Congratulations to The Maloney Firm, APC litigation team of Patrick M. Maloney, Carl I. S. Mueller, and Brittany B. Genthert who obtained a $1,141,963.50 decision on behalf of their client, Son of the South Owner, LLC in JAMS Arbitration. The arbitration centered around The Maloney Firm’s client being defrauded into entering a film promotion agreement, and being cheated out of hundreds of thousands of dollars. The arbitration award includes a finding of $750,000 of punitive damages.
Following the death of Wen Zheng’s wife at age 88, Wen’s son, who had been holding multiple pieces of real property and hundreds of thousands of dollars in trust for his parents, told Wen, “Your house is mine and you will have to go to Court to get it back.”
Over several weeks in November and December 2022, Patrick M. Maloney and Gregory M. Smith tried the matter on Wen’s behalf to Judge Schwarm of the Orange County Superior Court.
On June 6, Judge Schwarm finalized a statement of decision that gave Wen a decisive victory. Wen was awarded everything he had asked for – complete ownership of his primary residence, 50% ownership of an investment property, and hundreds of thousands of dollars in back rent. Further, Judge Schwarm found that Wen’s son had acted with malice and would be subject to punitive damages. The punitive damages trial is set for July 7.
Gregory M. Smith delivered the opening and closing statements, conducted the direct examination of Wen, Wen’s experts, and third party witnesses, and cross-examined third party witnesses. Patrick M. Maloney cross-examined the defendant and third party witnesses and authored the closing brief.
The Maloney Firm is pleased to congratulate Gregory Smith, Elizabeth Schaus, and Carl Mueller on their selection to the 2023 Southern California Rising Stars list. Each year, no more than 2.5 percent of the lawyers across California are selected by the research team at Super Lawyers to receive this honor.
Elizabeth has been recognized on the list for the past five years. Greg has been named to the Rising Stars list for eight years in a row, and has earned the further distinction of being selected to the Up-and-Coming 100 list for the past four years. Carl has now been named to the Southern California Rising Stars list for four years in a row and made his first appearance on the Up-and-Coming 100 list.
Additionally, firm founder Patrick Maloney has also consistently been recognized by Southern California Super Lawyers from 2015 to the present.
Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates, and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys.
The Super Lawyers lists are published nationwide in Super Lawyers Magazines and in leading city and regional magazines and newspapers across the country. Super Lawyers Magazines also feature editorial profiles of attorneys who embody excellence in the practice of law. For more information about Super Lawyers, visit SuperLawyers.com.
On May 24, 2023, the U.S. District Court for the Central District of California granted summary judgment in favor of The Maloney Firm client, Nourmand & Associates, in Relevant Group, LLC v. Nourmand, Case No. 19-CV-05019. Relevant Group sought damages of more than $150 million, which it sought to have tripled, arising from alleged civil RICO violations.
Relevant’s lawsuit alleged that Nourmand & Associates participated, along with the other defendants, in a racketeering enterprise that challenged four of Relevant Group’s hotel projects in Hollywood by raising environmental concerns under the California Environmental Quality Act (“CEQA”). Though it was not a party to any of the CEQA lawsuits, which were brought by Sunset Landmark, LLC, Nourmand & Associates was accused of supporting the CEQA challenges by attending local government hearings and loaning its conference room for a meeting between Relevant and Sunset Landmark.
In finding that Relevant’s suit lacked merit, Judge Gutierrez ruled that the CEQA petitions were “the product of a duly enacted, environmentally focused California statute” and prohibited Relevant from “undermin[ing] California’s policy choices by bringing a civil RICO action to penalize legitimate…CEQA activity.” Further, the Court found the CEQA challenges enjoyed the protections of the First Amendment right to petition because Relevant Group had not established that any of challenges were objectively baseless.
Maloney Firm attorneys Patrick Maloney, Gregory Smith, and Elizabeth Schaus represented Nourmand & Associates. James Turken, Christopher Pelham, and Neil Thakor of Norton Rose Fulbright represented Sunset Landmark and the other defendants.
Congratulations to the talented attorneys who achieved such a tremendous result!
Lawyers Behaving Badly
Wednesday, June 21st
It’s that time of year again when we learn from other attorneys’ mistakes.
Join Patrick Maloney and Gregory Smith for the fourth annual “Lawyers Behaving Badly” MCLE event, in which they will discuss the ethical violations attorneys made in 2022 that resulted in discipline from the California State Bar.
This presentation has been approved by the State Bar of California for 1.0 hour of Participatory MCLE credit, including 1.0 hour of Ethics credit. Please contact email@example.com with any questions related to this event.
