HYPERCONSTRUCT CO., ET AL vs. SHAW WALTERS

“’... “[D]emurrers for uncertainty are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.”’” (Morris v. JPMorgan Chase Bank, N.A. (2022) 78 Cal.App.5th 279, 292, citation omitted.)

Attorney-Client Privilege

The Czaplak parties argue that all of the causes of action directed against them are barred by the attorney-client privilege. They cite McDermott, Will & Emery v. Superior Court (2000) 83 Cal.App.4th 378, Solin v. O’Melveny & Myers, LLP (2009) 89 Cal.App.4th 451, and Reilly v. Greenwald & Hoffman, LLP (2011) 196 Cal.App4th 891. In contrast to McDermott, which was decided on a motion for judgment on the pleadings, and Reilly, which was decided on demurrer, the issue cannot be resolved in this case based upon the pleadings.

In Dietz v. Meisenheimer & Herron (2009) 177 Cal.App.4th 771, 792, the Court stated that the dismissal of a plaintiff’s claim based on the due process concerns addressed in the McDermott line of cases “is reserved for the rarest of cases[.]” The defendant in that case argued that dismissal is required “’if the lawyer-defendant would be prevented by his duties to his clients from presenting any of the relevant evidence that may bolster the defense...’” The Court responded:

Meisenheimer vastly overstates the breadth of the holding in Solin. If dismissal were required whenever a lawyer’s ethical duties prevented the lawyer from presenting evidence having any relevance to the action, without respect to the materiality of the evidence, the “drastic action” of dismissal would become commonplace. ...

(Ibid.) The Court then set forth the “four factors that a court must consider...before a court may dismiss a case on the ground that a defendant attorney’s due process right to present a defense would be violated by the defendant’s inability to disclose a client’s confidential information if the action were allowed to proceed”: (1) the evidence at issue is the client's confidential

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information, and the client insists that it remain confidential; (2) given the nature of plaintiff's claim the confidential information is highly material to the defendants' defenses; (3) there are no “ad hoc” measures available to avoid dismissal such as “ ‘sealing and protective orders, limited admissibility of evidence, orders restricting the use of testimony in successive proceedings, and, where appropriate, in camera proceedings' ”; and (4) it would be fundamentally unfair to proceed. (Id. at 792-794.)

In Rickley v. Goodfriend (2013) 212 Cal.App.4th 1136, 1165-1166, the Court wrote in finding that the trial court properly allowed plaintiffs to amend to include conspiracy claims against their neighbor’s attorneys, after finding that the conspiracy claims were based on nonconfidential communications and conduct:

Further, although a case may be dismissed on the ground that the attorney- client privilege prevents an attorney-defendant from presenting an adequate defense, the trial court must first conduct an evidentiary hearing to “determine whether it is able to effectively use ‘ad hoc measures from its equitable arsenal,’ including techniques such as ‘sealing and protective orders, limited admissibility of evidence, orders restricting the use of testimony in successive proceedings, and, where appropriate, in camera proceedings,’ so as to permit the action to proceed.” “A court may take the extraordinary step of dismissing a plaintiff’s claim on the ground that an attorney-defendant’s due process right to present a defense is compromised by the defendant’s inability to present confidential information in support of that defense only in the rarest of cases, after the court has considered several factors...” ...

(Citations and brackets omitted.)

Here, the Court cannot determine from the pleading itself that the Czaplak parties’ due process rights to present a defense would be compromised by their inability to present confidential information.

Statute of Limitations

The Czaplak parties argue that all of the causes of action against them are barred by the statute of limitations set forth in Code of Civil Procedure section 340.6. The argument fails.

In Escamilla v. Vannucci (2025) 17 Cal.5th 571, 576, the Supreme Court “[h]eld that section 340.6 does not apply to claims against attorneys brought by parties who were never their clients or the intended beneficiaries of their clients.” In reply, the Czaplak parties argue that the holding in Escamilla applies only to malicious prosecution actions. The Court disagrees. As already stated, the Supreme Court’s holding was that “section 340.6 does not apply to claims against attorneys brought by parties who were never their clients or the intended beneficiaries of their clients.”

Because the Supreme Court found that the text of section 340.6 is “ambiguous as to whether the statute applies to claims brought against attorneys by third parties” (id. at 581), it looked to section 340.6’s legislative history and purpose. It explained that “’[t]he Legislature enacted section 340.6(a) in 1977 amid rising legal malpractice insurance premiums’” contributed

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to by the fact that case law had held that the discovery rule applied to the previous two-year statute of limitations and by the fact that different limitations periods applied depending on whether the complaint asserted breach of written contract, fraud, or breach of an oral contract. (Id. at 582.) “It was in light of these circumstances that the Legislature enacted section 340.6. ‘To protect clients, the Legislature codified the...delayed discovery rule, albeit with a one-year limit from the time of actual or imputed discovery.

