Belna v. Rutan & Tucker LLP CA2/3 ( 2024 )

Filed 10/7/24 Belna v. Rutan & Tucker LLP CA2/3
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
JAMES M. BELNA, B336127
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. 22STCV22179)
v.
RUTAN & TUCKER LLP,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Stephanie M. Bowick, Judge. Affirmed.
James M. Belna, in pro. per., for Plaintiff and Appellant.
Loeb & Loeb and W. Allan Edmiston for Defendant and
Respondent.
_________________________
Plaintiff James M. Belna appeals from a judgment of
dismissal following a successful demurrer to his complaint
brought by defendant Rutan & Tucker LLP (Rutan). He contends
the complaint alleges sufficient facts to support his claim that
Rutan violated the Political Reform Act of 1974 (Gov. Code,
§ 81000 et seq.)1 by participating in a Claremont City Council
(the City Council) meeting as the interim City Attorney and
influencing the City Council’s decision to award Rutan the City
Attorney legal services contract. We affirm because plaintiff has
not alleged sufficient facts to show a violation of section 87100.
FACTUAL AND PROCEDURAL BACKGROUND2
I. Rutan’s Appointment as Claremont’s City Attorney
Best, Best and Krieger (BBK) served as the City Attorney
for the City of Claremont (the City) for many years. In late 2016,
BBK represented the City in an eminent domain lawsuit through
which the City sought to acquire the local water system. The
City lost the lawsuit, and BBK represented the City on appeal.
While the appeal was pending, the City engaged Rutan “to
attempt to negotiate a consensual purchase of the water system.”
When that effort failed, the City engaged Rutan to negotiate a
settlement of the eminent domain appeal in October 2017. BBK
then resigned as City Attorney.
1 All undesignated statutory references are to the
Government Code.
2 Consistent with the applicable standard of review, we draw
our statement of facts, including quoting occasionally, from the
allegations of the complaint. (Rallo v. O’Brian (2020) 52
Cal.App.5th 997, 1002.)
2
In November 2017, the City engaged Rutan to serve as City
Attorney in an interim capacity while it searched for a
permanent replacement. “At the end of the search process, the
Council identified six law firms which it deemed qualified to
serve as City Attorney. From these six firms, the Council chose
Rutan. During the regularly scheduled [C]ity [C]ouncil meeting
on March 13, 2018, the Council formally considered the approval
of a [l]egal [s]ervices [a]greement under which Rutan would serve
as the permanent City Attorney.”
Before the City Council’s vote on the legal services
agreement, members of the public were invited to comment.
Plaintiff, a resident of Claremont, California, objected to the legal
services agreement with Rutan. Plaintiff thought the City should
pursue a malpractice lawsuit against BBK for bringing and losing
the eminent domain case, and he asserted that Rutan was
unqualified to advise the City on such matters because Rutan
served as co-counsel with BBK in the eminent domain case.
Plaintiff also told the City Council that because “Rutan had a
financial interest in the agreement under consideration, the firm
could not participate in the Council’s decision-making process in
any way; and that if the Council wanted further guidance
concerning the [p]laintiff’s claim that Rutan had a conflict of
interest with respect to potential legal action against BBK, the
Council needed to retain a non-Rutan attorney to provide that
guidance.”
Jeffrey Oderman, a partner in the Rutan firm who had
been designated by Rutan to serve as the interim City Attorney,
was present at the March 13th meeting in that capacity.
Following plaintiff’s comments, one of the Council members
asked Oderman if there was any merit to plaintiff’s conflict of
3
interest objection. Oderman responded that he “was
(temporarily) not the City Attorney; that he was not providing
legal advice to the Council; that he had a conflict of interest
providing legal advice to the Council with regard to the
agreement under consideration; and that if the Council wished to
obtain legal advice to address [p]laintiff’s concerns, the Council
would have to find another attorney to do so.”
“Oderman then proceeded to tell the Council that ‘speaking
as sort of an applicant before you’ – and not as the City Attorney
– he did not agree at all that there was any conflict of interest
because of a potential claim that the City may make against
BBK.” “Another council member then asked Mr. Oderman if he
agreed that the City could not pursue legal action against BBK
until after the [California Fair Political Practices Commission
(FPPC)] completed its investigation and issued a decision. After
again stating that he was not speaking as the City Attorney, he
responded that he absolutely agreed with that contention.”3
The City Council then unanimously approved the legal
services agreement, appointing Rutan as the permanent City
Attorney.
