Filed 4/1/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

ANGELA BRITTON et al.,

Plaintiffs and Appellants,

v.

THOMAS V. GIRARDI et al.,

Defendants and Respondents.

 B249232

 (Los Angeles County

 Super. Ct. No. BC492978)

APPEAL from a judgment of the Superior Court of Los Angeles County, Debre 

Katz Weintraub, Judge. Affirmed.

The Dion-Kindem Law Firm and Peter R. Dion-Kindem for Plaintiffs and 

Appellants.

The Erhlich Law Firm and Jeffrey Isaac Erhlich for Defendants and Respondents 

William M. Shernoff, Michael J. Bidart, and Shernoff Bidart Echeverria Bentley.

Girardi | Keese, Thomas V. Girardi and Graham B. Lippsmith for Defendants and 

Respondents Thomas V. Girardi and Girardi | Keese.

Engstrom, Lipscomb & Lack, Robert J. Wolfe and Robert T. Bryson for 

Defendants and Respondents Jerry A. Ramsey, Walter J. Lack, and Engstrom, Lipscomb 

& Lack.

——————————
2

Plaintiffs Angela Britton and others appeal judgment after the trial court sustained 

the demurrer of defendants to plaintiffs’ second amended complaint (SAC) for damages 

based upon defendants’ alleged failure to obtain their informed consent to an aggregate 

settlement, and defendants’ misappropriation of and failure to account for the settlement 

funds. Plaintiffs were represented by defendant law firms and attorneys in connection 

with an action against State Farm Insurance Company arising out of the 1994 Northridge 

earthquake (State Farm litigation). Court-appointed retired judges presided over a 1997

aggregate settlement of the matter on behalf of the plaintiffs. However, in 2012, one of 

the parties to the State Farm settlement conducted a random sampling of other plaintiffs’

awards in the action, which sampling they contend revealed that the defendant law firms 

allegedly had not properly disbursed or accounted for the settlement funds and had 

concealed this conduct from plaintiffs. The trial court sustained defendants’ demurrers on 

the grounds that plaintiffs’ claims were based on speculation and barred by the statute of 

limitations of sections 340.6 and 338, subdivision (d).

1

On appeal, relying on our opinion in Prakashpalan v. Engstrom, Lipscomb & Lack 

(2014) 223 Cal.App.4th 1105 (Prakashpalan), a related matter also arising out of the 

Northridge earthquake, plaintiffs assert the statute of limitations had not run under 

Probate Code section 16460 because they had no notice of any wrongdoing. Further, they 

argue defendants’ violations of Business and Professions Code section 6091 in failing to 

provide an accounting are not barred under that statute because their action was filed 

within one year of defendants’ failure to comply with the statute.

In Prakashpalan, supra, 223 Cal.App.4th 1105, we held that absent any other 

notice, the statute of limitations pursuant to Probate Code section 16460 was tolled as to a 

client’s fraud claim arising out of funds held in an attorney’s trust account until the client 

received an accounting. Nothing in Prakashpalan altered the time-worn principle that 

where there are facts sufficient to put one on inquiry notice, the fraud statute of 

 

1 All statutory references herein are to the Code of Civil Procedure unless 

otherwise indicated.
3

limitations starts running even when the defendant is a fiduciary. In the instant case, 

unlike in Prakashpalan, plaintiffs’ allegations in their complaint in combination with the 

exhibits attached to their complaint reveal facts that should have put plaintiffs on inquiry 

notice of their fraud claim against the defendant attorneys, thus starting the running of the 

fraud statute of limitations. Because plaintiffs filed their complaint after expiration of the 

fraud statute of limitations, the trial court properly sustained defendants’ demurrers and 

we affirm.

BACKGROUND

1. Prakashpalan v. Engstrom, Lipscomb & Lack

In Prakashpalan, supra, 223 Cal.App.4th 1105, we held that the provisions of 

Probate Code section 16460 applied to claims for fraud where the attorney-fiduciary had 

failed to provide an accounting of an aggregate settlement. In Prakashpalan, the 

Prakashpalans alleged that the defendant law firm settled a lawsuit for 93 insureds of 

State Farm for claims arising out of the Northridge earthquake in November 1997, but 

that the plaintiffs did not learn until February 2012 that the defendant had failed to fully 

and properly distribute $22 million of the settlement funds. The Prakashpalans alleged 

that they first suspected fraud when they had randomly contacted 17 of the plaintiffs in 

the litigation, and conducted a mathematical analysis of the settlement and of the overall 

litigation. Based on those discussions, plaintiffs alleged a significant portion of the 

settlement funds had been withheld. The Prakashpalans did not allege that the settlement 

was presided over by retired judges, that they had signed a settlement agreement, or that 

their informed consent to the settlement was not obtained. (Id. at pp. 1114–1115.)

