DR DORAN HENDELMAN, ET AL. VS ELLIS LAW CORPORATION, ET AL.

Tentative Rulings

Case Number: 20STLC08485    Hearing Date: March 9, 2021    Dept: 26

Dr. Doran Hendelman DC, et al. v. Ellis Law Corp., et al.DEMURRER

(CCP § 430.10, et seq.)

TENTATIVE RULING:

Defendant Ellis Law Corporation’s Demurrer to the Complaint is OVERRULED.

DEFENDANT ELLIS LAW CORPORATION IS TO FILE AND SERVE AN ANSWER TO THE COMPLAINT WITHIN 20 DAYS’ SERVICE OF THIS ORDER.

ANALYSIS:

On October 7, 2020, Plaintiffs Dr. Doran Hendelman DC dba Doran Hendelman Chiro and Gerald Mason (“Plaintiffs”) filed the Complaint in this action against Defendants Ellis Law Corporation (“Defendant”) and Andrew L. Ellis, Esq., who was dismissed on December 16, 2020. The Complaint alleges causes of action for (1) breach of contract; (2) breach of fiduciary duty; (3) conversion; (4) violation of Cal. Business & Professions Code § 17200; and (5) intentional interference with contractual relations. Defendant filed the instant Demurrer to the Complaint on February 5, 2021. Plaintiffs filed an opposition on February 16, 2021.

Discussion

The Demurrer is accompanied by a meet and confer declaration as required by Code of Civil Procedure section 430.41. (Demurrer, Yazdi Decl., ¶¶2-3 and Exhs. A-B.) Defendant demurs to each cause of action for failure to allege sufficient facts to state a cause of action (Code Civ. Proc., § 430.10, subd. (e)) and to the first, second and fifth causes of action for defect of parties (Code Civ. Proc., § 430.10, subd. (c).) However, special demurrers are not permitted in courts of limited jurisdiction. (Code Civ. Proc., § 92, subd. (c).) Therefore, the Court will not consider the demurrer for defect of parties.

Allegations in the Complaint

The Complaint alleges that Defendant sent its client, Nassim Sanani (“the patient”), to be treated by Plaintiffs following a personal injury accident in July 2015. (Compl., ¶8.) The patient and Defendant signed a healthcare lien agreement (“the Lien Agreement”) on November 13, 2017 that obligated Defendant to pay the lien amount to Plaintiffs once the patient’s case settled. (Id. at ¶¶9-10 and Exh. A.) The Lien Agreement entitles Plaintiffs to 100 percent of their billings regardless of the settlement amount. (Id. at ¶10.) After Plaintiffs provided medical care to the patient, Defendant breached its fiduciary duty by disbursing the funds directly to the patient. (Id. at ¶15.) Plaintiffs have been forced to go directly to the patient to recover the monies owed under the Lien Agreement. (Id. at ¶25.)

1st Cause of Action for Breach of Contract

In order to allege a cause of action for breach of contract, the Complaint must allege facts showing (1) the existence of a contract; (2) plaintiff’s performance under the contract or excuse for non-performance; (3) defendant’s breach of the contract; and (4) resulting damage to plaintiff from the breach. (Wall Street Network, Ltd. v. New York Times Co. (2008) 164 Cal.App.4th 1171, 1178.) Defendant demurs on the grounds that there is no allegation of breach. The Complaint, however, alleges Defendant is obligated under the Lien Agreement to withhold sums from any settlement agreement reached on the patient’s behalf to adequately protect Plaintiffs with respect to sums due for treatment to the patient. (Compl., ¶28 and Exh. A.) The Complaint further alleges that Defendant failed to withhold the sums as required in breach of the Lien Agreement. (Id. at ¶29.) This adequately alleges a cause of action for breach of contract.

The demurrer to the first cause of action is overruled.

2nd Cause of Action for Breach of Fiduciary Duty

Defendant demurs to this cause of action on the grounds that the Complaint fails to allege facts showing the existence of a fiduciary relationship between the parties. The California Supreme Court, however, has held that an attorney who holds funds in trust for a third-party non-client, is a fiduciary to that third-party. (Johnstone v. State Bar (1966) 64 Cal.2d 153, 155-156 [“the funds in his possession are impressed with a trust, and his conversion of such funds is a breach of the trust.”].)

The Complaint alleges that, under the Lien Agreement, Defendant was to hold the settlement funds from the patient’s case for Plaintiffs’ benefit. (Compl., ¶36.) This allegation supports the existence of a fiduciary relationship between the parties.

The demurrer to the second cause of action is overruled.

3rd Cause of Action for Conversion

Conversion is defined as defendant’s disposition of property inconsistent with plaintiff's rights resulting in damages. (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.) Defendant argues that this cause of action fails to allege that Defendant disbursed any funds claimed by Plaintiffs.

The Complaint, however, alleges that Plaintiffs owned the rights to the proceeds from the patient’s settlement and that by disbursing the funds to the patient, Defendant “illicitly converted Plaintiffs’ rights and property to” its own use. (Compl., ¶¶44-47.) This sufficiently alleges Defendant’s disposition of the settlement proceeds in a manner inconsistent with Plaintiff’s right to those proceeds.

The demurrer to the third cause of action is overruled.

4th Cause of Action for Violation of Business & Professions Code § 17200

A cause of action for unlawful, unfair or fraudulent business practices is brought pursuant to Cal. Business & Professions Code section 17200, et seq. “[A] breach of contract may ... form the predicate for Section 17200 claims, provided it also constitutes conduct that is ‘unlawful, or unfair, or fraudulent.’ ” (Puentes v. Wells Fargo Home Mortgage, Inc. (2008) 160 Cal.App.4th 638, 645 [citing Watson Laboratories, Inc. v. Rhone–Poulenc Rorer, Inc. (2001) 178 F.Supp.2d 1099, 1117, fn. 12].) Defendant vaguely demurs to this cause of action on the grounds that the Complaint relies on assumptions and guesses. Whether a fact alleged in the Complaint is an assumption or guess is not something to be determined on demurrer. (Fox v. JAMDAT Mobile, Inc. (2010) 185 Cal.App.4th 1068, 1078 [“a demurrer accepts as true all well pleaded facts and those facts of which the court can take judicial notice.”].) The Complaint alleges that Defendant unfairly deducted its own costs and fees from the settlement amount before making the remainder available to lien holders such as Plaintiffs. (Id. at ¶53.) The Court accepts this allegation as true and finds that it supports the cause of action for unfair business practices.

The demurrer to the fourth cause of action is overruled.

5th Cause of Action for Intentional Interference with Contractual Relations

The elements of a cause of action for intentional interference with contractual relations are (1) the plaintiff had a valid and existing contract with a third party; (2) defendant had knowledge of the contract; (3) defendant committed intentional and unjustified acts designed to interfere with or disrupt the contract; (4) actual interference with or disruption of the relationship; and (5) resulting damages. (Davis v. Nadrich (2009) 174 Cal.App.4th 1, 10.) Defendant demurs to this cause of action on the grounds that Plaintiffs again have not alleged it disbursed funds claimed by Plaintiffs. As discussed above, Plaintiffs have alleged their right to the settlement funds disbursed by Defendant to the patient. This is again alleged in the fifth cause of action. (Compl., ¶58.)

The demurrer to the fifth cause of action is overruled.

Conclusion

Defendant Ellis Law Corporation’s Demurrer to the Complaint is OVERRULED.

DEFENDANT ELLIS LAW CORPORATION IS TO FILE AND SERVE AN ANSWER TO THE COMPLAINT WITHIN 20 DAYS’ SERVICE OF THIS ORDER.

Moving party to give notice.