Filed 2/11/14

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

MURUGANANDAN PRAKASHPALAN et 

al.,

Plaintiffs and Appellants,

v.

ENGSTROM, LIPSCOMB AND LACK et 

al.,

Defendants and Respondents.

 B244236

 (Los Angeles County

 Super. Ct. No. SC112882)

APPEAL from a judgment of the Superior Court of Los Angeles County, John H. 

Reid, Judge. Affirmed in part and reversed in part.

Dion-Kindem & Crockett and Peter R. Dion-Kindem for Plaintiffs and Appellants 

Muruganandan Prakashpalan and Navamalar Prakashpalan.

Engstrom, Lipscomb & Lack, Robert T. Bryson and Edward P. Wolfe for Defendants 

and Respondents Engstrom, Lipscomb & Lack, Jerry Ramsey, Walter Lack and Robert 

Wolfe.

——————————
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Plaintiffs Muruganandan Prakashpalan and Navamalar Prakashpalan were clients of 

defendant law firm Engstrom, Lipscomb and Lack and the individual defendants Walter Lack, 

Jerry Ramsey, and Robert Wolfe, who are attorneys with the firm (collectively Engstrom). 

Plaintiffs appeal judgment entered after the trial court sustained Engstrom’s demurrer to their 

complaint based on Engstrom’s representation of plaintiffs. We affirm in part and reverse in 

part.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

1. Factual Allegations of the Second Amended Complaint

Plaintiffs’ claims arise out of three separate representations undertaken by Engstrom: 

the Allegro Matter, the Malibu Construction Matter, and the Perlmutter Matter. The second 

amended complaint (SAC) alleged 13 causes of action: (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) unfair business practices (Allegro Matter); 

(9) unfair business practices (Perlmutter Matter); (10) conversion; (11) civil conspiracy to 

commit intentional fraud; (12) civil conspiracy to commit conversion; and (13) accounting. 

Plaintiffs’ complaint alleged the following:

(a) The Allegro Matter

Plaintiffs’ home was severely damaged in the 1994 Northridge earthquake. From 

January 1995 to January 30, 1998, Engstrom and two other law firms represented plaintiffs 

and other property owners in a bad faith and property damage claim against their insurer, State 

Farm. The action was not a class action, and plaintiffs were specifically assigned to 

Engstrom. In or around November 1997, Engstrom entered into a settlement with State Farm 

and obtained over $100 million for 93 insured families. Plaintiffs allege that Engstrom 

received $245,000, about one-third of plaintiffs’ settlement share, and distributed the 

remaining $500,000 to plaintiffs. In February 2012, plaintiffs were able to randomly contact 

17 of the plaintiffs in the Allegro Matter. Based on their discussions with the Allegro

plaintiffs, it was clear to plaintiffs that Engstrom had instructed all plaintiffs in the Allegro
3

Matter not to discuss the settlement funds with anyone. However, plaintiffs concluded, after 

conducting a mathematical analysis of the settlement and of the overall litigation, that there 

was over $22 million of settlement funds unaccounted for. Based upon this discrepancy, 

plaintiffs calculated that Engstrom had withheld funds from plaintiffs’ share of the settlement 

funds.

(b) The Malibu Construction Matter

From January 1995 through January 30, 1998, Engstrom represented plaintiffs in 

connection with the Malibu Construction Matter. In late 1994, plaintiffs purchased land in 

Malibu, California, a fact which Engstrom knew. In early 1995, due to a contractor’s 

negligence, the Malibu property sustained “hill cut failure.” Engstrom provided 

representation to plaintiffs in connection with the contractor’s negligence, plaintiffs’ insurance 

claim against its insurer, State Farm, and other construction matters. State Farm provided a 

defense to plaintiffs in connection with the hill cut failure; this defense was provided at the 

same time as the Allegro Matter was being litigated. As a result, Engstrom requested that 

plaintiffs permit Engstrom to review all of plaintiffs’ documents and discovery responses 

prior to submission to State Farm.

Engstrom requested that plaintiffs estimate the cost to repair the hill cut failure, 

including the cost of importing dirt. Plaintiffs had learned they could obtain free dirt from the 

Los Angeles County Public Works Department (Public Works), and Engstrom knew of 

plaintiffs’ plans to import dirt to repair the hill cut failure. Plaintiffs requested that Engstrom 

keep this information confidential.

During the Malibu Construction Matter, Engstrom provided legal advice regarding 

plaintiffs’ neighbors the Perlmutters in connection with a nuisance, and also assisted in getting 

a restraining order against Jacob Perlmutter, who allegedly hired thugs to harass plaintiff 

Navamalar Prakashpalan.

(c) The Perlmutter Matter

In January 2005, plaintiffs’ Malibu property sustained damages due to a landslide 

originating on the Perlmutters’ property. In 2006, plaintiffs learned the Perlmutters were 
4

involved in unpermitted construction activity and illegal construction that caused the 

landslide, including abandonment of their 25 feet deep septic pits. Plaintiffs filed a complaint 

against the Perlmutters for negligence arising from the landslide, and the Perlmutters filed a 

cross-complaint against plaintiffs alleging that plaintiffs’ Malibu construction was the cause 

of the landslide. The Perlmutters’ insurer hired the Law Office of Paul Wright to represent 

them in this matter.

In early 2009, allegedly after discovering their case had no merit, the Perlmutters

retained Engstrom on a contingency basis as their additional attorneys. Although they knew 

the Perlmutter Matter was substantially related to the Malibu Construction Matter, Engstrom 

did not notify plaintiffs of the representation or obtain their consent, and Engstrom knew that 

the Perlmutters were claiming that plaintiffs’ slope repair was the cause of the landslide. Yet 

Engstrom failed to disclose the conflict of interest and during the litigation, Engstrom and 

their expert claimed that the 3,800 cubic yards of dirt plaintiffs imported caused the landslide. 

Engstrom used attorneys who did not have direct communication with plaintiffs in the Malibu 

Construction Matter and Allegro Matter, all of which was a clever plan to conceal the conflict 

of interest from plaintiffs.

Sometime after the Perlmutters retained Engstrom, the Perlmutters’ insurance 

company hired the law firm of Gibbs, Giden, Locher, Turner & Senet (Gibbs) to join as 

additional attorneys to represent the Perlmutters in settling the Perlmutter Matter. During the 

Perlmutter Matter, the Perlmutters revealed that their unpermitted construction activities were 

performed by entities collectively known as “the McDermott contractors.” Plaintiffs amended 

their complaint to add the McDermott contractors as defendants, including McDermott 

Plumbing (represented by Skapik Law Group) and McDermott Pumping (represented by 

Walters, McClusky & Boehle).

After pretrial discovery, Gibbs wanted to settle the matter on behalf of the Perlmutters

with plaintiffs, and the Perlmutters made a Code of Civil Procedure section 998 offer. 

Plaintiffs declined the offer. Gibbs requested continuance of the trial to settle with plaintiffs, 

and the court granted a continuance to permit mediation. At a mediation held December 3, 
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2010, defendant Wolfe revealed the damaging information that plaintiffs intended to import 

dirt from Public Works. The next day, plaintiffs realized the significance of Wolfe’s

revelation to their case. Plaintiffs “caved in” and accepted the Code of Civil Procedure 

section 998 offer, although plaintiffs’ loss was over $4 million and the offer was $500,000. 

When the McDermott contractor entities—who were motivated to settle because their 

negligence caused the landslide—learned of the settlement, plaintiffs were likewise forced to 

settle with the McDermott parties for $500,000.

Plaintiffs allege they did not discover the conflict of interest until April 2011 while in 

court on the Perlmutter Matter. At that time, plaintiffs observed a familiar face in the 

courtroom gallery among the spectators, and recognized the individual as defendant attorney 

Ramsey. In early May, plaintiffs wrote to Engstrom regarding the conflict of interest, and on 

May 3, 2011, received a letter in response from Engstrom in which Engstrom denied any 

conflict of interest, stated that plaintiffs waived the conflict, any contact with plaintiffs’

adversaries was insignificant and minimal, and the two matters were not substantially related. 

