Belnap v. Roberts

TIM M. BELNAP et al., Plaintiffs and Appellants, v. AARON D. ROBERTS et al., Defendants and Respondents.

D071242

COURT OF APPEAL, FOURTH APPELLATE DISTRICT DIVISION ONE STATE OF CALIFORNIA

March 13, 2018

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 37-2014-00003844-CU-FR-CTL)

APPEAL from a judgment of the Superior Court of San Diego County, John S. Meyer, Judge. Affirmed.

Catanzarite Law Corporation and Kenneth Joseph Catanzarite, Brandon E. Woodward for Plaintiffs and Appellants Tim M. Belnap, and Tim M. Belnap, D.D.S., Inc.

Pettit Kohn Ingrassia Lutz & Dolin and Douglas A. Pettit, Jeffrey Kenji Miyamoto, Derek R. Noack for Defendants and Respondents Aaron D. Roberts; Kirby & Kirby and Michael L. Kirby for Defendants and Respondents Circuit McKellogg Kinney & Ross, L.P.

After unsuccessfully arbitrating a dispute with a former business partner, plaintiffs and appellants Timothy Belnap and Tim M. Belnap, D.D.S., Inc. (collectively Belnap) sued defendants and respondents, attorney Aaron D. Roberts and Roberts's then law firm, Circuit McKellogg Kinney & Ross, L.P., eventually asserting causes of action for fraud, legal malpractice, breach of fiduciary duty and violations of the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200 et seq.). The trial court granted summary judgment in favor of defendants, citing the arbitrator's findings and award and ruling there was no triable issue of material fact on the issue of causation, a necessary element of all of the causes of action. On appeal, Belnap contends the trial court erred in its ruling because (1) Vandenberg v. Superior Court (1999) 21 Cal.4th 815 (Vandenberg) precluded defendants, nonparties to the arbitration, from using the arbitration award as collateral estoppel; (2) defendants did not meet their threshold burden to demonstrate the elements of collateral estoppel applied and thus did not shift the burden to him to demonstrate a triable issue of material fact; (3) he demonstrated triable issues of material fact as to causation; and (4) he demonstrated he suffered an "injury in fact" and "lost money or property" for purposes of his claim under the UCL. We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In setting out the background facts, we view the evidence in the light most favorable to Belnap as the losing party, liberally construing his evidentiary submissions while strictly scrutinizing defendants' showing, and resolving evidentiary doubts or ambiguities in Belnap's favor. (Elk Hills Power, LLC v. Board of Equalization (2013) 57Cal.4th 593, 606; County of San Diego v. Superior Court (2015) 242 Cal.App.4th 460, 467; Code Civ. Proc., § 437c, subd. (c).)¹

In 2004, Belnap and Connie Pierce, both dentists, engaged Mercer Transition (Mercer) as a consultant to advise them about forming a partnership. Belnap had owned and operated his own dental practice since 1988. In late 2004, a Mercer representative sent both Belnap and Pierce draft form documents including a transition and purchase agreement with a "Post Closing Management Schedule" labelled "Schedule B" (the management schedule or Schedule B) as well as a draft partnership agreement.² Therepresentative advised the two to have local counsel review the management schedule to ensure it complied with state law and formalize it into a partnership agreement. About that time, Belnap and Pierce assigned themselves general partnership responsibilities: Belnap would undertake business aspects of the partnership including banking and insurance, and Pierce would be responsible for engaging and overseeing counsel on the partnership's behalf to conform the Mercer draft agreements to California law.

Pierce then hired Roberts to conform the Mercer documents to California law, and the partnership paid Roberts $2,000 in February 2005. Belnap relied on Pierce to jointly engage counsel, and did not question her when she told him she had retained Roberts and his firm to represent both of them in partnership matters. Neither Pierce nor Belnap signed a written fee agreement with Roberts for his legal services. Belnap never personally spoke with Roberts or participated in meetings or phone calls with him; he relied on Pierce to deal with Roberts and was not himself involved in Roberts's legal work.

