CHAVEZ, J.
Plaintiff and appellant Aris Janigian (plaintiff) appeals from the judgment entered in favor of defendants and respondents Cooley LLP (formerly Cooley Godward Kronish LLP) (Cooley) and Vincent Pangrazio (Pangrazio)
Plaintiff is a wine grape packer and shipper who conceived of an idea to produce and market varietal juices made from wine grapes. In August 2006, he discussed his idea with Christopher Bagdasarian (Bagdasarian), a friend he had known for many years. Plaintiff and Bagdasarian agreed to become business partners in an entity they named "First Blush." They agreed that they would each own 50 percent of First Blush and would use their respective areas of expertise to expand the business. Plaintiff and Bagdasarian anticipated that their percentage ownership of First Blush would diminish when venture capitalists invested in the company, but they agreed never to let their respective ownership interests fall below 25 percent.
Plaintiff and Bagdasarian blended First Blush's first batch of juice in early February 2007. That same day, they discussed the ownership structure of First Blush. Plaintiff and Bagdasarian agreed that First Blush would operate under the umbrella of an existing company named Rose Hill Garden, owned by Bagdasarian and his wife, Victoria Briggs (Briggs). Plaintiff and his wife prepared their income tax returns based on this ownership structure.
First Blush bottled its first batch of juice in April 2007. By July 2007, First Blush began selling large orders to Whole Foods markets.
In February 2008, plaintiff asked Bagdasarian that papers be drafted to memorialize their 50-50 deal. Bagdasarian refused to hire an attorney to do so and offered instead to write a letter confirming the terms of their deal. A confirming letter was never sent to plaintiff.
In May 2008, Bagdasarian sent plaintiff a proposed capital table that had been prepared by a venture capital firm. The capital table showed plaintiff and Bagdasarian to have ownership shares in First Blush that were not only unequal but also substantially below the 25 percent minimum they had agreed upon. After reviewing the assumptions underlying the proposed capital table, plaintiff discovered that Bagdasarian's ownership percentage of First Blush would increase substantially if he invested money in the business. Plaintiff and Bagdasarian both agreed that the proposed ownership allocations were unacceptable, and plaintiff began looking for alternative sources of funding.
In mid-June 2008, Dan Ginsburg agreed to become CEO of First Blush. In July 2008, Bagdasarian sent plaintiff a draft stock purchase agreement and a founder's share form prepared by Pangrazio, an attorney at the Cooley firm. Plaintiff believed that Pangrazio represented Bagdasarian. He was not told that Pangrazio and Cooley represented First Blush, and he never consented to such representation.
After reviewing the draft stock purchase agreement and founder's share form, plaintiff was concerned that the documents did not recognize him as a partner of First Blush, contained no narrative describing his contributions to First Blush, and made no reference to his future role in the company. Plaintiff wrote to Bagdasarian, expressing his confusion as to why the partnership was "jumping to shares so quickly" and asking whether the draft agreement was merely a template. Bagdasarian assured plaintiff that the draft agreement was a template. Plaintiff then asked Bagdasarian for information on valuation and options for executives. Bagdasarian told plaintiff that they could not determine valuation until deal terms were agreed upon by the investors. At some point during these discussions, plaintiff retained his own attorney, Marshall Watson. Watson spoke with Bagdasarian in August 2008 about plaintiff's concerns. During that conversation, Bagdasarian told Watson that he believed plaintiff's "idea" for First Blush was not intellectual property, and that plaintiff's contribution to the business had been negligible.
Some time after August 15, 2008, plaintiff learned that First Blush had been incorporated in Delaware without his knowledge or consent. In response to questions from plaintiff, Bagdasarian proposed several scenarios relating to plaintiff's ownership stake in First Blush. No scenario provided plaintiff with more than 10 percent of the company.
In September 2008, Bagdasarian emailed plaintiff with a "take it or leave it" offer for "founder's" shares in First Blush. Plaintiff responded by having his attorney send Bagdasarian a letter protesting plaintiff's exclusion from the business and from the decision-making process.
In February 2009, plaintiff learned that First Blush's corporate documents had been amended, shares in the corporation had been distributed, and plaintiff had been excluded from the distribution.
Plaintiff filed the instant action against Bagdasarian, Briggs, Ginsburg, Pangrazio, and Cooley. The complaint alleges that Bagdasarian orchestrated a sweeping conspiracy involving the other defendants, including Pangrazio and Cooley, to misappropriate plaintiff's interest in First Blush:
Against Bagdasarian, Briggs, and Ginsberg, the complaint alleges causes of action for fraud, breach of contract, and breach of fiduciary duty. The factual allegations underpinning each of these causes of action are the same. Plaintiff alleges that he and Bagdasarian had a valid and binding oral partnership agreement; that Bagdasarian owed him a fiduciary duty as a partner; and that Bagdasarian breached that duty by making false promises and representations to plaintiff about their respective ownership interests in First Blush, the form of business entity in which First Blush would operate, and the management structure and financing for First Blush's operations, with the intent to deceive plaintiff and to misappropriate plaintiff's ownership interest in First Blush.