Plaintiffs further allege that “[o]n May 16, 2011, [Engstrom] emailed [their] attorney 

threatening [them] with a debtor examination to effectuate a lien on PLAINTIFFS’ property 

and thereby [Engstrom] collected over $1.3 million.” Elsewhere in the SAC, plaintiffs allege 

the $1.3 million constituted the judgment against them in the Perlmutter Matter.

2. Procedural Background

On June 6, 2011, plaintiffs commenced this lawsuit, alleging six causes of action for 

professional negligence and malpractice; breach of fiduciary duty and conflict of interest; 

fraudulent concealment; constructive fraud, fiduciary fraud, intentional fraud and conspiracy 

to commit fraud; unjust enrichment; and unfair business practices under Business & 

Professions Code section 17500 (UCL). Plaintiffs filed a first amended complaint on 

January 17, 2012, alleging eight causes of action (the same six as the original complaint plus 

claims for conversion and civil conspiracy).

On April 12, 2012, the trial court overruled defendant’s demurrer to the first cause of 

action and sustained the demurrer as to the second, third, fourth, fifth, sixth, seventh, and 
6

eighth causes of action of the first amended complaint, with leave to amend. Plaintiffs filed 

their SAC on April 30, 2012.

Engstrom demurred to the SAC, arguing the alleged confidential information about the 

source of the dirt used in the Malibu Construction Matter was a matter of public record and 

therefore not confidential; Engstrom was entitled to dismissal of the Allegro Matter claims 

because it could not mount an adequate defense without breaching the attorney-client 

privilege with respect to the other Allegro Matter plaintiffs under Solin v. O’Melveny & Myers 

(2001) 89 Cal.App.4th 451 (Solin); plaintiffs did not plead fraud with sufficient particularity; 

plaintiffs could not seek restitution because their claims were made under an enforceable 

contract; plaintiffs failed to allege recoverable damages under the UCL; plaintiffs’ conversion 

claim failed to allege an identifiable sum of money; plaintiffs failed to allege all elements of a 

civil conspiracy; plaintiffs failed to state facts sufficient to state a claim for accounting; and

certain of plaintiffs’ claims relating to the Allegro Matter (the second, fourth, seventh, eighth, 

tenth causes of action) were time-barred. Engstrom requested judicial notice of the grading 

permit plaintiffs obtained from the City of Malibu in 1998 connection with installation of a 

“manufactured fill slope” and the Permit issued to the County of Los Angeles for the purpose 

of entering the plaintiffs’ property to deposit fill material.

Engstrom also moved to strike certain portions of plaintiffs’ SAC that requested 

punitive damages and attorney fees and costs on the grounds that the SAC failed to allege 

malice, fraud or oppression and the cause of action for accounting did not permit the recovery 

of damages, and the UCL did not provide for attorney fees.

In opposition,1 plaintiffs generally contended the Public Works documents were 

expired permits and had been obtained as a result of a privileged communication with 

 

1 Plaintiffs attached to their opposition defendants’ answers to interrogatories in 

which defendants stated that the settlement in the Allegro Matter was subject to a 

confidentiality agreement. Plaintiffs also sought judicial notice of (1) a copy of the asbuilt approved plan from the City of Malibu with respect to the grading, 

(2) correspondence from the City of Malibu regarding the grading dated November 23, 

2010 stating that no imported soils were used in the grading, and (3) defendant Wolfe’s 
7

plaintiffs. Further, plaintiffs argued the documents were not public records because Public 

Works does not provide information over the phone or over the counter unless a party is 

aware of the information and makes a request in writing. Plaintiffs further distinguished the 

case from Solin, supra, 89 Cal.App.4th 451, in which the clients intervened in a case to 

prevent disclosure of confidential information; here, the other parties in the Allegro Matter 

were coming forward and volunteering information, and thus the evidence was available. 

Further, the statute of limitations was not a bar to plaintiffs’ claims because Engstrom’s

actions were committed in secret.

Plaintiffs also opposed the motion to strike, contending the fraud alleged was sufficient 

under Civil Code section 3294, pointing to Engstrom’s alleged conduct in representing 

adverse interests without disclosing same to plaintiffs and in disclosing confidential 

information, and by taking settlement funds to which they were not entitled.

In reply, Engstrom asserted that plaintiffs’ failure to plead facts sufficient to entitle 

them to equitable tolling of the statute of limitations under the discovery rule in the Allegro 

Matter because there was nothing preventing plaintiffs from discovering any alleged 

misconduct in the 15 years since the settlement of the Allegro Matter. Further, unless all the 

Allegro plaintiffs waived the attorney-client privilege, plaintiffs would not be able to 

demonstrate how the settlement monies were disbursed. With respect to the Public Works 

document, Engstrom contended plaintiffs shared this allegedly confidential information with a 

public entity long before Engstrom allegedly improperly informed their adversaries.

The court granted Engstrom’s request for judicial notice and granted plaintiffs’ request 

for judicial notice only as to the final approved plan from the City of Malibu.

The court sustained the demurrer without leave to amend. The court found that with 

respect to those claims based on the Allegro Matter (second, fourth, seventh, eighth, tenth, 

twelfth and thirteenth causes of action), the statute of limitations did not bar those claims even 

under the delayed discovery rule because plaintiffs alleged sufficient facts to show they did 

 

correspondence dated December 3, 2010 with Public Works requesting documents 

evidencing the placing of fill dirt at plaintiffs’ residence.
8

not discover their claim until November 2011.

2 However, plaintiffs’ claims based on the 

Allegro Matter settlement were barred under Solin, supra, 89 Cal.App.4th 451, which held 

that where a lawsuit is incapable of complete resolution without breaching the attorney-client 

privilege, the suit may not proceed, if a balancing of certain factors set forth in Solin and 

explained in Dietz v. Meisenheimer Herron (2009) 177 Cal.App.4th 771 is satisfied. Here, the 

trial court found the plaintiffs had failed to satisfy those factors because although some of the 

Allegro plaintiffs had come forward, Engstrom would be forced to reveal confidential 

information relating to the other Allegro plaintiffs in order to defend the action, and thus 

demurrer was sustained as to those claims on that basis. Further, plaintiffs’ claims that a 

portion of the Allegro Matter settlement proceeds were unaccounted for was entirely based on 

speculation.

With respect to claims based on the Perlmutter Matter (first, third, fifth, sixth, ninth, 

and eleventh causes of action), the trial court found that although Engstrom’s judicially

noticed documents did not establish plaintiffs’ importation of fill dirt was a matter of public 

record, plaintiffs nonetheless failed to explain how they were damaged by this disclosure.

The court also addressed the specific merits of certain of plaintiffs’ claims, as more 

fully discussed below.

The trial court denied leave to amend because plaintiffs failed to show how they could 

correct the deficiencies in their complaint. In addition, because plaintiffs failed to plead any 

viable causes of action to support punitive damages, the trial court granted the motion to 

strike.

DISCUSSION

I. Standard of Review

“The function of a demurrer is to test the sufficiency of a pleading as a matter of law, 

[and] we apply the de novo standard of review in an appeal following the sustaining of a

 

2 Although plaintiffs alleged in their SAC that they became aware of their claim in 

February 2012, plaintiffs initially propounded discovery regarding the Allegro Matter in 

November 2011.
9

demurrer without leave to amend.” (California Logistics, Inc. v. State of California (2008) 

161 Cal.App.4th 242, 247; Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 

1413, 1420.) A complaint “is sufficient if it alleges ultimate rather than evidentiary facts,” but 

the plaintiff must set forth the essential facts of his or her case “‘“‘with reasonable precision 

and with particularity sufficient to acquaint [the] defendant with the nature, source, and 

extent’”’” of the plaintiff’s claim. Legal conclusions are insufficient. (Doe v. City of Los 

Angeles (2007) 42 Cal.4th 531, 550 & 551, fn. 5.) “We assume the truth of the allegations in 

the complaint, but do not assume the truth of contentions, deductions, or conclusions of law.” 