The Prakashpalans sued the Engstrom firm and two of its attorneys on numerous 

theories.2 In Prakashpalan, supra, 223 Cal.App.4th 1105, we held that their fraud-based

 

2 The second amended complaint alleged claims for (1) professional 

negligence/legal malpractice/conflict of interest; (2) breach of fiduciary duty; (3) fraudulent 

concealment of conflict of interest; (4) fraudulent concealment of embezzlement; 

(5) intentional fraud; (6) constructive fraud; (7) unjust enrichment; (8) two claims of unfair 
4

claims (those claims not covered by section 340.6) were timely under Probate Code 

section 16460, which governs fiduciaries, and that until the Prakashpalans received an 

accounting that put them on notice that monies may have been wrongfully withheld, their 

claims did not accrue. As a result, the complaint filed in February 2012 was timely 

although the action had originally been settled in 1997 because the Prakashpalans alleged 

that they had not received any accounting. On that basis, we also found their claims were 

not barred as speculative because without the accounting, the Prakashpalans had no way 

of ascertaining whether funds had been improperly accounted for or withheld. (Id. at 

pp. 1124–1127.)

2. The Britton Action

Plaintiffs commenced this action on September 28, 2012 against the firms and 

attorneys involved in the settlement of the Northridge earthquake action: Shernoff Bidart 

Echeverria Bentley and attorneys William M. Shernoff and Michael J. Bidart (collectively 

Shernoff); Girardi | Keese and attorney Thomas V. Girardi (collectively Girardi) and 

Engstrom, Lipscomb & Lack and attorneys Jerry A. Ramsey and Walter J. Lack 

(collectively Engstrom). Plaintiffs alleged that each of the defendants and their law firms 

represented plaintiffs in connection with an action filed against State Farm Insurance 

Company arising out of the 1994 Northridge earthquake. In 1997, defendants settled the 

State Farm litigation on behalf of plaintiffs for a sum that plaintiffs allege was in excess 

of $100 million. Plaintiffs’ SAC alleged a claim for “breach of fiduciary duty” based 

upon defendants’ alleged concealment of their failure to account, failure to obtain 

plaintiffs’ informed consent to the settlement, and concealment of their misappropriation

of settlement funds. Plaintiffs sought damages and equitable relief, including restitution 

and an accounting.

In addition, plaintiffs allege that in violation of rule 3-310(D) of the Rules of 

Professional Conduct, defendants failed to obtain their informed consent to the 

 

business practices ; (9) conversion; (10) civil conspiracy to commit intentional fraud; 

(11) civil conspiracy to commit conversion; and (12) accounting.
5

settlement. Plaintiffs alleged that “some of the Defendants have claimed that the amounts 

allocated to the various plaintiffs participating in the settlement of the State Farm 

litigation were determined by a retired judge who had been appointed as a referee to make 

such allocations. For this reason, among others, the gross amount of the allocations made 

to all of the plaintiffs participating in such settlement is not privileged or confidential as 

to Plaintiffs.” Nonetheless, defendants failed to inform plaintiffs how the settlement was 

calculated, the total amount of the settlement being paid, and how the settlement would be 

distributed to each plaintiff. Defendants failed to provide a copy of the entire settlement 

agreement to plaintiffs, and had each plaintiff sign a signature page. Further, defendants 

concealed from plaintiffs their violation of rule 3-310(D). Plaintiffs alleged that 

defendants provided them with “net” settlement checks and did not provide a complete 

and accurate accounting of all funds received and disbursements made from the 

settlement proceedings, a violation of Business and Professions Code section 6091.

However, as alleged in their SAC, plaintiffs attached to their SAC as exhibit 5 a 

document purporting to be a page from a November 3, 1997 letter to the Prakashpalans 

(exhibit 5) stating that Judge Peter Smith3 had made the allocation determinations, the 

attorneys could not distribute the settlement until the plaintiffs signed a signature page to 

be appended to the “Master Settlement Agreement,” (an agreement plaintiffs claim they 

never received), by signing the agreement plaintiffs agreed to the terms of the settlement, 

after signing the agreement plaintiffs would no longer have any claims against State 

Farm, and the settlement was confidential and could not be discussed with anyone. 

Exhibit 5 also stated that “[b]y signing the enclosed signature page, you agree to the terms 

of the Settlement in your case against State Farm . . . for claims arising from the 

Northridge earthquake . . . . Your signature also confirms that you accept the award and 

agree to have the signature page attached to the Master Release.”

 

3 As discussed below, Judge Smith was one of the two retired judges who presided 

over the settlement allocation pursuant to a reference order.
6

Plaintiffs alleged that defendants deducted their one-third fee and costs from the 

proceeds. Out of the approximately $67.7 million (two-thirds of $100 million) remaining 

after defendants deducted their fees and costs, plaintiffs assert that $18.3 million was paid 

to some of the participating plaintiffs from the settlement proceeds out of the $67.7 

million that was available for distribution to plaintiffs. As a result, $48 million of the 

settlement proceeds have not been accounted for.

The SAC at paragraphs 39 through 47 contain allegations of delayed discovery. 

Plaintiffs claimed they did not discover defendants’ wrongdoing until February 12, 2012,

within a year of filing of the action. Two of the plaintiffs, Ron Prakashpalan and Nava 

Prakashpalan, on February 14, 2012, sent a letter to 12 randomly selected plaintiffs in the 

State Farm litigation. On February 18, 2012, the Prakashpalans sent another letter to 12 

different random plaintiffs, and on February 23, 2012, sent another letter to 12 randomly 

selected State Farm litigation plaintiffs. The February 18, 2012 letter stated that “we 

were offered around $70,000 for each family as a settlement amount. . . . For those who 

did not like the $70,000 [they] received [an] additional $70,000 or [an] additional 

$140,000.” Based upon these figures, the 93 plaintiff families received $19.5 million, 

and over $80 million was unaccounted for.

