SLOVENSKY v. FRIEDMAN

Filed 9/19/06

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

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APPEAL from a judgment of the Superior Court of Sacramento County, Loren E. McMaster, J. Affirmed.

Carlson, Calladine & Peterson and Guy D. Calladine for Plaintiff and Appellant.

Boyd & Kimball, Betsy S. Kimball and David E. Boyd for Defendants and Respondents.

After settling a toxic mold personal injury complaint against an apartment complex, plaintiff Tamara Slovensky filed a tort action against her attorneys, pleading two counts (styled “Cause[s] of Action”). Her first count, for legal malpractice, alleged defendants negligently failed to obtain an adequate recovery. Her second count, for breach of fiduciary duty, alleged defendants misrepresented and concealed material facts in the course of the litigation. As to both counts, she sought damages and “other and further relief.”

Defendants (Morton L. Friedman, C. Brooks Cutter, the law firm of Friedman, Collard, Cutter & Panneton, and Cutter Law Firm) moved for summary judgment, maintaining plaintiff could not prove damages, because the statute of limitations had run on plaintiff’s claims before she had consulted defendants. Defendants did not move for summary adjudication in the alternative or adduce evidence to negate plaintiff’s allegations of breach of fiduciary duty.

The trial court granted summary judgment, agreeing with defendants that plaintiff’s inability to prove damages for malpractice defeated her entire action. The court also found plaintiff could not seek disgorgement of attorney’s fees for fiduciary breach because she had not pled entitlement to it.

We shall affirm. We agree with the trial court that the statute of limitations had run on plaintiff’s toxic tort claims before she consulted defendants. Although disgorgement (a remedy rather than an element of a cause of action) need not be specifically pled, it is available only if the breacher’s misrepresentation or concealment damaged the plaintiff. Plaintiff cannot prove damages from any such misrepresentation or concealment because defendants obtained a recovery for her in the underlying action to which she was not legally entitled. For the same reason, her malpractice claim fails. Therefore, summary judgment was properly granted.

STANDARD OF REVIEW

A defendant moving for summary judgment must show that the plaintiff cannot establish one or more elements of the cause of action or cannot refute an affirmative defense established by the defendant. (Code Civ. Proc., § 437c, subd. (o).) “From commencement to conclusion, the moving party bears the burden of persuasion that there is no genuine issue of material fact and that he is entitled to judgment as a matter of law. There is a genuine issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 845, fn. omitted.) Our review is de novo. (Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476.)

FACTUAL AND PROCEDURAL BACKGROUND

The complaint

Plaintiff alleged as to both counts:

In March 2000, she retained defendants to prosecute her toxic mold personal injury action against Sequoia Fairway Apartments (The Fairways).^[1] Defendants said they had about 20 other plaintiffs with claims against The Fairways and would accept no more after her; in fact, they took on further clients and ultimately represented 41 other plaintiffs in 21 similar actions against The Fairways. Defendants did not obtain a waiver from plaintiff of the conflict inherent in the representation of multiple plaintiffs or advise her to consult independent counsel on this point before retaining them.

In August 2001, defendants told plaintiff they had scheduled a mediation. She had not known of this or consented to it in advance. She objected that defendants had not adequately analyzed her case and only sought a quick settlement. She demanded that they evaluate and treat her case separately, not as part of a global pool. They assured her they were doing so.

On August 28, 2001, defendants faxed a letter protected by attorney-client privilege to her treating physician‘s office without plaintiff’s knowledge or consent. The letter contained privileged, private facts about plaintiff’s case unrelated to and unnecessary for her treatment.

On August 31, 2001, defendant Cutter met with plaintiff and pressured her to sign an agreement to a proposed settlement in a specified sum. Plaintiff gave Cutter the agreement on the condition that he could not use it without further written consent from her. Defendants did not advise plaintiff that she could or should obtain independent legal advice before signing the agreement.

During September 2001, Cutter harassed plaintiff with unannounced home visits and numerous telephone calls, exerting enormous pressure on her to agree to settle her case for the proposed amount. To stop Cutter’s harassment, plaintiff agreed to come to his office on September 7, 2001. She told him she could not sign a settlement agreement and release because neither she nor defendants had adequate information about her medical condition and prognosis.

