Case Name: Bradford Newman v. McManis Faulkner
Case No.: 17CV304813

This is primarily an action for professional negligence against a law firm, Defendant McManis Faulkner (“Defendant”). Currently before the Court is the motion for summary judgment/adjudication brought by Defendant against the operative Second Amended Complaint (“SAC”) of Plaintiff Bradford Newman (“Plaintiff”). The SAC states four causes of action: 1) Breach of Contract (the legal services contract Plaintiff entered into with Defendant for it to represent him in an underlying marital dissolution action); 2) Fraud (alleging in part that Defendant “falsely represented” that it would only bill him for work it actually performed and would not overbill in order to induce him to sign the legal services contract); 3) Negligence (legal malpractice), and; 4) Unfair Business Practices, based on the prior causes of action. Plaintiff’s original complaint was filed on January 4, 2017.

1. Requests for Judicial Notice
A precondition to judicial notice in either its permissive or mandatory form is that the matter to be noticed be relevant to the material issue before the Court. (Silverado Modjeska Recreation and Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, citing People v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422 fn. 2.) Both sides have submitted requests for judicial notice.

Defendant has submitted a request for judicial notice of nine documents (exhibits A-I) pursuant to Evidence Code §452(d) (court records). With the exception of court orders or judgments, court records can only be noticed as to their existence and filing dates, and not as to the truth of their contents. Therefore, notice of Exhibits A-F and H is GRANTED as to their existence and filing dates only. Notice of Exhibits G & I, court orders in the underlying litigation, is GRANTED as to their existence, contents and the date they were issued.

Plaintiff has submitted a request for judicial notice of five documents (exhibits A-E) pursuant to Evidence Code §452(d). Notice of exhibits A-D is DENIED as they are not relevant to the material issue before the Court. Notice of exhibit E, a copy of a stipulation between the parties in this action as to the admissibility of certain documents (specifically emails and billing records produced by Defendant in discovery in this action) is GRANTED.

2. Defendant’s motion for summary judgment/adjudication
The parties are bound by their respective pleadings on summary judgment. The pleadings limit the issues presented for summary judgment and such a motion may not be granted or denied on issues not raised by the pleadings. (See Government Employees Ins. Co. v. Sup. Ct. (2000) 79 Cal.App.4th 95, 98; Laabs v. City of Victorville (2008) 163 Cal.App.4th 1242, 1258; Nieto v. Blue Shield of Calif. Life & Health Ins. (2010) 181 Cal.App.4th 60, 73 [“the pleadings determine the scope of relevant issues on a summary judgment motion.”].) The moving party bears the initial burden of production to make a prima facie showing that there are no triable issues of material fact. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A motion for summary adjudication shall be granted only if it completely disposes of a cause of action, an affirmative defense, a claim for damages, or an issue of duty. (See Code of Civil Procedure [“CCP”] §437c(f)(1); McClasky v. California State Auto. Ass’n (2010) 189 Cal.App.4th 947, 975 [“If a cause of action is not shown to be barred in its entirety, no order for summary judgment—or adjudication—can be entered.”]) Summary adjudication of general “issues” or of facts is not permitted. (See Raghavan v. The Boeing Company (2005) 133 Cal.App.4th 1120, 1136.)

The moving party’s declarations and evidence will be strictly construed in determining whether they negate or disprove an essential element of a plaintiff’s claim “in order to resolve any evidentiary doubts or ambiguities in plaintiff’s (or opposing party’s) favor.” (Johnson v. American Standard, Inc. (2008) 43 Cal. 4th 56, 64, parentheses added.) While the same standards of admissibility govern both, the opposition declarations are liberally construed while the moving party’s evidence is strictly scrutinized. (Saelzler v. Advanced Group 400 (2001) 25 Cal. 4th 763, 768.) The moving party may generally not rely on additional evidence filed with its Reply papers. (See Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537-38 [“The general rule of motion practice . . . is that new evidence is not permitted with reply papers. This principle is most prominent in the context of summary judgment motions . . .”]; see also Nazir v. United Airlines, Inc. (2009) 178 Cal.App.4th 243, 252; San Diego Watercrafts, Inc. v. Wells Fargo Bank, N.A. (2002) 102 Cal.App.4th 308, 316.)

“A defendant seeking summary judgment must show that at least one element of the plaintiff’s cause of action cannot be established, or that there is a complete defense to the cause of action. … The burden then shifts to the plaintiff to show there is a triable issue of material fact on that issue.” (Alex R. Thomas & Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; internal citations omitted.) “There is a triable issue of material fact if, and only if, the evidence would allow a reasonable finder of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar, supra, at p. 850.)

