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This case was last updated from Los Angeles County Superior Courts on 05/02/2021 at 18:12:45 (UTC).

DE LAGE LANDEN FINANCIAL SERVICES, INC. VS CITY OF MONTEBELLO, A MUNICIPAL CORPORATION, ET AL.

Case Summary

On 07/20/2020 DE LAGE LANDEN FINANCIAL SERVICES, INC filed a Contract - Other Contract lawsuit against CITY OF MONTEBELLO, A MUNICIPAL CORPORATION. This case was filed in Los Angeles County Superior Courts, Stanley Mosk Courthouse located in Los Angeles, California. The Judges overseeing this case are DAVID J. COWAN and KEVIN C. BRAZILE. The case status is Pending - Other Pending.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    *******7191

  • Filing Date:

    07/20/2020

  • Case Status:

    Pending - Other Pending

  • Case Type:

    Contract - Other Contract

  • Court:

    Los Angeles County Superior Courts

  • Courthouse:

    Stanley Mosk Courthouse

  • County, State:

    Los Angeles, California

Judge Details

Presiding Judges

DAVID J. COWAN

KEVIN C. BRAZILE

 

Party Details

Plaintiff

DE LAGE LANDEN FINANCIAL SERVICES INC.

Defendants

ALVAREZ-GLASMAN & COLVIN A CALIFORNIA LAW FIRM

CITY OF MONTEBELLO A MUNICIPAL CORPORATION

GLASMAN ARNOLD MICHAEL AKA ARNOLD M. ALVAREZ-GLASMAN

Attorney/Law Firm Details

Plaintiff Attorney

GOLDBERG MARSHALL

Defendant Attorneys

WADLINGTON MARLON

DAVID HENRY S

DAVID HENRY

 

Court Documents

Answer - ANSWER TO FIRST AMENDED COMPLAINT

4/26/2021: Answer - ANSWER TO FIRST AMENDED COMPLAINT

Order - RULING: APRIL 14, 2021

4/14/2021: Order - RULING: APRIL 14, 2021

Reply - REPLY IN SUPPORT OF CITY'S DEMURRER TO FIRST AMENDED COMPLAINT

4/7/2021: Reply - REPLY IN SUPPORT OF CITY'S DEMURRER TO FIRST AMENDED COMPLAINT

Opposition - OPPOSITION DE LAGE LANDEN FINANCIAL SERVICES OPPOSITION TO DEFENDANTS ARNOLD MICHAEL GLASMAN AND ALVAREZ-GLASMAN & COLVINS DEMURRER TO THE FIRST AMENDED COMPLAINT

4/1/2021: Opposition - OPPOSITION DE LAGE LANDEN FINANCIAL SERVICES OPPOSITION TO DEFENDANTS ARNOLD MICHAEL GLASMAN AND ALVAREZ-GLASMAN & COLVINS DEMURRER TO THE FIRST AMENDED COMPLAINT

Opposition - OPPOSITION DE LAGE LANDEN FINANCIAL SERVICES OPPOSITION TO DEFENDANT CITY OF MONTEBELLOS DEMURRER TO THE FIRST AMENDED COMPLAINT

4/1/2021: Opposition - OPPOSITION DE LAGE LANDEN FINANCIAL SERVICES OPPOSITION TO DEFENDANT CITY OF MONTEBELLOS DEMURRER TO THE FIRST AMENDED COMPLAINT

Minute Order - MINUTE ORDER (COURT ORDER REGARDING CONTINUANCE OF HEARINGS)

2/5/2021: Minute Order - MINUTE ORDER (COURT ORDER REGARDING CONTINUANCE OF HEARINGS)

Notice - NOTICE OF CASE REASSIGNMENT

2/10/2021: Notice - NOTICE OF CASE REASSIGNMENT

Declaration - DECLARATION IN SUPPORT OF DEMURRER AND MOTION TO STRIKE

12/11/2020: Declaration - DECLARATION IN SUPPORT OF DEMURRER AND MOTION TO STRIKE

Declaration - DECLARATION IN SUPPORT OF DEMURRER TO FIRST AMENDED COMPLAINT

12/11/2020: Declaration - DECLARATION IN SUPPORT OF DEMURRER TO FIRST AMENDED COMPLAINT

Demurrer - with Motion to Strike (CCP 430.10)

12/11/2020: Demurrer - with Motion to Strike (CCP 430.10)