After Nearly a Decade and Two Appeals, Client Obtains $334,000 Fee Award From Lawyer Who Sought to Collect $3,720 of Unpaid Legal Fees
Soni v. Cartograph, Inc., 90 Cal.App.5th 1, 306 Cal.Rptr.3d 446 (2023).
Lawyers are well advised to think twice before suing a client for legal fees. Suits for unpaid fees routinely attract legal malpractice claims from disgruntled clients. In addition, they may expose lawyers to further liability under California’s Mandatory Fee Arbitration Act (“MFAA”), Cal. Bus. & Prof. Code § 6200 et seq. The California legislature enacted the MFAA to level the playing field between attorneys and clients in fee disputes. As one lawyer recently learned after nine years and two appeals, the MFAA does so in part by penalizing parties who take “unreasonable” positions in legal fee disputes.
Timothy Tierney and Cartograph (formerly SimpleLayers, Inc.) retained attorney Surjit Soni. Eventually, Tierney told Soni not to do any further work and moved the case from Soni’s firm. Tierney agreed to pay Soni’s outstanding balance, which Soni claimed was $7,211. Tierney paid $3,531 but declined to pay the remaining $3,720 because he had not authorized the work.
Tierney then initiated a Mandatory Fee Arbitration with the Los Angeles County Bar Association. The arbitrator awarded Soni a total of $2.50. Soni filed for a new trial 33 days after service of the award. Following a bench trial, the court entered judgment in favor of Soni in the amount of $2,890 and ordered Tierney to pay Soni’s attorneys’ fees in the amount of $79,898.
Tierney appealed. In a published opinion, Soni v. SimpleLayers, Inc., 42 Cal.App.5th 1071 (2019), the Court of Appeal reversed the judgment. The Court of Appeal held that the 30-day period within which to seek a trial de novo is not extended by five days when the fee award is served by mail. Thus, Soni’s request for a new trial was three days too late. The Court of Appeal sent the matter back to the trial court with directions to confirm the arbitration award, as Tierney had requested.
After remand, Soni filed a motion claiming $546,365 in attorneys’ fees for 1,400 hours of work in the fee case. Having obtained a total recovery of $2.50, Soni claimed he was entitled to a fee award pursuant to a prevailing parties’ attorney fee provision in his fee agreement with Tierney.
Tierney also filed a motion for attorney’s fees seeking $339,603 for 731.8 hours of work. Tierney presented his request for legal fees under California Business & Professions Code § 6203(c), which provides for an award of attorney’s fees to a party who is successful in confirming an award issued in a Mandatory Fee Arbitration.
The trial court awarded attorneys’ fees to Tierney under both Section 6203(c) and Section 6204(d). Subdivision (d) of Section 6204 provides courts with discretion to award attorneys’ fees to the prevailing party where one of the parties seeks a trial de novo. The party who sought a new trial is the prevailing party if they obtain “a judgment more favorable than that provided by the arbitration award.” Otherwise, the other party is the prevailing party. Because Tierney was successful in obtaining confirmation of the MFAA fee award and because Soni did not achieve a better result, the trial court found Tierney to be the prevailing party, awarding attorney’s fees and costs totaling $334,458.41.
Soni appealed. The Court of Appeal affirmed, finding that under both Sections 6203 and 6204, Tierney was the prevailing party. The Court of Appeal found that because the trial court had confirmed the arbitration award, Soni was not the prevailing party, notwithstanding that he won $2.50 in the arbitration. Soni had not obtained a more favorable result in the trial de novo, and Tierney was successful in having the arbitration award confirmed.
The Court of Appeal also held that fee provisions contained in the MFAA, namely, Sections 6203(c) and 6204(d), preclude contractual attorneys’ fees provisions. The Court of Appeal explained that the fee-shifting provisions in the MFAA encourage parties to avoid further frivolous litigation. Only parties who file meritorious positions to confirm, correct, or vacate an MFAA arbitration award may recover legal fees. This is intended to discourage unmeritorious petitions.
Similarly, a party unhappy with an MFAA fee award may insist upon a new trial. However, the party who does so must consider the risk of paying their adversary’s legal fees if they do not achieve a more favorable outcome.
Lawyers should be careful in the positions they take in legal fee disputes. Just because an attorney can sue for unpaid fees, does not mean that they should. In addition to the risk of a malpractice suit, there is also the risk of paying the former client’s legal fees.
About the authors
Patrick Maloney regularly represents lawyers and their clients in disputes with one another, including claims for legal malpractice, breach of fiduciary duty, and legal fee disputes. Mr. Maloney previously sat on the California State Bar Committee on Mandatory Fee Arbitration and presently serves as a Vice Chair of the Los Angeles County Bar Association’s Attorney-Client Mediation and Arbitration Service. Mr. Maloney also represents clients in business litigation matters.
