Case Number: BC529914 Hearing Date: May 07, 2014 Dept: 34

Moving Parties: Plaintiff Rancho Dominguez Equity LLC dba Rancho Tech Center (“plainitff”); cross-defendants TDL International Law Firm APLC, TDL International Real Estate Inc., and Ken Dat Duong (“cross-defendants”)

Resp. Party: Defendant and cross-complainant Christy Nguyen (“Nguyen”)

Plaintiff’s motion to strike Nguyen’s cross-complaint is DENIED.

Cross-defendant’s motion to strike references to punitive damages in the cross-complaint is GRANTED. Cross-defendants’ motion to strike is otherwise DENIED.

Cross-defendants’ Request for Judicial Notice is DENIED as unneeded. The Court need not take judicial notice of Nguyen’s cross-complaint because it is in the record in this action and is the pleading at issue in the instant motions.

BACKGROUND:

Plaintiff commenced this action against Nguyen and Nga Dinh on 12/10/13 for breach of lease. Plaintiff alleges that defendants breached a lease between the parties by failing to pay rent when due.

On 2/20/14, Nguyen filed a cross-complaint against the moving parties for declaratory relief and negligence. Nguyen alleges that cross-defendants represented Nguyen in the lease transaction with plaintiff. (Cross-Compl., ¶ 1.) Nguyen alleges that cross-defendants negligently advised Nguyen as to opening a restaurant business. (Id., ¶¶ 2-25.) Nguyen seeks a declaration that the lease is unenforceable because it was not signed by all parties. (See id., ¶¶ 27-43.)

ANALYSIS:

Plaintiff’s Motion to Strike the Entire Compliant

Plaintiff moves to strike the entire cross-complaint on the grounds that it was not properly served, it is not permissible under Code of Civil Procedure section 428.10, and it was filed in violation of a written agreement that no third-party cross-complaint would be filed in this matter.

The Court rejects plaintiff’s request to strike the cross-complaint because it was not properly served. “A cross-complaint against an existing party must be accompanied by proof of service at the time it is filed.” (Weil & Brown, Civ. Proc. Before Trial (The Rutter Group 2013) ¶ 6:573 [citing Cal. Rules of Court, rule 3.110(c)].) “If a party has appeared in the action, the cross-complaint shall be served upon his attorney, or upon the party if he has appeared without an attorney. . . .” (Code Civ. Proc., § 428.60(2).) Nguyen’s cross-complaint did not include proof of service on plaintiff at the time it was filed. Nguyen’s answer included a proof of service that stated that the cross-complaint was served on plaintiff directly, and not on plaintiff’s counsel. On 4/7/14, the day before plaintiff’s motion was filed, Nguyen filed a proof of service stating that plaintiff’s counsel was served by mail on 4/4/14. This is sufficient to survive plaintiff’s motion to strike.

The Court also rejects plaintiff’s argument that the cross-complaint is improper under section 428.10.

A party against whom a cause of action has been asserted in a complaint or cross-complaint may file a cross-complaint setting forth either or both of the following: [¶] (a) Any cause of action he has against any of the parties who filed the complaint or cross-complaint against him. . . . [¶] (b) Any cause of action he has against a person alleged to be liable thereon, whether or not such person is already a party to the action, if the cause of action asserted in his cross-complaint (1) arises out of the same transaction, occurrence, or series of transactions or occurrences as the cause brought against him or (2) asserts a claim, right, or interest in the property or controversy which is the subject of the cause brought against him. (Code Civ. Proc., § 428.10.)

The first cause of action (although it is not denominated as such on the face-page of the pleading) is against plaintiff and pertains to the lease at issue in the complaint; therefore, it is clearly authorized under section 428.10(a). The second cause of action pertains to cross-defendants’ advice as to a restaurant business that included advice as to the lease. (See, e.g., Cross-Compl., ¶¶ 1, 21, 22, 84, 93, 98, 100, 106, 108, 109, 122.) Therefore, this cause of action arose out of the same transaction or series of transactions as the complaint.

Finally, the Court rejects plaintiff’s argument that the cross-complaint should be stricken because it was filed in violation of an agreement not to file a third-party cross-complaint. This argument relies on extrinsic facts and is thus improper for a motion to strike. (See Code Civ. Proc., § 437(a).) Further, even if the Court were to consider this purported agreement, it simply states that it is plaintiff’s counsel’s understanding that the cross-complaint “will not include claims against third parties.” (See Exh. 5 to Plaintiff’s Motion to Strike.)

In the alternative, plaintiff makes a brief request to sever Nguyen’s claims against cross-defendants. Code of Civil Procedure section 598 allows a court to order that “the trial of any issue or any part thereof shall precede the trial of any other issue or any part thereof” where it would promote “the convenience of witnesses, the ends of justice, or the economy and efficiency of handling the litigation.” (Code Civ. Proc., § 598.) Whether to order bifurcation is ordinarily discretionary. (Weil & Brown, ¶ 12:415.) “The major objective of bifurcated trials is to expedite and simplify the presentation of evidence.” (Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 888.) Plaintiff does not make a sufficient showing at this time that bifurcation is necessary. The Court denies this request without prejudice to plaintiff re-submitting a motion to bifurcate after more facts are learned.