Against Pangrazio and Cooley, the complaint alleges two causes of action that are relevant to this appeal — aiding and abetting breach of fiduciary duty and fraud, and legal malpractice.
In the legal malpractice cause of action, plaintiff alleges that Pangrazio and Cooley purported to represent Bagdasarian and First Blush, both before and after incorporating First Blush, "in furtherance of Bagdasarian's unlawful scheme to misappropriate plaintiff's 50% ownership interest." Plaintiff further alleges that by representing First Blush before its incorporation, Pangrazio and Cooley represented all of the partners, including plaintiff, as to matters of partnership business, and engaged in an improper conflict of interest by representing Bagdasarian in matters that were adverse to plaintiff, such as the distribution of founder's shares.
Pangrazio and Cooley moved to strike the complaint pursuant to section 1714.10 and Code of Civil Procedure section 436, subdivision (b), on the ground that the substance of each cause of action asserted against them is that they conspired with their clients or aided and abetted wrongdoing by them, making the complaint subject to the prefiling requirements of Civil Code section 1714.10, subdivision (a). Plaintiff opposed the motion, arguing that section 1714.10 did not apply to any of the causes of action alleged against Pangrazio and Cooley.
The trial court granted the motion after finding that each of plaintiff's claims against Pangrazio and Cooley were based on an alleged conspiracy between them and their alleged clients, that plaintiff was represented by his own counsel, and that he failed to allege any facts showing that defendants acted beyond their duty in performing legal services for First Blush and/or Bagdasarian. The trial court concluded that all of the causes of action alleged against defendants were subject to section 1714.10, subdivision (a), and did not fall within any of the exceptions listed in subdivision (c) of the statute. The court struck the causes of action asserted against defendants and entered judgment in their favor. This appeal followed.
"Civil conspiracy is not an independent tort. [Citation.] Rather, it is 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." [Citation.]' [Citation.] `The major significance of a conspiracy cause of action "lies in the fact that it renders each participant in the wrongful act responsible as a joint tortfeasor for all damages ensuing from the wrong . . . regardless of the degree of his activity. [Citations.]"' [Citation.] The essence of the claim is that it is merely a mechanism for imposing vicarious liability; it is not itself a substantive basis for liability. Each member of the conspiracy becomes liable for all acts done by others pursuant to the conspiracy, and for all damages caused thereby. [Citations.]" (Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 823 (Berg).)
"In order to maintain an action for conspiracy, a plaintiff must allege that the defendant had knowledge of and agreed to both the objective and the course of action that resulted in the injury, that there was a wrongful act committed pursuant to that agreement, and that there was resulting damage. [Citation.]" (Berg, supra, 131 Cal.App.4th at p. 823.) A cause of action for conspiracy may not be asserted, however, if the alleged conspirator was not personally bound by the duty violated and was instead acting only as the agent or employee of the party who did have that duty. (Doctors' Co. v. Superior Court (1989) 49 Cal.3d 39 (Doctors' Co.).) "This principle is known as the `agent's immunity rule,' which establishes that `an agent is not liable for conspiring with the principal when the agent is acting in an official capacity on behalf of the principal.' [Citations.]" (Berg, supra, at p. 817.)
Section 1714.10 applies to 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, and which is based upon the attorney's representation of the client . . . ." (§ 1714.10, subd. (a).)
The purpose of section 1714.10 is "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.' [Citation.]" (Evans v. Pillsbury, Madison & Sutro (1998) 65 Cal.App.4th 599, 604.)
There are two exceptions to the statutory prefiling requirement. Section 1714.10, subdivision (a) 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).)
"The Legislature originally enacted section 1714.10 in 1988 in response to Wolfrich Corp. v. United Services Automobile Assn. (1983) 149 Cal.App.3d 1206 (Wolfrich), in which the Court of Appeal held that although attorneys representing an insurance company, who were not themselves engaged in the business of insurance, could not be sued for violating Insurance Code section 790.03, subdivision (h)(5), they could be liable for conspiring with their client to do so. [Citation.] The legislative impetus for the enactment was concern about the use of frivolous conspiracy claims that were brought as a tactical ploy against attorneys and their clients and that were designed to disrupt the attorney-client relationship. [Citations.]" (Berg, supra, 131 Cal.App.4th at p. 816.)
