Tran v. Hamilton CA4/3

Filed 7/29/16 Tran v. Hamilton 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
HOAN TRAN et al.,
Cross-complainants and Respondents, G051014
v. (Super. Ct. No. 30-2013-00666746)
JOHN M. HAMILTON, OPINION
Cross-defendant and Appellant.
Appeal from a judgment of the Superior Court of Orange County, Kirk H.
Nakamura, Judge. Reversed.
Mazur & Mazur and Janice R. Mazur for Cross-defendant and Appellant.
No appearance for Cross-complainants and Respondents.
* * *
Civil Code section 1714.10 (§ 1714.10) requires a party to obtain court
approval before filing any cause of action against an attorney which is based on an
alleged civil conspiracy between the attorney and his or her client, arising out of a claim
or dispute. The statute authorizes an attorney to enforce the prefiling requirement by way
of demurrer (among other options) and specifies that the trial court’s ruling on such a
demurrer will qualify as an appealable judgment.
In this case, appellant John M. Hamilton, the attorney for plaintiff Trinh
Thi To Ly, demurred to the cross-complaint filed by defendant Hoan Tran, arguing Tran
ran afoul of section 1714.10 when he named Hamilton as a cross-defendant on causes of
action alleging he had conspired with Ly to thwart Tran’s sale of a business entity that is
both a named defendant in Ly’s main complaint and a prime subject of its allegations.
Although the trial court overruled Hamilton’s demurrer on this ground, we conclude the
court erred and reverse the judgment.
I
FACTS
Hamilton, acting as attorney for Ly, filed the main complaint in August
2013. The complaint asserts various causes of action against Tran, Harbor Automotive,
Inc. (Harbor), and others, arising out of two failed agreements. The first was an alleged
agreement by which Ly would invest $1,000,000 in Harbor, with the expectation of
thereby qualifying for an EB 5 immigration visa. According to the complaint, the parties’
agreement specified that if the visa application was denied, Ly’s money would be
returned to her. However, when Ly’s visa application was denied, Tran allegedly refused
to refund her investment.
The second agreement was an alleged partnership through which Ly and
Tran would purchase and quickly rehabilitate single family homes with the goal of
reselling them for a profit. Ly alleges she invested significant sums in the partnership,
while Tran invested no money of his own. She further alleges that while five properties
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were purchased and resold by the partnership, Tran wrongfully diverted at least a portion
of the profits and other partnership funds for his own use.
Tran filed his cross-complaint in May 2014, naming not only Ly, but also
Hamilton, as cross-defendants. Hamilton is identified in the cross-complaint as “an
individual . . . who was, and still is, an attorney at law duly licensed by the State of
California and doing business under the name of Hamilton Law Offices. At times herein
mentioned, Hamilton was acting as agent, representative and counsel for Ly, was acting
in concert and agreement with Ly, was acting at the direction of Ly and was acting with
the consent, permission and knowledge of Ly as to all agreements, contracts, leases,
transactions and occurrences alleged and described herein.” (Italics added.) The cross-
complaint further alleges that all cross-defendants, “at all times herein mentioned, . . .
were acting within the course and s[cope] of their agency, employment, partnership,
conspiracy, ownership or joint venture and with the knowledge, consent, acquiescence
and permission of their respective principal, employer, partner, co-conspirator and joint
venturer.” (Italics added.) At no point does the cross-complaint allege Hamilton had any
role in the events alleged therein, other than in his capacity as Ly’s attorney and
coconspirator. Nor does the cross-complaint allege Hamilton had any financial stake in
the properties or transactions at issue in either the complaint or cross-complaint.
While the cross-complaint’s first cause of action does include allegations
against Hamilton, it is stated against Ly only, for breach of an agreement she entered into
with Tran and Harbor, to lease Harbor the premises used to conduct its auto body repair
business. It alleges that in May 2013, “Tran and Harbor informed Ly and Hamilton” of a
third party’s offer to purchase Harbor, which was contingent on an assignment of
Harbor’s lease to the purchaser, and that “Ly and Hamilton failed and refused to respond
to notice of this proposed purchase and sale of Harbor, failed and refused to respond to
cross-complainants’ request for consent to assign the lease, delayed in the granting of an
assignment of the lease and failed and refused to reasonably give consent to an
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assignment of the lease.” The cross-complaint alleges the same thing happened again in
June 2013, when new proposed purchasers offered to buy Harbor. Again, “Ly and
Hamilton” allegedly failed and refused to respond or cooperate in the effort to assign
Harbor’s lease to the proposed purchasers of the business.