Plaintiffs further alleged that none of the State Farm litigation plaintiffs who 

contacted the Prakashpalans actually suspected any wrongdoing by the attorney 

defendants; the individual defendants were concerned that they could get into trouble if 

they discussed the settlement. On March 31, 2012, the Prakashpalans and Bob Premble, 

one of the State Farm litigation plaintiffs, organized a meeting during which Premble 

made a presentation explaining how the Engstrom defendants had committed wrongful 

acts and that a simple mathematical analysis based upon 18 percent of the plaintiffs 

demonstrated that there was over $22 million of settlement funds not accounted for. 

Meetings were held in May and August 2012 with other State Farm litigation plaintiffs.
7

On September 17, 2012, plaintiffs’ counsel sent a letter to defendants requesting a 

complete accounting of the settlement proceeds pursuant to Business and Professions 

Code section 6091, but defendants failed to respond to this request.

Plaintiffs alleged that defendants were untruthful when defendants told the 

plaintiffs (including the plaintiffs herein) that the plaintiffs had received their proper 

share of the settlement proceeds. Plaintiffs herein did not know defendants had violated 

their duties under Rules of Professional Conduct, rule 3-310(D) or their duty to account to 

plaintiffs because they had no reason to distrust defendants. The information regarding 

the calculation and disposition of the settlement proceeds was entirely within defendants’

knowledge, and defendants did not provide plaintiffs with any records or information and 

expressly told plaintiffs they were not to discuss the settlement with anyone. The 

Engstrom defendants and the Shernoff defendants have destroyed their files relating to 

this matter, but did so without obtaining plaintiffs’ consent before doing so.

3. Demurrers to the SAC

The Engstrom defendants demurred.4 They argued the claims based on the 

settlement were time barred because plaintiffs failed to allege sufficient facts to support 

the delayed discovery of their alleged fraud claims: they had not alleged with 

particularity the representations alleged to be fraudulent, to whom the representations 

were made, or by whom they were made. Further, defendants argued plaintiffs did not 

allege why they did not discover the misrepresentations and concealment earlier with the 

exercise of due diligence; plaintiffs’ claims were purely speculative; defendants owed no 

duty to provide an accounting because the Rules of Professional Conduct did not place a 

 

4 The Engstrom defendants were joined by the Shernoff defendants, who 

separately argued that plaintiffs failed to allege why they were prevented from 

discovering the alleged fraud before the limitations period expired, and that plaintiffs’ 

misappropriation claims were based upon groundless speculation. The Engstrom 

defendants were also joined by the Girardi defendants, who separately argued the statute 

of limitations was not tolled because plaintiffs had constructive notice of the purported 

injury more than 15 years before filing their action and plaintiffs’ claims were based upon 

speculation and they had failed to plead fraud with particularity.
8

limitations period on the retaining of time records; and defendants could not mount an 

adequate defense without revealing confidential or privileged information under Solin v. 

O’Melveny & Myers (2001) 89 Cal.App.4th 451.

Further, Shernoff’s judicially noticed materials showed that the plaintiffs had 

requested the trial court to appoint special masters/referees to preside over the settlement. 

The trial court entered an order providing for two retired superior court judges, Peter 

Smith and Arthur Baldonado, to act as special masters. The judges were engaged to 

allocate the settlement proceeds among the various plaintiffs pursuant to the retainer 

agreement entered into by the parties. Retired Judge Smith made the allocations, while 

Retired Judge Baldonado heard appeals from the allocations.5 These facts relating to the 

settlement of the matter by retired judges in a special reference proceeding were not 

alleged in the Prakashpalan matter. In an order issued and filed by Los Angeles Superior 

Court Judge Harvey Schneider, the special referees were appointed on October 14, 1998 

and some three months after the special referees were appointed, plaintiffs voluntarily 

dismissed the matter on January 28, 1998.

In opposition, plaintiffs argued that section 340.6 did not bar their claims because 

they did not discover their claim due to defendants’ concealment and the statute was 

tolled until the fiduciary makes a proper accounting of client funds.

The trial court found the action was governed by section 340.6 as an action for 

breach of fiduciary duty, and that under 65 Butterfield v. Chicago Title Ins. Co. (1999) 70 

Cal.App.4th 1047, the plaintiffs’ ignorance that the defendants’ conduct constituted a 

violation of their fiduciary duty did not toll the statute of limitations because plaintiffs 

 

5 Defendants jointly have requested that we take judicial notice of those documents 

that Shernoff requested be judicially noticed in the trial court. Those documents are: 

(1) order granting plaintiffs’ ex parte application for appointment of special 

masters/referees pursuant to sections 638 and 639, filed October 14, 1997 in the 

Northridge earthquake litigation; (2) the second amended complaint filed in 

Prakashpalan on April 30, 2012; and (3) the order of dismissal with prejudice filed 