The trial court errs in sustaining a demurrer “if the plaintiff has stated a cause of action under 

any possible legal theory, and it is an abuse of discretion for the court to sustain a demurrer 

without leave to amend if the plaintiff has shown there is a reasonable possibility a defect can 

be cured by amendment.” (California Logistics, Inc. v. State of California, supra, 161 

Cal.App.4th at p. 247.)

A complaint must contain a “statement of the facts constituting the cause of action, in 

ordinary and concise language.” (Code Civ. Proc., § 425.10, subd. (a)(1).)3 The facts to be 

pleaded are those upon which liability depends—facts constituting the cause of action, or 

“ultimate facts.” (Doe v. City of Los Angeles, supra, 42 Cal.4th at p. 550.) Such facts must be 

plausible. (See Id. at p. 551.) “A complaint must allege the ultimate facts necessary to the 

statement of an actionable claim. It is both improper and insufficient for a plaintiff to simply 

plead the evidence by which he hopes to prove such ultimate facts.” (Careau & Co. v. 

Security Pacific Business Credit, Inc. (1990) 222 Cal.App.3d 1371, 1390.) In negligence 

cases, although negligence may be pleaded in general terms, if the pleaded facts of negligence 

and injury do not naturally give rise to an inference of causation, plaintiff must plead specific 

facts explaining how the conduct caused or contributed to plaintiff’s injury. (Bockrath v. 

Aldrich Chemical Co. (1999) 21 Cal.4th 71, 78.)

 

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

otherwise indicated.
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II. Engstrom’s Demurrer

A. Plaintiffs’ Claims Based on the Allegro Action—Statute of Limitations

Notwithstanding the trial court’s ruling that plaintiffs’ claims based on the Allegro 

Matter were not barred by the statute of limitations, Engstrom’s brief argues that the statute of 

limitations bars such claims. As a general rule, respondents who fail to file a cross-appeal 

cannot claim error in connection with the opposing party’s appeal. (Estate of Powell (2000) 

83 Cal.App.4th 1434, 1439.) A limited exception to this rule is provided by section 906, 

which states in pertinent part: “The respondent . . . may, without appealing from [the] 

judgment, request the reviewing court to and it may review any of the foregoing [described 

orders or rulings] for the purpose of determining whether or not the appellant was prejudiced 

by the error or errors upon which he relies for reversal or modification of the judgment from 

which the appeal is taken.” “‘The purpose of the statutory exception is to allow a respondent 

to assert a legal theory which may result in affirmance of the judgment.’ [Citation.]” 

(Hutchinson v. City of Sacramento (1993) 17 Cal.App.4th 791, 798.) We therefore consider 

the statute of limitations issue.

1. Malpractice Claim

“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 of fiduciary 

duty arising out of the performance of an attorney’s professional duties, but it does not apply 

to actions for fraud. (Favila v. Katten Muchin Rosenman LLP (2010) 188 Cal.App.4th 189, 

223.) Further, the statute applies to actions for any act or omission arising out of the 

performance of an attorney’s professional duties. (Ibid.)
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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.)

Here, plaintiffs’ injury occurred in 1997 when Engstrom allegedly wrongfully withheld 

the settlement funds, more than four years before the filing of the plaintiffs’ SAC in April 

2012. Thus, plaintiffs’ malpractice and breach of fiduciary duty claims based on the Allegro 

Matter settlement funds distribution are barred by section 340.6.

2. Fraud-Based Claims

We requested the parties to brief separately the issue of the applicability of the statute 

of limitations in Probate Code section 16460 to client trust accounts and the disbursement of 

settlement funds from such accounts. Plaintiffs contend that Engstrom had a duty as holder of 

their client funds in trust, to account for and maintain records of such funds under Rules of 

Professional Conduct, rule 4-100, and that Probate Code section 16460 governs the limitations

period, as well as lessens their duty of inquiry into Engstrom’s handling of such funds as a 

fiduciary; furthermore, the holding of client trust funds is arguably not the rendering of 

professional services to which Code of Civil Procedure section 340.6 would apply. Engstrom 

counters that Code of Civil Procedure section 340.6 controls any claims for breach of trust 

such as alleged here and Code of Civil Procedure section 338, subdivision (d) controls any 

fraud claims, and also that Probate Code section 16460 by its express terms states that it 

applies unless the potential breach of trust is covered by another statute. Furthermore, 

Engstrom argues that both Code of Civil Procedure section 338, subdivision (d) and Probate 

Code section 16460 supply the same time period and delayed discovery rule and plaintiffs are 

not under any lessened duty of discovery; as a result, plaintiffs have failed to establish that any 
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new facts not available to them in 1997 came to light in 2012 to justify their late amendment 

of their pleading.

By its own terms, section 340.6 does not govern claims for fraud.4 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).) This section 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; § 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).) The fraudulent concealment doctrine will also 

toll the statute of limitations under section 338, subdivision (d). “[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.)

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 Probate Code 

section 16460, the duty of inquiry is triggered where there is sufficient information (either 

 

4 Plaintiffs assert that the holding of settlement funds does not arise out of the 

provision of professional services and thus that section 340.6 does not apply for that 

reason. We disagree, as in this case, the funds in the trust account are settlement 

proceeds, Engstrom’s conduct in holding such funds arises out of the provision of 

professional services, namely, the settlement of the case on plaintiffs’ behalf.
13

through an accounting or otherwise) to put the beneficiary on notice to take action. (Prob. 

Code, § 16460, subd. (a); Noggle 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].)5

An express trust is defined as a fiduciary relationship whereby a trustee holds property 

for another’s benefit. (Placerville Fruit Growers’ Assn. v. Irving (1955) 135 Cal.App.2d 731, 

736.) There can be no reasonable dispute that an attorney’s client trust account is an express 

trust: Rules of Professional Conduct, rule 4-100 provides: “(A) All funds received or held for 

the benefit of clients by a member or law firm, including advances for costs and expenses, 

shall be deposited in one or more identifiable bank accounts labeled ‘Trust Account,’ ‘Client’s 

Funds Account’ or words of similar import, maintained in the State of California . . . .” 

Further, an attorney owes the client a duty to account for funds held in the client trust account. 

Rule 4-100 also provides: “(B) A member shall: [¶] . . . [¶] (3) Maintain complete records of 

all funds, securities, and other properties of a client coming into the possession of the member 

or law firm and render appropriate accounts to the client regarding them; preserve such 

records for a period of no less than five years after final appropriate distribution of such funds 

or properties; and comply with any order for an audit of such records issued pursuant to the 

Rules of Procedure of the State Bar. [¶] (4) Promptly pay or deliver, as requested by the 

client, any funds, securities, or other properties in the possession of the member which the 

client is entitled to receive.”

In addition, California Rules of Professional Conduct, rule 3-310(D), which was in 

effect at the time of the settlement of the Allegro Matter, provided that “[a] member who 

represents two or more clients shall not enter into an aggregate settlement of the claims of or 

 

5 Contrary to Engstrom’s contention, Probate Code section 16460 does not state 

that it applies unless any potential breach of trust is covered by another statute. Probate 

Code section 16460, subdivision (a) states it applies “[u]nless a claim is previously barred 

by adjudication, consent, limitation, or otherwise.” The use of the word “previously” 

does not mean any other limitations statute is paramount; rather, it connotes that any 

failure to provide an appropriate accounting, given that such duties are generally ongoing, 

cannot formerly have been the subject of disposition.
14

against the clients without the informed written consent of each client.” Although the 

California Rules of Professional Conduct do not specifically address what must be disclosed

to a client to obtain the client’s “informed consent,” the American Bar Association’s Model 

Rules of Professional Conduct impose additional demands, and require the lawyer to disclose 

the total amount of the aggregate settlement, the details of that lawyer’s other clients’ 

participation in the settlement. (ABA Model Rules of Prof. Conduct, rule 1.8(g).)

