Thursday, May 14, 2020
Member of State Bar Was Found by Trial Court to Have Committed Fraud, Legal Malpractice, Other Wrongs in Course of Conspiracy to Siphon Funds From Monied Alien Who Regarded Him as Her Attorney and Friend
By a MetNews Staff Writer
Div. Three of the Fourth District Court of Appeal has affirmed an award of compensatory damage exceeding $3.6 million against an attorney and others, with the lawyer additionally ordered to pay $100,000 in punitive damages, in a case stemming from the conspirators having secured funds from a women purportedly for investments in gas stations, then pocketing the money.
Tuesday’s decision leaves intact an Orange Superior Court judgment by Frederick P. Horn, a retired judge of that court, sitting on assignment. He found attorney Yu-Ching “Andy” Tu, two other persons including Tu’s wife, Linda Li, and two companies—each an alter ego of a defendant—jointly liable for damages in the amount of $3,645,180.
A fourth individual and his alter ego company were found liable for less than all of the loss suffered by the plaintiffs: $3.28 million.
Horn assessed punitive damages of varying amounts against the defendants totaling $900,000, and the defendants were ordered to pay interest from the time of the filing of the complaint on April 14, 2014 to the time of judgment—July 26, 2018—as well as attorney fees and costs, to be determined.
Causes of action brought by Xuanqiu “Rachel” Xin, a citizen of China, and five associated companies included fraud, breach of fiduciary duty, and unjust enrichment. Tu, alone, was sued for legal malpractice.
The transactions in issue—purchases of a gas station in Arcadia and eight in the State of Washington—took place in 2013. In January 2014, Xin and her husband became uneasy over Tu’s legal representation of her and they consulted an attorney in Washington; he spotted problems with lease agreements, leading to a realization by April that fraud had been perpetrated.
Tu is an attorney for the State Compensation Insurance Fund at its Riverside office.
No pending disciplinary proceeding against him is reflected on the State Bar’s website. However, Lisamarie McDermott of the Irvine law firm of Urtnowski & Associates, one of the attorneys representing the plaintiffs, said yesterday that “Andy Tu’s conduct has been reported to the State Bar.”
Lying Under Oath
Horn found all four individual defendants “to be not credible,” saying of Tu, in the course of his 59-page statement of decision:
“With respect to Andy Tu’s credibility, the Court finds Andy Tu not to be credible. The Court finds that Andy Tu’s testimony lacked candor, was misleading, and was riddled with lies. The Court finds that Andy Tu’s attempts to distance himself from the conduct of [co-defendants] Linda Li, Helen Wei and Alex Hammad, was not credible and was absurd in that regard.”
Addressing the cause of action for malpractice, Horn said:
“Andy Tu, as an attorney admitted to the California Bar, entered into an attorney-client relationship with plaintiff Rachel by which he represented himself as an attorney to Rachel and caused Rachel to reasonably believe that he was legally representing plaintiff Rachel in the various gas station investment transactions on which he advised her. Andy did not inform Rachel that he was not her attorney; rather, he carried on with undisclosed conflicts of interest by representing both his wife’s interest and his own interests in the transactions and otherwise provided legal services below the standard of care owed by a reasonable attorney under similar circumstances, directly resulting in plaintiff Rachel’s…damages….”
Conflicts of Interest
The assigned judge went on to declare:
“The Court finds by clear and convincing evidence that defendant Andy Tu’s conduct as an attorney fell below the standard care by, among other things, failing to disclose potential and actual conflicts of interest between and among Andy Tu, the plaintiffs and the defendants in this action, failing to notify all plaintiffs of the potential and actual conflicts that existed in writing, failing to obtain a written waiver of conflict from the plaintiffs, failing to disclose an actual financial interest by attorney Andy Tu in the transactions involved in this litigation, failing to have the necessary competence to handle the transactions involved in this litigation, failing to obtain a written representation agreement from the plaintiffs, and failing to maintain and disclose malpractice insurance coverage or lack thereof. The Court finds further that Andy Tu was being used as an attorney in these transaction to improperly influence the plaintiffs and to give plaintiffs a false sense of security in proceeding with the transactions.”
