Dynastion Energy v. Yung CA2/4
B311960
| Cal. Ct. App. | Apr 11, 2022Background
- Dynastion, a Slovak LLC, invested over $2 million in a joint venture (HoldCo) with CH4 Green Energy (Brewer) to build anaerobic digesters; Yung (a Lewis Brisbois partner) had previously represented Brewer and held a small ownership interest in an earlier related joint venture (BioEnergy).
- BioEnergy (the prior venture) collapsed amid allegations Brewer misrepresented project status, forged letters of intent, misappropriated funds; Yung had withdrawn representation and rescinded his interest after BioEnergy failed.
- During formation of HoldCo, Yung participated in meetings, drafted the Bill of Sale, and allegedly knew Brewer had overstated assets and that a fuel-supply agreement for one project (CDE 173) had been cancelled — facts not disclosed to Dynastion.
- Dynastion sued alleging aiding-and-abetting fraud (plus other claims by HoldCo). Defendants demurred, arguing the agent’s immunity rule and the Civil Code §1714.10 prefiling requirement barred the claims; they also argued Brewer was an indispensable party.
- The trial court sustained the demurrer without leave to amend. The Court of Appeal reversed, holding Dynastion sufficiently alleged that attorney Yung owed an independent duty to the investor (an exception to both the agent’s immunity rule and §1714.10), so the prefiling requirement did not apply and the aiding-and-abetting claim could proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Civ. Code §1714.10 prefiling order is required to sue an attorney for conspiracy/aiding with client | §1714.10 does not apply because exceptions (attorney’s independent duty or acts beyond professional scope for financial gain) cover the pleaded claims | §1714.10 applies and Dynastion failed to obtain the required prefiling court order | Court: §1714.10’s independent-duty exception applies here; prefiling order not required |
| Whether agent’s immunity bars aiding-and-abetting/conspiracy claims against an attorney acting for a client | Agent’s immunity does not apply to attorney who knowingly assists client’s fraud and owes an independent duty to the nonclient | Agent’s immunity bars claims based on attorney’s representative acts for client | Court: Agent’s immunity does not bar claims when attorney owes an independent legal duty to the third party |
| Whether Yung owed an independent legal duty to Dynastion (a nonclient investor) | Yung had an independent duty to refrain from defrauding nonclients given his prior role, interest in earlier venture, and active participation in HoldCo formation and negotiations | Yung’s duties were only to his client; no independent duty to Dynastion | Court: Allegations suffice to show an independent duty to Dynastion for purposes of surviving demurrer |
| Whether Brewer is an indispensable party that must be joined | Not necessary to join all tortfeasors; claim may proceed without Brewer | Brewer is an indispensable party | Trial court did not adjudicate indispensability; appellate opinion reversed on other grounds and left joinder issues open |
Key Cases Cited
- Doctors’ Co. v. Superior Court, 49 Cal.3d 39 (agent-immunity rule: agents generally cannot be liable for conspiring with their principals absent an independent duty)
- Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc., 131 Cal.App.4th 802 (Civil Code §1714.10 coextensive with agent-immunity rule; exceptions apply)
- Pavicich v. Santucci, 85 Cal.App.4th 382 (attorney may owe independent disclosure duty to a nonclient where statements are made that could mislead an investor)
- Klotz v. Milbank, Tweed, Hadley & McCloy, 238 Cal.App.4th 1339 (attorney has independent legal duty not to defraud nonclients)
- Rusheen v. Cohen, 37 Cal.4th 1048 (civil conspiracy requires an underlying independent wrong)