Notice of Case Reassignment and Order for Plaintiff to Give Notice

12/22/2020: Notice of Case Reassignment and Order for Plaintiff to Give Notice

Case Management Statement

11/18/2020: Case Management Statement

Case Management Statement

11/18/2020: Case Management Statement

Notice - NOTICE OF ENTRY OF ORDER CONTINUING HEARING ON DEMURRER

10/16/2020: Notice - NOTICE OF ENTRY OF ORDER CONTINUING HEARING ON DEMURRER

Demurrer - without Motion to Strike

9/22/2020: Demurrer - without Motion to Strike

Declaration - DECLARATION OF HENRY S. DAVID RE MEET-AND-CONFER

9/22/2020: Declaration - DECLARATION OF HENRY S. DAVID RE MEET-AND-CONFER

Order - ORDER STRIKING UNAUTHORIZED ANSWER PURPORTEDLY FILED ON BEHALF OF CITY OF MONTEBELLO

9/18/2020: Order - ORDER STRIKING UNAUTHORIZED ANSWER PURPORTEDLY FILED ON BEHALF OF CITY OF MONTEBELLO

Answer

8/27/2020: Answer

45 More Documents Available

 

Docket Entries

  • 10/03/2022
  • Hearing10/03/2022 at 09:30 AM in Department 20 at 111 North Hill Street, Los Angeles, CA 90012; Jury Trial

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  • 09/29/2022
  • Hearing09/29/2022 at 08:30 AM in Department 20 at 111 North Hill Street, Los Angeles, CA 90012; Final Status Conference

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  • 12/01/2021
  • Hearing12/01/2021 at 08:30 AM in Department 20 at 111 North Hill Street, Los Angeles, CA 90012; Post-Mediation Status Conference

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  • 04/26/2021
  • DocketAnswer (TO FIRST AMENDED COMPLAINT); Filed by Arnold Michael Glasman (Defendant); Alvarez-Glasman & Colvin, A California Law Firm (Defendant)

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  • 04/26/2021
  • DocketAnswer; Filed by City of Montebello, A Municipal Corporation (Defendant)

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  • 04/15/2021
  • DocketNotice (of Trial and Related Dates Set at Case Management Conference)); Filed by City of Montebello, A Municipal Corporation (Defendant); Arnold Michael Glasman (Defendant); Alvarez-Glasman & Colvin, A California Law Firm (Defendant)

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  • 04/15/2021
  • DocketNotice of Ruling; Filed by City of Montebello, A Municipal Corporation (Defendant); Arnold Michael Glasman (Defendant); Alvarez-Glasman & Colvin, A California Law Firm (Defendant)

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  • 04/14/2021
  • Docketat 08:30 AM in Department 20, Kevin C. Brazile, Presiding; Hearing on Demurrer - with Motion to Strike (CCP 430.10) (To First Amended Complaint) - Held

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  • 04/14/2021
  • Docketat 08:30 AM in Department 20, Kevin C. Brazile, Presiding; Hearing on Demurrer - without Motion to Strike (To FAC, Filed by Defendant, City of Montebello) - Held

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  • 04/14/2021
  • Docketat 08:30 AM in Department 20, Kevin C. Brazile, Presiding; Case Management Conference - Held

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61 More Docket Entries
  • 09/10/2020
  • DocketSubstitution of Attorney; Filed by City of Montebello, A Municipal Corporation (Defendant)

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  • 09/01/2020
  • DocketProof of Service by Substituted Service; Filed by De Lage Landen Financial Services, Inc. (Plaintiff)

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  • 09/01/2020
  • DocketProof of Service by Substituted Service; Filed by De Lage Landen Financial Services, Inc. (Plaintiff)

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  • 09/01/2020
  • DocketProof of Personal Service; Filed by De Lage Landen Financial Services, Inc. (Plaintiff)

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  • 08/27/2020
  • DocketAnswer ((STRICKEN ON 9/18/20)); Filed by City of Montebello, A Municipal Corporation (Defendant)

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  • 07/31/2020
  • DocketNotice of Case Management Conference; Filed by Clerk

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  • 07/21/2020
  • DocketSummons (on Complaint); Filed by De Lage Landen Financial Services, Inc. (Plaintiff)

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  • 07/20/2020
  • DocketNotice of Case Assignment - Unlimited Civil Case; Filed by Clerk

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  • 07/20/2020
  • DocketComplaint; Filed by De Lage Landen Financial Services, Inc. (Plaintiff)

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  • 07/20/2020
  • DocketCivil Case Cover Sheet; Filed by De Lage Landen Financial Services, Inc. (Plaintiff)

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Tentative Rulings

Case Number: 20STCV27191    Hearing Date: April 14, 2021    Dept: 20

Tentative Ruling

Judge Kevin C. Brazile

Department 20


Hearing Date: Wednesday, April 14, 2021

Case Name: De Lage Landen Financial Servs., Inc. v. City of Montebello, et al.

