Opinion
NOT TO BE PUBLISHED
Mendocino County Super. Ct. No. SCUK-CVPO-04-92901.
McGuiness, P.J.
Appellant, the assignee of a judgment and a contractual claim, sued an attorney and his law firm for conspiracy and other causes of action arising from their representation of a client in the allegedly fraudulent transfer of a business. The trial court sustained a demurrer to these claims and dismissed respondents from the action. On appeal, appellant argues his conspiracy claim was not subject to the petitioning requirements of Civil Code section 1714.10 and his complaint stated a valid cause of action for interference with prospective economic advantage. We affirm the judgment.
All statutory references are to the Civil Code unless otherwise stated.
BACKGROUND
In January 1997, while a lawsuit for conversion was pending against him, Timothy Pelzel changed the name of his business to “WFS Work Well/Work Well Resources” (Work Well). A year later, the court entered judgment against Pelzel for $31,810.27. Appellant, who is in the business of acquiring unsatisfied court judgments and enforcing them for a profit, obtained an assignment of the judgment against Pelzel on January 2, 2003, and also obtained an assignment of a contractual claim for $134,947.83, plus interest, owed by Work Well and Pelzel under a finance agreement. On December 30, 2002, appellant sent a notice to the Work Well office informing Pelzel of his intent to seek a temporary restraining order and appointment of a receiver over the Work Well assets. The court granted a temporary restraining order on January 3, 2003, pending further proceedings on the appointment of a receiver.
Later in January or in February 2003, Pelzel entered an agreement to sell all the business assets of Work Well to Kandy Heal, who had been employed for several years as Work Well’s office manager. Heal leased space in the building previously occupied by Work Well on February 19, 2003, and the following month she incorporated the business Heal Staffing, Inc. (Heal Staffing).
On July 7, 2004, appellant filed a verified complaint against Pelzel, Heal, Work Well and Heal Staffing, and against the attorneys who represented Heal in the transaction with Pelzel. Appellant alleged Pelzel transferred the Work Well business to Heal, without receiving reasonable consideration for it, in order to hinder and defraud creditors such as appellant. According to the complaint, Heal knew of the application for a restraining order and the claims pending against Pelzel and Work Well, and she participated in the transaction in order to unlawfully protect the Work Well assets (estimated at over $1 million in value) from creditors. The complaint alleged that respondents Brian C. Carter and the law firm Carter, Behnke, Oglesby & Bacik represented Heal in the transaction with Pelzel and “engineered and participated in the plan” between Pelzel and Heal to shield assets from Pelzel’s creditors. Specifically, the complaint alleged Carter and Heal proceeded with the Work Well transaction “after receiving notice of [appellant’s] claims and their violation of the TRO.” Based on these factual allegations, appellant asserted several claims against Heal and Pelzel and their business concerns and asserted claims against respondents for civil conspiracy, negligent and intentional interference with prospective economic advantage, unfair competition and punitive damages.
Respondents promptly filed a demurrer and motion to strike. On December 21, 2004, the court sustained the demurrer without leave to amend as to all causes of action alleged against respondents except conspiracy. As to the conspiracy claim, the court concluded appellant had failed to adequately allege breach of an independent duty respondents owed to appellants. Accordingly, the court sustained the demurrer to this cause of action with leave to amend, “subject to the requirement that [appellant] first comply with the provisions of Civil Code § 1714.10.” If appellant chose to amend the complaint, he was ordered to file a petition pursuant to section 1714.10 by January 14, 2005.
