Steiner v. Beal CA4/3 ( 2024 )

Filed 10/10/24 Steiner v. Beal CA4/3
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
CHARLES STEINER, an
Incompetent Person, etc.,
G062959
Plaintiff and Appellant,
(Super. Ct. No. 30-2020-
v. 01146200)
BRUCE L. BEAL et al., OPINION
Defendants and Respondents.
Appeal from a judgment of the Superior Court of Orange County,
Deborah C. Servino, Judge. Reversed.
Chambers & Noronha and Garret R. Chambers for Plaintiff and
Appellant.
Klinedinst, Heather L. Rosing, Earll M. Pott, Robert M.
Shaughnessy and Tara R. Burd for Defendants and Respondents.
Plaintiff Charles Steiner, by and through his guardian ad litem
Marjorie Sasson, (Steiner) appeals from the judgment entered after the trial
court granted the motion for summary judgment filed by his former
1
attorneys, defendants Bruce L. Beal and Beal Business Law. Steiner sued
the Beal defendants for legal malpractice, breach of fiduciary duty, and fraud.
Steiner’s claims arose from the Beal defendants’ joint representation of
Steiner and his business partner, Najdat Nissan, in the preparation of both a
reorganization agreement, which divested Steiner of his ownership interest
in Nissan and Steiner’s professional corporation, and a veterinary services
agreement, which converted Steiner’s status in that corporation from
employee to independent contractor.
We reverse. For the reasons we explain, a triable issue of
material fact exists as to whether the Beal defendants breached their
professional duty to Steiner because, inter alia, they failed to secure Steiner’s
informed consent before they proceeded to jointly represent Steiner and
Nissan in the preparation of the agreements. The trial court therefore erred
by granting summary judgment as to the legal malpractice claim on that
basis. The Beal defendants further failed to show Steiner could not establish
the causation element of that claim or that the claim was time-barred.
Because the Beal defendants did not move, in the alternative, for
summary adjudication, we do not address whether summary judgment was
properly granted as to Steiner’s claims for breach of fiduciary duty and fraud.
1
We refer to Bruce L. Beal as “Beal” and to both defendants
collectively as “the Beal defendants.”
2
UNDISPUTED AND ADDITIONAL FACTS
I.
SEPTEMBER 2011: BEAL PREPARES A SHAREHOLDER OWNERSHIP AGREEMENT
In September 2011, the Beal defendants represented Avocado
Animal Hospital, Inc. (the corporation), and veterinarians Steiner and Nissan
as the directors of the corporation, in the corporation’s acquisition of a
veterinary hospital for the purchase price of $1 million. Beal worked to
incorporate and organize the corporation itself and, in so doing, prepared a
“Buy-Sell Agreement Among the Shareholders of Avocado Ani[]mal Hospital,
Inc., and Avocado Ani[]mal Hospital, Inc.” (some capitalization omitted) (buy-
sell agreement), which established Nissan and Steiner each owned 50 percent
of the corporation’s shares.
The 12-page buy-sell agreement provided at paragraph 7 that in
the event a shareholder was no longer employed by the corporation due to the
shareholder’s retirement, resignation, change to part-time employment, or
termination by the corporation for cause,2 “the remaining Shareholder shall
purchase all or any part of the shares owned by the Shareholder at the price
and on the terms provided in this Agreement.” The buy-sell agreement
provided in paragraphs 9, 12, and 13, that upon the occurrence of a
2
The buy-sell agreement provided the term “‘cause’” “means any
of the following”: (1) a felony conviction; (2) a misdemeanor conviction which
results in the imposition of a term of incarceration for more than 30 days,
and/or directly affects the corporation, and/or involves dishonesty; (3) “gross
misconduct, gross carelessness, dishonesty, and/or gross neglect of duties
which has a substantial, direct, and material adverse effect on the
Corporation’s business”; (4) the commission of any act of discrimination,
sexual harassment, or other action which results in the assessment of a civil
penalty and/or civil damages against the corporation; or (5) the suspension or
revocation of the shareholder’s professional license to practice veterinary
medicine in California.
3
“Triggering Event,” including the “termination by the Corporation for cause,”
the departing shareholder would be paid the fair market value of his shares
3
in the corporation. The buy-sell agreement also provided it could be amended
by the parties’ written consent.
II.
SEPTEMBER 2016: NISSAN CONTACTS BEAL FOR ADVICE IN INCREASING HIS
OWNERSHIP INTEREST IN THE CORPORATION; BEAL AND NISSAN COMMUNICATE
REGARDING RESTRUCTURING THE CORPORATION
About five years later, on September 13, 2016, Beal received an e-
mail from Nissan stating: “Hi Bruce, . . . . [¶] I was not sure if you remember
but you help[ed] us [in] obtaining [A]vocado [A]nimal [H]ospital . . . . [¶] I am
thinking of increasing my share in the practice. I worked and [sic] working
way harder than my partner and I have been producing 80% of the income to
the practice by myself. I don’t think it is fair to me to keep 50% shares any
more. [¶] Let me know if you have ideas and or other suggestion to what we
should do. [¶] . . . [¶] Dr. Nissan.”
