Court Opinion

ID: 8488297
Source: CourtListenerOpinion
Date Created: 2022-11-21 18:01:52.062493+00
Date Added: 2024-06-11T16:50:09.825452
License: Public Domain

Filed 11/21/22 The Law Firm of Kallis & Associates v. Padgett CA6
                      NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      SIXTH APPELLATE DISTRICT

THE LAW FIRM OF KALLIS &                                           H046063
ASSOCIATES, P.C. et al.,                                          (Santa Clara County
                                                                   Super. Ct. No. 16CV298149)
         Plaintiffs and Appellants,

         v.

JOSEPH P. PADGETT,

         Defendant and Respondent.

         The Law Firm of Kallis & Associates, P.C. and Bustamante & Gagliasso, APC
(collectively Law Firms) appeal a summary judgment ruling in their 2016 action to
recover attorney fees from former client Joseph P. Padgett. Law Firms challenge the
dismissal of their 2016 quantum meruit and restitution causes of action as time-barred.
         We reject Law Firms’ arguments that the quantum meruit cause of action accrued
either in 2017 (when Padgett voided the retainer and general fee agreement) or in 2015
(when Padgett appealed a federal court attorney fees award for Law Firms’ services). As
we will explain, the quantum meruit claim accrued when Padgett discharged Law Firms
in 2013, and Law Firms forfeited their challenge to the statute of limitations ruling
related to the restitution cause of action. Alternatively, we conclude that Law Firms
failed to establish the elements of a restitution claim. We will affirm the judgment.
                                     I. BACKGROUND 1
       Federal Court Proceedings
       In 2004, Padgett and his then wife filed a civil rights action in federal court against
the City of Monte Sereno and several city officials. Law Firms and the Padgetts executed
a retainer and general fee agreement in September 2008, and Law Firms substituted in as
counsel in the federal court action. Several claims were dismissed or bifurcated, and
certain claims against two individual defendants were tried to a jury in 2009. The jury
returned a verdict in favor of Padgett on a claim against one defendant. Padgett was
awarded $1 in nominal damages and $10,000 in remitted punitive damages.
       Padgett moved under title 42 United States Code section 1988 for $900,000 in
costs and attorney fees exceeding $3.4 million (for pretrial work performed by a different
firm, and for pretrial, trial, and appellate work performed by Law Firms). The district
court ordered the liable defendant to pay $100,000 in costs and $500,000 in attorney fees.
In February 2013, the Ninth Circuit Court of Appeals vacated the order and remanded the
matter “for an explanation of how [the district court] used the lodestar method to reduce
Padgett’s fees and how it calculated Padgett’s reduced costs.”
       In July 2013, Padgett notified Law Firms that he was terminating their services
effective immediately, and instructed the firms “to take no further action in my name or
on my behalf.” A status conference on remand was held in October 2013. The district
court relieved Law Firms from representing Padgett at that time. At the same time, the
district court informed Padgett that “once the client makes the request [for statutory
attorney fees], the attorney’s fees actually belong to the attorneys,” citing a Ninth Circuit
case involving attorney fees in qui tam actions. Padgett remained in the case as an

       1  We grant Law Firms’ request for judicial notice of the superior court records in
this case (items 1, 10, 11.1, 11.2, 14-19) and the district court records in underlying civil
rights litigation (items 2-9, 20). (Evid. Code, § 452, subd. (d).) The request for judicial
notice of statutes and case law (items 21-23) is denied as unnecessary.

