Erick Chatel, et al. v. Shelly Jean Gayner

The judge also issued a protective order that severely restricts ESC’s ability to use Defendant-related evidence in its litigation against SIE. As a result, Plaintiffs lost their chosen counsel after years of representation, are unable to use critical evidence, and face increased litigation costs, delays, loss of settlement leverage, and reputational damage.

Plaintiffs’ First Cause of Action alleges professional negligence/legal malpractice, the Second Cause of Action alleges breach of fiduciary duty, the Third Cause of Action alleges breach of attorney-client confidentiality and privilege, the Fourth Cause of Action alleges intentional interference with contractual relations, the Fifth Cause of Action alleges constructive fraud, and the Sixth Cause of Action alleges violation of Business & Professions Code Section 6068(E).

Standard

“The function of a demurrer is to test the sufficiency of the complaint as a matter of law, and it raises only a question of law.” (Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1420.) A complaint “ordinarily is sufficient if it alleges ultimate rather than evidentiary facts” (Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 550), but the plaintiff must set forth the essential facts of his or her case “with reasonable precision and with particularity sufficient to acquaint [the] defendant with the nature, source and extent” of the plaintiff’s claim. (Doheny Park Terrace Homeowners Assn., Inc. v.

Truck Ins. Exchange (2005) 132 Cal.App.4th 1076, 1099 [citation and internal quotations omitted].) Legal conclusions are insufficient. (Id. at 1098–1099; Doe, 42 Cal.4th at 551, fn. 5.) The court “assume[s] the truth of the allegations in the complaint, but do[es] not assume the truth of contentions, deductions, or conclusions of law.” (California Logistics, Inc. v. State of California (2008) 161 Cal.App.4th 242, 247.)

Request for Judicial Notice

Defendant’s request for judicial notice of the Complaint (Exhibit A), the motion to disqualify MABR in the federal court action (Exhibit B), and the Order to Disqualify MABR in the federal court action (Exhibit C), is granted. (Evid. Code §§ 452, 453.)

In their Opposition, Plaintiffs refer to a “Counter-RJN” and a “Steiner Declaration” (see Opposition, pp. 7:9, 7:19-20, 7:26) but they failed to file any such documents with the Court

with their Opposition. The documents Plaintiffs filed and served on June 5th and June 8th (after Defendant filed her Reply) are untimely and will not be considered by the Court. The Court therefore does not take judicial notice of any additional documents, including court orders, from the separate pending malpractice action in Orange County or from the federal district court case. The Court would not consider Plaintiff’s counsel declaration in any event as extrinsic materials are not considered in ruling on a demurrer. (See Price v. Dames & Moore (2001) 92 Cal.App.4th 355, 359; McKenney v. Purepac Pharmaceutical Co. (2008) 167 Cal.App.4th 72, 77.)

Discussion

Unclean Hands

Defendant demurs to all six causes of action on the ground that they are barred by the doctrine of unclean hands.

A demurrer based on an affirmative defense, including unclean hands, is sustained only where the affirmative defense clearly appears on the face of the complaint. (CrossTalk Productions, Inc. v. Jacobson (1998) 65 Cal.App.4th 631, 635.) “A demurrer based on an affirmative defense cannot properly be sustained where the action might be barred by the defense, but is not necessarily barred. Nor is a demurrer the appropriate procedure for determining the truth of disputed facts or what inferences should be drawn where competing inferences are possible.” (Ibid. [citations omitted] [emphasis in original].)

The doctrine of unclean hands is generally a question of fact. (Id. at p. 639.) “Since the doctrine of unclean hands is heavily fact dependent, it is a uniquely poor candidate to support a demurrer. Nevertheless, there have been unusual situations in which a defense of unclean hands has been established solely by the allegations of the complaint.” (Id. at p. 641.) In Blain v. Doctor’s Co. (1990) 222 Cal.App.3d 1048, the court applied the doctrine of unclean hands to bar a doctor’s legal malpractice claim where he alleged that he lied in his deposition on the advice of his attorney.

The court, citing the Restatement Second of Torts, Section 889, stated: “ʽOne is not barred from recovery for an interference with his legally protected interests merely because at the time of the interference he was committing a tort or a crime . . .’” (Id. at p. 1060 [emphasis in original] [citation omitted].) The court explained that “whether there is a bar depends upon the analogous case law, the nature of the misconduct, and the relationship of the misconduct to the claimed injuries.” (Id. at p. 1060.)

