Williams v. Lucas
| Docket Number | B327061 |
| Decision Date | 19 January 2024 |
| Parties | WILBUR WILLIAMS, JR et al., Plaintiffs and Appellants, v. CAROL LUCAS et al., Defendants and Respondents. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of Los Angeles County No 22STCV14857, Barbara M. Scheper, Judge.
Nick A. Alden for Plaintiffs and Appellants.
Loeb & Loeb and W. Allan Edmiston for Defendants and Respondents.
Wilbur Williams, Jr., M.D.,[1] and his professional corporation, Wilbur Williams, Jr., M.D., Inc. (the Corporation; collectively, the Williams plaintiffs), appeal from an order of dismissal entered as to defendants Buchalter APC and Carol Lucas (collectively, the Buchalter defendants) after the trial court sustained without leave to amend the Buchalter defendants' demurrer to the complaint. The Williams plaintiffs asserted causes of action for conspiracy to defraud, financial elder abuse, and declaratory relief against the Buchalter defendants based on allegations that Lucas, an attorney and shareholder at Buchalter, conspired with Sevana Petrosian, who was Williams's business partner and managed several medical clinics where Williams conducted his medical practice, to deceive Williams into believing Buchalter represented him and to induce him to enter contracts that allowed Petrosian to embezzle more than $11 million dollars from the Corporation. In sustaining the demurrer, the trial court found all claims against the Buchalter defendants were barred by the one-year statute of limitations governing claims against an attorney "for a wrongful act or omission, other than actual fraud, arising in the performance of professional services" under Code of Civil Procedure section 340.6, subdivision (a).[2] On appeal, the Williams plaintiffs contend the one-year statute of limitations under section 340.6, subdivision (a), does not apply to their claims because the gravamen of their action is actual fraud. We agree the complaint sufficiently alleged the Buchalter defendants conspired to commit actual fraud, such that section 340.6 does not apply and the Corporation's conspiracy cause of action survives demurrer. However Williams's individual conspiracy claim fails because, as alleged, only the Corporation was defrauded. Moreover, the complaint fails to state claims for financial elder abuse and declaratory relief.
We reverse the order of dismissal and the order sustaining the demurrer and direct the trial court to enter a new order overruling the demurrer to the Corporation's cause of action for conspiracy to defraud and sustaining without leave to amend the demurrer to the Corporation's remaining causes of action and Williams's cause of action for conspiracy to defraud.
The Williams plaintiffs filed this action on May 4, 2022 against the Buchalter defendants and Petrosian, her associates Salina Ranjbar, Vana Mehrabian, and Staforde Palmer, Petrosian's wholly owned company Petrosian Esthetic Enterprises LLC (Petrosian Esthetic), and seven limited liability companies Petrosian formed to operate individual medical spas under the name "SEV Laser Aesthetics" (the SEV companies collectively, the Petrosian defendants).[3] The complaint alleged six causes of action, three of which were asserted against Lucas or the Buchalter defendants: the first cause of action for conspiracy to defraud, the third cause of action for financial elder abuse, and the sixth cause of action for declaratory relief.[4] As alleged in the complaint, in late 2013 Williams and Petrosian entered into discussions for Petrosian to act as the nonmedical manager of medical spas where Williams would conduct his practice. Williams was then 77 years old and in apparent poor health. Williams and Petrosian "decided to act through their respective corporations." Williams's longstanding accountant, Leila Aquino, met with Petrosian to discuss the preparation of a contract that would govern the parties' arrangement and suggested a few law firms to assist them. However, Petrosian stated she already had contacted a lawyer, later identified as Lucas, "who agreed to represent both parties and prepare a contract that is fair to both parties." Petrosian set up a meeting with Lucas.
On April 12, 2014 Williams and Aquino met with Petrosian and Lucas at Buchalter's offices (April 12 meeting). Lucas did not tell Williams that she did not represent him, nor did she ask him if he was represented by counsel. Lucas's statements and conduct during the meeting led Williams and Aquino "to believe Petrosian's representations to them, that Lucas represented both Parties and prepared a fair contract." Lucas never disclosed that she had been representing Petrosian for over a year.