Case No.: 20STCV27191

Motions: Demurrers with Motions to Strike

Moving Parties: Defendant City of Montebello; Defendants Glasman et al.

Responding Party: Plaintiff De Lage Landen

Notice: OK


Ruling: The Motion to Strike is GRANTED WITHOUT LEAVE TO AMEND Glasman’s Demurrer is OVERRULED.

Glasman’s Motion to Strike is DENIED.

The City’s Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the causes of action for breach of contract, breach of implied covenant of good faith and fair dealing, and declaratory relief regarding enforceability of the Leases.

Defendants to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear remotely by LA Court Connect rather than in person.


 

BACKGROUND

On November 9, 2020, Plaintiff De Lage Landen Financial Services, Inc. filed a First Amended Complaint (“FAC”) against Defendants City of Montebello (the “City”), Arnold Michael Glasman aka Arnold M. Alvarez-Glasman, Alvarez-Glasman & Colvin, and Does 1-10, stating causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, negligence, conversion, declaratory relief, and unfair business practices under Bus. & Prof. Code sec. 17200 et seq. (UCL). The claims arise out of Plaintiff’s equipment lease contracts with the City, under which Plaintiff bought equipment on behalf of the City and leased it to the City (the “Leases”). The claims against Glasman and the Alvarez-Glasman & Colvin firm are based on Glasman sending a letter to Plaintiff in August 2016 as counsel for the City expressing his opinion that the Leases were duly authorized and executed, among other things, yet sending a second letter in November 2019 asserting that the Leases were unenforceable because they were not signed by the mayor but by the City’s director of finance, Steven Kwon.

On December 11, 2020, Defendants Arnold Michael Glasman and Alvarez-Glasman & Colvin (together “Glasman”) filed a Demurrer and Motion to Strike. The same day, the City filed a separate Demurrer.

On April 1, 2021, Plaintiff filed Oppositions to Glasman’s Demurrer and Motion to Strike and an Opposition to the City’s Demurrer.

On April 7, 2021, Glasman and the City filed Replies in support of their motions.

 

DISCUSSION

Glasman demurs to Plaintiff’s fraud and UCL claims. The City demurs to Plaintiff’s breach of contract, breach of implied covenant, and declaratory relief claims.

When considering demurrers, courts read the allegations liberally and in context, and “treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law.” (Serrano v. Priest (1971) 5 Cal.3d 584, 591.) “The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.” (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) Defects must be apparent on the face of the pleading or from matters judicially noticed. (Donabedian v. Mercury Ins. Co. (2004) 116 Cal.App.4th 968, 994.) The Court is “not concerned with plaintiff's possible inability or difficulty in proving the allegations of the complaint.” (Gruenberg v. Aetna Ins. Co. (1973) 9 Cal.3d 566, 572.)  

 

Fraud and UCL—Glasman

First, Glasman argues Plaintiff has not alleged facts establishing scienter in connection with the 2016 Opinion Letter, objecting to the allegation in the alternative that Glasman “[e]ither . . . knew or should have known that the Leases were valid and enforceable . . . and/or . . . intentionally defrauded Plaintiff by later denying their enforceability.” (FAC, para. 82.) Glasman argues this is insufficient because “the alternative pleading . . . leaves open three distinct possibilities two of which are insufficient as a matter of law.” Specifically, Glasman argues no fraud claim is alleged if either (1) Glasman merely “should have known” the Leases were valid or (2) Glasman only concluded the Leases were invalid years after the fact.[1] Glasman argues the UCL claim fails as it “is based on the same allegations of fraud.”