September 4, 2012 of the Prakashpalan’s second amended complaint. We take judicial 

notice of these materials pursuant to Evidence Code sections 452, subd. (d)(1) and 459.
9

had all the facts to know that their consent had not been obtained when they were 

presented with their signature pages and checks, and had not received an accounting of 

the settlement funds, and accordingly, the statute ran when they received their settlement 

checks. The court noted that Business and Professional Code section 6091 gave them the 

right to demand an accounting at the time the settlement checks were received, citing 

People ex rel. v. Harris v. Sunset Car Wash, LLC (2012) 205 Cal.App.4th 1433. Further, 

the court found Rules of Professional Conduct, rule 4-100(C) did not impose an 

obligation on the attorney to keep records for more than five years. Finally, plaintiffs 

could have asked at the time of the settlement distribution for an accounting of the fees 

and costs defendants deducted from the gross settlement amount. Thus, claims based 

upon the underpayment of settlement shares and excessive fees and costs required 

plaintiffs to exercise reasonable diligence and make a reasonable inquiry upon receiving 

their settlement checks. In the case of fraud, where a fiduciary duty exists, nondisclosure 

is treated as fraud and a delayed discovery rule is more liberally applied, but such rule is 

nonetheless subjected to a reasonable diligence standard. Even applying the three-year 

statute applicable to fraud claims (§ 338, subd. (d)), the statue would have begun to run 

no later than the date when the plaintiffs received their settlement checks.

DISCUSSION

Plaintiffs contend that the statute of limitations is not a bar to their action because 

under Probate Code section 16460, defendants never provided a written accounting of the 

settlement proceeds, which would have triggered the running of the statute, and thus the 

statute did not begin to run until they discovered defendants’ wrongful conduct after the 

Prakashpalans conducted their mathematical analysis in 2012 and communicated that 

analysis to the State Farm litigation plaintiffs. Further, they argue that the statute did not 

run on their claim for defendants’ violation of Business and Professions Code section 

6091 because defendants did not provide an accounting of their trust fund within the oneyear period after plaintiffs’ request therefor in September 17, 2012.
10

Respondents respond that plaintiffs’ claims are based upon mathematical 

conjecture and surmise. Further, under section 340.6, consistent with Prakashpalan, their 

claims are barred by the one-year and four-year limitation periods applicable to claims for 

breach of fiduciary duty and plaintiffs have not alleged facts sufficient to toll the statute. 

Further, even if plaintiffs had adequately pleaded fraud-based claims within the scope of 

the holding of Prakashpalan (namely, the statute of limitations of Probate Code section 

16460 did not begin to run until plaintiffs had an accounting of the settlement proceeds), 

they are barred by the limitations period of Probate Code section 16460 because plaintiffs 

were on inquiry notice more than one year before the filing of their action when plaintiffs 

allege that they cashed their settlement checks without receiving a copy of the agreement, 

without receiving prior informed consent, and without compliance with Rules of 

Professional Conduct, rule 3-310(D). Finally, plaintiffs’ claims under Business and 

Professions Code section 6091 are barred because defendants had no obligation under 

that rule to maintain client records for more than five years.

I. Standard of Review

On appeal from an order dismissing an action after the sustaining of a demurrer 

without leave to amend, we independently review the pleading to determine whether the 

facts alleged state a cause of action under any possible legal theory. (McCall v. 

PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) “We may also consider matters that 

have been judicially noticed.” (Committee for Green Foothills v. Santa Clara County Bd. 

of Supervisors (2010) 48 Cal.4th 32, 42.) We give the complaint a reasonable 

interpretation, “treat[ing] the demurrer as admitting all material facts properly pleaded,”

but do not “assume the truth of contentions, deductions or conclusions of law.” (Aubry v. 

Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967; Evans v. City of Berkeley (2006) 38 

Cal.4th 1, 20 [demurrer tests sufficiency of complaint based on facts included in the 

complaint, those subject to judicial notice and those conceded by plaintiffs].) We 

liberally construe the pleading “‘“with a view to attaining substantial justice [between]
11

the parties.”’” (Mendoza v. Continental Sales Co. (2006) 140 Cal.App.4th 1395, 1401; 

§ 452.)

II. Statute of Limitations

Relying on Prakashpalan, supra, 223 Cal.App.4th 1105, plaintiffs argue that the 

statute of limitations in Probate Code section 16460 applies, and that the statute did not 

begin running until plaintiffs had knowledge of defendants’ wrongful conduct. They 

argue plaintiffs could not reasonably have discovered defendants’ wrongful conduct 

because there were no facts to put plaintiffs on notice of defendants’ concealment of their 

misappropriation of the settlement funds until the Prakashpalan’s did their mathematical 

analysis in 2012. We disagree. In Prakashpalan, our opinion was based upon the lack of 

an accounting because no other facts were pleaded which would have established the 

plaintiffs there were on inquiry notice. Here, however, numerous facts were pleaded 

establishing inquiry notice and hence the triggering of the statute of limitations.

