Broadway Victoria v. Norminton, Wiita & Fuster

Filed 4/19/17
CERTIFIED FOR PARTIAL PUBLICATION*
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
BROADWAY VICTORIA, LLC, B266060
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. SC119091)
v.
NORMINTON, WIITA & FUSTER et
al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of the
County of Los Angeles, Gerald Rosenberg, Judge. Affirmed.
Degani & Galston LLP, Katherine Galston; and Krane &
Smith, Marc Smith and Daniel L. Reback, for Plaintiff and
Appellant.
Nemecek & Cole, Mark Schaeffer and Janette Bodenstein
for Defendants and Respondents.
* Pursuant to California Rules of Court, rules 8.1100 and
8.1110, this opinion is certified for publication with the exception
of DISCUSSION subpart A of section I and section II.
INTRODUCTION
Plaintiff and appellant Broadway Victoria, LLC (plaintiff)
sued its former attorneys, Norminton, Wiita, & Fuster, Thomas
Norminton, and Thomas Norminton, PC (defendants) for legal
malpractice and breach of fiduciary duty arising from defendants’
representation of plaintiff in an earlier breach of contract action.
On appeal from a judgment in favor of defendants, plaintiff
contends that the trial court erred when it granted defendants’
nonsuit motions on one of plaintiff’s malpractice claims and its
breach of fiduciary duty claim. Plaintiff also contends that the
trial court abused its discretion in denying plaintiff’s motion in
limine to exclude evidence of alleged prior fraud by failing to
weigh the prejudicial effect of that evidence against its probative
value, as required under Evidence Code section 352 (section 352).
In the published portion of this opinion, we affirm the grant
of nonsuit on plaintiff’s breach of fiduciary claim because plaintiff
did not adduce any evidence in support of that claim beyond the
evidence offered in support of its malpractice claim for
professional negligence. We also affirm the judgment in all other
respects.
2
BACKGROUND1
I. The Underlying Breach of Contract Action
Because plaintiff’s malpractice and breach of fiduciary duty
claims arise from defendants’ representation of plaintiff in an
underlying suit against a third-party for breach of contract, we
first discuss the events giving rise to the breach of contract claim
and the results of that lawsuit.
A. The Lease and Right of First Refusal
Plaintiff, a limited liability company in the business of
owning and leasing commercial real estate, was owned by Anita
Lorber (Lorber) and her husband.2 Lorber and her husband also
owned a textile manufacturing business, Lorber Industries of
California, Inc. (Lorber Industries).
In 1996, Lorber Industries leased a parcel of industrial land
(the lease) in Carson (the property) from Elixir Industries
(Elixir). The lease for the property provided, inter alia, that
Lorber Industries had a right of first refusal, i.e., if, during the
20-year term of the lease, Elixir received an offer to buy the
property, Elixir was required to provide Lorber Industries 10-
days written notice of the offer, which Lorber Industries then had
1 Because our resolution of the issues raised on appeal does
not require a comprehensive statement of the trial evidence, we
set forth only a summary of the relevant factual background to
provide context for the legal discussion that follows. The trial
evidence necessary to the resolution of the nonsuit rulings is set
forth in the discussion of those issues.
2 Lorber’s husband, Arnold, died in 2000.
3
the right to match. The lease also included an option to purchase
the property at the end of the lease and an attorney fees
provision entitling the prevailing party in any lease dispute to
recover its attorney fees.
After Lorber Industries entered into the lease, plaintiff
constructed a 44,000 square foot industrial building on the
property. Plaintiff spent between $1.7 and $2 million to
construct the building.
In 2004, Elixir sold the property to Sahm Broadway
Property, LLC (Sahm). According to Lorber, Elixir never
provided Lorber Industries with written or oral notice that Elixir
was selling the property to Sahm.3
B. Lorber Industries’ Bankruptcy
In February 2006, Lorber Industries filed a voluntary
petition under Chapter 11 of the Bankruptcy Code. In June
2006, Lorber Industries filed a motion in the bankruptcy court
seeking an order authorizing it, as debtor-in-possession, to
assume and assign the lease to Sahm or the highest bidder.
Plaintiff, represented by the law firm of Buchalter Nemer
(Buchalter), made the highest bid for the lease assignment. In
August 2006, the bankruptcy court granted Lorber Industries’
motion and entered a stipulated order authorizing Lorber
Industries to assume the lease and assign it to plaintiff. The
order provided that plaintiff was assigned the lease for the
following consideration: a credit bid of $800,000, based on the
settlement of a $6.5 million secured claim against the bankruptcy
3 At trial in the instant malpractice case, there was
conflicting evidence as to whether Lorber Industries knew of the
transfer of title to Sahm.
4
estate filed by Lorber; an $800,000 guaranty by Lorber; a
$250,000 payment; and a release between plaintiff, Lorber, and
other entities, on the one hand, and Lorber Industries, the
creditors’ committee, and the bankruptcy estate, on the other.
