Prakashpalan v. Engstrom, Lipscomb & Lack
223 Cal. App. 4th 1105
| Cal. Ct. App. | 2014Background
- Plaintiffs Muruganandan and Navamalar Prakashpalan were clients of Engstrom, Lipscomb & Lack; complaints arise from three representations: the 1997 "Allegro" aggregate Northridge settlement, the Malibu construction/repair work, and the later Perlmutter litigation (landslide).
- Plaintiffs allege Engstrom secretly withheld large portions of an aggregate Allegro settlement (they calculate ~ $22M unaccounted for) and failed to adequately account for client trust funds.
- In the Perlmutter matter, plaintiffs allege Engstrom (through attorney Wolfe) revealed plaintiffs’ plan to import free fill dirt, and later represented the Perlmutters without plaintiffs’ informed consent, causing plaintiffs to accept low settlements and incur a $1.3M judgment.
- Plaintiffs filed a multi-count SAC (malpractice, breach of fiduciary duty, various fraud/concealment claims, conversion, unjust enrichment, UCL, conspiracy, accounting). Defendants demurred.
- The trial court sustained the demurrer without leave to amend as to most Perlmutter-related claims for failure to plead causation; it sustained some Allegro-related dismissals on privilege/defense impossibility (Solin).
- The Court of Appeal affirmed dismissal of Perlmutter-based claims for lack of causation but reversed as to several Allegro-based claims (fraudulent concealment of embezzlement, unjust enrichment, UCL, conversion, conspiracy, accounting), holding: Probate Code §16460 (trust-account accounting rule) applies to fraud-based claims about aggregate-settlement disbursements and tolled the limitations period as pleaded, and plaintiffs may amend Allegro claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Allegro malpractice/fiduciary claims are time-barred (statute of limitations) | Allegro accounting duties and fiduciary trust status mean Probate Code §16460 governs fraud-based claims; delayed discovery tolled limitations until plaintiffs’ 2012 investigation | Claims arise from professional services so CCP §340.6 (one-year/4-year rule) or general fraud limitations should bar claims more than 14 years after settlement | Court applied Probate Code §16460 to plaintiffs’ fraud-based (trust/accounting) allegations re: Allegro, permitting amendment and rejecting the statute-of-limitations bar as pleaded |
| Whether claims alleging mishandling/embezzlement of aggregate settlement funds must be dismissed as speculative | Plaintiffs’ sampling and arithmetic of other settling claimants raised plausible inference that funds were unaccounted and Engstrom failed to adequately account | Calculations speculative; Solin/privacy and privilege issues mean plaintiffs could not prove distribution without breaching other clients’ confidences | Court rejected dismissal at demurrer stage for Allegro-related accounting/fraud/unjust enrichment/conversion/conspiracy claims, concluding plaintiffs sufficiently alleged inadequate accounting and delayed discovery under §16460; Solin balancing not fatal here for all Allegro claims |
| Whether Perlmutter-related conflict/disclosure claims (reveal of free fill-dirt plan; successive representation) state actionable fraud/malpractice (causation) | Plaintiffs allege Wolfe’s disclosure and representation of Perlmutters without consent caused them to accept low settlements and pay/lose ~$1.3M | Defendants argue disclosure (and any public records) did not cause plaintiffs’ damages; plaintiffs did not plead how disclosure injured their valuation or settlement decisions | Court affirmed dismissal of Perlmutter-based claims for failure to plead causation—plaintiffs did not plausibly explain how the reveal of dirt plan caused the weaker settlement/judgment |
| Whether Solin/privilege-defense-impossibility requires dismissal of Allegro claims | Plaintiffs: other Allegro plaintiffs volunteered information; Solin balancing is fact-intensive and inappropriate at demurrer stage | Defendants: complete resolution would force disclosure of other clients’ confidences; Solin requires dismissal | Court held Solin does not automatically bar Allegro claims here because plaintiffs alleged insufficient accounting information and delayed discovery; disclosure sufficient for notice may be possible without revealing privileged details, so dismissal under Solin was unwarranted at demurrer stage for Allegro claims |
Key Cases Cited
- Solin v. O’Melveny & Myers, 89 Cal.App.4th 451 (court may dismiss suit that cannot be resolved without breaching attorney-client confidentiality)
- Dietz v. Meisenheimer & Herron, 177 Cal.App.4th 771 (explains Solin balancing factors and defense-impossibility analysis)
- Oasis West Realty, LLC v. Goldman, 51 Cal.4th 811 (former-client duties of loyalty/confidentiality and limits on disclosure)
- Vafi v. McCloskey, 193 Cal.App.4th 874 (statutory-construction rule: particular statute governs over general one)
- Cel‑Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 (scope and remedies under the UCL)