As pointed out in Vafi v. McCloskey (2011) 193 Cal.App.4th 874, where there are two 

statutes governing the same subject, the question of which statute governs is subject to de 

novo review. (Id. at p. 880.) Vafi further explained that “‘when a general and [a] particular 

[statutory] provision are inconsistent, the latter is paramount to the former. So a particular 

intent will control a general one that is inconsistent with it.’ [Citation.] Thus, a specific 

statute of limitations takes precedence over a general one, even though the latter ‘“would be 

broad enough to include the subject to which the more particular provision relates.” 

[Citation.]’” (Ibid.)

Although California has declined to adopt American Bar Association Model Rules of 

Professional Conduct, rule 1.8(g), which precisely defines the scope of disclosure in an 

aggregate settlement, an attorney’s duty accurately to account for client trust funds in the 

context of an aggregate settlement is nonetheless governed by Rules of Professional Conduct, 

rule 4-100(B). Under rule 4-100(B) in the context of an aggregate settlement, the attorney 

must disclose sufficient information to enable the client to evaluate whether the settlement 

proceeds have been properly distributed. That rule imposes a more particularized duty than 

the general duty imposed under Civil Code section 1710 not to omit or misrepresent facts, 

which duty is the basis for a generic claim of fraud.6

 

6 A deceit, within the meaning of Civil Code section 1709 is, in relevant part, 

“[t]he suggestion, as a fact, of that which is not true, by one who does not believe it to be 

true[] [and] [¶] . . . [¶] . . . [t]he suppression of a fact, by one who is bound to disclose it, 

or who gives information of other facts which are likely to mislead for want of 

communication of that fact.” (Civ. Code, § 1710.)
15

Thus, under the rule of statutory construction that we apply a more specific statute, 

given the accounting duty applicable to the express trust that is a client trust account, we apply 

Probate Code section 16460 to plaintiffs’ fraud-based claims that Engstrom did not properly 

distribute the aggregate settlement proceeds in the Allegro Matter. As alleged, the only 

information plaintiffs received from Engstrom was the amount of their share of the Allegro 

Settlement, Engstrom’s attorney fees, and that the 93 families received a total of $100 million. 

Even without applying the more detailed standard of American Bar Association Model Rules 

of Professional Conduct, rule 1.8(g), Engstrom’s accounting was incomplete because it did 

not provide plaintiffs with sufficient information to evaluate whether all monies were 

distributed, and whether they received the sums they were entitled to receive.

As a result, plaintiffs asserted they did discover the claim in February 2012 (after they 

filed their original complaint) when they conducted a survey of some of the other settling 

plaintiffs in the Allegro Matter, making plaintiffs’ complaint timely under the principles of 

Probate Code section 16460. Thus, plaintiffs should be permitted to amend their complaint to 

set forth delayed discovery entitling them to a tolling of the statute of limitations on the 

Allegro Matter under Probate Code section 16460 based upon an assertion that Engstrom 

failed to provide an accounting sufficient for them to determine whether their portion of the 

settlement proceeds was fairly and accurately distributed to them.7 As a result of this 

insufficient accounting which plaintiffs have alleged was the result of concealment, plaintiffs, 

who 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 Allegro Matter. 

We note that substantively, the trial court found plaintiffs’ claims based on the Allegro 

Matter failed because they were based upon speculation. However, based upon the 

accounting duty Engstrom owed to plaintiffs under the Professional Rules of Conduct, 

 

7 The pertinent causes of action are the fourth cause of action (fraudulent 

concealment of embezzlement), seventh cause of action (unjust enrichment), eighth cause 

of action (unfair business practices), tenth cause of action (conversion), twelfth cause of 

action (conspiracy to commit fraud), and thirteenth cause of action (accounting)).
16

and the fact plaintiffs’ allegations indicate they received an insufficient amount of 

information concerning the disposition of the aggregate settlement, this ground for 

sustaining Engstrom’s demurrer is without merit because the plaintiffs’ lack of 

information resulted from Engstrom’s alleged failure to adequately account. “‘Where no 

duty is imposed by law upon a person to make inquiry, and where under the circumstances ‘a 

prudent man’ would not be put upon inquiry, the mere fact that means of knowledge are open 

to a plaintiff, and he has not availed himself of them, does not debar him from relief when 

thereafter he shall make actual discovery.’ [Citation.]” (Vai v. Bank of America (1961) 56 

Cal.2d 329, 342, 353 [failure of fiduciary to fully and fairly disclose material facts constituted 

breach of fiduciary duty and constructive fraud].)

Although no other cases have so applied Probate Code section 16460, we do not see 

this as a reason for not doing so here. The statutory limitations period of Probate Code section 

16460 (which we only apply to plaintiffs’ fraud-based claims due to the exception of Code 

Civ. Proc, § 340.6) is identical to that of the three-year statute of limitations of Code of Civil 

Procedure section 338, subdivision (d), and there is a similar, if not identical, delayed 

discovery rule. The difference is that discovery is triggered under Probate Code section 

16460 by the receipt of an accounting, or if no accounting is supplied, by facts sufficient to 

put the plaintiff on notice of any wrongdoing. Given that accounting duties for an attorney 

vis-à-vis a client trust account were already in place under the Rules of Professional Conduct 

at the time of the Allegro Settlement, applying Probate Code section 16460 here does not 

work an injustice.8 Instead, we clarify and reinforce an attorney’s duty in the context of an 

aggregate settlement where the settling plaintiffs will have limited information about the other 

settling plaintiffs’ receipts and the device of the aggregate settlement could provide a shield 

for an attorney to misappropriate or improperly distribute funds, as plaintiffs have alleged 

here.

 

8 Although Rules of Professional Conduct, rule 4-100(B)(3) specifies that such 

accountings shall be kept for a minimum “of five years,” we do not read that rule to 

impose an outside limit on the amount of time an attorney must keep accounting records.
17

Finally, with respect to an attorney’s duties of confidentiality owed to multiple clients 

in an aggregate settlement, to the extent that other clients’ settlement information is 

confidential, that does not preclude disclosure of some information regarding the settlement 

sufficient to permit the aggregate settlement plaintiffs to determine whether the settlement 

funds have been properly distributed. In that manner, the rule of Solin, supra, 89 Cal.App.4th 

at p. 467—that where confidential information is vital to an attorney’s defense and the suit 

could not proceed without disclosure of such confidential information, the suit must be 

dismissed—will not be implicated because we do not advocate a disclosure of confidential 

information. We require that the information disclosed regarding an aggregate settlement 

must be sufficient to put the plaintiffs’ on notice of any potential claim and must comport with 

an attorney’s duties under Rules of Professional Conduct, rule 4-100(A) and (B).

B. First Cause of Action (Professional Negligence); Second Cause of Action 

(Breach of Fiduciary Duty)

Plaintiffs’ first cause of action for professional malpractice based upon conflict of 

interest (breach of duty of confidentiality and breach of duty of loyalty) alleged that 

Engstrom’s representation of the Perlmutters was undertaken without plaintiffs’ informed 

written consent in breach of rule 3-310 of the Rules of Professional Conduct, and Engstrom 

performed below the standard of care when it disclosed to plaintiffs’ adversaries plaintiffs’

plan to import free fill dirt from Public Works. Plaintiffs alleged that they suffered damages 

in the form of a settlement for substantially less than they were actually damaged in the 

Perlmutter Matter, as well as “threatening [them] with a debtor examination to effectuate a 

lien on plaintiffs’ property and thereby [Engstrom] collected over $1.3 million.” Plaintiffs’

second cause of action for breach of fiduciary duty is based upon the alleged insufficient 

distribution of settlement funds in the Allegro Matter and the conflict of interest and 

disclosure of confidential information in the Perlmutter Matter.