The stipulated order further provided that the bankruptcy court
retained jurisdiction to determine “all matters” arising from the
implementation of that order.
C. Plaintiff Sues Elixir in State Court
According to Lorber, in September 2008, she first learned
through her real estate broker that Elixir had sold the property
to Sahm. In October 2008, defendants, through attorney Thomas
Norminton (Norminton), agreed to represent plaintiff concerning
its claim against Elixir for selling the property without providing
plaintiff an opportunity to exercise its right of first refusal. There
was no written retainer agreement governing that
representation.
In late October 2008, in the Superior Court of Los Angeles
County, defendants filed on behalf of plaintiff a complaint against
Elixir, alleging breach of contract (Elixir action). Plaintiff alleged
that it had purchased all of Lorber Industries’ rights under the
lease, including Lorber Industries’ cause of action against Elixir
for breach of the right of first refusal provision. According to
plaintiff, Elixir breached the right of first refusal provision when
it sold the property to Sahm without providing Lorber Industries
with notice of the sale. In January 2009, Elixir filed an amended
answer that asserted an affirmative defense alleging that
plaintiff lacked standing to bring the suit.
In April 2009, Elixir filed a motion for judgment on the
pleadings on the ground that plaintiff did not have standing to
5
sue for breach of the right of first refusal provision. According to
Elixir, plaintiff lacked standing “because such standing reside[d]
with the bankruptcy trustee and/or debtor-in-possession.”
Defendants opposed the motion on plaintiff’s behalf, arguing that
the assignment of the lease to plaintiff “passed” the cause of
action against Elixir to plaintiff. In June 2009, the trial court
denied the motion for judgment on the pleadings. The trial court
also denied Elixir’s subsequent motions to amend its discovery
response that admitted Elixir had no facts to support its
affirmative defense based on lack of standing.
In January 2010, Elixir filed a motion for summary
judgment, again asserting that the assignment of the lease to
plaintiff did not include the cause of action against Elixir for
breach of the right of first refusal provision. Plaintiff opposed the
motion, maintaining that the cause of action transferred to
plaintiff as part of the lease assignment.
In May 2010, the trial court granted Elixir’s summary
judgment motion, concluding that neither the motion to approve
assignment of the lease nor the stipulated bankruptcy court order
approving the assignment transferred the cause of action against
Elixir as part of the lease assignment to plaintiff. In August
2011, the Court of Appeal affirmed the trial court’s order
granting Elixir’s summary judgment motion and, in November
2011, the Supreme Court denied plaintiff’s petition for review.
In connection with the Elixir action, plaintiff ultimately
paid defendants approximately $420,000 in attorney fees and
costs for services rendered. In addition, plaintiff paid Elixir
$325,000 to settle Elixir’s claim for attorney fees as the prevailing
party pursuant to the lease’s attorney fees provision.
6
II. The Instant Malpractice Suit
In November 2012, plaintiff sued defendants for legal
malpractice and breach of fiduciary duty in connection with the
Elixir action. In June 2013, plaintiff filed the operative first
amended complaint asserting the same causes of action.
Plaintiff’s malpractice claim included the following two
theories of legal malpractice that are relevant to this appeal: (1)
defendants’ failure to advise plaintiff of a potential claim it had
against Buchalter for purported malpractice in the bankruptcy
case over Buchalter’s handling of the right to sue Elixir in
connection with the assignment of the lease to plaintiff; and (2)
defendants’ failure to seek in the bankruptcy court clarification of
whether the cause of action against Elixir was included in the
lease assignment instead of litigating the issue in the Elixir
action. The breach of fiduciary duty claim was based on the exact
same conduct and acts alleged as the basis for the malpractice
claim.
The matter proceeded to jury trial in April 2015.4
Following the presentation of plaintiff’s case-in-chief, defendants
filed motions for nonsuit on the breach of fiduciary duty claim
and on that part of the legal malpractice claim based on the
alleged failure to advise plaintiff about a potential malpractice
claim against Buchalter. Following argument on the nonsuit
motions, the trial court ruled that defendants did not have a duty
to advise plaintiff about a potential malpractice claim against
Buchalter and that, in any event, defendants advised plaintiff to
4 Prior to trial, the trial court had denied defendants’
motions for summary judgment and/or summary adjudication
with the exception of granting summary adjudication in favor of
defendants as to plaintiff’s claims for punitive damages.
7
consult a legal malpractice attorney about such a claim. The trial
court also granted the nonsuit motion on the breach of fiduciary
duty claim.
Following the completion of trial on plaintiff’s remaining
malpractice claim that defendants negligently failed to seek
clarification of plaintiff’s rights in the bankruptcy court, the jury
returned a special verdict finding that defendants did not breach
any duty of care owed to plaintiff in representing plaintiff on its
claims against Elixir for breach of the lease. The trial court
entered judgment on the verdict, and plaintiff filed a timely
notice of appeal.
