Leeds> v. Reino & Iida

 

 

 

 

 

 

 

 

Filed 9/20/13  Leeds v. Reino & Iida
CA2/8

 

 

 

 

 

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

 

California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b).  This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115>.

 

 

 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

 

 
>

MARK R. LEEDS et al.,               Plaintiffs and Appellants,               v.   REINO & IIDA, a Professional Corporation et al.,               Defendant and Respondent.

B242516         (Los Angeles County       Super. Ct. No. VC060276)

 

            APPEAL
from a judgment of the Superior Court of href="http://www.adrservices.org/neutrals/frederick-mandabach.php">Los Angeles
County, Margaret Miller Bernal, Judge.  Reversed and remanded.

 

            Manly
& Stewart and Paul J. Sievers for Plaintiffs and Appellants.

 

            Cannon
& Nelms, Anthony L. Cannon, Julia A. Mouser and Garret F. Smith for
Defendants and Respondents.

 

* * * * * * * * *

 

 

Plaintiffs
Mark R. Leeds and Law Offices of Mark R. Leeds appeal from the judgment of
dismissal following the sustaining of a demurrer, without leave to amend, to
their complaint for declaratory relief.  Plaintiffs sued various lawyers and law
firms, including defendants Reino & Iida, a Professional Corporation, Law
Offices of Myles Iida, Donald Reino, Esq. and Myles Iida, Esq.

            Plaintiffs
contend the trial court erred in sustaining the demurrer for lack of subject
matter jurisdiction on the ground the Workers’ Compensation Appeals Board
(WCAB) has exclusive jurisdiction over a dispute regarding apportionment of attorney
fees arising from the underlying workers’ compensation proceedings.  They further contend the court erred in
sustaining the demurrer on the ground that another action is pending between
these parties on the same cause of action, because the pending WCAB proceeding
is unrelated to the apportionment of the attorney fees claim.  They also contend the trial court erred in
concluding the complaint failed to allege facts sufficient to state a cause of
action for declaratory relief because the complaint seeks a prospective
determination of the rights and duties of the parties under a contract for
apportionment of attorney fees.  Last,
they contend the court abused its discretion in not allowing plaintiffs to
amend the complaint to state a cause of action. 


            We
reverse the judgment and remand for further proceedings consistent with the
views expressed in this opinion.  We
conclude the court erred in sustaining the demurrer on the ground the WCAB has
exclusive jurisdiction over these claims and on the ground of another action
pending before the WCAB.  The court
properly sustained the demurrer on the ground the complaint fails to state a
cause of action for declaratory relief, but the court abused its discretion in
not allowing leave to amend.    

>BACKGROUND

            The complaint consisted of a single
cause of action for declaratory relief and alleged: 

1.      >      The Parties

Plaintiffs are
the Law Offices of Mark R. Leeds and its owner Mark R. Leeds (plaintiffs).  Many allegations of the complaint refer to
“plaintiff” in the singular, which we understand to be a reference to Mark R.
Leeds individually, and consistently with the allegations of the complaint, we
refer to Mr. Leeds as “plaintiff” in this opinion.  The demurring defendants are Reino &
Iida, a Professional Corporation, Myles Iida, and Law Offices of Myles Iida
(defendants).  Defendant Donald Reino did
not join in the demurrer and was not named in the judgment of dismissal.

>2.     
      The
Fee Splitting Agreements 

In April 1994, plaintiff entered into a
contract with the Law Offices of Donald J. Reino (Reino), whereby plaintiff
agreed to refer workers’ compensation cases to Reino in consideration for
payment of 25 percent of the attorney fees earned on those cases, 100 percent
of all deposition fees (Lab. Code, § 5710) if “handled” by plaintiff, and
25 percent of the vocational rehabilitation attorney fees.  Three years later, in 1997, Reino & Iida,
a Professional Corporation, and Law Offices of Myles Iida were formed as
successors of Reino.  By this time, plaintiff
had referred over 1,000 cases to Reino pursuant to the agreement.

