Estakhrian v. Obenstine

• Decision Date: 29 January 2017
• Docket Number: CV 11–3480 FMO (CWx)
• Citation: 233 F.Supp.3d 824
• Parties: James ESTAKHRIAN, et al. v. Mark OBENSTINE, et al.
• Court: U.S. District Court — Central District of California

233 F.Supp.3d 824

James ESTAKHRIAN, et al.

v.Mark OBENSTINE, et al.

CV 11–3480 FMO (CWx)

United States District Court, C.D. California.

Signed January 29, 2017

Dan L. Gildor, F. Paul Bland, Jr., Mark A. Chavez, Nance F. Becker, Chavez and Gertler LLP, Mill Valley, CA, Raymond C. Fay, Fay Law Group PLLC, Steven M. Skalet, Taryn Wilgus Null, Merhi and Skalet

PLLC, Washington, DC, S. Ron Alikani, Irvine Law Group LLP, Irvine, CA, for James Estakhrian, et al.

Harry A. Safarian, Alexis Ara Baroian, Safarian and Baroian LLP, Glendale, CA, David Conolly Grant, Grant Genovese and Baratta LLP, Irvine, CA, Kenneth Charles Feldman, Larissa G. Nefulda, Lewis Brisbois Bisgaard and Smith LLP, Los Angeles, CA, for Mark Obenstine, et al.

Proceedings: (In Chambers) Order Re: Motion for Summary Judgment / Summary Adjudication

The Honorable Fernando M. Olguin, United States District Judge

Having reviewed and considered all the briefing filed with respect to defendant Mark Obenstine's ("defendant" or "Obenstine") Joint Brief Concerning [His] Motion for Summary Judgment / Adjudication of Issues (Dkt. 433, "MSJ Jt. Br."), the court finds that oral argument is not necessary to resolve the motion, see Fed. R. Civ. P. 78 ; Local Rule 7–15; Willis v. Pac. Mar. Ass'n , 244 F.3d 675, 684 n. 2 (9th Cir. 2001), and concludes as follows.

INTRODUCTION

The instant matter arises out of a class action that was litigated in Nevada state court, Daniel Watt, et al. v. Nevada Property 1, LLC, et al. , Case No. A582541 ("Nevada litigation"). (See Dkt. 490, Court's Order of October 24, 2016, at 2) (citing Dkt. 373, Second Amended Class Action Complaint ("SAC") at ¶ 20). On February 11, 2009, plaintiffs filed a class action complaint for breach of contract regarding the purchase of condominium units in what became the Cosmopolitan Hotel ("Cosmopolitan"), located in Las Vegas, Nevada. (See id. ) (citing Dkt. 373, SAC at ¶ 20). The class members sought to "rescind their purchase contracts and to obtain a refund of their escrow deposits [.]" (See id. ) (citing Dkt. 373, SAC at ¶¶ 14–16). The Nevada litigation eventually settled in two stages in 2010. (See Dkt. 373, SAC at ¶ 32; see also infra at Statement of Facts (describing East Tower and West Tower settlements)).

Thereafter, on April 22, 2011, plaintiff James Estakhrian ("Estakhrian"), on behalf of himself and all others similarly situated, filed the instant action against defendants Mark Obenstine ("Obenstine"), Benjamin F. Easterlin ("Easterlin") and his law firm King & Spalding, LLP ("King & Spalding," and with Easterlin, the "King & Spalding defendants"), Terry A. Coffing ("Coffing") and his law firm Marquis & Aurbach P.C. (now called Marquis Aurbach Coffing, P.C.) ("MAC" and with Coffing, the "MAC defendants"). (See Dkt. 1, Complaint). Obenstine, the King & Spalding defendants, and the MAC defendants are all attorneys who represented the class members in the Nevada litigation. (See id. at ¶¶ 17–20). The court previously dismissed the MAC defendants for lack of personal jurisdiction. (See Dkt. 329, Court's Order of July 9, 2015). The court also approved a class action settlement between plaintiffs and the King & Spalding defendants and entered judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. (See Dkt. 490, Court's Order of October 24, 2016, at 21–22). As such, Obenstine is the sole remaining defendant in this action.

On October 27, 2015, the operative SAC was filed to add Abdi Naziri ("Naziri") as an additional named plaintiff (collectively, Estakhrian and Naziri are referred to as "plaintiffs"). (See Dkt. 373, SAC). Plaintiffs assert common law causes of action for professional malpractice, breach of fiduciary duty, and fraud against Obenstine. (See Dkt. 373, SAC at ¶¶ 51–60 & 76–77). Plaintiffs also assert statutory claims for violations of California Business & Professions Code §§ 17200, et seq. ("UCL" or "unfair competition") and the California Consumers Legal Remedies Act, California Civil Code §§ 1750, et seq. ("CLRA"). (See id. at ¶¶ 67–75). Finally, Estakhrian asserts a breach of contract claim on behalf of a subclass of approximately 500 purchasers who entered into a retainer agreement with Obenstine. (See id. at ¶¶ 19, 61–66 & Exhibit ("Exh.") A).

STATEMENT OF FACTS ¹

I. BACKGROUND OF THE NEVADA LITIGATION.

The Cosmopolitan was promoted as a project consisting of a West Tower with more than 1,300 condominium units and an East Tower with more than 700 units. (See Dkt. 373, SAC at ¶ 14). Purchasers of the units signed purchase and sale agreements, and made earnest money deposits totaling approximately $250 million, or $140,000 per purchaser, on average. (See id. ).