That same day, Beal responded to Nissan in an e-mail stating:
“Dear Dr. Nissan, [¶] Yes, I remember you well. [¶] I must remind you that I
represent the corporation and not either of the owners individually. [¶]
Having said that, there are general ways to approach this problem through
careful design of compensation programs, i.e. salary and bonus compensation,
as well as dividends. This should be done through your tax accountant . . . , so
3
The buy-sell agreement further provided, at paragraph 8, that
in the event of a shareholder’s disability, in addition to paying that
shareholder the fair market value for his shares, “[t]he Corporation shall
continue to pay the salary of a disabled Shareholder who is an employee of
the Corporation for a period not to exceed 12 months at full monthly salary
reduced by the amount of any federal or state disability compensation and/or
disability insurance benefits received by the Shareholder.”
4
that the IRS does not restate these matters. [¶] The one item that comes to
mind to address your concern is tying compensation to percentage of
revenues, so that those who bring in the most revenue obtain the most
compensation. That way, only the income above expenses, including
compensation, gets split 50/50. [¶] I hope this helps. [¶] Sincerely, [¶] Bruce.”
The parties agree in their respective separate statements that Beal, as prior
counsel for the corporation, could not represent either Steiner or Nissan in a
manner that was adverse to the other.
Ten months later, on July 13, 2017, Nissan sent Steiner a letter
providing notice Nissan was terminating the buy-sell agreement on the
ground Steiner had breached that agreement. Nissan’s letter stated in part:
“This letter serves as official notice that I Dr. Najdat, Nissan DVM am
official[ly] putting you on notice that you have breached our buy-sell
agreement dated 9-20-2011 and I am terminating said agreement. The
violation occurred as defined in section 7(a)(3) of the Buy-Sell Agreement. [¶]
Definition of the clause/violation: [¶] Gross misconduct, gross carelessness,
dishonesty, and/or gross neglect of duties which has a substantial, direct, and
material adverse effect on the Corporation’s business. [¶] At this time we ask
that: Marjorie Sasson,[4] cease and desist from communicating and making
any additional contact or representations on behalf of or with any employee,
vendor, government agency or company that is associated with the Avocado
Animal Hospital.” (Boldface omitted.) The parties do not cite evidence in the
record, and we have found none, that explains how Steiner engaged in gross
4
The record identifies Sasson as Steiner’s girlfriend at this point
in time; they have since married.
5
misconduct, gross carelessness, dishonesty, and/or gross neglect of duties as
asserted in the letter.
The following day, Beal received the following e-mail from
Nissan: “Good morning Bruce, . . . . This [is] Dr Nissan from Avocado Animal
Hospital . . . . [¶] Dr. Steiner is releasing his share to me. We both come [sic]
to agreement that I am taking 100% responsibility and shares of the hospital.
I am not sure what type of legal documents we should sign and change. [¶]
Kindly if you have any suggestions or plans. [¶] Thanks a lot [¶] Dr Nissan.”
That same day, Beal responded to Nissan via e-mail: “Dr. Nissan,
[¶] I am still in the saddle. [¶] What are the terms? Is Dr. Steiner [w]alking
away? [¶] I need to review the original transaction and will get to this as soon
as possible, probably Monday, OK? [¶] Sincerely, [¶] Bruce.” Nissan replied:
“Yes he is done and does not want to have part in it. I guess it is very
complicated. He just want[s] to stay and work in the place as an [sic] [¶]
Please if you could figure it out and let me know. [¶] . . . [¶] Dr Nissan.”
Three days later, on July 17, 2017, Nissan sent an e-mail to Beal,
stating: “Hi Bruce, . . . . [¶] Was not sure if you were able to review the
documents. [¶] Dr. Steiner’s girlfriend admit[ted] to our office manager that
she interfered with 2015 business tax and because of that we are getting
audit by IRS. She does have a copy of my K1 form. I am not sure how she
obtained it? [¶] I gave Dr. Steiner a notice and asked him to stop her from
interfering in the business aspect. I had you state that in the contract if you
remember. [¶] He is walking out of the shares and ownership of the hospital
like I told you. [¶] I am not sure what should be done legally. [¶] Please let
me know if you have a plan to discuss? [¶] Here is attached copy for your info.
[¶] . . . [¶] Dr. Nissan.” Nissan e-mailed to Beal a copy the letter he sent to
Steiner providing Steiner notice of the termination of the buy-sell agreement.
6
III.
JULY 2017: NISSAN AND STEINER SIGN AN AGREEMENT CONSENTING TO BEAL’S
JOINT REPRESENTATION OF THEM IN RESTRUCTURING THE CORPORATION
As of July 18, 2017, Beal was aware of several conflicts and/or
disputes between Nissan and Steiner, including Nissan’s discontent with the
compensation arrangement, their relative work production, an alleged audit,
Sasson’s alleged interference with the corporation by, inter alia, having a
copy of Nissan’s K-1 form, and Nissan’s notice of termination of the buy-sell
agreement on the ground of Steiner’s alleged gross misconduct.
