Joaquim Finato v. Keith Fink and Associates

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 18, 2020
• Docket: 18-55044
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION FEB 18 2020 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

JOAQUIM FINATO, No. 18-55044

Plaintiff-counter- D.C. No. defendant-Appellant, 2:16-cv-06713-RGK-AJW

v. MEMORANDUM* KEITH ALLEN FINK; SARAH HERNANDEZ,

Defendants-Appellees,

KEITH FINK AND ASSOCIATES,

Defendant-counter-claimant- Appellee.

Appeal from the United States District Court for the Central District of California R. Gary Klausner, District Judge, Presiding

Argued and Submitted June 12, 2019 Submission Vacated July 3, 2019 Resubmitted February 14, 2020 Pasadena, California

Before: FERNANDEZ, WARDLAW, and BYBEE, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Joaquim Finato appeals the district court’s decisions on a series of claims he

brought against Keith A. Fink & Associates (“KFA”) based on KFA’s

representation of him in a suit against his former employer. The parties are

familiar with the facts so we do not repeat them here. Finato filed a complaint

claiming malpractice, breach of contract, breach of fiduciary duty, intentional

interference with contractual and economic relations, restitution, and declaratory

relief. KFA countersued for breach of contract and brought a quantum meruit

claim for services rendered. The court dismissed all of Finato’s claims under

Federal Rule of Civil Procedure 12(b)(6) except his breach of contract and

declaratory relief claims. The parties filed cross-motions for summary judgment,

and the court rejected Finato’s remaining breach of contract and declaratory relief

claims, along with KFA’s breach of contract claim. Prior to trial, Finato moved for

sanctions against KFA for failing to provide computation of its damages in its

initial disclosures as required by Rule 26(a)(1)(iii), which the court denied.

Despite Finato’s demand for a jury trial, the district court conducted a bench trial

on the remaining quantum meruit claim. The one-day trial addressed only the

amount of fees owed, and following trial, the court granted KFA attorneys’ fees of

$22,250.

2 On appeal, Finato argues that the district court erred by (1) finding that KFA

met its burden of proof on the quantum meruit claim; (2) denying Finato’s motion

for Rule 37 sanctions; (3) granting KFA summary judgment on his breach of

contract and declaratory relief claims; (4) dismissing his malpractice, restitution,

and breach of fiduciary and contractual duties claims without leave to amend;

(5) finding his malpractice and breach of fiduciary duty claims time-barred;

(6) finding his intentional interference with contract claim barred by litigation

immunity; and (7) rejecting Finato’s request for a jury trial on the quantum meruit

claim.

1. The district court did not err by finding that KFA met its burden of proof

on its quantum meruit claim. We review whether a party met its burden of proof

for clear error. Wash. Mut., Inc. v. United States, 856 F.3d 711, 721 (9th Cir.

2017). We apply California law to the merits of a quantum meruit claim when

sitting in diversity. See Simler v. Conner, 372 U.S. 221, 222 (1963). Under

California law, to succeed on a quantum meruit claim, a party must show (1) that

the plaintiff performed certain services for the defendant, (2) their reasonable

value, (3) that they were rendered at defendant’s request, and (4) that they are

unpaid. Haggerty v. Warner, 252 P.2d 373, 377 (Cal. Ct. App. 1953). KFA

established that it completed legal work for Finato on his claim against his

3 employer, at his request. KFA also presented testimony regarding the hours

worked, the fees charged, and how it benefitted Finato’s case against his former

employer. The court properly weighed the facts in finding that KFA met its burden

of proof, and thus we do not have “a definite and firm conviction that a mistake has

been committed.” Exxon Co. v. Sofec, Inc., 54 F.3d 570, 576 (9th Cir. 1995)

(citation omitted).1

2. The district court did not err by denying Finato’s motion for Rule 37

sanctions. We review a district court’s decision on “the imposition of discovery

sanctions under Rule 37 for abuse of discretion,” Fjelstad v. Am. Honda Motor

Co., 762 F.2d 1334, 1337 (9th Cir. 1985), giving “particularly wide latitude to the

district court’s discretion,” Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d

