Dykema Gossett LLP vs. SCSA Group, Inc.

Cross-Complainants contend that Dykema improperly uses judicial notice to go beyond the face of the FAXC. Cross-Complainants contend that even if Section 340.6 applies to their claims, there are separate issues of accrual, discovery, and later reconstruction on the face of the pleading which create factual question that are not properly resolved on demurrer.

Sham Pleading

Dykema contends that the Cross-Complaint contains judicial admissions which were omitted from the FAXC and are subject to judicial notice.

“Under the sham pleading doctrine, plaintiffs are precluded from amending complaints to omit harmful allegations, without explanation, from previous complaints to avoid attacks raised in demurrers or motions for summary judgment. [Citations.]” (Deveny v. Entropin, Inc. (2006) 139 Cal.App.4th 408, 425.) The sham pleading does not apply if a plausible explanation for the amendment is given. (Id. at p. 426.) “The sham pleading doctrine is not ‘intended to prevent honest complainants from correcting erroneous allegations . . . or to prevent correction of ambiguous facts.’ [Citation.] Instead, it is intended to enable courts ‘to prevent an abuse of process.’ [Citation.]” (Ibid.)

Where an amended pleading omits allegations without providing an explanation, the trial court properly considers the allegations from the earlier complaints when ruling on the demurrers. (Larson v. UHS of Rancho Springs, Inc. (2014) 230 Cal.App.4th 336, 345.)

The Cross-Complaint alleged that Cross-Complainants’ claims were tolled under Code of Civil Procedure section 340.6(a)(2), and that Dykema’s representation of Cross-Complainants ended in July 2021. (Dykema’s Request for Judicial Notice (“RJN”), Ex. C, Cross- Complaint, ¶¶ 9, 114.) Cross-Complainants do not dispute that these allegations were omitted from the FAXC and do not explain the omission. As these allegations and relevant to the application of the statute of limitations and Cross-Complainants provide no explanation for omitting these allegations from the FAXC, the Court considers them.

Statute of Limitations

A demurrer can be used only to challenge defects that appear within the “four corners” of the pleading – which includes the pleading, any exhibits attached, and matters of which the court is permitted to take judicial notice. (Blank v. Kirwan (1985) 39 Cal. 3d 311, 318; Donabedian v. Mercury Ins. Co. (2004) 116 Cal. App. 4th 968, 994.) No other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.) On demurrer, a complaint must be liberally construed. (Code Civ. Proc. § 452; Stevens v. Superior Court (1999) 75 Cal. App. 4th 594, 601.) All material facts properly pleaded, and reasonable inferences, must be accepted as true. (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal. 4th 962, 966-67.)

Where the complaint discloses that the statute of limitations bars the action, a general demurrer is an appropriate means to assert such a facial defect. (Saliter v. Pierce Brothers Mortuaries (1978) 81 Cal.App.3d 292, 300 n. 2; Iverson, Yoakum, Papiano & Hatch v. Berwald (1999) 76 Cal.App.4th 990, 995; Vaca v. Wachovia Mortg. Corp. (2011) 198 Cal.App.4th 737, 746.)

In order for the statute of limitations bar to be raised by demurrer, it is not enough that the action may be timebarred, it must appear that the action is time-barred. (Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403.) “A general demurrer based on the statute of limitations is only permissible where the dates alleged in the complaint show that the action is barred by the statute of limitations.” (Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324, citation omitted.) “The running of the statute must appear ‘clearly and affirmatively’ from the dates alleged.

It is not sufficient that the complaint might be barred. [Citation.] If the dates establishing the running of the statute of limitations do not clearly appear in the complaint, there is no ground for general demurrer. The proper remedy ‘is to ascertain the factual basis of the contention through discovery and, if necessary, file a motion for summary judgment....’ [Citation.]” (Id. at pp. 324-325.)

A statute of limitations runs from the moment a claim accrues. (Aryeh v. Canon Business Solutions, Inc. (2013) 55 Cal.4th 1185, 1191.) “Traditionally at common law, a ‘cause of action accrues “when [it] is complete with all of its elements”—those elements being wrongdoing, harm, and causation.’ [Citation.]” (Ibid.)

Cross-Complainants concede that Section 340.6 applies to their claims and applies broadly to claims based on violations of an attorney's professional obligations, including excessive-fee and attorney-billing claims such that Section 340.6 applies to the FAXC’s claims arising from Dykema’s alleged billing practices. (Opposition, 5:13-18.)

Code of Civil Procedure section 340.6(a) states, in relevant 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, or four years from the date of the wrongful act or omission, whichever occurs first.” (Code Civ. Proc. § 340.6(a).)

Code of Civil Procedure “section 340.6(a)’s time bar applies to claims whose merits necessarily depend on proof that an attorney violated a professional obligation in the course of providing professional services. In this context, a ‘professional obligation’ is an obligation that an attorney has by virtue of being an attorney, such as fiduciary obligations, the obligation to perform competently, the obligation to perform the services contemplated in a legal services contract into which an attorney has entered, and the obligations embodied in the Rules of Professional Conduct.” (Lee v.