The morning of July 18, 2017, Beal sent an e-mail to Nissan,
stating: “Dr. Nissan, [¶] You describe an apparent dispute between you and
Dr. Steiner. [¶] Before we get any further with this, I hope you remember,
that according to the attorney-client agreement among us, I legally represent
only Avocado Animal Hospital, Inc., and charge only this corporation for my
fees. [¶] I only represent the interests of the Corporation. So, I do not
individually represent any of the founders, shareholders, directors, officers,
employees, or agents of the entity, including you and Dr. Steiner, other than
in your and their corporate capacity. [¶] I also represented in that agreement
that I am not a specialist in tax or accounting matters, and my engagement
does not include any professional services with respect to tax and accounting
matters. I believe you have retained an accountant or other tax specialist for
advice with respect to any tax or accounting matters related to corporation.
[¶] I also represented that my services will not include litigation of any kind,
whether in court or administrative hearings or before government agencies or
arbitration tribunals, although I will, if you desire, refer you to an attorney
with suitable litigation experience in the geographical area of the litigation.
[¶] I do note that a separation from the corporation is subject to a Buy-Sell
7
Agreement, which applies, unless a superseding, voluntary agreement
(resolution) is successfully entered into between you and Dr. Steiner with
different terms that [sic] the Buy-Sell Agreement. [¶] Has there been any
discussion about the Buy-Sell Agreement or any other voluntary agreement for
this dispute? [¶] I assume that the Note has been paid to the Seller. Please
[5]
confirm. [¶] If there is unlikely to be a satisfactory resolution of this matter
between you two shareholders, and the differences are significant, then you
will both need to engage your own legal counsel for the reasons stated above,
in which case mediation should be employed first, according to the Buy-Sell
Agreement. [¶] Please Advise. Thank you. [¶] Sincerely, [¶] Bruce.” (Italics
added.)
A few minutes later (according to e-mail time stamps) Beal again
e-mailed Nissan, asking: “Is he asking for any dollars for his corporate stock,
or is he willing to sign it over for nothing? [¶] Are you willing to have him
work for the corporation as an employee or independent contractor, if he can
fit that description?” Beal asked Nissan to confirm whether Steiner was
asking for any compensation for his corporate stock because he “couldn’t
believe that [Steiner] would do that.” Beal stated: “I just found it hard to
believe somebody would walk away from the stock of a corporation that might
have value.”
That same day, Beal, Nissan, and Steiner participated in a
telephone call lasting no more than 10 to 15 minutes (the July 18 telephone
5
Beal admitted he never thereafter inquired or learned whether
or not the “Note” to the seller of the practice the corporation acquired was
paid off. He did not know whether the “Note,” or any part of it, remained a
corporate liability because he never reviewed any of the corporation’s
financial statements or balance sheets.
8
call). This is the first time our record shows Beal had any communication
with Steiner since Nissan had first reached out to Beal in September 2016
regarding his desire to reorganize the corporation’s ownership structure.
According to Beal’s declaration filed in support of the motion for
summary judgment, “Nissan and Steiner informed [Beal] that they had
reached an agreement concerning the restructuring of [the corporation], and
[they] discussed the potential mechanisms to achieving their requested
result. [Beal] advised them both concerning the potential conflicts, that [Beal]
would require written informed consent in order to proceed with the
restructuring, and that [Beal] could not advise either party relative to their
individual interests. [Beal] further advised them to seek independent counsel
to represent their personal interest. When the call was completed, it was
[Beal’s] understanding that Steiner and Nissan had resolved any potential
conflicts prior to contacting [Beal] and were aligned in their decision for
Nissan to acquire 100% ownership and responsibility in [the corporation],
and that Nissan [sic] would continue to provide services at [the corporation]
as an independent contractor.”
At no time during the July 18 telephone call, did they discuss the
audit, Nissan’s complaints about Sasson, or Nissan’s notice of termination of
the buy-sell agreement on the ground of Steiner’s gross misconduct. They also
did not discuss the fact Beal did not have information about the company’s
finances or about Beal’s perception of the existence of “an unusual situation
where a doctor would just walk away.” Beal explained: “Well, I would expect
[Steiner] to review the documents and talk to me about problems, if he had a
problem with it.”
Beal did not remember Steiner asking any questions during the
telephone call, generally or specifically. Beal stated Steiner “was a quiet guy”
9
and was quiet on the July 18 telephone call. In his deposition in a different
lawsuit, Beal was asked: “[W]hen [Steiner] didn’t raise any questions, didn’t
make any inquiries, made no suggestions, you didn’t follow up and say, Are
you sure you understand this? You didn’t do that, did you?” Beal responded,
“No. Why would I?”