“[I]n opposing a summary judgment motion, a plaintiff may not create a disputed issue of fact by contradicting his or her deposition testimony with an affidavit or declaration.” (Jogani v. Jogani (2006) 141 Cal.App.4th 158, 177. See also Whitmire v. Ingersoll-Rand Co. (2010) 184 Cal.App.4th 1078, 1087 [“Where a declaration submitted in opposition to a motion for summary judgment clearly contradicts the declarant’s earlier deposition testimony or discovery responses, the trial court may fairly disregard the declaration and ‘conclude there is no substantial evidence of the existence of a triable issue of fact.’”]), citing D’Amico v. Board of Medical Examiners (1974) 11 Cal.3d 1, 21.) To the extent the opposing declaration of Plaintiff Bradford Newman contradicts his verified discovery responses or sworn deposition testimony submitted by Defendant (see Defense exhibits L and M) it has been disregarded.

Defendant’s primary argument for summary judgment/adjudication of each of the SAC’s four causes of action is that they are time-barred by CCP §340.6. (See Notice of Motion at 2:3-24. The bases for summary adjudication are mislabeled as “issues.” The only issues that can be summarily adjudicated under CCP §437c(f)(1) are “issues of duty.”)

CCP §340.6 states in pertinent part that 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 or the wrongful act or omission, whichever occurs first.” The running of the statute shall be tolled during any of the following, “(1) The plaintiff has not sustained actual injury; (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred; (3) The attorney willfully conceals the wrongful act or omission occurred, and; (4) The plaintiff is under a legal or physical disability which restricts the plaintiff’s ability to commence legal action.”

The Supreme Court in Lee v. Hanley (2015) 61 Cal.4th 1225, 1229 (a case cited by Defendant) held that “section 340.6(a) applies to a claim when the merits of the claim will necessarily depend upon proof that an attorney violated a professional obligation—that is, an obligation the attorney has by virtue of being an attorney—in the course of providing professional services. Such claims brought more than one year after the plaintiff discovers or through reasonable diligence should have discovered the facts underlying the claim are time-barred by section 340.6(a) unless the plaintiff alleged actual fraud.” (Emphasis in original.) The Court later stated that “section 340.6(a)’s time bar applies to claims whose merits necessarily depend upon proof that an attorney violated a professional obligation in the course of providing professional services. In this context, a ‘professional obligation’ is an obligation that an attorney has by virtue of being an attorney, such as fiduciary obligations, the obligation to perform competently, the obligation to perform the services contemplated in a legal services contract into which an attorney has entered, and the obligations embodied in the Rules of Professional Conduct.” (Id. at pp. 1236-1237.)

The one-year limitations period in §340.6 is triggered when the client discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission and suffers actual injury. (Peregrine Funding, Inc. v. Sheppard, Mullin, Richter & Hampton, LLP (2005) 133 Cal.App.4th 658, 685; Levin v. Graham & James (1995) 37 Cal.App.4th 798, 805; Pompilio v. Kosmo (1995) 39 Cal.App.4th 1324, 1328 [“discovery of facts essential to malpractice and the suffering of actual harm from the malpractice establish a cause of action and start the statute of limitations”].) “Actual injury” occurs “when the plaintiff suffers any loss or injury legally cognizable as damages in a legal malpractice action based on the asserted errors or omissions.” (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 743. Court’s emphasis.) “An existing injury is not contingent or speculative simply because future events may affect its permanency or the amount of monetary damages eventually incurred.” (Id. at p. 754.)

“Where the attorney unilaterally withdraws or abandons the client, “the representation ends when the client actually has or reasonably should have no expectation that the attorney will provide further legal services.” (Gonzalez v. Kalu (2006) 140 Cal.App.4th 21, 30.) “That may occur upon the attorney’s express notification to the client …, or, if the attorney remains silent, may be inferred from the circumstances.” (Id. at 30-31.) “After a client has no reasonable expectation that the attorney will provide further legal services … the client is no longer hindered by a potential disruption of the attorney-client relationship and no longer relies on the attorney’s continuing representation, so the tolling should end.” (Id. at 31.)

Defendant’s motion for summary judgment is DENIED as it has failed to meet its initial burden to establish that there are no triable issues of material fact as to all four causes of action alleged in the SAC. Defendant’s motion in the alternative for summary adjudication of each of the SAC’s four causes of action (again the only “issues” that can be adjudication are issues of duty) is GRANTED in part and DENIED in part as follows.