Upon formation of the successor firms, plaintiff
entered into a new agreement that is substantially similar to the original
agreement with Reino.  Both the original agreement and the new agreement provided
that plaintiff was “of counsel” to Reino and to the successor firms, and his
position was to be represented on the firm stationery.  Plaintiff was to
maintain the Law Offices of Mark R. Leeds independently of the other firms.  Reino and the successor firms provided
plaintiff a window office and telephone, and permitted him access to the
various office amenities (“reception, photocopying, coffee, etc.”).  Plaintiff was to maintain his own separate
malpractice insurance policy.  There were
provisions for sharing of fees generated by referrals to plaintiff from another,
unrelated law office.  Both agreements
permitted plaintiff to communicate at any time with any client he referred to
the firms and to appear at any and all legal proceedings.  The agreement with Reino provided that
plaintiff “will not be required to do any work on any of the cases but may
volunteer to do so.” 

Reino and the successor firms paid
plaintiff in accordance with the terms of the agreements for about 16
years.  During this time, the deposition fees were paid without objection
whether plaintiff personally attended the depositions or he arranged for a
contract attorney to appear.   

On October
1, 2010, plaintiff separated from the successor firms and formed his
own firm.  It is not clear from the allegations of the complaint,
including the exhibits incorporated into the allegations, whether plaintiff Law
Offices of Mark R. Leeds was first formed in October 2010.  It may have been formed at that time, because
the complaint alleges the Law Offices of Mark R. Leeds has its offices in Long Beach, whereas the
defendant firms whose offices plaintiff previously occupied are alleged to be in
Lakewood and Anaheim
Hills.  In any event, at separation,
“many of the referred clients manifested their intent to substitute [plaintiff]
as counsel of record while others elected to remain with [the successor firms]”;
and “some of the previously referred clients . . . had substituted other firms
to handle their claims.”

3.         The Controversy

Plaintiff contends that after he separated
from the successor firms and formed his own firm, defendants stopped paying him
25 percent of the fees earned on cases he had referred to them, and they
stopped paying him any fees for depositions he did not personally attend.  The complaint alleges these fees were earned
before plaintiff’s departure from the successor firms but defendants refuse to
pay them to plaintiff.  The complaint
alleges defendants contend plaintiff is no longer entitled to 25 percent of the
attorney fees generated by each case and is not entitled to any of the deposition
fees if plaintiff did not personally appear at the deposition.    

4.      >      The Demurrer         

            Defendants
demurred to the complaint on three grounds: 
(1)  the trial court lacked
subject matter jurisdiction over the subject of the cause of action, because
WCAB has exclusive jurisdiction over disputes regarding attorney fees in
workers’ compensation matters; (2) another action is pending before the WCAB
entitled Lovato v. The Kroger Co. dba
Ralph’s Grocery, case No. ADJ7354967 (Lovato) between the same parties on the same issues, i.e., “the
alleged failure of Defendants to pay Plaintiff[’s] referral fees allegedly
earned under the alleged contract . . . including California Labor Code section
5710 deposition fees;” and (3) no cause
of action for declaratory relief is stated. 


            Plaintiffs
opposed the demurrer primarily on the grounds the dispute over allocation of
attorney fees does not fall within the jurisdiction of the WCAB, and the >Lovato matter has no bearing on the
allocation of attorney fees between plaintiffs and defendants.

            The trial court
sustained the demurrer without leave to amend on all grounds asserted in
defendants’ demurrer and, on May 22, 2012, entered its order (judgment)
dismissing the complaint with prejudice. 


>DISCUSSION

>1.         Standard
of Review

“On appeal from a judgment dismissing an
action after sustaining a demurrer without leave to amend, the standard of
review is well settled. . . .  When a
demurrer is sustained, we determine whether the complaint states facts
sufficient to constitute a cause of action.”  (City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, 865,
citations omitted.)