The cross-complaint’s breach of contract cause of action then specifically
links the refusal to cooperate in the lease assignment with the filing of the main
complaint, alleging that “[t]hereafter, on August 5, 2013, Ly, with Hamilton as her
attorney of record, filed the within action [i.e., the main complaint] against Tran and
Harbor alleging breach of contract, fraud, common counts and punitive damages. [¶] . . .
Cross-complainants are informed and believe, and thereon allege, that at the time of the
offers to purchase Harbor, as described herein, Ly and Hamilton knew that they would be
filing a lawsuit against Tran and Harbor and that Ly, by and through Hamilton,
intentionally, willfully and purposefully delayed and withheld giving consent to
assignment of the lease to the prospective purchasers, as described herein.” (Italics
added.)
The cross-complaint’s second cause of action alleges fraud in connection
with Ly’s purchase of the real property on which Harbor conducts its business and in the
formation of Tran’s and Ly’s partnership to purchase and rehabilitate residential
properties. Hamilton is not mentioned in this cause of action.
It is the third through sixth causes of action that name Hamilton as a cross-
defendant, alleging he is liable to Tran for (1) intentional interference with contractual
relations, (2) negligent interference with contractual relations, (3) intentional interference
with prospective economic advantage, and (4) negligent interference with prospective
economic advantage. All of those causes of action allege that the contracts or prospective
economic relationships interfered with were Tran’s agreements (or proposed agreements)
to sell Harbor to the interested third parties, and all allege that cross-defendants interfered
with those agreements by intentionally or unreasonably delaying consent to the lease
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assignment. Moreover, the fifth and sixth causes of action, alleging intentional and
negligent interference with prospective economic advantage, also allege that cross-
defendants communicated with the prospective purchasers, making “false, untrue and
derogatory statements concerning Tran and Harbor,” which either intentionally or
negligently harmed Tran and Harbor, and caused the third parties to withdraw their offers
to purchase Harbor.
Finally, all of these causes of action allege that Ly and Hamilton engaged in
the described interference in contemplation of Ly’s lawsuit against Tran. For example,
the third and fifth causes of action allege “cross-defendants intentional acts were
designed to interfere with, eliminate, destroy and get rid of those contractual relationships
so that Harbor would not be sold and to ensure [Tran] and Harbor would continue to
operate the business, continue to pay Ly the monthly lease amount, continue to possess
active financial pockets from which Ly could look for payment of alleged damages
asserted in her lawsuit and for purposes of ill will and harassment. Ly and Hamilton
engaged in this strategy and scheme in that at the time of the contractual relationships, as
described herein, said cross-defendants knew that they were filing a lawsuit against Tran
and Harbor.” (Italics added.) Further, Ly and Hamilton’s “delay in acting on the offers
to purchase Harbor and the unreasonable failure and refusal to consent to the assignment
of the Lease . . . was designed to accommodate the prospective lawsuit which said cross-
defendants intended to file against cross-complainants, and was a despicable act done in
willful and conscious disregard of the rights of cross-complainants.” (Italics added.)
The fourth and sixth causes of action, based on a theory of negligent, rather
than intentional interference, nonetheless connect cross-defendants’ unreasonable delay
and failure to consent to Ly’s planned lawsuit, stating their delay “had the effect of”
getting rid of Harbor’s prospective buyers, thereby “ensuring that [Tran] and Harbor
would continue to operate the business . . . and continue to possess active financial
pockets from which Ly could look for payment of alleged damages asserted in her
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lawsuit. At the time of the contractual relationships, as described herein, said cross-
defendants knew that they were filing a lawsuit against Tran and Harbor.”
Hamilton demurred to Tran’s cross-complaint, arguing that none of the
causes of action alleged against him was sufficient to state a cause of action, and that all
required prefiling approval under section 1714.10. The trial court sustained the demurrer
as to the fourth cause of action, without leave to amend, solely on the basis there was no
cause of action for negligent interference with contract under California law, and citing
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Davis v. Nadrich (2009) 174 Cal. App. 4th 1, 9-10. However, the court otherwise
overruled Hamilton’s demurrer.