Plaintiffs contend the trial court erred in concluding that they failed to allege how 

Engstrom’s disclosure of their plan to import dirt caused them damage because they alleged 

they would not have settled for $500,000 if the disclosure had not been made, which they 
18

assert is a sufficiently detailed allegation to withstand demurrer. Further, even if their dirt 

importation plan was a public record, defendants were barred from disclosing information 

obtained during the course of their representation of plaintiffs under Oasis West Realty, LLC

v. Goldman (2011) 51 Cal.4th 811, 821. Further, plaintiffs alleged sufficient facts to establish

breach of fiduciary duty in their allegations of defendants’ embezzlement of the settlement 

funds, and the trial court erred in applying Solin, supra, 89 Cal.App.4th 451 because the 

balancing determination necessary under Solin is fact intensive and cannot be made at the 

demurrer stage.9

Rule 3-310(C) of the California Rules of Professional Conduct provides that: “A 

member shall not, without the informed written consent of each client: [¶] (1) Accept 

representation of more than one client in a matter in which the interests of the clients 

potentially conflict; or [¶] (2) Accept or continue representation of more than one client in a 

matter in which the interests of the clients actually conflict . . . .” (Rules Prof. Conduct, 

rule 3-310(C).) Rule 3-310(E) provides that an attorney shall not, without the informed 

written consent of the current or former client, “accept employment adverse to the client or 

former client where, by reason of the representation of the client or former client, the member 

has obtained confidential information material to the employment.” (See also Bus. & Prof. 

Code, § 6068, subd. (e).) However, a “violation of the Rules of Professional Conduct does 

not, in and of itself, render an attorney liable for damages. [Citations.]” (Stanley v. Richmond

(1995) 35 Cal.App.4th 1070, 1097.) In a tort action for breach of fiduciary duty or 

professional negligence, however, the rules may inform the scope of an attorney’s duty. 

(Slovensky v. Friedman (2006) 142 Cal.App.4th 1518, 1534–1535.)

“‘“The elements of a cause of action for professional negligence are: (1) the duty of 

the professional to use such skill, prudence, and diligence as other members of the profession 

commonly possess and exercise; (2) breach of that duty; (3) a causal connection between the 

 

9 Plaintiffs assert in their opening brief that Engstrom conceded the fill dirt 

revelation was a basis for the reduction in plaintiffs’ settlement figure. However, 

plaintiffs do not offer any factual support for this assertion.
19

negligent conduct and the resulting injury; and (4) actual loss or damage resulting from the 

professional negligence.”’” (Shopoff & Cavallo LLP v. Hyon (2008) 167 Cal.App.4th 1489, 

1509.) The elements of a cause of action for breach of fiduciary duty are the existence of a 

fiduciary relationship, breach of fiduciary duty, and damages. (Ibid.)

“Where the potential conflict is one that arises from the successive representation of 

clients with potentially adverse interests, the courts have recognized that the chief fiduciary 

value jeopardized is that of client confidentiality” but that “the primary value at stake in cases 

of simultaneous or dual representation is the attorney’s duty—and the client’s legitimate 

expectation—of loyalty, rather than confidentiality.” (Flatt v. Superior Court (1994) 9 Cal.4th 

275, 283, 284.) “‘[A]n attorney is forbidden to do either of two things after severing [his]

relationship with a former client. [He] may not do anything which will injuriously affect [his]

former client in any manner in which [he] formerly represented [the client] nor may [he] at 

any time use against [his] former client knowledge or information acquired by virtue of the 

previous relationship.’” (Oasis West Realty, Inc. v. Goldman, supra, 51 Cal.4th at p. 821.)

Here, with respect to the Perlmutter Matter, plaintiffs’ claims for professional 

negligence and breach of fiduciary duty fail because they allege no causation, a required 

element of these claims. Plaintiffs assert that attorney Wolfe divulged their plan to import free

dirt obtained from Public Works, but do not explain how the Perlmutters’ knowledge of their 

plan caused plaintiffs’ damage claim against the Perlmutters to collapse. Plaintiffs have not 

alleged the basis for their valuation of their case, why their use of fill dirt, or free fill dirt, 

harmed their position, or why their use of fill dirt was a matter that could be kept confidential 

in a lawsuit involving damage to their property based upon the fill dirt.

With respect to the Allegro Matter, as discussed above, claims based on professional 

negligence and breach of fiduciary duty are barred by the statute of limitations in 

section 340.6.
20

C. Fraudulent Concealment of Conflict of Interest (Third Cause of Action) and 

Fraudulent Concealment of Embezzlement (Fourth Cause of Action)

Plaintiffs’ fraudulent concealment causes of action allege that Engstrom failed to 

disclose that it was representing the Perlmutters in the Perlmutter Action, although attorneys 

Lack and Ramsey avoided direct contact with the Perlmutters, they were involved in behindthe-scenes legal work, while Wolfe, who had not worked on the Malibu Construction Matter, 

had contact with the Perlmutters. As a result, plaintiffs allege they would not have settled the 

Allegro Matter and would not have settled the Perlmutter Matter for the sums they did. The 

court found on the third cause of action for fraudulent concealment of conflict of interest in 

the Perlmutter Matter that although a disclosable conflict of interest existed, plaintiffs failed to 

allege how they were damaged by Wolfe’s disclosure of their plans regarding the fill dirt. On 

the fourth cause of action for fraudulent concealment of funds not distributed in the Allegro 

Matter settlement, the court found plaintiffs’ damage claims speculative and plaintiffs failed 

to show how the alleged concealment caused damages because the alleged concealment came 

after the plaintiffs had agreed to settle the matter. Plaintiffs contend the trial court erred in 

concluding they did not sufficiently allege causation on the Allegro Matter or Perlmutter 

Matter.

Civil Code section 1710, paragraph (3) provides that deceit includes “[t]he suppression 

of a fact, by one who is bound to disclose it.” In general, to prove a fraud based on 

concealment, a plaintiff must demonstrate: “(1) the defendant . . . concealed or suppressed a 

material fact, (2) the defendant [had] a duty to disclose the fact to the plaintiff, (3) the 

defendant . . . intentionally concealed or suppressed the fact with the intent to defraud the 

plaintiff, (4) the plaintiff [was] unaware of the fact and would not have acted as he [or she]

did if he [or she] had known of the concealed or suppressed fact, and (5) as a result of the 

concealment or suppression of the fact, the plaintiff sustained damage. (Linear Technology 

Corp. v. Applied Materials, Inc. (2007) 152 Cal.App.4th 115, 131.)

With respect to the Perlmutter Matter, the mere disclosure of plaintiffs’ fill dirt plan 

does not establish why such disclosure was the cause of plaintiffs’ lowered settlement figure, 
21

and the trial court properly sustained to demurrer to plaintiffs’ third cause of action. However, 

with respect to the Allegro Matter, as set forth above plaintiffs’ claims set forth in their fourth 

cause of action are not time barred, nor are they speculative and plaintiffs are permitted to 

amend such claims to set forth a basis for their delayed discovery of the facts.

D. Fifth Cause of Action (Intentional Fraud)

Plaintiffs’ fifth cause of action alleges that Engstrom failed to disclose its conflict of 

interest in the Perlmutter Matter to plaintiffs, and in communication with plaintiffs by letter 

dated May 3, 2011, falsely maintained that the matters were not substantially related, plaintiffs 

had waived the conflict, and Engstrom’s contact with the Perlmutters was insignificant and 

minimal. As a result of these misrepresentations, Engstrom defrauded plaintiffs of $1.3 

million.

The trial court found plaintiffs’ theory of liability unclear because plaintiffs did not 

allege why $1.3 million was paid based on defendants’ misrepresentations about the conflict 

of interest. Plaintiffs argue the trial court erred because if plaintiffs had known of the conflict, 

they would have taken steps to vacate the judgment improperly obtained against them.

