Engel & Engel, LLP v. Shuck

• Decision Date: 04 November 2021
• Docket Number: B300755,B297421
• Court: California Court of Appeals Court of Appeals
• Parties: ENGEL & ENGEL, LLP, Plaintiff and Appellant, v. THOMAS E. SHUCK et al., Defendants and Respondents.

ENGEL & ENGEL, LLP, Plaintiff and Appellant,
v.
THOMAS E. SHUCK et al., Defendants and Respondents.

B297421, B300755

California Court of Appeals, Second District, Second Division

November 4, 2021

NOT TO BE PUBLISHED

APPEAL from judgment and postjudgment orders of the Superior Court of Los Angeles County No. BC620667, Stephanie M. Bowick, Judge. Judgment affirmed; postjudgment orders affirmed as modified.

Law Offices of Richard Pech, Richard Pech; Tisdale & Nicholson and Michael D. Stein for Plaintiff and Appellant.

Randall S. Waier for Defendants and Respondents Thomas E. Shuck and Parker Milliken Clark O'Hara & Samuelian APC.

Sheppard, Mullin, Richter & Hampton, Aaron J. Malo, and Karin Dougan Vogel for Defendant and Respondent Wells Fargo Equipment Finance, Inc.

HOFFSTADT, J.

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A forensic accounting firm sued its client for $92, 055.54 in unpaid fees, went to arbitration, and obtained $27, 100.13 for the reasonable value of its services. The firm then sued a second entity, the entity's former lawyer, and the lawyer's law firm (collectively, the defendants) for some of the same fees it had previously told the arbitrator were the sole obligation of the first client. The defendants raised the affirmative defense of judicial estoppel (aka the defense of inconsistent positions), and the trial court bifurcated that issue and held a three-day bench trial. The court ruled that the firm had intentionally taken factually inconsistent positions in its sequential lawsuits, dismissed the second lawsuit, and awarded costs. The firm appeals, arguing that the trial court's evidentiary and procedural rulings denied it due process, that the court erred in applying judicial estoppel, and that the cost awards are too high. We conclude there was no error in the judgment for the defendants, but that the trial court erred in awarding one of the defendants $5, 056.61 in unallowable costs. We accordingly affirm the judgment, and affirm the costs awards with the modifications discussed in this opinion.

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FACTS AND PROCEDURAL BACKGROUND

I. Facts

A. The precursor lawsuit where plaintiff is hired

Two persons solicited investments in a surgical building in Newport Beach from John and Judith DeLong (the DeLongs), from Leona Horowitz (Horowitz), and from Wells Fargo Equipment Finance, Inc. (Wells Fargo). When the solicitors did not deliver what was promised, the DeLongs, Horowitz, and Wells Fargo sued the solicitors in separate lawsuits for the misuse of their funds.

In the spring of 2014, Engel & Engel, LLP (plaintiff) was retained to do forensic accounting in support of one or more of these pending lawsuits. One of its partners is Jason Engel (Engel). Initially, the DeLongs, Horowitz, and Wells Fargo discussed a pooling arrangement under which the three would split the cost of plaintiff's services. Ultimately, however, only the DeLongs and Horowitz signed retainer agreements with plaintiff.

Plaintiff worked on the pending lawsuits in May, June, and July of 2014, and billed over $110, 000 in fees for those months. Pursuant to what it believed to be the pooling agreement, plaintiff allocated some of its fees each month to the DeLongs, Horowitz, and Wells Fargo.

Horowitz paid plaintiff the amount plaintiff had allocated to her.

B. Plaintiff's lawsuit against the DeLongs

In 2014, plaintiff sued the DeLongs for breach of contract, quantum meruit, and fraud. Plaintiff then moved to compel arbitration.

The arbitration took place over four days in 2015 and 2016.

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During the arbitration, plaintiff offered two internally inconsistent theories about the amount the DeLongs owed. At some points, plaintiff argued that the DeLongs owed it $92, 055.43-which was the amount Engel had allocated to the DeLongs for May, June, and July 2014-plus interest. At other points, Engel testified that "I am not working for [Wells Fargo]. I'm not working for [Horowitz]. I am only working on [the DeLong] case, and the billing for [the DeLong] case . . . was going to be divided up somehow" but that was just "what you [three] . . . had agreed to," and plaintiff argued in closing, "Why would Wells Fargo and Horowitz agree to pay 2/3 of [plaintiff's] fees limited in scope to tracing [the] DeLong's . . . investment?"; this testimony and argument suggests that the DeLongs owed plaintiff the entire unpaid amount of $105, 339.92 plus interest. Under plaintiff's first theory, plaintiff suggested Wells Fargo might owe $13, 284.49 plus interest (which came to $16, 909.49); under its second, Wells Fargo owed nothing.