Appellant did not file a section 1714.10 petition or attempt to amend his complaint. Instead, on January 21, 2005, he filed a request to dismiss the conspiracy cause of action without prejudice, along with a declaration stating he had previously attempted to file the dismissal before the January 14 deadline. More than six months later, on August 10, 2005, appellant filed a motion seeking to amend the complaint to add respondents as defendants. Appellant’s motion relied on declarations from two former employees of Work Well, and appellant declared he had been unable to obtain this evidence within the time allowed for amendment after respondents’ demurrer was sustained. After a hearing, the trial court denied the motion to amend. The court found the motion was not timely made and was inconsistent with the court’s ruling on the demurrer, in that the proposed amendment was similar to the civil conspiracy cause of action previously alleged but appellant had not established a prima facie case or likelihood of success on the merits sufficient to satisfy the requirements of section 1714.10. To the extent the motion to amend sought relief under Code of Civil Procedure section 473, the court ruled the motion “was neither timely, procedurally sufficient nor factually compelling.”
Respondents filed a motion to dismiss the complaint against them with prejudice. Before the motion could be heard, however, the parties stipulated to entry of an order to the same effect. The court entered an order dismissing the action pursuant to this stipulation on December 20, 2005, and this appeal followed.
DISCUSSION
The appeal does not raise issues specific to the motion to amend. Instead, now that judgment has been entered, appellant challenges the trial court’s December 2004 ruling sustaining demurrers to his claims against respondents for conspiracy and interference with prospective economic advantage. “On appeal from a judgment dismissing an action after sustaining a demurrer without leave to amend, the standard of review is well settled. The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. [Citations.] The court does not, however, assume the truth of contentions, deductions or conclusions of law. [Citation.]” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 966-967.) We affirm the judgment if demurrer is well taken on any ground, but we reverse if the complaint states a cause of action under any possible legal theory. (Id. at p. 967.) It is an abuse of discretion for the trial court to sustain a demurrer without leave to amend if the plaintiff demonstrates a reasonable possibility that the defect can be cured by amendment. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081; Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
The trial court sustained the demurrer to appellant’s conspiracy claim with leave to amend. “ ‘It is the rule that when a plaintiff is given the opportunity to amend his complaint and elects not to do so, strict construction of the complaint is required and it must be presumed that the plaintiff has stated as strong a case as he can.’ [Citations.]” (Reynolds v. Bement (2005) 36 Cal.4th 1075, 1091.)
I. Pre-Filing Requirements of Section 1714.10 Applied to Conspiracy Claim
“Section 1714.10 is one of a number of statutes which impose extraordinary procedural requirements depending on the nature of the plaintiff’s claim or the identity of the defendant sued. [Citations.]” (Evans v. Pillsbury, Madison & Sutro (1998) 65 Cal.App.4th 599, 604.) The statute “was intended to weed out the harassing claim of conspiracy that is so lacking in reasonable foundation as to verge on the frivolous. [Citations.]” (Ibid.) It states, in relevant part: “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.” (§ 1714.10, subd. (a).) Failure to obtain such a court order is a defense that may be raised on demurrer. (§ 1714.10, subd. (b).) There are two exceptions to the pre-filing requirement, however. Section 1714.10 does “not apply to 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.” (§ 1714.10, subd. (c).)
With these two exceptions, section 1714.10 tracks the limits on attorneys’ liability for conspiracy described by the Supreme Court in Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39. After setting forth the elements of civil conspiracy, the court explained that a cause of action for conspiracy cannot arise “if the alleged conspirator, though a participant in the agreement underlying the injury, was not personally bound by the duty violated by the wrongdoing and was acting only as the agent or employee of the party who did have that duty.” (Id. at p. 44.) This is an application of the “agent’s immunity rule,” which holds that “ ‘[a]gents and employees of a corporation cannot conspire with their corporate principal or employer where they act in their official capacities on behalf of the corporation and not as individuals for their individual advantage.’ [Citation.] The rule ‘derives from the principle that ordinarily corporate agents and employees acting for or on behalf of the corporation cannot be held liable for inducing a breach of the corporation’s contract since being in a confidential relationship to the corporation their action in this respect is privileged.’ [Citation.]” (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 512, fn. 4) However, the Supreme Court discussed two settings in which a conspiracy claim may lie against an attorney. First, “an attorney who conspires to cause a client to violate a statutory duty peculiar to the client may be acting not only in the performance of a professional duty to serve the client but also in furtherance of the attorney’s own financial gain.” (Doctors’ Co. v. Superior Court, supra, 49 Cal.3d at p. 46.) The court held the agent’s immunity rule “does not preclude the subjection of agents to conspiracy liability for conduct which the agents carry out ‘as individuals for their individual advantage’ and not solely on behalf of the principal [citation].” (Id. at p. 47.) A second exception to immunity lies for “claims against an attorney for conspiring with his or her client to cause injury by violating the attorney’s own duty to the plaintiff.” (Ibid.)