On September 19, 2001, plaintiff’s doctor told her that Cutter had informed him plaintiff would be settling her case for the amount specified in defendants’ letter to the doctor, which was more than any of defendants’ other Fairways clients would receive. This information was within the attorney-client privilege, was not authorized for release to plaintiff’s doctor, and was not necessary for his treatment of plaintiff.

As part of defendants’ pressure campaign, defendants told plaintiff erroneously that her case was not being treated as part of a global settlement, but was being evaluated individually and independently; that the medical information she had was not reliable; and that she was not as sick from toxic mold exposure as she had been led to believe.

On September 20, 2001, at Cutter’s insistence, plaintiff met again with him. He again attempted to pressure her into settling the case. She objected that they did not yet have adequate medical information. He made further erroneous statements to her about her condition and its future course. He also misstated to her that he had negotiated with defendants to win the stated amount for her and that it was a better settlement than those of younger and sicker plaintiffs. When she continued to resist, Cutter brought defendant Friedman into the meeting. Comparing her case to the recent World Trade Center bombings, Friedman told her she was fortunate to be alive and should settle. Plaintiff ultimately signed the pre-printed settlement agreement and release.

On November 10, 2001, Cutter sent plaintiff a limited power of attorney to enable him to endorse the jointly payable settlement check and secure his fee. Plaintiff did not sign the document.

On December 25, 2001, plaintiff received a letter from Cutter stating that The Fairways’ attorneys had reissued the check with the Cutter Law Firm as sole payee, at Cutter’s request; defendants had cashed the check and taken out their fees and plaintiff’s proportionate share of costs. The rest was deposited into a separate account at Wells Fargo Bank in plaintiff’s name, where it remains. These actions were done without plaintiff’s knowledge or consent.

Defendants failed to exercise the care, skill, knowledge, competence, and diligence required of them by the attorney-client relationship. Their representation of plaintiff violated California Rules of Professional Conduct 3-310.^[2] They breached their duty of confidentiality in violation of Business and Professions Code section 6068.^[3] They coerced plaintiff to settle the case and converted the settlement monies. But for defendants’ conduct, plaintiff would have obtained a recovery in her case greater than that obtained by defendants, free of the taint of conflict of interest and conversion.^[4]

Plaintiff prayed for compensatory and punitive damages, costs of suit, and “such other and further relief as the Court may deem proper.”

The summary judgment motion

Defendants moved for summary judgment, asserting: (1) Plaintiff’s cause of action for legal malpractice lacked merit because plaintiff could not prove causation for damages: she could not have obtained a better result absent the alleged malpractice because her underlying action was barred by the statute of limitations as of the date she retained defendants. (2) Plaintiff’s cause of action for breach of fiduciary duty had no existence apart from her malpractice cause of action and failed on the same ground.

Defendants’ separate statement of undisputed facts adduced evidence that plaintiff had notice of toxic mold in her apartment and resulting physical ailments well over one year before she retained defendants^[5]; she admitted her prior knowledge of the relevant facts to defendant Cutter on July 28, 2001; and her case settled for $340,000. The separate statement did not adduce any evidence as to breach of fiduciary duty.

Plaintiff’s opposition

Plaintiff asserted and offered evidence purporting to show that she did not realize she had suffered toxic mold exposure until shortly before she retained defendants and triable issues of fact existed as to whether she should have known earlier; however, she did not dispute most of defendants’ evidence that during the period 1997 to 1999 she was aware of the facts that she later claimed as proof of toxic mold exposure and damage.^[6] She also asserted defendants’ breaches of fiduciary duty entitled her to fee disgorgement even if she could not prove malpractice damages, and defendants’ failure to address her fiduciary breach cause of action was enough to defeat summary judgment.