In assessing punitive damages, Horn observed that “there was a great deal of trickery and deceit on the part of the defendants by, among other things, failing to advise plaintiff Rachel Xin of many actions occurring without her knowledge involving her investments” and noted that “defendants Helen Wei, Linda Li, and Andy Tu, befriended plaintiff Rachel Xin and then took advantage of their relationship to defraud plaintiff Rachel Xin.”
He said Xin “was not financially weak, to the contrary, she had possession of, or had access to, large amounts of money” but that she “was vulnerable due to her lack of citizenship and was susceptible to undue influence and pressure asserted by the defendants.”
His award, he proclaimed, was “based upon the applicable codes, case law, and good sense.”
Acting Presiding Justice William W. Bedsworth authored the opinion affirming Horn’s judgment. That opinion, filed Tuesday, was not certified for publication.
“Appellants have identified six issues they claim warrant the reversal of the judgment against them. But, in addition to error, we must find prejudice to reverse a judgment, that is, the probability of a different outcome. The trial court’s conclusions about appellants’ veracity make their task in this court a difficult one. Once the trial court perceived it was being lied to, it is highly unlikely the outcome would have been different, unless we found significant error.
“We do not think appellants have met their burden to show error or, if the court erred, prejudice.”
In connection with the punitive-damage awards, Bedsworth noted that the defendants failed to provide all of the records they were ordered to produce. He said:
“By stonewalling the court and the plaintiffs with regard to many of the documents they were ordered to produce, appellants have forfeited any argument they might have had about the sufficiency of the evidence of their financial condition. Even so, their meager production gave the court glimpses of appellants’ affluent lifestyles. There was some evidence of significant real estate holdings and bank accounts. Linda bought a $12,000 purse—from Helen—and a $12,000 watch.”
“Appellants drove expensive cars. In light of their refusal to produce complete financial records, the court was entirely within the bounds of the law when it determined they were probably hiding more assets than they were acknowledging, especially given their access to banks in China.”
Judicial Misconduct Alleged
The appellants argued that Horn committed prejudicial misconduct by articulating in a tentative decision, supplied after the parties had rested but before oral argument, his view that the defendants had lied. That, the appellants maintained, constituted a prejudgment.
“A judge bases his or her decision on the evidence, not on the arguments of counsel….When the judge in this case gave his tentative opinion regarding the parties’ credibility, or lack thereof, the parties had rested. The evidence was in. Moreover, all counsel asked the judge to give a tentative opinion so they could shape closing arguments. We are dismayed to find this argument of bias so cavalierly made—but not surprised, given the rest of appellants’ approach to the case.”
Gave Defendants Hope
The justice proceeded to further assail the claim of bias by saying:
“We do not doubt the judge looked very stern as he gave his tentative opinion. For weeks he had listened to lies, evasions, and absurdities from appellants and watched them being impeached. It is highly unlikely that closing argument could have pulled their credibility out of the fire they had started. And his mien could not have been improved by the knowledge appellants’ counsel needed this information to have any hope of structuring an argument that would win the day for his clients despite their misconduct on the stand.
“The court need not have accommodated counsel’s request; it could have remained silent and allowed counsel to waste time arguing appellants’ bona fides in the face of the overwhelming evidence to the contrary. The tentative ruling was a gift and was recognized as such at the time. As appellants’ counsel stated, ‘Always prefer a tentative. That way we only address what the court finds relevant.’ Only on appeal has it turned into evidence of judicial misconduct. Singularly unconvincing evidence.”
The appellants’ counsel was Steven I. Hochfelsen of the Newport Beach litigation firm of Hochfelsen & Kani.
Horn found that the cross-complaint against Xin which, among other things, accused her of money-laundering, was without factual support, and Bedsworth’s opinion expresses agreement.
The case is Xin v. Li, G057020.
Representing the plaintiffs were McDermott and J. Brian Urtnowski. McDermott remarked yesterday:
“The appellate court easily saw through the continuous lies and fraud the defendants perpetrated upon a young couple in order to steal millions of dollars from them in real estate schemes.”
Hochfelsen did not respond to a request for comment.
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