II
DISCUSSION
1. Applicable Law
Section 1714.10, subdivision (a), states: “No cause of action against an
attorney for a civil conspiracy with his or her client arising from any attempt to contest or
compromise a claim or dispute, and which is based upon the attorney’s representation of
the client, shall be included in a complaint or other pleading unless the court enters an
order allowing the pleading that includes the claim for civil conspiracy to be filed after
the court determines that the party seeking to file the pleading has established that there is
a reasonable probability that the party will prevail in the action.”
1
As explained in Davis, this rule represents something of an anomaly. Our
Supreme Court rejected a cause of action for negligent, as opposed to intentional,
interference with contract in Fifield Manor v. Finston (1960) 54 Cal. 2d 632. However,
the Supreme Court subsequently recognized a cause of action for negligent interference
with prospective economic advantage in J’Aire Corp. v. Gregory (1979) 24 Cal. 3d 799.
And while some have questioned the continuing validity of Fifield in the wake of J’Aire,
“the Supreme Court has yet to disapprove [Fifield].” (LiMandri v. Judkins (1997) 52
Cal. App. 4th 326, 349.)
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“Section 1714.10 was intended to weed out the harassing claim of
conspiracy that is so lacking in reasonable foundation as to verge on the frivolous.
[Citations.] The weeding tool is the requirement of prefiling approval by the court, which
must be presented with a verified petition accompanied by a copy of the proposed
pleading and ‘supporting affidavits stating the facts upon which the liability is based’; the
pleading is not to be filed until the court has determined ‘. . . the party seeking to file the
pleading has established that there is a reasonable probability that the party will prevail in
the action.’” (Evans v. Pillsbury, Madison & Sutro (1998) 65 Cal. App. 4th 599, 604.)
As explained by our Supreme Court in Doctor’s Co v. Superior Court
(1989) 49 Cal. 3d 39, 47, an attorney can only be held liable based upon a conspiracy with
his or her client in two situations: first, when the attorney “conspir[es] with his or her
client to cause injury by violating the attorney’s own duty to the plaintiff,” and second,
when the attorney engages in a conspiracy “‘for their individual advantage’ and not
solely on behalf of the [client].” Thus, section 1714.10’s, subdivision (c), prefiling
requirement exempts “a cause of action against an attorney for a civil conspiracy with his
or her client, where (1) the attorney has an independent legal duty to the plaintiff, or (2)
the attorney’s acts go beyond the performance of a professional duty to serve the client
and involve a conspiracy to violate a legal duty in furtherance of the attorney’s financial
gain.”
The pleader’s failure to comply with section 1714.10’s, subdivision (b),
requirement for a prefiling court order is a defense to the complaint which can “be raised
by the attorney charged with civil conspiracy upon that attorney’s first appearance by
demurrer, motion to strike, or such other motion or application as may be appropriate.”
And finally, section 1714.10, subdivision (d), “establishes a special
proceeding of a civil nature.” Thus, any order made pursuant to its provisions, “which
determines the rights of a petitioner or an attorney against whom a pleading has been or is
proposed to be filed, shall be appealable as a final judgment in a civil action.” (Ibid.)
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And “[s]ince the section 1714.10 special proceeding procedure operates like a demurrer
or motion for summary judgment in reverse [citation], and since it involves only
questions of law, it follows that our review of the order under that section is de novo.”
(Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal. App. 4th 802,
822.)
2. The Causes of Action Alleged Against Hamilton are Subject to Section 1714.10
Hamilton’s primary contention on appeal is that the trial court erred by not
sustaining his demurrer on the basis of section 1714.10. We agree.
A cause of action that requires prefiling authorization under section
1714.10, subdivision (a), is one that it is based on the attorney’s “civil conspiracy with
his or her client arising from any attempt to contest or compromise a claim or dispute.”
Of course, a bare “conspiracy” is nothing more than an agreement, and thus a “civil
conspiracy” in and of itself, does not state a cause of action. “Conspiracy is not a cause
of action, but a legal doctrine that imposes liability on persons who, although not actually
committing a tort themselves, share with the immediate tortfeasors a common plan or
design in its perpetration.” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994)
7 Cal. 4th 503, 510-511.) “A civil conspiracy however atrocious, does not per se give rise
to a cause of action unless a civil wrong has been committed resulting in damage.”