DISCUSSION
I. Defendants’ Motions for Nonsuit
“A defendant is entitled to a nonsuit if the trial court
determines that, as a matter of law, the evidence presented by
plaintiff is insufficient to permit a jury to find in his favor.
(Campbell v. General Motors Corp. (1982) 32 Cal. 3d 112, 117-118
[184 Cal. Rptr. 891, 649 P.2d 224, 35 A.L.R. 4th 1036].) ‘In
determining whether plaintiff’s evidence is sufficient, the court
may not weigh the evidence or consider the credibility of
witnesses. Instead, the evidence most favorable to plaintiff must
be accepted as true and conflicting evidence must be disregarded.
The court must give “to the plaintiff[’s] evidence all the value to
which it is legally entitled, . . . indulging every legitimate
inference which may be drawn from the evidence in [the]
plaintiff[’s] favor.”’ (Id., at p. 118.) A mere ‘scintilla of evidence’
does not create a conflict for the jury’s resolution; ‘there must be
substantial evidence to create the necessary conflict.’ (7 Witkin,
8
Cal. Procedure (3d ed. 1985) Trial, § 410, p. 413, italics in
original.) [¶] In reviewing a grant of nonsuit, we are ‘guided by
the same rule requiring evaluation of the evidence in the light
most favorable to the plaintiff.’ (Carson v. Facilities Development
Co. (1984) 36 Cal. 3d 830, 839 [206 Cal. Rptr. 136, 686 P.2d 656].)
We will not sustain the judgment ‘“unless interpreting the
evidence most favorably to plaintiff’s case and most strongly
against the defendant and resolving all presumptions, inferences
and doubts in favor of the plaintiff a judgment for the defendant
is required as a matter of law.”’ (Ibid., quoting Mason v. Peaslee
(1959) 173 Cal. App. 2d 587, 588 [343 P.2d 805].)” (Nally v. Grace
Community Church (1988) 47 Cal. 3d 278, 291.)
We review the grant of a nonsuit de novo. (Legendary
Investors Group No. 1, LLC v. Niemann (2014) 224 Cal. App. 4th
1407, 1412.)
A. Nonsuit on Malpractice Claim
Plaintiff contends that the trial court erred when it granted
the nonsuit motion on its malpractice claim arising from
defendants’ failure to advise plaintiff that it might have a
potential malpractice claim against Buchalter for its handling of
the assignment of the lease in the bankruptcy action. We find no
error because defendants had no duty to so advise plaintiff.
1. Attorney’s Duty of Care
“To prove a legal malpractice cause of action, the plaintiff
must show: (1) a duty by the attorney to use such skill, prudence
and diligence as members of his or her profession commonly
possess and exercise; (2) breach of that duty; (3) a proximate
causal connection between the breach and the resulting injury;
9
and (4) actual loss or damage resulting from the attorney’s
negligence. [Citations]” (Redante v. Yockelson (2004) 112
Cal. App. 4th 1351, 1356.)
With respect to an attorney’s duty of care, an attorney may
have a duty to advise a client about related matters that fall
outside the scope of the agreed-upon representation. “[A]n
attorney who undertakes one matter on behalf of a client owes
that client the duty to at least consider and advise the client if
there are apparent related matters that the client is overlooking
and that should be pursued to avoid prejudicing the client’s
interests. ‘[E]ven when a retention is expressly limited, the
attorney may still have a duty to alert the client to legal problems
which are reasonably apparent, even though they fall outside the
scope of the retention.’ [Citations].” (Janik v. Rudy, Exelrod &
Zieff (2004) 119 Cal. App. 4th 930, 940 (Janik).)
“The existence and scope of duty are legal questions for the
court.” (Merrill v. Navegar, Inc. (2001) 26 Cal. 4th 465, 477.)
2. Defendants Had No Duty to Advise of Potential
Malpractice Suit
The evidence during plaintiff’s case-in-chief established
that, when Lorber met with Norminton to hire defendants to
represent plaintiff, the scope of such representation was to sue
Elixir for breach of the right of first refusal provision in the lease.
Norminton agreed to that representation as discussed. Thus, the
duty to provide advice concerning malpractice by Buchalter in the
10
bankruptcy action fell outside the scope of the agreed-upon
representation established by the evidence at trial.5
Moreover, although an attorney may have a duty to advise
a client about related matters beyond the scope of the agreed-
upon representation, if such matters present legal problems that
are reasonably apparent (Janik, supra, 119 Cal.App.4th at p.
