Case Name: Vince Nguyen, et al. v. Pinnacle Law Group, LLP, et al.
Case No.: 1-13-CV-248114

This is an action for legal malpractice arising out of defendants Andrew August and Pinnacle Law Group, LLP’s (collectively “Defendants”) brief representation of plaintiffs Vince Nguyen, Teri Nguyen, and Sorrento Pavilion, LLC (collectively “Plaintiffs”) in the underlying foreclosure action (Santa Clara County Superior Court, Case No. 1-09-CV-153711) (the “Foreclosure Action”) brought against them by First Century Plaza, LLC. In the Foreclosure Action, judgment was entered against Plaintiffs following First Century Plaza, LLC’s motion for summary judgment. Subsequently, Plaintiffs brought a wrongful foreclosure action (Santa Clara County Superior Court, Case No. 1-12-CV-233122) (the “Wrongful Foreclosure Action”) against East West Bank, the original lender, and the Syufy Group, a company affiliated with First Century Plaza, LLC, in which the parties reached a settlement.

On October 23, 2014, Plaintiffs filed the operative first amended complaint (“FAC”) against Defendants, alleging causes of action for: (1) legal malpractice (by Vince Nguyen and Teri Nguyen against Defendants); (2) breach of contract (by Plaintiffs against Defendants); and (3) breach of fiduciary duty (by Plaintiffs against Defendants).

Defendants filed the instant demurrer and motion to strike on December 19, 2014. Plaintiffs filed papers in opposition to the demurrer and motion to strike on January 28, 2015.

I. Defendants’ Request for Judicial Notice

Defendants’ request for judicial notice of the complaint filed on June 14, 2012, and the Notice of Entry of Dismissal and Proof of Service filed on January 16, 2013, in the case of Vinh Nguyen and Teri Nguyen v. Pinnacle Law Group, LLP and Andrew August (Santa Clara County Superior Court, Case No.1-12-CV-226495) is GRANTED. (See Evid. Code, § 452, subd. (d); see also People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2 [only relevant matters are subject to judicial notice].)

II. Demurrer

Defendants demur to the second and third causes of action of the FAC, only as to Sorrento Pavilion, LLC, on the ground of failure to allege facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).)

“In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

With respect to the second cause of action for breach of contract, Defendants persuasively argue that it fails to allege facts sufficient to state a cause of action as to Sorrento Pavilion, LLC because Sorrento Pavilion, LLC is not a party to the Engagement Agreement and, thus, lacks standing to sue on the same. (See FAC, ¶¶ 56-58, Ex.1, p.2 [“[this] attorney-client fee agreement … is entered into as [of] April 5, 2011 by and between Teri Ha Nguyen and Vince Nguyen (collectively ‘you’ or ‘your’ or ‘Client’), and Pinnacle Law Group, LLP ….”]; see also Code Civ. Proc., § 367 [stating that generally every action must be prosecuted in the name of the real party in interest]; see also Powers v. Ashton (1975) 45 Cal.App.3d 783, 787 [noting that if an action is brought by other than a real party in interest, it is subject to a general demurrer].) Although the FAC alleges that Sorrento Pavilion, LLC is a party to the Engagement Agreement (see FAC, ¶ 27), facts appearing in exhibits attached to the FAC, which are part of the “face of the pleading,” are given precedence over inconsistent allegations in the FAC. (See Holland v. Morse Diesel Int’l, Inc. (2001) 86 Cal.App.4th 1443, 1447; see also Barnett v. Fireman’s Fund Ins. Co. (2001) 90 Cal.App.4th 500, 505.)

In their opposition, Plaintiffs argue that Defendants promised to represent Sorrento Pavilion, LLC, and “a cross-complaint for wrongful foreclosure … was always a part of Defendants’ plan, advice, and counsel and was verbally promised to Sorrento at the initial consultation meeting between Plaintiffs and Defendants …[,]” citing page 7, lines 19-21 of the FAC. (Opp’n., p. 10:6-10.) However, the FAC does not allege that Defendants orally promised to represent Sorrento Pavilion, LLC. (See FAC, ¶ 7.) While the FAC alleges that Vince Nguyen and Teri Nguyen discussed their goals, which included filing a cross-complaint against First Century Plaza, LLC and East West Bank on behalf of Plaintiffs, with Defendants at the initial meeting, the Engagement Agreement stated that Defendants representation was limited in scope and the services to be provided did not include preparation of a cross-complaint on behalf of Sorrento Pavilion, LLC. (See FAC, Ex. 1, p. 2 [“You have retained us to perform the following services: [¶] To associate into the Lawsuit as co-counsel of record; to initiate discovery to the plaintiffs and appropriate third parties and to thereafter assess the merits of potential counter-claims against all potentially responsible parties. At this time our engagement does not contemplate our being involved beyond the discovery process.”].)