To protect attorneys it adopted a firm fouryear outside limit on liability...’ ...” (Id. at 582-583, citations omitted.) It noted that “[n]early all legislative history materials describe section 340.6 as a statute of limitations for ‘legal malpractice,’” even after the bill was amended to encompass more than “professional negligence.” (Id. at 583-584.) It stated:

In contrast to the clear indication of legislative intent we noted in Lee[v. Hanley (2015) 61 Cal.4th 1225], there is no indication the Legislature ever intended that section 340.6 apply to malicious prosecution, or, indeed any action brought by someone outside the attorney-client relationship. The amendments discussed in Lee broadened the statute’s reach, but only insofar as they defined more precisely the “actual wrong” of legal malpractice, that is, an attorney’s wrongful acts or omissions in rendering professional services for a client.

They did not signal an intent to give attorneys the benefit of a shortened limitations period for all wrongs they commit against anyone, even if those wrongs occurred while the attorney was performing legal services for a client. On the contrary, as we observed in Lee, it appears “the Legislature intended section 340.6(a) to apply to most lawsuits between clients and their attorneys.”

(Id. at 585.) In further discussing Lee, the Court stated:

... Lee did not suggest that section 340.6 might extend to claims brought by nonclients for wrongs allegedly done to them. We now conclude that it does not. As we interpret the statute, the one-year limitations period of section 340.6 applies only to claims by an attorney’s clients, or their intended beneficiaries, and only when the merits of the claim necessarily depend on proof the attorney violated a professional obligation.

(Id. at 587, citation omitted.)

In their reply, the Czaplak parties argue that Escamilla should not be applied retroactively. This is an argument that should have been raised initially and the Court will not consider it when raised for the first time in reply.

Civil Code Section 1714.10

The Czaplak parties argue that all of the claims against them are barred by section 1714.10. However, this argument can be quickly disposed of based upon the exception for personal financial gain set forth in subdivision (c). The Czaplak parties point to Cortese v. Sherwood (2018) 26 Cal.App.5th 445, 460, where the court stated that “’[t]his exception does not apply to fees charged, even where the fees were excessive or the services unnecessary. ...’”

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(Citation omitted.) The problem with this argument, however, is that Cross-Complainants allege that Czaplak received shares as part of the transaction, meaning that he had a personal interest in the conspiracy and suggesting that he held a part of the partnership business Liam and Shaw formed before the iR transaction commenced. (¶113.) This goes beyond fees charged.

Agent’s Immunity Rule

The Czaplak parties argue that all of the claims against them are barred by the agent’s immunity rule.

“...[U]nder the agent’s immunity rule, an agent is not liable for conspiring with the principal when the agent is acting in an official capacity on behalf of the principal.” (Fiol v. Doellstedt (1996) 50 Cal.App.4th 1318, 1326, citation omitted; see also Doctors’ Co. v. Superior Court (1989) 49 Cal.3d 39, 44.) However, as stated in Berg & Berg Enterprises, LLC v. Sherwood Partners, Inc. (2005) 131 Cal.App.4th 802, 817-818:

But the court in Doctors’ Co. did articulate two settings in which a conspiracy claim might lie against an attorney for participating in the violation of a duty owed by the client to another: (1) where the attorney violates a duty that he or she independently owes to the plaintiff; and (2) where the attorney’s acts go beyond the performance of a professional duty owed to the client and are, in addition, done for his or her own personal financial gain. Both of these settings, by definition, involve conduct of the attorney in which he or she acts not just as an agent for a principal, the client, but also for himself or herself independently. In these settings then, it is appropriate that the agent’s immunity rule does not protect the attorney’s conduct, for he or she is acting in more than just a representative capacity.

(Citations omitted.) As already discussed, the allegations are sufficient to show that Czaplak acted for his own personal gain.

Conspiracy and Aiding and Abetting Causes of Action

The Czaplak parties argue that the conspiracy and aiding and abetting causes of action fail because Czaplak was acting only as the agent or employee of his clients. They again rely on section 1714.10. As already discussed, their reliance on that provision fails.

Constructive Trust

The Czaplak parties first argue that this cause of action fails because they “did not gain any of the disputed properties in this case (i.e., the Engine), by fraud, accident, mistake, or otherwise.” As already shown, Cross-Complainants allege that Czaplak received shares as part of the transaction and then transferred some or all of them to Reefpoint Ventures and continues to withhold them from Shaw. (¶113.)

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The Czaplak parties next argue that constructive trust is a remedy and not a cause of action. Constructive trust is routinely alleged as a cause of action. (See Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093, 1114.) While Cross-Complainants could have pled constructive trust as a remedy in their prayer, there is no prejudice to the Czaplak parties in having it pled as a separate cause of action.