In March 2005, Pierce gave Belnap a transition and purchase agreement as well as a partnership agreement that she had received from Roberts and his firm. They both signed the documents on behalf of themselves individually and their respective corporations, which formed the partnership effective January 1, 2005. According to Belnap, Roberts had changed the draft agreements to insert a provision stating that each partner had been represented by independent legal counsel in the drafting and execution of the partnership agreement and omit the provision that would have permitted Belnap and Pierce to retain ownership of their own patient base in the event of the partnership's winding up. Later, Roberts received an additional $2,130 in dental services as a payment in kind, which was allocated equally between Belnap and Pierce.

In 2009, Belnap and Pierce again retained Mercer in connection with Mercer's "360 Program," which was intended to assist them in streamlining their business to increase efficiency and profitability. The Mercer representative spoke of a 50/50 allocation of patients between the partners and Belnap understood Mercer's philosophy and advice was to allocate 50 percent of the active client base to each doctor. As part of the program, Belnap agreed to reallocate his and Pierce's patients, and as a result of it, approximately 400 patients were transferred from Belnap to Pierce. Afterwards, Belnap signed an evaluation of the program instruction. Roberts was not involved with Belnap and Pierce's adoption of the Mercer 360 program; after 2005, Belnap did not engage or retain defendants to provide legal services or advice relating to that program, and he did not consult with Roberts at all.

Several years later, Pierce sought to dissolve the partnership and initiated binding arbitration, which took place over the course of nine days in May 2013.³ The arbitrator ultimately issued a ruling in Pierce's favor, finding the parties had agreed to amend their original partnership documents with the Mercer 360 program to implement an equal partnership with equal ownership and responsibilities, and an equal patient allocation; Belnap had breached the partnership documents by failing to ensure such an allocation and instead taking steps to prevent an equal allocation of patients, as well as by diverting new patients to himself; Belnap had breached his fiduciary duty to Pierce through these actions as well as by making decisions affecting the practice without Pierce's agreement, and by denying her management, control, and access to patient charts and records; and Belnap interfered with Pierce's ability to obtain an equal patient allocation by thwarting reallocation of existing and new patients, and denying Pierce the opportunity to provide dental services resulting from her performance of exams. The arbitrator dissolved the partnership as of March 1, 2014. It awarded Pierce $443,445 in damages in the form of lost profits from June 2009⁴ and declared her the prevailing party in the arbitration.

Shortly before the arbitrator issued the interim award, Belnap sued Roberts and his then law firm. In September 2014, he filed a first amended complaint alleging causes of action for fraud, legal malpractice, breach of fiduciary duty, and violations of the UCL. Belnap alleged defendants secretly and materially changed the draft partnership agreement in such a way to permit Pierce to make more favorable arguments during the arbitration: namely, that she was entitled to see 50 percent of all patients as of January 1, 2005, and was entitled in the event of an impasse between the partners to take 50 percent of all patients. He alleged that as a result, the arbitrator ruled in Pierce's favor, awarding her damages based on an immediate 50 percent patient allocation from January 1, 2005. Belnap further alleged that if defendants had met their professional obligations and disclosed the true nature of their representation, he would have retained independent counsel, would not have entered into the purchase or partnership agreements, and would not have sold his practice in the first place. As for fraud, Belnap alleged defendants led him to believe they represented the partnership, but instead concealed both the fact of their sole representation of Pierce and other facts about the partnership engagement, knowing he would sign the partnership documents and a promissory note without independent counsel review, thus inducing him to sign the purchase agreement,partnership agreement, and a promissory note. He alleged defendants owed him duties of care, loyalty and good faith both as a lawyer and fiduciary with regard to the preparation of transactional documents and work in preparing a general partnership engagement, but breached those duties based on their misconduct. He alleged defendants engaged in unlawful and unfair business practices, causing him to suffer injury in fact and to lose money or property rights. Shortly after Belnap filed his operative pleading, the Orange County Superior Court confirmed the arbitration award and entered judgment in Pierce's favor.

Defendants moved for summary judgment and alternatively summary adjudication of issues in this action. In part, they argued there was no evidence of an attorney-client relationship between Belnap and Roberts, nor was there evidence that Roberts's conduct was the legal cause of any of...