Appellant makes a perfunctory attempt to argue section 1714.10 does not apply to his conspiracy claim against respondents because it does not allege a conspiracy “arising from any attempt to contest or compromise a claim or dispute.” (§ 1714.10, subd. (a).) We disagree. The essence of appellant’s complaint is that respondents conspired with their client to transfer assets in order to help Pelzel “avoid payment of [appellant’s] claim.” These allegations describe efforts, albeit deceitful ones, taken to contest appellant’s claim; therefore, section 1714.10 applies.
Appellant’s primary argument is that the conduct alleged falls within the “independent legal duty” exception to section 1714.10. (See § 1714.10, subd. (c)(1) [pre-filing requirements do not apply when complaint alleges attorney has violated “an independent legal duty to the plaintiff”].) Appellant argues respondents violated an independent legal duty not to defraud him.
It is certainly true that an attorney, just like any other person, owes a duty to abstain from committing actual fraud. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 346; Pavicich v. Santucci (2000) 85 Cal.App.4th 382, 395 [“if an attorney commits actual fraud in his dealings with third parties, the fact that he did so in the capacity of attorney does not relieve him of liability”].) Thus, where a complaint alleges an attorney injured the plaintiff by making an express misrepresentation, the plaintiff can state a valid claim against the attorney for conspiracy and the requirements of section 1714.10 do not apply. (§ 1714.10, subd. (c)(1); Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone (2003) 107 Cal.App.4th 54, 74-75, 84 [insurer’s attorney misrepresented scope of coverage provided to insured]; Pavicich v. Santucci, supra, 85 Cal.App.4th at pp. 386, 397-398 [attorney for venture misrepresented project’s litigation woes to potential investor]; see also Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 818 [petition procedure of section 1714.10 does not apply to any viable conspiracy claim against an attorney].)
However, the complaint in this case alleges something different from intentional misrepresentation. Appellant alleged upon information and belief that, during the course of representing Heal in her negotiations with Pelzel for transfer of the Work Well business, respondent Carter “engineered and participated in the plan between TIMOTHY PELZEL and KANDY HEAL to fraudulently transfer . . . the WFS WORK WELL assets in order to avoid payment of Plaintiff’s claim.” Appellant further alleged that Carter “entered into a conspiracy, common enterprise and common course of conduct” with Heal for the purpose of placing the Work Well assets beyond the reach of creditors. The complaint recites the elements of a conspiracy cause of action but alleges no specific misconduct by Carter or his law firm. Unlike other causes of action, a claim of fraud must be pled with specificity. (Wilson v. Houston Funeral Home (1996) 42 Cal.App.4th 1124, 1139.) “The specificity requirement serves two purposes. The first is notice to the defendant, to ‘furnish the defendant with certain definite charges which can be intelligently met.’ [Citations.] The pleading of fraud, however, is also the last remaining habitat of the common law notion that a complaint should be sufficiently specific that the court can weed out nonmeritorious actions on the basis of the pleadings. Thus the pleading should be sufficient ‘ “to enable the court to determine whether, on the facts pleaded, there is any foundation, prima facie at least, for the charge of fraud.” ’ [Citations.]” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216-217.)
