Integrated Demolition and Remediation v. Socal Lien Solutions

Plaintiff argues the litigation privilege does not bar its claims because the gravamen of those claims is not based on what BHLC and Parikh said or filed in court but what they did with the money after it was collected with full knowledge that Plaintiff was contractually owed a share. Plaintiff argues that the latter is financial conduct, not litigation communication. Plaintiff further argues that the litigation privilege does not apply to protect against claims arising from a fraudulent scheme that merely uses litigation as its mechanism.

“The litigation privilege is codified in Civil Code section 47 (section 47): ‘[a] privileged publication or broadcast is one made . . . [i]n any . . . judicial proceeding. . . .’ [Citation.]” (Rusheen v. Cohen (2006) 37 Cal.4th 1048, 1057.) “ ‘The usual formulation is that the privilege applies to any communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some connection or logical relation to the action. [Citations.]’ [Citation.] Thus, ‘communications with “some relation” to judicial proceedings’ are ‘absolutely immune from tort liability’ by the litigation privilege [citation]. It is not limited to statements made during a trial or other proceedings, but may extend to steps taken prior thereto, or afterwards.” (Ibid.)

“Because the litigation privilege protects only publications and communications, a ‘threshold issue in determining the applicability’ of the privilege is whether the defendant's conduct was communicative or noncommunicative. [Citation.] The distinction between

communicative and noncommunicative conduct hinges on the gravamen of the action. [Citation.] That is, the key in determining whether the privilege applies is whether the injury allegedly resulted from an act that was communicative in its essential nature. The following acts have been deemed communicative and thus protected by the litigation privilege: attorney prelitigation solicitations of potential clients and subsequent filing of pleadings in the litigation [citation], and testimonial use of the contents of illegally overheard conversation [citation].” (Id. at p. 1058.)

Plaintiff alleges that defendant Jeff Coon also known as Jeff Anderson (“Anderson”) induced Plaintiff to enter into three separate contracts, titled Claim Assignments, pursuant to which Plaintiff assigned its unpaid construction claims to defendant SoCal Lien Solutions, LLC (“SoCal”) and Defendants would recover on the claims and disburse 85% of the recovered claims to Plaintiff. Plaintiff alleges that Defendants had a common plan to defraud Plaintiff using SoCal as a vehicle and BHLC and Parikh specifically took actions as licensed attorneys to enforce the claims without ensuring that Plaintiff received any compensation while knowing that Defendants were not compensating Plaintiff.

Plaintiff’s claims against BHLC and Parikh are based on their alleged engagement in a common plan to defraud Plaintiff rather than any conduct undertaken to achieve the objects of a potential litigation. This alleged conduct is distinct from that which has been held to be communicative, such as the solicitation of potential clients and filings of pleadings, and goes beyond BHLC and Parikh’s mere representation of SoCal in its collections efforts. Thus, the SAC does not show on its face that the claims against BHLC and Parikh are barred by the litigation privilege. (See Rickley v. Goodfriend (2013) 212 Cal.App.4th 1136, 1163 [“privilege does not bar a civil conspiracy claim against a defendant and his or her attorney . . .”].)

Economic Loss Rule

BHLC and Parikh argue that because there is a contract between SoCal and Plaintiff and the alleged harm is purely economic, the economic loss rule bars all causes of action against them.

Plaintiff argues (1) the economic loss rule does not apply to bar intentional tort claims such as fraud and conspiracy to defraud, (2) the economic loss rule does not apply because there is no contractual relationship, and (3) the unfair competition and conspiracy causes of action arise out of duties and obligations that are independent of any contract.

The economic loss rule provides that, “[i]n general, there is no recovery in tort for negligently inflicted ‘purely economic losses,’ meaning financial harm unaccompanied by physical or property damage.” (Sheen v. Wells Fargo Bank, N.A. (2022) 12 Cal.5th 905, 922.) “[T]he rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties” so as to prevent the law of contract and the law of tort from dissolving one into the other. (Ibid.) “The economic loss rule has been applied in various contexts.

First, it carries force when courts are concerned about imposing ‘ “liability in an indeterminate amount for an indeterminate time to an indeterminate class.” ’ ” (Ibid.) “In another recurring set of circumstances, the rule functions to bar claims in negligence for pure economic losses in deference to a contract between litigating parties.” (Ibid.)

BHLC and Parikh contend the economic loss rule applies to Plaintiff’s claims against them because there is a contract between SoCal and Plaintiff. However, there is no dispute that there is no contract between Plaintiff and BHLC and Parikh, and thus no concern regarding the law of contract and the law of tort from dissolving one into the other if Plaintiff’s claims against BHLC and Parikh are allowed to stand. They do not argue that there is any concern of imposing liability in an indeterminate amount for an indeterminate time to an indeterminate class. Thus, their arguments regarding the economic loss rule lack merit.

