Case Number: BC455229 Hearing Date: April 14, 2014 Dept: 58

Judge Rolf M. Treu
Department 58

Hearing Date: Monday, April 14, 2014
Calendar No.: 11
Case Name: Shaoxing City Maolong Wuzhong Down Products, Ltd., et al. v. Keehn & Associates, APC, et al.
Case No.: BC455229
Motion: (1) Motion for Summary Judgment
(2) Motion for Summary Judgment/Adjudication
(3) Demurrer
Moving Party: (1) Defendants Keehn & Associates, APC and L. Scott Keehn
(2) Defendants Landsberg & Associates and Ian Landsberg
(3) Cross-Defendants Landsberg & Associates and Ian Landsberg
Responding Party: (1)-(2) Plaintiffs Shaoxing City Maolong Wuzhong Down Products, Ltd. and Shui Yan Cheng
(3) Cross-Complainants Keehn & Associates, APC and L. Scott Keehn
Notice: OK

Tentative Ruling: (1) Keehn’s motion for summary judgment is granted.

(2) Landsberg’s motion for summary judgment is granted.

(3) Landsberg’s demurrer is off-calendar as moot.

Background –
On 2/18/11, Plaintiffs Shaoxing City Maolong Wuzhong Down Products, Ltd. and Shui Yan Cheng filed this action against Defendants Keehn & Associates, APC and L. Scott Keehn (collectively “Keehn”) and Landsberg Margulies, LLP and Ian Landsberg (collectively “Landsberg”) for legal malpractice. Plaintiffs allege that they obtained a judgment against Aeolous and two of Aelous’ shareholders Wei Xu and Wei Dong (“Debtors”) (Complaint ¶ 8); that Debtors filed Chapter 11 bankruptcies (Complaint ¶ 9); and that Plaintiffs retained Keehn and Landsberg to represent Plaintiffs in the bankruptcy proceedings (Complaint ¶ 10).

On 8/15/11, Landsberg filed a petition to compel arbitration which was denied on 10/18/11. Landsberg appealed the denial of the petition to compel arbitration. On 3/13/13, this action was assigned to this Court. On 6/10/13, the Court of Appeal affirmed the denial of the petition to compel arbitration: remittitur issued on 8/14/13.

On 9/13/13, Landsberg filed a cross-complaint against Keehn and Gerald Vernon Hollingsworth Jr. for (1) equitable indemnity, (2) equitable contribution, and (3) declaratory relief. Landsberg alleges that it succeeded Keehh’s representation of Plaintiffs in the bankruptcy proceedings and that Hollingsworth was concurrent counsel throughout. Landsberg Cross-Complaint ¶¶ 3-4.

On 1/13/14, the Court overruled Keehn’s demurrer to the Landsberg Cross-Complaint. On 1/23/14, Keehn filed a cross-complaint against Landsberg and Hollingsworth for (1) equitable indemnity and (2) equitable contribution. On 2/19/14, the Court sustained Hollingsworth’s demurrer to the Landsberg Cross-Complaint with leave to amend. On 2/27/14, Landsberg filed a First Amended Cross-Complaint.

Trial is set for 5/5/14, and FSC for 4/17/14.

I. Keehn Motion for Summary Judgment –

1. Undisputed Facts
On 12/22/08, Plaintiffs obtained an arbitration award of $5.35 million against Debtors who each filed Chapter 11 bankruptcies on 6/8/09. Pls.’ Opp’n Sep. Statement (“POSS”) [Keehn] ¶¶ 1-2. On 7/10/09, Plaintiffs hired Keehn to represent their interests in the bankruptcy cases, instructing Keehn to obtain discovery to challenge a lien filed by Zhejian Hengdi Bedding Co., Ltd. and its parent company Zhejiang Liuqiao Feather Co., Inc. (collectively “ZHBC”) and other alleged fraudulent transfers which the Bankruptcy Court ordered to be asserted by 10/7/09. Id. ¶¶ 3-7.