Beal sent an e-mail to Nissan and Steiner (the first also sent to
Steiner) to which was attached a “Consent to Joint Representation Letter”
regarding his representation of both parties in facilitating a reorganization of
the corporation. The Consent to Joint Representation Letter was a
form/standard letter which did not specifically identify any of the potential or
actual disputes and conflicts between Nissan and Steiner.6 The letter stated:
6
The letter included the following general provisions:
“Duty of Confidentiality and Loyalty; Conflicts of Interest
“As your attorney, I owe you a duty to preserve any confidential
information you share with me, unless you authorize me to disclose such
information. Similarly, I owe you a duty to act solely in your best interests,
without being influenced by the conflicting interests of other clients. If I
represent two individuals, I have a potential conflict of interest resulting
from my conflicting duties to your separate individual interests. For example,
in advising you regarding your business restructuring, I would ordinarily be
obliged to make known to you any information that I believe might be
important to you in making your decisions in this regard. I could not advise
you that actions planned by the other might be adverse to your own personal
interests, unless the other consents.
“Each of you may have differing and conflicting interests and
business objectives. You may have different views on how assets and
liabilities should be distributed between you. In some situations, it may be
advisable to distribute assets and liabilities to take advantage of available
tax benefits or avoid tax liabilities. In this regard, I recommend that you seek
independent tax advice. These are just a few general examples. Each
situation is unique.”
10
“As a preliminary matter, I am advised that there is currently no dispute
between you both in this regard.” Beal stated he “used” the Consent to Joint
Representation Letter as a “test” for Steiner to determine if Nissan and
Steiner were actually in agreement and had no conflicts. Beal testified, “Well,
if he didn’t sign the letter, that would be very good impetus that he didn’t
agree with it.”
When asked in a deposition taken in a different lawsuit, “on what
basis did you tell Dr. Steiner [in the Consent to Joint Representation Letter]
that you were advised that there was no dispute between [Steiner] and Dr.
Nissan?” Beal responded: “On the basis that Dr. Nissan was advising me that
[Steiner] had agreed to not be a shareholder, didn’t want the risks and
responsibilities of being officer and director, but wanted to work at the clinic.
And I needed to test that. And this is the test right here, you know” (italics
added), referring to the Consent to Joint Representation Letter. When asked,
“Did you take any steps, other than sending out this letter, to test Dr.
Steiner’s awareness of conflicts or actual agreement to the terms of the
proposed reorganization?” He responded “No” and “This [letter] is the test.”
During that same deposition, Beal was asked: “Didn’t you think
that [Steiner] would want to know the contents of the emails you’d had with
Dr. Nissan over the past year?” Beal testified: “He would probably want
to . . . know a lot. If he wanted to know what he should have known, he would
have called me or he would have emailed me or he would have said, ‘I’m not’--
or he wouldn’t have signed it.”
Steiner stated he read the Consent to Joint Representation
Letter but “did not know exactly . . . what was going on with it.” He could not
remember if he asked Beal to explain it to him after the brief July 18
telephone call. Steiner knew Nissan wanted to restructure the corporation,
11
but Steiner did not know what he meant; he did not ask Nissan questions. He
did not know what the result of a restructure would be. Steiner understood
Nissan to always be happy with his performance and never had a
conversation with him suggesting otherwise.
Beal received back from Nissan copies of the Consent to Joint
Representation Letter, signed via electronic signature by Nissan and Steiner
dated July 19, 2017; Nissan did not copy Steiner on the transmittal e-mail.
Beal did not receive a signed copy directly from Steiner. Beal thereafter
considered himself engaged. He did not forward any signed copy of the letter
to Steiner because he assumed he already had it.7 When asked “And you
made no inquiry to reach out to make sure he had gotten it, read it or
understood it?” Beal responded, “Well, I assumed. He had signed it.” Beal did
not have information whether Steiner had any prior experience with
corporate reorganizations.
IV.
JULY 2017: BEAL PREPARES AGREEMENTS DIVESTING STEINER OF HIS
OWNERSHIP INTEREST AND STATUS IN THE CORPORATION
With the Consent to Joint Representation Letter in place, Beal
proceeded to prepare documents to memorialize a restructuring of Nissan’s
and Steiner’s respective ownership interests in and the reorganization of the
corporation. On July 21, 2017, Beal prepared a reorganization agreement and
a veterinary services agreement (the agreements), providing, pursuant to
Nissan’s instructions, Steiner’s 50 percent ownership of the corporation be
transferred to Nissan, and Steiner’s status with the corporation be changed
7
Beal stated, “I copied [Steiner] on the agreement and I hadn’t
heard from him separately.”
12
from employee to independent contractor. In so doing, Beal did not inquire
about the corporation’s financial status (Dr. Nissan’s evaluation of the fair
market value of the corporation in July 2017 was $1 million), or the status of
8
the corporation’s outstanding loans (which amounted to $814,643.09). Beal
stated he did not advise Steiner on the corporation’s finances because he did
not want to “un[do] the deal.” Beal admitted he would have inquired about
the corporation’s financial status if Steiner had been his sole client. He
further admitted he could not be as thorough with either Nissan or Steiner
because he represented them jointly.
After reading the reorganization agreement, Steiner was not sure
what the agreement’s purpose was. Before he signed the reorganization
agreement, he had no idea what the document would accomplish.
Steiner did not receive any compensation in exchange for the
restructuring of the corporation and the transfer of all his shares to Nissan.