940), the evidence presented during plaintiff’s case-in-chief did
not demonstrate that a claim against Buchalter for malpractice
should have been reasonably apparent to defendants. To the
contrary, although the trial court ultimately found in the Elixir
action that plaintiff lacked standing, that summary judgment
ruling came after defendants had successfully opposed both
Elixir’s motion for judgment on the pleadings based on lack of
standing and Elixir’s motion to amend its discovery response that
admitted Elixir had no facts to support its affirmative defense
based on lack of standing. Plaintiff’s own expert, Christopher
Rolin, testified that the California Supreme Court’s decision in
National Reserve Co. v. Metropolitan Trust Co. (1941) 17 Cal. 2d
827 [holding that, in the absence of any contra indication by the
parties, assignment of a contract also transfers any causes of
action arising from the contract], supported the position that the
cause of action against Elixir transferred with the lease
assignment approved by the bankruptcy court, thereby conferring
plaintiff with standing. Given the seemingly close call
throughout the litigation over whether plaintiff had standing, we
5 We reject plaintiff’s suggestion that the lack of a written
retainer agreement meant that defendants’ scope of
representation and attendant duty to advise was essentially
limitless. Rather, the scope of representation was defined by the
evidence of the parties’ agreement, whether or not in writing.
11
cannot conclude that it should have been reasonably apparent to
defendants that Buchalter had committed malpractice when
handling the assignment of the lease in the bankruptcy action.
Indeed, as was made clear from an email from Norminton
to Lorber that was introduced at trial, legal malpractice is a
specialty, and Norminton was not a malpractice attorney.6
Plaintiff’s expert Rolin also confirmed that Norminton was not a
malpractice lawyer. By contrast, the testimony of plaintiff’s other
expert, March, who opined that Buchalter’s handling of the lease
assignment in the bankruptcy action fell below the standard of
care, proves the point—March rendered that opinion based on her
service as a federal bankruptcy court judge for 14 years, followed
by 12 years of bankruptcy law practice. It is simply not
reasonable to conclude that an attorney in Norminton’s position
would have been alerted to a potential claim for malpractice
against Buchalter for its actions in the bankruptcy proceedings.
(See Nichols v. Keller (1993) 15 Cal. App. 4th 1672, 1686 [noting
that “[f]oreseeability of harm” is a “chief factor” in deciding
whether a duty arose].)
Because we conclude that a claim for malpractice against
Buchalter would not have been reasonably apparent to
defendants under the circumstances, defendants did not have a
duty to advise plaintiff of such a claim. We therefore affirm the
6 Defendants contend this email, which referred Lorber to a
malpractice attorney to consult on “issues with [an unrelated
attorney] and other attorneys who have represented [plaintiff],”
was sufficient to satisfy any duty they may have had to inform
plaintiff of Buchalter’s potential malpractice. We do not address
this contention because we conclude there was no such duty.
12
trial court’s grant of nonsuit on this claim of malpractice against
defendants.7
B. Nonsuit on Fiduciary Duty Claim
Plaintiff contends the trial court erred when it granted the
nonsuit motion on its breach of fiduciary duty claim. That claim
was premised on plaintiff’s theory that, in order to generate
greater attorneys fees by continuing to litigate the issue of
standing in state court, defendants did not inform plaintiff of the
potentially faster and cheaper option of seeking in the
bankruptcy court clarification of whether the assignment of the
lease to plaintiff included the right to bring the breach of contract
action against Elixir. We conclude that nonsuit was properly
granted on this claim.
1. Breach of Fiduciary Duty
“The elements of a cause of action for breach of fiduciary
duty are: (1) existence of a fiduciary duty; (2) breach of the
fiduciary duty; and (3) damage proximately caused by the breach.
(Pierce v. Lyman (1991) 1 Cal. App. 4th 1093, 1101 [3 Cal. Rptr. 2d
236].)” (Stanley v. Richmond (1995) 35 Cal. App. 4th 1070, 1086.)
7 Because we affirm on the basis that defendants had no
duty, we do not address defendants’ contention that plaintiff
adduced no evidence of causation or damages. Moreover,
however meritorious, we cannot address that contention because
defendants did not raise it in their motion for nonsuit (see
Lawless v. Calaway (1944) 24 Cal. 2d 81, 93-94), even though it
appears plaintiff introduced no evidence that it would have acted
upon advice that it might have a potential cause of action against
Buchalter.
13
“The scope of an attorney’s fiduciary duty may be
determined as a matter of law based on the Rules of Professional
Conduct which, ‘together with statutes and general principles
relating to other fiduciary relationships, all help define the duty
component of the fiduciary duty which an attorney owes to his [or
her] client.’ (Mirabito v. Liccardo (1992) 4 Cal. App. 4th 41, 45 [5
Cal. Rptr. 2d 571]; David Welch Co. v. Erskine & Tulley (1988) 203
Cal. App. 3d 884, 890 [250 Cal. Rptr. 339].) Whether an attorney
has breached a fiduciary duty to his or her client is generally a
question of fact. (David Welch Co. v. Erskine & Tulley, supra,
203 Cal.App.3d at p. 890.) Expert testimony is not required (id.
at pp. 892-893), but is admissible to establish the duty and
breach elements of a cause of action for breach of fiduciary duty
where the attorney conduct is a matter beyond common
knowledge (id. at p. 893; Mirabito v. Liccardo, supra, 4
Cal.App.4th at pp. 45-46; see also Day v. Rosenthal (1985) 170
Cal. App. 3d 1125, 1146-1147 [217 Cal. Rptr. 89]).” (Stanley v.