Keehn failed to file a challenge by 10/7/09 (id. ¶ 8), informing Hollingsworth who was co-counsel for Plaintiffs that they did not possess evidence to support a good faith challenge as to ZHBC (id. ¶ 9), and Keehn’s request to extend the time to file a challenge was denied by the Bankruptcy Court on 11/10/09 (id. ¶ 12). On 11/19/09, substitution of attorney forms were filed in all the bankruptcy cases whereby Landsberg replaced Keehn as counsel of record. Id. ¶ 14. On 2/18/11, Plaintiffs filed this action. Id. ¶ 15.

2. Request for Judicial Notice
Keehn requests judicial notice of Plaintiffs’ judgment against Debtors and documents filed in the Debtors’ bankruptcy cases: the RJN is granted.

3. Evidentiary Objections
Keehn objects to portions of the declarations of Shui Yan Cheng (Nos. 1-4), Ivy Yuen (Nos. 5-6), and Gary Hollingsworth (Nos. 8-10). All objections are sustained except for Objection No. 5.

4. Statute of Limitations
Keehn moves for summary judgment on the ground that Plaintiffs’ legal malpractice claim is barred by the one year statute of limitations of CCP § 340.6(a). See generally Jocer Enterprises, Inc. v. Price (2010) 183 Cal.App.4th 559, 566-67.

Keehn argues that when Keehn failed to timely challenge ZHBC’s lien by 10/7/09 and was denied an extension to do so on 11/10/09, Plaintiffs suffered injury by the loss and diminution of a right or remedy (Adams v. Paul (1995) 11 Cal.4th 583, 589-90) which started the accrual of Plaintiffs’ claim (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 807-8). This is sufficient to carry Keehn’s initial burden to establish that Plaintiffs’ legal malpractice claim is barred by the statute of limitations.

In opposition, Plaintiffs argue that they did not suffer injury until they settled at the mediation on 2/22/10. See Pl.’s Add’l Material Facts (“PAMF”) [Keehn] ¶ 8. However, the Supreme Court has stated that “the determination of actual injury does not necessarily depend upon or require some form of final adjudication, as by judgment or settlement.” Adams, 11 Cal.4th at 591. That Landsberg told Plaintiffs that ZHBC’s lien could still be challenged (PAMF [Keehn] ¶ 5) does not raise triable issues of fact as to injury because Plaintiffs fail to submit any evidence that supports this assertion. Therefore, Plaintiffs fail to raise any triable issues of fact that they did not sustain actual injury as of 11/10/09.

Plaintiffs also argue that the statute of limitations was tolled when Keehn assisted in the transition of the representation of Plaintiffs’ to Landsberg. PAMF [Keehn] ¶ 3. However, continuous representation requires Keehn to have represented Plaintiffs “regarding the specific subject matter in which the alleged wrongful act or omission occurred.” CCP § 340.6(a)(2). It is undisputed that Keehn was retained to represent Plaintiffs’ interests in the bankruptcy cases and was then replaced as counsel of record by Landsberg in the bankruptcy cases on 11/19/09. That Keehn may have assisted in the transition does not raise any triable issues of fact of continuous representation because Plaintiffs consented to terminating Keehn’s representation of Plaintiffs’ interests in the bankruptcy cases on 11/19/09. See Lockley v. Law Office of Cantrell, Green, Pekich, Cruz & McCort (2001) 91 Cal.App.4th 875, 887-88. Therefore, Plaintiffs fail to raise any triable issues of fact that Keehn continued to represent Plaintiffs after 11/19/09.

Because Plaintiffs fail to raise any triable issues of fact as to tolling, Keehn’s motion for summary judgment is granted.