Summary adjudication of the second cause of action for fraud is DENIED. Summary adjudication of the fourth cause of action for unfair business practices is also DENIED as it incorporates and is based (in part) on the alleged fraud.

CCP §340.6 by its express terms does not apply to claims for “actual fraud” and it does not apply to or bar the SAC’s second cause of action for fraud. Incorporated into the second cause of action are the SAC’s general allegations that the legal service agreement between the parties was fraudulently induced in that as part of deciding whether to retain Defendant Plaintiff “made clear that he was an individual (not a corporation) of limited means and required [Defendant] to carefully monitor work performed and fees billed. [Defendant] falsely agreed it would not bill for work never performed, overbill or perform unnecessary work and would closely and properly manage the case to ensure fees and costs did not get out of hand. . . . Plaintiff is informed and believes that at the time [Defendant] made such representations to and agreements with the Plaintiff, [Defendant] knew such representations were false and made them for the purpose of inducing Plaintiff to retain [Defendant’s] so it could start fraudulently billing him.” (SAC at 2-3, brackets added.)

A claim that a law firm made false promises in order to fraudulently induce the signing of a contract—even a legal services contract—cannot reasonably be characterized as a claim “whose merits necessarily depend upon proof that an attorney violated a professional obligation in the course of providing professional services.” (Lee, supra, at p. 1236-1237.) To the extent the second and fourth causes of action are based on fraudulent inducement of contract CCP §340.6 does not apply and judgment/adjudication of both claims must be denied because “[i]f a cause of action is not shown to be barred in its entirety, no order for summary judgment—or adjudication—can be entered.” (McClasky, supra, at p. 975.)

Defendant has also failed to meet its initial burden to demonstrate that the unclean hands doctrine wholly disposes of the second or fourth cause of action. Therefore the motion for summary judgment/adjudication on the basis that the “Second Amended Complaint, in its entirety, is barred by the Doctrine of Unclean Hands” is DENIED. (See Defendant’s Notice of Motion at 2:23-24, Court’s emphasis.) While unclean hands is raised as the eleventh affirmative defense in Defendant’s Answer (see Defense Exhibit D), the argument specifically made by Defendant on this issue in its moving papers (see Defendant’s memo. of points and authorities at pp. 23:15-24:15 generally) only relates to the third cause of action for negligence.

Summary adjudication of the first cause of action for breach of contract and the third cause of action for negligence: legal malpractice on the basis that they are both time-barred is GRANTED. Summary adjudication of third cause of action is also GRANTED on the ground that Plaintiff has not established that he suffered any damage proximately caused by Defendant’s alleged negligence.

CCP §340.6 clearly applies to both the first and third causes of action. As the Supreme Court has stated “section 340.6(a)’s time bar applies to claims whose merits necessarily depend upon proof that an attorney violated a professional obligation in the course of providing professional services. In this context, a ‘professional obligation’ is an obligation that an attorney has by virtue of being an attorney, such as fiduciary obligations, the obligation to perform competently, the obligation to perform the services contemplated in a legal services contract into which an attorney has entered, and the obligations embodied in the Rules of Professional Conduct.” (Lee v. Hanley, supra, at pp. 1236-1237. Court’s emphasis.)

Defendant has submitted admissible evidence, a copy of the “Substitution of Attorney-Civil” form, signed by Plaintiff and filed on February 19, 2015, establishing that the attorney-client relationship—and any tolling created by the relationship—ended by no later than February 19, 2015. (See Defense Exhibit H.)

Regarding the first cause of action for breach of contract Plaintiff is bound by the SAC on summary judgment and the SAC admits on its face that Plaintiff believed Defendant had repeatedly breached the contract (the legal services agreement) and that he had been harmed by being overbilled and/or billed for nonexistent work long before the attorney-client relationship ended in February 2015. The SAC alleges that from January through September 2014 Plaintiff was overbilled and/or billed for nonexistent work and that “[w]hen [Plaintiff] called out [Defendant] on its fraud, despite [Defendant] previously commending [Plaintiff] for being a ‘good client’ and ‘nice person,’ [Defendant] now accused him of being a ‘bad’ client, threatened to immediately withdraw if he did not sign a stipulated substitution of counsel, and otherwise resorted to familiar tactics and attempted excuses.” (See SAC at ¶¶ 10-12, brackets added. See also SAC at ¶¶ 24-25.) These allegations are incorporated by reference into each cause of action. The first cause of action for breach of contract generally repeats these allegations at ¶¶ 35-36 and asserts that Defendant “breached the contract by failing to perform its obligations under the contract in the manner set forth above.” (SAC at ¶ 38.) Based on his interpretation of the contract, Plaintiff suffered harm every time he paid a monthly invoice that exceeded the agreement he believed he had regarding costs.