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unrepresented party, and Law Firms pursued their attorney fees in the federal case as real
parties in interest.
       In March 2015, the district court awarded Padgett $100,000 in costs and $471,057
in attorney fees for Law Firms’ services. Using the lodestar method, the court found
reasonable attorney fees to be $1,682,345 ($1,047,888 for the Bustamante firm’s services
and $634,458 for the Kallis firm’s services). It adjusted the award downward to reflect
Padgett’s limited success in the litigation (out of seven claims against eight defendants,
only two claims against two defendants had survived summary judgment). Padgett
appealed that order, challenging Law Firms’ standing to pursue attorney fees after being
terminated. Distinguishing civil rights cases from qui tam actions, the Ninth Circuit
remanded the matter for the district court to determine whether a contractual provision or
attorney’s lien justified the award to counsel rather than to Padgett. On remand, the
district court found that an enforceable fee agreement existed at the time it issued its
March 2015 order, and the fee award was therefore required to be paid to counsel.
       The Underlying Superior Court Action
       While the federal appeal was pending, in July 2016 Law Firms filed the instant
action in the superior court, seeking payment for services rendered. The first amended
complaint alleged causes of action for breach of contract; restitution by unjust
enrichment; quantum meruit; promissory estoppel; account stated; and declaratory relief.
Law Firms sought $520,586 in “[a]ctual [d]amages,” which they alleged was the district
court’s “ultimate[] award[] [of] fees and costs.” (We note the unexplained discrepancy
between the $520,586 figure and the district court’s 2015 award of $471,057 in attorney’s
fees and $100,000 in costs.) They also sought quantum meruit damages in the amount of
$1,682,345.
       In January 2017, Padgett notified Law Firms in writing that the 2008 fee
agreement violated Business and Professions Code section 6147 (governing contingency
fee agreements between lawyers and clients), and Padgett declared the contract “void”
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under subdivision (b) of that section. Padgett demurred to the operative first amended
complaint and cross-complained for declaratory relief. The demurrer was sustained as to
promissory estoppel. Padgett moved for summary judgment on the remaining causes of
action on grounds that the fee agreement was void and unenforceable, and the equitable
causes of action were either time-barred or otherwise not cognizable.
       While the summary judgment motion was pending, Kallis & Associates dismissed
all claims against Padgett except for quantum meruit, and Bustamante & Gagliasso
dismissed all claims except restitution by unjust enrichment and quantum meruit. In a
written order, the trial court granted Padgett’s summary judgment motion in its entirety.
The trial court invoked the rule in Leighton v. Forster (2017) 8 Cal.App.5th 467, 490:
“Where the claim of quantum meruit is based upon services performed under a contract
that was void or voidable, the limitations period commences to run on either the date the
last payment was made toward the attorney fees, or the last date that the attorney
performed services in the case.” It found the restitution and quantum meruit causes of
action accrued in October 2013 when Padgett terminated Law Firms’ services, and were
therefore time-barred. The court ruled that the fee agreement was void and did not create
a lien. Judgment was entered accordingly.
                                      II. DISCUSSION
       Summary judgment is appropriate when there are no triable issues of any material
facts and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc.,
§ 437c, subd. (c); Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th 990,
1002-1003.) We review de novo an order granting summary judgment. (Aguilar v.
Atlantic Richfield Co. (2001) 25 Cal.4th 826, 860.)
       Quantum Meruit Cause of Action
       The statute of limitations for a quantum meruit claim is two years. (Code Civ.
Proc., § 339, subd. 1 [“action upon a contract, obligation or liability not founded upon an
instrument of writing”].) The trial court found the quantum meruit cause of action
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accrued in October 2013 when Law Firms’ services were formally terminated. Law
Firms first argue the quantum meruit cause of action accrued in January 2017 when
Padgett elected to void the written fee agreement under Business and Professions Code
section 6147, subdivision (b), which provides, “Failure to comply with any provision of
this section renders the agreement voidable at the option of the plaintiff, and the attorney
shall thereupon be entitled to collect a reasonable fee.” The contract was voidable
because it omitted language required by section 6147, subdivision (a)(4) that “the fee is
not set by law but is negotiable between attorney and client.” Law Firms argue that
“[s]electing an accrual date for quantum meruit that allows the two-year limitations
period to run while there is an existing fee agreement in place” is inconsistent with the
rule that a legally enforceable written contract precludes a claim for quantum meruit and
would render meaningless subdivision (b) of section 6147, which allows for quantum
meruit recovery upon the voiding of a fee agreement. (See Huskinson & Brown v. Wolf
(2004) 32 Cal.4th 453, 460 [“the attorney remains ‘entitled to collect a reasonable fee’ ”
where an agreement is voided under Bus. & Prof. Code, § 6147].) Alternatively, Law
Firms argue the cause of action accrued in April 2015 after the district court awarded
reasonable fees for their services and Padgett appealed that award knowing “how much
he owed to Law Firms and was bound to pay.”
       Law Firms’ arguments rest on the premise that the existence of the parties’ fee
agreement precluded a quantum meruit cause of action until Padgett voided that
agreement. But our Supreme Court recognized 50 years ago that a client has the “right at
any time to discharge his attorney with or without cause” and that “[s]uch a discharge
does not constitute a breach of contract for the reason that it is a basic term of the
contract, implied by law into it by reason of the special relationship between the
contracting parties, that the client may terminate that contract at will.” (Fracasse v. Brent
(1972) 6 Cal.3d 784, 790-791 (Fracasse).) The court emphasized the anomaly and