3 “Plaintiff filed a complaint with the [FPPC] . . . in which he
alleged that BBK had violated conflict of interest laws by
participating in the City Council’s decision to initiate the eminent
domain with the foreknowledge that BBK would be able to collect
millions of dollars in litigation fees if the Council approved the
takeover attempt.” After investigating, in July 2018, the FPPC
“closed its investigation of [p]laintiff’s complaint and took no
action against BBK.”
4
II. Plaintiff’s Lawsuit
In July 2022, plaintiff sued Rutan, alleging a single cause
of action for violation of section 87100. Section 87100 states:
“A public official at any level of state or local government shall
not make, participate in making, or in any way attempt to use
the public official’s official position to influence a governmental
decision in which the official knows or has reason to know the
official has a financial interest.” Plaintiff asserts that Rutan, as
acting interim City Attorney, was a public official under section
87200, and it knowingly used its official position to influence the
City Council’s decision in its favor to secure the City Attorney
legal services agreement at the March 13, 2018 City Council
meeting.
Plaintiff alleges that “Rutan has billed and collected more
than $1 million for services rendered to the City under the [legal
services agreement].” Plaintiff prayed for a final judgment
ordering Rutan “to pay damages of three times the amount of
economic benefit realized by [Rutan],” with half of those damages
paid to plaintiff pursuant to sections 91005, subdivision (b), and
91009.
III. Demurrer
Rutan demurred to the complaint. Rutan argued that it did
not violate section 87100 because it expressly represented itself,
not the City, when it responded to plaintiff’s objections at the
City Council meeting. Rutan also asserted its commentary at the
City Council meeting was related to terms of its employment and
therefore was authorized by California Code of Regulations, title
2, section 18704 (2CCR § 18704), subdivision (d)(3).
Rutan also argued its public comment was statutorily
protected by section 87105, which allows a public official with a
5
financial interest in a decision to participate in public comment
after the official has made appropriate disclosures. Rutan
asserted it made such disclosures and thus could respond to
plaintiff’s objection.
Plaintiff opposed the demurrer, arguing that Rutan
participated at the meeting in its official capacity as interim City
Attorney and therefore was not free to participate as a member of
the public. Plaintiff asserted that Rutan’s commentary at the
meeting had nothing to do with its compensation or terms and
conditions of its employment because the sole “interchange”
alleged between Oderman and the City Council was about
plaintiff’s objection to Rutan’s asserted conflict of interest.
Plaintiff also argued that Rutan failed to comply with section
87105 such that it could participate in public comment.
The trial court sustained the demurrer without leave to
amend. Citing 2CCR section 18704, subdivision (d)(3), the trial
court found that “it is apparent from the face of the Complaint
that [Rutan] did not violate Government Code section 87100
because it was commenting on matters concerning its own
employment or compensation, or the terms, conditions, or
circumstances of its employment, in response to specific questions
from official decision makers, in this case, the Council.” The
court also agreed with Rutan that under section 87105, it could
participate in the City Council meeting as it had because
Oderman disclosed the potential conflict of interest and then
responded to questions about the conflict of interest only as an
applicant on behalf of Rutan and not in the capacity of a public
official.
6
Plaintiff moved for reconsideration of the court’s order
sustaining the demurrer without leave to amend. The trial court
denied the motion.
In December 2023, the court entered a judgment of
dismissal in favor of Rutan and against plaintiff. Plaintiff timely
appealed.
DISCUSSION
Plaintiff argues he sufficiently alleged the elements of a
section 87100 violation, and the trial court abused its discretion
in denying leave to amend. We disagree.
I. Standard of Review
“We review an order sustaining a demurrer de novo,
applying our independent judgment to assess whether the
complaint states a cause of action. (Minton v. Dignity Health
(2019) 39 Cal.App.5th 1155, 1161 [].) We assume the truth of all
properly pleaded facts, as well as all facts that may be implied or
reasonably inferred from those expressly alleged, but we do not
assume the truth of contentions, deductions, or conclusions of fact
or law.” (Sonoma Luxury Resort LLC v. California Regional
Water Quality Control Bd. (2023) 96 Cal.App.5th 935, 940.) “We
also ‘consider judicially noticed matters.’ ” (E-Fab, Inc. v.
Accountants, Inc. Services (2007) 153 Cal.App.4th 1308, 1315.)
“ ‘In order to prevail on appeal from an order sustaining a
demurrer, the appellant must affirmatively demonstrate error.