Plaintiff’s motion to strike the cross-complaint and/or server its claims is DENIED.

Cross-Defendants’ Motion to Strike References to Punitive Damages, Emotional Distress Damages, Indemnification, and Attorney’s Fees.

Punitive Damages

The standard of proof for recovery of punitive damages is “clear and convincing” evidence of malice, fraud, or oppression. (Civil Code § 3294(a).) Under Civil Code 3294(c),

[¶] (1) ‘Malice’ means conduct which is intended by the defendant to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others. [¶] (2) ‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights. [¶] (3) ‘Fraud’ means an intentional misrepresentation, deceit, or concealment of a material fact known to the defendant with the intention on the part of the defendant of thereby depriving a person of property or legal rights or otherwise causing injury.

“In determining whether a complaint states facts sufficient to sustain punitive damages, the challenged allegations must be read in context with the other facts alleged in the complaint. Further, even though certain language pleads ultimate facts or conclusions of law, such language when read in context with the facts alleged as to defendants’ conduct may adequately plead the evil motive requisite to recovery of punitive damages.” (Monge v. Superior Court (1986) 176 Cal.App.3d 503, 510.) The inquiry is generally fact specific to the nature of the claim raised and the context in which the damages are sought, but “the critical element is an ‘evil motive’ of the defendant.” (Ibid.) “‘Punitive damages are proper only when the tortious conduct rises to levels of extreme indifference to the plaintiff’s rights, a level which decent citizens should not have to tolerate.'” (American Airlines v. Sheppard (2002) 96 Cal.App.4th 1017, 1051.)

Nguyen alleges that cross-defendants represented that the restaurant business could be the basis for Dinh’s eligibility for residence in the United States and counseled Nguyen to operate the restaurant. (Cross-compl., ¶¶ 8-9.) Nguyen and Dinh objected to the business idea, but Duong insisted on its profitability and resale potential. (Id., ¶ 11.) Cross-defendants represented that the cost to open the restaurant would be $110,000.00 to $120,000.00. (Id., ¶ 12.) Nguyen alleges that the costs ended up exceeding $263,290.00. (Id., ¶ 15.) Nguyen eventually learned that the formation of the business for Dinh’s lawful resident status could not be legally supported. (Id., ¶ 20.) When Nguyen wanted to cease the business venture and mitigate damages from the lease, cross-defendants demanded payment of another $20,000.00 to carry out duties to wind down operations, and represented that they could recover or terminate payments from the lease and franchise fees. (Id., ¶ 22.) Cross-defendants allegedly improperly terminated the attorney/broker relationship and refunded Nguyen $35,000.00. (Id., ¶ 24.) Nguyen alleges that cross-defendants had represented the franchisor without concerns for conflicts of interest. (Id., ¶ 25.) Nguyen alleges that cross-defendants’ conduct constituted a breach of duties and failure to use reasonable and ordinary care and due diligence. (Id., ¶¶ 96-111.) Nguyen alleges she would not have agreed to the restaurant business but for these breaches. (Id., ¶¶ 112-129.)

At most, these allegations support a claim for negligence. Nguyen does not allege that cross-defendants’ representations about the restaurant business were knowingly false when made such as would support a fraud claim. Nguyen does not allege facts which show that cross-defendants engaged in intentional or despicable conduct, or oppression.

Cross-defendants’ request to strike references to punitive damages is GRANTED.

Emotional Distress Damages

“Emotional distress damages ordinarily are not recoverable in a legal malpractice action if the representation concerned primarily the client’s economic interests and the emotional injury derived from an economic loss.” (Ovando v. County of Los Angeles (2008) 159 Cal.App.4th 42, 73.) “California courts have explained that an attorney’s duty to his or her client in civil litigation ordinarily concerns the client’s economic interests and does not extend to protection against emotional injury. [Citations.] If the representation concerns primarily economic interests, ‘the foreseeability of serious emotional harm to the client and the degree of certainty that the client suffered such injury by loss of an economic claim are tenuous.’ [Citations.]” (Ibid.) Exceptions to this general rule have been recognized in the context of representation in a criminal action because the “primary interest at stake … is the defendant’s liberty” and “emotional injury resulting from the incarceration of an innocent defendant is plainly foreseeable.” (Ibid.)

Ovando cites to Holliday v. Jones (1989) 215 Cal.App.3d 102 for the proposition that in a malpractice actions arising out of an underlying criminal defense, emotional distress damages can be obtained. According to Holliday, “we are satisfied the recovery of damages for emotional distress in a legal malpractice case — if it is to be limited at all — should turn on the nature of plaintiff’s interest which is harmed and not merely on the reprehensibility of the defendant’s conduct. Accordingly, in light of Holliday’s liberty interest here, we believe California’s general rule of damages applies and Jones should be liable for emotional distress damages he caused.” (Id., at p. 119.)