Second, Glasman argues the Complaint must be dismissed because it cannot defend itself without disclosing privileged attorney-client communications with the City of Montebello which are raised explicitly in the FAC, relying on Solin v. O’Melveny & Myers LLP (2001) 89 Cal.App.4th 451. (See FAC, para. 37-45 (alleging misrepresentations by Glasman as part of a fraudulent “scheme” while acting as counsel for the City.)) The Court also notes Dietz v. Meisenheimer & Herron (2009) 177 Cal.App.4th 771, a case following Solin in providing for dismissal of claims on due process grounds where privileged communications are necessary for the defense but cannot be used without violating the attorney-client privilege. (Id. at 794.) The Dietz court found a dismissal on this ground is an “extraordinary step” to be used “only in the rarest of cases.” (Id.) To obtain such a dismissal, “the evidence at issue must be the client's confidential information, and the client must be insisting that the information remain confidential.” (Id. at 792; Solin, supra, 89 Cal.App.4th at 454 (client intervened in lawsuit and sought dismissal to avoid disclosure of confidential information).) This dismissal must comport with principles of “fundamental fairness,” which “in this context is an extension of the principle that, ‘the privilege which protects attorney-client communications may not be used both as a sword and a shield.’” (Id. at 793.)

On this point, the Solin court concluded it would be “fundamentally unfair for a client to sue a law firm for the advice obtained and then to seek to forbid the attorney who gave that advice from reciting verbatim, as nearly as memory permits, the words spoken by his accuser during the consultation.” (Solin, supra, 89 Cal.App.4th at 466.) Similarly, the Dietz court recognized “the inherent unfairness in allowing a plaintiff to bring a claim, which, by its very nature necessitates a defense based on confidential information, where the plaintiff has either directly supplied such confidential information to the defendant . . . or where the plaintiff seeks to derivatively represent a third party who has supplied such information to the defendant.”

Here, Glasman argues a dismissal is required here because it cannot defend itself without revealing privileged communications with the City. In response, Plaintiff argues the Court must consider its “interests . . . in bringing a potentially meritorious claim that is not premised on confidential information,” relying on Dietz, supra, 177 Cal.App.4th at 791. Specifically, Plaintiff claims it can “establish at trial through public records, non-privileged documents, testimony and the two documents Defendant[s] wrongfully seek to exclude, how Alvarez-Glasman and Defendant Attorneys now, and in the past, by serving as outside contract city attorney for numerous municipalities, . . . have embarked on a course of conduct to use their positions to injure and damage innocent merchants like Plaintiff by misrepresenting municipal law to suit their claims and for their personal gain.” (Opposition, p. 10.)

“Before dismissing a case ‘on the ground that a defendant attorney's due process right to present a defense would be violated by the defendant's inability to disclose a client's confidential information,’ a court must consider ‘at least four factors.’” (People ex rel. Herrera v. Stender (2012) 212 Cal.App.4th 614, 647.) First, the “evidence at issue must be the client's confidential information, which the client insists on keeping confidential.” (Id.) Second, “the evidence must be ‘highly material to the defendants' defenses.’” (Id.) Third, “the trial court must determine whether it could ‘effectively use ‘ad hoc measures from [its] equitable arsenal,’ including techniques such as ‘sealing and protective orders, limited admissibility of evidence, orders restricting the use of testimony in successive proceedings, and, where appropriate, in camera proceedings,’ so as to permit the action to proceed.’” (Id.) Fourth and finally, “the court ‘should consider whether it would be ‘fundamentally unfair’ to allow the action to proceed.’” (Id. (citing Dietz, supra, 177 Cal.App.4th at 792-94.)

Regarding the first and second factors, Plaintiff argues Glasman will not need to rely on the City’s confidential information, arguing the Opinion Letter and Reversal Letter “are not protected under the attorney-client privilege in that they were both transmitted to Plaintiff.” (Opposition, p. 9.) In Plaintiff’s view, these are the “two documents Defendant[s] wrongfully seek to exclude.” However, any of Glasman’s communications with the City in connection with the Opinion Letter, Reversal Letter, and (public) 2020 Resolution remain highly material and unquestionably confidential. This case is unlike Herrera, wherein the parties seeking dismissal failed to identify any confidential information which would need to be disclosed, merely stating in conclusory terms that a defense would require it. It is immaterial whether Plaintiff can present its case without use of confidential material, as the due process concern is Glasman’s ability to defend itself without privileged materials—which appears impractical.