Richmond, supra, 35 Cal.App.4th at p. 1086.)
A breach of fiduciary duty is a tort claim entirely distinct
from a malpractice claim based on professional negligence.
(Barbara A. v. John G. (1983) 145 Cal. App. 3d 369, 382-383; cf.
Budd v. Nixen (1971) 6 Cal. 3d 195, 200 [elements of cause of
action for professional negligence].) Beyond mere allegations of
professional negligence, a cause of action for breach of fiduciary
duty requires some further violation of the obligation of trust,
confidence, and/or loyalty to the client. (2 Mallen & Smith, Legal
Malpractice (2017) § 15.3, pp. 660-661 [“[F]iduciary breach
allegations that constitute negligence, which do not implicate a
duty of confidentiality or loyalty, and are merely duplicative of a
14
negligence cause of action, do not support a cause of action for
fiduciary breach”].)
It appears that no California court has explicitly held that
a breach of fiduciary duty claim cannot merely duplicate a claim
for professional negligence. (See Buehler v. Sbardellati (1995) 34
Cal. App. 4th 1527, 1544 fn. 9 [noting “there is authority for the
view the breach of fiduciary duty theory is separate from the
professional negligence theory” but “leav[ing] any resolution of
this separate cause of action question to another case”].) In other
jurisdictions, however, there appears to be universal agreement
that a breach of fiduciary claim cannot stand if it is merely based
on duplicative allegations of professional negligence by the
attorney. (See, e.g., Pippen v. Pederson and Houpt (Ill.Ct.App.
2013) 986 N.E.2d 697, 705 [finding breach of fiduciary duty claim
duplicative where “plaintiff’s negligence and breach of fiduciary
duty claims share the same operative facts and injuries . . . and
those injuries were actually caused by defendant’s allegedly
negligent acts”]; Cosmetics Plus Group, Ltd. v. Traub
(N.Y.Sup.Ct.App.Div. 2013) 105 A.D.3d 134, 143 [“[W]e find that
the cause of action for breach of fiduciary duty was properly
dismissed as duplicative of the legal malpractice claim. It arose
out of the same facts as the legal malpracice claim . . .”]; Crist v.
Loyacono (Miss. 2011) 65 So. 3d 837, 842-843 [“The law recognizes
a clear distinction between allegations of legal malpractice based
on negligence (sometimes called a breach of the standard of care)
and those based on breach of fiduciary duty (sometimes called a
breach of the standard of conduct)”]; Illinois National Ins. Co. v.
Wiles, Boyle, Burkholder & Bringardner Co., L.P.A. (Ohio Ct.App.
Dec. 2, 2010, No. 10AP-290) 2010 OhioApp. LEXIS 4938, at *17
[affirming grant of summary judgment against plaintiff on breach
15
of fiduciary duty claim where “[n]o other alleged conduct occurred
apart from that forming the basis of the legal malpractice claim”];
Nettleton v. Stogsdill (Ill.Ct.App. 2008) 899 N.E.2d 1252, 1268
[“Because plaintiff’s claim for breach of fiduciary duty was based
on the same operative facts and alleged the same injury as her
claim for legal malpractice, the dismissal of plaintiff’s breach of
fiduciary duty claim was appropriate”]; Pereira v. Thompson
(Or.Ct.App. 2008) 217 P.3d 236, 247 [noting that the two “claims
are distinct” because “[a]n attorney negligence claim concerns
competence [and] a breach of fiduciary claim concerns loyalty”];
Murphy v. Gruber (Tex.Ct.App. 2007) 241 S.W.3d 689, 694 [“This
court has differentiated between claims against a lawyer for
professional negligence and breach of fiduciary duty”]; Aller v.
Law Office of Carole C. Schriefer (Colo.Ct.App. 2005) 140 P.3d 23,
28 [“When a legal malpractice claim and a breach of fiduciary
duty claim arise from the same material facts, the breach of
fiduciary duty claim should be dismissed as duplicative”]; and
Vallinoto v. DiSandro (R.I. 1997) 688 A.2d 830, 834-838
[distinguishing between negligence-based malpractice claim and
claim for breach of fiduciary duty].)
Moreover, we have found no authority in this jurisdiction or
elsewhere concluding otherwise. Indeed, neither party to this
appeal has disputed this widely-accepted proposition.
We also note that, in an analogous context, our courts have
adopted the well-established principle that, if a tort cause of
action for insurance bad faith is based solely upon the facts which
give rise to a related contract cause of action, no separately
actionable tort claim is stated. “If the allegations do not go
beyond the statement of a mere contract breach and, relying on
the same alleged acts, simply seek the same damages or other
16
relief already claimed in a companion contract cause of action,
they may be disregarded as superfluous as no additional claim is
actually stated.” (Careau v. Security Pacific Business Credit, Inc.
