Filed 5/21/20 Carter v. Close CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

MARK N. CARTER,

Plaintiff and Appellant,

v.

MARK DANIEL CLOSE et al.,

Defendants and Respondents.

G057746

(Super. Ct. No. 30-2018-01009595)

O P I N I O N

Appeal from a judgment of the Superior Court of Orange County, Martha k. Gooding, Judge. Affirmed.

MLG; Jonathan A. Michaels, John M. Whelan and Kyle Gurwell, for Plaintiff and Appellant.

Murphy, Pearson, Bradley & Feeney; Jeff Shieh Hsu and Patrick A Gillespie, for Defendants and Respondents.

* * *

Plaintiff Mark N. Carter sued defendants Mark Daniel Close and his company EDR Valuations, Inc. (collectively Close), based upon Close’s accounting and valuation report for a business. In a separate lawsuit about the business, Carter and other parties had agreed to a settlement but did not agree on the value of Carter’s interest in the business. They jointly retained Close to provide an accounting and valuation of the business to finalize the settlement.

In this case, Carter sued Close based on his report, alleging professional negligence, breach of fiduciary duty, and written contract breach. The trial court sustained Close’s demurrer to Carter’s complaint, without leave to amend, applying the quasi-judicial immunity doctrine to Close. Carter argues quasi-judicial immunity does not apply because Close did not perform a judicial function and failed to perform his contractual obligations for his report. We agree the quasi-judicial immunity doctrine applies and therefore affirm the court’s judgment of dismissal.

I

FACTS AND PROCEDURAL HISTORY

A. The Co-Owner Lawsuit, Settlement Agreement, and Valuation Report

In 1980, Carter became a 31.48 percent co-owner of his family’s street sweeping company, Bill’s Sweeping Service LLC (Bill’s Sweeping). In 2015, Carter sued Bill’s Sweeping and his co-owners after his employment was terminated (the co-owner lawsuit). The following year, the parties entered a settlement agreement conditionally staying litigation of the lawsuit.

The agreement detailed a protocol for the trial court to appoint a financial referee, pursuant to Code of Civil Procedure section 638, to produce an accounting and valuation report for Bill’s Sweeping. Carter, his co-owners, and Bill’s Sweeping (collectively the parties) jointly agreed to select and pay the referee. The parties also agreed they would jointly meet with the referee to present what each believed was relevant information for the report. The parties agreed to use the referee’s calculated values to determine the purchase price of Carter’s interest in Bill’s Sweeping. Following the report, the co-owners would begin paying the purchase price in monthly installments.

The agreement specified that once a referee was jointly selected, the parties would present a stipulation to the trial court for the referee’s formal appointment. The agreement also memorialized that the court would retain jurisdiction over the co-owner lawsuit to enforce the parties’ settlement terms, under section 664.6.

After signing their agreement, the parties jointly selected Close to be the financial referee. They submitted a stipulation and proposed order for the trial court to appoint Close, but the court declined to sign the order. The court explained that given the parties’ settlement, it was not persuaded it should be involved in the valuation process. The parties nevertheless jointly hired Close to produce a valuation report, without a court appointment.

Close issued his valuation report to the parties eight months later, in August 2017 and the parties filed cross-motions in the trial court to enforce their settlement agreement. The co-owners sought an order confirming the purchase price of Carter’s ownership interest in Bill’s Sweeping based on the values calculated in Close’s report. In contrast, Carter sought an upward adjustment of the purchase price, claiming the court showed numerous errors in Close’s report under a statute authorizing courts to correct arbitration awards. (§ 1286.6.)

The trial court denied Carter’s motion and granted the co-owners’ motion. The court found “there [was] no evidence that the parties mutually consented to an arbitration” and, even if the claimed arbitration statute applied, Carter’s claims to correct Close’s report would fail on their merits. One month after granting the co-owners’ motion, the court entered a judgment declaring an unspecified “amount tendered” to Carter by the co-owners had been “consistent with” the parties’ settlement agreement. The judgment directed Carter to transfer his interest in Bill’s Sweeping to the co-owners.

B. The Instant Lawsuit and Demurrer

Carter filed the lawsuit in this case and based upon Close’s report in the co-owner lawsuit, alleged causes of action for professional negligence, breach of fiduciary duty, and written contract breach (the operative complaint). Close demurred, contending Carter’s claims were barred by collateral estoppel and, alternatively, quasi-judicial immunity. Close and Carter both filed requests for judicial notice on orders and filings in the co-owner lawsuit. Close also requested judicial notice of his retention letter, signed by parties of the co-owner lawsuit. The trial court granted the requests except for Close’s letter to the parties confirming his appointment as referee and the request to notice the contract, which was not attached to the complaint.

The trial court sustained Close’s demurrer without leave to amend. The court found quasi-judicial immunity applied under the precedent of Howard v. Drapkin (1990) 222 Cal.App.3d 843 (Howard). The court noted the lack of a formal appointment of Close did not affect its conclusion. The court entered a judgment of dismissal and this appeal followed.