Regarding the third factor, Plaintiff argues “the court has the power to protect the Defendants by issuing protective orders, sealing documents, if appropriate, limiting the admissibility of certain evidence, restricting the use of certain testimony, or holding in camera proceedings.” The Court is not persuaded—there are no “ad hoc measures” the Court can deploy which would enable Glasman to offer any confidential communications with the City in its defense, as Glasman lacks the authority to waive the attorney-client privilege held by the City as to any of those communications. However, at this time, there is no indication the City would be unwilling to waive the privilege. It is unclear how a protective order, sealing order or restriction on admissibility would permit Glasman to defend itself with relevant but privileged communications absent a waiver from the City; the Court also recognizes “the due process problems presented in precluding . . . presentation of competent, relevant evidence to defend.” (Solin, supra, 89 Cal.App.4th at 464.) It does not appear possible to mount a defense under those circumstances, as it would be effectively impossible for Glasman to introduce evidence regarding the circumstances leading up to and after issuance of the Opinion Letter in 2016 and Reversal Letter in 2019.

Regarding the fourth and final factor, the Court finds it would not be fundamentally unfair for this action to proceed against Glasman. “Fundamental fairness in this context is an extension of the principle that, ‘the privilege which protects attorney-client communications may not be used both as a sword and a shield.’” (Dietz, supra, 177 Cal.App.4th at 793.) There is no sense in which Plaintiff is using the attorney-client privilege as both a sword and a shield. In Solin, the plaintiff client sued his former “law firm for the advice obtained and then [sought] to forbid the attorney who gave that advice from reciting verbatim . . . the words spoken by his accuser during the consultation,” and the Solin court found that fundamentally unfair where the privilege was being used “both as a sword and a shield.” Similarly, in McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th 378, the plaintiff’s derivative action on behalf of a corporation against its outside counsel “ha[d] the dangerous potential for robbing the attorney defendant of the only means he or she may have to mount any meaningful defense” by “plac[ing] the defendant attorney in the untenable position of having to ‘preserve the attorney client privilege (the client having done nothing to waive the privilege) while trying to show that his representation of the client was not negligent.’” (Id. at 384.)

By contrast, the plaintiff in Dietz “did not participate in the sharing of confidential information with the defendant-attorney” at any point. (Dietz, supra, 177 Cal.App.4th at 794.) “Dietz, at least on relevant issues, never consulted with the defendants. . . . Dietz never communicated confidential material relevant to the instant dispute to the client and defendant, and [Meisenheimer] never provided legal advice to Dietz based on confidential material about the client supplied to the defendant by Dietz.” (Id.) On that basis, the trial court “properly distinguished Solin” in the Court of Appeal’s view. The Dietz court also found McDermott distinguishable in that Dietz did not “seek to ‘stand in the shoes’ of a corporation [cite] to prosecute an action against the corporation's attorney based on the attorney's attorney-client relationship with the corporation.” (Id.) “Thus, unlike the actions of the plaintiffs in Solin and McDermott, Dietz's action does not involve the affirmative use of the confidential information” the defendant claims cannot be disclosed. There is no fundamental unfairness in a plaintiff maintaining an action on those facts, as the plaintiff is not using the attorney-client privilege as both sword and shield.

Here, Plaintiff clearly is not using the attorney-client privilege as a shield in any manner; Glasman does not argue Plaintiff is doing so. Plaintiff never had an attorney-client relationship with Glasman so as to give rise to the attorney-client privilege. Further, Glasman does not claim it attempted to obtain a waiver of the attorney-client privilege from its client, the City, in order to defend itself against Plaintiff’s claim. (See id. at 792 (“the client must be insisting that the information remain confidential…”)) Rather, Glasman is merely asserting privilege. Certainly, Glasman will be in a difficult position if the City is unwilling to provide a waiver of the attorney-client privilege so that Glasman can defend itself. But this unfairness arises not from the nature of Plaintiff’s claims but from the City’s refusal to waive the privilege—Plaintiff is not using the privilege as a sword and shield as in Solin and McDermott.

The Court reiterates that a due process dismissal is an “extraordinary step” to be used “only in the rarest of cases,” in part due to its punitive effect on the Plaintiff; it is not clear that this is such an extreme case given the dissimilarity of this case to relevant appellate authority affirming such dismissals as a response to “fundamentally unfair” circumstances. (See Solin, supra; McDermott, supra; see also Reilly v. Greenwald & Hoffman LLP (2011) 196 Cal.App.4th 891 (derivative action against corporate counsel, following Solin) However, the Court also recognizes that such a waiver may or may not be forthcoming given that the City is represented in this action by the same law firm as Glasman. Fundamentally, a dismissal under McDermott, Solin, and Dietz is improper where there is no fundamental abuse of the attorney-client privilege by the plaintiff; any other result would be extraordinarily prejudicial.