Third Cause of Action for Conspiracy to Defraud BHLC and Parikh argue this cause of action is barred by Civil Code section 1714.10(a) and there is no fraud or misrepresentation alleged against Defendants. They further argue that the agent immunity rule applies because they were acting as counsel for SoCal in an official capacity and were not personally bound by any duty to Plaintiff.

Section 1714.10(a) provides, in relevant part: “No 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, shall be included in a complaint or other pleading unless the court enters an order allowing the pleading that includes the claim for civil conspiracy to be filed after the court determines that the party seeking to file the pleading has established that there is a reasonable probability that the party will prevail in the action.”

Section 1714.10(a) does not apply here because Plaintiff’s action does not arise from any attempt to contest or compromise a claim or dispute between BHLC and Parikh and Plaintiff.

Defendants’ agent immunity argument is based on the exceptions set forth in section 1714.10(c). (See Central Concrete Supply Co., Inc. v. Bursak (2010) 182 Cal.App.4th 1092, 1100.) Because section 1714.10 does not apply here, the exceptions in section 1714.10 are irrelevant to whether the SAC states sufficient facts to support a conspiracy cause of action.

While the SAC does not allege that BHLC or Parikh made any misrepresentations to Plaintiff themselves, it does allege that they acted as part of a common plan to defraud Plaintiff using SoCal as a vehicle and BHLC and Parikh agreed to collect the Claim Assignments without paying or ensuring payment to Plaintiff. These allegations support a claim for conspiracy. (Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 510-511 [conspiracy is “a legal doctrine that imposes liability in persons who, although not actually

committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration.”].)

Seventh Cause of Action for Negligence Defendants argue this cause of action fails because there is no duty owed to Plaintiff, no breach of any duty, and no causation.

Plaintiff argues that Defendants owed it a duty of care because their work was specifically intended to recover money belonging to Plaintiff. They contend that the entire purpose of the Claim Assignments was to recover construction proceeds and pay 85% to Plaintiff and the harm to Plaintiff was foreseeable and specifically known to Parikh and Defendants owed a standard of care to take reasonable steps to ensure that Plaintiff would receive its share.

Plaintiff alleges in the SAC that BHLC and Parikh were negligent in causing damage to Plaintiff by failing to protect Plaintiff’s interests as the primary intended beneficiary of their work, that it was foreseeable that the failure to ensure payment to Plaintiff would cause Plaintiff harm, and that their negligence caused Plaintiff to suffer damages.

The legal authorities cited by BHLC and Parikh relate to a duty of care owed by an attorney in the conduct of his or her professional duties and state that generally, an attorney is liable for professional negligence to his or her client alone. Here, Plaintiff is not suing Defendants based on professional negligence and, therefore, the cases are inapt. Plaintiff has alleged that Defendants owed it a duty and breached that duty, causing Plaintiff monetary damages. These allegations support each element of a negligence cause of action.

Eighth Cause of Action for Unfair Business Practices Defendants argue this cause of action fails because Plaintiff fails to identify which law was violated by Defendants, relies only on common law principles such as negligence for the unfair prong, and has not alleged

any fraudulent business practices with the required specificity.

Plaintiff contends that the SAC adequately alleges that Defendants assisted and facilitated Anderson’s and SoCal’s unauthorized practice of law and disregarded Plaintiff’s contractual right to the proceeds.

Plaintiff alleges that Defendants have a pattern and practice of making material misrepresentations that SoCal will recover payments owed on construction claims and pay a percentage of the recovery to those who retain Defendants but then keeps the entirety of the funds. Plaintiff alleges that BHLC and Parikh worked closely with Anderson to execute this fraud against Plaintiff and were used to recover on the claims with the knowledge that Defendants would not distribute any of the recovered amounts to Plaintiff.

Section 17200 of the Business and Professions Code defines unfair competition to include “any unlawful, unfair or fraudulent business act or practice . . . .” “ ‘[T]he unfair competition law’s scope is broad.” (Schnall v. Hertz Corp. (2000) 78 Cal.App.4th 1144, 1153.) “ ‘Its coverage is “sweeping, embracing ‘ “ ‘anything that can properly be called a business practice and that at the same time is forbidden by law.’ ” ’ ” (Ibid.) Section 17200 “borrows” violations of other laws and treats them as unlawful practices. (Ibid.) “ ‘However, the law does more than just borrow. The statutory language referring to “any unlawful, unfair or fraudulent” practice [] makes clear that a practice may be deemed unfair even if not specifically proscribed by some other law.’ ” (Ibid.)

Here, the SAC read as a whole alleges that BHLC and Parikh conspired with the other Defendants to defraud Plaintiff. These allegations are sufficient to support a cause of action under the broad scope of the unfair competition statute.

BHLC and Parikh to file an answer to the SAC within 20 days.

Moving party to give notice.