(Unruh v. Truck Insurance Exchange (1972) 7 Cal. 3d 616, 631, superseded by statute on
another point as stated in Hendy v. Losse (1991) 54 Cal. 3d 723, 732, fn. 6.) Rather,
“‘[t]he effect of charging . . . conspiratorial conduct is to implicate all . . . who agree to
the plan to commit the wrong as well as those who actually carry it out.’” (Wyatt v.
Union Mortgage Co. (1979) 24 Cal. 3d 773, 784.)
Hence, a “cause of action against an attorney for a civil conspiracy with his
or her client” as referenced in section 1714.10, subdivision (a), would be any cause of
action alleging an attorney conspired with his or her client in the commission of a tort
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that resulted in the pleader’s damage. And that description encompasses all four of the
causes of action alleged against Hamilton in this case. Further, Tran’s cross-complaint
explicitly alleges that Hamilton and his client, Ly, engaged in their conspiracy in
anticipation of filing Ly’s main complaint against Tran, and with the intention (or at least
the understanding) that thwarting Tran’s effort to sell Harbor would advantage Ly’s
interests in that litigation. Thus, there can be no dispute that their alleged conspiracy
arose from their attempt to “contest” Ly’s “claim.” (Ibid.) Consequently, each of the
causes of action alleged against Hamilton falls within the parameters of section 1714.10.
And nothing in Tran’s cross-complaint would bring these causes of action
within the exceptions set forth in subdivision (c) of section 1714.10. Nowhere does Tran
allege that Hamilton had any individual financial interest in the transactions at issue in
the cross-complaint, and he does not allege Hamilton owed – let alone violated – any
independent legal duty to him. Indeed, the primary wrong alleged is that Ly and
Hamilton unreasonably delayed approving the transfer of Harbor’s lease to prospective
purchasers. While that might qualify as a breach of Ly’s contractual duty under the lease,
it suggests no breach of duty by Hamilton, who is not a party to that lease. (Gruenberg v.
Aetna Ins. Co. (1973) 9 Cal. 3d 566, 576 [agent cannot be held liable for inducing
principal’s breach of contract]; see Schick v. Lerner (1987) 193 Cal. App. 3d 1321, 1329
[“absent extraordinary circumstances, an attorney may not be held liable for urging a
client to breach a contract with some third party”].)
The only other misconduct alleged is that Ly and Hamilton purportedly
made “false, untrue and derogatory statements concerning Tran and Harbor” to the
prospective purchasers. However, there is no legal duty to refrain from making false or
derogatory statements in the abstract, and the cross-complaint includes no allegation that
Hamilton made such statements with knowledge of their falsity, as might suggest
defamation, or with the intent to induce reliance, as might suggest intentional fraud.
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Instead, the causes of action stated against Hamilton in Tran’s cross-
complaint appear to allege just the sort of garden variety attorney-client claim of
“conspiracy” that section 1714.10 is intended to prevent. The cross-complaint does not
suggest Hamilton engaged in any conduct beyond that which would be expected of an
attorney who is advising a client in the midst of a dispute, and who is advocating in favor
of that client’s interests. As pointed out in Schick v. Lerner, supra, 193 Cal.App.3d at
page 1329, “public policy dictates that attorneys must remain free to counsel their clients
without fear of subjecting themselves to liability as a result of the proper discharge of
their professional obligations.” And Hamilton owes no duty to Tran, his client’s
opponent, to avoid inflicting harm upon him in the course of representing her. (Omega
Video Inc. v. Superior Court (1983) 146 Cal. App. 3d 470, 480–481.)
Based on the foregoing, we conclude the trial court erred by failing to
sustain Hamilton’s demurrer to each and every cause of action alleged against him in
Tran’s cross-complaint, on the ground Tran failed to obtain a prefiling order pursuant to
section 1714.10.
3. Other Arguments
Hamilton also contends the trial court erred by overruling his demurrer to
the third, fifth and sixth causes of action on ground that none states a cause of action
against him. However, it is only the court’s ruling under section 1714.10 that qualifies as
an appealable judgment. The balance of the court’s order falls under the ordinary rule
that “[a]n order overruling a demurrer is not directly appealable, but may be reviewed on
appeal from the final judgment.” (Cryolife, Inc. v. Superior Court (2003) 110
Cal. App. 4th 1145, 1151.) We consequently do not address those arguments here.
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III
DISPOSITION
The judgment is reversed. Hamilton is entitled to his costs on appeal.
MOORE, J.
WE CONCUR:
O’LEARY, P. J.
FYBEL, J.
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