(1990) 222 Cal. App. 3d 1371, 1395; see also Congleton v. National
Union Fire Ins. Co. (1987) 189 Cal. App. 3d 51, 59.)
Accordingly, we conclude that, when the basis for a claim of
breach of fiduciary duty arises from the same facts and seeks the
same relief as the attorney negligence claim for malpractice, the
claim for breach of fiduciary duty is duplicative and should be
dismissed.
2. Plaintiff’s Evidence
Plaintiff’s expert Kathleen March testified that there was
an alternative to litigating in state court the issue of whether the
lease assignment transferred the cause of action for breach of the
right of first refusal provision. March testified that plaintiff
could have filed in the bankruptcy court a motion for clarification
of whether that cause of action transferred to plaintiff as an
incident of the lease assignment because the order granting the
assignment explicitly retained jurisdiction over enforcement of
the order and gave the parties the “right” to return to bankruptcy
court for that purpose. According to March, a motion for
clarification in the bankruptcy court would have been heard
within 24 days of service and filing, or perhaps on shortened
time.
Plaintiff’s expert Christopher Rolin testified that
defendants had a duty to communicate the bankruptcy court
option to plaintiff because it was “a direct path” to the
determination of whether the accrued cause of action had
transferred to plaintiff as an incident of the lease assignment.
17
According to Rolin, the decision of whether to proceed in state
court or seek bankruptcy court clarification was a “big” decision
such that defendants “should have advised [plaintiff] of the risks,
the costs, and the likelihood of success in the bankruptcy court.”
Rolin opined that because state court litigation was “an expensive
proposition, it should have been diagrammed for the client.” He
concluded that, by failing to advise plaintiff of the option to seek
bankruptcy court clarification, while continuing to litigate the
issue in state court, defendants breached the fiduciary duty owed
to plaintiff.
Lorber testified that she never received any written
communication from Norminton in which he discussed the option
of returning to the bankruptcy court for clarification of the
stipulated bankruptcy court order. Lorber also maintained that
Norminton did not advise her of this option in any of their
meetings or telephone conversations regarding the Elixir action.
In his testimony, Norminton confirmed that he never
communicated the bankruptcy court option to plaintiff in writing.
Norminton also testified that he was aware of the bankruptcy
court’s retention of jurisdiction at the time he filed the Elixir
action and that he “never had any question in [his] mind that
[plaintiff] could have gone back to bankruptcy court, whether it
was under [the stipulated bankruptcy court order] or in another
way, to seek clarification.” Norminton further testified that,
although he did not consider the bankruptcy court option at the
time he filed the Elixir action, he “did certainly consider, at
length, that option later,” and “thought about it a number of
times over the course of days and weeks,” but ultimately decided
not to seek bankruptcy court clarification.
18
3. Plaintiff’s Evidence Did Not Establish a Claim
for Breach of Fiduciary Duty
Drawing all inferences in favor of plaintiff, the evidence
presented in plaintiff’s case-in-chief showed that: (1) Norminton
was aware of and considered the bankruptcy court option; (2) the
option would have been less expensive and more expeditious than
the state court litigation strategy pursued by defendants; and (3)
Norminton chose not to pursue the bankruptcy court option, but
did not inform plaintiff through Lorber or otherwise. Such
evidence, without more, does not establish a breach of fiduciary
duty claim.
We recognize the evidence adduced by plaintiff might have
been sufficient to show professional negligence, in that it could
support a finding that defendants negligently failed to present an
important litigation strategy to their client.8 But such evidence
could not support any finding that, beyond a failure to meet a
reasonable standard of professional care, defendants breached
any distinct duty of confidentiality or loyalty in support of a
viable claim for breach of fiduciary duty.
Plaintiff suggests a theory that might support a finding
that defendants’ failure to inform plaintiff of the bankruptcy
court option constituted a breach of fiduciary duty, namely that
defendants intentionally concealed the option to litigate in
bankruptcy court due to a self-interested financial motive to
continue litigating in state court. (See Riverwalk Cy Hotel
Partners Ltd. v. Akin Gump Strauss Hauer & Feld LLP
(Tex.Ct.App. 2012) 391 S.W.3d 229, 236 [“A breach of fiduciary
8 As we noted above, the jury ultimately found that
defendants did not breach any duty of care in connection with
representing plaintiff.
