Built Pacific v. Denning Moores CA4/1 ( 2024 )

Filed 10/25/24 Built Pacific v. Denning Moores CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
BUILT PACIFIC, INC., D081638
Plaintiff and Appellant,
v. (Super. Ct. No. 37-2020-
00032524-CU-PN-CTL)
DENNING MOORES, APC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of San Diego County,
Carolyn M. Caietti, Judge. Affirmed.
Diefenbach Law Group and James C. Diefenbach for Plaintiff and
Appellant.
Denning Moores, Christina M. Denning, Natalia D. Smith, and
Jennifer S. Hegemier for Defendant and Respondent.
Built Pacific, Inc. (BPI) appeals a judgment in its action against
Denning Moores, APC (DM) for legal malpractice. BPI contends the superior
court erroneously sustained without leave to amend DM’s demurrer made on
the ground the action was barred by an arbitration award DM had obtained
against BPI in a dispute regarding attorney fees. DM defends the court’s
ruling and asks us to sanction BPI for pursuing a frivolous appeal. We affirm
the judgment and deny the sanctions request.
I.
BACKGROUND
A. DM’s Representation of BPI
BPI retained DM in June 2018 to take over its representation in an
action BPI had filed against a school district for terminating a contract with
BPI for the demolition, relocation, installation, and site work for various
relocatable buildings. The retainer agreement required BPI to pay DM
hourly fees for attorneys and paralegals, a percentage of any recovery from
the school district exclusive of costs, and any fees and charges of expert
witnesses, consultants, or investigators hired by DM. The agreement
contained a provision requiring binding arbitration of “[a]ny controversy
between the parties regarding the construction, application or performance of
any services under the Agreement, and any claim arising out of or relating to
this Agreement or its breach, including but not limited to claims of
malpractice.”
In March 2019, DM retained Xpera Consulting Services, Inc. (Xpera) to
provide expert opinion on an issue at a mediation with the school district.
BPI paid Xpera $19,159 but objected to later bills as “excessive” and did not
pay them. BPI also objected to DM’s bills as “excessive and unconscionable.”
BPI’s nonpayment of the bills prompted DM to apply to withdraw from
representing BPI, and the superior court granted the application in
September 2019. Xpera demanded payment the following month, and DM,
BPI’s new counsel, and Xpera’s counsel exchanged e-mails about the matter.
In an e-mail dated November 13, 2019, BPI’s counsel stated that DM was
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supposed to manage the scope of Xpera’s work, “none of the work starting
with the July invoices was authorized other than attending [a] deposition and
settlement meeting,” and an August 31, 2019 invoice for $37,000 was
“entirely unauthorized.” BPI paid neither DM nor Xpera for all amounts
billed.
B. Arbitration
In December 2019, DM demanded arbitration of its payment dispute
with BPI.1 An arbitrator selected by the parties held a hearing over three
days in April 2021 and issued an award in May 2021. The arbitrator stated
in the award that in defense against DM’s claim for payment, BPI “presented
a skein of offset arguments related to deficient work and conduct alleged to
have constituted malpractice.” Specifically, BPI argued DM “mishandled”
depositions of BPI’s “majority owner” (Ahmed Salem) and of subcontractors’
persons most knowledgeable by failing to elicit favorable testimony;
“mishandled” several mediation sessions by not properly presenting damages;
“mishandled” the filing and pursuit of a motion; and committed
“malfeasance” by requesting a trial advance and then withdrawing as counsel
when BPI denied the request. The arbitrator found BPI “failed to make a
credible showing of legal work performed below industry standards,” denied
offsets, and awarded DM $162,596.03 in fees and costs. The superior court
confirmed the arbitration award as a judgment in January 2022.
C. Litigation
On April 21, 2020, while the arbitration was pending, BPI sent DM a
copy of a complaint BPI intended to file against DM and Xpera in the
1 DM also demanded arbitration with two individuals who had retained
DM to defend them against a cross-complaint filed in BPI’s action against the
school district. Those individuals are not parties to this appeal or to the
underlying action.
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superior court. The complaint asserted counts for legal malpractice and
breach of fiduciary duty against DM and counts for breach of fiduciary duty,
professional malpractice, unfair business practices, and fraud against Xpera.