The court concluded that the doctrine applied to bar the plaintiff’s claims because “[the plaintiff’s] emotional distress, if any, is attributable to his own knowing misbehavior. Even the most naive must know that lying under oath is illegal.... [T]he relationship of misconduct to harm in this case is direct and not incidental. The misconduct was, so it is alleged, the instrumentality of harm.” (Id. at p. 1063.)

Plaintiffs argue that the doctrine of unclean hands does not appear on the face of their Complaint because they allege the federal district court disqualified Plaintiffs’ counsel MABR due to Defendant’s conduct, not their own conduct. (Complaint, ¶¶23-25.) Defendant argues that the allegations in Plaintiff’s Complaint actually mischaracterize the federal court’s Order, which also reprimanded Plaintiffs for their violation of the duty of candor and found Plaintiff’s conduct to be another basis for the disqualification.

The federal district court Order is attached as Exhibit C to Defendant’s Request for Judicial Notice. In subsection 2 of this Order (“[Defendant’s] Conflict of Interest”), the court found that there was a substantial relationship between Defendant’s work at SIE and her work with Plaintiff ESC, that Defendant had a duty to keep the confidences of SIE, and that her subsequent work with ESC on a substantially similar matter created a conflict of interest. In subsection 3 (“Imputation”), the court concluded that Defendant’s conflict and improper representation of SIE and then ESC could be imputed to MABR and, as a result, MABR must be disqualified.

In subsection 4 (“Appearance of Impropriety”), the court found that Defendant’s work with SIE, ESC and MABR gave rise to the appearance of impropriety and stated that the court “exercises its inherent power (as an additional ground) to disqualify MABR from further representation herein.”

Defendant’s argument that the doctrine of unclean hands applies is based on subsection 5 of the Order (“Duty of Candor”), which provides in part:

. . . ESC, through MABR’s representation, has repeatedly changed positions regarding their relationship with [Defendant], positions which are completely at odds with each other.

After ESC filed the 2020 Gayner Declaration, SIE filed a motion to strike the declaration. ESC opposed the motion to strike, saying that “[Defendant] is not attempting to represent ESC in this action and is thus not accepting representation adverse to SIE.” Additionally, they argued, “ESC’s contact with [Defendant] does not put ESC’s counsel in a position to disclose or use SIE’s privileged information to assist ESC, in other words, [Defendant] has no knowledge of this action.”

In 2020, after ESC filed the 2020 Gayner Declaration, SIE emailed MABR to obtain more information. In response, MABR said “we will be represented [Defendant] in this matter.” SIE protested this representation and MABR agreed to decline representing [Defendant] to avoid disputes, but said, that with regard to ESC and [Defendant], “there was absolutely no confidential information, attorney-client communications, or attorney work product shared.”

Subsequently, on June 3, 2021, ESC identified [Defendant] as a witness likely to have [discoverable] information relevant to the case. . . .

Later, SIE asked ESC to “identify each person employed by ESC or retained by ESC as counsel” who communicated with any third party about ESC’s dispute with SIE and/or this action. ESC identified . . . [Defendant], and counsel of record . . . .” Subsequently, the parties met and conferred regarding the

deposition topic of [Defendant]. Afterwards, SIE’s counsel wrote to MABR: “During a meet and confer on May 2nd, ESC represented that [Defendant] was solely ESC’s attorney on matters that did not relate to SIE or this lawsuit, and that communications or information exchanged between ESC and [Defendant] that concerned SIE . . . are not privileged.” . . .

Subsequently, in [Plaintiff Chatel’s] declaration, he stated that in 2017, he “engaged [Defendant] to provide legal advise and counsel to ESC in a variety of matters, including the drafted and preparation of general agreements involving ESC’s intellectual property, as well as the negotiation and finalization of contracts between ESC and third parties,” and that “much of that work did not involve SIE.” That representation implicitly concedes that [Defendant] did some work which did involve SIE. Indeed, [Plaintiff Chatel] acknowledges that ‘as part of her engagement by ESC, [Defendant] did advise and assist ESC in connection with ESC’s work and negotiations with [SIE]” . . . [Plaintiff Chatel] stated that “[f]rom [his] perspective (and necessarily that of ESC), from approximately August 2017 until the present, Ms.