As originally enacted, former section 1714.10 (added by Stats. 1988, ch. 1052, § 1) provided in pertinent part as follows:
After section 1714.10 was enacted, the California Supreme Court overruled Wolfrich in Doctors' Co. The high court applied the agent's immunity rule and held that attorneys representing an insurance company could not be sued for conspiring with their client to violate Insurance Code section 790.03 because the attorneys, unlike the insurer, were not engaged in the business of insurance and were not bound by that statute. The Supreme Court concluded that the attorneys could not be held liable for a conspiracy to violate a duty peculiar to the insurer: "A cause of action for civil conspiracy may not 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." (Doctors' Co., supra, 49 Cal.3d at p. 45.)
The Supreme Court in Doctors' Co. did articulate two situations in which a conspiracy claim might lie against an attorney for participating in the violation of a duty owed by the client to another: (1) where the attorney violates a duty that he or she independently owes to the plaintiff; and (2) where the attorney's acts go beyond the performance of a professional duty owed to the client and are, in addition, done for his or her own personal financial gain. (Doctors' Co., supra, 49 Cal.3d at pp. 46-47.)
In 1991, two years after the Supreme Court's decision in Doctors' Co., the Legislature amended section 1714.10. The history and effect of the 1991 amendment was analyzed by the Sixth Appellate District in Pavicich v. Santucci (2000) 85 Cal.App.4th 382 (Pavicich) and in Berg. In a detailed and thoughtful analysis, the Sixth Appellate District traced the history of the 1991 amendment, noting that as originally proposed, the amendment was intended to narrow the scope of section 1714.10 to apply only to Wolfrich-type conspiracy claims, or conspiracy allegations against attorneys and clients that were based upon the Insurance Code. The court noted that "[t]he Legislature believed section 1714.10 was being used to bar at the pleading stage meritorious conspiracy claims involving attorneys. In particular, savings and loan cases were cited as an example of cases in which section 1714.10 had been improperly applied. [Citation.]" (Pavicich, supra, at p. 393.)
To address this concern, the Legislature initially considered an amendment that proposed two changes to the text of the statute. First, the proposed amendment deleted the words "based upon" and replaced them with the word "for" so that the statute applied to a cause of action "for a civil conspiracy" instead of a cause of action "based upon a civil conspiracy." Second, it added the words "to violate subdivision (h) of Section 790.03 of the Insurance Code, and which is based upon the attorney's representation of the client" immediately after the words "civil conspiracy." As originally proposed, the 1991 amendment thus would have changed section 1714.10 to provide as follows: "No cause of action against an attorney for a civil conspiracy with his or her client to violate subdivision (h) of Section 790.03 of the Insurance Code, and which is based upon the attorney's representation of the client . . . ." (Sen. Bill No. 820 (1991-1992 Reg. Sess.) as introduced Mar. 7, 1991.)
The drafters of the 1991 amendment then considered the effect of the Supreme Court's decision in Doctors' Co. "There then arose many debates about that case's impact upon section 1714.10. Initially, the bill's author commented that `[i]t is unknown whether there is a need for pleading hurdles to protect attorneys from the type of civil conspiracy claims permitted under the Doctors' Company rational [sic].' (Sen. Com. on Judiciary, com. on Sen. Bill No. 820 (1991-1992 Reg. Sess.) May 7, 1991, p. 4.) The bill's author also reasoned that `existing case law makes it impossible to sue anyone under Section 790.03, [therefore] the need for a pleading hurdle for actions against attorneys under that section has been effectively negated.' (Id. at p. 3.)" (Pavicich, supra, 85 Cal.App.4th at p. 393.)
Further analysis led the Legislature to conclude "that the `"pleading hurdle" should not apply in those civil conspiracy cases in which the Supreme Court has upheld the potential liability of an attorney. The "pleading hurdle" should only apply in other cases, where the allegation of civil conspiracy is made for ulterior reasons, primarily to disrupt the attorney-client relationship.' (Assem. Subcom. on the Administration of Justice, analysis of Sen. Bill No. 820 (1991-1992 Reg. Sess.) July 17, 1991, pp. 2-3.)" (Pavicich, supra, 85 Cal.App.4th at p. 393.) "Ultimately, it was decided that the statute should be amended to apply when an attorney engaged in a civil conspiracy with his or her client `"arising from any attempt to contest or compromise a claim or dispute."' It was also decided to except from the statute's scope the two situations detailed in Doctors' Co. The author of the proposed amendment stated that `This bill would limit [the statute] to civil conspiracies between an attorney and client arising from any attempt to contest or compromise a claim or dispute, and which involve the attorney's representation of the client, excluding causes of action where (1) the attorney has an independent legal duty to the plaintiff, or (2) the attorney's acts go beyond the attorney's duties to the client, and involve conspiracy to violate a legal duty in furtherance of the attorney's financial gain.' (Sen. Mike Thompson, letter to Governor Pete Wilson, Sept. 17, 1991.)" (Pavicich, supra, at pp. 393-394.)