Specifically, the appellant must show that the facts pleaded are
sufficient to establish every element of a cause of action and
overcome all legal grounds on which the trial court sustained the
demurrer.’ ” (Save Lafayette Trees v. East Bay Regional Park
Dist. (2021) 66 Cal.App.5th 21, 35.)
7
Whether the trial court should have granted leave to
amend “is reviewed under the abuse of discretion standard,
although error is shown if there is any reasonable probability an
amendment that cures the defect can be made. Appellants bear
the burden on appeal of showing a reasonable possibility exists
that the complaint can be successfully amended.” (Fischer v.
Time Warner Cable Inc. (2015) 234 Cal.App.4th 784, 790.)
II. Applicable Law
The voters adopted the Political Reform Act (PRA) in 1974
through the passage of Proposition 9. (Consumers Union of U.S.,
Inc. v. California Milk Producers Advisory Bd. (1978) 82
Cal.App.3d 433, 436.) As relevant here, section 87100 provides
that “a public official at any level of state or local government
shall not make, participate in making or in any way attempt to
use his official position to influence a governmental decision in
which he knows or has reason to know he has a financial
interest.” A public official has a financial interest in a decision “if
it is reasonably foreseeable that the decision will have a material
financial effect, distinguishable from its effect on the public
generally.” (§ 87103; see also Santa Clarita Organization for
Planning & the Environment v. Abercrombie (2015)
240 Cal.App.4th 300, 313–314.) However, notwithstanding
section 87100, a public official who has a financial interest in a
governmental decision may “speak on the issue during the time
that the general public speaks on the issue” if the public official
does all of the following: “(1) [p]ublicly identif[ies] the financial
interest that gives rise to the conflict of interest or potential
conflict of interest”; “(2) [r]ecuse[s] the public official’s own self
from discussing and voting on the matter, or otherwise acting in
violation of Section 87100”; and “(3) [l]eave[s] the room until after
8
the discussion, vote, and any other disposition of the matter is
concluded.” (§ 87105.)
Pursuant to the PRA’s implementing regulations,4 a “public
official participates in a governmental decision if the official
provides information, an opinion, or a recommendation for the
purpose of affecting the decision without significant intervening
substantive review.” (2CCR § 18704, subd. (b).) A public official
“uses an official position to influence a governmental decision” if
the official “(1) Contacts or appears before any official in the
official’s agency or in an agency subject to the authority or
budgetary control of the official’s agency for the purpose of
affecting a decision; or [¶] (2) Contacts or appears before any
official in any other government agency for the purpose of
affecting a decision, and the public official acts or purports to act
within the official’s authority or on behalf of the official’s agency
in making the contact.” (Id., subd. (c)(1)–(2).) However,
“[m]aking, participating in, or influencing a governmental
decision does not include” “[a]ctions by a public official relating to
compensation or the terms or conditions of the official’s
employment or consulting contract.” (Id., subd. (d)(3).)
A member of the public may bring a civil action against
“[a]ny designated employee or public official specified in
Section 87200, except an elected state officer, who realizes an
economic benefit as a result of a violation of Section 87100 or of a
4 The FPPC “has primary responsibility for the impartial,
effective administration and implementation” of the PRA.
(§ 83111; see § 83116 [proceedings by the FPPC when there is
probable cause of a PRA violation].) The FPPC “may adopt,
amend and rescind rules and regulations to carry out the
purposes and provisions” of the PRA. (§ 83112.)
9
disqualification provision of a conflict of interest code.” (§ 91005,
subd. (b).) A public official may be liable in such an action “for an
amount up to three times the value of the benefit.” (Ibid.) If a
judgment is entered under this section, “the plaintiff shall receive
fifty percent of the amount recovered” and “[t]he remaining fifty
percent shall be deposited in the General Fund of the state.”
(§ 91009.)
III. Plaintiff Failed to Allege a Violation of Section 87100
Plaintiff contends he sufficiently alleged a violation of
section 87100. As mentioned above, to state a claim under
section 87100, plaintiff must have alleged that (1) Rutan was a
public official and (2) participated in or attempted to use its
official position to influence a governmental decision, (3) in which
it knew it had a financial interest. (§ 87100.)