A. The Statute of Limitations Began to Run at the Time of Settlement 

Because Plaintiffs Have Pleaded Facts Showing They Were on Inquiry Notice of Any 

Alleged Misfeasance

1. Applicable Statutes of Limitations

In Prakashpalan, supra, 223 Cal.App.4th 1105, we discussed the basic principles 

of statutes of limitations regarding actions brought against attorneys. “‘An action against 

an attorney for a wrongful act or omission, other than for actual fraud, arising in the 

performance of professional services shall be commenced within one year after the 

plaintiff discovers, or through the use of reasonable diligence should have discovered, the 

facts constituting the wrongful act or omission, or four years from the date of the 

wrongful act or omission, whichever occurs first.’” (§ 340.6, subd. (a).) Section 340.6 

states two distinct and alternative limitation periods: One year after actual or constructive 

discovery, or four years after occurrence (the date of the wrongful act or omission), 

whichever occurs first. The statute applies to an action for malpractice as well as breach 
12

of fiduciary duty arising out of the performance of an attorney’s professional duties. 

(Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 223.)

The statute is tolled only during the time the plaintiff has not sustained actual 

injury. (§ 340.6, subd. (a)(1).) Actual injury occurs where the plaintiff suffers any loss or 

injury legally cognizable as damages based on the asserted errors or omissions of an 

attorney. (Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 

739, 743.) The fact of injury or damage need not be recognized or noticed by the 

plaintiff. Nor does the fact that damage may be difficult to calculate or prove prevent the 

legal malpractice statute of limitations from running. (Croucier v. Chavos (2012) 207 

Cal.App.4th 1138, 1148.) “Actual injury must be noticeable, but the language of the 

tolling provision does not require that it be noticed.” (Foxborough v. Van Atta (1994) 26 

Cal.App.4th 217, 227.)

Further, “[b]y its own terms, section 340.6 does not govern claims for fraud. 

Generally, courts have applied section 338, subdivision (d) to actions for fraud against 

attorneys. This statute of limitations for fraud is three years. (§ 338, subd. (d).) [Section 

338] also codifies the delayed discovery rule, providing that a cause of action for fraud 

‘“is not to be deemed to have accrued until the discovery, by the aggrieved party, of the 

facts constituting the fraud or mistake.”’ (Brandon G. v. Gray (2003) 111 Cal.App.4th 

29, 35; see § 338, subd. (d).) The date a complaining party learns, or at least is put on 

notice, that a representation was false is the date the statute starts running. (§ 338, 

subd. (d).)” (Prakashpalan, supra, 223 Cal.App.4th at p. 1123, fn. omitted.)

“With respect to trust accounts, Probate Code section 16460 applies to a 

fiduciary’s duty to provide an accounting to a beneficiary and provides a three-year 

limitations period that is triggered by the trustee’s accounting duty. A beneficiary of a 

trust who receives an accounting that would put him or her on notice of a claim against 

the trustee has three years from the date of receipt of the accounting to file an action; if no 

accounting is provided, any action must be filed within three years of the discovery of the 

claim. Under [this section], the duty of inquiry is triggered where there is sufficient 
13

information (either through an accounting or otherwise) to put the beneficiary on notice 

to take action. (Prob. Code, § 16460, subd. (a); Nogle v. Bank of America (1999) 70 

Cal.App.4th 853, 861, fn. 5 [a duty of inquiry exists even where the alleged wrongdoer is 

a fiduciary].)” (Prakashpalan, supra, 223 Cal.App.4th at p. 1123, italics added.)

The statute of limitations of section 338, subdivision (d) provides a limitations 

period for fraud of three years. (§ 338, subd. (d).) This section effectively codifies the 

delayed discovery rule in connection with actions for fraud, providing that a cause of 

action for fraud “‘is not to be deemed to have accrued until the discovery, by the 

aggrieved party, of the facts constituting the fraud or mistake.’” (Brandon G. v. Gray, 

supra, 111 Cal.App.4th at p. 35.) The “date a complaining party learns, or at least is put 

on notice, that a representation was false” is the date the statute starts running. (Ibid.)

Where a fiduciary relationship exists, such as that between an attorney and a client, 

“delaying accrual of the statute [of limitations] ‘prevents the fiduciary from obtaining 

immunity for an initial breach of duty by a subsequent breach of the obligation of 

disclosure.’” (Amtower v. Photon Dynamics, Inc. (2008) 158 Cal.App.4th 1582, 1597.) 

Thus, the discovery rule is applicable in situations where the plaintiff is unable to see or 

appreciate a breach has occurred. “Delayed accrual of a cause of action is viewed as 

particularly appropriate where the relationship between the parties is one of special trust 

such as that involving a fiduciary, confidential or privileged relationship.” (Moreno v. 

Sanchez (2003) 106 Cal.App.4th 1415, 1424.)

The fraudulent concealment doctrine will also toll the statute of limitations. 

“[T]he ground of relief is that the defendant, having by fraud or deceit concealed material 

facts and by misrepresentations hindered the plaintiff from bringing an action within the 

statutory period, is estopped from taking advantage of his own wrong.” (Pashley v. 