Defendants’ reply

In a separate statement titled, “Response to Plaintiff’s Separate Statement of Undisputed Facts,” defendants objected to all of plaintiff’s evidence as to actual or constructive notice of her injury in the underlying action. Defendants further objected that plaintiff’s evidence as to breach of fiduciary duty was “irrelevant and immaterial” to the issues raised in the summary judgment motion; however, defendants also for the first time offered evidence purporting to confute plaintiff’s evidence on this topic.^[7]

The trial court’s order and judgment

The trial court issued an order granting summary judgment on the following grounds:

1. Defendants had shown that the one-year statute of limitations for personal injury actions then in effect (Code Civ. Proc., former § 340(3)), raised as an affirmative defense to plaintiff’s toxic mold complaint, had expired as of the date plaintiff first consulted defendants. Defendants had also shown that from the fall of 1997 to March 1999, when plaintiff moved out of her apartment, she had notice of the facts giving her a cause of action but failed to investigate them. Since her complaint would have been found time-barred had it gone to trial, plaintiff could not have achieved a better outcome than defendants obtained for her; thus she could not prove damages for malpractice. Plaintiff had not raised a triable issue of material fact on this point.

2. Plaintiff’s second cause of action for breach of fiduciary duty failed for the same reason. Because it incorporated by reference the damages alleged in the first cause of action, plaintiff’s inability to show causation for damages was also fatal to the second cause of action.

3. Plaintiff failed to request disgorgement of attorney’s fees in the complaint and had not sought leave to amend the complaint to include this request prior to the hearing on the motion. Therefore, it was not properly before the court.

The trial court thereafter entered judgment dismissing plaintiff’s action.

DISCUSSION

To prevail on a summary judgment motion that does not request summary adjudication in the alternative, the defendant must show conclusively that all of the plaintiff’s causes of action or legal theories fail as a matter of law. (See Jimenez v. Protective Life Ins. Co. (1992) 8 Cal.App.4th 528, 534.)

Plaintiff contends defendants are not entitled to summary judgment because she has shown triable issues of fact as to legal malpractice and defendants failed to rebut her claim of fiduciary breach. We disagree. Like the trial court, we conclude that to avoid summary judgment plaintiff must show at least the possibility of proving damages from defendants’ conduct and that she cannot do so. Because defendants won her a substantial recovery in a matter where she was not legally entitled to recover anything at all, plaintiff has no cognizable damage claim. Similarly, although disgorgement of fees is a recognized remedy for breach of fiduciary duty, it is available only if the alleged misconduct caused damage; thus plaintiff cannot escape summary judgment by claiming entitlement to this remedy.

I

It is undisputed that when plaintiff filed her toxic mold complaint it was subject to a one-year statute of limitations. (Code Civ. Proc., former § 340(3); see now § 335.1, added by Stats. 2002, ch. 448, § 2 [extends personal injury limitations period to two years]).) Defendants adduced much evidence that plaintiff was on actual or constructive notice of her cause of action well before the spring of 1999, yet did not consult with defendants until March 2000. Plaintiff admits she was aware of those facts, but claims they were insufficient as a matter of law to put her on notice of her cause of action, or at least that triable issues of fact remain on this point. Plaintiff is wrong.

Because plaintiff’s claim was time-barred on the day she filed it, she was entitled to no recovery and would inevitably have lost the case had it not settled.^[8] Thus, the settlement defendants obtained for her was a windfall. As defendants’ alleged malpractice did not damage her, her malpractice claim fails.

“The elements of a cause of action for legal malpractice are (1) the attorney-client relationship or other basis for duty; (2) a negligent act or omission; (3) causation; and (4) damages.” (Kurinij v. Hanna & Morton (1997) 55 Cal.App.4th 853, 863 (Kurinij); italics added.) Summary judgment is appropriate if the defendant negates any of these elements. (Ibid.)

Causation here means that but for the attorneys’ negligence the client would have prevailed in the underlying action. (Kurinij, supra, 55 Cal.App.4th at p. 864.) Though normally a question of fact, causation may be decided as a question of law if the undisputed facts permit only one reasonable conclusion. (Ibid.)

To win a legal malpractice action, the plaintiff must prove damages to a legal certainty, not to a mere probability. (Barnard v. Langer (2003) 109 Cal.App.4th 1453, 1461-1462.) Thus, a plaintiff who alleges an inadequate settlement in the underlying action must prove that, if not for the malpractice, she would certainly have received more money in settlement or at trial. (Id. at p. 1463.) Such claims are likely to be speculative, as even the most skillful attorneys can seldom know whether they obtained the best possible result; thus they are held only to the standard of whether the settlement was within the realm of reasonableness. (Id. at pp. 1462-1463, fn. 13, citing 4 Mallen, Legal Malpractice (5th ed. 2000) Error - Settlement, § 30.41, pp. 582-585.)

