Engel v. Pech ( 2023 )

Filed 10/19/23 (unmodified opn. attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
JASON ENGEL et al., B324560
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No.
v. 22STCV06062)
RICHARD PECH, ORDER MODIFYING
OPINION AND DENYING
Defendant and REHEARING
Respondent.
NO CHANGE IN THE
JUDGMENT
THE COURT:
It is ordered that the opinion filed herein on September 28, 2023,
be modified as follows:
1. On page 21, line 4, immediately after the sentence ending
with “Engel’s malpractice claims were properly dismissed”
add as footnote 4 the following footnote:
4 Although the focus of Engel’s briefs was the
potential malpractice claim, Engel’s petition for
rehearing argues that Engel still has viable claims
for breach of contract and breach of fiduciary duty.
He is wrong. In the operative complaint, Engel
alleges that Pech breached the retainer agreement
and his fiduciary duty by (1) committing malpractice;
and (2) charging fees that, due to his malpractice,
were excessive. As described above, however, any
damages arising from malpractice belong to the LLP,
not Engel, and Engel’s payment of fees does not
otherwise transfer ownership of the LLP’s
malpractice claim (or the damages it may have
suffered) to Engel. No amendment can cure these
defects.
* * *
There is no change in the judgment.
Appellant’s petition for rehearing is denied.
——————————————————————————————
ASHMANN-GERST, Acting P. J. CHAVEZ, J. HOFFSTADT, J.
2
Filed 9/28/23 (unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION TWO
JASON ENGEL et al., B324560
Plaintiffs and Appellants, (Los Angeles County
Super. Ct. No.
v. 22STCV06062)
RICHARD PECH,
Defendant and
Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Maureen Duffy-Lewis, Judge. Affirmed.
Parker Shaffie and David B. Parker for Plaintiffs and
Appellants.
Richard Pech, in pro. per., for Defendant and Respondent.
******
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, italics
omitted (Bartalo); Branick v. Downey Savings & Loan Assn.
(2006) 39 Cal.4th 235, 243 (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,
2
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) [nonpub.
opn.].)
3
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
4
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
1 Pech also filed a motion to strike and a request for judicial
notice in support of that motion. Engel and the LLP opposed the
request, but the trial court never ruled on the motion or request.
They are not at issue on appeal.
5
(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
2 Although plaintiffs’ notice of appeal indicates that they
appeal from both the dismissal order following the demurrer
ruling and the ruling denying Engel’s motion for reconsideration,
they raise no separate argument in their briefs regarding the
6
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 (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 (Tax & Fee
Administration); Loeffler v. Target Corp. (2014) 58 Cal.4th 1081,
1100; 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; Brown v. USA Taekwondo (2021) 11
Cal.5th 204, 209-210) 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; Brakke v. Economic Concepts,
Inc. (2013) 213 Cal.App.4th 761, 767). 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.) We review the trial
court’s ruling regarding the first question de novo (Rodas v.
Spiegel (2001) 87 Cal.App.4th 513, 517; People ex rel. Harris v.
Pac Anchor Transportation, Inc. (2014) 59 Cal.4th 772, 777), and
reconsideration ruling and have accordingly abandoned their
appeal from that ruling.
7
review its ruling regarding the second for an abuse of discretion
(Branick, supra, 39 Cal.4th at p. 242).
Because a demurrer is properly sustained if a claim is
“‘necessarily[] barred’” by the applicable statute of limitations
(Geneva Towers Ltd. Partnership v. City and County of San
Francisco (2003) 29 Cal.4th 769, 781) or if a plaintiff is unable to
establish an element of his claim as a matter of law (Wilson v.
Parker, Covert & Chidester (2002) 28 Cal.4th 811, 826, partially
superseded by statute on other grounds as stated in Hutton v.
Hafif (2007) 150 Cal.App.4th 527, 547), the first step of assessing
whether the demurrer in this case was properly sustained boils
down to two questions: (1) Are the LLP’s claims time-barred,
which turns on whether the untimely filing of the LLP’s claims
relates back to the timely filing of Engel’s claims; and (2) Are any
of Engel’s timely filed, malpractice-related claims viable?