The elements of a claim for fraudulent concealment require the plaintiff to show that: 

“(1) the defendant . . . concealed or suppressed a material fact, (2) the defendant [was] under a 

duty to disclose the fact to the plaintiff, (3) the defendant . . . intentionally concealed or 

suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff was unaware of the 

fact and would not have acted as he did if he had known of the concealed or suppressed fact, 

and (5) as a result of the concealment or suppression of the fact, the plaintiff sustained 

damage. (Marketing West, Inc. v. Sanyo Fisher (USA) Corp. (1992) 6 Cal.App.4th 603, 612–

613.) There must also be a duty to disclose. Such a duty may be established where there is a 

confidential relationship between the parties, defendant has made a representation which was 

likely to mislead due to the nondisclosure, there is active concealment of undisclosed matters, 

or one party has sole knowledge of or access to material facts and knows such facts are not 

known to or discoverable by the other party. (Goodman v. Kennedy (1976) 18 Cal.3d 335, 

346–347.)
22

Here, plaintiffs’ claims fail because they allege no causation. Plaintiffs assert that 

attorney Wolfe divulged their plan to import free dirt obtained from Public Works, but do not 

explain how the Perlmutters’ knowledge of their plan plausibly caused their damage claim 

against the Perlmutters to collapse. Plaintiffs have not alleged the basis for their valuation of 

their case, why their use of fill dirt, or free fill dirt, harmed their position, or why their use of 

fill dirt was a matter that could be kept confidential in a lawsuit involving damage to their 

property based upon the fill dirt.

E. Sixth Cause of Action (Constructive Fraud)

Plaintiffs’ sixth cause of action for constructive fraud was based on Engstrom’s 

disclosure in the Perlmutter Matter of plaintiffs’ plan to import free fill dirt obtained from 

Public Works, and as a result, plaintiffs settled the Perlmutter Matter for less than the amount 

of their damages. The trial court found plaintiffs failed to allege how Engstrom’s revelation 

of plaintiffs’ confidential plan to import dirt from Public Works caused their damages. 

Plaintiffs contend the trial court erred because they adequately pleaded that Engstrom’s failure 

to maintain their confidences and its conflict of interest caused them damages.

Constructive fraud “‘“‘is a unique species of fraud applicable only to a fiduciary or 

confidential relationship.’”’” (Michel v. Moore & Associates, Inc. (2007) 156 Cal.App.4th 

756, 763.) “Constructive fraud ‘arises on a breach of duty by one in a confidential or 

fiduciary relationship to another which induces justifiable reliance by the latter to his 

prejudice.’ [Citations.] Actual reliance and causation of injury must be shown. [Citations.]” 

(Tyler v. Children’s Home Society (1994) 29 Cal.App.4th 511, 548, italics omitted; see also 

Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 516, fn. 14 [elements of constructive 

fraud cause of action are “(1) a fiduciary or confidential relationship; (2) nondisclosure; 

(3) intent to deceive, and (4) reliance and resulting injury (causation)”].) “‘“In its generic 

sense, constructive fraud comprises all acts, omissions and concealments involving a breach 

of legal or equitable duty, trust or confidence, and resulting in damages to another. 

[Citations.] Constructive fraud exists in cases in which conduct, although not actually 

fraudulent, ought to be so treated—that is, in which such conduct is a constructive or quasi 
23

fraud, having all the actual consequences and all the legal effects of actual fraud.” 

[Citation.]’” (Estate of Gump (1991) 1 Cal.App.4th 582, 601; see also Civ. Code, § 1573; 

Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 981–982, fn. 13.) 

“[W]hether a fiduciary duty has been breached, and whether conduct constitutes 

constructive . . . fraud, depend on the facts and circumstances of each case. (Assilzadeh v. 

California Federal Bank (2000) 82 Cal.App.4th 399, 415.)

Here, plaintiffs’ inability to plead how Engstrom’s concealment of its conflict of 

interest, or its revelation of plaintiffs’ confidential plan to import fill dirt caused plaintiffs to 

settle the case for less than their valuation is fatal to their claim. Plaintiffs have not alleged the 

basis for their valuation of their case, why their use of fill dirt harmed their position, why their 

use of fill dirt was a matter that could be kept confidential in a lawsuit involving damage to 

their property, or why the use of fill dirt as opposed to free dirt affected the outcome of their 

case.

F. Seventh Cause of Action (Unjust Enrichment)

Plaintiffs’ seventh cause of action for unjust enrichment was based upon the alleged 

$22 million in unaccounted funds remaining from the Allegro Matter settlement and 

Engstrom’s wrongful retention of a portion of that sum. Plaintiffs sought restitution of such 

wrongfully obtained sums due them. The trial court found plaintiffs failed to allege that 

Engstrom retained a larger portion of the settlement funds than it was entitled to retain. 

Plaintiffs contend the trial court erred because they specifically alleged that Engstrom 

“‘embezzled, misused and stole settlement funds from PLAINTIFFS for their own use’” and 

at the pleading stage, plaintiffs need only allege ultimate facts.

The elements for a claim of unjust enrichment are “receipt of a benefit and unjust 

retention of the benefit at the expense of another.” (Lectrodryer v. SeoulBank (2000) 77 

Cal.App.4th 723, 726.) “The theory of unjust enrichment requires one who acquires a benefit 

which may not justly be retained, to return either the thing or its equivalent to the aggrieved 

party so as not to be unjustly enriched.” (Otworth v. Southern Pac. Transportation Co. (1985) 

166 Cal.App.3d 452, 460.) It is not, strictly speaking, a theory of recovery, “‘but an effect:
24

the result of a failure to make restitution under circumstances where it is equitable to do so.’ 

[Citation.] . . . It is synonymous with restitution.” (Melchior v. New Line Productions, Inc. 

(2003) 106 Cal.App.4th 779, 793.) Ordinarily, restitution is required only if “‘the benefits 

were conferred by mistake, fraud, coercion, or request.’” (Nibbi Brothers, Inc. v. Home 

Federal Sav. & Loan Assn. (1988) 205 Cal.App.3d 1415, 1422, italics omitted.)

With respect to the Allegro Matter, as set forth above plaintiffs’ claims set forth in 

their seventh cause of action are not time barred, nor are they speculative and plaintiffs are 

permitted to amend such claims to set forth a basis for their delayed discovery of the facts.

G. Eighth Cause of Action (Unfair Business Practices, Allegro Matter)

Plaintiffs alleged that Engstrom violated the UCL by embezzling funds from the 

Allegro settlement and by violating the confidentiality provisions of the Business and 

Professions Code and the Rules of Professional Conduct in connection with the Perlmutter 

Matter, and sought restitution of such funds. The trial court found plaintiffs failed to support

their claim for damages because they failed to allege that Engstrom retained a larger portion of

the settlement funds than it was entitled to. Plaintiffs contend the trial court erred because 

they recognize damages are not available under the UCL, but seek restitution of the funds 

allegedly misappropriated by Engstrom.

“Business and Professions Code section 17200 is written in the disjunctive [and]

establishes three varieties of unfair competition—acts or practices which are unlawful, or 

unfair, or fraudulent.” (Podolsky v. First Healthcare Corp. (1996) 50 Cal.App.4th 632, 647.) 

The three prongs of the law have different thresholds. Under its “unlawful” prong, “the UCL 

borrows violations of other laws . . . and makes those unlawful practices actionable under the 

UCL.” (Lazar v. Hertz Corp. (1999) 69 Cal.App.4th 1494, 1505.) Thus, a violation of 

another law is a predicate for stating a cause of action under the UCL’s unlawful prong. In a 

consumer case, determining whether a business practice is “unfair” involves “balancing the 

utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” 

(Smith v. State Farm Mutual Automobile Ins. Co. (2001) 93 Cal.App.4th 700, 718.) 
25

Traditional fraud requirements, such as intent or actual reliance, are inapplicable to the UCL. 

(Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 Cal.App.4th 1282, 1288.)

A distinguishing feature of the UCL is that it does not provide a private action for 

damages or other legal remedies. Instead, the UCL provides an equitable means to prevent 

unfair practices in the future and restore money or property to victims of those practices. (CelTech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 

179.) Thus, remedies are limited to injunctive relief and restitution. Unlawful practices are 

practices “forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, 

regulatory, or court-made.” (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 838–

839.) To state a cause of action based on an unlawful business act or practice under the UCL, 

a plaintiff must allege facts sufficient to show a violation of some underlying law.

A business act or practice is unfair when the conduct “threatens an incipient violation 

of an antitrust law, or violates the policy or spirit of one of those laws because its effects are 

comparable to or the same as a violation of the law, or otherwise significantly threatens or 

harms competition.” (Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.,

supra, 20 Cal.4th at p. 187.) To establish an unfair business act or practice, a plaintiff must 

establish the unfair nature of the conduct and that the harm caused by the conduct outweighs 

any benefits that the conduct may have. (McKell v. Washington Mutual, Inc. (2006) 142 

Cal.App.4th 1457, 1473.)

Finally, a fraudulent business act or practice is one in which members of the public are 

likely to be deceived. (Olson v. Breeze, Inc., supra, 48 Cal.App.4th at p. 618 [“‘“Fraudulent,”

as used in the statute, does not refer to the common law tort of fraud but only requires a 

showing members of the public “‘are likely to be deceived’’”].) Thus, in order to state a cause 

of action based on a fraudulent business act or practice, the plaintiff must allege that 

consumers are likely to be deceived by the defendant’s conduct. (Committee on Children’s 

Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 211.)
26

With respect to the Allegro Matter, as set forth above plaintiffs’ claims set forth in 

their eighth cause of action are not time barred, nor are they speculative and plaintiffs are 

permitted to amend such claims to set forth a basis for their delayed discovery of the facts.

H. Ninth Cause of Action (Unfair Business Practices, Perlmutter Matter)

Plaintiffs alleged that Engstrom owed it a full disclosure of the conflict of interest that 

existed in connection with Engstrom’s representation of the Perlmutters, and that Engstrom’s 

disclosure of plaintiffs’ plan to import dirt from Public Works violated rule 3-310 of the Rules 

of Professional Conduct requiring that Engstrom maintain plaintiffs’ confidence. Plaintiffs 

sought disgorgement of all revenue Engstrom received from plaintiffs in the Perlmutter 

Matter. The trial court found plaintiffs failed to allege how they were damaged by Engstrom’s

conduct, and did not allege that defendants obtained any money or property that could be 

disgorged to them under the UCL. Plaintiffs contend the trial court erred because they did 

allege that Engstrom obtained $1.3 million from them as a result of Engstrom’s fraudulent, 

unfair, and unlawful acts.

Here, plaintiffs’ claims fail because they allege no causation. Plaintiffs assert that 

attorney Wolfe divulged their plan to import free dirt obtained from Public Works, but do not 

explain how the Perlmutters’ knowledge of their plan caused their damage claim against the 

Perlmutters to collapse. Plaintiffs have not alleged the basis for their valuation of their case, 

why their use of fill dirt, or free fill dirt, harmed their position, or why their use of fill dirt was 

a matter that could be kept confidential in a lawsuit involving damage to their property based 

upon the fill dirt. Nor can plaintiffs explain or clarify the inconsistency between their 

assertions that Engstrom received $1.3 million from them while at the same time they assert

that the $1.3 million figure constituted the judgment in the Perlmutter Matter.

I. Tenth Cause of Action (Conversion)

Plaintiffs alleged that Engstrom instructed the plaintiffs in the Allegro Matter not to 

discuss the settlement with anyone, yet based upon plaintiff’s mathematical analysis of a 

sampling of some of plaintiffs in the Allegro Matter, Engstrom converted a portion of the 

Allegro Matter settlement funds to their own use, an assertion that Engstrom refused to 
27

respond to under oath. The trial court found plaintiffs’ calculation of the sums owed from the 

Allegro Matter were unsupported. Plaintiffs contend that they alleged sufficient facts to 

support a claim for conversion based upon their calculations of the missing settlement funds.

“‘Conversion is the wrongful exercise of dominion over the property of another.’” 

(Farmers Ins. Exchange v. Zerin (1997) 53 Cal.App.4th 445, 451.) The elements of a claim 

for conversion are (1) “the plaintiff’s ownership or right to possession of the property at the 

time of the conversion,” (2) “the defendant’s conversion by a wrongful act or disposition of 

property rights,” and (3) damages. (Ibid.) “It is not necessary that there be a manual taking of 

the property,” only “an assumption of control or ownership over the property, or that the 

alleged converter has applied the property to his [or her] own use.” (Id. at pp. 451–452.)

With respect to the Allegro Matter, as set forth above plaintiffs’ claims set forth in 

their tenth cause of action are not time barred, nor are they speculative and plaintiffs are 

permitted to amend such claims to set forth a basis for their delayed discovery of the facts.

J. Eleventh Cause of Action (Civil Conspiracy to Commit Intentional Fraud) 

and Twelfth Cause of Action (Civil Conspiracy to Commit Conversion)

Plaintiffs’ eleventh cause of action alleged that to induce plaintiffs to pay over $1.3 

million to settle the Perlmutter Matter, Engstrom formed a conspiracy to make a number of 

material representations to plaintiffs, including concealing the conflict of interest in the 

Perlmutter Matter and using confidential information in the Perlmutter Matter, threatening 

plaintiffs with a judgment debtor examination and obtaining $1.3 million. Plaintiffs’ twelfth 

cause of action alleged that Engstrom requested that plaintiffs not discuss the settlement with 

anyone, misrepresented that they only retained one-third of plaintiffs’ settlement share, there 

was $22 million in settlement funds unaccounted for, and Engstrom conspired to commit 

these wrongful acts. The trial court found these claims failed because plaintiffs failed to 

allege any underlying torts to support the conspiracy claim.

There is no separate tort of civil conspiracy and no action for conspiracy to commit a 

tort unless the underlying tort is committed and damage results therefrom. (Unruh v. Truck 

Insurance Exchange (1972) 7 Cal.3d 616, 631.) The significance of a conspiracy theory of 
28

liability is that each member may be held jointly liable as a tortfeasor, even though he or she 

may not have participated directly in the underlying tort. (Richard B. LeVine, Inc. v. Higashi

(2005) 131 Cal.App.4th 566, 574.) “The elements of an action for civil conspiracy are 

(1) formation and operation of the conspiracy and (2) damage resulting to the plaintiff 

(3) from a wrongful act done in furtherance of the common design.” (Rusheen v. Cohen

(2006) 37 Cal.4th 1048, 1062.) Where fraud is alleged to be the object of the conspiracy, the 

claim must be pleaded with particularity. (Favila v. Katten Muchin Rosenman LLP (2010) 

188 Cal.App.4th 189, 211.)

Here, plaintiffs have failed to establish how Engstrom’s conduct in the Perlmutter 

Matter caused them damages, and the trial court properly sustained Engstrom’s demurrer to 

the eleventh cause of action. With respect to plaintiffs’ twelfth cause of action based on the 

torts alleged in the Allegro Matter, plaintiffs’ claims are not time barred, nor are they 

speculative and plaintiffs are permitted to amend such claims to set forth a basis for their 

delayed discovery of the facts.

K. Thirteenth Cause of Action (Accounting)

Plaintiffs alleged that Engstrom was in the best position to know the disposition of the 

Allegro Matter settlement funds, and that the settlement funds received from Engstrom were 

inaccurate and not based upon the applicable retainer agreement; based on the fiduciary 

relationship of the parties, plaintiffs were entitled to an accounting. In addition, plaintiffs 

alleged that plaintiffs paid approximately $300,000 as expert fees in the Perlmutter Matter 

based on Engstrom’s invoices, and that Engstrom misused these funds. The trial court found 

plaintiffs’ accounting claim failed because plaintiffs failed to plead facts sufficient to show 

they were entitled to an accounting. Plaintiffs contend the trial court erred, pointing to the fact 

that they alleged defendants were their attorneys, owed them a fiduciary duty, obtained 

settlement proceeds in which plaintiff had an interest, and had a duty to account for the 

distribution of such settlement proceedings.