Elements one and three are clearly alleged. The complaint
alleged that Rutan was the interim City Attorney, who is a
“public official” pursuant to section 87200. The complaint also
alleged that Rutan had a known financial interest in the City
Council’s decision to award Rutan the permanent City Attorney
position. Specifically, the complaint alleged that plaintiff
informed Oderman that Rutan had a financial interest in the
agreement under consideration, and Oderman acknowledged
Rutan’s conflict of interest by indicating he was not speaking as
City Attorney but as an applicant.
As to the second (and final) element, i.e. that Rutan
participated in or influenced the making of the governmental
decision, plaintiff alleged that at the March 13, 2018 City Council
meeting, in response to a Council member’s request for comment,
Rutan partner Oderman voiced his opinion that Rutan did not
have a conflict of interest in representing the City as the City
10
Attorney based on its relationship as former co-counsel with
BBK. Rutan argues that Oderman’s comments at the City
Council meeting did not constitute making, participating in, or
influencing a governmental decision because the comments
related to the terms or conditions of Rutan’s employment or
consulting contract within the meaning of 2CCR section 18704,
subdivision (d)(3). Rutan contends Oderman’s statement that
Rutan had no conflict of interest “represented an essential
dialogue between a lawyer and a prospective client regarding a
foundational aspect of the proposed engagement. And it
obviously related to, and potentially impacted, the terms of the
proposed [l]egal [s]ervices [a]greement. If Rutan had a genuine
conflict of interest, that conflict would have required Rutan to
disclose the ‘relevant circumstances’ and ‘material risks’ of the
conflict and proposed representation, and then obtain
Claremont’s informed written consent thereto. [Citations.] A
genuine conflict may also have required some express limitation
on Rutan’s role or the scope of its responsibilities as they were
defined in the proposed [l]egal [s]ervices [a]greement. (Id.)”
We agree that Oderman’s verbal assurance to the City
Council that there was no conflict of interest was an action
“relating to . . . the terms or conditions of [Rutan]’s employment
or consulting contract.” (See 2CCR § 18704, subd. (d)(3).) As
Rutan points out, lawyers are subject to special rules of
professional responsibility and conduct, under which lawyers owe
their clients a duty of loyalty. (Flatt v. Superior Court (1994)
9 Cal.4th 275, 282.) Where there is a conflict of interest, an
attorney must make appropriate disclosures and obtain informed
written consent from the client. (Ibid.; Rules Prof. Conduct, rule
1.7 [requiring “informed written consent” from client if “there is a
11
significant risk the lawyer’s representation of the client will be
materially limited by the lawyer’s responsibilities to or
relationships with” others].) As the existence of a conflict of
interest would impact the scope of Rutan’s representation and
perhaps influence whether Rutan could represent the City at all,
Oderman’s statements were unquestionably related to the terms
and conditions of the legal services agreement, which was a
proposed employment or consulting contract within the meaning
of the regulations. We therefore conclude Rutan did not violate
section 87100 when speaking on that issue at the City Council
meeting.5
5 We note that there are few cases applying section 87100
and none that deal with whether a public official’s action is
related to its terms and conditions of employment pursuant to
2CCR section 18704, subdivision (d)(3). Both parties cite
Campagna, supra, 42 Cal.App.4th 533 for support, but we do not
find Campagna instructive. In Campagna, a city contracted with
an attorney for the provision of certain legal services as a deputy
city attorney. (Id. at p. 536.) The attorney then retained an
outside law firm to litigate on a contingency fee basis on the city’s
behalf; the attorney also negotiated a separate oral agreement,
the “referral fee agreement,” with the outside law firm whereby
his firm would receive a percentage of the total contingency fee.
(Ibid.) Before the underlying litigation went to trial, the city
asserted it was unlawful for the attorney to have an interest in
the contract that he negotiated on behalf of the city in his official
capacity. After the underlying litigation settled, the city insisted
that the attorney not be paid his share of the fee. The attorney
sued for declaratory relief. (Id. at pp. 536–537.) A judgment for
the attorney was reversed on appeal. The appellate court
concluded the attorney acted as a private attorney in negotiating
the contingency fee between his firm and the city, but acted in an
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Plaintiff argues we should not apply 2CCR section 18704,
subdivision (d)(3) here because doing so would frustrate the
purpose of section 87100. We disagree. “[T]he whole purpose of
the Political Reform Act of 1974 is to preclude a government
official from participating in decisions where it appears he may
not be totally objective because the outcome will likely benefit a
corporation or individual by whom he is also employed.” (Witt v.