The allegations in this complaint seem to fall somewhere between that of Ovando and Holliday. Nguyen’s interests were not purely economic; on the other hand, she was not facing incarceration after being convicted for involuntary manslaughter due to incompetence of counsel, as was Holliday.

In their reply, cross-defendants state, “ It may be foreseeable that a client who is the victim of legal malpractice will suffer emotional distress. But the lawyer’s obligation to the client, at least absent knowledge of any unusual susceptibility, is economic; the lawyer does not assume an obligation to protect the client’s emotional state.” (Friedman v. Merck & Co. (2003) 107 Cal.App.4th 454, 472; see Reply, p. 2:16-21.) The issue here, is whether Nguyen’s pregnancy and desire to have her mother present to care for her during her pregnancy was such an “unusual susceptibility.”

Friedman goes on to state:

“The decisional authority does not provide any bright-line guidance as to the meaning of an assumed duty in which the plaintiff’s emotional condition is an object. However, one treatise provides some clarity. In The Law of Torts, the author notes that in Burgess v. Superior Court, supra, 2 Cal.4th at pages 1069, 1071-1085, the Supreme Court held a physician owed an assumed or independent duty to a mother whose child suffered severe brain damage during birth. (2 Dobbs, The Law of Torts (2001) § 312, pp. 848-849.) The treatise, authored by University of Arizona Professor of Law Dan B. Dobbs, goes on to state: “Although the childbirth setting is perhaps the most prominent example of the independent duty, the same reasoning can be applied whenever the defendant assumes to duty by contract or otherwise and when that duty encompasses the plaintiff’s emotional well-being. …. [¶] … The nature and scope of the duty assumed or imposed by law because of the relationship is a matter for the court to decide.” (2 Dobbs, The Law of Torts, supra, § 312, pp. 849-850, fns. omitted.)” (Friedman v. Merck & Co. (2003) 107 Cal.App.4th 454, 473-74.)

Nguyen has alleged that the purpose of cross-defendants’ representation was to assist Nguyen’s mother, Dinh, who was in Vietnam at the time, in obtaining lawful permanent resident status in the United States. (See, e.g., Cross-compl., ¶ 8.) Nguyen alleges that she was pregnant at the time and needed her mother’s care. (See id., ¶¶ 85, 113.)

Although this is a close case, the court finds that this is sufficient to be able to allege emotional distress damages.

Cross-defendants’ request to strike references to emotional distress damages is DENIED.

Indemnity

Cross-defendants argue that there is no basis for indemnity because Nguyen has not alleged a contract that would give rise to a duty for indemnification. Indemnity need not be based on a contract. “Equitable indemnity principles govern the allocation of loss or damages among multiple tortfeasors whose liability for the underlying injury is joint and several. [Citations .] Such principles are designed, generally, to do equity among defendants who are legally responsible for an indivisible injury by providing a basis on which liability for damage will be borne by each joint tortfeasor ‘ “in direct proportion to [its] respective fault.’ ” [Citations.] Under comparative indemnity principles, a full range of allocations is possible, from no indemnity to complete indemnity for the amounts paid by the indemnitee.” (Expressions at Rancho Niguel Assn. v. Ahmanson Developments, Inc. (2001) 86 Cal.App.4th 1135, 1139-1140.) “Unlike contractual indemnity which looks to the parties’ intent, equitable indemnification focuses on principles of fairness and justice and ‘is designed to apportion loss among tortfeasors in proportion to their relative culpability….’ ” (Maryland Casualty Co. v. Bailey & Sons, Inc. (1995) 35 Cal.App.4th 856, 864.)

Nguyen alleges that cross-defendants’ were at least partly responsible for the purported lease. (See Cross-compl., ¶¶ 1, 21, 22, 84, 93, 98, 100, 106, 108, 109, 122.) Therefore, it is possible that Nguyen could seek equitable indemnification as to plaintiff’s claims.

Cross-defendants’ request to strike the request for indemnification is DENIED.

Attorney’s Fees

“[A]s a general rule, attorney fees are not recoverable as costs unless they are authorized by statute or agreement.” (People ex rel. Dept. of Corporations v. Speedee Oil Change Systems, Inc. (2007) 147 Cal.App.4th 424, 429.) Courts may strike prayers for attorney fees where a party demonstrated no potential basis for their recovery. (Agricultural Ins. Co. v. Sup. Ct. (1999) 70 Cal.App.4th 385, 404.) However, unsupported attorneys fees allegations need not be stricken pursuant to a motion to strike, since later discovery may reveal a basis for their recovery. (Camenisch v. Sup. Ct. (1996) 44 Cal.App.4th 1689, 1699.)

Though cross-defendants are correct that Nguyen does not allege a contractual or statutory basis for the attorney’s fees request, this does not mean that there is no such basis. To the extent that cross-defendants wish to obtain more facts as to the attorney’s fees request, they may do so during the discovery process.

Accordingly, cross-defendants’ request to strike the request for attorney’s fees is DENIED.