II

DISCUSSION

Carter contends quasi-judicial immunity does not apply to Close because he did not perform a judicial function and failed to perform his contractual obligations for his untimely and erroneous report. Alternatively, Carter argues he should have been granted leave to amend his complaint because he “could have more fully alleged the factual background supporting” his breach of contract claim.

A. Standard of Review

We review de novo “a judgment dismissing an action after the sustaining of a demurrer . . . . For the limited purpose of reviewing the propriety of the trial court’s ruling, we accept as true all well-pled factual allegations in the operative complaint, as well as any facts that may be reasonably implied or inferred from those expressly alleged. . . . We do not ‘however, assume the truth of contentions, deductions or conclusions of law.’” (Foxen v. Carpenter (2016) 6 Cal.App.5th 284, 287-288.)

When a demurrer is sustained without leave to amend, the reviewing court must determine whether there is a reasonable probability that the complaint could have been amended to cure the defect. . . .” (Sprinkles v. Associated Indemnity Corp. (2010) 188 Cal.App.4th 69, 76.) The abuse of discretion standard governs our review of that question. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081.) “The plaintiff bears the burden of proving there is a reasonable possibility of amendment.” (Rakestraw v. California Physicians’ Service (2000) 81 Cal.App.4th 39, 43 (Rakestraw).) To satisfy that burden, the plaintiff “‘must show in what manner he can amend his complaint and how that amendment will change the legal effect of his pleading.’ [Citation.] The assertion of an abstract right to amend does not satisfy this burden. [Citation.] The plaintiff must clearly and specifically set forth the ‘applicable substantive law’ [citation] and the legal basis for amendment, i.e., the elements of the cause of action and authority for it. Further, the plaintiff must set forth factual allegations that sufficiently state all required elements of that cause of action. [Citations.] . . . [¶] The burden of showing that a reasonable possibility exists that amendment can cure the defects remains with the plaintiff; neither the trial court nor this court will rewrite a complaint. [Citation.] Where the appellant offers no allegations to support the possibility of amendment and no legal authority showing the viability of new causes of action, there is no basis for finding the trial court abused its discretion when it sustained the demurrer without leave to amend. [Citations.]” (Id. at pp. 43-44.)

 

B. The Trial Court Correctly Applied the Quasi-Judicial Immunity Doctrine to Sustain the Demurrer

The doctrine of quasi-judicial immunity for neutrals such as referees and mediators developed to protect them from “the threat of civil liability” and encourage their impartial assistance to overburdened courts. (Howard, supra, 222 Cal.App.3d at p. 857 (Howard).) The holding in Howard “extended [the doctrine of quasi-judicial immunity] to . . . neutral third parties for their conduct in performing dispute resolution services which are connected to the judicial process and involve either (1) the making of binding decisions, (2) the making of findings or recommendations to the court or (3) the arbitration, mediation, conciliation, evaluation or other similar resolution of pending disputes.” (Id. at p. 860.) In Howard, a mother sued a psychologist who reported nonbinding findings and recommendations to a family law court on issues involving child custody and parental visitation rights. (Id. at p. 848.) The mother alleged the psychologist concealed conflicts of interest, incompetently evaluated pertinent issues, and omitted material information in her report. (Id. at pp. 848, 850.)

Affirming the trial court’s application of quasi-judicial immunity (Howard, supra, 222 Cal.App.3d at p. 850), the Howard court “agree[d] with [the defendant-psychologist] and amicus that the justification for giving judicial and quasi-judicial immunity to judges, commissioners, referees, court-appointed persons . . . and nonappointed persons . . . applies with equal force to . . . neutral persons who attempt to resolve disputes.” (Id. at pp. 858-859.) The Howard court explained that those “‘nonjudicial persons who fulfill quasi-judicial functions intimately related to the judicial process’ [citation] should be given absolute quasi-judicial immunity for damage claims arising from their performance of duties in connection with the judicial process.” (Id. at p. 857.)

We agree with the decision in Howard and its applicability to this case. Like the psychologist there, Close was jointly retained by the parties in the co-owner lawsuit to provide neutral findings on issues arising from the litigation. (Howard, supra, 222 Cal.App.3d at p. 858, fn. 8.) The parties agreed to retain Close in an “attempt to resolve” the co-owner lawsuit as an alternative to formal litigation. (Id. at pp. 858-859.) Indeed, the trial court relied upon Close’s report to finalize the settlement and conclude the lawsuit through the co-owners’ purchase of Carter’s business interest. Equally important, it is clear Carter’s operative complaint asserts “damage claims arising from [Close’s] performance of duties in connection with the judicial process [of the co-owner lawsuit].” (Howard, supra, 222 Cal.App.3d at p. 857.)