The Demurrer is therefore OVERRULED as to the fraud and UCL claims.

Motion to Strike—Glasman

Glasman moves to strike several allegations regarding the 2019 Letter. In opposing the Motion to Strike, Plaintiff argues the litigation privilege is inapplicable here because it does not apply to allegations in support of a legal malpractice claim, arguing the second cause of action for negligent misrepresentation is in reality a “malpractice action against” Glasman. (FAC, para. 59 (asserting professional negligence)) In response, Glasman argues Plaintiff’s negligence claim is based only on the 2016 Letter expressing the validity of the Leases, not the 2019 Letter disavowing the Leases, because Plaintiff necessarily did not “rely” on the 2019 Letter.

However, the 2019 Letter figures centrally in Plaintiff’s negligence allegations, generally either showing Plaintiff was damaged by unwarranted cancellation or that Glasman had misrepresented the validity of the Leases in 2016. (FAC, para. 62-65, 67.) In either case, the negligence claim is based on the 2019 Letter. Glasman implies the malpractice exception may not “extend[] to malpractice claims by third-parties, such as Plaintiff,” but offers no argument as to why it would not apply.

Glasman also argues the communication is absolutely privileged as a prelitigation communication. (See Blanchard v. DIRECTV, Inc. (2004) 123 Cal.App.4th 903, 919 (“if the statement is made with a good faith belief in a legally viable claim and in serious contemplation of litigation, then the statement is sufficiently connected to litigation and will be protected by the litigation privilege. (Ibid.) If it applies, the privilege is absolute.”)) However, there is nothing in the Letter itself reflecting the City’s “serious contemplation of litigation” over the cancellation of the leases. It merely expressed the City’s position regarding payment in connection with the Leases upon inquiry and demand for payment. Not all communication by counsel before litigation is an absolutely privileged prelitigation communication. The Motion to Strike is therefore DENIED.

Breach of Contract—City

Gov. Code sec. 40602 provides that the “mayor shall sign: (a) All warrants drawn on the city treasurer[;] (b) All written contracts and conveyances made or entered into by the city[; and] (c) All instruments requiring the city seal.” However, notwithstanding that requirement, Section 40602 authorizes the “legislative body [to] provide by ordinance that the instruments described in (a), (b) and (c) be signed by an officer other than the mayor.” Plaintiff argues Montebello Municipal Code sec. 3.20.010 and 3.20.020 authorize Steven Kwon, rather than the Mayor, to execute the leases as the director of finance and purchasing officer for the City. In Section 3.20.010, the City adopts “a purchasing system” in order “to establish efficient procedures for the purchase of supplies and equipment, to secure the city supplies and equipment at the lowest possible cost commensurate with quality needed, to exercise positive financial control over purchases, to clearly define authority for the purchasing function and to assure the quality of purchases.” Section 3.20.020 designates the “director of finance” for the City to act as “ex officio purchasing officer under the direction of the city manager.”

Section 3.20.020 provides that the “purchasing officer shall have the duty and authority to: (A) Purchase or contract for supplies and equipment required by any using agency in accordance with purchasing procedures prescribed by this chapter, such administrative regulations as the purchasing officer shall adopt and such other rules and regulations as shall be prescribed by the city council; (B) Negotiate and recommend execution of contracts for the purchase of supplies and equipment; (C) Act to procure for the city the needed quality in supplies and equipment at least expense to the city; (D) Discourage uniform bidding and endeavor to obtain as full and open competition as possible on all purchases; (E) Prepare and recommend to the city council rules governing the purchase of supplies and equipment for the city; (F) Prepare and recommend to the city council revisions and amendments to the purchasing rules; (G) Keep informed of current developments in the field of purchasing, prices, market conditions and new products; (H)  Prescribe and maintain such forms as are reasonably necessary to the operation of this chapter and other rules and regulations; (AI Supervise the inspection of all supplies and equipment purchased to ensure uniform conformance with specifications; (J)  Recommend the transfer of surplus and unused supplies and equipment between departments as needed and the sale of all supplies and equipment which cannot be used by any agency or which have become unsuitable for city use; (K) Maintain a bidders' list, vendors' catalog file and records needed for the efficient operation of the purchasing department; [and] (L) Maintain a list of duly authorized designees and the authorization limits, which shall be less than [$50,000] for each designee.”