I. Are the LLP’s Claims Time-Barred?
A claim for legal malpractice (that is, a claim “whose merits
necessarily depend on proof that an attorney violated a
professional obligation in the course of providing professional
services”) has a one-year statute of limitations—whether it
sounds in tort or contract. (Code Civ. Proc., § 340.6, subd. (a); Lee
v. Hanley (2015) 61 Cal.4th 1225, 1236-1237.) That limitations
period begins to run when the attorney-client relationship ends,
which happens when the attorney is “formally substituted out as
counsel” or “‘“complet[es] the tasks for which [he was] retained.”’”
(Michaels v. Greenberg Traurig, LLP (2021) 62 Cal.App.5th 512,
536; Nguyen v. Ford (2020) 49 Cal.App.5th 1, 13.) Because the
LLP formally substituted Pech out as an attorney on February
25, 2021, the LLP’s claims that were asserted for the first time in
the first amended complaint are untimely because that amended
8
complaint was not filed until April 21, 2022—nearly two months
after the one-year limitations period expired.
Thus, whether the LLP’s malpractice-related claims were
properly dismissed as untimely depends entirely on whether
those claims “relate back” to Engel’s claims asserted in the timely
filed complaint.
As a general rule, subsequent amendments to a pleading
will “relate back” to an earlier, timely filed pleading if they “(1)
rest on the same general set of facts, (2) involve the same injury,
and (3) refer to the same instrumentality, as the original
[pleading].” (Norgart v. Upjohn Co. (1999) 21 Cal.4th 383, 408-
409; Branick, supra, 39 Cal.4th at p. 244.) Subsequent
amendments that might relate back encompass amendments
adding new causes of action between previously named parties
(San Diego Gas & Electric Co. v. Superior Court (2007) 146
Cal.App.4th 1545, 1549-1550 (San Diego Gas)), adding new
defendants (ibid.; Barnes v. Wilson (1974) 40 Cal.App.3d 199,
201-202), and, as is pertinent here, adding new plaintiffs
(Hutcheson v. Superior Court (2022) 74 Cal.App.5th 932, 940
(Hutcheson) [“Relation back may apply to amendments that
substitute a plaintiff”]; American Western Banker v. Price
Waterhouse (1993) 12 Cal.App.4th 39, 49 [same]).
However, when it comes to adding a new plaintiff, courts
have refined the general rule: A new plaintiff’s claims relate
back to claims asserted in a previously and timely filed complaint
if the new plaintiff is seeking to enforce the same right as a
previously named plaintiff (because, in that case, the amendment
relies on the same general set of facts, involves the same injury,
and refers to the same instrumentality of the defendant’s
conduct). (Klopstock v. Superior Court (1941) 17 Cal.2d 13, 16-21
9
(Klopstock) [amendment to a derivative action in a corporation’s
name that substitutes a new plaintiff relates back because the
relief “sought on behalf of the corporation [entails] . . . exactly the
same liability” as previously alleged]; Pasadena Hospital Assn.,
Ltd. v. Superior Court (1988) 204 Cal.App.3d 1031, 1034-1037
(Pasadena Hospital) [amendment adding the prior plaintiff’s
professional corporation as a new plaintiff to a defamation
lawsuit against a defendant who defamed the plaintiff relates
back because “the resulting harms to [the plaintiff] and [his
professional] corporation”—because damage was to their
reputation, which was inseparable between the two—“do not
appear to be distinct”]; Bank of America v. Superior Court (1973)
35 Cal.App.3d 555, 556-557 [amendment correcting an error in
one word of the new plaintiff’s three-word corporate name in a
check forgery claim relates back because the claim is the same
and because the check with the plaintiff’s correct name was
attached to the original complaint].) This is why amendments
that do no more than swap in a new plaintiff for an existing cause
of action—when the new plaintiff is the real party in interest and
the original plaintiff was not—typically relate back. (Cox v. San
Joaquin Light & Power Corp. (1917) 33 Cal.App. 522, 523-524
[amendment swapping in decedent’s personal representative as
plaintiff instead of decedent’s heir relates back]; California
Gasoline Retailers v. Regal Petroleum Corp. (1958) 50 Cal.2d 844,
850-851 [amendment swapping in individual as plaintiff instead
of business association relates back]; California Air Resources Bd.
v. Hart (1993) 21 Cal.App.4th 289, 301 (Hart) [amendment
swapping in State of California as plaintiff instead of state
agency relates back]; Cloud v. Northrop Grumman Corp. (1998)
67 Cal.App.4th 995, 1000, 1005 [amendment swapping in
10
bankruptcy trustee as plaintiff relates back]; see generally
Garrison v. Board of Directors (1995) 36 Cal.App.4th 1670, 1678
[amended complaint “‘by the right party’” relates back when it
“‘restates the identical cause of action’”].)