Brittany Genthert is an Associate Attorney at The Maloney Firm. Ms. Genthert represents clients in legal fee disputes and related matters in addition to business disputes.
Can The State Bar Trust Your Trust Account?
By Carl Mueller
As a result of the California State Bar’s investigation into the Girardi Scandal, new reporting and management requirements for trust accounts have been implemented and are prerequisites for all lawyers to renew their licenses in 2023.
First and foremost, if you are managing a client trust account as a solo practitioner or for your firm, it is absolutely necessary that you acquaint yourself with the applicable rules. The State Bar provides a helpful digital handbook to review those rules:
Second, the most prominent changes in trust account management appear in Cal. Rules of Professional Conduct, Rule 1.15. Subsection (d)(1) now requires a lawyer to inform clients of the receipt into trust of funds or other property “which the lawyer knows or reasonably should know the client or other person has an interest” within 15 days. Additionally, Subsection (d)(7)’s requirement for prompt distribution of client property from an attorney trust account has been modified by subsections (f) and (g). Under subsections (f) and (g) it is now a presumed violation of subsection (d)(7) if an attorney retains client property in their trust account for 45 days without one of (A) good cause, (B) signed consent, or (C) a legitimate dispute over the ownership of the property in the trust account.
Third, all lawyers, regardless of whether you manage a trust account, will be affected by Cal. Rules of Court (“CRC”) 9.8.5, which created the Client Trust Account Protection Program (“CTAPP”). Most lawyers will encounter CTAPP when they seek to renew their licenses via the State Bar website. All lawyers are now required to answer a series of questions relating to their use of a trust account as part of the annual renewal process. Importantly, CTAPP requires lawyers to report all existing trust accounts to the State Bar and confirm their role in relation to the management of that account.
Fourth, and finally, the CRC 9.8.5(2) and the CTAPP program allow the State Bar to select individual licensees for a “Compliance Review.” This review requires the attorney to submit to a trust account review by a CPA at the attorney’s expense. Further, the State Bar is impowered to take “Additional Actions” based on the results of a that review, including an “investigative audit, a notice of mandatory corrective action, and a referral for disciplinary action.”
Whether these measures will prevent another scandal is unlikely. However, the changes will hopefully result in most of our colleagues becoming more educated about and therefore more responsible with their trust accounts. Further, the changes may make it easier for the State Bar to punish those attorneys who abuse their positions of trust and steal from clients. Whatever the effect of this policy change generally, on an individual level it is always a good idea to properly manage your trust account and ensure that you are up to date on all rules related thereto.
We are pleased to congratulate Patrick Maloney on his selection to the 2023 Southern California Super Lawyers list. Each year, no more than five percent of the lawyers in the state are selected by the research team at Thomson Reuters to receive this honor.
A business litigator and the founder of the Maloney Firm, Patrick has been recognized as a Super Lawyer each year from 2015 to 2023, and had been a Rising Star – an award given to just 2.5% of attorneys who have been in practice for ten years or less – from 2005 to 2008.
Firm attorneys Gregory Smith, Carl Mueller, and Elizabeth Schaus have also been consistently recognized by Southern California Super Lawyers. In 2022, Greg was selected to the Super Lawyers Rising Stars List for the seventh consecutive year, and earned the further distinction of being named to the Up-and-Coming 100 list. Carl was recognized on the Rising Stars list for the third time last year, and Elizabeth has been selected to the Rising Stars list every year since 2019.
Super Lawyers, part of Thomson Reuters, is a research-driven, peer influenced rating service of outstanding lawyers who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area. The result is a credible, comprehensive and diverse listing of exceptional attorneys.
February 16th, 12-1pm
Client Trust Accounts – New Reporting and Management Requirements
This presentation will provide guidance to attorneys regarding proper trust account procedures which the California State Bar enacted beginning January 2023.
This presentation has been approved by the State Bar of California for 1.0 hour of Participatory MCLE Credit, including 1.0 hour of Legal Ethics credit.
Maloney Firm attorneys Patrick Maloney and Carl Mueller represented Cen Xu, Ph.D. in defense of claims that she breached her fiduciary duties as a corporate officer and director of a biopharma startup company when she decided to end her affiliation with the entity. The Plaintiff, GCX Innovation, Inc., claimed that as a result of Dr. Xu’s departure, it lost $10,000,000 in venture capital funding. GCX sought $10,000,000 in damages, claiming Dr. Xu’s departure caused loss of value to its business.
After three weeks of testimony, the jury deliberated for less than an hour before unanimously finding that Dr. Xu was not liable because she had not breached any fiduciary duty to GCX.
Maloney Firm founder Patrick Maloney commented “we are pleased to have secured a favorable outcome for Dr. Xu, and we are honored she had the faith in our firm to vindicate her interests at trial.”