Furthermore, the second cause of action for breach of contract fails to allege facts sufficient to state a cause of action as to Sorrento Pavilion, LLC because it is time-barred by the applicable statute of limitations. (See Saliter v. Pierce Bros. Mortuaries (1978) 81 Cal.App.3d 292, 300 [stating that where the dates alleged in a complaint show that the action is barred by the statute of limitations, a general demurrer lies]; see also Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403 [stating that the running of the statute must appear “clearly and affirmatively” from the dates alleged, and it is not enough that the complaint might be barred].) Since Plaintiffs’ breach of contract claim arises from the performance of professional legal services, Code of Civil Procedure section 340.6 applies and the claim must be brought “either ‘one year after actual or constructive discovery, or four years after occurrence (the date of the wrongful act or omission), whichever occurs first’ [citation] unless these periods are tolled pursuant to the exceptions specified in the statute.” (Leasequip, Inc. v. Dapeer (2002) 103 Cal.App.4th 394, 401; see also Levin v. Graham & James (1995) 37 Cal.App.4th 798, 805 [stating that the statute of limitations set forth in Code of Civil Procedure section 340.6 applies “[i]n all cases [arising from the performance of professional legal services,] other than actual fraud, whether the theory of liability is based on the breach of an oral or written contract, a tort, or a breach of a fiduciary duty.”].)

The statute of limitations began to run on September 1, 2011, because as of that date Plaintiffs had discovered or should have discovered the facts essential to their claims, and they had suffered appreciable and actual harm from Defendants’ conduct (i.e., on September 1, 2011 the court in the Foreclosure Action granted First Century Plaza, LLC’s motion for summary judgment and entered judgment against Plaintiffs in the amount of $880,634.77). (See Laird v. Blacker (1992) 2 Cal.4th 606, 611-615 [“the limitations period of section 340.6 commences when a client suffers an adverse judgment or order of dismissal in the underlying action on which the malpractice action is based,” and not when the appeal of that judgment becomes final].) Thus, the statute of limitations expired on September 1, 2012. Since Sorrento Pavilion, LLC was not a party to the tolling agreement between Defendants and Vince Nguyen and Teri Nguyen, even if the FAC relates back the complaint filed on June 18, 2013, the breach of contract claim asserted by Sorrento Pavilion, LLC is untimely. (See Nelson v. A. H. Robins Co. (1983) 149 Cal.App.3d 862, 866 [“when a new party is added to the action, the action commences as to him on the date of the order adding him as a party or on the date of filing of the pleading naming him as a new party.”]; see also Pasadena Hospital Assn., Ltd. v. Superior Court (1988) 204 Cal.App.3d 1031, 1034–1037 [applying the relation-back doctrine]; see also Garrison v. Board of Directors (1995) 36 Cal.App.4th 1670 [applying the relation-back doctrine]; but see Quiroz v. Seventh Ave. Center (2006) 140 Cal.App.4th 1256, 1278 [a new plaintiff cannot be joined after the statute of limitations has run where he or she seeks to enforce an independent right or to impose greater liability upon the defendant].)

Plaintiffs’ argument that the statute of limitations is tolled due to the appeals process regarding the Foreclosure Action and the later filing of the Wrongful Foreclosure Action is without merit. (See Laird v. Blacker (1992) 2 Cal.4th 606, 615 [rejecting the plaintiff’s argument that the limitations period was tolled until her appeal was resolved].) Additionally, there are no allegations in the FAC that Defendants continued to represent Plaintiffs after the judgment was entered in the Foreclosure Action on September 1, 2011. (See FAC, ¶¶ 27, Ex. 1 [stating that Defendants’ representation was limited to conducting discovery in the Foreclosure Action], 42 [stating that Plaintiffs were represented by new counsel, Berliner Cohen in the Wrongful Foreclosure Action]; see Code Civ. Proc., § 340.6, subd. (a)(2) [setting forth tolling based on continuing representation].)

Accordingly, Defendants’ demurrer to the second cause of action as to Sorrento Pavilion, LLC is SUSTAINED, with 10 days’ leave to amend.

With respect to the third cause of action for breach of fiduciary duty, Defendants persuasively argue that it fails to allege facts sufficient to constitute a cause of action as to Sorrento Pavilion, LLC because there are no facts that give rise to an inference that a fiduciary relationship existed between Defendants and Sorrento Pavilion, LLC. (See City of Atascadero v. Merril Lynch (1998) 68 Cal.App.4th 445, 483 [setting forth the elements of a claim for breach of fiduciary duty]; see also Kirschner Brothers Oil, Inc. v. Natomas Co. (1986) 185 Cal.App.3d 784, 790 [“While breach of fiduciary duty is a question of fact, the existence of legal duty in the first instance and its scope are questions of law.”].) As articulated above, Engagement Agreement does not demonstrate that Defendants agreed to represent Sorrento Pavilion, LLC and there are no other facts alleged in the FAC that establish the existence of an attorney-client relationship or any other type of confidential relationship between Sorrento Pavilion, LLC and Defendants.