Pacific Elec. Ry. Co. (1944) 25 Cal.2d 226, 231.) ‘To take advantage of this doctrine 

‘“the plaintiff must show . . . the substantive elements of fraud . . . and . . . an excuse for 

late discovery of the facts.”’ (Snapp & Associates Ins. Services, Inc. v. Robertson (2002) 

96 Cal.App.4th 884, 890.)” (Prakashpalan, supra, 223 Cal.App.4th at p. 1123.)
14

2. Plaintiffs Have Alleged Facts Putting Them on Inquiry Notice

As we read the SAC, Plaintiffs’ claims for “breach of fiduciary duty” are based 

upon three theories of concealment:

6

 (1) plaintiffs’ lack of informed consent to the State 

Farm litigation settlement because plaintiffs were given only signature pages and the 

nature of the settlement was concealed from them; (2) defendants’ concealment of the 

salient settlement facts through defendant’s failure to render an accounting; and 

(3) defendants’ concealment of their alleged misappropriation of settlement funds.

In Prakashpalan, the plaintiffs’ operative complaint did not allege numerous 

crucial facts present here that distinguish Prakashpalan and that lead us to conclude that, 

unlike Prakashpalan, the facts demonstrate that plaintiffs here were on inquiry notice

because the information given them about the settlement process warned them that they 

did not have the information needed to give consent about the process and thus alerted 

them to investigate.

Plaintiffs have alleged here that they had inadequate information to make an 

informed consent to the aggregate settlement as required by rule 3-310(D) of the Rules of 

Professional Conduct because defendants concealed information from them under the 

guise of confidentiality and privilege concerning the total amount of the settlement, how 

much each plaintiff was getting, how much the attorneys would be paid, and the amount 

of deducted costs. Plaintiffs claim this information could not be confidential because the 

amounts allocated to the various plaintiffs were determined by a retired judge appointed 

as a referee. Further, plaintiffs contend the defendant law firms failed to account for and 

allegedly misappropriated monies from the settlement proceeds (the alleged $100 million 

 

6 We observe that in this case, like Prakashpalan, a claim for breach of fiduciary 

duty would be barred by the statute of limitations of section 340.6. (Prakashpalan, supra,

223 Cal.App.4th at p. 1122.) However, because we read plaintiffs’ claims as sounding in 

concealment (fraud), we apply the statutes of limitations of Probate Code section 16460 

and section 338, subdivision (d), which both have a three-year period. (Thomson v. 

Canyon (2011) 198 Cal.App.4th 594, 606–607 [to determine applicable statute of 

limitations, court looks to gravamen of complaint].)
15

State Farm payout), either through the taking of an excessive share for themselves as fees 

and costs, or by failing to distribute all of the settlement proceeds. Thus, plaintiffs allege 

their “net” settlement proceeds either did not reflect their retainer agreement, or the 

amount the attorneys represented to them as their gross settlement (prior to deduction of 

fees and costs) was in fact less than the amount actually awarded to them.

Unlike Prakashpalan, the plaintiffs here have alleged facts showing they were on 

inquiry notice given what they have alleged they did not know at the time they received 

their settlement checks. With respect to their consent to the settlement, plaintiffs have 

alleged that at the time of the settlement, they received only a signature page and knew 

that they did not receive a copy of the master settlement agreement, master release, and 

confidentiality agreement. Plaintiffs attached to their SAC exhibit 5, a copy of a page 

from a letter sent to the Prakashpalan regarding the settlement7in which plaintiffs were

advised that by signing the mere signature page, they were giving up all claims against 

State Farm, past and future, and that they could not talk about the settlement with anyone. 

Exhibit 5 also mentioned Judge Smith, who was not the superior court judge assigned to 

their case, who would be making the settlement allocations. Judge Smith had been named 

as one of the settlement special masters/referees in the order requested by plaintiffs and 

filed by Judge Schneider on October 14, 1998.

Unlike Prakashpalan, supra, 223 Cal.App.4th 1105, where the plaintiffs did not 

receive an accounting nor did they allege they had signed a settlement agreement and thus 

“had no other sources of information, were not put on notice of any wrongdoing until they 

later conducted an investigation by surveying other settling plaintiffs in the [State Farm 

litigation],” (id. at p. 1125) here, plaintiffs allege facts that required them to do more than 

wait almost 15 years to bring their claims against the defendant attorneys. Plaintiffs have 

not explained why they gave up all claims against State Farm, yet they knew upon signing 

 

7 We infer that although the page from the letter attached as exhibit 5 was 

addressed to the Prakashpalans, because plaintiffs attached a page from this letter to the 

SAC, plaintiffs received a letter that was either identical or substantially similar.
16

a mere signature page that they did not have the master settlement agreement, the master 

release, or the confidentiality agreement, and were barred from speaking with each other 

about the settlement based on a confidentiality agreement they knew they did not have; 

further, they did not inquire about Judge Smith who was making the settlement allocation, 

presumably including to the attorneys for fees and costs, which would have been the 

amounts left after allocations to the plaintiffs.