Appellant attempts to bolster the complaint’s allegations by reference to declarations he submitted in support of the motion to amend the complaint. However, this appeal challenges the trial court’s ruling on demurrer, and a demurrer tests only the sufficiency of the pleadings. (Neilson v. City of California City (2005) 133 Cal.App.4th 1296, 1305.) Appellant did not file a timely motion to amend with allegations of any express misrepresentation by Carter. (See Reynolds v. Bement, supra, 36 Cal.4th at p. 1091 [failure to file timely amendment to complaint must be construed as an admission that plaintiff has stated the strongest case possible]; Gonzales v. State of California (1977) 68 Cal.App.3d 621, 635.) Moreover, even if appellant is correct that the declarations show Carter made misrepresentations to third parties who were potential purchasers of the Work Well assets, these facts do not establish the breach of any legal duty owed to appellant.
Appellant’s argument boils down to an assertion that respondents had a legal duty to refrain from participating in a fraudulent transfer of assets. However, according to the complaint’s allegations the only way respondents participated in the challenged transaction was as the attorney and law firm representing Heal. “[A]n attorney acting only within the scope of his or her official duties who is not personally bound by the duty violated may not be held liable for civil conspiracy even though he or she may have participated in the agreement underlying the injury. [Citations.]” (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., supra, 131 Cal.App.4th at p. 825; see also Doctors’ Co. v. Superior Court, supra, 49 Cal.3d at p. 44.) The complaint alleges respondent Carter “was aware of the laws governing fraudulent transfers and bulk sales” at the time he counseled Heal, but it does not allege Carter had a duty to potential creditors to refrain from representing a client in an allegedly improper transaction. Indeed, respondent has not cited, and we have not found, any published case imposing conspiracy liability on an attorney merely for representing a client in a transaction that is alleged to constitute a fraudulent transfer of assets.
Appellant asserts the United States District Court allowed a similar conspiracy claim to go forward in Gutierrez v. Givens (S.D.Cal 1997) 989 F.Supp. 1033, but the allegations in that case were significantly different. The complaint in Gutierrez alleged an attorney was a central figure in planning and operating a scheme to hide assets, and he was the owner, director or officer of many holding companies used to perpetuate the scheme. (Id. at p. 1041.) This attorney and other attorney defendants allegedly transferred funds into accounts held in their own names, for the purpose of laundering or funneling the assets, and the complaint alleged the attorneys stood to reap substantial profits from these activities apart from amounts paid as attorney fees. (Id. at pp. 1041-1042.) The district court rejected the attorneys’ argument that they could not be liable under the Uniform Fraudulent Transfer Act (§§ 3439 et seq.) because the complaint alleged assets had been transferred to the attorneys’ own accounts. (Gutierrez v. Givens, supra, 989 F.Supp. at p. 1043.) In addition, without addressing section 1714.10, the court concluded all defendants, including the attorneys, could be liable for conspiracy to violate the Uniform Transfer Act. (Gutierrez v. Givens, supra, 989 F.Supp. at p. 1044; see Monastra v. Konica Business Machines, U.S.A., Inc. (1996) 43 Cal.App.4th 1628, 1644-1645 [triable issue prevented summary judgment of civil conspiracy claims against a company and subsidiary that allegedly received fraudulent transfer of assets].)
Here, by contrast, the complaint did not allege respondents were personally involved in a fraudulent scheme to transfer assets. They were only connected to the challenged transaction in a professional capacity, i.e., through their representation of the alleged purchaser. The agent’s immunity rule precludes imposition of conspiracy liability against attorneys under these circumstances. (Doctors’ Co. v. Superior Court, supra, 49 Cal.3d at p. 45; Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 576.) Because the complaint failed to state a viable conspiracy claim against respondents based upon an independent duty owed to appellant (or based upon allegations that they acted for their own individual advantage), appellant was required to satisfy the petitioning requirements of section 1714.10. (§ 1714.10, subd. (a); see also Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., supra, 131 Cal.App.4th at p. 818 [only viable conspiracy claims are exempt from section 1714.10 requirements].) Appellant failed to file a petition under section 1714.10 and failed to file a timely amendment establishing that an exception to section 1714.10 applied. In light of these failures, the conspiracy claim was appropriately dismissed.