Conversely, a new plaintiff’s claims do not relate back if the
new plaintiff is seeking to “enforce a[] right” “independent” of the
right asserted by the previously named plaintiff(s). (Bartalo,
supra, 51 Cal.App.3d at p. 533, italics omitted; Quiroz v. Seventh
Ave. Center (2006) 140 Cal.App.4th 1256, 1264, 1278 (Quiroz).)
This occurs when (1) the new plaintiff’s claims rest on a “wholly
different legal liability or obligation” (that is, a “distinct” “cause
of action”) “from that originally [alleged]” (Klopstock, supra, 17
Cal.2d at p. 20 [claim does not relate back “where the effect of
such amendment is to state ‘another and distinct cause of
action’”]; Branick, supra, 39 Cal.4th at pp. 243-244; Pasadena
Hospital, supra, 204 Cal.App.3d at p. 1035); (2) the new plaintiff’s
claims entail a distinct injury (Quiroz, at p. 1279); or (3) the new
plaintiff’s claims “‘impose greater liability upon the defendant’”
than the original plaintiff’s claims (Quiroz, at p. 1278; Bartalo, at
p. 533; Estrada v. Royalty Carpet Mills, Inc. (2022) 76
Cal.App.5th 685, 715, review granted June 22, 2022, S274340).
(See Quiroz, at pp. 1278-1279 [amendment adding spouse as a
plaintiff in her capacity as representative for the decedent in a
survivor action does not relate back to prior complaint naming
spouse as a wrongful death plaintiff because the two claims
involve “different injur[ies]”]; Dominguez v. City of Alhambra
(1981) 118 Cal.App.3d 237, 243 [same]; Bartalo, at p. 533
[amendment adding injured person’s spouse as a plaintiff to
assert a loss of consortium claim does not relate back to
complaint alleging personal injury to person because the two
11
claims involve distinct injuries]; Shelton v. Superior Court (1976)
56 Cal.App.3d 66, 74 [same].)
At bottom, this refined, plaintiff-focused test is aimed at
assessing whether adding the new plaintiff merely corrects a
“‘misnomer in the description of the [plaintiff]’” or instead
“interject[s] a new party into the litigation for the first time
under the guise of a misnomer.” (Hart, supra, 21 Cal.App.4th at
pp. 300-301; Stephens v. Berry (1967) 249 Cal.App.2d 474, 478.)
This distinction seeks to harmonize competing policies. On the
one hand, public policy favors liberal amendment of pleadings in
order to effectuate the resolution of lawsuits on their merits if the
party being sued has timely notice of its potential liability.
(Branick, supra, 39 Cal.4th at p. 243; Pointe San Diego
Residential Community, L.P. v. Procopio, Cory, Hargreaves &
Savitch, LLP (2011) 195 Cal.App.4th 265, 277 (Pointe San Diego)
[noting “‘strong policy in this state that cases should be decided
on their merits’”]; Pointe San Diego, at p. 277 [“‘The policy behind
statutes of limitations . . . to put defendants on notice of the need
to defend against a claim . . . is satisfied when recovery under an
amended complaint is sought on the same basic set of facts as the
original pleading’”].) On the other hand, public policy favors
finality and repose once a limitations period for a particular
potential liability has passed. (Bartalo, supra, 51 Cal.App.3d at
p. 534 [“Once the statute of limitation has passed as to other
possible plaintiffs, a defendant is entitled to dismiss them from
his considerations”].)