With respect to the distribution of funds, unlike Prakashpalan, the plaintiffs here 

admitted that the settlement was presided over by retired judges who provided them with 

an allocation process and a review of that allocation. Judicially noticed materials reflect 

that the trial court entered an order appointing Judges Baldonado and Smith. Exhibit 5 to 

the SAC demonstrates that plaintiffs knew Judge Smith had made the allocations; the 

allocations could not be distributed until plaintiffs signed signature pages of a settlement 

agreement they knew they did not have; and the settlement was confidential so that they 

could not discuss it with anyone. If the plaintiffs did not know about Judge Smith’s 

function, or about the allocation process described in the reference order, exhibit 5 put 

them on notice to inquire who Judge Smith was and to inquire about the nature of the 

allocation process because they were told at the time of settlement that this allocation 

process foreclosed them from ever bringing claims against State Farm. Again, unlike 

Prakashpalan, sufficient facts were available to plaintiff to trigger their inquiry duty; the 

same analysis plaintiffs conducted in 2012 could have been conducted in 1997.

In Miller v. Bechtel Corp. (1983) 33 Cal.3d 868, the Supreme Court rejected an 

argument that reliance on one’s attorney discharged a plaintiff from being on inquiry 

notice for purposes of the running of a fraud statute of limitations. In that case, the 

plaintiff wife sued her attorney, among others, alleging that the value of stock owned by 

the community was misrepresented to her when she entered into a marital property 

distribution settlement. Her attorneys had made earlier inquiries into the value of the 

stock when they questioned the stock’s valuation, but dropped their investigation. The 

wife argued that she had no duty to “make inquiry regarding the accuracy of the 
17

representations as to the value of the stock because [her attorney] had an obligation as a 

fiduciary to provide her with full and correct information as to their worth.” (Id. at 

pp. 874–875.) The Supreme Court observed that even if this were a correct statement of 

the law, “if she became aware of facts which would have make a reasonably prudent 

person suspicious , she had a duty to investigate further, and she was charged with 

knowledge of matters which would have been revealed by such an investigation.” (Id. at 

p. 875.)

The same is true here. Thus, in conclusion, the three-year statutes of limitations of 

Probate Code section 16460 and Code of Civil Procedure section 338, subdivision (d) 

began to run at the very latest when all avenues of recourse—the special master 

proceedings, its internal appeal process, questioning of the process and its allocation—

expired, which was more than three years before the commencement of this action. 

Plaintiffs’ complaint filed in 2012 was untimely because the fraud statute of limitations 

started running at the latest in 1998, when plaintiffs were on inquiry notice (1) to 

investigate why they were being asked to accept a check about a settlement where they 

knew they had next to no information and (2) had access to a settlement allocation 

process in which to object.

B. Business and Professions Code Section 6091

Business and Professions Code section 6091 provides that, “If a client files a 

complaint with the State Bar alleging that his or her trust fund is being mishandled, the 

State Bar shall investigate and may require an audit if it determines that circumstances 

warrant. [¶] At the client’s written request, the attorney shall furnish the client with a 

complete statement of the funds received and disbursed and any charges upon the trust 

account, within 10 calendar days after receipt of the request. Such requests may not be 

made more often than once each 30 days unless a client files a complaint with the State 

Bar and the State Bar determines that more statements are warranted.” The attorney must 

preserve client records for at least five years after “final appropriate distribution of 
18

(client) funds or properties.” (Rules of Prof. Conduct, rule 4-100(B)(3); cf. ABA Model 

Code DR 9–102(B) [no time period specified for maintenance of records].)

In the context of an aggregate settlement, Business and Professions Code section 

6091 does not specify to whom the accounting must be given. Plaintiffs argue here that

all plaintiffs represented by a particular attorney are entitled to an accounting of all of that 

attorneys’ aggregate settlement clients. Some authority suggests that Business and

Professions Code section 6901 does not apply so broadly. (See Rules of Prof. Conduct, 

rule 4-100(B)(3) [client or client’s representative entitled to accounting]; Sternlieb v. 

State Bar (1990) 52 Cal.3d 317, 330 [accounting for entrusted funds must be provided to 

client and any third party who has an interest in the funds or to whom attorney owes 

fiduciary duty].) However, we need not decide the issue here, as the plaintiffs admit they 

signed an agreement knowing that they would not receive that information in connection

with the settlement.8

DISPOSITION

The judgment is affirmed. Respondents are to recover their costs on appeal.

CERTIFIED FOR PUBLICATION.

JOHNSON, J.

I concur:

BENDIX, J.

*

 

8 The applicability of Business and Professions Code section 6091 to the State 

Farm settlement was not raised in Prakashpalan, supra, 223 Cal.App.4th 1105.

*

Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant 

to article VI, section 6 of the California Constitution.
Rothschild, P. J., concurring in the judgment:

I concur in the judgment only. I respectfully disagree with the majority’s 

conclusion that plaintiffs’ allegations show that, at the time of the settlement, plaintiffs 

already had sufficient notice of wrongdoing to trigger a duty to investigate. But I believe 

that the judgment should be affirmed for largely the same reasons stated in my dissent in 

Prakashpalan v. Engstrom, Lipscomb & Lack (2014) 223 Cal.App.4th 1105.