Accounting

The Czaplak parties cite two cases in support of their argument that attorneys are not proper defendants against whom an accounting can be sought: Duggal v. G.E. Capital Communications Services, Inc. (2000) 81 Cal.App.4th 81 and Foxen v. Carpenter (2016) 6 Cal.App.5th 284. In neither case was the capacity of the defendants as attorneys a factor in the decision.

The Czaplak parties also argue that this cause of action necessarily fails since the other causes of action fail. As discussed above, they have not shown that the other causes of action fail.

Unfair Competition

The Czaplak parties argue that Cross-Complainants have not identified “what ‘practices’ allegedly committed by the Czaplak Parties are sufficiently unlawful, unfair, or fraudulent.” Contrary to this argument, Cross-Complainants allege that the Czaplak parties conspired and aided and abetted breach of fiduciary duty, conversion and trespass to chattels.

Restitution/Unjust Enrichment

The Czaplak parties correctly argue that Cross-Complainants have an adequate remedy at law. (Sepanossian v. National Ready Mixed Concrete Co. (2023) 97 Cal.App.5th 192, 207-208; see also Collins v. eMachines, Inc. (2011) 202 Cal.App.4th 249, 260.) Accordingly, the Court sustains demurrer as to this cause of action.

Penal Code Section 496

The Czaplak parties argue that they are not alleged to have obtained possession of the Engine or any other intellectual property. However, Cross-Complainants correctly note in their opposition that the allegations show that “the Czaplak Parties have aided in the selling and/or withholding of partnership property (the Engine, the iR shares received in exchange for selling the Engine to iR), while knowing the property was stolen / obtained by theft.”

Derivative Claims

The Czaplak parties first argue that the cross-complaint alleges no facts suggesting that an unincorporated partnership existed. Contrary to this argument, the cross-complaint repeatedly alleges that a partnership existed. For example, it alleges that “in a Direct Message to Shaw, Liam expressly made it ‘official’ that Shaw and Liam were a ‘Partnership’” and it includes a screen shot of that message. (¶33.) It further alleges:

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Shaw and Liam worked together to share in the profit and loss of their business through multiple strategies. In addition to XR Foundation, the Partnership also owned business ventures operating under the names Laguna Labs, the Metaverse Construction Company, and the Nexus. (¶37.)

The Czaplak parties next argue that Shaw does not satisfy the contemporaneous and continuous ownership requirement because the cross-complaint alleges in paragraph 139(g) that the partnership is “dissolved.” Initially, liberally construing the complaint, the Court finds that this allegation does not necessarily establish that the partnership had been officially dissolved in one of the ways set forth in Corporations Code section 16801. Cross-Complainants allege that the relationship between Shaw and Liam soured and that “Shaw and Liam were negotiating the state of the partnership and its assets when Liam unilaterally directed staff to freeze Shaw out of the partnership assets...” (¶¶ 71 and 74.)

This is reasonably read as alleging an unofficial “dissolution” of the partnership. In any event, “a partnership continues after dissolution...for the purpose of winding up its business.” (§ 16802.) A person winding up the business may “prosecute and defend actions and proceedings...” § 16803.)

Finally, the Czaplak parties argue that all of the claims are direct rather than derivative. The Court disagrees. Cross-Complainants allege that “Liam stole the Engine and other partnership assets and froze Shaw out.” (¶73.) They further allege that “Shaw and Liam were negotiating the state of the partnership and its assets when Liam unilaterally directed staff to freeze Shaw out of the partnership assets, including the Engine, XR Foundation, Laguna Labs, and MCC.” (¶74.) In the fourth cause of action, they allege that Cross-Defendants “have profited from the use of partnership assets...” (¶173.) These are allegations of harm to the partnership.

Uncertainty

Finally, the Court finds that the complaint is not uncertain as Czaplak parties can reasonably respond to the allegations.

All parties must comply with Marin County Superior Court Local Rules, Rule 2.10(B) to contest the tentative decision. Parties who request oral argument are required to appear in person or remotely by ZOOM. Regardless of whether a party requests oral argument in accordance with Rule 2.10(B), the prevailing party shall prepare an order consistent with the announced ruling as required by Marin County Superior Court Local Rules, Rule 2.11.

The Zoom appearance information for July, 2026 is as follows: https://marin-courts-ca-gov.zoomgov.com/j/1615487764?pwd=Ob4B5J7LLKcpnkxzJjjEOSHNzEGafG.1 Meeting ID: 161 548 7764 Passcode: 502070 If you are unable to join by video, you may join by telephone by calling (669) 254-5252 and using the above-provided passcode. Zoom appearance information may also be found on the Court’s website: https://www.marin.courts.ca.gov