Gayner has been engaged as an outside attorney for ESC, providing ... legal services and counsel” . . .

In sum, MABR and ESC have breached their duty of candor. MABR and ESC have repeatedly changed their position regarding their relationship with [Defendant], claiming that [Defendant] “has no knowledge of this action” and yet admitting that [Defendant] has provided ESC with legal advice for their litigation with SIE. Additionally, MABR said that there was “absolutely no confidential information ... shared” yet subsequently claimed that their communications with [Defendant] as to SIE were privileged. MABR breached the duty of the candor owed to the court, and this provides another basis for disqualification of the firm.

(Order, RJN Exh. C at pp. 19-20 [internal citations omitted] [emphasis in original].)

The Court does not sustain the demurrer based on the doctrine of unclean hands. In its Order, the federal court first concluded that disqualification was warranted because of Defendant’s conflict of interest, which was imputed to Plaintiffs’ counsel MABR. The court subsequently addressed Plaintiffs’ breach of their duty of candor and concluded it was “another basis” for disqualification. Thus, the order can be interpreted to read that MABR would have been disqualified regardless of Plaintiffs’ breach of the duty of candor.

As a result, the Court cannot find based on the allegations of the Complaint, and the language of the federal court Order, that the doctrine of unclean hands necessarily bars Plaintiffs’ claims. Further, as Plaintiffs point out in their Opposition, Plaintiffs’ claims are based on more than just the disqualification of MABR. Plaintiffs also allege that Defendant produced privileged material to SIE in a document production and during her depositions, failed to disclose to Plaintiffs her

conflict and agreements with SIE, and failed to provide an engagement letter or conflict waiver. (Complaint,¶¶ 11, 15, 19, 22.) The Court cannot sustain a demurrer based on unclean hands because it challenges only part of Plaintiffs’ claims. A demurrer does not lie to only part of a cause of action. (See Cornejo v. Lightbourne (2013) 220 Cal.App.4th 932, 944.)

Statute of Limitations

Defendant also demurs to all six causes of action on the ground that they are barred by the one year statute of limitations under Code of Civil Procedure Section 340.6(a), which provides in part: “An action against an attorney for a wrongful act or omission, other than for actual fraud, arising in the performance of professional services shall be commenced within one year after the plaintiff discovers, or through the use of reasonable diligence should have discovered, the facts constituting the wrongful act or omission . . . .” “[S]ection 340.6(a) applies to a claim when the merits of the claim will necessarily depend on proof that an attorney violated a professional obligation—that is, an obligation the attorney has by virtue of being an attorney— in the course of providing professional services.” (Lee v.

Hanley (2015) 61 Cal.4th 1225, 1238 [emphasis in original].) Thus, this limitation period also applies to a client’s claims against the attorney for breach of fiduciary duty and for breach of contract. (See Stoll v. Superior Court (1992) 9 Cal.App.4th 1362, 1368-1369 [breach of fiduciary duty]; Southland Mechanical Constructors Corp. v. Nixen (1981) 119 Cal.App.3d 417, 429, disapproved on other grounds in Laird v. Blacker, supra, (1992) 2 Cal.4th 606, 617 [breach of contract]; Levin v. Graham & James (1995) 37 Cal.App.4th 798, 805.)1

“In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.’“ (Guardian North Bay, Inc. v. Superior Court (2001) 94 Cal.App.4th 963, 971-972 [citations omitted]; see also Childs v. State of California (1983) 144 Cal.App.3d 155, 161 [“‘[a] demurrer on the ground of the bar of the statute of limitations does not lie where the complaint merely shows that the action may have been barred.

It must appear affirmatively that, upon the facts stated, the right of action is necessarily barred”’] [citation omitted][emphasis in original].) “[T]here are no hard and fast rules for determining what facts or circumstances will compel inquiry by the injured party and render him chargeable with knowledge. [Citation.] It is a question for the trier of fact. However, whenever reasonable minds can draw only one conclusion from the evidence, the question becomes one of law.” (Brewer v. Remington (2020) 46 Cal.App.5th 14, 28 [citations and internal quotations omitted].)