19
duty occurs when an attorney, among other things, subordinates
his client’s interest to his own, retains the client’s funds, engages
in self-dealing, improperly uses client confidences, fails to
disclose conflicts of interest, or makes misrepresentations to
achieve these ends”].) But, even when viewed in the light most
favorable to plaintiff, the evidence presented in plaintiff’s case-in-
chief did not support a reasonable inference that Norminton
harbored an intent to take advantage of plaintiff by billing it for
fees that he knew were not justified. It would be entirely
speculative to infer defendants intended to harm plaintiff solely
from the nondisclosure of the bankruptcy option or the fact that
they received approximately $420,000 in attorney fees and costs
for the Elixir action. To conclude otherwise would mean that any
time an attorney is compensated for pursuing a losing litigation
strategy that the attorney did not fully vet with the client, we
must assume the attorney did so to fleece the client. Without any
additional evidence, that conclusion is pure conjecture and
speculation, which cannot withstand a motion for nonsuit.
(Kidron v. Movie Acquisition Corp. (1995) 40 Cal. App. 4th 1571,
1580-1581; California Shoppers, Inc. v. Royal Globe Ins. Co.
(1985) 175 Cal. App. 3d 1, 44-45.)
We therefore hold that the trial court correctly concluded
plaintiff did not make out a claim for breach of fiduciary duty
based on the failure to advise plaintiff of the bankruptcy court
option.
II. Plaintiff’s Motion In Limine
Prior to trial, plaintiff filed a motion in limine to exclude
evidence of Lorber Industries’ alleged business practices,
including alleged customs fraud. The trial court denied that
20
motion. Plaintiff contends the trial court erred by failing to
adequately weigh the likely prejudice that would result from the
admission of such evidence against its limited probative value, as
is required under section 352. We disagree.
A. Background
Plaintiff moved under section 352 to exclude evidence of
alleged business practices of Lorber Industries, including
evidence that Lorber Industries allegedly committed—and was
investigated for committing—customs fraud by misrepresenting
the country of origin from which it imported goods in order to pay
lower tariffs or duties to the government. Defendants argued the
customs fraud evidence was critical to defending against the
malpractice claim that they were negligent in not seeking
clarification from the bankruptcy court whether the breach of
contract cause of action was transferred with the assignment of
the lease. According to defendants, Norminton was “deeply
concerned” that returning to the bankruptcy court would expose
Lorber and other principals of Lorber Industries to potential
criminal liability based on the alleged fraud and might jeopardize
the agreement concerning the lease assignment which included a
release of all claims against plaintiff, Lorber, and related entities.
The trial court denied the motion, concluding that
Norminton should be allowed to testify that his concern about the
alleged customs fraud was one of the factors he considered when
deciding whether to seek bankruptcy court clarification. In
ruling on the motion in limine, the trial court engaged in the
following exchange with the parties.
“THE COURT: So you want [testimony about the customs
fraud admitted] . . . because [Norminton’s] position is[,] in terms
21
of deciding what tactic to use and whether or not [he] was going
to go back to the bankruptcy court, this [was] one of the factors
[he] considered?
“[DEFENSE COUNSEL]: Two factors.
“THE COURT: I said this was one of them?
“[DEFENSE COUNSEL]: One of them is the customs
issues, absolutely . . . .
“THE COURT: So let me go back to [plaintiff’s counsel].
[I]f this is now litigation between client and attorney, what does
that do to the privilege?
“[PLAINTIFF’S COUNSEL]: Well, what I am saying on
the privilege issue is that the communications - - Tom Lorber
[Arnold and Anita Lorber’s son] and Anita Lorber, as individuals,
had discussions with . . . Norminton about this issue, about this
customs issue. That is . . . privileged. . . .
“THE COURT: You know what, if that is [Norminton’s]
position, and I am not here to say he is justified in doing any of
this, but if that is his position, and now there is litigation
between client and attorney, I think the privilege is waived.
[L]ook, you can stand up in front of this jury and show otherwise,
but if [Norminton] is contending [the alleged customs fraud] was
a consideration, I think he can bring it out.
“[PLAINTIFF’S COUNSEL]: Your honor, the problem with
this is under [section] 352, there has never been a criminal
charge. They are going to get up there and talk about criminal
charges. It just infects the trial. It makes it look like there
[were] criminal charges when there [were not]. They are simply
throwing [the alleged customs fraud] in. [T]here is no evidence of
any claim, anything ever done. [T]here is no communication from
. . . Norminton to the client saying, hey - -
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“THE COURT: That is something else. Look, just stop.
Stop. [¶] Denied. This [motion] is denied.
“[PLAINTIFF’S COUNSEL]: Can I just - -
“THE COURT: Look, that doesn’t mean that during the
trial, if [defendants] are trying to introduce statements . . . for
some other reason, you may object. But right now, on the basis of
privilege, or having some relevance to the action, since
[Norminton] is contending [the alleged customs fraud] was a
consideration, I am going to allow him . . . if he chooses, to testify
about it.”