When Beal was asked what he understood Steiner got out of the deal, and to
identify the consideration that supported the reorganization agreement, Beal
stated: “I understood it that he was--and I don’t know if it had any
relationship to tax problems or whatever, but he just did not want to be
responsible have the risk of being a shareholder, director or officer of the
corporation.” When asked what risks he thought existed at the time, Beal
responded “Well, the I.R.S. comes to mind,” but he also acknowledged he did
8
It is unclear the extent to which this amount reflects debt for
which Steiner was personally liable. As of July 31, 2017, the corporation had
approximately $1,780,359.86 in the bank. It is Steiner’s position the value of
his one-half ownership interest in the corporation at that time was, “at a
minimum,” of $982,858.35.
13
not know whether the corporation was an S corporation or C corporation and
did not inquire.
While Nissan had mentioned something about an audit to Beal,
Beal did not ask about it, explaining he “had no reason to not believe [his]
clients at this point.” Beal did not know whether (1) there was any lawsuit
then pending against the corporation; (2) the corporation had any money in
the bank; or (3) the extent to which Nissan and/or Steiner had any personal
liability on the corporation’s debts including any outstanding amount owed
on loans taken out for the 2011 purchase of the veterinarian practice. Other
than being absolved of unidentified responsibilities and liabilities attendant
to being a shareholder of the corporation, the only thing Beal could identify
as benefiting Steiner in the deal was to have more freedom “to come in when
he wanted to come in.”
The veterinary services agreement provided Steiner would be
retained by the corporation as an independent contractor, but failed to specify
the amount of compensation Steiner would be entitled to receive for his
services. Beal acknowledged the amount of such compensation would be a
material term that should have been included in the veterinary services
agreement but was not. In addition, the veterinary services agreement
provided it could be terminated by the corporation or Steiner “for any reason
or no reason.” Beal did not have any conversations or communications with
Steiner about the terms of the veterinary services agreement; Beal testified
14
9
Steiner “was very quiet.” In signing both of the agreements, Steiner did not
know what he was “getting in exchange for signing” them.
On July 23, 2017, Beal e-mailed the two agreements, in PDF
form, to both Nissan and Steiner. That same day, Nissan e-mailed Beal
stating he would have his bookkeeper send a copy of each agreement. Our
record contains copies of the agreements signed by Nissan and Steiner. Both
of the agreements had an effective date of August 1, 2017.
V.
SEPTEMBER 2017: NISSAN FIRES STEINER
On September 15, 2017, Nissan sent Steiner a letter notifying
him of the termination of the veterinary services agreement, effectively firing
Steiner. The letter asserted Steiner’s “material breach” of that agreement by
engaging in “conduct detrimental to the wellbeing of the [corporation], its
facilities, employees and customers.” (Italics and boldface omitted.)
VI.
MAY 2018: STEINER IS DIAGNOSED WITH AN ALZHEIMER’S-RELATED DISEASE
In May 2018, Steiner was diagnosed with posterior cortical
atrophy, a disease related to Alzheimer’s disease. Steiner was found at that
time to have suffered significant cognitive impairment. The severity of the
disease as of May 2018 indicated Steiner had been suffering cognitive
impairment during the prior two to four years. As of May 23, 2018, Steiner
lacked capacity to make financial, legal, or medical decisions.
9
Beal could not recall Steiner ever relaying any verbal
communication with Beal other than a “hello” during the short July 18
telephone call. Steiner never sent Beal an e-mail throughout the entirety of
Beal’s involvement with the reorganization transaction. In contrast, our
record includes e-mails Steiner sent to Beal in 2011 regarding the formation
of the corporation and acquisition of the veterinary practice.
15
PROCEDURAL HISTORY
10
In February 2020, Steiner, by and through his guardian ad
litem Sasson, initiated this action. In 2021, Steiner filed the second amended
complaint (the complaint) against the Beal defendants for legal malpractice,
11
breach of fiduciary duty, and fraud.
In December 2022, the Beal defendants filed a motion for
summary judgment (the motion), arguing the legal malpractice and breach of
fiduciary duty claims were barred by the one-year statute of limitations set
forth in Code of Civil Procedure section 340.6, and all causes of actions failed
for lack of a triable issue of material fact.
The trial court granted the motion, concluding there is no triable
issue of material facts as to any of Steiner’s claims against the Beal
defendants. In its minute order granting the motion, the court ruled on the
parties’ evidentiary objections, granted the Beal defendants’ request for
judicial notice, and granted in part and denied in part Steiner’s request for
judicial notice; Steiner has not challenged any of those rulings in this appeal.
Judgment was entered in favor of the Beal defendants and
against Steiner. Steiner appealed.
10 The parties entered into tolling agreements providing
additional time to initiate this lawsuit. In the motion for summary judgment,
the Beal defendants argued, as discussed post, Steiner’s claims for legal
malpractice and breach of fiduciary duty were time-barred because the tolling
agreements were not entered into soon enough.