In
determining whether a plaintiff has properly stated a claim for relief, “ ‘ “We
treat the demurrer as admitting all material facts properly pleaded, but not
contentions, deductions or conclusions of fact or law.  [Citation.] 
We also consider matters which may be judicially noticed.” 
[Citation.]  Further, we give the complaint a reasonable interpretation,
reading it as a whole and its parts in their context.  [Citation.] 
When a demurrer is sustained, we determine whether the complaint states facts
sufficient to constitute a cause of action.  [Citation.]  And when it
is sustained without leave to amend, we decide whether there is a reasonable
possibility that the defect can be cured by amendment:  if it can be, the
trial court has abused its discretion and we reverse; if not, there has been no
abuse of discretion and we affirm.  [Citations.]  The burden of
proving such reasonable possibility is squarely on the plaintiff.’ 
[Citations.]”  (Zelig v. County of
Los Angeles (2002) 27 Cal.4th 1112, 1126.)  Our review is de
novo.  (Ibid.)

        2.         Agreement
to Split Fees in Final Award Not Subject to WCAB      Jurisdiction

        Plaintiffs contend the trial court erred
in concluding the WCAB had exclusive jurisdiction over the claims alleged in
the complaint, because the WCAB lacks “jurisdiction to interpret a contract to
which the workers’ compensation claimant is not a party, and which only
involved the question as to how attorney[] fees that have already been awarded
shall be divided outside of the workers’ compensation setting.”    We
conclude the distribution of attorney fees in a final award pursuant to a fee
splitting agreement is not subject to the exclusive jurisdiction of the WCAB.    

                    a.  Applicable general legal principles

        “Pursuant
to the plenary power granted by article XIV, section 4, the name=BestSection>Legislature has enacted
a comprehensive statutory scheme name="SR;2281">governing workers’ compensation
law. (Lab. Code, § 3200 et seq.)  This
plenary grant of authority permits the Legislature to name="SR;2300">enact, amend, and repeal workers’ compensation
laws as it deems appropriate.  [Citations.]”href="#_ftn1" name="_ftnref1" title="">>[1]  (Bautista
v. State of California (2011) 201
Cal.App.4th 716, 722.)

        “ ‘The right to receive attorney fee
awards for securing compensation on behalf of name="SR;5098">workers is also within the broad authority vested in the name="SR;5108">Legislature over the complete workers’
compensation system. . . .’  [Citation.]  Because injured workers
are limited to these statutory remedies for all injuries caused by wrongful
delays or refusals to pay, lien name="citeas((Cite_as:_186_Cal.App.4th_480,_*4">claimants are limited to
the same.  [Citation.]  As a result, ‘claims seeking compensation for
services rendered to an employee in connection with his or her workers’
compensation claim fall under the exclusive jurisdiction of the WCAB.  [Citations.]’  [Citations.]” 
(Koszdin v. State Compensation
Ins. Fund (2010) 186 Cal.App.4th 480, 491-492; see also >Longval v. Workers’ Comp. Appeals Board
(1996) 51 Cal.App.4th 792, 799-800.)

        Moreover, “ ‘[p]roceedings which in any
manner concern the recovery of compensation, or any right or liability “arising
out of or incidental thereto’ are to be instituted solely before the [WCAB.]’ ”  (Greener v. Workers’ Comp. Appeals Bd.
(1993) 6 Cal.4th 1028, 1038-1039.) 
Proceedings as to an attorney’s “right to fees” therefore are within the
exclusive jurisdiction of the WCAB in the first instance.  (Id.
at p. 1039.)

