Friday, June 22, 2018
Court of Appeal:
Suit Against Lawyer Didn’t Require Judicial Countenance
Statute Conditioning Action Against Attorney, Along With Client, for Conspiracy Was Not Subject to Pre-Filing Approval Where Allegations Included Non-Representation Wrongs
By a MetNews Staff Writer
A Manhattan Beach attorney has failed to persuade the Court of Appeal for this district that a trial judge erred in denying his motion to strike a cause of action against him for civil conspiracy in a case allegedly involving a multi-million-dollar Ponzi scheme.
The attorney, Keith F. Simpson, argued that Los Angeles Superior Court Judge Lori A. Fournier should have axed the cause of action in the operative pleading, the third amended complaint, on the ground that the plaintiffs failed to abide by a statutory command to obtain judicial consent before suing an attorney for conspiring with a client. Consent may be conferred, under the statute, only if it is shown that there is a “probability” that the action will succeed.
Writing for Div. Five, Justice Lamar Baker said that Civil Code §1714.10 does, ordinarily, require that a prefiling order be obtained before pursuing a “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.”
However, he pointed out, in an unpublished opinion filed Wednesday, there is an exception where “the attorney’s acts go beyond the performance of a professional duty to serve the client and involve a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 cause of action against Simpson, he declared, comes under that exception.
While the opinion affirms Fournier’s decision (which the statute renders appealable), it rejects her basis: that noncompliance with a statutory requisite for bringing an action may be raised only by demurrer. Baker pointed out that §1714.10 expressly permits a motion to strike.
Amar D. Patel and seven other plaintiffs were investors in Meridian Health Services Holdings, Inc., which runs nursing homes, and is headed by defendant James Preimesberger. Preimesberger voluntarily tendered a resignation from the State Bar on Nov. 5, 2015, in the wake of an April 17 filing against him and others, in a separate case, by 70 investors who claimed they were swindled, collectively, out of $14.5 million through the scheme, as well as the April 29 filing of the case in which Patel is lead plaintiff.
(The April 17 case was settled while on appeal.)
Simpson is general counsel to the corporation, Preimesberger’s personal lawyer, and is described in the opinion as “an actual or de facto officer or director of the corporation.”
Allegations of Complaint
According to the complaint, Preimesberger and Simpson engaged in a scam under which they created businesses that owned or otherwise possessed real property; the properties were leased to Meridian at exorbitant rates; that sapped profits from Meridian, with moneys going, ultimately, into the pockets of Preimesberger and Simpson.
“The gist of the conspiracy claim,” Baker said, “is that Simpson assisted Preimesberger in perpetrating a Ponzi scheme to defraud the corporation’s new investors.”
The jurist declared that the motion to strike should have been denied on the same basis relied upon by Fournier on Jan. 24, 2017, in sustaining a demurrer to the second amended complaint—that the statutory exception applies.
“Here, the complaint…alleges Simpson was actively involved in soliciting prospective investors for both the corporation and the other entities, and communicated with investors regarding the corporation’s financial prospects. It further alleges Simpson assisted in the destruction of corporate records in order to cover up the alleged fraud. And it alleges Simpson invested money in the other entities and derived investment profits from the fraud. In short, the complaint sufficiently alleged Simpson was acting in excess of his duties as an attorney for the corporation and Preimesberger, was involved in a conspiracy to violate duties owed to plaintiffs (by at least the corporation and Preimesberger), and was acting to further his financial gain as an investor in the other entities. These allegations are sufficient to excuse plaintiffs from complying with section 1714.10’s prefiling requirements.”
The case is Patel v. Simpson, B282592.
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