Engel v. Pech

95 Cal.App.5th 1227

314 Cal.Rptr.3d 176

Jason ENGEL et al., Plaintiffs and Appellants,

v.Richard PECH, Defendant and Respondent.

B324560

Court of Appeal, Second District, Division 2, California.

Filed September 28, 2023

As Modified on Denial of Rehearing October 19, 2023

Parker Shaffie and David B. Parker, Los Angeles, for Plaintiffs and Appellants.

Richard Pech, in pro. per., for Defendant and Respondent.

HOFFSTADT, J.

A limited liability partnership and one of its partners retained a lawyer but limited the scope of representation to having the lawyer represent the partnership in a specific, ongoing case. After the partnership lost the case, the partner sued the lawyer for malpractice. In an amended complaint, the partnership was added as a plaintiff. The partner's complaint was filed before the statute of limitations ran; the amendment was filed after. This case thus presents two questions: (1) Do the partnership's malpractice claims "relate back" to the timely filing of the partner's malpractice claims (such that the partnership may continue as a plaintiff); and (2) May the partner continue to press his timely claims for malpractice against the lawyer, when the lawyer's sole task was to represent the partnership in the ongoing case? We conclude that the answer to both questions is "no." An amendment adding a new plaintiff will not relate back to a prior complaint if the new plaintiff is "enforc[ing] an independent right" that imposes a " ‘wholly distinct and different legal obligation against the defendant’ " ( Bartalo v. Superior Court (1975) 51 Cal.App.3d 526, 533, 124 Cal.Rptr. 370, italics omitted ( Bartalo ); Branick v. Downey Savings & Loan Assn. (2006) 39 Cal.4th 235, 243, 46 Cal.Rptr.3d 66, 138 P.3d 214 ( Branick )). Because the partnership's malpractice claims against the lawyer are distinct from—and in addition to—the partner's malpractice claim, the partnership's claims do not relate back and are untimely. And because the scope of the lawyer's representation was to represent solely the partnership in the ongoing case, only the partnership has potentially viable claims for malpractice; those claims belong to—and any damages were suffered by—the partnership. As a result, the partner has suffered no damages as a matter of law. Thus, the trial court properly sustained a demurrer to the amended complaint as to both plaintiffs. We accordingly affirm.

FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. The plaintiffs

Jason Engel (Engel) is a forensic accountant. He is "the principal" of Engel & Engel, LLP (the LLP), a limited liability partnership.

B. The prior litigation

In 2014, the LLP was retained by three investors who were in the midst of suing the people who solicited them to make that investment. The investors did not pay the full amount the LLP billed for accounting services.

The LLP initiated an arbitration against one of the investors (John and Judith DeLong, or the DeLongs), which netted the LLP an award of $27,100.13 in unpaid fees, along with attorney fees and costs (the DeLong arbitration).

On May 18, 2016, the LLP subsequently sued a second investor (Wells Fargo Equipment Finance, Inc.), its attorney, and the attorney's law firm (the Wells Fargo litigation). Following a bench trial in the fall of 2018, the trial court entered judgment against the LLP, finding that the current lawsuit was based on a factual theory inconsistent with the position the LLP had asserted in the DeLong arbitration, and hence was barred by the doctrine of judicial estoppel. We affirmed the judgment against the LLP, but modified the investors’ cost award. ( Engel & Engel, LLP v. Shuck et al. (Nov. 4, 2021, B297421, B300755) 2021 WL 5119189 [nonpub. opn.].)

C. The retention and termination of attorney Richard Pech

On September 21, 2018—more than two years after the LLP initiated the Wells Fargo litigation but prior to trial—Engel and the LLP both signed an agreement retaining Richard Pech (Pech) "solely" "for legal representation" in the pending Wells Fargo "lawsuit." While Engel signed both as a "client" and as a "partner" on behalf of the LLP, only the LLP (but not Engel) was a party to the Wells Fargo litigation and Pech's "legal services" were explicitly "limited" to that "lawsuit." The retainer agreement also prohibited any "side" agreements and required any modifications to be in "writing."

On February 25, 2021—after Pech filed an opening brief in the LLP's appeal from the judgment in the Wells Fargo litigation—the LLP filed a substitution of counsel that terminated Pech's representation.

II. Procedural Background

A. The original complaint

On February 17, 2022, Engel—while representing himself—filed a complaint against Pech for (1) professional negligence, (2) breach of contract, and (3) breach of fiduciary duty. All of Engel's professional negligence claims stem from Pech's allegedly deficient representation during the Wells Fargo litigation; specifically, Engel alleges that Pech (1) "failed to conduct proper research, analysis and investigation" regarding a defense; (2) "failed to call" Wells Fargo's attorney as a hostile witness to elicit damaging testimony; (3) "refused to comply" with one of the trial court's procedural requests; (4) "declined" to "deliver" a closing argument at the bench trial; and (5) "repeatedly displayed a contemptuous attitude toward the trial court throughout the three-day bench trial." The breach of contract and breach of fiduciary duty claims similarly arise solely out of the Wells Fargo litigation; specifically, Engel alleges that Pech's attempt to collect fees for his deficient representation amounted to breaches.