Morrow (1977) 70 Cal.App.3d 817, 822–823.) The exception
embodied by 2CCR section 18704, subdivision (d)(3) does not
undermine that objective, but rather permits employees to
communicate with employers about terms and conditions of
employment. That is exactly what is alleged to have occurred at
the City Council meeting in response to plaintiff’s objection.
Plaintiff also argues that Rutan improperly raised an
affirmative defense on demurrer by arguing the exception under
2CCR section 18704, subdivision (d)(3). In support, plaintiff cites
G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 273 (G.H.I.I.) for
the proposition that at this stage of proceedings, he was not
required to affirmatively disclaim that Rutan was not acting in
relation to a term or condition of its employment.
G.H.I.I. is inapposite. There, plaintiffs sued defendants for
“ ‘locality discrimination’ ” under section 17040 of the Business
and Professions Code—that is, for selling or furnishing an article
official capacity in choosing the associated firm and negotiating
the referral fee agreement with it, rendering him liable under
section 1090. (Id. at pp. 541–542.) Not only does Campagna not
address a violation of section 87100, but it does not address the
issue at the heart of this appeal: whether Rutan’s denial of a
conflict of interest at the City Council meeting was related to the
terms and conditions of its employment as City Attorney.
13
or product at a lower price in one location than in another.
Significantly, section 17041 of the Business and Professions Code
permitted such discrimination if allowances were made for
“grade, quality, quantity or cost of transportation.” (Id. at
p. 272.) On demurrer, defendants challenged the locality
discrimination cause of action as “vague and defective for lack of
essential allegations that the price differences cited were not
justified by such differences in grade, quality, quantity or cost of
transportation.” (Ibid., italics added.) The appellate court
concluded plaintiffs were not required to plead that the price
differences were not justified by grade, quality, quantity, or cost
of transportation as required by the second statute. The court
explained the plaintiff need only plead facts in support of each of
the requirements of a statute upon which a cause of action is
based, and need not plead facts negating exceptions to liability
found in subsequent sections of the act. (Id. at p. 273)
G.H.I.I. does not support plaintiff’s argument. We are not
concluding, nor is Rutan arguing, that plaintiff failed to plead
facts to negate an exception to liability under section 87100. Our
decision is not based on a lack of essential allegations. Rather,
we conclude plaintiff’s allegations demonstrate that Rutan’s
conduct was not actionable under section 87100 as a matter of
law. Accordingly, the trial court properly sustained Rutan’s
demurrer to the complaint.
IV. The Trial Court Did Not Abuse Its Discretion in
Denying Leave to Amend
Plaintiff asserts the trial court abused its discretion in
denying leave to amend the complaint. In his motion for
14
reconsideration,6 plaintiff proposed amending the complaint with
the following facts: (1) “The Permanent Legal Services Contract
was negotiated, published, and publicly disseminated on March
8, 2018 – five days before the March 13, 2018 Council Meeting”;
(2) “The question posed to Mr. Oderman by the Council did not
relate to Defendant’s compensation or any of the terms and
conditions of the contract”; (3) “Mr. Oderman did not speak
during the time set aside for public comment”; and (4) “Neither
Defendant nor Mr. Oderman had a personal interest in the legal
services contract as defined in” 2CCR section 18704, subdivision
(d)(2).
None of these factual allegations remedy the defect in this
case by showing Rutan participated in or influenced a
governmental decision pursuant to section 87100. The first,
third, and fourth facts are not relevant to showing that Rutan
influenced or participated in the City Council’s decision. The
second “fact” is a legal conclusion, not a factual allegation,
expressly contradictory to our legal analysis of the complaint and
relevant law. This legal conclusion likewise fails to remedy the
complaint’s deficiency. (See Thrifty Payless, Inc. v. The
Americana at Brand, LLC (2013) 218 Cal.App.4th 1230, 1238
[court assumes the truth of the allegations in the complaint, but
not the truth of contentions, deductions, or conclusions of law].)
6 Plaintiff asserts that prior to the trial court sustaining the
demurrer, he was not given an opportunity to address how he
could amend the complaint and therefore he filed the motion for
reconsideration stating these additional facts he could allege to
amend his complaint.
15
Plaintiff does not assert any other amendments would cure
the deficient complaint. As such, we conclude there was no abuse
of discretion in denying leave to amend.
DISPOSITION
The judgment is affirmed. Defendant and respondent
Rutan & Tucker LLP is awarded its costs on appeal.
EDMON, P. J.
We concur:
EGERTON, J.
ADAMS, J.
16