                                              5
injustice that would result “to hold the client liable in damages for exercising that basic
implied right.” (Id. at p. 791.)
       The Fracasse court recognized that a discharged attorney, although precluded
from suing for breach of contract, is entitled to recover in quantum meruit “ ‘the
reasonable value of services rendered to the time of discharge.” (Fracasse, supra, 6
Cal.3d 784, 790.) The court explained that a cause of action for the reasonable value of
services to the time of discharge generally arises at that time. (Id. at p. 792.) Addressing
the timeliness of an action filed by a discharged attorney who had been retained under a
contingent fee contract, the court announced a different rule where it is impossible to
determine “ ‘the amount involved and the result obtained’ ” until the matter has been
finally resolved and where “it would be improper to burden the client with an absolute
obligation to pay his former attorney regardless of the outcome of the litigation.” (Ibid.)
In those circumstances, “the attorney’s action for reasonable compensation accrues when
the contingency stated in the original agreement has occurred—i.e., the client has had a
recovery by settlement or judgment.” (Ibid.)
       Law Firms would have us apply here the “different rule” announced in Fracasse,
such that a quantum meruit cause of action has still not accrued because remuneration
was contingent on Padgett actually receiving payment from the liable defendant, which
has not yet occurred. But that interpretation is at odds with the plain terms of the parties’
fee agreement, which brings the quantum meruit cause of action within the general rule
announced in Fracasse.
       Paragraph 9 of the fee agreement, which governs the agreement’s termination,
states that either party may terminate the agreement by giving written notice to the other
party. The provision continues: “Client may discharge Lawyer for any reason and at any
time. Lawyer may terminate its representation of Client with Client’s consent or for
cause or for ethical considerations. Cause includes, without limitation, Client’s breach of
any provision of this Agreement; if terminated, Lawyers shall have a lien as set forth in
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this paragraph on, but limited to, any recovery in the Litigation for the reasonable hourly
value of their services. . . . If Client[s] dismiss this action against the advice of the
Attorney or fires the Law Firm of Kallis & Associates p.c. or Bustamante, O’Hara and
Gagliasso, client[s] agree in a contingency case, to pay attorney the hourly fee set forth in
Paragraph 5A above for the time spent on the representation. Payment to be made within
10 business days of dismissal or termination. In all cases Client agrees that the lawyer(s)
will have a contractual lien for either the contractual fees and costs due, or in a
contingency fees case[] the reasonable value of the services and cost[s] provided.”
Paragraph 5[A] sets forth the hourly rate for Law Firms’ attorneys, paralegals, and
clerical staff. Paragraph 5[B] states that “the case will be handled as a modified
[c]ontingency fee case,” whereby Padgett “agrees to pay [Law Firms] as follows: [¶]
Should the case go to trial, [Law Firms] get their respective attorneys fees, and any load
star [sic] and multiplier []. Attorneys also get 20% of the award as a contingency.”
       Under the terms of the fee agreement, if Padgett were to fire Law Firms, the
parties agreed that Padgett would pay Law Firms, within 10 days of discharge, the hourly
fee for services rendered. On the other hand, if Law Firms were to terminate the
representation, they would not be immediately entitled under the contract to collect for
their services but would have a lien for the reasonable value of their services against any
judgment or settlement. The arrangement prevents Law Firms from demanding
immediate payment after withdrawing from a contingency case. The arrangement also
protects Law Firms from having to wait for a recovery in the event they are terminated
from a contingency case.
       Significantly, Law Firms’ quantum meruit cause of action does not seek the
district court’s attorney fees award or 20 percent of Padgett’s damages, but rather
$1,682,345 in hourly compensation for work performed from the time Law Firms were
retained in 2008 through October 2013, when the district court relieved Law Firms from
representing Padgett in the litigation. By the terms of paragraph 9, the cause of action
                                               7
accrued 10 days after Law Firms were discharged, when payment for their services was
due. (Fracasse, supra, 6 Cal.3d 784, 792.) Whether that occurred in July 2013 when
Padgett informed Law Firms of his decision, or in October 2013 when the district court
relieved Law Firms from their representation, Law Firms’ 2016 complaint is untimely.