BPI did not file that complaint and instead eliminated the counts against DM
and filed a complaint against only Xpera on September 16, 2020.
On October 13, 2021, BPI amended the complaint to add DM as a
defendant and to add the claims for legal malpractice and breach of fiduciary
duty that were included in the copy of the complaint BPI had sent DM in
April 2020. In the legal malpractice count, BPI alleged that DM failed to
properly examine Salem and subcontractors’ persons most knowledgeable at
depositions, failed to properly present damages at mediations and settlement
meetings, and failed to properly monitor and supervise Xpera’s work for the
mediations. In the breach of fiduciary duty count, BPI alleged that “DM
either authorized work by Xpera without BPI’s consent or failed to monitor
the work performed by Xpera.” BPI sought compensatory damages, attorney
fees, and costs.
DM demurred to both claims asserted against it in the amended
complaint. It argued the legal malpractice claim was barred by the
arbitration award under principles of preclusion. DM argued both claims
were barred by the provision of the statute of limitations requiring the claims
be filed within one year of discovery of the underlying wrongful acts or
omissions. (See Code Civ. Proc., § 340.6, subd. (a)). In support of the
demurrer, DM requested the superior court take judicial notice of the
judgment confirming the arbitrator’s award, two motions DM had filed in the
arbitration, a motion for sanctions DM filed in the proceeding to confirm the
arbitration award, the petition BPI filed in the superior court to stay the
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arbitration, and DM’s notice of intent to file a motion for sanctions in the
proceeding to stay the arbitration.
In opposition to the demurrer, BPI argued the arbitration award did
not preclude its claim for legal malpractice, because the full extent of its
damages was unknown at the time of the arbitration and prevented the claim
from then being ripe for adjudication. It argued the legal malpractice claim
was timely under the provision of the statute of limitations requiring
commencement within four years of the date of the underlying wrongful act
or omission, and the statute was tolled until all of the damages associated
with its lawsuit against the school district accrued. (See Code Civ. Proc.,
§ 340.6, subd. (a)(1)). BPI argued the breach of fiduciary duty count was
timely under the four-year limitations period applicable to “[a]n action for
relief not hereinbefore provided for . . . .” (Id., § 343; William L. Lyon &
Associates, Inc. v. Superior Court (2012) 204 Cal.App.4th 1294, 1312 [“Breach
of fiduciary duty not amounting to fraud or constructive fraud is subject to
the four-year ‘catch-all statute’ of Code of Civil Procedure section 343.”].) BPI
neither objected to DM’s request for judicial notice in the memorandum filed
in opposition to the demurrer nor filed a separate opposition to the request.
The superior court held a hearing and later issued a minute order. The
court denied DM’s request for judicial notice of the two motions it had filed in
the arbitration and granted the request as to the judgment confirming the
arbitration award and other documents. The court sustained the demurrer to
the legal malpractice count without leave to amend, on the ground it was
“evident from the arbitration award that [BPI] did litigate the malpractice
claim during the arbitration proceedings.” The court overruled the demurrer
to the breach of fiduciary duty count, on the ground it was “unclear based on
the pleadings when the statute of limitations began to run.”
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DM later moved for summary judgment or adjudication of the breach of
fiduciary duty count on the ground it was barred by the statute of limitations.
Over BPI’s opposition, the superior court granted the motion. Based on this
ruling and the prior ruling on DM’s demurrer, the court entered a separate
judgment that BPI take nothing from DM. At oral argument on BPI’s appeal
from the judgment, the parties advised this court that the ruling on the
summary adjudication motion was no longer at issue because the dispute
between BPI and the school district upon which the breach of fiduciary duty
count was based had settled. We therefore do not discuss that ruling further.
II.
DISCUSSION
A. Demurrer Ruling
BPI attacks on two grounds the superior court’s order sustaining DM’s
demurrer to the legal malpractice count without leave to amend. BPI first
complains the court abused its discretion by taking judicial notice of the
arbitration award, because, BPI says, “its prejudicial value far outweigh[ed]
[its] probative value.” BPI next complains the court abused its discretion by
sustaining the demurrer to the legal malpractice claim. BPI argues “it could
not have litigated the issue of its legal malpractice claims [in the arbitration]
because the damages are still unknown and continuing to accrue, preventing
these issues from being ripe for adjudication.” Neither ground urged by BPI
is persuasive.