11
The complaint also asserted a claim for professional negligence
(accountant malpractice) solely against another named defendant, Terry
Flinchum. As Flinchum was not a party to the motion for summary
judgment, that claim as alleged against him is not at issue in this appeal.
16
DISCUSSION
I.
GOVERNING LEGAL STANDARDS AND STANDARD OF REVIEW
“‘Summary judgment is appropriate only “where no triable issue
of material fact exists and the moving party is entitled to judgment as a
matter of law.”’ [Citation.] A moving defendant bears the burden to show that
the plaintiff cannot establish one or more essential elements of the cause of
action, or that there is a complete defense to that cause of action. [Citations.]
If the defendant meets this burden, ‘the burden shifts to the plaintiff . . . to
show that a triable issue of one or more material facts exists as to the cause
of action or defense thereto.’ [Citation.] We review an order granting
summary judgment de novo, ‘liberally construing the evidence in support of
the party opposing summary judgment and resolving doubts concerning the
evidence in favor of that party.’” (Hassaine v. Club Demonstration Services,
Inc. (2022) 77 Cal.App.5th 843, 849–850.) “[A]ny doubts as to the propriety of
granting a summary judgment motion should be resolved in favor of the party
opposing the motion.” (Reid v. Google, Inc. (2010) 50 Cal.4th 512, 535.)
II.
TRIABLE ISSUES OF MATERIAL FACT EXIST AS TO THE
LEGAL MALPRACTICE CLAIM
In support of his legal malpractice claim, Steiner alleged the Beal
defendants breached their duty of care owed to him by failing to (1) conduct a
full and complete investigation of all facts and circumstances relevant to the
representation of Steiner; (2) identify any potential and/or actual disputes,
disagreements or conflicts between Steiner and Nissan; (3) identify and/or
recognize a non-waivable conflict between the parties and require Steiner to
obtain independent counsel; (4) fully disclose to Steiner all potential and/or
17
actual disputes, disagreements and/or conflicts; (5) communicate all facts and
circumstances relevant to the factual and legal issues during the
representation; and (6) render advice and exercise judgment with the
professional skill, knowledge, prudence, and care as is commonly exercised by
lawyers practicing in Orange County.
The complaint further alleged, as a result of the Beal defendants’
breach of duty, Steiner has been subjected to three years of litigation with the
corporation and Nissan, thereby suffering damages related to incurring
attorney fees, costs of litigation, and other special damages. Steiner also
alleges he suffered special damages in the form of lost wages, lost profits, and
lost equity shares in the corporation he would not have relinquished without
proper compensation.
In the motion, the Beal defendants argued the legal malpractice
claim fails because the undisputed evidence showed they did not breach the
duty of care they owed Steiner, Steiner could not prove causation, and, in any
event, the claim was time-barred. The trial court granted the motion as to the
legal malpractice claim on the ground Steiner failed to show the existence of
a triable issue of material fact as to whether the Beal defendants breached
their duty of care in their joint representation of Nissan and Steiner in the
preparation of the agreements. For the reasons we explain, the trial court
erred in granting the motion.
A. Triable Issues of Material Fact Exist as to Whether the Beal Defendants
Breached Their Professional Duty to Steiner
In a legal malpractice case, “the plaintiff must generally establish
‘(1) the duty of the attorney to use such skill, prudence, and diligence as
members of his or her profession commonly possess and exercise; (2) a breach
of that duty; (3) a proximate causal connection between the breach and the
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resulting injury; and (4) actual loss or damage resulting from the attorney’s
negligence.’” (O’Shea v. Lindenberg (2021) 64 Cal.App.5th 228, 235.)
The California Rules of Professional Conduct regulate
professional conduct of California State Bar members through discipline.
These rules were adopted “to protect the public, the courts, and the legal
profession; protect the integrity of the legal system; and promote the
administration of justice and confidence in the legal profession.” (Cal. Rules
Prof. Conduct, rule 1.0(a).)
Former Rule 3-310 of the California Rules of Professional
Conduct (former rule 3-310), which was in effect at all relevant times at issue
in this case, provided in part in section (C): “A member shall not, without the
informed written consent of each client: [¶] (1) Accept representation of more
than one client in a matter in which the interests of the clients potentially
conflict; or [¶] (2) Accept or continue representation of more than one client in
a matter in which the interests of the clients actually conflict.” (Italics
added.) Section (A)(2) of former rule 3-310 defines “‘Informed written
consent’” as “the client’s or former client’s written agreement to the
representation following written disclosure.” Section (A)(1) of that rule, in
turn, defines the term “‘Disclosure’” as “informing the client or former client
of the relevant circumstances and of the actual and reasonably foreseeable
adverse consequences to the client or former client.” (Italics added.)
While a violation of the Rules of Professional Conduct “subjects
an attorney to disciplinary proceedings, [it] does not in itself provide a basis
for civil liability.” (BGJ Associates v. Wilson (2003) 113 Cal.App.4th 1217,
1227; see Cal. Rules Prof. Conduct, rule 1.0(b)(3) [“A violation of a rule does
not itself give rise to a cause of action for damages caused by failure to
comply with the rule. Nothing in these rules or the Comments to the rules is
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intended to enlarge or to restrict the law regarding the liability of lawyers to
others”].) Those rules, however, “‘together with statutes and general
principles relating to other fiduciary relationships, all help define the duty
component of the fiduciary duty which the attorney owes to his or her client.’”
