil Procedure section 1094.5(e) remanding the Commission’s May 29, 2013 final decision for reconsideration in light of Petitioner’s supporting materials. As discussed in greater detail below, the Court finds that Petitioner is not entitled to a remand order under Code of Civil Procedure section 1094.5(e) for the following reasons: (1) Petitioner has failed to identify the supporting materials she seeks to submit to the Commission; and (2) Petitioner has failed to demonstrate that any documents she seeks to submit are relevant to her objection to the Commissions’ tentative decision.

Code of Civil Procedure section 1094.5(e) provides:

Where the court finds that there is relevant evidence that, in the exercise of reasonable diligence, could not have been produced or that was improperly excluded at the hearing before respondent, it may enter judgment as provided in subdivision (f) remanding the case to be reconsidered in the light of that evidence; or, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, the court may admit the evidence at the hearing on the writ without remanding the case.

“The stringent requirements set forth in section 1094.5, subdivision (e) require the moving party to identify what evidence is sought to be discovered for purposes of adding it to the record; to establish the relevancy of the evidence; and to show that either (a) any such relevant, additional evidence was improperly excluded at the administrative hearing, or (b) it could not have been produced at the hearing with the exercise of reasonable diligence. . . . If the moving party fails to make the required showing, it is an abuse of the court’s discretion to allow posthearing discovery.” Pomona Valley Hospital Medical Center v. Superior Court, (1997) 55 Cal.App.4th 93, 102 (emphasis added).
First, Petitioner has failed to identify the materials that she untimely submitted to the Commission on April 23, 2013. Although there is a tab numbered “12” attached to Petitioner’s first petition packet filed on August 9, 2013 whose label states that it contains the exhibits Petitioner submitted to the Commission, there are no documents attached to that tab.

Second, Petitioner has failed to demonstrate that any documents relevant to her objection exist. While Petitioner states that she is in possession of evidence demonstrating that she performed $20,122.50 worth of services on the former clients’ predatory lending case, she fails to identify the nature of these documents in her declarations and supporting memoranda. (January 8, 2014 Staten Decl., ¶ 11; April 8, 2014 Staten Decl., ¶ 7). Further, although both declarations state that the supporting documents are attached as Exhibit “9” to her “book of exhibits,” the Court is unable to locate Exhibit “9” in the more-than 800 pages of documents Petitioner has attached to her original petitions. While there is a tab numbered “9” included in the documents attached to the first petition packet filed on August 9, 2013, that tab contains Petitioner’s medical records from May 2013 that are unrelated to Petitioner’s representation of the former clients. None of the other numbered tabs contain documents corresponding to Petitioner’s representation of the former clients.

As for the remaining approximately 800 pages of documents included in Petitioner’s other two petition packets, none of the pages are labeled, ordered, or numbered in a manner that allows the Court to meaningfully review their contents, and Petitioner has not addressed the contents of those pages in her supporting memoranda. From the Court’s review of these attachments, it appears that they largely consist of court documents and financial records relating to Petitioner’s former client, Vita Locurto, which Ms. Locurto, and not Petitioner, filed with various courts. The Court could not locate any documents containing Petitioner’s work product from the short period she represented the former clients. Among these voluminous documents, the Court could not locate any billing records or other documents that support Petitioner’s claim that she worked 56.85 billable hours on the former clients’ case. Thus, because Petitioner has failed to identify any relevant documents supporting her objection to the Commission’s tentative decision, she is not entitled to a remand order directing the Commission to consider additional evidence. See Pomona Valley Hospital Medical Center, supra, 55 Cal.App.4th at p. 102 (Code of Civil Procedure section 1094.5(e) requires “the moving party to identify what evidence is sought to be discovered for purposes of adding it to the record . . . [and] to establish the relevancy of the evidence”).

2. Substantial evidence does not support the Commission’s final decision

The Commission made several factual findings in support of its conclusion that Petitioner’s former clients were entitled to reimbursement of the $10,500 allegedly paid to Petitioner under the Client Security Fund’s rules. Petitioner challenges several of these findings, arguing that they are not supported by substantial evidence. Due to the dearth of evidence supporting the former clients’ application before the Commission, the Court finds that insufficient evidence supports the Commission’s finding that Petitioner misappropriated $10,000 from the former clients’ credit card account.

Rule 3.430 of the Client Security Fund’s Rules of Procedure establishes the Commissions’ general requirements for reimbursement. That rule provides:

(A) To qualify for reimbursement, an applicant must establish a loss of money or property that was received by an active attorney who was acting as an attorney or in a fiduciary capacity customary to the practice of law, for instance as an administrator, executor, trustee of an express trust, guardian, or conservator.

(B) The loss must have been caused by dishonest conduct as defined in these rules.

(C) The attorney must have a status that meets the requirements of these rules.

(D) Even if an application meets these requirements, the Commission has sole discretion to deny or limit reimbursement. No person or entity has a right to reimbursement.

(RJN Exhibit 1) (emphasis added).

The Commission found that on January 25, 2010, the former clients provided Petitioner with their credit card number over the phone to secure payment of the agreed-upon $10,500 representation fee. (AR 11, 21). The Commission also found that Petitioner later used the former clients’ credit card number to purchase a $10,000 car from “All Make Auto” and never returned the funds to the former clients’ account. (AR 11, 21). Based on these findings, the Commission concluded that the former clients satisfied Rule 3.430(A) because they established that Petitioner misappropriated $10,000 from their credit card account. (AR 11, 22). Substantial evidence does not support these findings.

The only evidence of Petitioner’s alleged misappropriation of the former clients’ $10,000 the Commission had before it consisted of the clients’ written statement and the credit card statement belonging to Lewis W. Freeman. These documents do not support the Commission’s findings because they are inconsistent. In their written statement, the former clients, Vita Locurto and Damon Hollis, state that they provided Petitioner’s assistant with their credit card number over the phone. (AR 52). However, the credit card statement submitted in support of the former clients’ application against Petitioner is addressed to Leon W. Freeman, and it makes no reference to Vita Locurto or Damon Hollis. (AR 62). Further, the former clients’ written statement does not address why the credit card statement they claimed substantiates their application for reimbursement does not include either of their names and is addressed to an individual that was not a party to their reimbursement application. (See AR 52-53). The former clients produced no other documentary evidence supporting their claim that Petitioner misappropriated $10,000 from their credit card account. For example, there is no evidence in the record that the former clients were authorized to use Lewis W. Freeman’s credit card or that they were named on Mr. Freeman’s account. The Commission’s final and tentative decisions do not address this discrepancy. (See AR 9-11, 21-24). Because the record contains no evidence clarifying the inconsistency between the clients’ written statement and the credit card statement belonging to Lewis W. Freeman, the Commission’s finding that Petitioner received and later misappropriated $10,000 from the former clients’ credit card account is not supported by substantial evidence. See Mohilef v. Janovici, (1996) 51 Cal. App. 4th 267, 305 n. 28 (“Substantial evidence is not [literally] any evidence—it must be reasonable in nature, credible, and of solid value”) (alteration in original).

Disposition

The Court grants the petition because the Commission’s final decision is not supported by substantial evidence. Judgment should be entered ordering a writ of mandate to issue from this Court remanding the proceedings to the Commission and commanding it to set aside its decision and reconsider its action in light of this decision and order.

Petitioner shall file and serve a proposed judgment and a proposed writ of mandate within 10 days with a proof of service showing that they were served on all parties. The administrative record shall be returned to the party who lodged it, to be preserved without alteration until the judgment is final, and to be forwarded to the Court of Appeal in the event of an appeal.