1. Judicial notice
BPI did not preserve for appeal its challenge to the ruling on DM’s
request for judicial notice of the arbitration award. By failing to object to the
request in the superior court, BPI forfeited that challenge. (Evid. Code,
§ 353, subd. (a) [no reversal for erroneous admission of evidence without
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timely objection]; Younan v. Caruso (1996) 51 Cal.App.4th 401, 406, fn. 3
[appellant’s “failure to timely object to the propriety of judicial notice in
opposition to [respondent’s] dismissal motion is deemed a waiver of that
objection”].)
The challenge to the judicial notice ruling also lacks merit. We review
the ruling for abuse of discretion. (Physicians Committee for Responsible
Medicine v. Los Angeles Unified School Dist. (2019) 43 Cal.App.5th 175, 182;
Savea v. YRC, Inc. (2019) 34 Cal.App.5th 173, 182.) Judicial notice may be
taken of a record of a state court. (Evid. Code, § 452, subd. (d).) The
arbitration award was attached as an exhibit to a superior court judgment
confirming the award and so was subject to judicial notice as a court record.
A court may consider a document subject to judicial notice when ruling on a
demurrer. (Code Civ. Proc., § 430.30, subd. (a).) The arbitration award was
highly relevant to the preclusion defense DM asserted. (See Evid. Code,
§ 210 [evidence is relevant if it has “any tendency in reason to prove or
disprove any disputed fact that is of consequence to the determination of the
action”]; Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292,
1299 (Frommhagen) [if allegations of complaint or facts subject to judicial
notice show complaint is barred by prior adjudication, court may properly
sustain demurrer].) BPI has not explained how taking judicial notice of the
arbitration award “create[d] substantial danger of undue prejudice” (Evid.
Code, § 352), i.e., a “tend[ency] to evoke an emotional bias against [BPI]” with
“very little effect on the issues” (Scott v. C.R. Bard, Inc. (2014) 231
Cal.App.4th 763, 782). BPI thus has not met its burden to show the superior
court “ ‘exceed[ed] the bounds of reason’ ” when it took judicial notice of the
arbitration award. (Denham v. Superior Court (1970) 2 Cal.3d 557, 566; see
Greenspan v. LADT, LLC (2010) 191 Cal.App.4th 486, 503, 525 [court
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properly took judicial notice of arbitration award confirmed as judgment
when award was relevant to issue on which court ruled].)
2. Merits of ruling
BPI has shown no reversible error in the trial court’s order sustaining
the demurrer to the legal malpractice claim without leave to amend. A
demurrer is properly sustained if the allegations of the complaint and the
judicially noticed documents show the challenged claim is barred by a prior
decision. (Nicholson v. Fazeli (2003) 113 Cal.App.4th 1091, 1100;
Frommhagen, supra, 197 Cal.App.3d at p. 1299.) “We review the trial court’s
sustaining of a demurrer de novo and apply the abuse of discretion standard
in reviewing the court’s denial of leave to amend. [Citation.] ‘On appeal from
a judgment of dismissal following the sustaining of a demurrer without leave
to amend, the appellant “has the burden to show either the demurrer was
sustained erroneously or that to sustain the demurrer without leave to
amend constitutes an abuse of discretion.” ’ ” (Feliz v. County of Orange
(2023) 91 Cal.App.5th 927, 932–933 (Feliz).) BPI has not met that burden.
The superior court correctly ruled the arbitration award barred BPI’s
malpractice claim. A judgment confirming an arbitration award constitutes a
final judgment on the merits and bars a party to the award from later
relitigating against the other party any issue that was necessarily decided in
the arbitration proceeding. (JPV I L.P. v. Koetting (2023) 88 Cal.App.5th 172,
192; Grinham v. Fielder (2002) 99 Cal.App.4th 1049, 1054; Sartor v. Superior
Court (1982) 136 Cal.App.3d 322, 328.) One issue the arbitrator considered
was BPI’s contention that against the fees and costs DM claimed “there
should be an offset for deficient work or conduct constituting malpractice.”