Significantly, and contrary to the judicial opinions and retainer agreement attached as exhibits, the original complaint repeatedly but misleadingly alleges that Engel (rather than the LLP) was the party who initiated (and prevailed in) the DeLong arbitration as well as the party who prosecuted the Wells Fargo litigation.

B. The operative first amended complaint

On April 21, 2022—one week after he retained counsel—Engel filed the first amended complaint. The amended complaint is identical to the original complaint, except that it (1) adds the LLP as a plaintiff, and (2) corrects the inaccuracies in the original complaint by noting that the LLP (not Engel) was the party who initiated (and prevailed in) the DeLong arbitration as well as the party who prosecuted the Wells Fargo litigation.

C. The demurrer is sustained

Pech demurred to the first amended complaint on the grounds that (1) the LLP ’s claims are barred by the one-year statute of limitations applicable to malpractice claims; and (2) Engel ’s claims are barred because only the LLP, as Pech's sole client in the Wells Fargo litigation, has standing to sue for malpractice arising out of that litigation.¹ Engel and the LLP (collectively, plaintiffs) opposed the demurrer, responding that the LLP's claims related back to the filing of Engel's claims and that Engel had standing to sue for malpractice. After Pech filed a reply and the trial court held a hearing, the court sustained the demurrer without leave to amend.

D. Motion for reconsideration

After the trial court issued its judgment of dismissal, Engel filed a motion for reconsideration along with a proposed second amended complaint. In the motion, Engel argued that he had standing to sue Pech because (1) he had an "oral agreement" with Pech in which Pech agreed he was litigating for the LLP "for the benefit of" Engel, and (2) Engel had an "implied attorney-client relationship" with Pech that Pech would "protect[ ]" Engel ’s "interest in a successful recovery in the" Wells Fargo litigation. In the second amended complaint, plaintiffs added new allegations that Engel has an independent interest in the Wells Fargo litigation because (1) Engel, as "the principal and owner" of the LLP, "made all relevant decisions" regarding the Wells Fargo litigation; (2) Engel was the "sole beneficiary of any recovery" from the litigation; and (3) Engel was financing that litigation. After further briefing, the trial court denied the motion as untimely and without merit because the proffered second amended complaint did not "present any new allegations which could support the claim that ... Engel was a client of Pech."

E. Appeal

Plaintiffs filed this timely appeal.²

DISCUSSION

Plaintiffs argue that the trial court erred in sustaining Pech's demurrer to their first amended complaint without leave to amend.

In assessing whether the trial court erred in this ruling, we ask two questions: "(1) Was the demurrer properly sustained; and (2) Was leave to amend properly denied?" ( Shaeffer v. Califia Farms, LLC (2020) 44 Cal.App.5th 1125, 1134, 258 Cal.Rptr.3d 270 ( Shaeffer ).) In answering the first question, "we ask whether the operative complaint ‘ "states facts sufficient to constitute a cause of action." ’ " ( California Dept. of Tax & Fee Administration v. Superior Court (2020) 48 Cal.App.5th 922, 929, 262 Cal.Rptr.3d 397 ( Tax & Fee Administration ); Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100, 171 Cal.Rptr.3d 189, 324 P.3d 50 ; Code Civ. Proc., § 430.10, subd. (e).) In undertaking that inquiry, "we accept as true all ‘ " ‘ "material facts properly pleaded" ’ " ’ " in the operative complaint ( Tax & Fee Administration , at p. 929, 262 Cal.Rptr.3d 397 ; Brown v. USA Taekwondo (2021) 11 Cal.5th 204, 209-210, 276 Cal.Rptr.3d 434, 483 P.3d 159 ) as well as facts appearing in the exhibits attached to it, giving " ‘ "precedence" ’ " to the facts in the exhibits if they " ‘ "contradict the allegations" ’ " ( Gray v. Dignity Health (2021) 70 Cal.App.5th 225, 236, fn. 10, 285 Cal.Rptr.3d 343 ; Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 767, 153 Cal.Rptr.3d 1 ). In answering the second question, we ask " ‘ "whether ‘ " ‘there is a reasonable possibility that the defect [in the operative complaint] can be cured by amendment.’ " ’ " ’ " ( Shaeffer , at p. 1134, 258 Cal.Rptr.3d .) We review ...