Applying this law, we conclude that the malpractice claims
brought by the LLP do not relate back to the timely filing of the
malpractice claims brought by Engel because Pech’s “legal
liability or obligation” to the LLP is “different” and “distinct” from
12
his “legal liability or obligation” to Engel. To begin, the retainer
agreement that is the sole basis for any malpractice liability in
this case explicitly identifies two “clients”—the LLP and Engel as
an individual. That is because Engel signed the agreement both
as a representative for the LLP and also in his individual
capacity as a “client.” Thus, there are two potential sets of
malpractice claims—one owned by the LLP, and another owned
by Engel.3 (Borissoff v. Taylor & Faust (2004) 33 Cal.4th 523,
529 [liability for malpractice “normally” runs “to the client with
whom the attorney stands in privity of contract”]; Stine v.
Dell’Osso (2014) 230 Cal.App.4th 834, 840 [same].) (Whether
any such claim by Engel is unviable as a matter of law is a
separate question we confront in section II of the Discussion.)
What is more, the LLP is “an entity distinct” from Engel himself
3 We accordingly disagree with the trial court’s finding—
implicit in its dismissal of Engel’s claims without elaborating on
the basis—that Engel lacked standing to pursue his otherwise
timely filed malpractice claims. As a “client” under the retainer
agreement, Engel, as an individual, stands in privity of contract
and, as discussed in the text above, has standing to sue for
malpractice. We consequently reject Pech’s argument that we
may sidestep examination of the relation-back question because
Engel—as the originally named plaintiff—never had standing
both (1) because Engel did have standing, and (2) because an
original plaintiff’s lack of standing is not, in any event, a bar to
adding a new plaintiff if the test for relation back is otherwise
satisfied. (River’s Side at Washington Square Homeowners Assn.
v. Superior Court (2023) 88 Cal.App.5th 1209, 1239 [“‘[A] named
plaintiff’s lack of standing at the beginning of an action is not
necessarily fatal to continuation of the action’”]; San Diego Gas,
supra, 146 Cal.App.4th at p. 1550 [same]; Branick, supra, 39
Cal.4th at pp. 243, 244 [rejecting argument that lack of standing
is fatal to amendment].)
13
(Corp. Code, § 16201 [“[a limited liability] partnership is an
entity distinct from its partners”]), and this distinctness includes
the LLP’s right and ability to sue in its own name (id., § 16307,
subd. (a); Code Civ. Proc., § 369.5, subd. (a)). As a result, Pech
owes each Engel and the LLP a separate “legal liability or
obligation” to perform competently the services for which he was
retained, and each therefore owns its own potential malpractice
claims against Pech. Engel himself seems to recognize this: The
amended complaint did not replace Engel as an individual with
the LLP, as it would if the LLP were merely stepping into Engel’s
shoes as a plaintiff; instead, the complaint added the LLP as a
second plaintiff, because Engel and the LLP stand in different
shoes. Because, and as explained more fully below, the scope of
Pech’s retention—and hence his duties—was “limited” solely to
the pending Wells Fargo litigation involving the LLP, and
because any damages resulting from deficient representation in
that litigation accordingly were suffered only by the LLP (and
none by Engel, who was not a party to that litigation), adding the
LLP as a plaintiff also risks “impos[ing] greater liability upon”
Pech. Plaintiffs asserted at oral argument that Pech’s liability to
the LLP was “coextensive” with (and, ostensibly, no different
from) his liability to Engel as an individual, such that a trier of
fact’s sole duty would be to “allocate” damages between the two.
We reject this argument because it incorrectly conflates Pech’s
liability to the LLP for malpractice with his liability to Engel as
an individual; as noted above, that liability is distinct.
Our conclusion is consistent with the analysis—and the
conclusion—set forth in Diliberti v. Stage Call Corp. (1992) 4
Cal.App.4th 1468 (Diliberti). There, two sisters were involved in
a car crash; one was injured, the other was not. The uninjured
14
sister filed a timely lawsuit against the driver at fault. That
sister later sought to amend her complaint to add the injured
sister as a new plaintiff, but did so after the statute of limitations
had run. The trial and appellate courts did not allow the
amendment, reasoning that each sister had a distinct claim for
damages, such that adding the new sister interjected a new
plaintiff (with different and greater liability to the defendant)
into the lawsuit. This case before us is analogous: Both Engel
and the LLP have distinct potential claims for malpractice, so it
is equally inappropriate to add the injured party (the LLP) to the
lawsuit after the limitations period has run merely because the
uninjured party (Engel) had previously filed a timely claim.