(Italics added.) The alleged malpractice the arbitrator considered was DM’s
handling of several depositions, several mediation sessions, and a pretrial
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motion. In the legal malpractice claim BPI later asserted against DM in the
superior court, BPI alleged DM failed to properly conduct depositions, failed
to properly present damages at mediations, and failed to properly supervise
Xpera’s work for the mediations. To prevail on that claim, BPI would have to
prove DM breached its duty “to use such skill, prudence, and diligence as
members of [its] profession commonly possess and exercise.” (Coscia v.
McKenna & Cuneo (2001) 25 Cal.4th 1194, 1199.) But it cannot do so because
relitigation of that issue is barred by the arbitrator’s finding that BPI “failed
to make a credible showing of legal work performed below industry
standards.” Since BPI’s inability to prove the essential breach element of its
claim “is fatal to recovery” (Nichols v. Keller (1993) 15 Cal.App.4th 1672,
1682), the superior court correctly sustained DM’s demurrer to the legal
malpractice claim.
Neither case BPI cites requires reversal of the demurrer ruling. In
Chavez v. Carter (1967) 256 Cal.App.2d 577, 582–583 (Chavez), the Court of
Appeal held a claim for legal malpractice was not barred by the plaintiff’s
failure to assert the claim as a counterclaim in an earlier action by his
attorney against him to recover fees, because the malpractice claim had not
fully accrued at the time the attorney sued the plaintiff for fees. In Budd v.
Nixen (1971) 6 Cal.3d 195, 200–201 (Budd), the Supreme Court held a claim
for legal malpractice does not accrue until the client suffers injury as a result
of the attorney’s negligence. The accrual of BPI’s claim for legal malpractice
is irrelevant to the type of preclusion at issue here. Accrual may be relevant
to claim preclusion (or res judicata), which bars relitigation of claims that
could have been but were not asserted in a prior action between the parties
that resulted in a final judgment on the merits. (DKN Holdings LLC v.
Faerber (2015) 61 Cal.4th 813, 823–824; Wassmann v. South Orange County
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Community College Dist. (2018) 24 CalApp.5th 825, 844.) But accrual is not
relevant to issue preclusion (or collateral estoppel), which bars relitigation of
issues that were actually litigated and decided in a prior action between the
parties that has gone to final judgment on the merits. (DKN Holdings, at
pp. 824–825; Frommhagen, supra, 197 Cal.App.3d at p. 1299.) In the
arbitration, BPI raised the issue of DM’s malpractice by seeking an offset
against the fees and costs DM was seeking, and the arbitrator determined
DM had not committed malpractice. It is the issue-preclusive effect of the
arbitration award, not its claim-preclusive effect, that bars BPI’s legal
malpractice claim. The cases BPI cites about accrual of its claim are
therefore not on point.
BPI also has shown no error in the superior court’s decision to sustain
the demurrer without leave to amend. As the appellant, BPI has the burden
to show how it could amend its pleading to avoid the preclusive effect of the
arbitration award. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Srouy v. San
Diego Unified School Dist. (2022) 75 Cal.App.5th 548, 559.) It has made no
effort to do so in its briefing. We find no abuse of discretion in the court’s
denial of leave to amend. (Feliz, supra, 91 Cal.App.5th at p. 940, fn. 10.)
B. Sanctions
In its respondent’s brief, DM requests $20,126 in sanctions against BPI
for the “cost and time [DM] spent addressing BPI’s appeal,” which DM
disparages as “frivolous, riddled with factual misrepresentations and
meritless legal arguments.” DM has not filed a motion that “include[s] a
declaration supporting the amount of any monetary sanction sought.” (Cal.
Rules of Court, rule 8.276(b)(1).) “For lack of compliance with rule
8.276(b)(1), we deny [DM’s] request for sanctions.” (Saltonstall v. City of
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Sacramento (2014) 231 Cal.App.4th 837, 858–859; accord, City of Crescent
City v. Reddy (2017) 9 Cal.App.5th 458, 468.)
III.
DISPOSITION
The judgment is affirmed. Respondent shall recover its costs on appeal.
IRION, J.
WE CONCUR:
HUFFMAN, Acting P. J.
CASTILLO, J.
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