Moreover, the claim is time-barred as to Sorrento Pavilion, LLC for the reasons previously articulated with respect to the second cause of action.

Accordingly, Defendants’ demurrer to the third cause of action as to Sorrento Pavilion, LLC is SUSTAINED, with 10 days’ leave to amend.

III. Motion to Strike

Defendants move to strike portions of the FAC pertaining to Plaintiffs’ request for punitive damages, specifically: ¶ 53 [“The conduct of Pinnacle Law Group, LLP and August was willful, justifying punitive damage.”]; ¶ 62 [“The conduct of Pinnacle Law Group, LLP, and August was willful, justifying an award of punitive damage.”]; ¶ 70 [“The conduct of Pinnacle and August was willful, justifying an award of punitive damage.”]; ¶ subdivision (c) of the Prayer [“For punitive damages according to proof.”]. (See Code Civ. Proc., § 436.)

A court may strike any irrelevant, false, or improper matter inserted into any pleading or strike all or part of any pleading not drawn or filed in conformity with the laws of this state, a court rule, or an order of the court. (See Code Civ. Proc., § 436.) As with a demurrer, the grounds for a motion to strike must appear on the face of the challenged pleading or from matters of which the court may take judicial notice. (See Code Civ. Proc., § 437, subd. (a); see also City and County of San Francisco v. Strahlendorf (1992) 7 Cal.App.4th 1911, 1913.) In ruling on a motion to strike, the court reads the complaint as a whole, all parts in their context, and assuming the truth of all well-pleaded allegations. (See Turman v. Turning Point of Central California, Inc. (2010) 191 Cal.App.4th 53, 63, citing, Clauson v. Super. Ct. (1998) 67 Cal.App.4th 1253, 1255.)

To recover punitive damages, a plaintiff must plead facts sufficient to show that the defendant is guilty of oppression, fraud, or malice. (See Civ. Code, § 3294.) “‘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 and safety of others.” (Civ. Code, § 3294, subd. (c)(1).) “‘Oppression’ means despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of the rights and safety of others.” (Civ. Code, § 3294, subd. (c)(2).) “‘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.” (Civ. Code, § 3294, subd. (c)(3).)

Defendants’ argument that punitive damages are not available for claims based on legal malpractice is without merit because a plaintiff may recover punitive damages in a legal malpractice action if the attorneys are guilty of oppression, fraud, or malice. (See Ferguson v. Lieff, Cabraser, Heimann & Bernstein (2003) 30 Cal.4th 1037, 1053, fn., 3 [stating that a plaintiff may recover punitive damages in a legal malpractice action if the attorneys, themselves, are guilty of oppression, fraud, or malice.]; see also Blegen v. Super. Ct. (1981) 125 Cal.App.3d 959, 962.)

However, Defendants persuasively argue that the Plaintiffs fail to allege sufficient facts demonstrating fraud, oppression, or malice. (See Brousseau v. Jarrett (1977) 73 Cal.App.3d 864, 872 [stating that punitive damages cannot be pleaded generally (i.e., with mere legal conclusions) and specific factual allegations are required].) Plaintiffs request punitive damages in connection with the first, second, and third causes of action, which are based on the following conduct: (1) Defendants’ failure to conduct depositions or discovery, other that requests for production of documents (see FAC, ¶ 35); and (2) Defendants’ decision to granted an extension of time to First Century Plaza, LLC to file its motion for summary judgment in the Foreclosure Action and their subsequent refusal to retract the extension. (See FAC, ¶¶ 29-34.) None of the alleged conduct qualifies as conduct that is oppressive, fraudulent, or malicious as defined by Civil Code section 3294. Instead, it is simply garden-variety legal malpractice, i.e., allegations that Defendants did not provide competent representation to Plaintiffs in the underlying proceeding. (See Jackson v. Johnson (1992) 5 Cal.App.4th 1350, 1354 [simple negligence cannot support an award of punitive damages].) Also, Plaintiffs’ conclusory allegations that Defendants’ conduct was willful are insufficient. (See G. D. Searle & Co. v. Superior Court (1975) 49 Cal.App.3d 22, 29 [“When nondeliberate injury is charged, allegations that the defendant’s conduct was wrongful, willful, wanton, reckless or unlawful do not support a claim for exemplary damages; such allegations do not charge malice.”]; see also Smith v. Superior Court (1992) 10 Cal.App.4th 1033, 1041-1042.)

Accordingly, Defendants’ motion to strike is GRANTED, with 10 days’ leave to amend.