Hanley (2015) 61 Cal.4th 1225, 1236-1237.) “[S]ection 340.6(a) does not bar a claim for wrongdoing—for example, garden-variety theft—that does not require proof that the attorney has violated a professional obligation, even if the theft occurs while the attorney and the victim are discussing the victim’s legal affairs. Section 340.6(a) also does not bar a claim arising from an attorney’s performance of services that are not ‘professional services,’ meaning ‘services performed by an attorney which can be judged against the skill, prudence and diligence commonly possessed by other attorneys.’ [Citation.]” (Id. at p. 1237.) “[T]he attorneyclient relationship often requires attorneys to provide nonlegal professional services such as accounting, bookkeeping, and holding property in trust. [Citation.] . . . .

In light of the Legislature’s intent that section 340.6(a) cover more than claims for legal malpractice, the term ‘professional services’ is best understood to include nonlegal services governed by an attorney’s professional obligations. (Ibid.) “[T]he question is whether the claim, in order to succeed, necessarily depends on proof that an attorney violated a professional obligation as opposed to some generally applicable nonprofessional obligation.” (Id. at p. 1238.)

Section 340.6(a) applies to claims that an attorney charged excessive, wrongful, and/or unconscionable fees. (Foxen v. Carpenter (2016) 6 Cal.App.5th 284, 291 [finding that plaintiff’s claims for breach of contract, declaratory relief, money had and received, and breach of the implied covenant of good faith and fair dealing were governed by Section 340.6 as plaintiff’s contract claims were based on defendants’ alleged misconduct in allocating settlement funds]; Levin v. Graham & James (1995) 37 Cal.App.4th 798, 800 [finding that an allegation that a lawyer charged a client excessive, unreasonable or unconscionable fees for professional services does not take the action outside the one-year statute of limitations for wrongful acts or omissions by an attorney in the performance of professional services, and that the statute is not tolled until the client actually pays the fees, but begins to run, when the client knows or should have known the facts constituting the alleged overcharge]; Schultz v.

Harney (1994) 27 Cal.App.4th 1611, 1621 [finding an allegation that an attorney engaged in self-dealing to the detriment of his client by charging an excessive and unlawful fee is sufficient to charge an act of professional negligence].)

“Under Code of Civil Procedure section 340.6, . . ., the one-year period is triggered by the client’s discovery of ‘the facts constituting the wrongful act or omission,’ not by his discovery that such facts constitute professional negligence, i.e., by discovery that a particular legal theory is applicable based on the known facts. ‘It is irrelevant that the plaintiff is ignorant of his legal remedy or the legal theories underlying his cause of action. Thus, if one has suffered appreciable harm and knows or suspects that professional blunderings is its cause, the fact that an attorney has not yet advised him does not postpone commencement of the limitations period.’ [Citations.]” (Worton v. Worton (1991) 234 Cal.App.3d 1638.)

“Section 340.6 states two distinct and alternative limitations periods: One year after actual or constructive discovery, or four years after occurrence (the date of the wrongful act or omission), whichever occurs first. The statute applies to an action for malpractice as well as a breach of fiduciary duty arising out of the performance of an attorney’s duties. [Citation.]” (Britton v. Girardi (2015) 235 Cal.App.4th 721, 732-733

The test for actual injury under Section 340.6 is “whether the plaintiff has sustained any damages compensable in an action, other than one for actual fraud, against an attorney for a wrongful act or omission arising in the performance of professional services.” (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 751.) The fact of damage, not the amount is the relevant consideration. (Adams v. Paul (1995) 11 Cal.4th 583, 589 (“Adams”).) “[T]he character or quality of the injury must be manifest and palpable. ‘The mere breach of a professional duty, causing only nominal damages, speculative harm, or the threat of future harm—not yet realized—does not suffice . . . .’ [Citations.]” (Ibid.)

Here, as set forth above, the Cross-Complaint alleged that Cross-Complainants’ claims were tolled under Code of Civil Procedure section 340.6(a)(2), and that Dykema’s representation of Cross-Complainants ended in July 2021. (RJN, Ex. C, Cross-Complaint, ¶¶ 9, 114.)

The FAXC alleges that between 2019 and 2021, Dykema billed Cross-Complainants more than $800,000, which far exceeded the scope and purpose of the limited appellate engagement, and that the billing records reveal pervasive duplication, vague entries, and undisclosed staffing, work outside the agreed scope, and inaccurate accounting of payments. (RJN, Ex. D, FAXC, ¶¶ 2, 16.) It is alleged that “[a]fter representation tapered off, Dykema provided no invoices, billing updates, or account statements for approximately 18 months, then shortly before filing this lawsuit reissued and resent invoices purporting to show a claimed balance of $297,163.84, while crediting only a small fraction of the substantial payments Cross-Complainants actually made.” (Id., ¶¶ 3, 20-21.)