Here, though plaintiff won a substantial settlement, she contends defendants’ negligence barred her from proving greater damages at trial. But to recover damages at trial, she would have had to defeat the statute of limitations defense. The undisputed facts reveal she could not have done so.

A cause of action accrues when the claim is complete with all of its elements. (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 397.) Although this ordinarily occurs on the date of the plaintiff’s injury, accrual is postponed until the plaintiff either discovers or has reason to discover the existence of a claim, i.e., at least has reason to suspect a factual basis for its elements. (Id. at pp. 397-398; Jolly v. Eli Lilly & Co. (1988) 44 Cal.3d 1103, 1109 (Jolly).) “[P]laintiffs are required to conduct a reasonable investigation after becoming aware of an injury, and are charged with knowledge of the information that would have been revealed by such an investigation.” (Fox v. Ethicon Endo-Surgery, Inc. (2005) 35 Cal.4th 797, 808.) So long as there is a reasonable ground for suspicion, the plaintiff must go out and find the facts; she cannot wait for the facts to find her. (Jolly, supra, 44 Cal.3d at p. 1111.)

To be continue as Part II ...

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Analysis and review provided by La Mesa Property line Lawyers.

^[1] Plaintiff alleged that attorneys Friedman and Cutter practiced with the law firm of Friedman, Collard, Cutter & Panneson, and that Cutter also practiced as a member and sole shareholder of Cutter Law Firm.

^[2] Rule 3-310, titled, “Avoiding the Representation of Adverse Interests,” provides in part:

“(C) A member shall not, without the informed written consent of each client:

“(1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or

“(2) Accept or continue representation of more than one client in a matter in which the interests of the clients actually conflict;

“

. . .

“(D) A member who represents two or more clients shall not enter into an aggregate settlement of the claims of or against the clients without the informed written consent of each client.” (Rules Prof. Conduct, rule 3-310(C), (D).)

^[3] Business and Professions Code section 6068, subdivision (e)(1), provides that an attorney has the duty “[t]o maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.” (Bus. & Prof. Code, § 6068, subd. (e)(1).)

^[4] We requested supplemental briefing on whether this allegation meant only that plaintiff would have obtained a better result at trial, or whether it could also be construed to mean that plaintiff could have negotiated a larger share of the settlement pot for herself if defendants had informed her the settlement was a global settlement.

Plaintiff replied that it could be construed the latter way. Defendants pointed out, however: (1) In their motion for summary judgment they asserted as an undisputed fact: “[P]laintiff does not contend that the defendants in plaintiff’s [underlying mold case] would have paid her any more in settlement than they did[.]” (2) In plaintiff’s reply to the motion, she agreed this fact was undisputed.

Having conceded below that her complaint did not allege the possibility of winning a better settlement, plaintiff may not now claim that it did. (Brown v. Boren (1999) 74 Cal.App.4th 1303, 1316 [party may not change theory of case on appeal]; City of San Diego v. DeLeeuw (1993) 12 Cal.App.4th 10, 14-15 [judicial admissions binding on summary judgment].) Thus, we construe the complaint to allege only that plaintiff could have obtained a better result at trial.

^[5] We give this evidence in greater detail in part I of the Discussion.

^[6] She raised evidentiary objections, but the trial court denied them when granting defendants’ motion. She does not attack this ruling on appeal.

^[7] Defendants filed separate objections to much of plaintiff’s evidence in opposition. The trial court mostly granted them.

Plaintiff’s opening brief does not challenge this ruling, and she may not do so for the first time in her reply brief. (Neighbours v. Buzz Oates Enterprises (1990) 217 Cal.App.3d 325, 335, fn. 8.) Nevertheless, she sets out numerous alleged facts for which she cites only to evidence ruled inadmissible. Defendants properly object to this procedure. We disregard any factual assertions in plaintiff’s opening brief that depend on inadmissible evidence.

^[8] As noted ante, plaintiff conceded below that she was not alleging she could have obtained a better result through settlement but for defendants’ negligence.