Ersoff v. Alschuler Grossman et al.

Filed 9/28/06 Ersoff v. Alschuler Grossman et al. CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

APPEAL from a judgment of the Superior Court of Los Angeles County.

Gerald Rosenberg, Judge. Affirmed.

Law Office of Philip A. Levy, Philip A. Levy for Plaintiff and Appellant.

Alschuler Grossman Stein & Kahan, Bruce A. Friedman, David B. Dreyfus for Defendants and Respondents.

___________________________________________________

A businessman has sued a lawyer and law firm because of their professional representation of his adversaries. The lawyer and firm demurred on the ground that plaintiff failed to obtain court approval before filing his action, as is required by Civil Code section 1714.10.^[1] Plaintiff then brought a belated petition under section 1714.10, which the trial court denied. We affirm. Plaintiff has failed to establish (a) that this case falls within any exception to section 1714.10, and (b) that he can prevail in this action.

FACTS

The Complaint

Appellant Seth Ersoff was an officer, director and shareholder in SRL Management (SLR), a boxing management and promotion firm. On April 10, 2001, Ersoff filed a lawsuit against various lawyers and a boxer named Ray Charles Leonard, who had a business relationship with SRL. Among the defendants named in Ersoff’s complaint is respondent Michael Plonsker, who is a member of respondent law firm Alschuler, Grossman, Stein & Kahan (Alschuler).

Ersoff alleged that in 1999, he recommended Plonsker’s services to Leonard, who needed legal representation in a personal matter. Leonard thereafter employed Plonsker on several occasions. Ersoff alleged, on information and belief, that Plonsker represented SRL while Ersoff was still associated with the company, which made Ersoff a client, or a third party beneficiary, or a person whose interests were impacted by Plonsker’s representation.

In March 2000, Plonsker contacted Ersoff, on behalf of Leonard, and indicated that he wanted to amicably and professionally resolve some disputes between Ersoff and Leonard. Plonsker did not disclose that he was also representing SRL, thereby creating a conflict of interest because SRL wanted to get rid of Ersoff. Ersoff quickly learned of this conflict of interest when he met with Plonsker to discuss the dispute. Using strong-arm tactics, Plonsker demanded that Ersoff capitulate to an unfavorable settlement proposal. This included having two FBI agents come to Ersoff’s home and interrogate him. Plonsker also arranged to have the FBI tape Ersoff’s telephone conversations. Ersoff refused to give way, and hired counsel to negotiate with Plonsker.

Ersoff asserted causes of action against respondents for breach of fiduciary duty, negligence, violation of statutory ethical standards, intentional and negligence infliction of emotional distress, and malpractice. Ersoff concedes that he did not secure approval from the court before filing his complaint.

Respondents’ Demurrers To The Complaint

On May 10, 2001, respondents demurred to the complaint. Respondents’ first argument was that Ersoff failed to comply with section 1714.10. Ersoff did not respond to the demurrer. Instead, he filed a first amended complaint in July 2001.

The First Amended Complaint

The first amended complaint (FAC) adds further detail to Ersoff’s allegations. Ersoff claims that money was owed to him for his association with Leonard that was “rechanneled into the hands of Defendants Plonsker/Alschuler.” Ersoff reasserts that respondents undertook representation that was adverse to his interests. In most respects, the FAC simply repeats the allegations in the complaint, but asserts a new claim against respondents for invasion of privacy.

Respondents’ Demurrers To The FAC

In August 2001, respondents demurred to the FAC. They once again argued that Ersoff failed to comply with section 1714.10, among other contentions. Ersoff opposed the demurrers, and contended that section 1714.10 is inapplicable. While the demurrers were pending, Leonard petitioned the state Labor Commission to determine whether Ersoff improperly acted as a talent agent without a license, in violation of the Labor Code. This lawsuit was apparently held in abeyance while the Labor Commission was considering Leonard’s petition.

The Trial Court’s Ruling On The Demurrers To The FAC

In December 2004, the trial court ruled on respondents’ demurrers to the FAC. The court sustained the demurrers on various grounds. In particular, the court found that all of Ersoff’s claims are barred by his failure to obtain court approval under section 1714.10.