During the meeting, Lucas had in front of her a "Management Services Agreement" that she referred to a few times. She briefly explained to Williams that the laws governing the corporate practice of medicine prohibit non-physicians from owning a medical practice, and then she "immediately moved to convince and advise Dr. Williams to grant [Petrosian Esthetic] a power of attorney and Petrosian the right to sign checks and to pay bills," explaining this would be necessary for Petrosian Esthetic to operate a clinic, collect patient payments, and make bank deposits on behalf of Williams's medical practice. "In reliance on Petrosian's representation that Lucas represented both Parties and prepared a fair contract, reinforced by Lucas's conduct and statements during the meeting," on April 12, 2014 Williams signed the management services agreement without reading it.
A copy of the executed management services agreement between the Corporation and Petrosian Esthetic was attached to the complaint. The recitals state the Corporation "desires to engage the services of [Petrosian Esthetic] to perform certain non-professional functions for [the Corporation], in order to permit [the Corporation] to concentrate its efforts on the Practice."' The "Practice" was defined as the provision of medical cosmetic services at medical spa locations in Glendale and West Hollywood. Under the agreement, the Corporation appointed Petrosian Esthetic as its attorney-in-fact for a wide range of nonmedical functions, including collecting payments, making deposits, and other banking functions on the account of the Corporation (including making payments to Petrosian Esthetic for management services and expenses). Petrosian Esthetic was responsible for providing numerous services on behalf of the Corporation with respect to the practice, including accounting, financial, and legal services, the employment of non-physician personnel, providing and maintaining furniture, fixtures and equipment, and marketing. The agreement also provided Petrosian Esthetic would sublease space to the Corporation. Under the agreement, a copy of any notices served pursuant to the agreement would be sent to the attention of Lucas at Buchalter's Los Angeles office.
The complaint alleged on information and belief that "from the onset Lucas knew of Petrosian's intent to own the Practice, take all the profits and pay Dr. Williams some kind of salary and, upon termination of the agreement, Petrosian intended to take over the Practice," and Lucas drafted the management services agreement "in a way to allow Petrosian to achieve her intended scheme."
Beginning in 2016 the medical practice expanded to seven new clinic locations, and Lucas, on behalf of Petrosian, formed and registered the SEV companies, one for each new location. Each of the SEV companies then entered into a management services agreement with the Corporation regarding Williams's medical practice at the individual locations. Relying on Petrosian's representation that the seven management services agreement were identical to the April 12, 2014 management services agreement and that they were prepared by Lucas, Williams signed each agreement on behalf of the Corporation, again without reading the agreements. Each of the management services agreements provided that the respective SEV company would be entitled to actual out-of-pocket costs in providing management services plus a management fee of 15 percent of those costs.[5]
In January 2020 the Corporation received a tax form from its credit card processing company indicating the practice had collected credit card payments exceeding $7.5 million in 2019, although in 2019 the Williams plaintiffs had only received $155,000 from the Petrosian defendants. Petrosian had claimed the $155,000 was the net profit from operations. Williams was surprised by the disparity and consulted an attorney in February 2020. With the help of an accountant, Williams reviewed the Corporation's bank records and determined gross income to the Corporation during 2019 exceeded $10.2 million, with estimated profits of about $6 million.
On February 17, 2020 the parties mutually agreed to terminate their relationship effective April 30, 2020. Following the termination, Petrosian allegedly "took over" the entire practice, including the equipment, patients and employees, without compensating Williams, and she denied Williams access to the clinics. The Petrosian defendants relied on a provision of the management services agreements to claim ownership of the practice.[6] The Williams plaintiffs calculated that between January 1, 2017 and March 31, 2020, the practice generated gross revenues of about $20 million, with estimated overhead of $8 million, but they only received about $400,000 in purported net profits during this period. The complaint alleges on this basis the Petrosian defendants embezzled about $11.4 million from the Corporation.
Moreover in early 2020 the Petrosian defendan...
To continue reading
Request your trial