An accounting is an equitable proceeding which is proper where there is an 

unliquidated and unascertained amount owing that cannot be determined without an 
29

examination of the debits and credits on the books to determine what is due and owing. (St. 

James Church v. Superior Court (1955) 135 Cal.App.2d 352, 359; Peoples Finance etc. Co. 

v. Bowman (1943) 58 Cal.App.2d 729, 734.) Equitable principles govern, and the plaintiff 

must show the legal remedy is inadequate. Thus, where the books and records are so 

complicated that an action demanding a fixed sum is impracticable, an accounting is 

appropriate. (Civic Western Corp. v. Zila Industries, Inc. (1977) 66 Cal.App.3d 1, 14.) If an 

ascertainable sum is owed, an action for an accounting is not proper. (St. James Church, at 

p. 359.) Generally, an underlying fiduciary relationship, such as a partnership will support an 

accounting, but the action does not lie merely because the books and records are complex. 

(San Pedro Lumber Co. v. Reynolds (1896) 111 Cal. 588, 596–597; Union Bank v. Superior 

Court (1995) 31 Cal.App.4th 573, 594.) Some underlying misconduct on the part of the 

defendant must be shown to invoke the right to this equitable remedy. (Union Bank, at 

pp. 593–594.)

With respect to the Allegro Matter, as set forth above plaintiffs’ claims set forth in 

their thirteenth cause of action are not time barred, nor are they speculative and plaintiffs are 

permitted to amend such claims to set forth a basis for their delayed discovery of the facts. 

With respect to claims based on the defendants’ failure in the Perlmutter Matter to account for 

$300,000 in expert witness fees plaintiffs paid to Engstrom after plaintiffs rejected 

defendants’ section 998 offer, plaintiffs have alleged they received an insufficient accounting

of how such funds were disbursed and allege some of the funds may have been misused. The 

trial court erred in sustaining the demurrer to this claim on the ground that there was no 

fiduciary duty owed because Engstrom were plaintiffs’ attorneys and owed a duty to account 

with respect to the expert witness fees paid. To the extent plaintiffs contend defendants 

fraudulently misappropriated any of such expert witness fees, plaintiffs are permitted to 

amend their complaint to set forth facts supporting such an additional claim.

L. Punitive Damages

Civil Code section 3294 authorizes an award of punitive damages where the defendant 

has acted with “oppression, fraud, or malice.” “Malice” is described as “conduct that is 
30

intended by the defendant to cause injury to the plaintiff or despicable conduct which is 

carried on by the defendant with a willful and conscious disregard of the rights or safety of 

others.” (Civ. Code, § 3294, subd. (c)(1).) A punitive damage claim depends upon a viable 

claim for compensatory damages for its vitality. (See McLaughlin v. National Union Fire Ins. 

Co. (1994) 23 Cal.App.4th 1132, 1164.) Here, because plaintiffs are permitted to amend their 

complaint to state claims for intentional torts upon which a claim for punitive damages may 

be based, the trial court erred in striking plaintiffs’ prayer for punitive damages.
31

DISPOSITION

The judgment is affirmed with respect to Muruganandan Prakashpalan and Navamalar 

Prakashpalans’ first cause of action (professional negligence), second cause of action (breach 

of fiduciary duty), third cause of action (fraudulent concealment of conflict of interest), fifth

cause of action (intentional fraud, Perlmutter Matter), sixth cause of action (constructive 

fraud, Perlmutter Matter), ninth cause of action (unfair business practices, Perlmutter Matter), 

and eleventh causes of action (conspiracy, Perlmutter Matter), and reversed with respect to 

Muruganandan Prakashpalan and Navamalar Prakashpalans’ fourth cause of action 

(fraudulent concealment of embezzlement), seventh cause of action (unjust enrichment), 

eighth cause of action (unfair business practices, Allegro Matter), tenth cause of action 

(conversion), twelfth cause of action (civil conspiracy, Allegro Matter) and thirteenth cause of 

action (accounting, Allegro Matter, and expert witness fees, Perlmutter Matter). The motion 

to strike is reversed on those claims related to the Allegro Matter and the expert witness fees 

in the Perlmutter Matter. The parties are to bear their own costs on appeal.

CERTIFIED FOR PUBLICATION.

JOHNSON, J.

I concur:

MALLANO, P. J.
Rothschild, J., concurring and dissenting:

I agree that plaintiffs have not adequately alleged how they were harmed by 

defendants’ disclosures about the fill dirt, so I agree that the demurrer was properly 

sustained as to all claims arising from that conduct. I disagree about the timeliness of 

the remaining claims, all of which relate to the settlement of the Northridge earthquake 

litigation (the “Allegro Matter”) in 1997. I would affirm the judgment in its entirety, and 

I therefore respectfully dissent in part.

Defendants were plaintiffs’ lawyers, and all of plaintiffs’ claims concerning the 

settlement of the Allegro Matter arise from defendants’ performance of professional 

services for plaintiffs. Those claims are consequently subject to the statute of limitations 

defined by subdivision (a) of Code of Civil Procedure section 340.6, which provides that, 

apart from cases of “actual fraud,” the action must “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.” Plaintiffs filed suit more than fourteen 

years after the (alleged) wrongful act of omission, so their claims are untimely unless they 

are based on “actual fraud.” (Code Civ. Proc., § 340.6, subd. (a).)

In my view, plaintiffs have not sufficiently alleged actual fraud. They claim 

that defendants did not give them their full share of the settlement proceeds in the 

Allegro Matter, but plaintiffs admit that their sole basis for that claim is the following: 

(1) defendants settled the Allegro Matter for “over $100 [m]illion for about 93 families”; 

(2) in or about November 1997, defendants distributed $500,000 to plaintiffs, and 

defendants informed plaintiffs that they (defendants) retained one-third of the proceeds of 

the settlement of plaintiffs’ claims as their fee, pursuant to the contingent fee agreement 

between plaintiffs and defendants; (3) in or about March 2012, plaintiffs learned that 

17 of the plaintiff families in the Allegro Matter received, on average, $467,441 from 

the settlement, which would yield a total of $43,472,029 for 93 families; (4) plaintiffs 

calculated that, assuming a one-third contingent fee for all 93 families and a total 
2

settlement of $100 million, payment of $43,472,029 in settlement proceeds to the 

93 families would leave over $22 million of the settlement proceeds “unaccounted.” 

Plaintiffs infer from these calculations that defendants defrauded them by withholding 

settlement funds to which plaintiffs were entitled.

Plaintiffs’ theory is entirely speculative. Plaintiffs do not allege, and I do not 

discern, any basis for believing that the 17 families included in their calculations are 

representative of the 93 families included in the settlement. Rather, plaintiffs allege only 

that it is “fair to assume the variation in the distribution among all plaintiffs should be 

within [a] few thousands per family” and “it is fair to assume that most properties 

[included in the settlement] are in similar category and condition in many aspects.” 

Plaintiffs’ groundless assumptions do not constitute sufficient allegations of fraud. 

Further, plaintiffs do not even allege the amount of damages that they sought to recover in

the Allegro Matter. Thus they have not sufficiently alleged damages either.

Given that plaintiffs admit that they have no basis for their fraud claim other than 

what is alleged in their pleadings, and given that an inference of fraud based on plaintiffs’ 

allegations would be pure speculation, I conclude that plaintiffs have not adequately 

alleged fraud. Their claims are therefore untimely under Code of Civil Procedure 

section 340.6.

ROTHSCHILD, J.