Plaintiff’s knowledge of injury during the attorney-client relationship is confirmed by his deposition testimony (see Defense Exhibit M at pp. 26:4-27:16) where he testified that he knew by February 2014 that he was being billed over the allegedly promised monthly limit of $10,000 and that he discussed this with Defendant. His verified special interrogatory responses include the statement (Defense Exhibit L at p. 5:2-4) that “[e]ach invoice submitted to Mr. Newman by McManis which reflected the categories above and/or exceeded the agreed upon budget of $10,000 [per month] without Mr. Newman’s prior consent, constituted independent breach[] of the Agreement.” (Brackets added.) Plaintiff’s own opposing declaration confirms his knowledge of overbilling in 2014, as it states that he had confronted Defendant about the billing, and been told that his “billing issues” would be worked out at the end of the case. “By September, 2014, I was getting increasingly concerned about receiving McManis monthly invoices totaling three and four times the agreed upon $10,000 or less monthly budget.” (Plaintiff’s opposing declaration at ¶ 12.)

As soon as the attorney-client relationship had indisputably ended in Feb. 2015 (with the marital dissolution case still ongoing) any tolling created by the relationship and/or any alleged assurances by Defendant that billing problems would be taken care of later ended and the limitations period immediately began running as Plaintiff was clearly aware of the claimed injury. (See Gonzalez, supra, 140 Cal.App.4th at pp. 30-31.) Plaintiff’s breach of contact claim became time-barred under the one-year statute by the end of February 2016, well before his original complaint was filed on January 4, 2017.

Regarding the SACs third cause of action for negligence: legal malpractice claim, Plaintiff must establish: “(1) the duty of the attorney to use such skill, prudence, and diligence as members of his or her profession commonly possess and exercise; (2) a breach of that duty; (3) a proximate causal connection between the breach and the resulting injury; and (4) actual loss or damage resulting from the attorney’s negligence.” (Ambriz v. Kelegian (2007) 146 Cal.App.4th 1519, 1531; Coscia v McKenna & Cuneo (2001) 25 Cal.4th 1194, 1199.)

The SAC’s third cause of action simply alleges that “[d]uring the representation, [Defendant] failed to exercise the reasonable and heightened standard of care owed to [Plaintiff] and made a material mistake and proximately caused [Plaintiff’s] damages. [Defendant’s] negligence first resulted in damages to [Plaintiff] in 2016 . . .” (SAC at ¶¶ 52-53.) The general allegations incorporated by reference clarify that Defendant allegedly “failed to prepare a necessary document required by the express terms of a court order.” (SAC at ¶ 32.)

The parties do not dispute that the court order referred to is a November 26, 2014 order of the Court (Hon. Grilli) in the underlying marital dissolution action, a copy of which is submitted as Defense Exhibit G (“Stipulation and Order Re Pre-Marital Agreement”). The Order states in pertinent part: “1. Transfer of Retirement Funds: Within 30 days of entry of this Order, Petitioner [Plaintiff] shall transfer to Respondent $250,000 in retirement funds, to be rolled over into a retirement account in her name, in a non-taxable transfer incident to divorce.” (Brackets added.) Paragraph 14 of the Order further states “[b]oth parties acknowledge that they have carefully read this agreement in its entirety, fully understand its contents and legal effect, and voluntarily chose to execute it.” Plaintiff was thus aware of the Order as soon as it was issued and cannot claim to not understand what it required of him.

The parties agree that carrying out the transfer of retirement funds ordered by the Court required a Qualified Domestic Relations Order (“QDRO”). Plaintiff’s deposition testimony (Defense Exhibit M at pp. 51:5-22 and 54:3-20) and verified discovery responses (Defense Exhibit L) confirm that Defendant’s alleged failure to timely prepare a QDRO is the sole basis for the third cause of action. In response to Defendant’s request to “state all facts” in support of the negligence claim (special interrogatory no. 7) Plaintiff stated in pertinent part: “McManis was negligent by failing to timely prepare and obtain the respondent’s signature on the QDRO referenced in the November 2015 order and by failing to advise Mr. Newman that if this task was not timely completed, he ran the risk of paying more than the agreed amount to respondent. Further, in McManis’ February 5, 2015 correspondence listing case items which needed to be complete[d], McManis failed to reference the QDRO in any fashion. As a proximate result of McManis’ negligence, Mr. Newman was first harmed in June 2016 when he was ordered to pay to the respondent an additional $8118.83 representing the gain of the principal amount during the period of McManis’ negligence.” (See Defense Exhibit L at pp. 13:19-14:8.)