Plaintiffs’ chief response is that Engel’s original complaint
put Pech on notice of his liability for malpractice arising out of
the Wells Fargo litigation. Because “the most important
consideration” into “whether an amended complaint rests on the
same general set of facts” for purposes of the relation-back
doctrine “is whether the original pleading gave the defendant
adequate notice of the claim” (Hutcheson, supra, 74 Cal.App.5th
at p. 940; Pointe San Diego, supra, 195 Cal.App.4th at p. 280),
plaintiffs continue, the LLP’s claims also arising out of Pech’s
malpractice in the Wells Fargo litigation should relate back. We
reject this argument because it conflates notice of potential
liability to Engel with notice of potential liability to the LLP. The
retainer agreement attached to the original complaint explicitly
named both Engel and the LLP as clients, yet the original
complaint (misleadingly) reported that Engel was the named
party in the Wells Fargo litigation and Engel had suffered injury
as a result. It nowhere referred to the LLP as a party-litigant in
the Wells Fargo litigation who was itself seeking to vindicate its
15
own rights as a client under the agreement. The original
complaint effectively said, “There are two possible plaintiffs, but
only one of them is suing for malpractice.” The separateness of
Pech’s potential liability for malpractice to Engel and Pech’s
potential liability for malpractice to the LLP means that the two
liabilities do not rest on the same general set of facts; notice of
one is not synonymous with notice of the other.
At bottom, plaintiffs seem to be suggesting that Pech
should have known that Engel’s original complaint was wrong to
name Engel as the plaintiff rather than the LLP. Diliberti
implicitly rejected this “should have known” argument when it
refused to let the injured sister join the lawsuit previously filed
by the uninjured sister. We see no reason to part ways with
Diliberti on this issue, particularly when it is well established
that “the failure to comply with a statute of limitations cannot be
excused on the ground of lack of prejudice” (which, here, would be
the lack of prejudice to the party being sued possibly knowing of
an error in naming the actually injured plaintiff). (San Diego
Gas, supra, 146 Cal.App.4th at p. 1553; State Farm Fire &
Casualty Co. v. Superior Court (1989) 210 Cal.App.3d 604, 612.)
Because plaintiffs do not attempt to articulate any way to
amend the complaint to avoid the time bar (and because we
independently perceive no such way), we conclude that the trial
court properly sustained the demurer to the LLP’s claims without
leave to amend.
II. Can Engel State Viable Claims?
A. Does the first amended complaint state viable
malpractice-related claims by Engel?
Although, as noted above, Engel—as a party in privity with
Pech under the retainer agreement—has standing to sue for
16
malpractice, we must next ask: Are Engel’s malpractice claims
otherwise defective as a matter of law?
We conclude they are. Liability for legal malpractice
requires proof by the client-plaintiff that (1) the attorney owed a
duty to the client “‘to use such skill, prudence and diligence as
members of the profession commonly possess’”; (2) the attorney
breached that duty; (3) the breach proximately caused the client’s
injury; and (4) the client was damaged. (Wiley v. County of San
Diego (1998) 19 Cal.4th 532, 536.) Damages in a malpractice
lawsuit include (1) the amount the client paid the attorney
(Simke, Chodos, Silberfeld & Anteau, Inc. v. Athans (2011) 195
Cal.App.4th 1275, 1288); and (2) the difference between what the
client would have obtained had the lawyer’s representation been
competent and what the client actually obtained (Merenda v.
Superior Court (1992) 3 Cal.App.4th 1, 12, disapproved on other
grounds by Ferguson v. Lieff, Cabraser, Heimann & Bernstein
(2003) 30 Cal.4th 1037, 1053).