Against that legislative background, the Sixth Appellate District considered the scope and application of section 1714.10 and concluded that no attorney-client conspiracy would be subject to the statutory pleading hurdle. (Pavicich, supra, 85 Cal.App.4th at p. 394.) The court reasoned: "Section 1714.10's procedural hurdle seems aimed at situations where the attorney is acting in his or her official capacity. This is indicated by the statute's legislative history and the Legislature's concern with conspiracy actions designed to `disrupt' the attorney/client relationship. It is also demonstrated by section 1714's words. In particular, section 1714.10, subdivision (a) refers to actions against an attorney for conspiring with his or her client that arise from `attempt[s] to contest or compromise a claim' and that are `based upon the attorney's representation of the client.' [¶] Yet when an attorney is acting in his or her official capacity, there are only the situations articulated in Doctors' Co., in which an attorney could be liable for conspiring with his or her client. Of course, these situations are specifically excepted from section 1714.10's scope." (Pavicich, at p. 395.)
Five years after Pavicich, the Sixth Appellate District again considered the scope of section 1714.10 in Berg, noting that the 1991 amendment had an "anomalous" effect on the statute's application: "Since the statute now removes from its scope the two circumstances in which a valid attorney-client conspiracy claim may be asserted, its gatekeeping function applies only to attorney-client conspiracy claims that are not viable as a matter of law in any event." [Citation.] Thus, a plaintiff who can plead a viable claim for conspiracy against an attorney need not follow the petition procedure outlined in the statute as such a claim necessarily falls within the stated exceptions to its application." (Berg, supra, 131 Cal.App.4th at p. 818.)
The court in Berg then concluded that the proper inquiry focuses on the viability of the plaintiff's conspiracy claim. "Applying section 1714.10 thus requires the court to initially determine whether the pleading falls either within the coverage of the statute or, instead, within one of its stated exceptions. This determination pivots, in turn, on whether the proposed pleading states a viable claim for conspiracy against the attorney. [Citation.] For all intents and purposes, this is the determinative question. If such a claim is stated, the analysis ends before reaching evidentiary considerations; the statute does not apply because the claim necessarily falls under one of its exceptions. If it is not stated, the analysis likewise ends, but with the opposite result; the pleading is disallowed for its failure to meet the initial gatekeeping hurdle of the statute." (Berg, supra, 131 Cal.App.4th at p. 818.)
In order to overcome the gatekeeping hurdle of section 1714.10, the plaintiff must state a viable cause of action and present "competent, admissible evidence to establish the elements of the claim." (Berg, supra, 131 Cal.App.4th at p. 817, fn. omitted.) However, the trial court does not weigh the evidence. Instead, it "merely assesses whether the plaintiff has stated and substantiated his or her claim. [Citation.]" (Id. at p. 817, fn. 7.) The plaintiff must show that a prima facie case can be established at trial. (Ibid.)
"Since 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. [Citation.]" (Berg, supra, 131 Cal.App.4th at p. 822.)
The complaint in this case expressly alleges a conspiracy between the attorney defendants and their alleged client, Bagdasarian. Paragraph eight of the complaint states in part: "Pangrazio, Cooley and DOES 1 through 100, each conspired with, aided and abetted, and were the agents of Bagdasarian and each other, with respect to the acts and omissions of Bagdasarian, as set forth in detail below, and each such defendant's acts and omissions were with the permission and consent of each other defendant, and in furtherance and within the course and scope of such conspiracy and agency." This general conspiracy allegation is incorporated by reference into every cause of action in the complaint.
The allegations of the complaint that are specific to defendants all concern conduct arising out of defendants' legal representation of Bagdasarian or First Blush. The aiding and abetting cause of action, for example, alleges that defendants "knowingly assisted Bagdasarian in breaching his fiduciary duty to and defrauding plaintiff by . . . helping to incorporate a partnership in which plaintiff owned a 50% interest" and "helping to issue shares of stock in that newly formed corporation as a means of misappropriating plaintiff's 50% ownership interest." The legal malpractice cause of action alleges that defendants "purported to represent both Bagdasarian and First Blush" without plaintiff's knowledge or consent, incorporated First Blush, and issued shares of stock in the newly formed corporation. Defendants are not alleged to have engaged in any independent conduct apart from their legal representation of Bagdasarian or First Blush.