The City argues Section 3.20.020(B) merely authorizes Kwon to “[n]egotiate and recommend execution of contracts for the purchase of supplies and equipment,” not to actually execute the contracts as purchasing officer. In response, Plaintiff points out that Section 3.20.020(A) expressly authorizes Kwon to “[p]urchase or contract for supplies and equipment . . . in accordance with purchasing procedures prescribed by this chapter.” Section 3.20.020(C) also authorizes Kwon to “[a]ct to procure for the city the needed quality in supplies and equipment,” which Plaintiff argues further indicates Kwon may take steps to actually procure the goods by executing contracts. Finally, Plaintiff contrasts Section 3.20.020 with Section 3.20.060; the latter was the subject of Torres v. City of Montebello (2015) 234 Cal.App.4th 382.

In its Reply, the City argues Plaintiff’s interpretation effectively ignores the phrase “in accordance with purchasing procedures prescribed by this chapter,” which qualifies Kwon’s power to “contract for supplies and equipment.” (See Cal. Assn. of Psychology Providers v. Rank (1990) 51 Cal.3d 1, 11 (“in attempting to ascertain the legislative intention effect should be given, whenever possible, to the statute as a whole and to every word and clause thereof, leaving no part of the provision useless or deprived of meaning.”) The City contends the several subsequent specific limits on Kwon’s authority express the “purchasing procedures prescribed” for Kwon and that the authority to “purchase or contract” must be construed relative to these procedures. Further, the City points out that if Kwon has the authority to execute contracts under Section 3.20.020(A), as Plaintiff contends, the authority to “recommend” execution of contracts under Section 3.20.020(B), is wholly useless and superfluous.

The foregoing arguments present a pure issue of law as to proper interpretation of the Montebello Municipal Code. (See City of Monterey v. Carrnshimba (2013) 215 Cal.App.4th 1068, 1081 (“Judicial interpretation of a municipal ordinance involves a question of law.”)) Further, the Court finds no dispute in the briefing that the claims for declaratory relief and breach of the implied covenant are predicated upon the enforceability of the underlying Leases, such that if they are unenforceable as a matter of law, those claims will fail as well.[2]

The Court finds Section 3.20.020(A) cannot reasonably be read as expressly authorizing Kwon’s execution of the Leases. Read in context, subdivision (A) appears to be a preliminary clause, indicating Kwon shall procure supplies and equipment “in accordance with purchasing procedures prescribed by this chapter, such administrative regulations as the purchasing officer shall adopt and such other rules and regulations as shall be prescribed by the city council.” The preliminary clause is followed by a variety of specific allocations to Kwon, requiring and/or authorizing Kwon among various things to “[n]egotiate and recommend execution of contracts for the purchase of supplies and equipment,” “[a]ct to procure for the city the needed quality in supplies and equipment,” and recommend “purchasing rules” governing the purchase of supplies and equipment to the city council. (Section 3.20.020(B), (C), (E), (F).)  This interpretation distinguishes between execution of contracts and “act[ing] to procure [supplies] for the city”—a more limited ability—and “negotiat[ing] and recommend[ing] execution” by others—a subsidiary ability which indicates Kwon does not have the authority to execute any agreement for purchase of supplies.

Further, interpreting Section 3.20.020(A) as a blanket grant of authority to execute contracts would frustrate the purposes of the Purchasing Plan adopted by the City. (See City of Orange v. San Diego County Employees Retirement Assn. (2002) 103 Cal.App.4th 45, 55 (the “purpose of statutes specifying the manner of municipal contract formation is to ‘ensure that expensive decisions are not hastily made’ and to create ‘a broad base of authority by requiring (contract) approval by a number of different individuals.’”)) Plaintiff’s interpretation of Section 3.20.020(A) does not account for the allocation of authority to “recommend execution”—which would be superseded by the authority to “execute” contracts, unless that authority is limited—and does not account for the other provisions of the Purchasing Plan which do require contract approval by others and limit Kwon’s ability to act alone in order to “prevent hasty decisions concerning taxpayer funded public finances.” (Torres, supra, 234 Cal.App.4th at 396.) Therefore, the Court rejects the argument that Section 3.20.020(A) explicitly authorized Kwon to  sign the Leases instead of the mayor, as required by Section 40602. Plaintiff identifies no other provision of the municipal code authorizing Kwon to execute the Leases. Plaintiff’s argument that Section 3.20.020 authorizes Kwon to execute contracts because it “contains no restrictive language requiring the mayor’s signature,” unlike Section 3.20.060, misses the mark as Section 40602 already requires the mayor’s signature and must be circumvented by express language not found in Section 3.20.020.