The allegations in the operative complaint as well as the
attached exhibits show, as a matter of law, that the only entity to
have suffered damages attributable to Pech’s alleged malpractice
is the LLP, not Engel. Although both Engel and the LLP signed
the retainer agreement as clients, that agreement explicitly
“limit[s]” Pech’s duties to “legal representation” in the pending
Wells Fargo litigation. But only the LLP was a party to that
litigation; Engel never was. Because the malpractice alleged in
the operative complaint is also explicitly limited to deficiencies in
Pech’s representation during the Wells Fargo litigation, the only
entity that could have suffered damages as a result of that
malpractice was the LLP, not Engel. What is more, because the
LLP’s potentially viable claims for malpractice are a type of
17
property (Potter v. Alliance United Ins. Co. (2019) 37 Cal.App.5th
894, 907; Schauer v. Mandarin Gems of Cal., Inc. (2005) 125
Cal.App.4th 949, 956), and because “[p]roperty acquired by a
[limited liability] partnership is property of the partnership and
not of the partners individually” (Corp. Code, § 16203; Bartlome
v. State Farm Fire & Casualty Co. (1989) 208 Cal.App.3d 1235,
1240 (Bartlome) [although limited liability partnerships are a
type of “‘hybrid’ organization that is viewed as an aggregation of
individuals for some purposes, and as an [independent] entity for
others,” “a partnership is viewed as an [independent] entity . . .
with respect to ownership of property”]), the LLP’s malpractice
claims belong solely to the LLP, and not to Engel. (Accord,
Wallner v. Parry Professional Bldg., Ltd. (1994) 22 Cal.App.4th
1446, 1449 [“When a partnership has a claim, the real party in
interest is the partnership and not an individual member of the
partnership”].) Consequently, Engel cannot establish he was
damaged by Pech’s malpractice, such that Engel’s malpractice
claims fail as a matter of law.
Engel resists this conclusion with what boils down to three
arguments.
First, Engel argues that he has a viable malpractice claim
against Pech because he is an “intended beneficiary” of the
retainer agreement between Pech and the LLP. Because Engel’s
arguably greater status as a signatory to the retainer agreement
does not compensate for the fact that the damages attributable to
any malpractice belong to the LLP and not him, his lesser status
as an intended beneficiary—even if we assume him to have that
status—is also not enough. Indeed, were we to accept Engel’s
argument, we would effectively permit an individual partner to
step into a limited liability partnership’s shoes by the simple
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expedient of labeling himself an “intended beneficiary”; in so
doing, we would effectively eliminate the otherwise clear—and
statutorily mandated—line between property owned by a limited
liability partnership and property owned by the partnership’s
individual partners, as well as effectively authorize a transfer of
the malpractice claims from the LLP to Engel in violation of the
general rule prohibiting such transfers (Curtis v. Kellogg &
Andelson (1999) 73 Cal.App.4th 492, 504 [such claims are
generally not assignable]; cf. White Mountains Reinsurance Co. of
America v. Borton Petrini, LLP (2013) 221 Cal.App.4th 890, 909
[such assignment may be permissible as part of a sale of all
assets]).
Second, Engel argues that the LLP’s malpractice claims
effectively belong to him because he was the one speaking with
Pech on the LLP’s behalf and paying its legal bills. We are
unpersuaded. An LLP—as an incorporeal entity—must
communicate with its lawyer through someone, and the fact of
that communication does not itself make the communicator a
concurrent owner of the LLP’s malpractice claims (see Zenith Ins.
Co. v. O’Connor (2007) 148 Cal.App.4th 998, 1009 (Zenith)), let
alone transfer any resulting malpractice claim belonging to the
LLP to the communicator. For much the same reason, the
payment of attorney fees also does not transfer ownership of the
malpractice claims. (Ibid.) Consistent with this analysis, claims
for malpractice suffered by a partnership must be brought by the
partnership, and not by the individual partners. (Mayer v. C.W.
Driver (2002) 98 Cal.App.4th 48, 60 [so holding]; Tinseltown
Video, Inc. v. Transportation Ins. Co. (1998) 61 Cal.App.4th 184,
199-200 [same]; Bartlome, supra, 208 Cal.App.3d at pp. 1239-
1240 [same].)
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Third, Engel argues that he should be able to sue
individually because he—as the self-proclaimed “principal” of the
LLP—will individually benefit if the LLP prevails in proving
malpractice. Although counsel for a limited liability partnership
can sometimes, depending on a variety of factors, be deemed to
“represent” the individual partners (Wortham & Van Liew v.
Superior Court (1987) 188 Cal.App.3d 927, 932-933; Johnson v.