Ersoff’s Petition For Court Approval

In January 2005, Ersoff petitioned the court for approval to assert conspiracy claims against respondents, under section 1714.10. Ersoff contended that (a) respondents waived their right to assert section 1714.10; (b) respondents violated an independent legal duty owed to him; and (c) there is a substantial probability that he will prevail in the action. Ersoff submitted a proposed second amended complaint, asserting claims against respondents for breach of fiduciary duty; negligence; unfair business practices; intentional and negligent infliction of emotional distress; and invasion of privacy. Respondents opposed the petition, noting that all of Ersoff’s claims are now time-barred because he waited five years to petition the court for prefiling approval.

THE TRIAL COURT’S RULING

The trial court ruled that Ersoff did not meet his burden of establishing a legally sufficient claim against respondents. The court wrote, “None of his proposed amended claims are supported by competent admissible evidence.” The court found that Ersoff “did not explain how he personally was a client of Plonsker and/or [Alschuler].” The proposed amendment to the complaint only showed that Plonsker offered to help Leonard: “There are no allegations that Plonsker represented Ersoff in any matter.” Furthermore, Ersoff did not show with admissible evidence that respondents “went beyond the scope of their representation for their own financial gain.” Finally, Ersoff could not show a reasonable probability of prevailing because his claims are barred by the statute of limitations. The court denied Ersoff’s petition, but granted him leave to file a third amended complaint.

DISCUSSION

1. Appeal And Review

Ersoff appeals from the order denying his petition to certify his conspiracy claims against respondents. The order is appealable as a final judgment. (§ 1714.10, subd. (d).) Review is de novo. (Berg & Berg Enterprises v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 822 (Berg & Berg); Hung v. Wang (1992) 8 Cal.App.4th 908, 931 [adequacy of the section 1714.10 petition presents a question of law, not of fact].)

2. Overview Of Section 1714.10

Section 1714.10 mandates that a plaintiff obtain a prefiling court order authorizing a complaint, if the plaintiff wishes to sue an attorney for conspiring with a client while contesting or compromising a claim or dispute. The plaintiff bears the burden of substantiating his claims and showing a reasonable probability of prevailing in the action. (§ 1714.10, subd. (a); Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003) 107 Cal.App.4th 54, 83.) The statute is “intended to weed out the harassing claim of conspiracy that is so lacking in reasonable foundation as to verge on the frivolous.” (Evans v. Pillsbury, Madison & Sutro (1998) 65 Cal.App.4th 599, 604.)

The statute enumerates two exceptions to the prefiling requirement. It does not apply “where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney’s acts go beyond the performance of a professional duty to serve the client and involve a conspiracy to violate a legal duty in furtherance of the attorney’s financial gain.” (§ 1714.10, subd. (c).)

In ruling on a petition, the court must determine whether there is sufficient evidence showing that a prima facie case will be established at trial. (Hung v. Wang, supra, 8 Cal.App.4th at p. 933; Burtscher v. Burtscher (1994) 26 Cal.App.4th 720, 725-726.) The court may consider evidence in a verified complaint and in declarations made under penalty of perjury. (Burtscher v. Burtscher, at p. 727.) The evidence must be competent and admissible. (Berg & Berg, supra, 131 Cal.App.4th at p. 817.)

3. Waiver Of Section 1714.10

Failure to obtain a prefiling court order under section 1714.10 is a defense to a claim for civil conspiracy. The defense must be raised by the attorney charged with civil conspiracy “upon that attorney’s first appearance by demurrer, motion to strike, or such other motion or application as may be appropriate. Failure to timely raise the defense shall constitute a waiver thereof.” (§ 1714.10, subd. (b).)

Ersoff contends that respondents litigated this case for over three years before raising the defense provided by section 1714.10. This argument is contradicted by the record, which clearly indicates that respondents promptly raised the defense in their demurrer to the original complaint, in May 2001. Because the defense was asserted in respondents’ first appearance, Ersoff’s waiver argument fails.

4. Application Of Section 1714.10

a. Application Of The Statutory Exceptions

Ersoff writes, “there is no doubt but that plaintiff’s action arises from an ‘attempt to contest or compromise a claim or dispute, and [ ] is based upon the attorney’s representation of the client.’” In other words, he concedes that the allegations of his pleading are the type to which section 1714.10 applies. Nevertheless, he contends that this case falls within the statutory exceptions to the prefiling requirement.

1. The Independent Legal Duty Exception

Ersoff maintains that respondents owe him an independent legal duty because he is their client. The Rules of Professional Conduct prohibit a lawyer from accepting employment that is adverse to the interests of an existing client. (Rule 3-310 (C)(3).)