In view of the express allegations of conspiracy between defendants and their alleged clients, and the absence of allegations regarding any independent conduct by defendants, the causes of action asserted against defendants come within the scope of section 1714.10. (Berg, supra, 131 Cal.App.4th at p. 824.)
Plaintiff contends his claims against defendants are outside the scope of section 1714.10 because the statute applies only to a cause of action "for a civil conspiracy," and the complaint alleges no conspiracy cause of action against defendants. Although the complaint does not explicitly allege a cause of action for civil conspiracy against defendants, such specificity in pleading is not necessary. As noted by the Sixth Appellate District in Berg, section 1714.10 may apply "without regard to the labels attached to the causes of action or whether the word `conspiracy'—having no talismanic significance—appears in them." (Berg, supra, 131 Cal.App.4th at p. 824.) The appropriate inquiry involves a determination of whether the allegations show a "union of conduct between attorney and client arising out of the legal representation." (Ibid.)
Such "union of conduct" between defendants and their client is alleged here. The alleged acts constituting the breach of fiduciary duty and fraud that purportedly resulted in the misappropriation of plaintiff's ownership interest in First Blush were committed by Bagdasarian. Defendants' participation in Bagdasarian's wrongful conduct consisted solely of "helping to incorporate" First Blush and "helping to issue shares of stock . . . as a means of misappropriating plaintiff's 50% ownership interest." These allegations show that the harm plaintiff suffered resulted not from any independent act committed by defendants, but from the acts of Bagdasarian, with whom defendants were allegedly complicit, and bring the claims asserted against defendants within the scope of section 1714.10, subdivision (a). (Berg, supra, 131 Cal.App.4th at p. 824.)
The court in Berg also considered the argument plaintiff raises here — that a cause of action for aiding and abetting the commission of a tort falls outside the scope of section 1714.10 because it differs fundamentally from a cause of action for conspiracy to commit a tort. In a footnote to its opinion, the Berg court considered the similarities and differences between the two causes of action: "`"[A]iding-abetting focuses on whether a defendant knowingly gave `substantial assistance' to someone who performed wrongful conduct, not on whether the defendant agreed to join the wrongful conduct." [¶] . . . [W]hile aiding and abetting may not require a defendant to agree to join the wrongful conduct, it necessarily requires a defendant to reach a conscious decision to participate in tortious activity for the purpose of assisting another in performing a wrongful act. A plaintiff's object in asserting such a theory is to hold those who aid and abet in the wrongful act responsible as joint tortfeasors for all damages ensuing from the wrong.' [Citation.] The aider and abettor's conduct need not, as `separately considered,' constitute a breach of duty. [Citations.]" (Berg, supra, 131 Cal.App.4th at pp. 823-824, fn. 10.) The Berg court then concluded that "[e]ven though aiding and abetting . . . does not generally require that the defendant owe an independent duty, we believe that as pleaded against an attorney for conduct arising from the representation of a client, and depending on the particular allegations, this tort would still fall within the ambit of section 1714.10 and would thus be subject to its requirements and exceptions. [Citation.]" (Ibid.)
We agree with the Sixth Appellate District's analysis in Berg and apply it here. The alleged conduct that is the basis for plaintiff's cause of action against defendants for aiding and abetting breach of fiduciary duty and fraud consists solely of legal services rendered in connection with First Blush's incorporation. Defendants are alleged to have aided and abetted Bagdasarian's wrongdoing by "helping to incorporate a partnership in which plaintiff owned a 50% interest . . . helping to issue shares of stock in that newly formed corporation . . ." and "blithely" responding to objections from plaintiff's counsel by stating that the "`[c]ompany has to move forward.'" The allegations against defendants concern conduct solely related to their legal representation and thus fall within the scope of section 1714.10. (Berg, supra, 131 Cal.App.4th at p. 824.)
Plaintiff contends the Sixth Appellate District's analysis in Berg should not be applied here because that case is both factually distinguishable and legally incorrect. Neither argument is persuasive.
Berg involved a business dispute between the plaintiff creditor, Berg & Berg Enterprises, and the defendant who served as an assignee for the benefit of creditors of a financially troubled company. (Berg, supra, 131 Cal.App.4th at pp. 810-814.) Plaintiff Berg sought to name the assignee's law firm as a defendant, alleging that the law firm had conspired with its client to deplete the company's assets by performing unnecessary legal services that were adverse to the plaintiff and by excessively billing the assignee for those services, which were paid for from the assigned assets. (Id. at p. 809.) Plaintiff Berg moved to amend its complaint to assert causes of action against the law firm for declaratory relief, accounting, waste of corporate assets, and conspiracy to waste corporate assets. (Ibid.)