It is alleged that “Dykema’s reissued invoices contained vague billing descriptions, undisclosed staffing, work outside scope, duplicative charges, and incorrect payment application. (Id., ¶ 22.) The FAXC alleges that “Cross-Complainants do not allege deficient legal advice, advocacy, or work product. The claims asserted herein do not depend on proof of professional negligence or violations of a legal standard of care, but instead arise from billing practices, failure to disclose staffing and rates, failure to credit payments, statutory noncompliance, and retention of fees beyond the reasonable value of services.” (Id., ¶¶ 23-24.)

Based on the allegations of the Cross-Complaint and FAXC, Cross-Complainants knew or should have discovered facts constituting the alleged wrongful billing practices in 2021, at the latest, as the Cross- Complaint alleges that Dykema continuously represented Cross-Complainants “through approximately July 2021,” and as the FAXC alleges that Dykema billed Cross-Complainants more than $800,000 between 2019 and 2021. By these allegations, Cross-Complainants knew or should have known facts relating to the alleged wrongful billing practices, i.e., failure to disclose staffing and rates, failure to credit payments, statutory noncompliance, and retention of fees beyond the reasonable value of services, as well as vague billing descriptions, work outside of the scope, and duplicative charges, by 2021.

Additionally, the FAXC does not allege a “later account reconstruction” but alleges that Dykema “reissued and resent invoices.” To the extent that the FAXC may allege that additional overcharges were discovered in the “reissued” invoices, this does not toll the statute of limitations, and it is the fact of damages, not the amount that is relevant. The fact of the damage occurred at the time Cross- Complainants were billed in 2019-2021.

Cross-Complainants also allege actual injury in making “substantial six-figure payments to Dykema.” (Ex. D to RJN, FAXC, ¶¶ 3, 18, 25, 37, 55, 79, 87, 104, 116, 136, 144, 147-148, 162.) The Prayer for Relief seeks general and special damages for all amounts overpaid to Dykema as a result of unreasonable, duplicative, vague, unauthorized, or out-of-scope billing, for restitution of all amounts paid to Dykema in excess of the reasonable value of services, for disgorgement of all fees obtained by Dykema during periods in which it breached its fiduciary duties, violated statutory obligations, or billed improperly, and for set off against any amounts claimed to be owed by Dykema in its Complaint. (Id., Prayer for Relief, ¶¶ 1-4.)

Based on the foregoing, Cross-Complainants were required to bring suit within one year after 2021, i.e., in 2022. However, this action was filed on September 25, 2025, such that it is barred by the statute of limitations.

In addition, Cross-Complainants do not argue or show that the statute of limitations was tolled, nor could they.

As relevant here, the time for commencement of legal action shall not exceed four year except that the period shall be tolled during the time that any of the following exist: (1) The plaintiff has not sustained actual injury. (2) The attorney continues to represent the plaintiff regarding the specific subject matter in which the alleged wrongful act or omission occurred. (Code Civ. Proc. § 340.6(a)(1)-(2).) As set forth above, Cross- Complainants’ allegations support actual injury beginning in 2019, at the earliest, and 2021, at the latest.

Next, the Cross-Complaint alleged that “limitations were tolled under Code Civ. Proc. § 340.6(a)(2) during Dykema’s continuous representation through approximately July 2021 . . . .” (Ex. C to RJN, Cross- Complaint, ¶ 9.) By this allegation, Cross- Complainants admit that Dykema ceased representing Cross-Complainants in July 2021. Thus, at the latest, Cross-Complainants had until July 2022 to file their claims.

Even if the four-year limitations period under Code of Civil Procedure section 340.6 applied, Cross- Complainants’ claims would still be time-barred. Based on the allegations of the Cross-Complaint and FAXC, the date of the occurrence or the alleged wrongful act would be, at the latest, in July 2021, when Dykema’s representation of Cross-Complainants ended. Thus, Cross-Complainants would have had to file their claims by July 2025. However, the instant Cross-Complaint was filed on September 25, 2025, after the four-year limitations expired.

As Plaintiff’s claims are barred by the limitations set forth in Code of Civil Procedure section 340.6, Dykema’s demurrer to the FAXC is SUSTAINED, without leave to amend.

Dykema requests that the Court take judicial notice of the existence and contents of four documents: (1) Notice of Right to Arbitrate served on Defendants and Cross-Complainants SCSA Group, Inc., a California corporation and David Dewyke, an individual on April 29, 2025 (Ex. A); (2) Complaint filed in this action on September 25, 2025 (Ex. B); (3) Cross-Complaint filed in this action on December 9, 2025 (Ex. C); and (4) FAXC filed in this action on January 12, 2026 (Ex. D).

The Court GRANTS the request as to Exhibits B through D pursuant to Evidence Code section 452(d) but declines to take judicial notice of the truth of hearsay statements therein. (See Lockley v. Law Office