Superior Court (1995) 38 Cal.App.4th 463, 475-476; Responsible
Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1732-
1733), this potential for an attorney-client relationship running
between the partnership’s counsel and the individual partner
does not mean that those individual partners own the
partnership’s property—including its potential claims for
recovery—simply because those partners may eventually benefit
financially from how the partnership uses that property. The law
is to the contrary. (O’Flaherty v. Belgum (2004) 115 Cal.App.4th
1044, 1062 [claims owned by receiver for a partnership belong
solely to the receiver, not individual partners]; Sausser v.
Barrack (1954) 123 Cal.App.2d Supp. 948, 950 [money owed to a
partnership did not “belong” to partners “individually”]; Swanson
v. Siem (1932) 124 Cal.App. 519, 528 [same].) Indeed, “to allow a
[partner] to sue on his own behalf” (as Engel suggests) “would
run the risk of double recovery—once to the [partner] and once to
the [partnership].” (Vinci v. Waste Management, Inc. (1995) 36
Cal.App.4th 1811, 1815 [applying this principal to shareholders
of a corporation].) And because partnerships by definition have
at least two partners (see Corp. Code 16101, subd. (a)(9) [defining
"partnership" to mean two or more partners]), the risk here is of
at least triple recovery.
20
For these reasons, we conclude as a matter of law that
Engel has suffered no damage as a result of Pech’s alleged
malpractice to the LLP during the Wells Fargo litigation, and
that Engel’s malpractice claims were properly dismissed.
B. Can Engel amend the complaint to state a claim
on his own behalf for malpractice?
Given that all damages for any malpractice claims were
suffered by and belong to the LLP, there is no “reasonable
possibility” that Engel can amend the complaint to state a viable
malpractice claim.
Engel offers two sets of arguments to the contrary.
First, Engel argued in his motion for reconsideration that
he can amend the complaint to state that (1) he had an “oral
agreement” with Pech that Pech “would pursue the [Wells Fargo
litigation] for the benefit of . . . Engel based on . . . Engel’s
commitment to pay the legal fees,” and (2) he had an “implied
attorney-client relationship whereby . . . Engel had an actual and
reasonable expectation that Pech would protect[] his interest in a
successful recovery in the underlying [litigation].” These
proposed amendments would not cure the defects in Engel’s
pleading. To begin, these allegations are little more than an end
run around the legal principles stated above—namely, they allege
that Engel’s payment of the attorney fees and expectation of a
payout somehow transfer ownership of the LLP’s malpractice
claims to him. As explained above, they do not. What is more,
both of these proposed amendments are flatly foreclosed by the
terms of the retainer agreement, which prohibit all “side”
agreements not memorialized in writing—whether “oral” or
“implied.” Because “implied” agreements are grounded in the
parties’ mutual intent (Zenith, supra, 148 Cal.App.4th at p.
21
1010), no implied agreement could be consistent with the parties’
express mutual intent in the retainer agreement to not have
unwritten, “implied” agreements.
Second, Engel alleged in the proposed second amended
complaint that he had an interest in the Wells Fargo litigation
prosecuted by the LLP because he “made all relevant decisions”
for the LLP regarding that lawsuit, he was the “sole beneficiary
of any recovery,” and he was “financing” that lawsuit personally.
These allegations do not cure the defects in the complaint for the
same reasons the arguments he makes in his reconsideration
motion fail: They do nothing more than allege legal conclusions
contrary to the governing law (and to which we owe no deference)
(Berry v. State of California (1992) 2 Cal.App.4th 688, 691
[“conclusions of law are not binding on a court reviewing a
demurrer”]; Today’s IV, Inc. v. Los Angeles County Metropolitan
Transportation Authority (2022) 83 Cal.App.5th 1137, 1169
[“conclusion[s] of law” are “to be disregarded”]), and they seek to
blur the otherwise clear distinction between claims owned by an
LLP and claims owned by individual partners.
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DISPOSITION
We affirm the judgment. Pech is entitled to his costs on
appeal.
CERTIFIED FOR PUBLICATION.
______________________, J.
HOFFSTADT
We concur:
_________________________, Acting P. J.
ASHMANN-GERST
_________________________, J.
CHAVEZ
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