The developer of the Cosmopolitan, 3700 Associates LLC, projected that the condominium units would be ready for occupancy in early 2008. (See Dkt. 373, SAC at ¶ 15). However, 3700 Associates LLC defaulted on its construction loan with Deutsche Bank, which then foreclosed on the property in March 2008. (See id. ). Following the foreclosure, Nevada Property 1, LLC ("NP1"), a wholly-owned subsidiary of Deutsche Bank, acquired the property and all rights and obligations under the purchase and sale agreements. (See id. ).

A. The King & Spalding Defendants .

On August 22, 2008, a purchaser of a Cosmopolitan unit, Carol Muszik ("Muszik"), contacted Easterlin about NP1's refusal to return her earnest money deposit after 3700 Associates LLC filed for chapter 11 bankruptcy. (See Dkt. 433–5, Joint Evidentiary Appendix Concerning Defendant Mark Obenstine's Motion for Summary Judgment / Adjudication ("MSJ. Evid. App'x"), Exh. 19 at P0149; Dkt. 433–10, MSJ Evid. App'x, Exh. 33 at P0516). On August 29, 2008, Easterlin contacted Obenstine by email about the possibility of jointly litigating the issues raised by Muszik, and referred Obenstine to a blog of Cosmopolitan purchasers. (See Dkt. 433–10, MSJ Evid. App'x, Exh. 19 at P0516; Dkt. 433–5, MSJ Evid. App'x, Exh. 19 at P0151). A few days later, Easterlin told Obenstine that he had uploaded a fake post to the blog, stating that Cosmopolitan purchasers were in contact with them, the "Trump Tower attorneys."²(See Dkt. 433–5, MSJ Evid. App'x, Exh. 19 at P0151) ("When you look at the blogs, you will see one where someone tells everyone they are in contact with Trump Tower attorneys. I wrote that blog to generate interest and to keep people from pursuing other avenues until we spring into action.").

On October 2, 2008, Easterlin told Obenstine that he and his firm had a conflict of interest:

I have received bad news. Deutsche Bank is a K&S client. Because Nevada Property 1, LLC is an affiliate of the bank, K&S has a clear conflict of interest that would enable the defendant to disqualify the firm from any litigation involving NP1. Moreover, the firm does not want to damage its relationship with this client. So, I am directed that K&S cannot be part of any engagement letter with any clients and cannot be on any pleadings in any litigation against NP1.

If this means that you want to proceed without me, I understand. Of course, I would like to continue if you are agreeable and my involvement would be helpful. In that event, I think we would be talking about filing a class action with [Obenstine] and local counsel on the pleadings, and [Obenstine] hiring K&S to do work for him. He and I have discussed that possibility. The immediate problem I see, though, is signing up people. We have enough to proceed with a class action, but we want more to provide more leverage in discussions with local counsel.

(See Dkt. 433–5, MSJ Evid. App'x, Exh. 19 at P0153).

Despite Easterlin and his firm's conflict of interest, Easterlin continued to participate in the Nevada litigation with Obenstine. For example, on October 4, 2008, two days after Easterlin advised Obenstine of his conflict of interest, Obenstine and Easterlin exchanged drafts of an engagement letter to retain Cosmopolitan condominium purchasers, (see Dkt. 433–5, MSJ Evid. App'x, Exh. 19 at P0154; see id. at P0105 & P0121), and began retaining clients two days later. (See , e.g. , id. at P0104, P0105, P0155 & P0157). Easterlin and Obenstine also sent periodic updates to their clients regarding the status of the Nevada litigation. (See Dkt. 433–11, MSJ Evid. App'x, Exh. 38 at P0569 & P0579; id. at P0571 (forwarding February 2009, complaint to clients); id. at P0570 (forwarding amended complaint to clients)). Easterlin reviewed the terms of the East Tower settlement, (see Dkt. 433–8, MSJ Evid. App'x, Exh. 28 at P0415–18), and had one-on-one communications with at least one potential client in the Nevada litigation. (Dkt. 433–10, MSJ Evid. App'x, Exh. 33 at P0518–19) (January 31, 2009, email from Easterlin to potential client). Indeed, Easterlin was described to potential clients as the Nevada litigation's "lead attorney," with the "clout" and "deep pockets" to litigate the case. (See , e.g. , Dkt. 433–5, MSJ Evid. App'x at P0111 ("Ben Easterlin with King and Spalding is our lead attorney... in partnership with Mark Obenstine out of California."); see id. at P0113 (January 26, 2009, email providing Easterlin's contact information to a new client); id. at P0118 (email to new client, "if you haven't looked up the bio on our lead attorney you should. His name is Ben Easterlin and he represents Coca Cola and Sprint"); id. at P0148 ("As you know [Ben Easterlin] is the force behind all of our claims and he has the most clout as well as the deep pockets to fight for us and carry us through.")).

B. Donna Billiter a/k/a "Kay Jackson ."

Around the time Easterlin approached Obenstine about jointly litigating the Nevada litigation, Easterlin sought to hire Donna Billiter ("Billiter" or "Jackson"). In an email to Obenstine, Easterlin stated the following:

Mark, if you have time, I recommend looking at this. I just looked at it, and there is a group of people who want their money back at Cosmopolitan. I think we should try to get up another group and go after it. We

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