The arbitrator ruled that the DeLongs were responsible for paying plaintiff for the reasonable value of its services under a quantum meruit theory, and awarded $27, 100.13 as the value of services; with attorney fees and costs, the total arbitration award came to $75, 949.02. At plaintiff's request, the Superior Court confirmed the award.

II. Procedural Background

In May 2016, plaintiff sued Wells Fargo; Thomas E. Shuck (Shuck), the lawyer that represented Wells Fargo in its lawsuit against the solicitors in 2014; and Parker Milliken Clark O'Hara & Samuelian, APC (the law firm), the firm where Shuck worked at the time (collectively, defendants). On the basis of an alleged oral agreement between Engel and Shuck, plaintiff asserted

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claims against defendants for (1) intentional misrepresentation, (2) false promise, (3) negligent misrepresentation, (4) quantum meruit, and (5) promissory estoppel. Plaintiff alleged that defendants were liable for $37, 571.32 of plaintiff's services in May, June, and July 2014, for an additional amount greater than $100, 000 for other unspecific general damages, and for punitive damages.

In their answers, defendants asserted the affirmative defense of judicial estoppel-namely, that plaintiff was seeking to recover fees that it had previously taken the position were owed by the DeLongs.^[1]

Defendants then moved for summary adjudication. The trial court granted summary adjudication of plaintiff's quantum meruit claim after finding that none of plaintiff's services from May, June, or July 2014 were for Wells Fargo's benefit because Engel had testified at the arbitration that "[plaintiff's] services for May and June 2014 were out of an obligation to Horowitz" and its services "in July w[ere] only for the DeLongs." The court denied summary adjudication of plaintiff's remaining claims.

Because it would be "cleaner" and "best in terms of efficiency," the trial court bifurcated the further proceedings: the court would first conduct a bench trial on the affirmative defense of judicial estoppel, and, if necessary, a jury trial on plaintiff's

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remaining claims for intentional misrepresentation, fraud, and negligent misrepresentation.^[2]

At the conclusion of a three-day court trial, the court issued a statement of decision concluding that "judicial estoppel applies" because plaintiff, in the prior arbitration, "intentionally" took the position that the DeLongs "are responsible for all of the fees incurred between May and July 2014" and was now taking the inconsistent position that defendants "are responsible for those same fees." Because it would be "'patently wrong'" to allow plaintiff to change its position on the factual issue at the very heart of the pending lawsuit (namely, who owed plaintiff its fees), the court dismissed plaintiff's remaining claims.

Shuck and the law firm filed a memorandum of costs, and Wells Fargo filed a separate memorandum. Plaintiff filed motions to tax as to each. Following a full round of briefing, the trial court partially granted and partially denied one of plaintiff's motions to tax, awarding $12, 375.90 in costs to Shuck and the law firm, and denied the other outright, awarding $18, 496.61 in costs to Wells Fargo.

Plaintiff filed timely notices of appeal from the judgment as well as the cost orders.

DISCUSSION

I. Judicial Estoppel, Defined

The doctrine of judicial estoppel, which is sometimes referred to as the "'doctrine of "'"preclusion of inconsistent positions, "'"'" is designed to prevent litigants from "'"'gaining an advantage by taking one position [in litigation], and then seeking a second advantage by taking an incompatible position.'"'" (MW Erectors, Inc. v. Niederhauser Ornamental & Metal Works Co., Inc.

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(2005) 36 Cal.4th 412, 422 (MW Erectors); Minish v. Hanuman Fellowship (2013) 214 Cal.App.4th 437, 448 (Minish)). Preventing litigants from "playing 'fast and loose with the courts'" in this fashion, in turn, serves "'to protect parties from opponents' unfair strategies'" and, more importantly, to '"maintain the integrity of the judicial system."' (Aguilar v. Lerner (2004) 32 Cal.4th 974, 986 (Aguilar); Minish, at p. 449).

Before the doctrine can be invoked, a court must find five "necessary elements"-namely, that "'(1) the same party [or its attorney] has taken two positions; (2) the positions were taken in judicial or quasi-judicial administrative proceedings; (3) the party was successful in asserting the first position (i.e., the tribunal adopted the position or accepted it as true); (4) the two positions are totally inconsistent; and (5) the first position was not taken as a result of ignorance, fraud, or mistake.'" (MW Erectors, supra, 36 Cal.4th at p. 422, quoting Aguilar, supra, 32 Cal.4th at pp. 986-987; Blix Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 48 (Blix) ["Judicial estoppel may be based on a position taken by a party or party's legal counsel"]; accord, Kelsey v. Waste Management of Alameda County (1999) 76 Cal.App.4th 590, 599 [positions must be "intentional"] (Kelsey).) Because it "is an equitable doctrine," however, whether judicial estoppel will be invoked "is discretionary." (MW Erectors, at p. 422, italics omitted; People ex rel. Sneddon v. Torch Energy Services, Inc. (2002) 102 Cal.App.4th 181, 189 (Torch Energy).) Because invocation of the...