        The WCAB is authorized to determine and allow as a lien “[a]
reasonable attorney’s fee for legal services pertaining to any claim for
compensation either before the [WCAB] or before any of the appellate courts,
and the reasonable disbursements in
connection therewith. . . .”  (§ 4903, subd. (a); see
also § 5710, subd. (b)(4) [reasonable attorney fees for deposition], § 5801
[supplemental attorney fee on remand]; see also Glass Containers, Inc. v.
Industrial Acc. Commission (1953) 121 Cal.App.2d 656, 660 [“Since these
liens are expressly created
by section 4903 they may fairly be said to fall within the language of section
5300(b) as a ‘liability for compensation imposed . . . by this division in
favor of . . . a third person.’”].) 

                    b.  Distribution
of attorney fees pursuant to fee splitting agreement                                 >outside exclusive WCAB jurisdiction 

Plaintiffs contend issues regarding the division of
the attorney fees already awarded by the WCAB do not concern the WCAB, fall
outside its expertise, and thus, are not within its jurisdiction.  They argue the fee dispute over such division
between plaintiffs and defendants “is not ‘largely arithmetical’ despite the
percentage allocation set forth in the Contracts”; rather, “[t]he specific
nature of the controversy . . . involves contractual issues of estoppel, waiver
and interpretation as well as rights upon termination, oral modification,
course of conduct and possibly novation.”   We find plaintiffs’ contention persuasive as
to claims arising from final WCAB attorney fee awards. 

            Section 4906, subdivision (a)
provides that “[n]o charge, claim, or agreement for . . . legal
services . . . is enforceable, valid, or binding in excess of a reasonable
amount.  The [WCAB] may determine what
constitutes a reasonable amount.” 
(Italics added.)  “Subdivision (b)
prohibits an attorney from demanding or accepting a name="SR;2466">fee until the amount has been approved by the WCAB.”  (Vierra
v. Workers’ Comp. Appeals Board (2007) 154 Cal.App.4th 1142, 1147; see also
Hughes v. Argonaut Ins. Co. (2001) 88 Cal.App.4th 517 [sections 3860,
subdivision (f) and 5300 infuse WCAB with exclusive jurisdiction to decide
dispute over allocation of attorney fees incurred in reaching settlement with
third party].)  

            The WCAB has legitimate
interests in ensuring an award of attorney fees is valid (nonfraudulent and
services actually rendered) and the fees awarded are reasonable (valuable, no
double-recovery).  (See § 4903.2, subd. (c) [WCAB may award attorney
fees to applicant’s attorney out of lien claimant’s recovery if WCAB determines
all of the enumerated factors occurred, including “[t]here were bona fide
issues respecting compensability, or respecting allowability of the
lien, such that the services of an attorney were reasonably required to
effectuate recovery on the claim of lien and were instrumental in effecting
the recovery” (italics added)].)  

            In contrast, once the WCAB has
resolved the “reasonable amount” of the attorney fees and makes a final
award in this amount, the WCAB has no further interest in, or obligation to
determine, how the fees are to be disbursed or otherwise disposed of by the
lien claimant.  We therefore conclude
that a dispute between the lien claimant and a third party regarding allocation
or division of the attorney fees in a final award issued by the WCAB is outside
the jurisdiction of the WCAB. 

        3.         Pendency
of Another Action Not Proper Basis to Sustain Demurrer

            Plaintiffs contend the trial
court erred in sustaining the demurrer on the ground of “another action pending
between the same parties on the same cause of action.”  (Code. Civ. Proc.,
§ 430.10, subd. (c).)  We agree. 

            In addition to this court action,
the parties also are before the WCAB in the Lovato
matter.  Plaintiffs acknowledge >Lovato is pending before the WCAB on their
sanctions claim for the alleged conversion of a check representing deposition
fees incurred in that matter.   Plaintiffs argue Lovato thus involves a very narrow issue which does not encompass
the contractual issues raised in his complaint. 
It may be that in resolving the conversion issue, the WCAB first will
determine whether those fees should have been paid to plaintiff or some other
attorney, e.g., one of the defendants. 
But we are not persuaded the WCAB decision in Lovato will necessarily be so expansive as to resolve all of the
parties’ fee disputes at issue in this lawsuit.