Ersoff first claims that he, individually, is respondents’ client. This characterization of his relationship with respondents was not asserted in his original complaint or in the FAC. To counter respondents’ section 1714.10 defense, Ersoff now alleges in his proposed SAC that he sought from Plonsker “professional advice, counseling and legal services, and defendant Plonsker provided such professional legal services to plaintiff. Therefore, an attorney-client relationship was created” between the parties. The SAC is not verified, so it cannot be treated as “evidence” for purposes of deciding Ersoff’s petition. (Burtscher v. Burtscher, supra, 26 Cal.App.4th at p. 727.)

In his verified petition seeking prefiling approval, Ersoff declares that he contacted Plonsker in July 1999, for the purpose of obtaining legal counsel on matters relating to Ersoff’s business interests. In particular, Ersoff states, he informed Plonsker about his connection with an anti-drug youth program called Dare America, with which Leonard and Ersoff were associated. As Ersoff further describes the matter, however, it becomes clear that Ersoff contacted Plonsker on behalf of Leonard, who found himself in a compromising situation with a former mistress. Ersoff’s own concerns were vicarious: he worried that a scandal involving Leonard could have a negative impact on his business. Plonsker assured Ersoff that he could take care of Leonard’s problem.

In his deposition, Ersoff testified that he did not retain Plonsker as his attorney.^[2] Ersoff did not submit any documentation showing that he ever paid respondents a retainer fee for legal services, or that he received any bills from them. There is no competent evidence that respondents did any work for Ersoff or offered him any legal advice. The evidence shows that respondents worked for Leonard. Ersoff was Leonard’s emissary when Leonard was seeking legal representation in an embarrassing matter. At most, Ersoff’s connection with respondents was that he hoped respondents would resolve Leonard’s compromising situation quietly and expeditiously, so that Ersoff would not be touched by any scandal. Thus, respondents did not owe Ersoff a legal duty because there is no showing that Ersoff, individually, was respondents’ client.

Next, Ersoff asserts that respondents owe him a legal duty because they rendered legal services to SLR, and he was an officer and shareholder of SRL. This is the type of attorney/client relationship that Ersoff alleged in his unverified original complaint and FAC. When the client is an entity, not an individual, its lawyer represents the organization, itself, acting through its officers, employees or overseers. (Rule 3-600 (A).) The Professional Rules recognize that the organization’s lawyer may take positions that are adverse to its directors, officers, employees, members, shareholders, or other constituents. (Rule 3-600 (D); Brooklyn Navy Yard Cogeneration Partners v. Superior Court (1997) 60 Cal.App.4th 248, 254-255.)

Ersoff’s position as a shareholder, officer or director of SRL did not make him respondents’ client. Respondents initially represented Leonard in a personal matter. Then, Leonard apparently decided that he no longer wished to work with Ersoff, and respondents took on the additional representation of Leonard and SRL in terminating their business relationship with Ersoff. Ersoff promptly realized that Plonsker did not represent his interests and engaged legal counsel to negotiate with Plonsker. Respondents did not become Ersoff’s lawyers merely because they worked for Leonard at Ersoff’s request, or because Ersoff was affiliated with SRL.

2. The Financial Gain Exception

The prefiling approval requirement may not apply if the lawyer took action “in excess of his or her official representative capacity in service to his client” and “violated a legal duty running to the plaintiff . . . in furtherance of the lawyer’s own financial advantage.” (Berg & Berg, supra, 131 Cal.App.4th at p. 833.) A lawyer acts in excess of his capacity as a legal representative by acting for his or her own benefit. (Ibid.) An improper financial advantage is “a personal advantage or gain that is over and above ordinary professional fees earned as compensation for performance” of the legal representation. (Id. at p. 834.)

To establish the financial gain exception, Ersoff points to two events: Plonsker’s alleged harassment of Ersoff with FBI agents, and Plonsker’s alleged hope to establish a celebrity clientele. Neither of these events establishes the exception. Even if it is true that Plonsker provoked the FBI interrogation, the benefit redounded to Plonsker’s clients, not to Plonsker personally. And hoping to attract new clients and generate more professional fees by zealously representing one’s current clients is not the sort of improper financial gain contemplated by section 1714.10.

b. Likelihood Of Prevailing In The Action

Ersoff was unable to show that either of the exceptions to section 1714.10 apply here. As a result, he must show that this is not a “harassing claim of conspiracy“ lacking in a reasonable foundation. (Berg & Berg, supra, 131 Cal.App.4th at p. 815.) This means that he has the burden of establishing a reasonable probability of prevailing in the action. (Ibid.)