II. Landsberg Motion for Summary Judgment/Adjudication –

1. Undisputed Facts
Plaintiffs obtained an arbitration award of $5.35 million against Debtors who each filed Chapter 11 bankruptcies on 6/8/09. Pls.’ Opp’n Sep. Statement (“POSS”) [Landsberg] ¶¶ 1-2. Plaintiffs retained Landsberg to represent their interests in the bankruptcy proceedings. Id. ¶ 3. On 2/22/10, Plaintiffs settled for $3,750,000. Id. ¶ 4.

2. Evidentiary Objections
Landsberg objects to portions of the declaration of Gary Hollingsworth. All objections are sustained.

3. Confidentiality
Landsberg moves for summary judgment/adjudication on the ground that Plaintiffs’ legal malpractice claim is based on statements made during mediation which are inadmissible pursuant to Evidence Code § 1119. The Supreme Court has rejected a legal malpractice exception to mediation confidentiality. See Cassel v. Superior Court (2011) 51 Cal.4th 113, 132-35.

Preliminarily, the Court notes that Plaintiffs attempt to distinguish Cassel from this action on the ground that the settlement was the result of a court-ordered mandatory settlement conference (see Evid. Code § 1117(b)(2); Rojas v. Superior Court (2004) 33 Cal.4th 407, 417 n.4). However, not only is Plaintiffs’ evidence inadmissible to support this argument, but Landsberg has also submitted evidence in reply that establishes that the mediation was in fact voluntary (Dorny Decl. ¶ 2, Ex. A).

Landsberg’s motion is based on Plaintiffs’ discovery responses that Landsberg failed to conduct discovery to provide sufficient information to engage in mediation and forced Plaintiffs to accept settlement. See, e.g., Pls.’ Response to Special Interrogatory No. 20 [Landsberg Evid. Ex. D]. Landsberg correctly notes that mediation confidentiality applies to bar a party’s claim that their attorney coerced them into signing a settlement agreement. Wimsatt v. Superior Court (2007) 152 Cal.App.4th 137, 164. In opposition, Plaintiffs argue that their claim is based on Lansberg’s failure to reopen and conduct discovery. However, this fails to acknowledge that Plaintiffs’ claim for damages arises out of Plaintiffs’ acceptance of the settlement agreement. To defend this action, Landsberg would necessarily be required to divulge facts as communications as to the settlement agreement, which is prohibited by the mediation confidentiality. This results in prejudice because Landsberg would not be able to effectively defend against Plaintiffs’ legal malpractice claim. Cf. Solin v. O’Melveny & Myers, LLP (2001) 89 Cal.App.4th 451, 462-63, 466 (addressing attorney client privilege). Therefore, the mediation confidentiality bars Plaintiffs’ legal malpractice claim. Landsberg’s motion for summary judgment is granted.

III. Demurrer –
Landsberg demurs to Keehn’s cross-complaint. Consistent with the Court’s ruling on the motions for summary judgment, the Court takes the demurrer off-calendar as moot.

IV. Shaoxing City Maolong Wuzhong Down Products, Ltd. –
The Court notes that both Keehn and Landsberg have argued that Plaintiff Shaoxing City Maolong Wuzhong Down Products, Ltd. is a suspended California corporation (Hong Decl. [Keehn] ¶ 2, Ex. 1; Dorny Decl. [Landsberg] ¶ 3, Ex. B) which results in barring prosecution of this action (i.e., opposing their motions for summary judgment) pending revivor (see, e.g., Bourhis v. Lord (2013) 56 Cal.4th 320, 324).

However, the Court notes that Keehn and Lansberg’s evidence is directed at an entity named “Shaoxing City Maolong Wuzhong Down Products Co.” There is no evidence to establish that this entity is the same as Plaintiff Shaoxing City Maolong Wuzhong Down Products, Ltd. even though the Court notes that Shaoxing City Maolong Wuzhong Down Products Co.’s agent for service of process appears to be the other plaintiff in this action, Shui Yan Cheng. Therefore, the Court does not consider the opposition filed by Shaoxing City Maolong Wuzhong Down Products, Ltd. as being invalid.