Defendants were plaintiffs’ lawyers, and all of plaintiffs’ claims arise from 

defendants’ performance of professional services for plaintiffs. Plaintiffs’ claims are 

consequently subject to the statute of limitations defined by subdivision (a) of Code of 

Civil Procedure section 340.6, which provides that “[a]n action against an attorney for 

a wrongful act or omission, other than for actual fraud, arising in the performance of 

professional services shall be commenced within one year after the plaintiff discovers, or 

through the use of reasonable diligence should have discovered, the facts constituting the 

wrongful act or omission, or four years from the date of the wrongful act or omission, 

whichever occurs first.” The statute provides in addition that the four-year period is 

tolled whenever “[t]he attorney willfully conceals the facts constituting the wrongful act 

or omission when such facts are known to the attorney.” (Code Civ. Proc., § 340.6, 

subd. (a)(3).)

Plaintiffs filed suit more than 14 years after the (alleged) wrongful act or omission. 

Plaintiffs’ claims are therefore untimely unless plaintiffs have adequately alleged fraud or 

willful concealment. Consequently, in order for their claims to be timely, plaintiffs must 

allege with particularity all of the facts constituting the substantive elements of fraud. 

(See, e.g., Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1469.)

Plaintiffs have not done so. Plaintiffs purport to allege two fraud theories, but 

neither of them is adequately pleaded.

First, plaintiffs allege that “[w]hen Defendants made settlement distributions to 

Plaintiffs, Defendants represented in writing to Plaintiffs that they were distributing the 

shares of the State Farm Litigation settlement to which they were entitled,” and plaintiffs 
2

allege that that representation was false. Those allegations are far too vague to constitute 

an adequate pleading of fraud. Plaintiffs never allege what defendants told them 

about (1) the settlement, (2) their shares of the settlement, or (3) how those shares 

were determined. In the absence of such allegations, it is impossible to determine 

whether defendants’ alleged representations or omissions were materially misleading, 

or misleading at all. We do not even know exactly what defendants’ alleged 

representations were. (Cf. 5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 718, 

p. 134 [“The representation must be directly and specifically pleaded; without that 

pleading an essential element of the cause of action is lacking”]; id., § 719, p. 135 

[“The typical misrepresentation of fact is usually pleaded verbatim”].)

Second, plaintiffs allege that “Defendants did not obtain Plaintiffs’ informed 

written consent to the aggregate settlement,” because defendants allegedly did not 

disclose certain information about the settlement. But plaintiffs again fail to allege 

what defendants did tell them about the settlement, so they again fail to plead fraud with 

sufficient particularity. As long as plaintiffs fail to allege with particularity what they did

know about the settlement, it is impossible to determine whether the things they did not

know were of any significance.

Plaintiffs also argue that their cause of action for violation of Business and 

Professions Code section 6091 (which requires an attorney to provide an accounting

of client trust funds upon the client’s written request) is timely under Code of Civil 

Procedure section 340.6, because the action was filed within one year of plaintiffs’ 

written request for an accounting. I am not persuaded. Plaintiffs concede that they 

first requested the accounting in 2012, more than 14 years after the 1997 settlement. 

Plaintiffs further concede that under rule 4-100(B)(3) of the Rules of Professional 

Conduct, defendants were not required to keep the relevant records for more than five 

years after “final appropriate distribution” of the funds. The five-year period for retention 

of relevant records presents a reasonable outer limit on the time within which a client is 

entitled to an accounting under Business and Professions Code section 6091. Plaintiffs 
3

do not propose any alternative. Rather, plaintiffs appear to contend that an attorney is 

obligated in perpetuity to provide an accounting upon the client’s request, even if the 

relevant records were lawfully destroyed decades ago. That cannot be the law.

Finally, I disagree with the majority’s description of the facts in two significant 

respects. First, the majority states that plaintiffs allege that when they executed signature 

pages for the settlement, “they did not have the Master Settlement Agreement, the Master 

Release, or the confidentiality agreement.” (Maj. opn., ante, p. 16.) I can find no such 

allegation in the second amended complaint. The pleading does allege that “[d]efendants 

did not even provide a copy of the entire settlement agreement to Plaintiffs” (italics 

added), but it does not say how much of the settlement agreement defendants did provide. 

If defendants gave plaintiffs part of the settlement agreement, then it is possible that the 

omitted parts were not material and their omission was not misleading. Similarly, 

the second amended complaint alleges that defendants “instructed [plaintiffs] to sign 

signature pages and return such pages to [defendants],” but it does not allege that the 

signature pages were the only part of the settlement agreement that plaintiffs were given. 

Again, all of the facts constituting the elements of fraud must be pleaded with 

particularity. (Cansino v. Bank of America, supra, 224 Cal.App.4th at p. 1469.)

Second, the majority states that attached to the second amended complaint is 

“a document purporting to be a November 3, 1997 letter to the Prakashpalans” concerning 

the settlement. (Maj. opn., ante, p. 5.) What is attached to the second amended 

complaint, however, purports to be only the fourth page of a letter of unspecified length. 

That page refers to “allocation determinations” made by “Judge Smith” and various other 

matters, including “the Master Settlement Agreement.” It is impossible to determine 

whether anything on that page was fraudulent (as plaintiffs would have it) or suspicious 

(as the majority would have it) without seeing the rest of the letter. Again, the burden is 

on plaintiffs to plead fraud with particularity. The fourth page of that letter has no 

tendency, on its own, to show that they were defrauded.
4

For all of the foregoing reasons, I concur in the judgment.

ROTHSCHILD, P. J.