Plaintiff also argues the Leases may be enforceable on an estoppel or ratification theory, relying on City of Orange v. San Diego County Employees Retirement Assn. (2002) 103 Cal.App.4th 45. City of Orange is the opposite of this case—there, the Retirement Association argued its oral option contract with Orange was invalid under Section 40602 because it was not reduced to writing and signed by the mayor. The Court of Appeal looked to the “general purpose” of Section 40602, explaining that the “purpose of statutes specifying the manner of municipal contract formation is to ‘ensure that expensive decisions are not hastily made’ and to create ‘a broad base of authority by requiring (contract) approval by a number of different individuals.’” (Id. at 55.)

The court found the “oral option contract furthered this statutory purpose” as it “involved no expenditure of city funds,” “gave Orange adequate time to review [the Association’s] offer and secure approval from the appropriate city officials,” and “ensured that the decision whether to accept the offer would not be hastily made out of fear that the offer might be withdrawn.” (Id.) Under the option contract, Orange “remained free to reject it and recommence litigation activities” while the Association could not. In sum, “Orange had much to gain and little, if anything, to lose from the oral option contract.” (Id.) The court therefore found the statutory purposes “would be frustrated if the statutes were interpreted to invalidate an oral option contract in these circumstances” because this “would benefit only the party contracting with the municipality at the public's expense.” (Id.)

The court also found the option contract enforceable under an estoppel theory, finding the Association “estopped from asserting its invalidity.” (Id. at 57.) It found the “subject matter of the oral option contract was within the scope of Orange's powers” because a “municipality has the power to settle and compromise claims in its favor or against it.” (Id.) It found the Association “received the benefits of the litigation standstill” promised in exchange for the option. It further concluded that Orange had “ratified the [option] contract by accepting appellant's offer,” held open by the option. (Id.)

Those conclusions are not applicable here for three principal reasons. First, an action for enforcement of the Leases here would “frustrate” the statutory purposes of Section 40602—the validation of the contract “would benefit only the party contracting with the municipality at the public’s expense.” (Id. at 55.) Second, this is not a situation where the City has “much to gain and little to lose” from validating the contract—it may be on the hook for a significant amount of money, particularly if it has already contracted with new providers, all at public expense. (See Torres, supra, 234 Cal.App.4th at 396 (distinguishing Orange where the contract “does impose a financial burden on the City,” finding “the purpose of Section 40602 is to prevent hasty decisions concerning taxpayer funded public finances” or “improvident decisions affecting taxpayers’ wallets.”)) Third, the Orange court never found that a municipality could be estopped from denying the validity of its own contracts under Section 40602. A municipality stands in a very different relationship to that statute than a party contracting with the municipality. Therefore, the estoppel argument is rejected.

The Court finds the Leases unenforceable as a matter of law under Section 40602 where they were not signed by the mayor or an expressly authorized agent under the Montebello Municipal Code. Therefore, the breach of contract claim based on the Leases fails as a matter of law, as do the related claims for breach of the implied covenant of good faith and fair dealing and declaratory relief. (CCP sec. 1061.)

CONCLUSION

Glasman’s Demurrer is OVERRULED.

Glasman’s Motion to Strike is DENIED.

The City’s Demurrer is SUSTAINED WITHOUT LEAVE TO AMEND as to the causes of action for breach of contract, breach of implied covenant of good faith and fair dealing, and declaratory relief regarding enforceability of the Leases.

Defendants to give notice.

If counsel do not submit on the tentative, they are strongly encouraged to appear remotely by LA Court Connect rather than in person.


[1] The Complaint is not uncertain—the alternative pleading of intentional misrepresentation and negligent misrepresentation is commonplace and permissible.

[2] In actions for declaratory relief, the Court “may refuse to exercise the power granted by this chapter in any case where its declaration or determination is not necessary or proper under all the circumstances.” (CCP sec. 1061.) “The broad discretionary power of the trial court to deny declaratory relief may be invoked by general demurrer,” particularly where relief is shown to be unnecessary. (General of America Ins. Co. v. Lilly (1968) 258 Cal.App.2d 465, 471.) If the Leases are facially unenforceable as a matter of law under Section 40602, which the Court concludes they are, no declaratory relief is necessary on that point.

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