Defendant has demonstrated through admissible evidence (Defense Exhibit K) that Plaintiff himself is responsible for all but the slightest of delays in preparing the QDRO. On January 7, 2015 (roughly a week past the 30 day deadline for transferring the retirement funds set by the November 26, 2014 order) Plaintiff sent Defendant an email with the subject line: “Pleading template for transfer of $250k in retirement funds to Liz,” “Liz” referring to Plaintiff’s spouse. Attached to the email (and included in Defense Exhibit K) is a draft QDRO form prepared by Paul Hastings LLP Retirement Plans, the retirement plan for the law firm at which Plaintiff is a partner. The email stated: “Carrie: This template will need to be completed by us and sent to Patton [his wife’s attorney] for signature at [a] time when Liz decides to follow through on PMA settlement. Let’s hold off incurring the costs until they inquire. Then we need it filed with the Court. Hopefully this template can be filed in largely by a paralegal in half an hour with you reviewing it and checking accuracy. Thanks for your help.” (Court’s Emphasis, brackets added.) This evidence establishes that any delay in preparing the QDRO after January 7, 2015 was not an act of negligence by Defendant but rather compliance with a directive from the client.

Plaintiff’s deposition testimony further establishes that the additional $8,118.83 he was later required to transfer was not a penalty imposed on him or an additional fee he was charged. The $8,118.83 figure simply reflected the amount the original “$250,000 in retirement funds” had increased in value from late 2014 to June 2016 when he actually transferred it as the Court had ordered on November 26, 2014. Plaintiff testified that the $8,118.83 represented “[t]he actuarially calculated—planned calculation of the appreciation in value of the 250,000 between the date of this agreement and the date–there was ultimately an order. . . . [T]he $8,118 is the actuarially calculated amount of how much the . . . 250,000 increased over that period of time.” (Defense Exhibit M at p. 54:7-15.) There was no additional financial injury to Plaintiff beyond the transfer of “$250,000 in retirement funds” he had already expressly agreed to in November 2014 and which he testified was not a damage he was claiming in this lawsuit. (See Defense Exhibit M at p. 129:3-7.). The Court in the underlying action had in essence ordered that the “$250,000 in retirement funds” was to become the property of Plaintiff’s soon-to-be former spouse by approximately January 1, 2015 (roughly 30 days after entry of the order). Plaintiff never had any interest in any increase in the value of those funds that occurred during the delay in transferring them.

Assuming for purposes of argument that the additional $8,118 transferred by Plaintiff as a result of his decision to delay compliance with the November 26, 2014 Court Order until June 2016 could be construed as an “injury” (and Plaintiff presents no authority for this proposition) the “injury” cannot be reasonably understood as proximately caused by any negligent act or failure to act by Defendant. Defendant has established through admissible evidence (Defense Exhibit K) that Plaintiff directed it to “hold off” completing the transfer “until they inquire” on January 7, 2015 and there is no evidence that Plaintiff changed that directive before the attorney-client relationship ended in February 2015.

Even if it is further assumed for purposes of argument that the additional $8,118.83 that was transferred was not only an “injury” but was also proximately caused by Defendant, the negligence claim is still time-barred under CCP §340.6. The “injury” occurred as soon as the 30 day period to comply with the November 26, 2014 Court Order had expired. Plaintiff was indisputably aware of the “injury” (the noncompliance with the Court’s order) on January 7, 2015 when he sent Defendant the template QDRO and expressly instructed Defendant to “hold off” completing it. Once the attorney-client relationship ended by no later than February 19, 2015 any tolling caused by the relationship ceased, the one-year limitations period began running immediately (as Plaintiff was aware of the “injury”) and the claim was time-barred by approximately February 20, 2016. Plaintiff’s argument that, because the amount of additional money he was required to transfer increased the longer he chose to delay transferring it, his “injury” therefore did not occur until the transfer was completed in June 2016 does not raise a triable issue of material fact as when he made the transfer is not when the claim accrued. “An existing injury is not contingent or speculative simply because future events may affect its permanency or the amount of monetary damages eventually incurred.” (Jordache Enterprises, Inc. v. Brobeck, Phleger, & Harrison, supra, 18 Cal.4th at p. 754.)