Monday, March 15, 2010
Court of Appeal Rules:
Law No Bar to Amending Conspiracy Complaint Against Lawyer
By KENNETH OFGANG, Staff Writer
The state law that limits the ability to plead a claim against an attorney for conspiring with a client does not preclude the trial court from granting leave to amend an inadequately pleaded complaint, the First District Court of Appeal has ruled.
Div. Five on Thursday affirmed a San Mateo Superior Court judge’s order allowing Central Concrete Supply Co. Inc. to amend a complaint in which it alleged that Redwood City attorney Michael Bursak conspired with his former clients to violate an injunction barring them from liquidating assets.
Bursak had represented Steven Steffani, a former employee of the company, and his wife Shaun Steffani in their defense of a suit alleging embezzlement. At the outset, the court enjoined the defendants from selling, transferring and encumbering certain property, including San Carlos real estate.
Bursak substituted out of the case in January 2004. In the conspiracy action, Central Concrete alleged that the Steffanis sold the San Carlos property in 2006, and that Bursak had helped them violate the injunction by various means.
Among other things, the company alleged that Bursak had refused to testify at a deposition, citing attorney-client privilege. When the court ordered him to testify, he refused again, this time on grounds that his answers might incriminate him.
Fraudulent Transfers Alleged
The company also alleged that Bursak had helped effectuate fraudulent transfers to prevent the plaintiff from obtaining the proceeds of the sale, and that he and Shaun Steffani “either continue to hold the proceeds, have made further fraudulent transfers and/or have utilized the funds for their own use.”
Bursak moved to strike under Civil Code Sec. 1714.10(a), which—subject to exceptions—requires leave of court to sue an attorney for conspiring with a client, and under the anti-SLAPP statute.
Judge Beth L. Freeman denied the anti-SLAPP motion, but granted the Sec.1714.10(a) motion with 30 days leave to amend the complaint. In a minute order, the judge explained that the plaintiff “may be able to allege that 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” or that Bursak was not representing the Steffanis while engaged in the conspiracy.
Justice Mark Simons, writing for the Court of Appeal, explained that there are two exceptions to the requirement that leave of court be obtained before suing an attorney for conspiring with a client—where the attorney has an independent duty to the client or the attorney conspired to violate a legal duty in order to obtain personal financial gain.
The justice rejected Bursak’s argument that failure to obtain a prefiling order constitutes “an absolute defense such that the complaint must be stricken without leave to amend.”
Simons noted that the defense is available only where a prefiling order is required by the statute; if either of the two exceptions applies, or if the defendant was not acting as an attorney for the alleged co-conspirators, leave to sue is not required and the lack of an order granting leave is no defense.
“No express provision in section 1714.10(b) or any other subdivision of that statute precludes a trial court from granting a plaintiff leave to amend to demonstrate a valid conspiracy claim against an attorney by alleging either of the statutory exceptions,” the justice wrote. “Further, nothing in the legislative history of section 1714.10(b) (added by Stats. 1991, ch. 916, § 1, p. 4108) suggests that the trial court lacks its normal discretionary authority to grant leave to amend. Finally, section 1714.10(b) states that this defense is waived if not raised at the defendant’s first appearance in the action, undermining appellant’s assumption that the defense is ‘absolute.’”
The jurist distinguished Evans v. Pillsbury, Madison & Sutro (1998) 65 Cal.App.4th 599, which held that a demurrer to a cross-complaint based on Sec. 1714.10(a) should have been sustained. The cross-complainants in that case, Simons said, apparently never sought to amend the cross-complaint, and the court never considered whether they could.
Simons went on to conclude that allowing Central Concrete to amend the complaint was appropriate under the circumstances cited by the trial judge, since the company appeared to be claiming that Bursak acted as part of a conspiracy more than two years after he ceased to be representing the Steffanis, and that he personally received a portion of the proceeds of the sale.
The case is Central Concrete Supply Co., Inc. v. Bursak, 10 S.O.S. 1315.
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