The Sixth Appellate District held that all causes of action against the law firm, including those not expressly for civil conspiracy, were subject to section 1714.10. In reaching this conclusion, the court relied upon actual allegations in the complaint:
(Berg, supra, 131 Cal.App.4th at p. 824.)
As in Berg, the complaint in this case alleges a "union of conduct" between defendants and Bagdasarian arising out of the legal representation. Also like Berg, the complaint in this case incorporates a general conspiracy allegation against all of the defendants, including Pangrazio and Cooley, that is incorporated by reference into every cause of action in the complaint, including the causes of action that are the subject of this appeal.
Plaintiff argues that Berg is distinguishable because the causes of action in his complaint do not rely upon the conspiracy allegations in paragraph 8 "for their vitality." Plaintiff's allegations against Pangrazio and Cooley, however, describe acts that consist solely of legal services rendered on behalf of their clients. Here, as in Berg, the particular allegations throughout plaintiff's complaint "of the union of conduct between attorney and client arising out of the legal representation," "the absence of other allegations of independent conduct" by the defendant attorneys, and "the incorporation of conspiracy allegations into every cause of action, more than suffice to subject all the claims" against defendants to the initial coverage of section 1714.10. (Berg, supra, 131 Cal.App.4th at p. 824.)
Plaintiff's reliance on Alden v. Hindin (2003) 110 Cal.App.4th 1502 as a basis for distinguishing Berg is misplaced. In Alden, the court held that the proper remedy when only one cause of action is subject to section 1714.10 is to dismiss that cause of action rather than the entire complaint. (Alden, supra, at pp. 1507-1508.) Here, unlike Alden, all of plaintiff's causes of action against defendants are premised on the same factual allegations of conspiracy. The trial court accordingly did not err by dismissing the entire complaint.
Plaintiff contends the Sixth Appellate District in Berg incorrectly concluded that section 1714.10 may apply to a cause of action premised on factual allegations of conspiracy but not explicitly pled as a cause of action "for a conspiracy." Plaintiff argues that the Berg court's interpretation of the statute is flawed because it failed to "consider the fact that the Legislature had deleted the words `based upon' and replaced them with `for' in 1991" so that the statute applies only to a cause of action "for a civil conspiracy" rather than one "based upon a civil conspiracy." Plaintiff maintains that the word "for" narrowed the scope of the statute, and that under its plain meaning, only causes of action that are explicitly pled as "a cause of action for a civil conspiracy" are covered.
Plaintiff's argument raises an issue of statutory construction. The fundamental rule of statutory construction is that the court should ascertain the intent of the Legislature so as to effectuate the purpose of the law. (Select Base Materials v. Board of Equalization (1959) 51 Cal.2d 640, 645 (Select Base).)
In determining the intent of the Legislature, we first examine the words of the statute itself. (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 698.) If the language of the statute is clear and unambiguous, there is no need for statutory construction. (Lungren v. Deukmejian (1988) 45 Cal.3d 727, 735.) However, "the `plain meaning' rule does not prohibit a court from determining whether the literal meaning of a statute comports with its purpose . . . ." (Ibid.) "If . . . the terms of a statute provide no definitive answer, then courts may resort to extrinsic sources, including the ostensible objects to be achieved and the legislative history. [Citation.]" (People v. Coronado (1995) 12 Cal.4th 145, 151.) Every statute should be construed "`with reference to the whole system of law of which it is a part so that all may be harmonized and have effect.' [Citation.]" (Select Base, supra, 51 Cal.2d at p. 645.) "`We must select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.' [Citation.]" (Coronado, supra, at p. 151 .) The Legislative purpose "will not be sacrificed to a literal construction" of any part of the statute. (Select Base, at p. 645.)
Plaintiff argues that the plain language of the statute supports his interpretation that section 1714.10 applies only to claims explicitly pled as a cause of action "for a civil conspiracy." The statutory language does not, however, cover "a cause of action for a civil conspiracy." That phrase appears nowhere in the text of the statute. Section 1714.10, subdivision (a) begins with the words "[n]o cause of action against an attorney for a civil conspiracy with his or her client . . . ." The statute thus covers a cause of action directed against an attorney that also alleges a civil conspiracy between the attorney and client. The statutory language itself does not limit its application to claims explicitly pled or labeled as "a cause of action for a civil conspiracy."