(BGJ Associates v. Wilson, supra, 113 Cal.App.4th at p. 1227.) Consequently,
a violation of the Rules of Professional Conduct “prohibiting concurrent
representation of conflicting interests without each client’s informed written
consent constitutes evidence of malpractice liability and breach of fiduciary
duty” even though such a violation does not, standing alone, prove the
malpractice. (Yanez v. Plummer (2013) 221 Cal.App.4th 180, 188, italics
added.)
In the motion, the Beal defendants argued the undisputed
evidence showed they did not breach the duty of care they owed Steiner
because the undisputed evidence showed Beal obtained Steiner’s informed
written consent before jointly representing Nissan and Steiner in 2017. In
support of their argument, they cite evidence of the July 18 telephone call,
the disclosures of potential conflicts Beal made in the Consent to Joint
Representation Letter, and the fact Steiner signed that letter.
It is undisputed the July 18 telephone call between Beal, Nissan,
and Steiner took place. But it is also undisputed that conversation, which
lasted only about 10–15 minutes, was the first time Beal had any contact in
any form with Steiner since Nissan reached out to Beal in 2016 to discuss
changing the corporation’s ownership structure he felt was no longer fair to
him. Until that point in time, the evidence shows Nissan was the only one
who sought to change the corporation’s ownership structure and seemed set
on doing so as quickly as possible after he sent Steiner the letter of
termination of the buy-sell agreement on July 13, 2017.
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It was Nissan alone who reported to Beal before the July 18
telephone conversation that Steiner had agreed to surrender to Nissan the
entirety of his ownership interest in the corporation without any
compensation in return even though the buy-sell agreement provided for
compensation in the event of the termination of that agreement. It is
undisputed that as of the July 18 telephone conversation, Beal was aware
there were problems between Nissan and Steiner, which included Nissan’s
discontent with the corporation’s ownership structure, their relative work
production, an alleged audit, Sasson’s alleged interference with the
corporation, and Nissan’s termination of the buy-sell agreement on the
ground of Steiner’s gross misconduct. Nevertheless, by the end of the July 18
telephone conversation, Beal concluded they had “resolved any potential
conflicts.”
Beal made this determination even though: (1) The issues of the
audit, Sasson’s alleged interference in the corporation, and the termination of
the buy-sell agreement for Steiner’s alleged gross misconduct were not
discussed during the July 18 telephone conversation; (2) Steiner did not
speak to or otherwise communicate with Beal other than to say hello;
(3) Steiner did not ask Beal any questions; (4) Beal considered it unusual for
someone in Steiner’s position to walk away from his ownership interest—in
fact he could not believe it; (5) Beal did not inquire about the corporation’s
finances or ask any questions of Steiner that might have elicited information
explaining why Steiner might have agreed to make such a decision; and
(6) Beal did not raise the issue of the corporation’s finances with Steiner
(because he did not want to undo the deal Nissan told him already had been
agreed to by Steiner). Triable issues of material fact exist as to whether Beal
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reasonably concluded the interest of Nissan and Steiner did not actually
conflict.
In addition, the record contains evidence showing the corporation
was solvent. There was no evidence of any pending lawsuit against it and the
record is unclear about the extent to which Steiner was personally liable for
any of the corporation’s then-current debt.
Furthermore, notwithstanding Steiner’s lack of communication,
evidence shows Beal assumed, when it came to Steiner, no news was good
news, and thereafter opted to confirm or, in Beal’s words, “test,” Steiner’s
acquiescence with the plan communicated by Nissan by simply declaring in
the Consent to Joint Representation Letter that he understood there was no
dispute between them. After he received from Nissan, and only from Nissan,
a copy of that letter signed (electronically) by Nissan and Steiner, the
evidence shows Beal considered himself in the clear to jointly represent
Nissan and Steiner and proceeded to prepare the agreements with the terms
provided by Nissan.
Although the Consent to Joint Representation Letter contained
general disclosures, a triable issue of material fact exists whether it or any
other communication by Beal sufficiently informed Steiner of the relevant
circumstances and the actual and reasonably foreseeable adverse
consequences he faced by agreeing to the proposed joint representation
arrangement within the meaning of former rule 3-310. We reject any
suggestion evidence a client signed a consent to joint representation
agreement in and of itself precludes a finding an attorney breached the duty
of care to the client as a matter of law.
The Beal defendants offered no expert opinion supporting their
position they discharged their duty with respect to the issue of informed
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consent. The trial court erred by concluding no triable issues of material fact
exist as to whether Beal breached his duty to use the skill, prudence, and
diligence commonly possessed and exercised by members of his profession.
(See O’Shea v. Lindenberg, supra, 64 Cal.App.5th at p. 235.)