            In any event, the trial court erred
in dismissing the complaint on this basis. 
The proper disposition in the situation of another action pending is to
abate, i.e., stay, the second action, i.e., the current court action.  (Plant
Insulation Co. v. Fibreboard Corp. (1990) 224 Cal.App.3d 781,
787-788.)  Thus, the trial court may have had the power to have stayed resolution
of plaintiffs’ claim for attorney fees pursuant to their fee splitting
agreement as it relates to any final attorney fee award in Lovato, but it was improper to sustain the demurrer on this basis.

            4>.         Leave to Amend Declaratory Relief Cause
of Action or to Allege Breach of Contract

            We
turn now to the third basis on which the court sustained the demurrer, for
failure to state a declaratory relief
cause of action.  Plaintiffs contend the
trial court abused its discretion in failing to afford an opportunity to amend
the complaint to cure its defective allegations and to state a cause of action
for breach of contract.  We agree.

            “It is the general rule that in an action for declaratory relief
the complaint is sufficient if it sets forth facts showing the existence of an
actual controversy relating to the legal rights and duties of the respective
parties under a contract and
requests that the rights and duties be adjudged.  [Citation.] 
If these requirements are met, the court must declare the rights of the
parties whether or not the facts alleged establish that the plaintiff is
entitled to a favorable declaration.”  (Bennett
v. Hibernia Bank (1956) 47 Cal.2d 540, 549-550; see also Wellenkamp v.
Bank of America (1978) 21 Cal.3d 943, 947.)

name="_______#HN;F28">            The remedy of declaratory relief is
unavailable where a “plaintiff has a fully matured cause of action for money,
if any cause exists at all.”  (>Jackson v. Teachers Ins. Co. (1973) 30
Cal.App.3d 341, 344; see also Canova v.
Trustees of Imperial Irrigation Dist. Employee Pension Plan (2007) 150
Cal.App.4th 1487, 1497 [“Where, as here, a party has a
fully matured cause of action for money, the party must seek the remedy of
damages, and not pursue a declaratory relief claim.”].)

            As pled, the complaint alleges
defendants breached their contracts and seeks to redress the past wrong
plaintiffs suffered by being denied payment of fees they earned that are due
and owing.  The complaint does not
clearly seek a declaration of rights that will operate prospectively to prevent
a breach of contract.  Plaintiffs argue
the controversy is “still prospective in nature” because some of the thousands
of cases referred to defendants are still pending, although plaintiffs do not
know how many pending cases are involved. 
“How the parties are going to conduct themselves in the future with respect
to fees awarded by the WCAB in the remaining referred cases is still to be
determined.”  At oral
argument, plaintiffs’ counsel stated the real dispute involves plaintiff's
claim for deposition fees incurred to attend depositions already taken but for
which the WCAB had not yet awarded attorney fees.

            Plaintiffs below
did not offer a proposed amended complaint or identify the legal theory or
theories and additional facts on which they
intended to rely.  In the opening brief
on appeal, plaintiffs urge for the first time they should be allowed to amend
the complaint to show “a prospective controversy with respect to fees which
will be awarded in the future by the WCAB in the remaining referred
cases.”  Additionally, they seek leave to
amend the complaint to assert an “accrued cause of action for breach of
contract.”  We believe plaintiffs should
be given leave to amend the defects in the declaratory relief cause of action,
if they can do so.  Moreover, it does not
appear from the complaint’s allegations that, as a matter of law, no cause of
action for breach of contract could be stated at this juncture in the
pleadings.href="#_ftn2" name="_ftnref2"
title="">[2]>             

>DISPOSITION

            We reverse the judgment and remand the matter for further
proceedings to permit plaintiffs the opportunity to amend the complaint to cure
the defects in that pleading and to plead a cause of action for breach of
contract. 
Plaintiffs shall recover their costs of appeal.

 

                                                                                    GRIMES,
J.

 

We
concur:

 

                        RUBIN, Acting P. J. 

 

 

                        FLIER, J.