Klotz v. Milbank, Tweed, Hadley & McCloy CA2/1
238 Cal. App. 4th 1339
| Cal. Ct. App. | 2015Background
- In 2010–2012 Adam Klotz, Richard Spitz and Stephen Bruce formed a partnership and later SageMill Capital Advisors LLC; Festa (formerly O’Melveny, later Milbank) advised the group and communicated with all three.
- Bruce consulted Festa individually in mid‑2012 about withdrawing and about a competing joint‑venture with Invest AD; Festa prepared a Termination Agreement and provided legal advice to Bruce without disclosing the individual representation or obtaining waivers.
- SageMill’s proposed Invest AD deal collapsed; Klotz and Spitz allege Bruce usurped SageMill’s corporate opportunity and that Festa/Milbank aided and conspired with Bruce.
- Plaintiffs sued for breach of fiduciary duty, civil conspiracy (with Bruce), and legal malpractice; defendants moved to strike/construe under Civ. Code §1714.10 (pre‑filing approval required for conspiracy claims against attorneys who conspire with clients while contesting or compromising a claim).
- The trial court overruled defendants’ demurrer and denied the §1714.10 motion; on appeal the Court of Appeal reversed as to the conspiracy cause of action by the individual plaintiffs (Klotz, Spitz) but affirmed denial as to the non‑conspiracy claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §1714.10 applies to Klotz and Spitz’s conspiracy claim against Festa/Milbank for conspiring with Bruce | Klotz/Spitz say their conspiracy claim alleges an independent duty (implied agreement) by Festa not to represent them adversely, so §1714.10 gatekeeping does not apply | Defendants say the alleged conduct arose from legal representation (Bruce’s withdrawal/settlement) and thus §1714.10 requires prefiling court approval | Held: §1714.10 applies; conspiracy claim must be stricken absent court approval because allegations arise from attorney’s representation in contest/compromise of a dispute |
| Whether plaintiffs pleaded an independent legal duty (exception to §1714.10) | Plaintiffs allege implied agreement and direct communications creating duties to Klotz/Spitz as individuals | Defendants say conduct was within normal attorney‑client scope (conflict/representation) and not beyond professional duties | Held: No independent duty pleaded; alleged conflict of interest arose from representation and does not establish the required duty beyond legal services |
| Whether plaintiffs pleaded attorney financial gain exception to §1714.10 | Plaintiffs claim Milbank favored Bruce (a more lucrative client) over SageMill/Klotz/Spitz | Defendants contend increased fees do not equal the special extra‑compensation/pecuniary advantage needed for the exception | Held: Fees or representing a more lucrative client are not the financial‑gain exception; plaintiffs did not plead the requisite extra economic advantage |
| Scope of appeal: whether non‑conspiracy claims are reviewable under this appeal | Plaintiffs maintain all claims should survive; breach of fiduciary duty and malpractice are independent non‑conspiracy claims | Defendants seek dismissal of conspiracy and related derivative claims under §1714.10 | Held: Appeal limited to §1714.10 issue; non‑conspiracy claims (breach of fiduciary duty, malpractice) survive and are not reviewable on this interlocutory §1714.10 appeal — trial court’s denial of motion to strike those claims is affirmed |
Key Cases Cited
- Evans v. Pillsbury, Madison & Sutro, 65 Cal.App.4th 599 (discusses direct appealability under §1714.10)
- Pavicich v. Santucci, 85 Cal.App.4th 382 (attorney conduct that conceals material facts from investors can create independent duty)
- Berg & Berg Enters., LLC v. Sherwood Partners, Inc., 131 Cal.App.4th 802 (scope of §1714.10; labels do not control—substance does)
- Alden v. Hindin, 110 Cal.App.4th 1502 (nonconspiracy causes of action need not be dismissed when conspiracy claim is stricken)
- Stueve v. Kahn, 222 Cal.App.4th 327 (§1714.10 requires prima facie showing before conspiracy claim against attorney may proceed)
- Rickley v. Goodfriend, 212 Cal.App.4th 1136 (attorney conduct beyond normal legal services—e.g., assisting client avoid remediation—can create independent duty)
- Hung v. Wang, 8 Cal.App.4th 908 (application of §1714.10 to conspiracy claims arising from representation)
- Shafer v. Berger, Kahn, Shafton, Moss, Figler, Simon & Gladstone, 107 Cal.App.4th 54 (attorneys can owe duties to third parties where misrepresentations cause harm)