II. Interference Claims Were Properly Dismissed
Next, appellant contends the trial court erred in dismissing his causes of action for negligent and intentional interference with prospective economic advantage. He argues the complaint stated sufficient facts to support these causes of action or, alternately, the court abused its discretion in denying leave to amend.
“The elements of a cause of action for interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s intentional and wrongful conduct designed to interfere with or disrupt this relationship; (4) interference with or disruption of this relationship; and (5) economic harm to the plaintiff proximately caused by the defendant’s wrongful conduct. [Citation.]” (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 241.)
Appellant’s claims fail on the very first element: there was no economic relationship between appellant and any third party at the time of the alleged fraudulent transfer with which respondents could have interfered. “[A]n essential element of the tort of intentional interference with prospective business advantage is the existence of a business relationship with which the tortfeasor interfered. [Citation.] Although this need not be a contractual relationship, an existing relationship is required. [Citation.]” (Roth v. Rhodes (1994) 25 Cal.App.4th 530, 546; see also North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786 [to establish tort of negligent interference with prospective business advantage, plaintiff must show “an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff”].) The complaint alleges only that appellant “had a prospective economic advantage” because he had a temporary restraining order and was in the process of having a receiver appointed at the time the Work Well assets were transferred. Appellant did not allege that he had a business relationship with Pelzel or Work Well or any potential buyer of the Work Well assets. Although he speculates in his opening brief that “[t]here is a distinct probability” two former employees of Work Well (Molly McCloud and Kelly Sterling) would have purchased the Work Well assets absent the fraudulent transfer to Heal, this assertion falls far short of establishing they had an existing business relationship. Appellant cannot have had such a relationship with McCloud and Sterling at the time Work Well’s assets were transferred because, according to his declaration in support of the motion to amend the complaint, he did not make contact with these individuals until June 2005—approximately six months after the demurrer to the complaint in this case was sustained. Nor can appellant satisfy the requirements of the interference tort by claiming a relationship with any other potential purchasers. (Cf. Roth v. Rhodes, supra, 25 Cal.App.4th at p. 546 [no cause of action stated for interference with relationship between plaintiff and possible future patients, due to lack of an existing business relationship].)
Moreover, appellant could not have amended the complaint to state a claim for interference based on the notion that respondents’ representation of Heal interfered with the prospect of his recovery from Pelzel under the outstanding judgment or contract. “ ‘The tort of intentional or negligent interference with prospective economic advantage imposes liability for improper methods of disrupting or diverting the business relationship of another which fall outside the boundaries of fair competition. [Citation.]’ (Settimo Associates v. Environ Systems, Inc. (1993) 14 Cal.App.4th 842, 845).” (Stolz v. Wong Communications Limited Partnership (1994) 25 Cal.App.4th 1811, 1824-1825, italics added.) The only relationship appellant has ever had with Pelzel is as a creditor by assignment. Appellant has cited no case, nor have we found any, suggesting the tort of interference with prospective economic advantage encompasses such an attenuated relationship. Moreover, the mere representation of a client who purchases a debtor’s assets cannot give rise to liability because, as the Supreme Court has explained, “a plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant’s interference was wrongful ‘by some measure beyond the fact of the interference itself.’ [Citation.]” (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392-393, fn. omitted.) Here, as we have explained, the complaint did not allege respondents committed actual fraud or did anything other than represent their client in a transaction now alleged to be undertaken for fraudulent purposes. These allegations do not support liability.
DISPOSITION
The judgment is affirmed. Appellant shall bear costs on appeal.
We concur: Pollak, J., Horner, J.
Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.