We are not persuaded by Carter’s attempts to distinguish this case from Howard’s holding. Carter asserts Close’s function in the co-owner lawsuit was not “intimately related to the judicial process” under Howard because Close “did not assist the parties in reaching their settlement . . . did not generate any work product that was to be provided to the court, and . . . did not serve as a court-appointed referee.” (Italics and boldfacing omitted.) Based upon our discussion above, Carter’s characterizations of Close’s role are inaccurate or otherwise irrelevant. For example, the trial court correctly observed whether it formally appointed Close in the co-owner lawsuit had no bearing on whether Howard and the quasi-judicial doctrine applied. (See id. at pp. 858-859 [rationale for judicial and quasi-judicial immunity applies with equal force to nonappointed “neutral persons who attempt to resolve disputes”].)

Carter’s argument also mischaracterizes Howard’s holding because it did not turn on whether third parties had to play roles sufficiently similar to traditional judicial roles. (See Howard, supra, 222 Cal.App.3d at p. 860 [quasi-judicial immunity is extended to “third parties for their conduct in performing dispute resolution services which are connected to the judicial process and involve . . . mediation, conciliation, evaluation or other similar resolution of pending disputes”].) Here, the parties jointly hired Close to perform an impartial accounting and a valuation of the business. It is of no significance Close’s determination was not a judicial function “normally performed by judges,” as Carter alleges. Howard emphasized the doctrine of quasi-judicial immunity applies to neutral third parties performing dispute resolution services “no matter whether they are . . . making binding decisions” or “making recommendations to the court.” (Id. at p. 860.) In sum, there is no merit in Carter’s attempt to distinguish this case from Howard.

We also reject Carter’s policy argument to part ways with Howard’s holding. Carter claims that applying Howard to this case would “wreak havoc among the professional community [because] private CPAs [sic] such as Close would routinely seek to be canonized to immune status, releasing them of responsibility for their actions.” Contrary to Carter’s suggestion, Howard’s holding does not support any categorical immunity based upon professional identity. (See Howard, supra, 222 Cal.App.3d at pp. 857, 859-860 [proper analytical focus distinguishes between role as an advocate versus nonadvocate]; accord Susan A. v. County of Sonoma (1991) 2 Cal.App.4th 88, 97-98 [hired psychologist was not immune because he acted as an advocate for a criminal defendant].)

C. The Nonperformance Exception to Quasi-Judicial Immunity Does Not Apply

Carter attempts to apply the “‘complete nonperformance’” exception to arbitrator immunity. (Morgan Phillips, Inc. v. JAMS/Endispute, L.L.C. (2006) 140 Cal.App. 4th 795, 801-802 (Morgan Phillips).) As explained in Baar v. Tigerman (1983) 140 Cal.App.3d 979 (Baar), the exception applies where an arbitrator fails to issue any award after a dispute was submitted to the arbitrator. (Id. at pp. 981-982.) Similarly, in Morgan Phillips, supra, 140 Cal.App.4th at pp. 797-798, 800, the appellate court held quasi-judicial immunity did not apply there because, after the parties submitted evidence and argument, the arbitrator withdrew without cause and refused to issue an award.

Relying on Baar and Morgan Phillips, Carter contends “California courts have repeatedly held that quasi-judicial immunity does not protect persons . . . who breach the agreement that defines their obligations.” Carter asserts Close’s report was issued seven months late and attempts to analogize his claims against Close to those against “an arbitrator who unjustifiably fail[ed] to complete his job.” Carter’s argument lacks merit. The “‘complete nonperformance’” in Baar and Morgan Phillips involved circumstances categorically different from those in Howard. Those cases applied the exception to quasi-judicial immunity based upon an absence of performance (Baar, supra, 140 Cal.App.3d at pp. 981-982; Morgan Phillips, supra, 140 Cal.App.4th at pp. 797-798, 800), rather than the erroneously rendered performance Carter claims in this case. Even accepting that Close’s report was late (Foxen v. Carpenter, supra, 6 Cal.App.5th at pp. 287-288), no basis exists to apply the exception here.

Based on the allegations in Carter’s complaint and the judicially noticed documents, we conclude the trial court correctly sustained Close’s demurrer based on the quasi-judicial doctrine.

D. Leave to Amend

Finally, Carter has not demonstrated a “reasonable possibility” of amending his complaint to avoid our conclusion above. (Smith v. County of Kern (1993) 20 Cal.App.4th 1826, 1829-1830.) As mentioned, Carter asserts he “could have more fully alleged the factual background supporting” his breach of contract claim. Although Carter claims the existence of factual issues such as Close’s refusal to correct certain errors, Carter has not demonstrated how they would alter our dispositive analysis. Accordingly, Carter has failed to demonstrate the court abused its discretion in denying leave to amend. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)

 

III

DISPOSITION

The judgment is affirmed. Close and EDR Valuations, Inc., are entitled to their costs on appeal.

ARONSON, J.

WE CONCUR:

MOORE, ACTING P. J.

FYBEL, J.