B. Triable Issues of Material Fact Exist as to Whether the Beal Defendants’
Alleged Breach of Duty Caused Steiner Damages and Whether the Claim
Was Time-barred
In the motion, the Beal defendants also argued the legal
malpractice claim fails because no triable issue exists as to the causation
element and because it is barred by the governing one-year statute of
limitations set forth in Code of Civil Procedure section 340.6. That the trial
court granted the motion on an erroneous basis does not end our analysis as
“our review of the judgment on the summary judgment order is not limited to
the issues decided by the trial court.” (Gray v. La Salle Bank N.A. (2023) 95
Cal.App.5th 932, 967.) To the contrary, “we must ‘“affirm the judgment of the
trial court if it is correct on any theory of law applicable to the case”’ (ibid.)
provided the parties have been given adequate opportunity to address that
theory in the trial court (id. at p. 948).
We therefore turn to review whether the judgment as to the legal
malpractice claim can be affirmed on either of the specified grounds.
1. A triable issue of material fact exists as to whether the Beale
defendants’ alleged breach of duty caused Steiner’s alleged
damages
In the motion, the Beal defendants argued, even if a triable issue
of material fact existed as to whether they breached their professional duty to
Steiner, his malpractice claim fails because he cannot demonstrate causation.
“Causation in a professional malpractice context means establishing by a
preponderance of the evidence that, but for the negligence, ‘the plaintiff
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would have obtained a more favorable judgment or settlement in the action in
which the malpractice allegedly occurred.’” (O’Shea v. Lindenberg, supra, 64
Cal.App.5th at p. 236.)
Here, a triable issue of material fact exists as to whether Steiner
would have agreed to the joint representation arrangement and/or signed the
agreements had Beal first provided Steiner with adequate disclosures. At a
minimum, the evidence suggests had he been so informed, Steiner might
have consulted independent counsel sooner and not agreed to relinquish his
ownership interest in the corporation to Nissan without any compensation. It
is not unfounded speculation that Steiner might have consulted independent
counsel because our record shows he did retain independent counsel by
September 2017—the month after the agreements became effective.
Beal’s admission he did not want to advise Steiner on the
corporation’s finances because he did not want to “un[do] the deal”
underscores the existence of a triable issue of material fact on this issue. We
therefore cannot affirm the judgment on the ground Steiner could not
establish the causation element.
2. A triable issue of material fact exists as to whether the legal
malpractice claim is time-barred
In the motion, the Beal defendants argued the legal malpractice
claim was not timely filed. Code of Civil Procedure section 340.6, subdivision
(a) provides in part: “An action against an attorney for a wrongful act or
omission, other than for actual fraud, arising in the performance of
professional services shall be commenced within one year after the plaintiff
discovers, or through the use of reasonable diligence should have discovered,
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the facts constituting the wrongful act or omission, or four years from the
date of the wrongful act or omission, whichever occurs first.”
In the motion, the Beal defendants argued, because the last day
they performed any work for Steiner was on August 6, 2017, Steiner had
until August 6, 2018 to file his legal malpractice claim under Code of Civil
Procedure section 340.6, but he did not do so. They acknowledged they
entered into tolling agreements with Steiner to initiate this action, but they
argue those agreements were ineffective because none was entered into
before August 15, 2018, and thus after the statute of limitations had run on
that claim.
As triable issues of material fact exist as to whether Beal
provided Steiner with adequate disclosures to enable Steiner to give his
informed consent to the joint representation arrangement, triable issues of
material fact exist as to when Steiner learned, or reasonably should have
learned, of any such omissions on Beal’s part. On this record, we cannot
conclude Steiner’s legal malpractice claim is time-barred as a matter of law
within the meaning of section 340.6 of the Code of Civil Procedure.
III.
BECAUSE THE MOTION DID NOT SEEK SUMMARY ADJUDICATION, WE DO NOT
REACH THE BEAL DEFENDANTS’ CHALLENGES TO STEINER’S OTHER CLAIMS
The Beal defendants did not move for summary adjudication of
individual theories or claims; they only moved for summary judgment. As we
conclude summary judgment should not have been granted because a triable
issue of material fact exists as to the legal malpractice claim, we do not reach
the Beal defendants’ challenges to Steiner’s claims for breach of fiduciary
duty or fraud. (Hedayati v. Interinsurance Exchange of the Automobile Club
(2021) 67 Cal.App.5th 833, 846 [“When as here, the defendant ‘did not move
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in the alternative for summary adjudication of specified issues, we will not
address whether [it] may have prevailed on some issues in this case’”]; see
Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (The Rutter
Group 2024) ¶ 10:45, p. 10-17 [“a court cannot grant summary adjudication
where the only motion noticed for hearing is for summary judgment”].)
Further, because we conclude the motion was granted in error,
we do not need to address whether the trial court abused its discretion by
denying Steiner’s request for a continuance of the hearing on the motion in
order to take Beal’s deposition in this case.
DISPOSITION
The judgment is reversed. Appellant to recover costs on appeal.
MOTOIKE, J.
WE CONCUR:
O’LEARY, P. J.
SANCHEZ, J.
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