1101, 1106 (9th Cir. 2001). Under Rule 26(a)(1)(A)(iii), a party must provide in

its initial disclosures “a computation of each category of damages claimed by the

disclosing party—who must also make available for inspection . . . the documents

or other evidentiary material . . . on which each computation is based.” If it does

not, the party may be subject to Rule 37 sanctions, “unless the failure to disclose is

1 Finato also argues the court should have dismissed KFA’s quantum meruit claim because it did not file a separate action to establish the lien and amount. However, this is not grounds for dismissal, see Little v. Amber Hotel Co., 136 Cal. Rptr. 3d 97, 109 (Ct. App. 2012), and the quantum meruit claim in this case satisfied that requirement. 4 ‘substantially justified or harmless.’” Ingenco Holdings, LLC v. Ace Am. Ins. Co.,

921 F.3d 803, 821 (9th Cir. 2019) (quoting Fed. R. Civ. P. 37(c)(1)).

Finato moved for sanctions on the ground that KFA provided no notice of its

claimed fees or how they were computed in its Rule 26 disclosures, but instead

presented them for the first time at trial. KFA’s Rule 26 disclosures were brief and

not at all detailed. But if Finato believed the computations needed to be more

specific, he should have filed a motion to compel, not a Rule 37 motion for

sanctions. Cf. Patelco Credit Union v. Sahni, 262 F.3d 897, 913 (9th Cir. 2001)

(finding the defendants’ Rule 37 motion was, “in essence, a motion to compel

discovery from plaintiffs,” and thus any “failure to obtain the requested documents

[was] due to [defendants’] own lack of diligence” in not filing a motion to compel).

In addition, Finato signed the final pretrial order, which explicitly stated that “[a]ll

disclosures under [Rule] 26(a)(3) have been made.” Even if KFA violated Rule

26, any failure to disclose was harmless. The court had all the evidence before it at

trial, including KFA’s estimates and the witnesses’ testimonies regarding the hours

they worked, and Finato failed to show how not having this information prior to

trial harmed his case. Thus, the district court did not abuse its discretion in

denying Finato’s Rule 37 motion for sanctions.

5 3. The district court did not err by granting summary judgment to KFA on

Finato’s breach of contract and declaratory relief claims. We review a district

court’s decision on a motion for summary judgment de novo. Hamilton Materials,

Inc. v. Dow Chem. Corp., 494 F.3d 1203, 1206 (9th Cir. 2007). First, Finato

argues that the court erred in finding that KFA did not assert a lien on fifty percent

of the individual settlement. The only evidence supporting this assertion is his and

his wife’s testimony that KFA orally told them it wanted fifty percent of the

contingency fee. However, this testimony is directly contradicted by the notice of

lien itself, which stated that KFA asserted the lien “pursuant to the parties[’]

written contract to pay attorneys’ fees,” with no mention of the contingency fee.

Second, Finato argues the court erred in finding that KFA did not abandon him.

This is directly contradicted by his complaint, in which he stated, “[p]laintiff

terminated the attorney–client relationship.”

4. The district court did not err in dismissing without leave to amend

Finato’s claims of malpractice, restitution, and breach of fiduciary and contractual

duties. “Dismissal without leave to amend is improper unless it is clear, upon de

novo review, that the complaint could not be saved by any amendment.” Thinket

Ink Info. Res., Inc. v. Sun Microsystems, Inc., 368 F.3d 1053, 1061 (9th Cir. 2004).

Finato’s claims rest on allegations that KFA entered into a “collusive” settlement

6 agreement, “simultaneously represent[ed] two clients with diametrically opposed

legal and pecuniary interests,” released and superseded his claims, and sought fifty

percent of Finato’s individual settlement. Finato provides no evidence showing

that the class settlement agreement was “collusive.” The record shows that it was a

beneficial settlement to the class plaintiffs. In addition, while KFA represented

both Finato and the class, they had the same legal and pecuniary interest in the

settlement. Finato chose to opt out of the settlement, and retained new counsel

when he did; at no point did KFA represent two parties with “diametrically

opposed” interests. Lastly, KFA’s lien did not breach any fiduciary or contractual

duty—KFA did not seek fifty percent of the individual settlement, but rather only

the reasonable value of its services, which did not breach the contract. Finato

argues he should be allowed to amend his complaint to provide “further

elaboration of the grounds for asserted damages,” but he does not explain how he

would do so—nor could he without directly contradicting the facts he already

alleged. Finato’s claims cannot be saved by any amendment, and the district court

did not err in dismissing them without leave to amend.