B. Section 3529
“‘[S]ection 352 vests discretion in the trial judge to exclude
evidence where its probative value is substantially outweighed by
the probability that its admission will necessitate undue
consumption of time or create a substantial danger of prejudice,
of confusion of issues, or of misleading a jury.” (Kelly v. New West
Federal Savings (1996) 49 Cal. App. 4th 659, 674.) “‘Prejudic[ial]’
in . . . section 352 does not mean ‘damaging’ to a party’s case, it
means evoking an emotional response that has very little to do
with the issue on which the evidence is offered. (People v. Karis
(1988) 46 Cal. 3d 612, 638 [250 Cal. Rptr. 659, 758 P.2d 1189].)
Evidence which has probative value must be excluded under
section 352 only if it is ‘undu[ly]’ prejudicial despite its legitimate
9 Section 352 provides: “The court in its discretion may
exclude evidence if its probative value is substantially
outweighed by the probability that its admission will (a)
necessitate undue consumption of time or (b) create substantial
danger of undue prejudice, of confusing the issues, or of
misleading the jury.”
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probative value. [Citation].)” (Rufo v. Simpson (2001) 86
Cal. App. 4th 573, 597.)
Although a trial court is required under section 352 to
weigh potential prejudice against probative value, it is not
required to make an express record of the weighing process it
employed. “If a proper objection under section 352 is raised, the
record must affirmatively demonstrate that the trial court did in
fact weigh prejudice against probative value. The trial court
need not make findings or expressly recite its weighing process,
or even expressly recite that it has weighed the factors, so long as
the record as a whole shows the court understood and undertook
its obligation to perform the weighing function. (People v. Waidla
(2000) 22 Cal. 4th 690, 724, fn. 6 [94 Cal. Rptr. 2d 396, 996 P.2d
46]; People v. Crittenden (1994) 9 Cal. 4th 83, 135 [36 Cal. Rptr. 2d
474, 885 P.2d 887]; People v. Triplett (1993) 16 Cal. App. 4th 624,
627-629 [20 Cal. Rptr. 2d 225].)” (Rufo v. Simpson, supra, 86
Cal.App.4th at p. 599.)
We review a trial court’s denial of a motion in limine made
pursuant to section 352 for abuse of discretion. (People ex rel.
Lockyer v. Sun Pacific Farming Co. (2000) 77 Cal. App. 4th 619,
639.) This means we will not disturb the trial court’s ruling
unless the trial court’s determination was beyond the bounds of
reason and resulted in a manifest miscarriage of justice. (People
v. Waidla, supra, 22 Cal.4th at p. 724.)
C. The Trial Court’s Section 352 Balancing
Plaintiff contends the trial court abused its discretion when
denying its motion in limine because the trial court failed to
engage in the weighing process required by section 352. Plaintiff
argues that the trial court denied the motion after finding the
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evidence of customs fraud relevant, but without considering the
prejudicial impact of such evidence.
In determining whether the record as a whole
demonstrates that the trial court understood and engaged in the
required weighing process under section 352, we consider the
content and context of the arguments that were before the trial
court and can reasonably infer findings that supported the trial
court’s denial of the motion in limine. (See People v. Johnson
(1987) 193 Cal. App. 3d 1570, 1573-1577.)
Based on the record of the hearing on the motion in limine,
we conclude that the trial court was aware of plaintiff’s prejudice
arguments under section 352 and considered them in denying the
motion. To begin with, we note that plaintiff’s written motion set
forth plaintiff’s arguments under section 352, including plaintiff’s
claim that the uncharged customs fraud was unduly prejudicial;
there is nothing in the record to suggest that the trial court did
not read and consider those arguments.
In addition, during the motion hearing, plaintiff’s counsel
expressly reiterated the section 352 argument and specified the
potential prejudice that would result from testimony about
uncharged criminal conduct, stating that “the problem with this
is under [section] 352, there has never been a criminal charge.
They are going to get up there and talk about criminal charges.
It just infects the trial. It makes it look like there [were] criminal
charges when there [were not].” Close on the heels of hearing
those prejudice arguments, the trial court denied the motion.
Reading the record as a whole, we find that the trial court
conducted the requisite balancing test under section 352. The
trial court explicitly acknowledged that defendants, in presenting
their defense to the malpractice charge, had a right to present
25
evidence concerning the factors Norminton considered in deciding
against returning to the bankruptcy court for clarification of the
scope of the lease assignment. This included Norminton’s
concern about the customs fraud issue. The trial court
entertained argument from plaintiff’s counsel regarding the
dangers of permitting the introduction of such evidence, and then
denied plaintiff’s motion. Because the record reflects that the
trial court was aware of and considered the parties’ respective
relevance and prejudice arguments, we do not find the trial court
abused its discretion by denying plaintiff’s motion in limine to
preclude evidence of customs fraud.
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DISPOSITION
The judgment is affirmed. Defendants are awarded their
costs on appeal.
CERTIFIED FOR PARTIAL PUBLICATION
KIN, J.*
We concur:
TURNER, P. J.
BAKER, J.
* Judge of the Superior Court of the County of Los Angeles,
appointed by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
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