Plaintiff's interpretation of section 1714.10 is also inconsistent with the rest of the statutory language, which includes the very phrase plaintiff claims the Legislature sought to excise from section 1714.10. The second sentence of section 1714.10 provides: "The court may allow the filing of a pleading claiming liability based upon such a civil conspiracy following the filing of a verified petition . . . ." (§ 1714.10, subd. (a), italics added.) Notably, this sentence uses the broader term "liability based upon" a civil conspiracy when referring to pleadings allowed under the statute, as opposed to the narrower and more specific term "cause of action." (Italics added.)
The language of section 1714.10 does not support the narrow interpretation suggested by plaintiff.
Plaintiff cites certain aspects of the legislative history as support for his position that section 1714.10 should be limited to claims specifically pled as a cause of action "for a civil conspiracy." The documents plaintiff relies upon reflect the Legislature's initial intent to limit section 1714.10 to conspiracy claims against attorneys involving insurance bad faith, or to exclude from its application actions against attorneys who conspired with their clients to violate a legal duty, as in the savings and loan financial fraud cases in the late 1980's and early 1990's. (See, e.g., Off. of Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 820 (1991-1992 Reg. Sess.) [amendment would "limit the pleading hurdle for conspiracy claims against attorneys to cases involving statutory bad faith claims"]); (letter from Sen. Thompson, sponsor of Sen. Bill No. 820 (1991-1992 Reg. Sess.) to Governor, Sept. 17, 1991 [stating section 1714.10 had been "applied to a much wider range of cases for which it was never intended" and explaining that bill should be passed to "limit the use of this pleading hurdle to those allegations arising from attempts to disrupt settlement proceedings"].) These documents are consistent with the Legislature's intent to limit the scope of section 1714.10 to a narrower range of factual circumstances giving rise to civil conspiracy claims against attorneys and their clients, but they do not evidence an intent to limit the statute in the manner suggested by plaintiff.
Plaintiff has not identified a single document that demonstrates the Legislature replaced the former statutory language "based upon a civil conspiracy" with the phrase "for a civil conspiracy" with the specific intent to limit section 1714.10 to causes of action expressly pled or labeled as "for a civil conspiracy." The legislative history does not support this interpretation.
Plaintiff also contends the phrase "arising from any attempt to contest or compromise a claim" was added to section 1714.10 in 1991 in order to narrow the scope of the statute to claims relating to an attorney's litigation conduct only. As support for this argument, plaintiff cites two documents from the legislative record. The first, a letter from California Defense Counsel urging Senator Thompson, the author of the 1991 amendment, to abandon the proposal to limit section 1714.10 to insurance bad faith claims, states: "[T]here are sound policy reasons for retention of Section 1714.10 in its current form. The opportunity for gamesmanship is seriously and properly restricted by foreclosing the specious allegation of conspiracy against an opponent's attorney so as to interrupt trial settings, hearing calendars and the like." (Jon D. Smock, California Defense Counsel, letter to Sen. Mike Thompson, Apr. 29, 1991.) The second is a letter from Senator Thompson to then Governor Pete Wilson urging him to sign the amendment into law. In that letter, Senator Thompson states that the amendment would limit the use of the pleading hurdle imposed by section 1714.10 "to those allegations arising from attempts to disrupt settlement proceedings." (Sen. Mike Thompson, letter to Gov. Pete Wilson, Sep. 17, 1991.)
While these two letters show that the defense bar and the author of the 1991 amendment both believed the statutory pleading hurdle should apply to attorney-client conspiracy claims arising in the context of litigation, they do not evidence an overall intent by the Legislature to limit the statute's application solely to that context. The legislative history also shows that the Legislature was more broadly "concern[ed] with conspiracy actions designed to `disrupt' the attorney/client relationship" generally. (Pavicich, supra, 85 Cal.App.4th at p. 395.)
The legislative history also shows that the Legislature considered the Supreme Court's decision in Doctors' Co., including the court's application of the agent's immunity rule. (Pavicich, supra, 85 Cal.App.4th at p. 393.) The amendatory language on which plaintiff relies can be understood to refer more broadly to "situations where the attorney is acting in his or her official capacity." (Id. at p. 394.) Consistent with this understanding, courts have applied section 1714.10 to conspiracy allegations against attorneys outside the context of litigation. (See, e.g., Evans v. Pillsbury, Madison & Sutro, supra, 65 Cal.App.4th at p. 602 [applying section 1714.10 to a prelitigation "boardroom battle over finances"]; Panoutsopoulos v. Chambliss (2007) 157 Cal.App.4th 297, 301-303 [applying section 1714.10 to prelitigation attempts to enforce a lease]; Pavicich, supra, 85 Cal.App.4th at p. 386 [discussing section 1714.10 in context of attorney's failure to disclose information regarding plaintiff's investment in a business project].)
The statutory language cited by plaintiff does not support the very narrow construction of section 1714.10 that he advocates.