7 5. The court did not err in finding that Finato’s malpractice and breach of

fiduciary duty claims were barred by the one-year statute of limitations.2 Cal. Civ.

Proc. Code § 340.6(a). We review a motion to dismiss under Rule 12(b)(6) de

novo. Baker v. McNeil Island Corr. Ctr., 859 F.2d 124, 127 (9th Cir. 1988).

“[T]he one-year limitations period that commences when the plaintiff actually or

constructively discovers the attorney’s wrongful act or omission is no longer tolled

after the plaintiff sustains actual injury, i.e., when the plaintiff can plead a legal

malpractice cause of action.” Jordache Enters., Inc. v. Brobeck, Phleger &

Harrison, 958 P.2d 1062, 1069 (Cal. 1998). The district court explained that any

harm from Finato’s alleged “loss of his wrongful termination claim and

representative status” and “the cost of additional litigation to enforce the Individual

Settlement” occurred, at the latest, when he reached the individual settlement on

July 1, 2015. He filed his malpractice and breach of fiduciary duty claims over a

year later, on September 7, 2016.

Finato asserts that the injury did not occur until the state court “refus[ed] to

enforce the terms of the 2015 settlement agreement.” This argument is foreclosed

2 Finato also argues it is improper to dismiss a claim on statute-of-limitations grounds under Rule 12(b)(6), because it is an affirmative defense. This is incorrect; a court may address a statute-of-limitations defense when ruling on a 12(b)(6) motion. See U.S. ex rel. Air Control Techs., Inc. v. Pre Con Indus., Inc., 720 F.3d 1174, 1178 (9th Cir. 2013). 8 by Jordache Enterprises, in which the California Supreme Court explained that

“[t]here is no requirement that an adjudication or settlement must first confirm a

causal nexus between the attorney’s error and the asserted injury.” Id. at 1071.

Rather, the statute of limitations begins whenever there is “injury or harm

recoverable in a legal malpractice action.” Id. at 1080. In Jordache Enterprises,

the plaintiff had a cause of action when he discovered the firm’s negligence—not

when he received a final settlement in the case. Id. at 1073. Here, Finato alleges

that his injury was caused by the cost of additional litigation to recover his

individual claim, of which he was well aware when he entered his individual

settlement. At that point his alleged injury was no longer “speculative or

inchoate,” and he had a claim for actual damages. See id. at 1066.

6. The district court did not err by finding that the litigation privilege barred

Finato’s interference with contractual relations claim under California Civil Code

§ 47(b). The California Supreme Court explained in Silberg v. Anderson, 786 P.2d

365, 371 (Cal. 1990) (en banc), that “[t]he only exception to application of

[§ 47(b)] to tort suits” is “for malicious prosecution actions”—not interference

with contractual relations, which Finato is claiming here. More specifically, in

Olszewski v. Scripps Health, 69 P.3d 927, 950 (Cal. 2003), the California Supreme

Court explained that “the assertion of liens as authorized by validly enacted

9 California statutes is shielded by the litigation privilege.” Although KFA’s right is

not directly prescribed by statute like in Olszewski, KFA “undoubtedly had a legal

right to assert the liens” based on its implied contract with Finato. Id. Therefore,

the district court did not err by finding the claim barred by the litigation privilege.

7. The district court did not violate Finato’s Seventh Amendment rights by

holding a bench trial. Regardless of whether a quantum meruit claim is legal or

equitable, the trial concerned only the reasonable amount of attorneys’ fees, which

is an equitable claim that does not carry a Seventh Amendment right to a jury trial.

See Hale v. U.S. Tr., 509 F.3d 1139, 1147 (9th Cir. 2007); Schmidt v. Zazzara, 544

F.2d 412, 414 (9th Cir. 1976).

AFFIRMED.