Defendant argues that the facts alleged in the Complaint indicate that Plaintiffs should have discovered facts concerning Defendant’s alleged wrongdoing as of at least September 7, 2023, when SIE filed its motion to disqualify MABR arguing that MABR induced Defendant to disclose confidential SIE information, engaged in conduct giving rise to the appearance with impropriety, and violated its duty of candor. (RJN Exh. C at p. 9.) Plaintiffs filed their Complaint on August 8, 2025, almost two years later.

Defendant also argues that Plaintiffs had 1 Plaintiffs do not dispute that the one-year period under Section 340.6(a) applies to some of their claims, but suggest that it does not apply to their interference with contractual relations and constructive fraud causes of action. Plaintiffs do not identify any other limitations periods they contend apply to these two causes of action and only raise this issue in passing. As Plaintiffs fail to support this argument with any authority or analysis, the Court does not consider it. 6

suffered actual injury before September 7, 2023 because they had already spent money on legal fees and costs and had already experienced negative results in litigation.

Plaintiffs argue that the filing of SIE’s motion to disqualify is not the trigger date because the disqualification motion was directed at MABR, Plaintiffs’ counsel, and Plaintiffs saw it as a litigation tactic. Plaintiffs argue that they had no reason to suspect as of that time that Defendant had committed malpractice against them because Defendant concealed her wrongful acts against Plaintiffs and her agreements with SIE. (See Complaint, ¶¶11, 15.) Plaintiffs also argue that they did not sustain actual injury until the day the disqualification Order was entered – November 27, 2023 – because at that point their counsel was disqualified from representing them any further in the litigation.

Plaintiffs contend that given this trigger date, their claims are timely under the parties’ tolling agreement. (See Complaint, ¶7 [““On November 21, 2024, Plaintiffs and Gayner entered into a Tolling Agreement suspending the statute of limitations for one year from that date. This action is filed timely”].)

The Court does not sustain the demurrer on the basis of the statute of limitations as this defense is not clearly shown on the face of the Complaint. The Complaint does not clearly reflect when Plaintiffs discovered, or through the use of reasonable diligence should have discovered, the facts regarding Defendant’s conduct that resulted in the disqualification Order, or when Plaintiffs suffered actual injury from this conduct. While Defendant argues that Plaintiffs suffered actual injury before the Order was entered because they incurred attorney’s fees to respond to the disqualification motion, Defendant relies on pleadings of which she does not request judicial notice, and the Complaint does not reference any such pleadings or fees.

Similarly, Defendant argues that Plaintiffs were “subject to various negative results in litigation” before the disqualification Order, but Defendant fails to identify any such results and no such results appear on the face of the Complaint. Defendant’s arguments are speculative and not based on actual allegations of the Complaint.

Finally, the Court notes that Plaintiffs allege more than the disqualification Order as a basis for their claims; they also allege that Defendant disclosed privileged information to SIE in the litigation against SIE and that Defendant failed to provide a written engagement agreement or conflict waiver. To the extent Plaintiffs’ claims are based on these events, they may possibly be untimely. However, “where a plaintiff sues a defendant for legal malpractice alleging several distinct acts of malpractice with respect to a single representation, a demurrer is properly granted on the basis of the statute of limitations only if each alleged act of malpractice is time barred.” (Pointe San Diego Residential Community, LP v.

Propocio, Cory, Hargreaves & Savich, LLP (2011) 195 Cal.App.5th 265, 274 [emphasis in original].) Therefore, the existence of these other allegations does not warrant the sustaining of a demurrer if the demurrer cannot also be sustained as to the disqualification Order. The demurrer is overruled.

All parties must comply with Marin County Superior Court Local Rules, Rule 2.10(B) to contest the tentative decision. Parties who request oral argument are required to appear in person or remotely by ZOOM. Regardless of whether a party requests oral argument in

accordance with Rule 2.10(B), the prevailing party shall prepare an order consistent with the announced ruling as required by Marin County Superior Court Local Rules, Rule 2.11.

The Zoom appearance information for July, 2026 is as follows: https://marin-courts-ca-gov.zoomgov.com/j/1615487764?pwd=Ob4B5J7LLKcpnkxzJjjEOSHNzEGafG.1

Meeting ID: 161 548 7764 Passcode: 502070

If you are unable to join by video, you may join by telephone by calling (669) 254-5252 and using the above-provided passcode. Zoom appearance information may also be found on the Court’s website: https://www.marin.courts.ca.gov

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