Having concluded that the claims asserted against defendants fall within the scope of section 1714.10, we must determine whether plaintiff has alleged facts which support either of the two exceptions set forth in subdivision (c) of the statute. Plaintiff contends the facts alleged in the complaint establish an independent duty by defendants because they agreed to represent First Blush, a partnership in which plaintiff was a partner. He maintains that when defendants represented First Blush, under California law they also represented him as an individual partner in connection with matters of partnership business. Plaintiff further contends he believed that defendants acted as his attorneys in connection with First Blush's incorporation. Plaintiff's contentions are not supported by the factual allegations in the complaint.
The complaint alleges that First Blush was operating, not as a partnership, but under the "shell" of an existing corporation named Rose Hill Garden at the time defendants commenced their representation. There are no allegations that defendants knew or agreed to represent First Blush as a partnership. The complaint further alleges that plaintiff was represented by his own attorney, Marshall Watson, during discussions with defendants and with Bagdasarian concerning First Blush's incorporation. There is no allegation that plaintiff believed defendants were his attorneys. Rather, the complaint alleges that plaintiff believed Pangrazio and Cooley represented Bagdasarian, and not plaintiff, either individually or as a partner of First Blush. The factual allegations in the complaint show no independent duty by Pangrazio and Cooley to plaintiff.
Plaintiff's assertion that defendants' representation of First Blush created a legal duty to him is not only factually unsupported, it is also legally unsound. An attorney representing an entity represents the entity itself, and not its constituent members. Rule 3-600(A) of the State Bar Rules of Professional Conduct provides in pertinent part: "In representing an organization, a member shall conform his or her representation to the concept that the client is the organization itself, acting through its highest authorized officer, employee, body, or constituent overseeing the particular engagement." Thus, "[a]n attorney representing a corporation does not become the representative of its stockholders merely because the attorney's actions on behalf of the corporation also benefit the stockholders; as attorney for the corporation, counsel's first duty is to the corporation. [Citation.]" (Skarbrevik v. Cohen, England & Whitfield (1991) 231 Cal.App.3d 692, 703.)
The same principle applies if the entity being represented is a partnership. "[R]epresentation of individual partners does not automatically flow from representation of the partnership. Something more is required to create an attorney-client relationship with a partner." (Responsible Citizens v. Superior Court (1993) 16 Cal.App.4th 1717, 1731.) Here, defendants are alleged to have done nothing more than prepare a draft stock purchase agreement, incorporate First Blush, and issue shares of stock for the new corporation. These allegations are insufficient to establish that an attorney-client relationship existed between plaintiff and defendants.
Plaintiff cites Johnson v. Superior Court (1995) 38 Cal.App.4th 463 (Johnson), as support for his argument that defendants owed him a duty as his attorneys. That case, however, is distinguishable. The attorney in Johnson not only knew that he was representing an existing partnership with limited partners, but held himself out as representing both the partnership and its general partner, and took affirmative action toward the limited partners, including drafting a letter to the limited partners that he expected the limited partners to rely upon. (Id. at pp. 468-470, 478.) The circumstances here are markedly different. Defendants were asked to incorporate First Blush in the summer of 2008. At that time, First Blush was doing business under the "shell" of an existing corporation named Rose Hill Garden. Plaintiff believed that defendants represented Bagdasarian. Plaintiff, in turn, was represented by his own attorney, Marshall Watson, in his dealings with defendants and Bagdasarian. Given these differences, Johnson is not persuasive authority for concluding that the defendant attorneys in this case owed an independent duty to plaintiff.
Plaintiff's claims do not fall within the independent legal duty exception to section 1714.10.
Plaintiff contends the trial court erred by dismissing the complaint without leave to amend. "[I]n appropriate circumstances, a trial court may permit an amendment of the complaint after sustaining a demurrer based on section 1714.10." (Central Concrete Supply Co., Inc. v. Bursak (2010) 182 Cal.App.4th 1092, 1103.) If the plaintiff's causes of action are not viable, however, leave to amend should not be granted if there is no basis for the court to conclude further amendment would cure the defects. (Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 211.) The burden of proving a reasonable probability of amending the complaint to state a cause of action "is squarely on the plaintiff." (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)
Plaintiff did not seek leave to amend the complaint, nor has he offered any additional facts to support the possibility of amendment. The trial court did not err by dismissing the complaint without leave to amend. (Vaillette v. Fireman's Fund Ins. Co. (1993) 18 Cal.App.4th 680, 685 ["[L]eave to amend should not be granted where . . . amendment would be futile"].)
The judgment is affirmed. Defendants are awarded their costs on appeal.
We concur:
BOREN, P. J.
ASHMANN-GERST, J.