We note, however, that the district court in 2019 ordered the fee award payable to Law
Firms, and the circuit court affirmed the order, notwithstanding Padgett’s 2017 voiding of
the fee agreement. Our decision does not disturb Law Firms’ entitlement to that award
under the plain terms of the federal judgment.
       Law Firms’ appeal focuses on the voiding of a fee agreement under Business and
Professions Code section 6147, but that statute is not implicated here. In light of Law
Firms’ discharge in 2013—which under Fracasse cannot trigger a breach of contract
cause of action—Padgett’s conduct in 2017 had no bearing on the accrual of Law Firms’
quantum meruit cause of action. Ultimately, the rule in Leighton v. Forster, supra, 8
Cal.App.5th 467 was properly applied here: The client in Leighton voided an unsigned
fee agreement under Business and Professions Code section 6148 (governing
non-contingency fee agreements between attorneys and clients) by refusing to pay an
invoice allegedly authorized by the agreement. (Leighton, at p. 487.) The quantum
meruit cause of action accrued the following month when the court granted the attorney’s
request to be relieved as counsel. (Id. at p. 480.)
       Restitution Cause of Action
       The cause of action for restitution advanced by Bustamante & Gagliasso relates
solely to the district court’s fee award. Bustamante & Gagliasso alleged in the operative
complaint that Padgett agreed to pay to Law Firms the fees and costs awarded by the
district court, but Padgett “has refused to do so and has taken steps contrary to the award
of fees.” The Kallis Law Firm dismissed its restitution cause of action; Bustamante &
Gagliasso (whether purposefully or inadvertently) did not oppose summary adjudication
as to its restitution claim, apparently taking the position that its claim had also been
                                              8
dismissed. Bustamante & Gagliasso now takes the position that the restitution cause of
action, which is subject to the two-year statute of limitations for “[a]n action upon a
contract, obligation or liability not founded upon an instrument of writing” (Code Civ.
Proc., § 339, subd. 1), accrued either in April 2015 “when Padgett manifested his intent
to keep the attorneys’ fees and costs for his own” by appealing the district court’s March
2015 fee order, or in 2017 when Padgett voided the fee agreement.
       Bustamante & Gagliasso forfeited the argument it now makes by abandoning its
restitution claim in the trial court. (Johanson Transportation Service v. Rich Pik’d Rite,
Inc. (1985) 164 Cal.App.3d 583, 588.) Even considering the merits, we see no error in
the trial court summarily rejecting the claim. We note the absence of evidence that the
costs and fees awarded by the district court were actually received or retained by Padgett.
(Peterson v. Cellco Partnership (2008) 164 Cal.App.4th 1583, 1593 [“The elements of an
unjust enrichment claim are the ‘receipt of a benefit and [the] unjust retention of the
benefit at the expense of another.’ ”].) Law Firms neither alleged nor put forth evidence
that the award—which the district court confirmed was an “award of fees to counsel
rather than to the plaintiff” and was required to be paid to counsel—was disbursed to
Padgett. Bustamante & Gagliasso argues its professional and competent legal
representation in the federal case has value, and that Padgett was unjustly enriched by
those services which were reasonably valued by the district court at $1,682,345.14. But
the gravamen of the restitution cause of action was the district court’s attorney fees
judgment, not the reasonable value of services rendered.2 The restitution claim therefore
fails as a matter of law. (David v. Hermann (2005) 129 Cal.App.4th 672, 685 [“ ‘If the

       2  Padgett is incorrect that the restitution cause of action is “identical in factual
substance” to the quantum meruit cause of action. The quantum meruit claim seeks over
$1.6 million for “[t]he reasonable value of the legal services provided,” whereas the
restitution claim specifically relates to Padgett being unjustly enriched by the district
court’s lesser award of attorney fees and costs.

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decision of a lower court is correct on any theory of law applicable to the case, the
judgment or order will be affirmed regardless of the correctness of the grounds upon
which the lower court reached its conclusion.’ ”].)
                                    III.   DISPOSITION
       The judgment is affirmed. Padgett is awarded costs on appeal by operation of
California Rules of Court, rule 8.278(a)(1).

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                                           ____________________________________
                                           Grover, Acting P.J.

WE CONCUR:

____________________________
Lie, J.

____________________________
Wilson, J.

H046063 – Law Firm of Kallis & Associates P.C. et al. v. Padgett