The trial court determined that Ersoff cannot prevail because his claims are time-barred. Respondents’ alleged wrongdoing--and Ersoff’s awareness of the perceived conflict of interest and the strong arm tactics--first occurred on March 22-23, 2000, during two meetings Ersoff had with Plonsker. At that time, Plonsker threatened to involve federal authorities unless Ersoff capitulated to “ridiculous terms and conditions.” Plonsker disclosed that he was working for Leonard and SRL. Ersoff realized that he was in an adversarial situation with respondents, Leonard, and the other defendants, and immediately engaged counsel to represent him.

Ersoff filed the original complaint in April 2001; however, this filing was ineffectual because Ersoff failed to secure prefiling approval from the trial court. Ersoff’s FAC filed in July 2001 was equally ineffectual, for the same reason. Without authorization from the trial court under section 1714.10, Ersoff was “a courtroom trespasser.” (Evans v. Pillsbury, Madison & Sutro, supra, 65 Cal.App.4th at p. 607. See also Derderian v. Dietrick (1997) 56 Cal.App.4th 892, 900 [statute of limitations expired because plaintiffs failed to comply with statutory prefiling notice requirements for medical malpractice actions].) The statute of limitations continued to run in this case until January 10, 2005, when Ersoff filed his petition and proposed complaint under section 1714.10. (§ 1714.10, subd. (a) [“The filing of the petition, proposed pleading, and accompanying affidavits shall toll the running of any applicable statute of limitations until the final determination of the matter . . .”].)

Ersoff waited for over five years (from March 2000 until July 2005) before seeking to assert his claims against respondents using the appropriate statutory mechanism of a petition under section 1714.10. Ersoff was warned as early as May 10, 2001, that respondents intended to challenge his lawsuit by asserting section 1714.10, when they demurred to his complaint. Even after the demurrers were filed, four years two months passed before Ersoff availed himself of the approval process. This is beyond the longest of the limitations periods for the claims asserted in Ersoff’s SAC. (Bus. & Prof. Code, § 17208 [four years for unfair competition claims]; Code Civ. Proc., §§ 335.1 [two years for negligence and personal injury claims], 340, subd. (a) [one year for a civil action to impose a penalty, in this case for invasion of privacy based upon a violation of Pen. Code § 637.2], 340.6 [one year from plaintiff’s discovery of attorney’s wrongful acts under a breach of fiduciary duty theory, per Stoll v. Superior Court (1992) 9 Cal.App.4th 1362, 1366-1369, and Quintilliani v. Mannerino (1998) 62 Cal.App.4th 54, 67-68].)

CONCLUSION

Ersoff concedes that his action arises from respondents’ legal representation of the other defendants and their attempts to contest or compromise a claim or dispute. Ersoff does not fall within either of the two exceptions to the prefiling approval requirement because (a) respondents owed him no independent legal duty and (b) there is no showing that respondents acted for any illicit financial gain. Ersoff cannot prevail in this action because all of his claims are barred by the statute of limitations, due to his failure to timely seek prefiling authorization from the court. The trial court’s denial of Ersoff’s petition must be upheld.

DISPOSITION

The judgment is affirmed.

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.

BOREN, P.J.

We concur:

DOI TODD, J.

ASHMANN-GERST, J.

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^[1] Civil Code section 1714.10 reads: “(a) No cause of action against an attorney for a civil conspiracy with his or her client arising from any attempt to contest or compromise a claim or dispute, and which is based upon the attorney’s representation of the client, shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes the claim for civil conspiracy to be filed after the court determines that the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action. The court may allow the filing of a pleading claiming liability based upon such a civil conspiracy following the filing of a verified petition therefor accompanied by the proposed pleading and supporting affidavits stating the facts upon which the liability is based. . . .”

All further statutory references in this opinion are to the Civil Code, unless otherwise indicated. All rule references are to the Rules of Professional Conduct.

^[2] The lack of a retainer agreement, or testimony that the client did not “retain” the lawyer is not dispositive, at least not in a case where there is proof that the client paid the lawyer to perform a specific service and the lawyer concedes that he took the case but failed to work on it and then refused to refund the fee. (Bernstein v. State Bar (1990) 50 Cal.3d 221, 225-227, 231 [attorney received thousands of dollars in retainer fees from three different clients, then failed to perform or refund the money].)